The federal government has unveiled a new crackdown on profit shifting by multinational companies attempting to lower their tax bills in a measure commentators have dubbed a ‘Google tax’ (perhaps unfairly given the search giant changed the way it is booking Australian revenue before the new measure was announced.).
The government said the measure builds on the Multinational Anti-Avoidance Law, which was passed in December last year.
The crackdown on aggressive tax minimisation by multinational corporations was spurred on by a parliamentary inquiry which thrust the practices of a number of tech giants, including Google, Apple and Microsoft, into the spotlight.
The new Diverted Profits Tax (DPT) announced by the government is forecast to raise $200 million over the forward estimates period, budget papers state.
The tax “will target companies that shift profits offshore through arrangements involving related parties” that result in less than 80 per cent tax being paid overseas than would otherwise have been paid in Australia, where it is reasonable to conclude that the arrangement is designed to secure a tax reduction, and that do not have sufficient economic substance, budget papers state.
“Where such arrangements are entered into, this measure will apply a 40 per cent tax on diverted profits to ensure that large multinationals are paying sufficient tax in Australia.”
The new measure will capture companies with global revenue of $1 billion or more; it will not apply to companies with Australian revenue of less than $25 million (unless a company is artificially booking its Australian revenue offshore).
“Together with the Multinational Anti-Avoidance Law, introduced by this government last year, the DPT is expected to raise around $650 million over four years,” Treasurer Scott Morrison said in his budget speech.
The government will also introduce ‘anti-hybrid’ rules to prevent corporations exploiting differences in the tax laws of two or more jurisdictions to avoid paying tax, the treasurer said.
The government will provide the Australian Taxation Office with $679 million for a ‘Tax Avoidance Taskforce’ as part of its crackdown. Budget papers state that the government will boost information sharing between the ATO and the Australian Securities and Investments Commission (ASIC).
The government said the new taskforce will raise more than $3.7 billion in tax liabilities through to July 2020.