Budget 2017: Crackdown on multinational tax 'black economy'

The Australian government is continuing to crack down on multinational tax avoidance and the 'black economy' under a new set of recommendations to be implemented.
Written by Corinne Reichert, Contributor

The Australian government has announced a crackdown on the "black economy", saying it will continue fighting multinational tax avoidance through a ban on sales suppression technology.

The Black Economy Taskforce was formed in December in order to develop a whole-of-government response to the so-called black economy, with its interim report and recommendations being announced on Tuesday during the Federal Budget 2017-18.

"Banning the manufacture, distribution, possession, use, or sale of sales suppression technology," one of the recommendations says.

"This technology allows businesses to understate their income, and has been identified as a threat to the integrity of the tax system both in Australia and internationally."

Along with recommendations to extend the Taxable Payment Reporting System to cleaning and couriers, and to provide funding for the Australian Taxation Office (ATO) to audit and target black economy risks, Australian Finance Minister Mathias Cormann said the program would result in a net gain to the Budget of AU$632 million.

The government said on Tuesday that it will provide AU$8.1 million over two years to fund its tax integrity measures, including the Diverted Profits Tax (DPT) -- known as the "Google tax" -- introduced in March.

According to Treasurer Scott Morrison, the ATO has already raised AU$2.9 billion in tax liabilities under the DPT against just seven multinational companies, and expects to raise more than AU$4 billion this financial year.

"Tonight, we are toughening the Multinational Anti-Avoidance Law to extend the rules to structures involving foreign partnerships or trusts and clamping down on aggressive structuring using hybrids," Morrison added.

"We will also be introducing new tax integrity measures as recommended by our Black Economy Taskforce."

The DPT, first announced in the 2016-17 Budget, will apply a 40 percent tax on all profits to multinationals with global revenue of more than AU$1 billion and Australian revenue of greater than AU$25 million in an effort to prevent the practice of multinational organisations shifting profits made in Australia offshore to avoid paying tax.

As a result of the government's crackdown on multinational tax, Google, Apple, Samsung, and Microsoft upped the amount of tax they paid in Australia during the 2014-15 financial year.

As of July 1, 2016, companies operating with an annual global income of more than AU$1 billion in Australia are required to lodge their general purpose financial statements to the ATO if they are not already doing so with the Australian Securities and Investments Commission.

The laws were implemented in response to recommendations made by the Organisation for Economic Cooperation and Development (OECD) from its G20-commissioned base erosion and profit-shifting (BEPS) project.

Under BEPS, the OECD expects governments to be able to regain as much as $240 billion in lost revenue each year through deceitful tax practices across the globe, which it claims represents up to 10 percent of global corporate income tax revenues.

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