In a bid to halt the diversion of profits earned by multinationals in Australia to no or low tax jurisdictions, treasurer Joe Hockey will use the federal budget to tighten taxation rules.
The Tax Commissioner will be able to recover unpaid taxes and issue fines of double the amount owing, plus interest.
Earlier this year, Hockey turned to British chancellor George Osborne for advice after the UK established a diverted profits tax for profit declared overseas but earned from local activity. Today he said after consultation with the UK it was clear Australia did not need to replicate it.
“If we strengthen our own anti-avoidance laws to ensure the Tax Office has the powers to see through these contrived arrangements, then we will be able to recover the tax that should be paid in Australia,” Hockey said. “Our penalties for diverted profits will go further than the United Kingdom.”
The treasurer said members of the Australian Tax Office have been embedded in a number of multinational businesses to better understand their complex taxation arrangements.
And while he would not specify companies in the firing line for the corporate tax crackdown, one example of a multinational earning large sums but paying little tax in Australia is Apple. In 2013, the computer giant had revenues of more than $6 billion in Australia but paid just $56 million in tax. And Google which reported paying just $4.1 million in tax on revenue of $268 million.
Hockey said there were 30 multinationals which have used the “contrived or artificial tax arrangements such as the much publicised ‘Double Irish Dutch Sandwich’.”
“These contrived and very complicated arrangements have been used to avoid paying Australian tax,” he said, adding the Budget will include legislation which strengthens Australia’s anti-avoidance regime.