The Albanese government is claiming some preliminary success in its multinational tax avoidance “crackdown.” That’s according to a Treasury department press release earlier this month.
The government claim follows a report that the ATO collected 17% more business tax in FY23 than the previous year. It attributes this to a $100 million “investment” in compliance taskforces.
“Australians can be confident that the Albanese Government is cracking down on big businesses tax dodging and ensure they pay their fair share,” said Assistant Treasurer Stephen Jones.
Labor’s current leadership has been campaigning on this issue since the Morrison government. In April 2022, Jim Chalmbers said, “We are losing billions of dollars that could be funding Medicare or funding child care, because it’s becoming easier and easier…for big global multinationals to park their profits and their debt in different parts of the world.”
As a result, the ALP promised it would be “limiting debt-related deductions by multinationals at 30 percent of profits, consistent with the OECD’s recommended approach.” “Deductions” here refers to local companies (e.g. Google Australia) paying exorbitant interest, royalty and intellectual property fees to parent companies (e.g. Google Netherlands and Google Bermuda).
A step taken toward fixing the problem is Albanese’s legislation, which recently passed the lower house, that requires all public companies to declare their subsidiaries and the jurisdictions where they are incorporated. This is intended to root out disingenuous royalties and fees to overseas subsidiaries.
This goal, however, has been stymied by its reliance on federal LNP tax evasion legislation passed in 2017, which was widely viewed as a smokescreen for business interests at the time. Indeed, the LNP’s “diverted profits tax”, which had been applied by the ATO against Pepsi, failed to hold up on appeal when challenged by Pepsi earlier this year. These laws, keep in mind, were legislated after first being passed to PwC, who leaked them to their corporate clients.
The government’s efforts are part of a global initiative is underway among OECD countries to minimise tax evasion. Yet bills implementing these plans are currently stalled before the Senate.
LNP Senate leader Simon Birmingham moved a motion seeking to eliminate the new Professional Code of Conduct for tax advisors, which would oblige advisors to report fraudulent declarations. Coalition senators are also seeking an amendment to allow multinationals to conceal information from the ATO if they self-assessed that information as “commercially sensitive.”
If they know what is good for them, Labor strategists will be beating the drum on this issue in the lead-up to the 2025 election. While right-wing parties have been playing populist worldwide, corporate tax evasion is a lay-down-your-cards, brass-tacks moment for all the major parties.
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