Scott Morrison introduced the ‘Google Tax’ or the less exciting Diverted Profits tax on the 29th of November this year, stating that it will ensure that tax dodging corporations will be heavily scrutinised and taxed heavier if they try and dodge their tax. The tax will allow the ATO to broaden their scope and ensure that these large multi-nationals can properly be punished.This is something that a lot of Australians are frustrated with, especially SME owners that pay a 30% corporations tax. Running a successful business shouldn’t give you immunity from taxation, and that seems to be the case with the status quo at the moment.
We see a lot of successful multi-nationals enter Australia, crowd out Australian businesses and divert their income overseas to avoid any tax. You could argue that they are giving Australians jobs, sure, you aren’t wrong on that front. However, there is a major amount of money that we, as Australians, are putting into their companies.
Just because you can afford the best accountants in the world and amazing tax lawyers should not preclude you from paying tax. I think this is a bi-partisan issues that should be agreed on by both parties.
The proposal states a $200M increase in the Australian budget if tax evasion by multi-nationals is adequately prevented and the money is redirected back into Australia. As a Government that was cracked down on about this very issue, it is refreshing to see some action taken on it. It will be interesting where support lies on this tax, and how it will affect multi-nationals entering into Australia.Will it stop multi-nationals from setting up shop in Australia? If this passes, we’ll have one of the strictest laws on this issue in the world. Google has moved billions of dollars to Bermuda, it’s under pressure from Indonesia to pay its taxes, and it’s proud of how the company avoids taxes.Whether this is okay or not depends on what you believe.
Irish tax law is the a major way to avoid corporate tax liability, using payments between related entities in corporate structures to move payments across from a higher-tax country to one with lower jurisdiction.