Wednesday, December 17, 2014

Liberal Government Wimps Out on Multinational Tax Avoidance

Today's reports that Treasurer Joe Hockey has backed away from action to tackle companies that avoid tax by shifting billions of dollars in profits between Australia and their international subsidiaries are remarkable for a number of reasons.

First, the Government said it would act to stop tax avoidance by profit shifting across international borders – though given the mountainous pile of broken promises perhaps a gap between promise and performance is no longer remarkable.

Second, the issue of global corporations loading up subsidiaries with debt so they can claim to have made all their profits in low tax jurisdictions was a major topic of discussion at the G20 Conference, where countries were urged by civil society to stop global tax avoidance. Australia needs to be part of the international effort to combat this.

Third, only this week the government was crying poor in releasing its MYEFO estimates and saying it had suffered a revenue downturn and would have to cut spending. The projected benefit to the revenue from abolishing deductions under Section 25-90 of the Income Tax Assessment Act is $600 million. Before the government attacks students, pensioners and the unemployed it should enact this measure and make sure multinational corporations are paying their fair share of tax.

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