The Australian government has released draft revisions to transfer pricing laws to prevent multinational firms, including the local arm of Google, from shifting their income to countries where tax rates are lower.
This follows recent revelations across the globe of multinational companies exploiting loopholes to shift taxation of their income away from where they are generated.
Australian assistant treasurer, David Bradbury released the exposure draft of proposed amendments which he said will help protect Australia's tax base.
Bradbury comments, 'Australia's transfer pricing rules play an important role to ensure that multinational firms pay their fair share of tax on profits in Australia - based on an amount of income which reflects the economic activity attributable to Australia'.
Bradbury cited a few examples including Google - a multinational that paid only $781,000 (£508,773) in tax, when it has been estimated its annual advertising revenue from Australia is more than $1bn-a-year (£651m), with Australian firms buying their advertising from an Irish subsidiary of Google.
However Bradbury remained technically correct and said, 'I am not suggesting that these companies are in breach of the law as it stands'.
Paul Stacey, Tax counsel at the Institute of Chartered Accountants Australia, said ensuring Australia's transfer pricing rules accord with current best practice is part of the answer to meeting the nation's increasing expenditure needs.
While welcoming what is the second tranche of the transfer pricing reforms, he stressed international effort is needed to address global tax avoidance.
'If Australia is going to revise our approach to taxing multi-nationals, we need the buy-in of our international trading partners - going alone is not the answer'.
Recent revelations of multinationals avoiding tax in the UK have also lead to calls for government action and changes to UK tax law.
UK Business Secretary Vince Cable is the latest to promise government action to tackle the apparent tax avoidance by multinational companies who aggressively structure themselves to pay little or no corporation tax in the UK.
