CANBERRA: The federal government has welcomed support from the opposition for its planned crackdown on multinational tax dodgers. Extending the olive branch, the federal government is also prepared to consider suggestions from Labor to improve its legislation.
The opposition will declare on Monday that it intends backing draft laws, introduced by former treasurer Joe Hockey, which impose tougher penalties on large companies engaging in tax avoidance and profit shifting. It also introduces country-by-country reporting to give authorities greater visibility of multinationals’ tax structures.
Shadow Assistant Treasurer Andrew Leigh will tell parliament that having called for more action on multinational taxation for more than two years, Labor was not going to stand in the way of attempts to tighten the tax net, “no matter how small or insufficient these may be”. Leigh said Labor’s measures could be implemented with the changes in the government’s bill.
Leigh is expected to say on Monday that Labor is taking a constructive approach to protecting Australia’s revenue base. Speaking on ABC News Radio earlier in the day, Leigh said the opposition is committed to support in the spirit of bipartisanship.
“We hope that in return, they’ll take a look at Labor’s AU$7 billion package which has been costed, which does raise revenue and which closes a different set of loopholes than the government’s package focuses on,” Leigh told ABC.
“The proof of the pudding is in the eating but I certainly hope that the prime minister, unlike his predecessor, will recognise that Australia’s superannuation tax breaks aren’t fair and they aren’t sustainable. ”
Assistant Treasurer Kelly O’Dwyer said the federal government is happy to consider amendments to its legislation, which tackles tax loopholes that let companies send their profits offshore. But she wants the opposition to release the assumptions behind its policy.
“They’ve been very, very reluctant to do that and one can only query why,” O’Dwyer said. The coalition’s plan, scheduled to start on January 1, will apply to 1,000 large multinationals operating in Australia with annual global revenue of AU$1 billion or more — companies that pose the highest risk to Australia’s tax base. O’Dwyer did not provide a figure, but said the measures would increase tax revenue.
Earlier this year, a Senate inquiry into the tax avoidance of multinational companies in Australia found AU$31 billion was funnelled to Singapore within a year by 10 multiinternational companies.
Previously, a report by multi-industry union United Voice and the Tax Justice Network Australia, found that at least one of Australia’s largest telecommunications companies is likely to be scrutinised by the inquiry.
The Who Pays for Our Common Wealth? report said 29 percent of Australia’s top 200 companies are paying an effective corporate tax rate of 10 percent or less, while more than 14 percent have an effective tax rate of 0 percent, with Optus’ parent company SingTel named as one of the country’s top tax avoiders.
The report also estimated Singapore-based SingTel had an average annual foregone tax figure in Australia of AU$713 million, alleging the telco averaged a tax paid amount of AU$284 million, off the back of the AU$3.3 billion average pre-tax profit. The resulting effective tax rate of 9 percent is well below Australia’s 30 percent corporate tax rate.
In April, executives from Apple, Google, and Microsoft confirmed they were being investigated by the Australian Taxation Office as part of the Senate’s tax avoidance inquiry.
On ABC radio in August, Hockey — who previously likened tax-evading companies to thieves — said the government will go after 30 primarily offshore-based companies that are not paying their fair share of tax, promising also to put legislation to parliament in September.
At the time, Hockey criticised the chairman of the inquiry, Labor Senator Sam Dastyari, saying he had questions to answer about the release of recommendations to media outlets before the report had been signed off by other senators. Hockey also accused the senator of trivialising the issue by playing political games.
Earlier this month, the Organisation for Economic Co-operation and Development (OECD) announced the final recommendations from its two-year, G20-commissioned base erosion and profit-shifting (BEPS) project.
The OECD’s recommendations aim to regain up to AU$240 billion lost globally in revenue every year thanks to tax avoidance — around 10 percent of worldwide corporate income tax revenue, according to the organisation.
“They will put an end to double non-taxation, facilitate a better alignment of taxation with economic activity and value creation, and, when fully implemented, these measures will render BEPS-inspired tax planning structures ineffective,” OECD secretary-general Angel Gurria said at the time.
A parliamentary report released in August recommended the Australian government make companies competing for government contracts say where they are taxed, as well as naming and shaming corporate tax dodgers.
The Senate standing committee on economics said at the time it wanted an annual public report on “aggressive tax minimisation and avoidance activities” tabled in the parliament and a mandatory tax reporting code for any Australian corporation with an annual turnover above a certain figure.
The “You cannot tax what you cannot see” report said that increased transparency in reporting tax practices needed to be improved dramatically.
“[The committee] was also taken aback by the reluctance of some companies to disclose information to the committee, or, of greater concern, where some companies seemed not to be in possession of what seemed important information about their company’s operations in other countries,” the report said.
