Today I am announcing that the Government will be proceeding with two new major tax integrity measures in the Budget tomorrow night.
Multinational Anti-Avoidance Law
The first measure deals with the activities of 30 identified multinational companies.
These companies are diverting profits earned in Australia away from Australia to no or low tax jurisdictions.
After months of the Australian Taxation Office being embedded in these businesses we now have a better understanding of how these companies have used 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.
Tomorrow night I will be releasing legislation that strengthens our anti-avoidance regime.
After consultation with the United Kingdom it is clear that we do not need to replicate their Diverted Profits Tax.
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.
Our penalties for diverted profits will go further than the United Kingdom.
The Tax Commissioner will have the power to recover unpaid taxes and issue a fine of an additional 100% of unpaid taxes plus interest.
Australia has played a lead role in the BEPS program that has helped facilitate this measure.
Levelling the playing field for GST
The second tax integrity measure will ensure that there is a level playing field for the suppliers of digital products and services in Australia in relation to the GST.
It is plainly unfair that a supplier of digital products in Australia has to charge GST and an off-shore supplier does not.
When the GST legislation was drafted it did not anticipate the massive growth in the supply of digital goods like movie downloads, games and e-books from overseas.
I have consulted with the States and Territories and following further discussions at an officials level we are releasing the draft legislation for review.
The revenue from this initiative is expected to be $350m over the next four years, every dollar of which will go to the States.
The OECD has recognised this as a problem for some time and a number of companies are working constructively with governments.
A number of other countries have or will introduce similar rules such as Japan, Norway, South Korea, Switzerland and member countries of the European Union.
Application of multinational anti-avoidance law