The overnight release of the OECD’s Final Report on the Base Erosion and Profit Shifting (BEPS) Action Plan shows that Australia is firmly on the right track when it comes to ensuring multinationals pay their fair share of tax.
This Government is committed to ensuring companies that earn income in Australia and benefit from the Australian economy, pay their fair share of tax here. The Coalition has been working steadfastly on measures to combat multinational tax avoidance, in partnership with the OECD and through its leadership of the G20.
This approach is producing tangible reforms that are already delivering on our commitment to ensure multinationals pay their share of tax in Australia.
This OECD report represents the culmination of a two-year, 15-item Action Plan developed through the unprecedented cooperation of more than 60 countries. It aims to promote transparency and restore fairness to the international tax system by providing countries with a range of tools designed to ensure that profits are taxed where the underlying economic activities take place and where value is created.
The strong measures already taken by the Australian Government are entirely consistent with the final OECD recommendations. The Government’s measures attack the heart of the multinational tax avoidance problem, whilst ensuring Australia remains an attractive and competitive place to do business.
The Australian Government is proud to have led the way globally in this fight against tax avoidance during its G20 Presidency in 2014 and we now have some of the strongest tax integrity rules in the world. The Government has:
- In the last sitting fortnight introduced to Parliament the Multinational Anti-Avoidance Law, delivering on our 2015 Budget commitment, to ensure that where companies make sales in Australia, but book that revenue offshore, they will be subject to tax in Australia;
- Doubled the penalties for those who choose to break the rules through transfer pricing and profit shifting schemes;
- Obtained the in-principle agreement of the States and Territories to apply the GST to digital products and services imported by Australian consumers;
- Obtained the in-principle agreement of the States and Territories to abolish the GST low value threshold, ensuring that GST will apply to goods valued at or below $1000 that are imported by Australian consumers. This ensures that Australian retailers can compete on a more level playing field with overseas outlets;
- Introduced Country-by-Country reporting and new transfer pricing documentation standards to give the Australian Taxation Office a greater ability to assess transfer pricing risks;
- Tasked the Board of Taxation with consultation on the OECD’s recommendations to combat hybrid mismatches that allow companies to issue financial instruments and claim a deduction in one jurisdiction but not pay tax in another.
In assessing the implementation of the balance of the OECD recommendations released overnight, the Government will be consulting with stakeholders, foreign governments and the OECD and will pay close attention to ensuring investment activity is not compromised and that Australia remains an economically competitive place to do business.
The intricate and sensitive nature of international taxation demands precise and targeted responses to policy challenges, responses that are developed in consultation with our international partners to maximise their effectiveness. This is what the Australian Government has pursued for two years, in stark contrast to the blunt and superficial approach of the Labor Party that addresses the politics, but not the policy.
|June 2012||G20 Leaders reiterated the need to prevent BEPS and endorsed the work of the OECD|
|September 2012||Australia’s transfer pricing rules amended and aligned to the OECD Transfer Pricing Guidelines. The new rules apply retrospectively from
1 July 2004.
|June 2013||OECD releases 15 point Action Plan on Base Erosion and Profit Shifting to be delivered by end 2015.|
|July 2013||G20 Finance Ministers’ meeting endorses the Action Plan and the establishment of the OECD/G20 BEPS project.|
|December 2013||Australia takes over G20 Presidency. Leads global efforts to combat multinational tax avoidance.|
|January 2014||The Prime Minister addressed the World Economic Forum in Davos, Switzerland, stating the G20 will continue to tackle tax avoidance and profit shifting.|
|April 2014||Australia and the United States signed an intergovernmental agreement to implement the US’s Foreign Account Tax Compliance Act (FATCA) in Australia. The agreement entered into force on 30 June 2014.|
|September 2014||OECD delivers first tranche of recommendations from the BEPS Action Plan, which is endorsed by G20 Finance Ministers. The Treasurer released a ministerial statement on G20-OECD Tax and Transparency. The Government announced implementation of Common Reporting Standard for the automatic exchange of financial account information from 2017 to deal with tax evasion.|
|October 2014||Changes to tighten the thin capitalisation rules and improve the integrity of the rules introduced by the Tax and Superannuation Laws Amendment (2014 Measures No. 4) Bill 2014 receives Royal Assent. The rules apply for the income years starting on or after 1 July 2014. The legislation tightens the thin capitalisation safe harbour limits and closes a loophole to ensure that the foreign non-portfolio dividend exemption for Australian companies only applies to returns on equity. Both measures were announced but not implemented by the former Government.|
|November 2014||G20 Leaders endorse the first tranche of the OECD’s recommendations from the BEPS Action Plan, delivered under Australia’s G20 Presidency.|
|April 2015||The Treasurer and the Chancellor of the Exchequer, the Rt. Hon. George Osborne, MP, announces the establishment of a joint UK and Australia working group on diverted profits.|
|May 2015||The Government stated it will provide $87.6 million to the ATO over the next three years to continue the International Structuring and Profit Shifting programme.|
|May 2015 (2015‑16 Budget)||Australia announces action on four key BEPS Actions
provided to multinationals by other countries (Action 5)
|June 2015||Australia signs the OECD’s common reporting standard multilateral competent authority agreement to catch taxpayers using hidden offshore bank accounts to evade Australian tax.|
|July 2015||Stronger penalties start to apply to tax benefits obtained through a tax avoidance or profit shifting scheme. Effective from 1 July 2015 (subject to passage of legislation).|
|September 2015||The Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015 introduced into Parliament (on 16 September). The bill contains:
|September 2015||Draft legislation to implement the OECD’s Common Reporting Standard for the automatic exchange of financial account information released for public consultation (on 18 September)|
|October 2015||OECD releases final BEPS recommendations (on 5 October).|
|October 2015||G20 Finance Ministers to consider final BEPS recommendations (on 8 October).|
|GOVERNMENT PRIORITY ACTIONS||Status||Australian action|
|OECD Item 1: Tax challenges of digital economy||Digital economy issues addressed by other Action Items. The Government has announced that it will introduce an integrity measure to apply
the GST to digital products and services imported by Australian consumers, which is consistent with this item
|OECD Item 2: Neutralise hybrid mismatch across borders allowing double non‑taxation||Board of Tax consultation commenced in August and will report in March 2016|
|OECD Item 3: Controlled foreign company rules||Australia’s CFC rules meet OECD best practice guidance|
|OECD Item 4: Limit interest deductions||Australia has already tightened its Thin Capitalisation rules|
|OECD Item 5: Counter harmful tax practices||ATO already implemented exchange of rulings|
|OECD Item 6: Prevention of treaty-shopping||To be adopted into negotiation of new / updated treaties|
|OECD Item 7 : Prevent artificial avoidance of permanent establishment||The Multinational Anti-Avoidance Law is consistent with this item. Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015 is before Parliament.
Other OECD recommendations are in line with Australia’s treaty practice
|OECD Item 8, 9 and 10: Transfer pricing and value creation||No fundamental change to Australia’s transfer pricing rules, but enhanced guidance to help ATO’s administration|
|OECD Item 11: Methodologies to collect and analyse BEPS data||Estimate of BEPS problem 4‑10 per cent of global corporate income tax revenue. Further work on methodologies to measure progress required|
|OECD Item 12: Mandatory disclosure of aggressive tax planning||OECD recommends countries consider adopting disclosure rules. ATO considering costs and benefits for Australia|
|OECD Item 13: Transfer pricing documentation and country-by-country reporting||Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015 before Parliament|
|OECD Item 14: Dispute resolution||A number of countries (including Australia) are committed to binding arbitration|
|OECD item 15: Multilateral instrument||87 countries (including Australia) working on instrument to quickly update bilateral treaties with BEPS outcomes. To be open for signing by
|No major issues expected||Further work on implementation being undertaken|