BUDGET 2013: Wayne Swan Is Planning A Tax Crackdown On Big Business Worth $4 Billion

A sweeping crackdown on crafty corporate accounting will see the Government net more than $4 billion in extra tax revenue over the next four years.


In his sixth budget, Treasurer Wayne Swan said the government would crack down on profit-shifting tax loopholes exploited by big business by tightening rules that allow them to artificially load debt into their Australian operations, stamping out “dividend washing” and improving offshore banking regulations.

The Government would also make changes to capital gains tax rules for foreign residents, invest in the Australian Tax Office’s operations and amend the regulations covering tax deductions for resources exploration.

“International tax rules that give multinational enterprises access to tax arrangements that are not available to domestic firms provide them an unfair competitive advantage,” the Budget papers say.

The biggest boost to revenue will come from fixing rules that let multinational corporations allocate debt to Australia, by “tightening and improving the integrity of several aspects of Australia’s international tax arrangement.”

This will take effect from 1 July next year, and is predicted to boost revenue by $1.5 billion over the forward estimates period to June 2017. The Government said it would consult industry on implementation.

The second biggest boost to revenue will come from a revision of tax deductions for the cost of assets first used for exploration, by excluding mining rights and information. This measure is expected have a $1.1 billion impact on revenue.

The Government said this would “better target resource sector concessions for depreciating assets to support genuine exploration.”

Both Swan and the Prime Minister had flagged concern over sophisticated accounting ploys used by international businesses, after repeated tax revenue write-downs cut a $17 billion hole in Federal Budget estimates in the lead-up to tonight’s announcement.

In what is probably bad news for investment bankers, from 1 July this year the Government said it would raise $60 million by 2017 by bringing an end to “dividend washing” by sophisticated investors.

“Dividend washing” is when an investor sells shares with a dividend and then straight away buys equivalent shares that still carry a dividend. Under the new rules they will only be entitled to use one set of franking credits.

Changes to Capital Gains Tax will also come into effect from tonight, which will make sure that indirect Australian real property interests are taxable if disposed of by a foreign resident. This is expected to improve revenue by $219.2 million.

A $109 million kick to the tax office’s war chest over four years will also increase revenue by $576.5 million, with the money going towards increasing compliance checks in offshore marketing hubs and of business restructures. In underlying cash terms, that investment is estimated to increase receipts by $406 million.

All up the measures are expected to increase revenue by around $4.1 billion over the forward estimates period.

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