In an address in Melbourne on Fri 4.7.2014, Treasury Revenue Group Executive Director Rob Heferen gave his perspective on the opportunities that globalisation and the digital age have created, and in particular the implications for Australia’s corporate tax system and the tax system as a whole. Some of the points he made included:
- International commerce has always posed difficulties for tax policy. Investors may reside in one country, manufacturing takes place in another, marketing and R&D goes on in a third country and consumption in a fourth. All 4 jurisdictions have a potential taxation claim. And this is where the problems of double taxation arise, Mr Heferen said.
- Corporate taxing rights stem ultimately from assumptions about where value is created and economic activity occurs. The essential principle is that you should normally pay tax in the country where you’ve earned the profit. This has in truth never been straightforward, but in the digital world, it has become increasingly contested.
- While national and international efforts will go some way to addressing BEPS, the increasing importance of intangibles means “we are dealing with major changes in our economy that require a fundamental rethink of our tax policy”, Mr Heferen said.
- Australia’s high rate of corporate tax will always leave it vulnerable to profit-shifting.
[LTN 127, 4/7/14]