Heat on Joe Hockey over tax avoidance deal as government prepares to host G20

Labor has accused the government of procrastinating on a key measure to stop multinational companies shifting profits offshore.

It comes as the government prepares to chair the G20 finance ministers meeting in Cairns next week.

The information-sharing deal, part of the global push to tackle tax avoidance, has been signed by 40 countries, including Britain, the US and tax havens such as the Cayman Islands.

The Abbott government has delayed signing the deal to consult with business.

Companies such as Apple, Google, Ikea, and Glencore Xstrata have been accused of deliberately reducing their tax bills in Australia by relocating profits overseas.

Treasurer Joe Hockey warned last week that government would not stand “idly by” while multinationals avoided tax.

But Labor’s assistant treasurer spokesman Andrew Leigh said the government was talking tough on tax dodging while avoiding action.

“Joe Hockey has huffed and puffed in the Parliament about tackling multinational tax avoidance but continued to stall on a key initiative that would actually achieve this,” he said.

“As the current chair of the G20, it is an embarrassment that Australia has not yet signed up to this important tax measure which we helped negotiate.”

The information-sharing deal was endorsed by finance ministers at the G20 meeting in Sydney in February as part of a global crackdown on tax dodging.

A spokeswoman for Mr Hockey said the government remained committed to the deal.

“The Treasurer has made this a priority of the G20 finance ministers,” she said. However, she would not say whether it would change its plan to address business concerns.

“The government always encourages and listens to stakeholders around important issues,” she said.

Australia’s banks and financial institutions have criticised the deal as being too costly and ineffective, saying costs would be passed along to consumers.

The deal would require banks to pass on account information about suspected tax dodgers to tax authorities around the world.

Labor says it would not only tackle tax avoidance by rich people but make it easier for tax authorities to identify profit-shifting by global firms.

“At the moment, companies can use opaque networks of trusts, associated companies and individual accounts to obscure the true value of their profits and assets,” Dr Leigh said.

“Giving tax authorities access to information about these entities’ bank balances, interest and other details will allow them to see through these networks to better identify profit shifting and tax evasion.”

Business lobby groups have ramped up their push for lower corporate taxes, saying Australia’s 30 per cent tax rate was acting as a deterrent to companies wanting to invest in Australia.

Business Council of Australia president Catherine Livingstone said on Thursday that Australia was losing out to lower tax jurisdictions in the Asia-Pacific.

“Without change, our tax system runs the very real risk of deterring investment, reducing incentives for businesses to employ people and compromising Australia’s attractiveness to skilled and talented people,” she told a tax forum in Sydney.