21 December 2018

Preventing multinational tax avoidance by strengthening Australia's tax treaties

The entry into force of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting from 1 January 2019 again shows the commitment of the Morrison Government to make sure multinationals pay their fair share of tax to Australia.

The Convention, commonly known as the OECD Multilateral Instrument, is a key output of the OECD/G20 Base Erosion and Profit Shifting agenda, which the Government has firmly supported. Australia ratified the Convention on 26 September 2018.

Under the Convention, countries are able to quickly and efficiently modify some or all of their bilateral tax treaties. This will make it simpler for Australia to implement new integrity rules, protect its tax treaties from exploitation for tax avoidance purposes, and improve tax-treaty related dispute resolution mechanisms.

From 1 January 2019, the Multilateral Instrument will operate to modify six of Australia’s 44 bilateral tax treaties: those with France, Japan, New Zealand, Poland, the Slovak Republic and the United Kingdom.

More Australian tax treaties will be modified in the future, following the ratification of the Convention by other countries.

This Convention builds on the Government’s initiatives to tackle multinational tax avoidance.

The Government has been vigilant in implementing the BEPS actions, including country-by-country reporting, strengthening transfer pricing rules and enacting hybrid mismatch rules to prevent multinationals exploiting differences in tax treatment given to transactions and entities by the countries where multinationals have their operations. In addition, the Government has introduced the Diverted Profits Tax, the Multinational Anti-Avoidance Law and established the ATO Tax Avoidance Taskforce which has raised $3 billion in liabilities against large public groups and multinationals in 2017-18.

Ensuring multinationals pay their fair share of tax in Australia is essential to providing the essential services that Australians rely upon.