As Australia takes on the presidency of the G20 forum, Prime Minister Tony Abbott has signalled that a key focus for the government over the next year will be clamping down on multinational companies such as Google and Apple that seek to avoid paying taxes in Australia.
Multinational companies exploit loopholes in the tax codes of countries like Australia to shift their profits earned within Australia to countries such as Ireland, where there are lower taxation rates. The former government commenced a review into how it could close these loopholes, but ultimately, no decision was ever made prior to the election.
This morning, Abbott said that as part of the meeting of 20 of the world's biggest economies in Brisbane in November next year, he would like to see the G20 summit address transfer pricing arrangements to close these taxation loopholes.
"One of the things I would like to see is better international taxation arrangements, so that we don't have the kind of leakage from people's economies, which we are currently getting through transfer pricing arrangements, particularly in an internet age, and the principle ought to be that you pay tax on your income in the country where that income is earned," Abbott told 4BC Radio.
"If a business earns several billions of dollars in Australia, it should pay tax on those earnings here in this country. It shouldn't be able to transfer those earnings to Bermuda or somewhere like that and pay zero or very little tax on them."
Abbott said that the advent of the internet made it much easier for companies to avoid paying taxes.
"If you're an online business, it's certainly very easy for you to purport to earn income by various pricing arrangements in low-tax jurisdictions, and that's why this is an important challenge for us," he said.