07/10/22

AUSTRALIA: Consultation paper on tackling multi-national tax avoidance open for comment.

As published on themandarin.com.au, Friday 7 October, 2022.

Federal Treasury has told stakeholders this week they have until November 1 to respond to a consultation paper at the centre of the Albanese government’s promise to tackle multi-national tax avoidance.

The 28-page discussion paper covering proposals for Australia to implement what is known as the Inclusive Framework on Base Erosion and Profit Shifting, put together in 2021 by the Organisation for Economic Co-operation and Development.

That framework was developed with the involvement of 130 jurisdictions in an attempt to improve compliance with tax laws across the globe.

“Australia was one of 130 countries that endorsed the solution to address tax challenges arising from digitalisation and globalisation,” treasurer Jim Chalmers said in a statement announcing the release of the consultation paper.

“This historic global effort will help ensure that multinationals pay their fair share of tax, help stop the ‘race to the bottom’ on corporate tax rates, and support the domestic and global economy.”

Chalmers said the government is seeking views on how the global proposal fits within the Australian framework as well as the views from Australian stakeholders on the benefits and challenges.

“Submissions will help inform how to implement the reforms domestically, and help with ongoing negotiations on the design elements of the two-pillar solution,” Chalmers said.

“Australia’s ongoing engagement in the OECD-led multilateral process complements our multinational tax integrity package that will address tax loopholes exploited by multinational companies.”

The two pillars at the centre of the proposal are specific measures that are an attempt to discourage forum shopping across jurisdictions by multinational corporations to get the lowest tax bill.

Pillar One is an attempt to ensure that global businesses pay taxes in the country in which their products or services are sold.

“Critical aspects of Pillar One are still being negotiated at the international forum, resulting in a delay in the proposed implementation timeframe to 2024 (under the historic October 2021 agreement, both pillars were to commence operation in 2023).

A second pillar seeks to create a minimum corporate tax rate around the globe of 15 per cent with the OECD having released model rules and guidance on how this would operate. An implementation framework is due to be completed by the end of 2022 in order for Pillar Two to be rolled out next year.