Treasurer Joe Hockey has announced new measures “to deal with the activities of 30 identified multinational companies” that were accused of diverting profits made in Australia to low tax jurisdictions.
Mr. Hockey said the new rules have been designed with a better understanding of the situation after the government spent several months to reverse-engineer the contrived and complicated tax arrangements, such as the much-publicised “double Irish Dutch sandwich” used by some companies to shift profits offshore without breaking laws.
Australia’s Senate inquiry into corporate tax evasion early April found that nearly all sales made by major multinationals – Apple, Google and Microsoft – were taxed in Singapore at almost half of Australia’s existing 30% tax rate.
The Australian Taxation Office’s report to the inquiry indicated that out of Australia’s $600 billion total trade, $388.4 billion was shifted overseas by multinationals to their offshore companies for tax minimization.
Representatives of the companies rejected any wrongdoing, saying their current tax payment complies with Australian law.
By the new measure, Australia will strengthen existing anti-avoidance law and provide the Tax Office with more powers, instead of replicating their Diverted Profits Tax, said Mr. Hockey.
“Our penalties for diverted profits will go further than the United Kingdom”.
Under the changes, the Tax Commissioner would have the power to recover unpaid taxes and slap fines of up to an additional 100 per cent for unpaid taxes, plus interest.
In addition to the multinational anti-avoidance law, another measure what the treasurer called “Levelling the playing field for GST” will be formally announced as part of the Budget on May 12.
“It is plainly unfair that a supplier of digital products in Australia has to charge GST and an off-shore supplier does not.
“When the GST legislation was drafted it did not anticipate the massive growth in the supply of digital goods like movie downloads, games and e-books from overseas,” Mr. Hockey said.
Extending GST to digital goods is to deliver an anticipated $350 million in additional revenue, which will flow through to the states.