The Australian Taxpayers’ Alliance (ATA) has made a submission to the Senate Economics Committee which is currently considering legislation for a Diverted Profits Tax, calling on the committee to not recommend proceeding with this new tax.
Whilst the Diverted Profits Tax is supposed to reduce aggressive tax avoidance by big multinational companies, it will hardly generate much revenue over the forward estimates (estimated $200million) and will only serve to create a chilling effect on foreign investment in our country. Other countries see Australia abandoning its cooperative approach with the OECD on the issue in favour of copying the UK and going it alone to scare multinational companies into paying more tax. As even the explanatory notes point out, Australia already has some of the strongest anti-avoidance laws in the world. There is no need for a brand new tax to crack down on aggressive avoidance schemes. Furthermore, the proposed legislation allows the ATO to take a ‘pay now, prove innocence later’ type approach to compliance. This means that means companies are forced to cough up money and then hand over troves of information to try and prove their innocence to get their money back. As for those involved in aggressive avoidance schemes, Australia’s high tax rate means that even places which don’t have a tax haven status become places to put profits. This means that big multinationals can book profit to regional or global headquarters and argue that therefore the tax shouldn’t apply to them. Even in the United Kingdom where it was dubbed the Google Tax, Google doesn’t pay the Google Tax.
This is a case of short term political considerations coming over long term tax reform that would provide for a fairer and simpler tax system.