Australia widens legislation to target more companies for tax avoidance

Federal government increases number of companies under tax office scrutiny from 30 to 80 under budget measures announced in May

The federal government has widened the scope of legislation aimed at tackling multinational tax avoidance, increasing the number of large companies under the tax office’s microscope from 30 to 80.

The government announced budget measures in May that allow the Australian Tax Office (ATO) to receive information on 30 multinationals that have a global revenue of more than $1bn.

“From the beginning of next year that would extend to around 80,” the treasurer, Scott Morrison, said.

Legislation was introduced into parliament in September to enhance the integrity of the tax system by closing loopholes that allow large corporations to avoid paying their normal share of tax. The government wants legislation passed in time for the laws to come into effect on 1 January.

A Senate inquiry looking into multinational tax avoidance recommended that companies that deliberately avoid tax be named and shamed.

The tax commissioner, Chris Jordan, rejected the idea.

“Under our secrecy laws, we are compelled to hold our discussions in private,” he told reporters in Sydney on Wednesday. “I don’t see any particular advantage in us sort of trying to name and shame companies.”

The Organisation of Economic Cooperation and Development (OECD) has released a 15-point plan to increase transparency and minimise tax avoidance practices.

The organisation estimates that between 4% to 10% of global revenue is lost through base erosion and profit shifting measures, amounting to up to US$240bn annually.

G20 leaders will discuss the OECD anti-avoidance measures when they meet in Peru on Thursday.

Morrison said Australian laws were stronger than those in other countries, meaning the tax recouped would not be as high.

“You need to be wary here when others are making claims about how much can be raised here, and suggesting it can be used for any number of things. I think there’s a very big question mark over that,” the treasurer said.

The budget included a strengthening of penalties for companies that deliberately shirk their tax burden.

Jordan said it was “not possible” to give a precise figure on the amount of tax lost in Australia.

“I’m very reluctant to try to sort of throw a figure out there,” he said. “What I have said in the past is we know there are billions of dollars of sales that are booked overseas from activities that directly occur here in Australia.”

“I should acknowledge that the majority of corporates do pay the right amount of tax in Australia and are open and transparent in their dealings with us. However, there is a minority that try to avoid their obligations and we do act on behaviour that is questionable.”