Tonight’s budget included more detail on the anti-tax-avoidance measures announced yesterday by Treasurer Joe Hockey.
“As a result of Tax Office investigations we have identified 30 large multinational companies that may have diverted profits away from Australia to avoid paying their fair share of tax in Australia,” Hockey said tonight as part of his speech introducing the government’s 2015-16 budget.
“Everyday Australians rightly believe that if a dollar of profit is earned here, then you should pay tax here. Unfortunately this is not always the case for some multinationals. Many have the capacity to aggressively minimise their tax.
“What that means, is that families and small businesses are forced to carry more than their fair share of the tax burden.”
“Tonight I am releasing the details of a new Multinational Anti Avoidance Law, that will stop multinationals using complex schemes to escape paying tax,” the Treasurer said.
“Under this new law, when we catch companies cheating, they will have to pay back double what they owe, plus interest.”
This new law will apply to companies with global revenue of $1 billion or more, according to budget documents.
The government has not given an estimate of how much revenue it will raise through the new law.
“This measure is estimated to have an unquantifiable gain to revenue over the forward estimates period,” budget documents state.
The measure follows an inquiry into corporate tax avoidance which has seen scrutiny of the tax minimisation strategies of a number of multinational technology companies, including Google, Apple and Microsoft.
Budget documents state that the new law will target companies where “the activities of an Australian company or other entity are integral to an Australian customer’s decision to enter into a contract”, ”the contract is formally entered into with a foreign related party to that entity” and “the profit from the Australian sales is booked overseas and subject to no or low global tax.”
“Where such arrangements are entered into for a principal purpose of avoiding tax, this measure will ensure that the profits from Australian sales are taxed in Australia,” budget documents state.
As part of the strategy, the Australian Taxation Office will be provided with $11.3 million over four years to implement the OECD’s new transfer pricing documentation standards from the start of 2016.
The documentation standards will aid the ATO in enforcing the new law by providing it “with a global picture of how multinational entities operate, assisting it to identify multinational tax avoidance.”
The government will also double the maximum administrative penalties that can imposed by ATO when companies enter into tax avoidance and profit-shifting schemes. The increased penalties will apply from 1 July.
The Treasury has opened a public consultation on the new anti-avoidance regime, which will involve changes to Part IVA of the Income Tax Assessment Act 1936. Treasury is accepting submissions until June 9.