Australia back in the ring to fight transnational tax evaders

After a year of simmering and discussions amongst the G20 group of nations and the Organisation for Economic Co-operation and Development (OECD), the Australian government is once again looking to turn the heat up on multinational enterprises engaging in tax avoidance schemes.

Speaking in federal parliament today, Australian Treasurer Joe Hockey said it was "rational and fair" to expect multinational enterprises to pay tax in the country where profit is earned.

"There is a small proportion of multinational businesses that set up sophisticated arrangements to avoid Australian tax," he said. "This is patently unfair — unfair on the Australian taxpayer and unfair on local businesses that are doing the right thing."

"We are determined that multinational taxpayers will not be able to avoid their Australian tax obligations by shifting their international profits to low tax or no tax jurisdictions."

"I have asked the Commissioner of Taxation to double his efforts in this area by undertaking more extensive inquiries and audits of multinational companies considered a risk to Australian tax collections."

Acknowledging that Australians often pay more for IT hardware, software, music, games, sporting equipment, and fashion, Hockey said the Australian Taxation Office would look at whether Australia's transfer pricing rules applied to determine the amount of profits from Australian operations that a company should be taxed on.

Although a favourite topic of the former Labor government, the issue of correctly taxing multinational companies such as Google or Apple has not been taken up with the same vigour by the Coalition, who have instead preferred to work through organisations such as the G20 group of nations on the issue.

With the next meeting of the G20 Finance Ministers to be held in Cairns in a fortnight, of which Australia is the current president, Hockey said the G20's tax agenda would look at base erosion and profit shifting, tackling tax avoidance, and promoting tax transparency and automatic exchange of information.

"The G20's tax agenda responds to international concern about the ability of multinationals and high wealth individuals to avoid or evade their tax liabilities," the treasurer said. "The G20 is committed to making our international tax system fairer for all countries, whether they are fully developed economies or not."

In concert with the OECD and its base erosion and profit shifting action plan, Hockey said progress was being made in the G20 to update international tax rules for the 21st century.

"The Action Plan is aimed at ensuring that international tax rules keep up with advances in multinational companies’ business models, such as greater use of intellectual property and information technology, and integrated global supply chains," he said.

Shadow Treasurer Chris Bowen said in response that while the opposition agreed with the full principles of Hockey's statement to parliament, it was without substance or any advances forward.

"Simply asking the Tax Office and the Tax Commissioner to double your compliance effort, at the same time as reducing funding for the Australian Taxation Office, makes absolutely no sense at all," Bowen said.

"We asked the Tax Commissioner to increase tax compliance efforts as well, but we gave them the resources to do it."

"It takes more than words to beat tax evasion."

While not addressing tax issues, Bowen called on the government to consider the recommendations from the IT pricing inquiry tabled last year, to address a disparity in pricing for IT in Australia compared to what consumers pay in other markets such as the US.