news The Federal Government has agreed to share Australian information with other nations as part of a plan to combat tax avoidance by multinationals.
The deal will give the Australian Taxation Office (ATO) increased scope in ensuring companies pay their fair share of tax, said the government.
On Wednesday, 27 January, Australia was one of 31 countries to sign a multilateral agreement in Paris to share tax information on the activities of multinational companies.
The agreement will boost the exchange of multinationals’ country-by-country reports between tax authorities in different jurisdictions. The reports will contain details of multinational firms’ international transactions, including the location of their income and taxes paid, as well as setting out their transfer pricing policies.
Country-by-country reporting is one of the outcomes of the OECD/G20 Base Erosion and Profit Shifting (BEPS) project and a component of the government’s recently enacted multinational tax avoidance law.
BEPS refers to tax planning strategies that exploit gaps and mismatches in tax rules between jurisdictions to artificially shift profits to low or no-tax locations, resulting in little or no overall corporate tax being paid.
Access to adequate transfer pricing information is essential to tackling international profit shifting, said the government. The agreement signed in Paris will enable the ATO to exchange key information on the activities of multinationals with foreign tax administrations in the most “effective and efficient way possible”.
The government further said it is committed to shutting down tax avoidance strategies used by multinationals who have exploited such holes in the international tax system.
“The Government inherited a tax system from Labor that had failed to keep pace with the changing times, the growing importance of intellectual property, digital technology and integrated global supply chains,” said a statement from the office of the Treasurer Scott Morrison.
Tightening the transfer pricing rules and introducing the Multinational Anti-Avoidance Law has made it “harder than ever “for companies to shift profit offshore by “mispricing” their dealings with foreign-related entities, the statement added.
The ATO has stated that additional revenue from the Multinational Anti-Avoidance Law alone will be in the hundreds of millions.
The issue of multinational tax payments raised its head just this week, when tech giant Apple insisted that it pays all of its local taxes despite financial results that saw the company pay extra taxes of just $4.5 million last year from an extra $1.8 billion in local revenue.
In response to a query from Delimiter, Apple said: “Apple Australia pays all taxes it owes in accordance with Australian law.”
However, the Australian Taxation Office is currently auditing Apple’s 2012 financial results for compliance with Australian taxation law.
Elsewhere, the company has been forced into paying Italy €318 million to settle a tax dispute, and is under growing pressure on the issue in a number of jurisdictions worldwide.
However, the Government’s announcement did not find favour with the Opposition. Shadow Assistant Treasurer Andrew Leigh issued a statement claiming that the Government’s record on tax included 4,700 jobs cut at the Australian Tax Office; A deal with the Greens to wind back tax transparency; and a multinational tax plan so vague that Treasury couldn’t cost it.
“Labor has consistently argued that Australians demand strong tax laws, greater transparency, and a well-staffed tax office. We have a costed multinational tax policy ready to go that would deliver $7.2 billion in revenue over the decade,” said Leigh.
“Signing the agreement to share multinational tax information with other countries is a belated step in the right direction for the Coalition, but it strains credibility to think after years of undermining the ability of the tax office to act that they are any closer to seriously addressing multinational tax avoidance.”