On May 3, 2016 the Australian Government presented new plans to fight tax avoidance by multinationals. Furthermore it opened a consultation on implementing a Diverted Profits Tax and a consultation on OECD Proposals for Mandatory Disclosure of Tax Information.

On May 3, 2016 the Hon Scott Morrison MP Treasurer of the Commonwealth of Australia issued two media releases announcing the Australian Government’s new plans to fight tax avoidance by multinationals.

 

A tax plan for Australia’s Future

The first media release is titled ‘A tax plan for Australia’s future’. In the media release several subjects are discussed and one of these subjects are the plans of the Australian Government to fight tax avoidance.

 

In the paragraph ‘Fighting tax avoidance’ the following is stated:

At the same time as reducing the tax burden on businesses, the Government will take additional steps to reinforce the integrity of Australia’s corporate tax base and ensure businesses pay the right amount of tax in Australia.

 

We are introducing tough new laws and much harsher penalties including: 

·        A Diverted Profits Tax (DPT) which will impose a penalty rate of tax on large multinationals that attempt to shift their Australian profits offshore to avoid paying tax. Together with the Multinational Anti-Avoidance Law, introduced by this Government last year, the DPT is expected to raise around $650 million over four years.

·        Rules to prevent multinationals exploiting differences in the tax laws of two or more jurisdictions to defer or avoid paying tax (anti-hybrid rules).

·        Updating Australia’s transfer pricing rules to align with international best practice.

·        A new Tax Transparency Code to encourage greater transparency within the corporate sector, especially by multinationals.

·        New protections for whistleblowers who disclose information about tax misconduct to the ATO.

·        New rules, to be developed in consultation with stakeholders, to require better disclosure to the ATO about potentially aggressive tax planning schemes.

·        Increased penalties for breach of tax reporting obligations for companies with global incomes of $1 billion or more.  The maximum penalty for failing to lodge tax returns and similar documents will be increased 100 fold from $4,500 to $450,000.

 

Enforcement of our existing and tough new laws will be supported by a Tax Avoidance Taskforce to be set up in the ATO. This crack down on multinationals and high wealth individuals is expected to generate $3.7 billion of additional revenue over the next four years.

 

Click here to be forwarded to the media release ‘A tax plan for Australia’s future’.

 

A new Tax Avoidance Taskforce

Also on May 3, 2016 the Hon Scott Morrison MP Treasurer of the Commonwealth of Australia issued a press release announcing that the Australian Government will establish a new Tax Avoidance Taskforce to crack-down on multinational tax avoidance and secure revenue for the Australian community.

 

According to the press release the Australian Government will provide the ATO with $679m for the Taskforce over four years to strengthen efforts to ensure that multinational companies, private companies and high wealth individuals pay the right amount of tax. The Taskforce shall be a single, targeted program accountable to Government. The Taskforce will have around 1,300 jobs in the ATO, including 390 new specialised officers.

 

Click here to be forwarded to the media release ‘A new Tax Avoidance Taskforce’.

 

Consultation on implementing a Diverted Profits Tax

Also on May 3, 2016 the Australian Treasury opened a consultation on implementing a Diverted Profits Tax. The Australian Government invites all interested parties to make a submission on the design of the Diverted Profits Tax. The Closing Date for submissions is June 17, 2016.

 

In an announcement on the opening of the consultation the Australian Treasury states a.o. the following:

Government will introduce a Diverted Profits Tax (DPT) aimed at multinationals that artificially divert profits from Australia. The DPT will target businesses that shift profits offshore through arrangements that result in less than 80 per cent tax being paid overseas than would otherwise have been paid in Australia and where it is reasonable to conclude that the arrangement is designed to secure a tax reduction and lacks economic substance. Where such arrangements are entered into, the Government will apply a 40 per cent tax on the diverted profits to ensure that large multinationals are paying sufficient tax in Australia.

 

The DPT will apply to multinationals with global revenue of $1 billion or more. The DPT will not apply to multinationals with Australian turnover of less than $25 million unless they are artificially booking their revenue offshore.

 

The DPT will provide the Australian Tax Office (ATO) with greater powers to deal with multinationals who transfer profits, assets or risks to offshore related parties using artificial or contrived arrangements to avoid Australian tax and who do not cooperate with the ATO. By imposing a penalty rate of tax, requiring the DPT to be paid on assessment and broadening the ATO reconstruction powers, the DPT will encourage greater openness with the ATO, address information asymmetries and allow for speedier resolution of disputes including under our transfer pricing rules.

 

The DPT will apply from 1 July 2017 and forms part of the Government's Tax Integrity Package, which helps to ensure that multinationals are paying the right amount of tax.

 

Click here to be forwarded to the announcement from the Australian Treasury on the opening of the consultation on implementing a Diverted Profits Tax. Attached to this announcement you can find the consultation paper.

 

Consultation on OECD Proposals for Mandatory Disclosure of Tax Information

Also on May 3, 2016 the Australian Treasury opened a consultation on OECD Proposals for Mandatory Disclosure of Tax Information. The Closing Date for submission is July 15, 2016.

 

In an announcement on the opening of the consultation the Australian Treasury states a.o. the following:

On 3 May 2016, the Government announced that it will seek community input on the OECD's proposals for Mandatory Disclosure Rules, which require tax advisers and/or taxpayers to make early disclosures of aggressive tax arrangements (often before income tax returns are lodged), to provide tax authorities with timely information on arrangements that have the potential to undermine the integrity of the income tax system.

 

The purpose of this paper is to seek community views on how Mandatory Disclosure Rules should be framed in the Australian context, having regard to the disclosure rules that are currently available to the Australian Taxation Office.  The paper also provides an outline of the OECD's key recommendations, and the Government's preliminary views in relation to those recommendations.

 

For further information click here to be forwarded to the announcement of the Australian treasury on the opening of the public consultation on OECD Proposal for Mandatory Disclosure of tax information.

 

 

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