In the context of multinational taxation, the Federal Government’s phrase of choice seems to be: "fair share".
The Tax Institute welcomes the Government’s recognition of the need to update current international taxation laws in conjunction with our treaty and major trading partners. The integrity of the tax base is essential to making a lowering of the company tax rate possible.
An internationally co-ordinated effort to tackle tax avoidance and re-examine the relevance of existing source and residence doctrines is essential to ensure that Australia’s international tax and treaty network adequately addresses the challenges posed by the increasingly digital international economy and levies taxation on the economic substance of the transaction.
Nevertheless, consideration of the current activities of multinationals and any proposed changes to tax laws need to take into account the challenging and competitive circumstances faced by businesses operating in an international environment.
In Australia, where the company tax typically acts as a withholding tax due to the imputation system, concepts of a "fair share" of company tax burden need to be tempered by recognition of the high level of share ownership amongst Australians either directly or via superannuation investments (and the resulting flow-through of franking credits). Furthermore, a wealth of evidence suggests that the incidence of company tax falls on capital owners in the short to medium term and on labour in the longer term.
The effect of such changes in tax laws on inbound investment and potential flow-on ramifications of changes in tax treatment by our trading and treaty partners of outbound investment also need to be appropriately taken into account.
Any efforts to increase transparency that allow tax authorities to properly understand taxpayer circumstances and apply tax laws correctly and in a timely fashion is welcomed, but not at the cost of an increased regulatory burden. Every effort should be made to ensure that the current information gathering powers of the ATO are not duplicated or excessively complicated.
We recently raised this as one of our Federal Budget priorities and you can read the full Budget submission.
Robert Jeremenko CTA is Senior Tax Counsel of The Tax Institute.
The Tax Institute is Australia’s leading professional association in tax. Its 13,000 members include tax agents, accountants and lawyers as well as tax practitioners in corporations, government and academia.