Australia Set to Introduce Google Tax Bill in February

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By Murray Griffin

The Australian government has privately consulted key interest groups on a revised draft of its diverted profits tax legislation and will introduce the bill to parliament as early as next week.

The bill would give effect to a government commitment made last May to introduce a 40 percent penalty tax on large multinationals such as Google Inc. that it says artificially divert profits from Australia.

Treasury officials last week discussed a revised version of the diverted profits tax bill with selected interest groups and tax specialists, after releasing an initial draft for broad public comment last November.

The revised version hasn’t been publicly released, but a source told Bloomberg BNA that key aspects of the legislation haven’t changed. The thresholds for coverage remain the same—large multinationals with global income of A$1 billion ($757 million) or more and total Australian revenue of more than A$25 million.

The test for demonstrating payment of “sufficient foreign tax” to avoid a determination that taxes have been artificially diverted also remains unchanged.

Taxpayers will satisfy the “sufficient foreign tax” test if the increase in foreign tax liabilities is 80 percent or more of the reduction in the Australian tax liability.

Improved Clarity

The bill, inspired by the UK’s “Google tax,” has, however, been revised, sources said, in an attempt to improve clarity and ensure greater consistency with transfer pricing rules.

A Treasury spokesman told Bloomberg BNA the department “cannot comment on the specifics of any confidential consultation processes it undertakes in the development of policy and legislation.”

Several sources have told Bloomberg BNA they expect the government to introduce the bill and a detailed explanatory memorandum in the first parliamentary session, which starts Feb. 7.

The government is likely to use the diverted profits bill, a high-profile tax integrity measure, to bolster its case for proposed cuts to corporate tax rates.

However, based on the views of parties that hold the balance of power in the senate, any bill providing for extensive corporate tax cuts is likely to receive a hostile reception.

The bill is expected to apply to income years beginning on or after July 1, 2017, for existing and subsequent schemes.

The purposes of DPT as per the Explanatory Memorandum to the draft law are:

  •  Provide the ATO with extra powers to deal with taxpayers who divert profits to offshore associates to avoid Australian tax.
  •  Encourage greater compliance by large multinationals with their tax obligations, including transfer pricing.
  •  Address information asymmetries.
  •  Allow for speedier resolution of disputes than current transfer pricing and GAAR provisions.
  •  Encourage large multinationals (both Australian and foreign) to be more transparent and cooperative with the ATO.

 

To contact the reporter responsible for this story: Murray Griffin in Melbourne at correspondents@bna.com

To contact the editor responsible for this story: Penny Sukhraj at psukhraj@bna.com

For More Information

The Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2016: Diverted Profits Tax, and an explanatory statement, published in November 2016, are at http://www.treasury.gov.au/ConsultationsandReviews/Consultations/2016/Diverted-profits-tax.

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