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16.09.2015 01:49 Age: 2 days

Australia targets tax avoidance by multinationals


Treasurer Joe Hockey, all but certain to lose his job within days, has announced the detail of his anticipated crackdown on tax avoidance by Australia's 1000 highest-earning multinational companies, reports The Australian.

Pressing ahead with his campaign to stop the leakage of tax revenue overseas, Mr Hockey said new laws would ensure companies caught "cheating" on their Australian taxes would have to pay back double what they owe, plus interest.

He announced the law would cover multinationals operating in Australia with global revenues above AU$1 billion.

"These 1000 companies will need to consider the new rules if they have economic activities in Australia but book their Australian sales revenue offshore," he said.

"With the introduction of this legislation, we are sending a clear message that Australia has no tolerance for tax avoiders. If you are avoiding tax, the Australian Taxation Office will catch you."

The US Treasury's top international tax official, Robert Stack, in April cautioned Australia against such a policy.

"We understand that governments are under enormous pressure to raise revenue and it must be tempting to target nonresidents," Mr Stack said at the time. "The fact that a company has significant sales in a country doesn't necessarily mean that the value-generating activities are in that country."

Mr Hockey today said: "Major international companies operating in Australia, but booking profits offshore, have to pay tax here.

"When a company or an individual avoids paying their fair share of tax, it means Australian families and small businesses are forced to carry more than their fair share."

Mr Hockey said he had been working with the UK government and the Organisation for Economic Co-operation and Development to tackle international tax avoidance.

The legislation introduced to parliament today implements a new multinational anti-avoidance law, stronger penalties for large companies that engage in tax avoidance and profit-shifting, and country-by-country reporting to give authorities a greater visibility into international structures.

The new laws are intended to take effect from January 1, 2016.

"We are sending a clear message that if you deliberately and artificially avoid paying tax in Australia this is not acceptable," Mr Hockey said.

Aware of the crackdown, a number of multinationals already had come forward to identify profits previously unseen by the ATO. They were prepared to restructure their business to pay a fair share of taxes, Mr Hockey said.

The draft laws give the tax commissioner stronger powers in tax enforcement.

But Tax Commissioner Chris Jordan hopes no revenue will be raised from big penalties for avoidance because he wants companies to do the right thing.

He was unable to put a specific figure on what additional tax would be collected other than to say it was "hundreds of millions of dollars of revenue at least".

That's because while the ATO can estimate that targeted companies earn billions of dollars in sales in Australia, it does not have a lot of information at this stage on their cost structure and what actual profit they make.

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Australia targets tax avoidance by multinationals