Australia wants to plug tax loopholes that have been exploited by some of the largest multinational companies.
On Tuesday, the conservative government proposed new legislation to tighten the tax code which it says have allowed 30 of the world’s biggest multinationals to evade taxes.
The proposal, part of the federal budget this fiscal year, will enable authorities to pursue companies with more than A$1 billion (US$799 million) in global revenue that are found to have intentionally avoided paying tax in Australia for lost taxes, Reuters reported Wednesday.
With the new measures, Australia will join Britain in leading a crackdown on companies such as global tech giants, Apple and Microsoft, focusing particularly on their alleged shifting of profits from high-tax countries to low or no tax regimes.
“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,” Treasurer Joe Hockey told parliament.
“Under this new law, when we catch companies cheating, they will have to pay back double what they owe, plus interest.”
Under Australia’s leadership last year, the G20 leading economies endorsed a set of common standards of sharing bank account information across borders with automatic exchange of information among its members.
The Australian units of Google, Apple and Microsoft revealed earlier this year they were “under review” by the Australian Tax Office, 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 raising the cost of those goods to subsidiaries in high-tax regimes.
Pressure from the United States and the consensus nature of the OECD have made tackling this issue extremely difficult, said Antony Ting, an associate professor of economics at Sydney University.
“I think if Australia really wants to protect its tax base, we really need to think about something like a Google Tax or this kind of unilateral action,” he told Reuters, using the colloquial term coined for Britain’s proposed diverted profits tax.
Apple’s revenue in Australia grew from A$3.5 billion in 2010 to A$6.1 billion in 2013 while its taxable income went from A$166 million to A$240 million during the same period.
And while Australia does not represent these companies’ largest market, it is a significant and influential one.
Still, unilateral action is not without risks.
“It’s unwise and ill-advised and irrational to depart from current approaches and agreements expressed in OECD rules,” George Barker, an expert on taxation law and economics at the Australian National University’s Centre for Law and Economics, said.
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