Australia plans new law on tax avoidance
Sydney, 10 June (Argus) — The Australian government has released legislation to tighten rules governing corporate taxation such as the use of offshore tax havens. The bill is not aimed at any particular sector of the economy, but several resource and commodity companies have come under scrutiny following a Senate inquiry on the issue.
The bill seeks to target companies that carry out business activity in Australia but book the revenue generated from that activity in an offshore low tax or no tax jurisdiction. Treasurer Joe Hockey did not specify industries or companies the proposed law will target. A Senate inquiry into corporate tax avoidance revealed that UK-Australian resources firm BHP Billiton was in dispute with the Australian Tax Office over a A$522mn ($401mn) tax bill for booking mining profits through its Singapore marketing office.
The first measure of the law deals with the activities of 30 identified multinational companies, Hockey said. BHP Billiton is Australia’s largest corporate taxpayer.
The Australian Tax Commissioner under the proposed changes will have the power to recover unpaid taxes and issue a fine of an additional 100pc of unpaid taxes plus interest, Hockey said.
Corporate tax transparency is becoming an increasingly important issue for the global resources sector. The UK parliament in December implemented the EU directive on tax reporting transparency that requires the mandatory reporting of tax payments by resources firms on a country and project basis. This will require Shell, BP, UK energy firm BG, UK-Australian resources firm Rio Tinto, mining firm Anglo American and BHP Billiton to publicly disclose payments they make to governments starting in early 2016, when companies report their 2015 financial results.
The OECD has been spearheading an international drive to reduce corporate tax avoidance through its base erosion profit shifting (BEPS) among both member countries and resource-rich countries in the developing world.
Australia signed on 3 June the OECD common reporting standard multilateral competent authority agreement to catch taxpayers using hidden offshore bank accounts to evade Australian tax. The agreement, which enables the automatic exchange of common reporting standard information between countries, is key to cracking down on those who deliberately try to avoid paying their fair share of tax, said Australian parliamentary secretary Steven Ciobo.
Australia will implement the new standards from 1 January 2017 and first exchange information in 2018. The Senate committee carrying out the inquiry into Australian corporate tax avoidance is expected to release its report later this month.
