Australia and the United Kingdom will join forces to tackle the issue of profit-shifting by multinational organisations, but treasurer Joe Hockey has stepped back from supporting a British-style “Google tax”.
Hockey and chancellor of the exchequer George Osborne discussed the British diverted profits tax, commonly known as the “Google tax”, at this week’s meeting of G20 treasurers in the United States.
“We are going to work with them on their diverted profits tax, which is already implemented,” Hockey told ABC TV on Sunday.
“We are going to send officials over to the United Kingdom as soon as their [7 May] election is complete and we are going to, together, lead the world and ensure we work with the OECD in developing the very best practices that will absolutely ensure that companies that are earning profits pay tax in the jurisdictions where they earn the profits.”
But Hockey was coy when pressed on whether Australia would consider implementing its own version of the Google tax.
“Australia does not need to impose a new tax but certainly there are ways we can beef up the integrity measures around our own taxation system,” he said. “We can learn a lot from what the British are doing with their so-called Google tax but, importantly, the whole world needs to work together.”
Hockey said that the joint working group would enable Australia to go “further and faster” than the framework for change offered through multilateral groups like the OECD and G20.
“By the United Kingdom and Australia coming together on this initiative, we are going to lead the world and work with the OECD and the G20 to ensure that companies pay the proper amount of tax where they earn the income.”
“The OECD, through its base erosion and profit-shifting program, is trying to set up consistent global definitions and rules in relation to companies. We welcome that,” Hockey said.
“We are going for the next stage which is to go after those companies that are not paying the proper amount of tax where they earn the income. So we are going one step further than what the OECD is doing.”
The treasurer had earlier flagged that a diverted profits tax may be part of the upcoming federal budget, warning that Australia is “losing control of our destiny from a taxation perspective” because of “holes” in the tax system in relation to multinationals.
Labor’s $1.9bn savings package in relation to tax avoidance centres on making changes to the amount of debt for which companies can claim deductions in Australia. The Coalition has rejected that proposal.
Shadow treasurer Chris Bowen and his assistant Andrew Leigh said in a joint press release: “If Joe Hockey is serious about ensuring multinationals pay their fair share, why is he still refusing to even consider Labor’s package? We’re still waiting for the treasurer’s call and the clock is ticking down to the budget.”
Labor has described the joint working group as “all talk and no action”.
