Tuesday, May 12, 2015

Joe Hockey's multinational tax war - symbolism over substance that weakens tougher global action?

Joe Hockey's crackdown on corporate tax avoiders might be a world first but it pre-empts what might have been a broader agreement between G20 and OECD member nations.

Mr Hockey has declared war on thirty multinationals who pay little or no tax in Australia while threatening fines of 100 percent of the tax owed plus interest.

But by going it alone has the Treasurer put pre-Budget symbolism ahead unified action that stood to make a greater global impact on tax dodgers?

Listen to my analysis from this morning's edition of AM on the ABC.

Mr Hockey's tough talk ramped up last year when Australia was on the world stage in its presidency of the G20 where finding ways to target the likes Google, Apple, News Corp and Microsoft was high on the agenda.

As with most things G20 related, the pressure to turn worthy yet non-binding commitments into real action remains immense.

But throughout the G20 deliberations, the myriad of laws and loopholes that vary across nations meant a global approach seemed to be the only practical solution given the legal firepower of multinationals.

The OECD, which is known to be months away from finalising recommendations for a multi lateral approach, will almost certainly be angered by Mr Hockey's action which is coloured by the pre-Budget timing.

Michael Croker, head of tax at the Institute of Chartered Accountants, says Mr Hockey might have been better waiting for a more coordinated global approach.

"That's the key concern from tax practitioners as the OECD is not far off finishing its work. It's expected to wind up its final recommendations in November this year and present those to the G20 ministers at their meetings in Turkey," Mr Croker told AM.

"So it's probably not going to go down well from the OECD perspective, and it will perhaps raise some concerns that maybe Mr Hockey lacks confidence in the outcomes from the OECD process."

Mr Croker thinks the pre-Budget timing is potentially problematic for Mr Hockey who risks being accused of symbolism over substance.

"I'm sure that will be levelled at the Treasurer. But I think there's a sense that the public is of a mind something should be done," Mr Croker said.

"Mr Hockey could say 'well I've acted early and if the OECD comes out with better approaches, then I'll embrace the OECD approach when I see their final recommendation."

The crackdown on multinational tax dodgers means the Tax Office will have greater clout to do its job which in turn will help coffers depleted by the falling iron ore price.

But Michael Croker says the government and the ATO will need to act quickly to send clear messages to foreign companies about the tougher penalties for tax avoidance.

"The ATO needs to be on the ball here because these big companies are making big investments and expect very quick turnaround," Mr Croker said.

"The ATO will effectively will carry the load of determining what's a good inbound structure and what's a bad inbound structure, in terms of these new anti-avoidance provisions. "

No comments:

Post a Comment

What's your view on this?