Whilst speaking at the Press Club in Canberra, on the importance of ‘free-enterprise, the Assistant Treasurer: the Honourable Kelly O’Dwyer reprised the Government’s actions to deal with avoidance of tax by ‘multi-national enterprises’ and also elaborated about progress in some of those areas. Saying that it was a matter of ‘fairness’, she said the following.
“That is why in 2014 we tightened thin capitalisation rules to stop multinationals claiming excessive debt deductions, so they pay more Australian tax.
That is why we introduced the new Multinational Anti-Avoidance Law to stop companies artificially structuring themselves to move profits from doing business here to low tax countries.
And that is why we acted to introduce a whole raft of other measures such as country-by-country reporting and the common reporting standard.
Penalties for profit shifting have also now been doubled so that large companies caught out have to pay 100% of the tax they sought to avoid. All up the ATO estimates that they will raise $700 million over the coming year as a result of the multinational compliance program and hundreds of millions over the forward estimates as a result of the Multinational Anti-Avoidance Law.
And yet Labor voted against the legislation that allows the tax office to target this sort of behaviour.
For all their big talk on tax – they put their base political interest ahead of the national interest.
Not only have we ensured that tougher laws are in place, but we’re ensuring the tax office has the resources to enforce them.
The ATO has expanded its international team. It is now larger than it was under Labor.
The Government committed to the full funding of the ATO to pursue its International Structuring and Profit Shifting project which has raised over $400 million in liabilities since its commencement. There are 43 audits of large multinational companies in progress including 12 technology companies and three in the pharmaceutical industry.
Following introduction of the Multinational Anti-Avoidance Law, which came into effect on 1 January this year, the tax office has already identified 80 taxpayers as having arrangements in the general scope of the law and a further 300 taxpayers are being profiled. Significantly, while the law came into effect at the beginning of the year, the ATO can also pursue arrangements that were entered into before 1 January 2016.
Already, the Australian Taxation Office has been approached by companies who are keen to correct their arrangements and sort out their liability to the Australian taxpayer as a result of our new laws.
This is prudent. The alternative for these companies could be significantly worse.
You only need to look to the recent ruling by the Federal Court in favour of the ATO and the Australian taxpayer against Chevron for $180 million of primary tax and around $85 million in penalty and interest, and you just need to consider that this ruling applied the old law, not the tough new laws as they stand today.
Australia used our position as Chair of the G20 in 2014 to lead the global action plan on multinational tax avoidance.
In the year ahead, the Government will continue to work with the OECD and other countries to implement other OECD Base Erosion and Profit Shifting recommendations in a way that maximizes their effectiveness.
Last week, we joined 30 other countries in signing a multilateral agreement to share tax information on the activities of multinational companies.
We are also introducing GST on digital goods and services provided from overseas and low value items which are currently exempt. This will mean that foreign multinationals can no longer choose to sell their goods or services from overseas and avoid having to remit Australian GST – from next year they will have to compete on the same playing field as local Australian businesses.
But it doesn’t stop there.
The Government is currently finalising options for a tough new tax taskforce so Australians can be confident that no stone is left unturned to ensure that businesses that operate in Australia are paying their fair share of tax on the economic activity taking place in Australia.
The Government will ensure the ATO has the resources to test the law on an equal playing field with the world’s largest companies.
This tax taskforce will be accountable to the government through transparent reporting so Australians can have confidence in the integrity and fairness of our tax system.
We will also consider changes to the law to encourage, protect and reward whistle-blowers whose information reveals artificial tax structures and misconduct.
Big business will have to get their house in order, or suffer the consequences.”
[Assistant Treasurer’s Press Release dated 3 February 2016] [LTN 21, 3/2/16]