Government Senators' Dissenting Report
1.1
Government Senators have deep concerns about some of the recommendations
made in the interim report.
1.2
Most significantly, the interim report fails to recognise that the
Coalition Government has taken strong action in our nearly two years in office
to combat corporate tax avoidance.
1.3
The Government is committed to ensuring companies pay tax on profits
properly attributable to profit generating activities undertaken in Australia.
In preference to introducing new taxes on Australians, the Government simply
wants to ensure individuals or companies that are avoiding tax pay their fair
share. The Government is determined to achieve this without increasing the
overall tax burden, or imposing additional complexity on those individuals and
entities that do abide by our taxation rules.
1.4
In our role as G20 President during 2014, Australia took the lead in
global efforts to address international profit-shifting arrangements. We led
the global effort to crack down on tax avoidance by multinationals through the
two-year OECD Base Erosion and Profit Shifting (BEPS) Project. This leadership
will continue well into the future.
1.5
As part of the May 2015 Budget, the Government actioned the 2014
G20/OECD BEPS recommendations on Country-by-Country reporting, harmful tax
practices, exchange of revenue authority rulings and treaty abuse rules.
Additionally, the Government has commissioned the Board of Taxation to report
back on implementing the G20/OECD BEPS anti-hybrid rules by May 2016.
1.6
The Government has also taken important steps domestically to strengthen
Australia's defences against tax avoidance, including the tightening of our thin
capitalisation rules to prevent multinationals claiming excessive debt
deductions.
Multinational Anti-Avoidance Law
1.7
On Budget night, the Treasurer released the details of a new
Multinational Anti-Avoidance Law, which will prevent multinationals using complex
and artificial structures to escape paying Australian tax. The draft law was
released for consultation on Budget night.
1.8
Multinationals who break the law and avoid paying their fair share will
have to pay back the tax they owe (plus interest) and face penalties of up to
100 per cent of the tax owed.
1.9
As a result of Tax Office investigations the Government, including our
agencies, have identified 30 large multinational companies that may have
deliberately shifted profits away from Australia to avoid paying their fair
share of tax in Australia.
1.10
The Bill to implement our Multinational Anti-Avoidance Law is scheduled
for introduction into Parliament in the coming sitting weeks.
Country-by-Country reporting
1.11
On 6 August 2015, the Government released an exposure draft of
legislation to implement the OECD's Country-by-Country reporting regime.
1.12
Country-by-Country reporting will require multinational companies to
disclose the key details of their activities in each jurisdiction they do
business. Tax authorities will have a global picture of how multinationals
operate, including detailed information on the global allocation of revenues,
profits, taxes paid and other economic activities.
1.13
Country-by-Country reporting was one of the key recommendations
developed during Australia's G20 Presidency. Furthermore, Australia is one of
the first countries to commit to implement the regime.
Voluntary disclosure code
1.14
The Government will work with business to develop a code for the public
disclosure of information on taxes paid by large corporates.
1.15
The actions of a few businesses, particularly large multinationals
engaging in aggressive tax avoidance, have tarnished the reputations of many
businesses that are doing the right thing.
1.16
Some large businesses have responded by releasing detailed information
about their tax affairs. This is pleasing—indeed many of the witnesses during
Committee proceedings voluntarily released details of their tax affairs.
1.17
In the 2015–16 Budget, the Treasurer asked the Board of Taxation to lead
the development of a new code on greater public disclosure of tax information
by businesses, particularly large multinationals.
1.18
The Board of Taxation is conducting consultations on this measure in
August and September 2015. Indeed this process is well underway and
consultations are currently occurring.
Private company transparency
1.19
Under current legislation, the Commissioner of Taxation will shortly be
required to publish the total income, taxable income and tax payable of
companies with total income of $100 million or more each income year. This law
was enacted by the former Labor Government.
1.20
However, this law contradicted repeated Labor commitments to protect
confidential taxpayer information of private individuals.
1.21
The legislation also ignored the concerns of key stakeholders, went
against international best practice and would potentially unfairly expose
individuals to commercial and reputational damage.
1.22
For closely held Australian owned private companies, the publication of
their tax affairs would effectively reveal details of the owner's finances,
which would violate individual rights to privacy. The published information
may also reveal commercially sensitive information which might harm the
competitiveness of private businesses.
1.23
The law violates the important principle of taxpayer confidentiality. As
former assistant treasurer Bill Shorten told the Parliament:
The taxation law has long recognised that such protection is
fundamental to ensuring that taxpayers maintain their confidence in the
operation of the tax system. (Source: Bill Shorten, then Assistant Treasurer,
Hansard, Wednesday, 29 September 2010)
1.24
Former Treasurer Wayne Swan also recognised the importance of
confidentiality when he said:
I would have thought that everyone out there that was
concerned about good public administration would see the common sense in
observing what the Tax Office says about confidentiality provisions because
they are important to every Australian and it's not a decision of the
Government, it's the decision of the Tax Office. (Source: Wayne Swan, doorstop
interview: Brisbane: 24 January 2013)
1.25
The law would require publication of information already in the
possession of the ATO.
1.26
Its release to a wider audience will not in any way enhance the ability
of Australian tax authorities to collect additional revenue.
1.27
The release of this information will neither better protect the public
nor enhance the quality of debate around tax avoidance.
1.28
The public will not be assisted in understanding the legitimacy of
deductions or costs incurred by a company in calculating its reported income
for a given income year, nor will the large number of state taxes an entity may
pay (such as payroll and land tax) be considered.
1.29
It is the view of Government Senators that a voluntary disclosure code
will strike a better balance between the need for transparency and the privacy
and competitiveness concerns of business.
ATO resourcing
1.30
The ATO has been granted more resources than ever specifically dedicated
to dealing with multinational tax avoidance.
1.31
The Public Groups and International division of the ATO has more
specialised staff with greater access to resources than existed under the
former Labor Government.
1.32
The ATO's multinational tax avoidance practice is also backed by
significant private sector expertise and resources to ensure the effective
sharing of industry knowledge.
Marketing hubs
1.33
The Government has ensured continued funding for the highly successful
work undertaken by the ATO International Structuring and Profit Shifting
(ISAPS) project, committing $87.6 million over the next three years. Under the
programme, the ATO is reviewing the affairs of companies that have undertaken
an international restructure or have significant levels of related party
cross-border arrangements (including offshore marketing hubs).
1.34
The ATO's exchange of information with other tax administrations
supports its local information gathering efforts. The ATO has worked
particularly hard to develop strong relationships with revenue authorities in
important jurisdictions for tax structuring, such as the Inland Revenue
Authority of Singapore.
1.35
Additionally, a new focus on negotiating tax treaties with enhanced
integrity measures, such as the recent Australia-Switzerland double taxation
agreement, will allow for better information exchange between tax authorities.
Senator Sean
Edwards Senator Matthew Canavan
Deputy Chair Senator
for Queensland
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