Global firms accused of diverting profits offshore to lower their tax bill will come under fresh scrutiny in Australia after new laws were introduced yesterday to ensure they pay their “fair share of tax.”
The bill was put before parliament amid an international push to stop firms using complex corporate structures to avoid tax, and targets more than 1,000 multinationals generating turnovers of more than A$1 billion (US$700 million), Australian Treasurer Joe Hockey said.
The complex methods allegedly used by firms include booking revenue in lower-taxing countries to reduce tax on profits in higher-taxing jurisdictions, with governments collectively losing billions of dollars in the process.
Photo: Bloomberg
“It is patently unfair for a large multinational with sophisticated structures not to pay its fair share of tax,” Hockey told reporters in Canberra.
“Under this new law, when we catch companies cheating, they will have to pay back double what they owe, plus interest,” the treasurer added in a statement.
Australian Tax Office Commissioner Chris Jordan said the bill also strengthened his agency’s abilities to go after firms that continue to shift profits to lower-taxing nations such as Singapore, adding that there were currently “billions of dollars” not being booked locally.
Hockey said the new laws would take a different approach from Britain, which in March introduced a so-called “Google tax” on companies that divert profits overseas, although treasury officials have been working closely with London on the issue.
The legislation will require public companies with income of more than A$100 million a year to disclose their tax affairs from Dec.1.
Rules will also be tightened so heavily geared firms cannot shift profits overseas through the guise of paying interest, while funding to the Australian Tax Office will be boosted to increase its focus on tax avoidance.
Hockey said at this stage he could not put a number on how much more corporate tax could be raised through the amendments.
An Australian parliamentary inquiry into corporate tax avoidance last month recommended naming and shaming firms that avoid paying tax, after hearings with senior executives from giants such as Apple Inc, Google Inc, Pfizer Inc and Johnson & Johnson.
The firms said they had operated within local and international tax laws.
International efforts to tighten laws have been led by the Organisation for Economic Co-operation and Development.
Under the G20, which encompasses the world’s top 20 economies, Hockey said that “very integrated and ... wide-ranging” proposals on how to allocate profits from multinational firms between countries were also being discussed.
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