Australia’s new Treasurer Jim Chalmers has laid out bold plans for reversing the criminal loss of tax revenue under the recently-departed Coalition Government. Dr Chalmers released a detailed consultation paper on Friday and invited public comment.
The new Labor Government, led by Anthony Albanese, has sharpened the challenge by asking specific questions – 53 in fact – and all homework must be in by September 2nd.
The purposes of these tax reforms, according to a statement, are to fund essential health programs, help ‘service the trillion dollars of debt racked up by the former government’, and level the playing field for Australian businesses. No problems with any of that.
Two main targets
The first proposal is to amend current tax rules to limit the deductions multinational enterprises can claim on payments between branches.
The classic case here was Rupert Murdoch’s News Corp Australia which evaded $880 million in tax by claiming his Australian subsidiary had to pay interest on loans and other disbursements to the parent company. No money had actually flowed anywhere so the Tax Office took Murdoch’s company to court. In an astonishing decision, the Federal Court handed down a technical ruling in News Corp’s favour – just before the 2013 election. This blatantly unjust decision demanded an immediate appeal to the High Court and urgent changes to the tax laws. The incoming right-wing Abbott Government did neither, thus gifting Murdoch 880 million taxpayer dollars.
The second proposal is to limit tax deductions claimed for intra-company payments for intangibles, such as the use of copyright, brand names, trademarks or trade secrets.
Consider a large global social media company with a well-known logo. If that company earned taxable profits of one billion dollars in Australia one year, it would normally pay $300 million in taxes to the Tax Office (and to the people of Australia). But if that company paid one billion dollars in “royalties” for the use of the logo to another branch of the company, tax payable in Australia would be zero.
Other initiatives to claw back revenue
Friday’s consultation paper is on top of Australia’s participation in international talks on the OECD’s ‘two-pillar’ solution to the tax challenges presented by the digitalisation of economies. This includes a 15% global minimum effective tax rate on corporate profits.
The Parliamentary Budget Office estimated Labor’s current proposals would generate $1.9 billion in extra tax revenue over four years. This seems quite conservative.
Given current multinational profits, between three and five billion each year should be achievable.
The Government could go further
As has been argued previously, there is significant evidence that ministers in the previous Coalition Government engaged in collusive activities with donor corporations to the Liberal and National parties and may have benefited from corrupt practices.
It is imperative that these be investigated fully by a royal commission or the new federal Independent Commission Against Corruption when in place. This will not only punish the wrongdoers and warn against future transgressions, but should recover more misappropriated funds.
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This is an abbreviated version of an article published today in Independent Australia. The original article is available here in full for free:
https://independentaustralia.net/politics/politics-display/new-treasurer-sets-cracking-pace-on-chasing-foreign-tax-cheats,16638
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“Alan Austin is a great Australian journalist and,
I think, a pirate. I steal Alan Austin’s findings all the time.”
~ Jordan Shanks
https://www.youtube.com/watch?v=HtV-2X4BjQI
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