Australia to crack down on corporate tax avoidance

The Australian government has announced a crackdown on corporate tax avoidance targeting 30 multinational companies.

Under legislation to be introduced to parliament tomorrow (May 12th), the Australian Taxation Office will have the power to fine the corporations an amount which could reach up to 100 per cent of the amount of tax deemed to be avoided.

Analysts believe this could force multinationals such as Apple, Google and Microsoft – who are currently under review by the Australian Tax Office – to restructure their businesses to escape large penalties.

"Double Irish Dutch sandwich"

"These companies are diverting profits earned in Australia away from Australia to no-tax or low-tax jurisdictions," treasurer Joe Hockey told reporters, without identifying the companies targeted. However, he said: "it's pretty evident which companies are involved". 

One of the methods used by several multinationals to reduce their corporate tax bill is known as "base erosion and profit shifting", described by Mr Hockey as a "double Irish Dutch sandwich". 

Companies often send profits first through an Irish company to a Dutch company and finally to a second Irish company headquartered in a tax haven.

He described the tax crackdown as "the first of its kind in the world". He said: "We have taken a lead role globally in this regard," Hockey told reporters. "Have no doubt, the rest of the world is looking at this legislation."

While he did not detail the exact content of the proposed new laws, he said they would not contain a profits diversion tax like the "Google tax" introduced by Britain on April 1st.

He also declined to say how much money Australia expected to raise through the new laws, which will come into force on January 1st if they pass parliament.

There has been an ongoing effort by governments in recent years to crack down on tax avoidance, with the signature last year of an agreement to automatically exchange data collected by financial institutions as early as 2017.