Toughening the multinational anti-avoidance law
Tax avoidance by multinational companies are not a new issue as professionals such as accountants are discussing about this issue for a long time. At last, the Australian Government has done something to stop this which definitely will help the small businesses to exist in this competitive market.
For Australian economy, small businesses are always an important part, as they are contributing around 34% of GDP in whole Australian economy. The Australian Bureau of Statistics identified small businesses who are employing fewer than 20 employees. However, if the Australian Government can assist small businesses, it could be increase up to 50% of total GDP. Obviously, toughening the multinational tax avoidance law is one important step towards helping the small businesses to encourage them to be more involved in Australian economy
Most of our clients are small to medium size businesses so we know how hard to operate small businesses to comply with all regulations and paying taxes. Larger corporations are already in an advantaged situation due to economic scale. On top of this, not paying tax help them to cut their services & product’s prices to eliminate small and medium size competitors.
Australian Taxation Office (ATO) is claiming they already have received $1.5 billion from large multinational companies since June 2016, after the new law implemented. So, we can assume the amount of tax has been lost as a result of tax avoidance by multinational companies could be used for strengthening the Australian Economy.
Prior to this law tax avoidance structure, there was thin capitalisation (Intra group debt) regime in where excessive amount of interest deduction depends on debt to asset ratio. In reality that was not working as more than 30% of large multinational companies did not pay a cent where’s they made millions of dollar from Australia.
From 1st of July 2017, The Australian Government has implemented 40 percent of tax rate (higher than standard company tax rate of 30%) on multinational companies who used to use overseas tax havens to avoid tax in Australia which is known as Google tax. Australia is the second country after UK who has implemented this tax on multinational companies.
Nevertheless, introduction of multinational anti avoidance tax law much appreciated and will help to boost Australian Economy as income from resource sectors has been reduced lately dramatically.