The government is creating a new operational taskforce of more than 1,000 specialist staff at the Australian Taxation Office (ATO) to prosecute companies, multinationals and high wealth individuals who are not paying enough tax.
This is one of several measures to combat multinational tax avoidance announced by treasurer, Scott Morrison during his maiden budget speech on Tuesday night.
Other measures, expected to contribute to raising an additional $3.9 billion in revenue over the next four years, include:
- Introducing a diverted profits tax or ‘Google Tax’, as implemented in the United Kingdom, that taxes multinationals on income they have sought to shift offshore at a penalty rate of 40 per cent, that is higher than the current company tax rate
- Strengthening protections for whistleblowers who report tax avoidance
- Increasing penalties for multinational that fail to meet their compliance and disclosure obligations to the ATO.
Corporations that attempt to avoid tax by shifting profits offshore will be subject to targeted anti-avoidance measures and high penalties, budget documents said.
In last year’s budget, the government announced a ‘Multinational Anti-Avoidance Law’ aimed at stopping multinationals using complex schemes to escape paying tax.
It targets multinational firms with taxable revenues of $1 billion or more and companies caught cheating are asked to pay back double what they owe plus interest.
“The new power and penalties in these laws are now in place and supporting the Australian Taxation Office to ensure multinationals pay tax on what they earn in Australia,” Morrison said during his budget speech.
Morrison said everyone has to pay their fair share of tax, especially large corporates and multinationals, on what they earn here in Australia, not avoid tax by shifting their profits offshore.
Last year, the government said it had identified 30 multinational companies that have diverted profits away from Australia to avoid paying their fair share of tax here.
Specific organisations have not been named by last year during a Senate inquiry into tax avoidance, the tax practices of technology companies Apple, Google and Microsoft came under scrutiny.
The companies told the enquiry at the time that they were being audited by the Australian Taxation Office.
Responding to the changes, shadow assistant treasurer, Andrew Leigh, claimed the government’s savage cuts to the ATO – axing 4,700 jobs – have cost revenue over the past two years, and promising to restore some of the agency’s funding in this budget is an admission of failure, not a new crackdown on multinationals.
“It’s too little and too late,” Leigh said.
“Putting aside their enforcement measures, the Coalition’s multinational tax measures are budgeted to raise just $200 million over the forward estimates – or $650 million if we include the costing they now attribute to last year’s measures.
“This falls well short of Labor’s multinational tax package, which raises $1.9 billion over the forward estimates, and $7.2 billion over the decade,” he claimed.
Leight said that unlike the Coalition, Labor will close debt deduction loopholes that allow multinationals to siphon money out of Australia.
“Under our policy, there will be no arbitrary thin capitalisation threshold. Firms will be subject to a worldwide gearing ratio, meaning they can only deduct debt from their Australian operations up to the overall level of debt held by the multinational group,” he said.