Australia to gain from Singapore joining OECD fight against multinational tax avoidance

Multinationals suspected of routing Australian profits via Singapore will be outed to tax authorities, with the low-tax nation this week signing up to the global plan to fight tax evasion.

Companies including big miners BHP Billiton and Rio Tinto as well as technology giants Apple and Google, have admitted using Singapore, where they can reduce tax rates to near zero, rather than pay in Australia, where the company tax rate is currently 30 per cent.

The Australian Taxation Office has audited these companies for using Singapore hubs, arguing profits sent there are artificially inflated.

Until now, Singapore had not signed up to a key part of the Organisation for Economic Cooperation and Development (OECD) plan, which aims to stop tax avoidance.

The OECD’s Base Erosion and Profit Shifting Plan, known as BEPS, includes a series of measures including country-by-country reports that will be kept secret from the public, but that require multinationals to report to authorities their income, economic activity and taxes paid in every jurisdiction that they operate in.

Australia signed up earlier this year and has also introduced tougher domestic laws to stop profit-shifting.

Tax experts say Singapore’s inclusion will boost information sharing between tax authorities and make it easier to identify when profits are being shifted purely to minimise tax.

But tax transparency groups still want country-by-country reports to be made public.

Clayton Utz tax partner Niv Tadmore said that having detailed information would be useful if there were tax revenue disputes between governments.

“There are instances where the ATO and the Singapore tax office don’t agree as to who gets what,” he said. “This will further strengthen the way they will resolve differences under the OECD framework.”

Pitcher Partners executive director Leon Mok said Singapore would “still remain an attractive jurisdiction for business”, but the measures will give tax authorities more visibility on the level of profits multinationals make.

The OECD conservatively estimates that use of tax loopholes that allow companies to shift profits into tax havens costs anywhere between about $US100 billion and $US240 billion annually.

Oxfam did a report this month that estimates Australia loses about $6 billion in annual revenue due to tax dodging.

Oxfam’s report said Singapore was a “tax haven” for many multinationals with Australian operations.

This is reflected in ATO data that shows over $55 billion gets transferred to “related parties” in Singapore.

Singapore’s government has long maintained that it is not a tax haven, but a value-adding hub.

But the OECD’s head of tax, Pascal-Saint Amans, has questioned the amount of profits being channelled there by multinationals, pledging it will reduce under the BEPS plan.

Tax Commissioner Chris Jordan had told Fairfax Media earlier this year that Singapore’s authorities were “not concerned” if Australia taxes multinationals more. Experts, though, have warned there could be “revenue wars”.