Apple, Google facing tax crackdown
The proposed crackdown, announced on Monday, would also clear the way for the government to publish more detail on how much mining tax resources firms are paying. Until now, the government has refused to say exactly how much money the mining tax has raised, citing the need for confidentiality.
A fundamental principle of tax law is that the affairs of all taxpayers, from individuals to corporate giants, are confidential.
But with governments around the world seeking to protect their budgets against use of tax havens, especially by technology firms, large companies operating in Australia may no longer enjoy such privacy.
Labor hopes to pass legislation before the September election that would require large firms to publish more detailed information on how much tax they pay.
Treasury is looking at how to implement the change, ahead of a meeting of a high-powered working group this month.
"Large multinational companies that use complex arrangements and contrived corporate structures to avoid paying their fair share of tax should not be able to hide behind a veil of secrecy," the Assistant Treasurer, David Bradbury, said.
Although some tax information can be gleaned from accounts lodged with the corporate regulator, they do not always reflect how much was actually paid, nor do they itemise the amounts raised by different types of tax.
For instance, accounts show Google paid just $74,176 in Australian tax in 2011, although the company argues it paid significantly more.
Although no firms were named by Mr Bradbury, the move is directed at multinationals such as Google and Apple, which have come under fire for their use of tax havens.
Mr Bradbury last year took the rare step of naming Google and referring to a technique known as the "Double Irish Dutch Sandwich" - in which firms divert income through low-tax regimes such as Ireland and the Netherlands.
The executive director of the Corporate Tax Association, Frank Drenth, said he had not heard of any other country targeting taxpayer confidentiality as Australia was.
Mr Drenth said it was too early to comment on the impact of the changes, as it would depend on how much information firms would be required to disclose.
The general manager of policy at the Institute of Chartered Accountants, Yasser El-Ansary, said the move was part of a global push to put increasing pressure on multinationals.
"It's going to be an area where there's going to be an ongoing focus, and not just by our government here in Australia but around the world," he said.
Frequently Asked Questions about this Article…
The proposed crackdown would require large multinational firms to reveal how much tax they pay to the federal government. Described as a 'name and shame' approach, the plan aims to reduce use of tax havens and force greater transparency about companies' Australian tax payments.
For everyday investors, greater tax transparency could improve visibility into a company's tax risks and reputational exposure. Public disclosure of tax payments may show if profits are being shifted to low-tax jurisdictions, which could influence assessments of future after-tax profits and corporate governance — though the article does not state any specific market outcomes.
Yes. The proposed changes would clear the way for the government to publish more detailed information on how much the mining tax has raised. Until now the government has refused to disclose exact amounts raised, citing taxpayer confidentiality.
Labor hopes to pass legislation before the September election, and Treasury is studying how to implement the change ahead of a meeting of a high-powered working group scheduled for this month, according to the article.
The 'Double Irish Dutch Sandwich' is a tax technique in which firms divert income through low-tax regimes such as Ireland and the Netherlands. It was mentioned by Assistant Treasurer David Bradbury in relation to tech multinationals like Google, and is relevant to investors because it illustrates the kinds of profit-shifting strategies the government wants to expose.
Company accounts lodged with the corporate regulator can reveal some tax information, but the article notes they do not always reflect how much was actually paid and usually do not itemise amounts raised by different types of tax. For example, accounts showed Google paid just $74,176 in Australian tax in 2011, though Google argues it paid significantly more.
According to the executive director of the Corporate Tax Association, Frank Drenth, he had not heard of any other country targeting taxpayer confidentiality in the same way as Australia. The article suggests this approach may be unusual, though broader global pressure on multinationals is also noted by other experts.
The push is being driven by the government and Labor figures, including Assistant Treasurer David Bradbury, who says large multinationals using complex structures to avoid paying their fair share should not hide behind secrecy. Treasury is working on implementation, and industry voices like the Institute of Chartered Accountants describe the move as part of a global effort to increase pressure on multinationals.
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