Bradbury Drones On About BEPS
25 July 2013
Posted by: Author: Mary Swire
Author: Mary Swire
Research by the Australian Treasury has shown that "global tax settings have failed to keep pace with changes in the global economy," Assistant Treasurer David Bradbury has said.
Bradbury was commenting on the release of a Treasury scoping paper he commissioned last November. He requested that the Treasury examine the risks to the sustainability of Australia's corporate tax base. In this, the Treasury was assisted by a Specialist Reference Group, composed of tax professionals, and representatives from business, academia and the community sector. It was also able to draw on submissions to an Issues Paper released earlier this year, which outlines the challenges that changes in the global economy pose to the international tax system.
Australia's corporate tax receipts were worth AUD66.6bn (USD61.7bn) in 2011-12, representing 22 percent of the total federal tax receipts and 4.5 percent of gross domestic product (GDP). Australia also collects more corporate tax as a share of its GDP than most other Organization of Economic Cooperation and Development (OECD) countries.
In his foreword to the scoping paper, Bradbury notes the growing concern at the tax practices of some multinational corporations. Although they act within the law, Bradbury believes that they are able to take advantage "of outdated international laws to reduce the taxation contribution they make to the countries in which they operate."
Bradbury is clear that addressing "the deficiencies in the tax laws is beyond the scope of any one country acting alone." To move forward, governments must cooperate, and Australia is keen to ensure that by taking the chair of the G20 next year it is able to play a prominent role in "determining and driving the base erosion and profit shifting reform agenda."
Indeed, this message is strongly put by the Treasury, with the scoping paper stressing that the focus of Australia's policy response should be on "shaping and leading efforts to improve multilateral reform." Domestic action should complement this, by "identifying and taking action against emerging risks that are identified where such action can be taken within existing international frameworks."
The paper makes four key recommendations. The first relates to an expansion of the public release of taxation statistics, to better cover the international dealings of multinational enterprises. The Government is also urged to publish an annual report on the health of the business tax system.
From the Government's response, it appears that it already considers its action on this front sufficient to meet the paper's concerns. In June, Bradbury announced that the Australian Taxation Office (ATO) would release more de-identified data into the public domain, with the aim of contributing to a richer understanding of the tax and transfer system.
A similar response is given to recommendations three and four. The third is that Australia consider exploring options for improving the way tax authorities work together. The Government says that it has been a strong supporter of strengthened information exchange networks, and Australia is set to join a pilot launched by the G5 for the multilateral automatic exchange of taxpayer information. Likewise, the Government has supported the OECD's new Action Plan on base erosion and profit shifting, an endorsement recommendation four urges strongly.
The Government will however consider the second of the paper's recommendations, which calls for each of Australia's bilateral tax treaties to be reviewed at least once a decade, to ensure that they continue to operate in the national interest.