Treasurer Joe Hockey says United States is looking to take share of Australia’s tax base

Treasurer Joe Hockey has taken aim at the United States for dragging its feet on taxing multinationals such as Google, and says the Obama administration now wants to come after Australia’s tax base.

Australia has been working with the United Kingdom on a local version of Britain’s ‘Google tax’ to try and collect more money from multinationals.

The United States has been critical of such taxes, long arguing that it will not sign up to a plan that cannibalises its tax base.

Earlier this month deputy assistant secretary for international tax affairs at US Treasury, Robert Stack, told the OECD international tax conference in Washington that Britain’s Google tax, and Australia’s multinational tax avoidance legislation, had “shone a spotlight on the degree to which political pressure can trump policy”.

Without explicitly naming the United States, Mr Hockey inferred that he was concerned that the Obama administration had taken too long to come to the table on the issue, and was now looking to protect its own tax base.

Most of the companies accused of not paying tax are headquartered in the United States. This has made it difficult for the OECD to get agreement from G20 governments on all elements of its Base Erosion and Profiting Shifting (BEPS) project.

In answer to questions at PwC’s tax forum held in Melbourne on Wednesday, Mr Hockey said he wanted Australia to become more competitive globally, but it was important foreign-based multinationals paid their fair share of tax domestically.

“When I first became Treasurer and raised at the G20 the fact that multinationals were not paying their fair share of tax, a number of finance minister colleagues – well in fact just one or two – said, ‘leave it alone, they’re our companies.They pay their fair share of tax in our jurisdiction’.

“I must say that view has changed over past 12 months, and that country in particular has decided to not only go after the tax those companies owe in their jurisdiction, but they are trying to get the tax out of them that is owed in our jurisdiction as well. So there’s been quite dramatic sea change in the G20 and across the OECD in the last 18 months.”

Mr Hockey defended his plan to collect more tax out of multinationals by beefing up domestic anti-avoidance measures.

He also took aim at other multinationals, including Chinese online business Alibaba, which is now listed on the New York Stock Exchange.

The company operates out of China but has a holding company registered in the Cayman Islands.

“Alibaba doesn’t pay tax anywhere,” Mr Hockey said.

“More and more companies have no effective domicile, they are global citizens.”

“Google might have a head office in the US, but it’s truly global.”
M Hockey said the debate on tax reform needed to consider whether GST and company tax would be around in 30 years.

He said the fact was that all nations were seeing their tax bases eroded, and Australia needed to ensure it remained competitive in such an environment.

“Twelve companies in Australia provide a third of all our company tax,” he said.

“Ten per cent of Australian workers pay almost 50 per cent of our income tax, they’re the most mobile and agile in Australia. You lose a few of them and all of a sudden it erodes your tax base. This is a big challenge we’re facing going forward.”