International tax laws are 90 years out of date, which makes it tough to audit multinational companies, Australian Tax Office (ATO) commissioner Chris Jordan told the Australian Senate’s inquiry into corporate tax avoidance today.
Asked about the possibility of a UK-style diverted profits tax, Jordan said the problem was tax regulations failed to keep up with the digital age, and remained focused on manufacturing-era physical premises. He wants international laws that apply to domestic economies.
Here’s what he said:
I have said many times that the best long-term solution for everyone concerned, both taxpayers and us as revenue authorities, is to have some new, clear international rules that all the major countries adopt domestically.
Sometimes people ask how did we ever get into the situation that we’re in.
I think part of that problem is that the current international tax architecture was actually designed by the League of Nations in the early 1920s. Clearly it’s inappropriate because the main focus is still around physical presence… a factory, warehouses, that sort of thing. A growing part of our consumption has nothing to do with the physical presence in a particular country. It’s all about services being delivered in a digital fashion. And the argument goes that intellectual property has a lot of value and the server and that intellectual property could be located anywhere and hence that aggressive structuring.
Later today, the Senate Inquiry will hear evidence from the Australian heads of Apple, Google and Microsoft to determine whether greater transparency is needed to halt multinational tax avoidance.
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