The Government today took further strong action to ensure multinational companies pay their fair share of tax through the introduction of our multinational tax avoidance package.
This is part of the Government’s broader commitment to tax integrity, and further legislation in this area will be introduced imminently. Our tax integrity package includes ensuring the GST applies to all digital products and services, along with lowering the GST Low Value Threshold to zero.
Integrity must be a key component of any tax system.
When a company or an individual avoids paying their fair share of tax, it means Australian families and small businesses are forced to carry more than their fair share.
The legislation I put before Parliament this morning introduces the multinational tax avoidance package to ensure major international companies operating in Australia, but booking profits offshore, have to pay tax here.
Under this new law, when we catch companies cheating, they will have to pay back double what they owe, plus interest.
I am pleased to announce, after extensive consultation, the Multinational Tax Avoidance Package has been further strengthened.
The law will now cover all multinationals operating in Australia with global revenues above $1 billion. These 1,000 companies will need to consider the new rules if they have economic activities in Australia but book their Australian sales revenue offshore.
Further, our legislation implements the OECD’s Country‑by-Country reporting regime and new transfer pricing documentation standards, giving the Australian Tax Office a better picture of how these multinationals companies internally operate.
This package of measures has been developed through an extensive feedback and consultation process undertaken by Treasury – along with the result of having Tax Office officials working within key multinationals operating in Australia. The Tax Office now has additional detailed information of how many of these companies structure their tax affairs to avoid paying their fair share.
With the introduction of this legislation, we are sending a clear message that Australia has no tolerance for tax avoiders. If you are avoiding tax, the Australian Taxation Office will catch you.
This decisive action today adds to domestic action already put in place in this area to combat tax avoidance.
Firstly, we have provided $87 million to the Australian Taxation Office to focus on multinational tax avoidance, making the International Tax Division of the Australian Taxation Office larger than it has ever been. The division is now a full 14 per cent larger than what we inherited from the previous Government and has already been successful in collecting an additional $400 million in tax.
Secondly, we have legislated changes to thin capitalisation rules to help prevent multinationals from shifting profits overseas through excessive interest deductions. These rules are now tighter than they have ever been and are currently being enforced.
And come 1 December of this year, for the first time there will be mandatory disclosure of the tax affairs of major public companies whose total income is more than $100 million.
Finally, internationally, Australia used our position as President of the G20 in 2014 to spearhead the international action on multinational taxation, both through the OECD Base Erosion and Profit Shifting Action Plan and bilateral action. Next month, the OECD will deliver its final recommendations across 15 key areas to deal with multinational tax avoidance.
Further to this, in April, the Chancellor of the Exchequer and I announced the formation of a joint working group to further consider and develop initiatives in relation to diverted profits by multinational enterprises. The working group is building on the UK’s experience of introducing a Diverted Profits Tax, which came into effect at the beginning of April.
The outcome of these initiatives will inform the Government whether any further action is required due to changing circumstances in the future.
The former Government achieved practically nothing in this space during their six years in office. In contrast our Government has taken strong action to ensure companies pay their fair share of tax.
These reforms are more broadly part of our package to improve and modernise the financial system, which will include enacting recommendations from the comprehensive Financial System Inquiry. The Government response to this Inquiry will be released imminently.