Abbott government’s multinational tax avoidance plan was never costed

The Abbott government didn’t get costings from Treasury on how much revenue its multinational tax avoidance budget measure would bring.

The revelation explains why costings were not given by Treasurer Joe Hockey when he announced the measure or included budget papers.

Speaking at a Senate estimates hearing on Tuesday, finance minister Mathias Cormann said the government could not “credibly do that”.

“You can only do that if you’ve got realistic information to be able to base such a costing on,” he said, in response to a question from Labor’s Sam Dastyari.

“Unless you’re suggesting the government should just make up numbers out of thin air,” Senator Cormann said.

Shadow assistant treasurer, Andrew Leigh said it was “astonishing that the government would propose a significant change to Australia’s tax laws without having any idea what the implications of this will be”.

“Joe Hockey’s best effort features a proposal so flimsy that the country’s brightest economic minds in Treasury can’t even cost it,” Mr Leigh said.

“This may be the clearest example yet of Joe Hockey’s erratic and slapdash approach to managing Australia’s economy.”

But the Coalition’s taxation changes were not the only ones under scrutiny.

Economic activity compromise
Speaking at the same hearing, Treasury’s Rob Hefferen was critical of Labor’s 2013-14 budget tax plan, specifically its proposed changes to Australia’s “thin capitalisation” laws, which deal with excessive debt deductions claimed by multinationals.

Mr Hefferen said that Labor’s proposed changes would “compromise economic activity”.

He said Labor’s proposal would have increased the cost of capital for subsidiaries of multinationals and would reduce the attractiveness of doing business in Australia, which could lead to job losses.

The changes would not have increased structural unemployment rates, Mr Hefferen said. But they would have been likely to have an impact on some individual jobs.

But at no stage did Treasury attempt to put a number on potential job losses as a result of the proposal, he said.

G20 leaders and finance ministers will receive the OECD’s proposal on tackling multinational tax avoidance in Turkey in September.

The OECD base erosion and profit shifting [BEPS] project aims to address tax avoidance through several key measures, but the onus is then on the world’s governments to implement the plan.

Locally, the Coalition also flagged in the budget that it would work with business and the ATO – through the Board of Tax – to develop a voluntary code whereby large corporates disclose detailed information about their tax affairs.

This is in addition to existing tax disclosure laws, introduced by the former labor government, requiring the Tax commissioner Chris Jordan to publish headline tax information about multinationals.

Mr Hefferen said if there was not agreement on the voluntary code, then the government would “revisit the issue and possibly go another path”.