OECD releases multinational corporate tax avoidance recommendations

Tax experts say the effectiveness of a raft of internationally focused recommendations to stop corporate tax avoidance depends on the approach of each country.

The Organisation for Economic Cooperation and Development (OECD) released the final recommendations of its two-year, G20-commissioned base erosion and profit-shifting project, otherwise known as BEPS, on Monday.

It aims to claw back as much $240 billion in lost revenue each year through dodgy tax practices across the globe, which the OECD said represents up to 10 percent of global corporate income tax revenues.

"The OECD should be commended for issuing its recommendations, but whether this constitutes a game-changing moment depends on each country," Zara Ritchie at tax consultant BDO told AAP on Tuesday.

The BEPS measures include new minimum standards for country-by-country reporting, which will for the first time give tax administrators a global picture of operations of multinational enterprises.

They also aim to stop companies being set up purely to channel investments into tax havens, curbing harmful tax practices and ensuring the fight against double non-taxation does not result in double taxation.

David Watkins, a partner at Deloitte, said existing rules can no longer cope with the globalised, digitised, innovative economy of the 21st century.

The changes will have major impacts on governments, multinational corporations, their management, boards of directors, professional advisers, and tax authorities globally.

"Collectively, the international tax system will be made significantly more robust," he said.

But head of tax at EY Australia Craig Robson wants a considered approach by Australia, saying any new rules must be clear to limit any disruption to businesses operating across borders and don't result in unintended consequences.

"It is also almost certain that the volume and complexity of the change involved in these recommendations will create uncertainty and increase the risk of tax disputes," he told AAP.

OECD secretary-general Angel Gurria said in a statement on Monday the measures are the most fundamental changes to international tax rules in almost a century.

"They will put an end to double non-taxation, facilitate a better alignment of taxation with economic activity and value creation, and, when fully implemented, these measures will render BEPS-inspired tax planning structures ineffective," he said.

"BEPS is depriving countries of precious resources to jump-start growth, tackle the effects of the global economic crisis, and create more and better opportunities for all. But beyond this, BEPS has been also eroding the trust of citizens in the fairness of tax systems worldwide."

Over 90 countries are developing a mechanism to incorporate the tax treaty-related BEPS measures into the existing network of bilateral treaties, the OECD said, with work set to be completed in 2016.

In August, it was revealed that AU$31 billion was funnelled from Australia to Singapore in a year by 10 multinational companies.

"There has to be consequences for these companies, for what they're doing," Jason Ward, who was part of a coalition that sought Freedom of Information documents over corporate Australia's tax avoidance, said at the time. "It's not illegal, but it's completely immoral."

Days later, a parliamentary report recommended that the Australian government make companies competing for government contracts say where they are taxed, as well as naming and shaming corporate tax dodgers.

The committee formed the view that overseas tax incentives offered to multinational companies are behind aggressive tax minimisation and erosion of Australia's tax base, and that Australia should work with the OECD to tackle base erosion and profit shifting, but, if need be, be prepared to take unilateral action.

"[The committee] was also taken aback by the reluctance of some companies to disclose information to the committee, or, of greater concern, where some companies seemed not to be in possession of what seemed important information about their company's operations in other countries," the report said.

"The committee, however, is dismayed by the ingenuity shown by some companies in avoiding answering questions posed by the committee. This reluctance verged on contempt for the committee process, exhibited disdain for Australian taxpayers, and overall reflected poorly on those particular companies."

Under testimony at an Australian Senate inquiry into tax avoidance in April, tech giants Apple, Google, and Microsoft all admitted that they were being audited by the Australian Taxation Office.

Former Australian Treasurer Joe Hockey labelled companies engaging in tax evasion as "thieves".

"They're stealing from us and our community," Hockey said in November. "The only way we can address this is through global action.

"We can have all the measures we want in Australia, but there will still be ways they can try and reduce, significantly reduce, or even evade their tax obligations in Australia."

Prior to being dumped from his position by Communications Minister cum Prime Minister Malcolm Turnbull, Hockey announced in August that from July 2017, Australians will have to pay GST on all products and services sold from overseas into Australia.

The change will lower the threshold for GST collection from online goods from its current AU$1,000 level to zero.

The Australian Taxation Office is set to target companies selling more than AU$75,000 of goods and services in value into the country, asking them to register for GST collection. Hockey said, at the time, that the number of companies targeted could be in the hundreds.

Hockey was replaced a month later as treasurer by former social services minister Scott Morrison upon the ascent of Malcolm Turnbull to the prime ministership.

With AAP