CANBERRA: Australia plans to announce tougher rules on cross-border taxation in the upcoming budget to tighten loopholes that have allowed multinational companies to avoid paying taxes, Treasurer Joe Hockey told Reuters on Friday.
Australia has joined Britain in a crackdown on companies such as global tech giants, Apple and Microsoft over tax evasion, particularly the shifting of profits from high-tax countries to more relaxed regimes.
“We are proceeding with measures, working with the United Kingdom, that will strengthen integrity,” Hockey said in an interview. “You’ll see we’ll release draft legislation around the budget which will indicate a strengthening of the integrity measures.” Hockey did not detail the content of the new legislation, but he has said previously he wanted to find a way for digital companies to pay the goods and services tax (GST).
“It doesn’t raise a lot of revenue, but it’s an integrity measure,” he said. “And it’s vitally important, with the world’s economy changing, that our tax system globally will have to change.” Under Australia’s leadership last year, the Group of 20 leading economies (G20) endorsed a set of common standards of sharing bank account information across borders with automatic exchange of information among its members.
The United States backed that move, but has become concerned about Britain, Australia and other nations lining up against U.S. digital companies as they seek extra funds to trim budget deficits.
“I understand the concerns of the United States government, but they’ve come a long way from the point where they were completely opposed to the proper tax of those entities to the point where they’re reaching into other countries to collect the tax,” Hockey said.
Hockey cautioned that a change of government in Britain could set back the international crackdown on corporate tax avoidance. Britain, which has a Conservative Party-led coalition government, goes to the polls for a general election on May 8.
“The UK under (Treasurer) George Osborne and (Prime Minister) David Cameron is leading the world in chasing down companies that are not paying their fair share of tax,” he said. “Any change of government in the United Kingdom would obviously put that at risk.” The Australian units of Google, Apple and Microsoft revealed earlier this year they were “under review” by the Australian Tax Office (ATO), which had declined to renew agreements with the companies on transfer pricing.
That accounting practice, under which a company sets internal prices for goods to its subsidiaries, has been blamed for helping large companies minimise their tax bills by lowering the cost of those goods to subsidiaries in high-tax regimes.All three Australian subsidiaries denied any tax evasion.
The ATO is also conducting audits of 15 marketing hubs in Singapore and Switzerland that it expects will raise an extra $1 billion. The world’s two largest miners – BHP Billiton and Rio Tinto – told an Australian Senate hearing last month that their Singapore units were being audited.Hockey is due to announce Australia’s conservative Liberal Party-led government’s budget on May 12.
