Members will recall that last month the Federal Government introduced a Bill to implement changes to Part IVA and the second phase of the Transfer Pricing reforms. The Bill is titled: Tax Laws Amendment (Countering Tax Avoidance and Multinational Profit Shifting) Bill 2013.
Whilst it is yet to be debated in Parliament, it has been referred for further examination to the House of Representatives Standing Committee on Economics; The Tax Institute has made a submission to the Committee.
With respect to Part IVA, we support the maintenance of a robust general income tax anti-avoidance rule to ensure that tax is levied fairly, consistently and according to the policy intention of the tax laws.
However, the amendments in the Bill are an unnecessary overreaction to recent Court cases and not required to maintain the integrity of the system. Furthermore, we are concerned that the Bill as drafted will bestow excessively wide powers on the Commissioner to levy tax on the basis of an unreasonable alternative postulate. Such an unconstrained power will result in an inappropriate erosion of taxpayer rights and create potential for undesirable behavioural changes.
On transfer pricing, The Tax Institute is supportive of the Government's efforts to align our transfer pricing laws with OECD Guidelines. However, we are concerned that the Bill as currently drafted will:
- bestow unnecessarily wide reconstruction powers on the Commissioner leading to taxpayer uncertainty;
- impose excessively high documentation requirements, especially on small to medium enterprises; and
- unnecessarily broaden the scope for penalties to apply.
Our submission contains a number of recommended amendments for the Committee's consideration.
The Government intends to debate the Bill in time to pass it through both houses of Parliament by 21 March 2013.
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.