COMPERE:
The Federal Government is moving to close a tax loop hole and protect $4 billion in revenue. It wants to prevent companies from shifting their profits to low tax or tax-free countries and in a separate move it wants to force about 2000 companies to make public the amount of tax they pay. The Assistant Treasurer David Bradbury explained the changes to Alexandra Kirk.
DAVID BRADBURY:
We're making amendments to part IVA, which are the general anti avoidance provisions of the tax act and also the transfer pricing regime. These are largely directed at avoiding profit shifting where companies seek to shift the profitable parts of their business offshore into low tax or no tax jurisdictions and to absorb the costs that lower their tax bill here in Australia.
KIRK:
Now Australia has tax agreements with a host of countries when companies with Australian operations transfer their profits to subsidiaries in low tax countries or tax havens where they pay no tax. That's not technically illegal is it?
BRADBURY:
Well, provided that those transactions occur on what is essentially an arm's length basis that of itself would not be a problem but what we do see on occasions is contrived actions to try and shift profit and sometimes with the sole purpose of shifting profit to other jurisdictions and loading up deductions here in Australian to minimise tax here. The transfer pricing provisions we're seeking to update to bring them into line with OECD best practice.
KIRK:
In a separate move you're also releasing a discussion paper outlining your plan to force about 2000 companies to reveal the amount of tax they actually pay. What's special about these particular companies?
BRADBURY:
There is disclosure already required in a range of areas, but one area where that disclosure has not previously been required is in relation to tax payable. We think it is important that there be transparency around the levels of tax being paid by our large businesses and to ensure that particularly when it comes to multi-national enterprises that we do have some transparency over the actual amounts of tax payable for those companies. There is a very big international debate occurring at the moment and Australia is playing an important part in this international debate to try and ensure that some of the biggest and most profitable companies in the world pay their fair share of tax. In the end if large multinationals are not paying their fair share of tax that will leave a greater burden for households, individuals and for small businesses to have to carry the can when it comes to generating the revenue that Government needs for its goods and services.
KIRK:
Now it won't breach their privacy by making them declare what they actually pay?
BRABDURY:
Well it is difficult to make a case on privacy grounds in relation to a corporate entity and I think that –
KIRK:
Except that the Government did that for months, saying that it couldn't reveal how much mining tax was paid because privacy provisions in the tax laws would have been breached and in the end that turned out to be a furphy.
BRADBURY:
Well no, it didn't turn out to be a furphy. That is the law as it currently stands and one of the things that we're proposing to do is to ensure that these antiquated provisions within the Tax Administration Act that seek to impose privacy requirements upon corporate entities - some of the largest corporate entities in the world - are no longer relevant.
KIRK:
Do you expect a big backlash from corporate Australia?
BRADBURY:
I think that there already some very good examples, and I take for example Rio Tinto as an example of a company that is publishing a vast array of information about the tax that they pay and their tax affairs and the one thing that we would hope these measures would encourage would be for companies to get onto the front foot and to get out there and to explain the tax that they are paying, why they are paying the levels of tax that they are paying –
KIRK:
Clearly you think this might force some companies to pay more tax than they are currently paying? Is that the bottom line?
BRADBURY:
Well, if you are a company that is engaging in structuring that may not with stand the smell test, it may be legally correct in terms of what the law currently proscribes, but if you are a company engaged in activities that you can't publicly justify or defend, then you may have something to be concerned about when it comes to these transparency measures.
KIRK:
How much more tax do you think you could get via this move?
BRADBURY:
Look we certainly don't see this as a revenue raising measure in any sense; we wouldn't be putting a figure on it. It will only be those companies that are engaging in the sort of tax-driven structuring that we've seen some evidence of internationally that will be concerned about having a spotlight shone upon how much tax they are actually paying.
COMPERE:
That's the Assistant Treasurer David Bradbury speaking to Alexandra Kirk in Canberra.