Australian Tax Office Commissioner Chris Jordan has welcome a request from Treasurer Joe Hockey for the ATO to “double its efforts” to ensure multinational corporations pay their fair share of tax in Australia.
In a speech on Thursday about the tax reform agenda of the G20 and Organisation for Economic Co-operation and Development, Hockey said opening Australia to international businesses means “ensuring that multinational companies pay tax in Australia on the income they earn here”.
“You should pay tax in the country where you’ve earned a profit,” said Hockey.
“That’s not just an essential tax principle, it is rational and fair.”
“Of course, most businesses do comply with our tax laws. But there is a small proportion of multinational businesses that set up sophisticated arrangements to avoid Australian tax. This is patently unfair—unfair on the Australian taxpayer and unfair on local businesses that are doing the right thing,” said Hockey.
In a statement provided to SmartCompany, Jordan says he “appreciate[s] the Treasurer’s encouragement to do more” in what is a “difficult area of the law”.
“The program of renewal underway at the ATO includes lifting our focus and performance in the area of taxation of multinational enterprises,” says Jordan.
“The ATO has strengthened base erosion and profit shifting initiatives to spearhead that change. These initiatives are looking at instances of international structuring and where profit shifting might have occurred, and checking that the law has been followed correctly.”
Jordan says the ATO is specifically looking at “some taxpayers in the high tech sector to closely examine whether income has been declared in Australia when it has been earned here” and Hockey’s statement “reinforces the importance of our current work program”.
“Most corporations pay the right tax but it is important we examine those with more aggressive arrangements to ensure everyone is paying their fair share,” he says.
Hockey’s speech also addressed the introduction of a global reporting standard from next year, which will increase the extent to which companies’ financial information is shared between up to 60 countries in a bid to weed out those operating outside of the law.
Paul Drum, head of policy at CPA Australia, told SmartCompany the mandate the Treasurer has handed to the ATO in addressing international tax avoidance is “an example of Australia leading by example”.
“The Base Erosion and Profit Shifting project, headed by the G20 and the OECD is seeking to address this major issue for governments around the world,” says Drum.
“It’s complex and won’t be resolved overnight, but as the pace of globalisation continues, it’s critical that blatant and artificial arrangements devised to evade tax are addressed.”
“We welcome the Treasurer’s resolve to lead efforts through the G20 [and] Australia ought to be a vigorous participant in this debate.”
Hockey’s comments were also endorsed by Peter Strong, executive director of the Council of Small Business of Australia, who told SmartCompany this morning “we’re here to help if the tax office wants us to dob in some big businesses”.
“Some small businesses rort the system but not many, but when a multinational does it, that’s hundreds of millions of dollars and jobs,” says Strong.
News Editor
Prior to joining SmartCompany, Eloise was news editor at Books+Publishing, the trade press for the Australian book industry. Eloise has degrees in media and communications, marketing and business management, and political science. You can follow her on Twitter at @ellykeating.
