Australia plans t to follow the UK with the introduction of a diverted profits tax (DPT) – the so-called Google tax - which will introduce a penalty rate of tax for multinational companies found to have moved profits offshore to improve corporate tax transparency, effectively charging a 10% tax premium
In his first Budget, Australian Treasurer, Scott Morrison, announced that the new Australian DPT will impose a 40% penalty rate of tax on large multinationals that attempt to shift their Australian profits offshore to avoid paying tax, rather than the standard company tax rate of 30%.
The DPT will come into effect on 1 July 2017 and apply to multinationals using ‘artificial or contrived arrangements’ to reduce tax by diverting profits.
The move follows the introduction late last year of the multinational anti avoidance law (MAAL) to ensure that large multinational companies operating in Australia are subject to local tax laws. Together the MAAL and the DPT are expected to raise around $650m (£336m) over four years from large multinationals, Morrison said.
‘Everyone has to pay their fair share of tax, especially large corporates and multinationals,’ he said during his address to parliament.
The 2016-17 Budget also included details of a new tax avoidance taskforce designed to strengthen audit and compliance activity by the Australian Taxation Office (ATO), which is to receive $679m in extra funding and will have around 1,000 staff.
The taskforce will target tax avoidance by high wealth individuals as well as by multinationals and is expected to raise $3.7bn of additional revenues in four years.
There is to be a new, voluntary tax transparency code to encourage businesses with an annual turnover of $100m or more to publish information to support greater and better informed public scrutiny. The government will encourage companies to adopt the code from the 2016 financial year onwards.
Penalties for breaching tax reporting obligations for companies with global incomes of $1bn or more are set to increase sharply. The maximum penalty for failing to lodge tax returns and similar tax documents on time goes up from $4,500 to $450,000, which the penalties for making false and misleading statements to the ATO are to double.
In addition, the Australian government is to consult on new rules requiring tax and financial advisers to report potentially aggressive tax planning schemes.
