Australia yesterday announced plans to go after large multinational firms shifting profits offshore to minimize taxes, with 30 companies in the government’s sights.
It also outlined proposals to force companies selling digital products, such as streamed content and e-books, to pay a Goods and Services Tax (GST).
Australian Treasurer Joe Hockey, who last year said the practice of corporations shifting profits amounted to “theft,” said he would reveal the new legislation when he hands down the national budget today.
“The government will be proceeding with new tax integrity measures in the budget,” Hockey said, adding that the multinational anti-avoidance law would target the activities of 30 identified companies.
“These companies are diverting profits earned in Australia away from Australia to no tax or low-tax jurisdictions,” he said.
The initiative comes amid increased efforts by governments around the world to crack down on global firms that use complex corporate structures to lower their tax bills.
Last month, Australian parliamentarians grilled global technology and mining giants including Apple Inc, Google Inc, BHP Billiton and Rio Tinto at an upper house Senate hearing on their tax structures. The firms insisted that they had paid the taxes they owed under the country’s laws.
The inquiry heard Google Australia in 2013, for example, made A$358 million (US$275 million) in income, generated profits of just over A$46 million and paid A$7.1 million in tax.
Hockey did not name any of the companies being targeted, or say how much revenue the government hopes to get back, but said the Australian Tax Office had spent months embedded in some of the world’s biggest firms.
They had noted that billions of dollars in profits have been transferred offshore to minimize tax in Australia.
Under an arrangement described by Hockey as a “double Irish Dutch sandwich,” firms often send profits first through an Irish company to a Dutch company and finally to a second Irish company headquartered in a tax haven. Singapore is also a cog in the system.
Hockey said companies often bill from the city-state for business activity that happens in Australia.
“The money is transferred to Ireland and then advantage is taken of a range of different EU tax procedures in relation to royalties,” Hockey said. “This is all designed to avoid paying tax in Australia on profits earned in Australia.”
Under the planned rules, the tax commissioner will have the power to recover unpaid taxes and issue a fine of an additional 100 percent of the unpaid taxes plus interest.
Hockey said the new taxation powers would not take effect until Jan. 1.
Australia made closing corporate tax loopholes and endorsing a common reporting standard to increase transparency a key focus of the G20 meetings last year when it assumed the rotating presidency.
Hockey also plans to impose a GST on digital products.
“It is plainly unfair that a supplier of digital products into Australia is not charging the GST whilst someone locally has to charge the GST,” he said.
Additional reporting by AP
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