OECD urges multilateral approach to tax
Treasurer Joe Hockey is working on new laws to counter tax avoidance by global companies, but the OECD is urging countries not to go it alone.
The Paris-based institution has been working on a so-called base erosion and profit-shifting action plan through the G20 since 2013 and is aiming to complete its work by October.
The OECD’s director for tax policy and administration Pascal Saint-Amans said this ambitious timeline was set because a number of countries are eager to take action quickly.
He told a Senate inquiry into corporate tax avoidance on Thursday in Canberra that unilateral action is much less effective.
“If you act on your own it is going to be more difficult to fix the issues than if all the countries act together,” he told the hearing via video conference.
But away from the hearing, Mr Hockey revealed new laws were being drafted to combat tax avoidance outside the OECD’s global approach.
He declined to call it a Google tax – the nickname given to action taken by the UK government – but would not speculate what form it might take.
The government was “absolutely determined to do whatever we can, as soon as we can”, he said.
Mr Hockey will travel to this weekend to Washington for a G20 finance ministers meeting that will again discuss tax avoidance.
Treasury deputy secretary Rob Heferen told the hearing profit-shifting was a “huge issue” that probably mattered more to Australia than almost any other country, bar Norway, because Australia relies heavily on corporate tax revenue.
But Mr Heferen also warned any tax changes needed to be well considered to ensure they did not unnecessarily affect legitimate business activity.
“The risk of overreaching is high,” he said.
Business Council of Australia chief economist Lisa Gropp was concerned that if more countries take unilateral action then the whole multilateral process will fall apart.
The second day of the inquiry proved less fiery after the first instalment in Sydney on Wednesday where there were sometimes heated exchanges between senior executives from global tech giants Apple, Google and Microsoft and senators.
But the Canberra hearing was not without its moments.
Rosheen Garnon, the national managing partner of tax at KPMG, had an unfortunate slip of the tongue while defending the firm’s employee secondment program with Treasury.
“As we develop the laws, let me rephrase, as Treasury is developing the laws …,” she stumbled.
Greens leader Christine Milne pounced on the misstep, concerned that bureaucrats responsible for legislation were working with others offering advice on how to avoid the same laws.
