After endless hearings and crafty testimony from big tech giants, the Federal Budget has a big, new stick to tackle corporate profit shifting and tax minimisation.
The Government will implement a new law to punish corporate tax dodgers by making them pay back twice the money they owe to the tax office plus interest.
It's called the Multinational Anti‑Avoidance Law, but you may hear it referred to colloquially as the "Google Tax".
The law will target tax benefits from 1 July 2015 and is specifically targeting around 30 companies suspected of dodging tax, according to the Budget papers.
The new law will target approximately 30 companies where:
• the activities of an Australian company or other entity are integral to an Australian customer’s decision to enter into a contract; • the contract is formally entered into with a foreign related party to that entity; and • the profit from the Australian sales is booked overseas and subject to no or low global tax.
Where such arrangements are entered into for a principal purpose of avoiding tax, this measure will ensure that the profits from Australian sales are taxed in Australia.
The money set to flow into the Government's coffers from the tough new tax measure is unquantifiable at this point, but the Treasurer says that it's sure to "stop multinationals using complex schemes to escape paying tax". The companies involved haven't been named.
The Australian Taxation Office will also potentially receive an avalanche of documentation under another new rule that will force large companies operating in Australia to provide a line-by-line report of the taxes they're paying in different countries around the world; a so-called "master file" that lists internal transfer pricing policies and a global map of their corporate structure, and a detailed report of local activities that can be taxed.
Image courtesy of Shutterstock