Worldwide Gearing Ratio
Tax deductions will be based on a company’s entire global operations, not just what they do in Australia.
Labor is proposing to amend the current thin capitalisation rules to reduce the amount of debt that multinational companies can claim deductions for in Australia. Companies will no longer be able to claim up to a 60 per cent debt-to-equity ratio for their Australian operations. Instead, deductions will be assessed on the debt-to-equity ratio of a company’s entire global operations. This means that if a company has an average 30 per cent debt-to-equity ratio across its different subsidiaries, it will only be able to claim tax deductions up to that level.
No Tax Cut for Billion-Dollar Multinationals
Labor supports small businesses, not tax cuts for billion dollar multinational firms.
The Government has proposed a $65 billion tax cut for banks and multinationals. Labor will stop this tax cut for the big end of town. Labor believes this revenue should be used to fund schools, protect families and improve the budget bottom line.
Closing Every Loophole
Remove tax advantages and inconsistencies used by multinationals
Multiple Entry Consolidated groups are corporate groups, treated as a single taxpayer, consisting of Australian-resident entities that share a common ultimate foreign owner. Labor will accept Treasury recommendations to remove unintended beneficial tax outcomes for such groups compared to Australian tax consolidated groups.
Restore Public Reporting Integrity
Restore the $100 million threshold for reporting the tax affairs of large private firms.
Labor’s original threshold was watered-down in a dirty deal between the Coalition and the Greens last year, with 600 companies being shielded from public scrutiny as a result. This reform brings them back in line with public companies.
More Voices at the Tax Table
Ensure a community sector representative is on the Board of Taxation
The Board of Taxation is a non-statutory advisory body that provides the Government with real-time advice on tax policy issues by contributing a business and tax community perspective to improving the design and operation of taxation laws. Tax advisors and multinational companies are well represented on the Board and this potentially skews the interests and feedback given by the Board.
Increased ATO Compliance
Improving compliance with the ATO by providing effective funding.
Labor is proposing that the Australian Tax Office has the resources it needs to properly investigate and pursue multinational profit shifting. Evidence in Senate estimates, and from the Australian Tax Commissioner himself, showed additional compliance from the Tax Office is yielding greater revenue from multinationals. Evidence in House estimates shows investing in the ATO can yield up to $6 for every $1 invested.
Public Reporting of Worldwide Tax Affairs
Tax information about where and how much tax was paid by large corporations will be released publicly.
The proposal would require the Australian Taxation Office to make country-by-country reports (excerpts) publicly accessible. This would be high level data on how much tax is paid in jurisdictions the firm operates, the number of employees, and related material. The EU is implementing this measure. Public disclosure would make country-by-country reporting much more useful to developing countries, other businesses, shareholders, civil society, academics and journalists.
Whistle-blower Protection, Incentives and Rewards
Individuals who highlight tax evasion are protected and can receive a share of the penalty collected
Individuals who highlight tax avoidance behaviour, tax evasion, aggressive tax planning, and other tax issues, can collect a share of the penalty collected (capped at $250,000 or 1 per cent of the penalty figure, whichever is higher). This share would be taxable as ordinary income. Anyone who takes adverse action against whistleblowers will face 2 years jail and an $18,000 fine, and whistleblowers will also be able to take civil action for reinstatement and compensation. The US and UK have existing reward/incentive measures in their tax enforcement.
Companies Must Disclose Tax Haven Risks to Investors
Require companies disclose dealings in tax havens to shareholders
The Australian Tax Office would issue guidance on the types of activity, and detail, businesses are required to disclose. A list of material tax risk jurisdictions (tax havens) would be maintained by the ATO and issued as a guidance note to inform companies’ corporate governance regimes. It would be similar to the design of the European Union’s ‘blacklist’.
Public Register of Beneficial Ownership
Obligation to disclose the beneficial ownership for Australian legal identities.
Labor will ensure that the G20 principles Australia committed to at the G20 summit in Brisbane in 2014, which are based on guidance from the Financial Action Task Force, are implemented fully and quickly to ensure that Australia cannot be used as a destination for money-laundering, tax evasion, terrorism financing or other criminal behaviour. This will be achieved by establishing a publicly accessible central registry of the beneficial ownership of companies, trusts and other corporate structures.
Data on Cashflows to Tax Havens
Publicly available totals of funds transferred from Australia to overseas destinations
Require AUSTRAC to publicly release International Funds Transfer Instructions (IFTI) data for every calendar year (or, if more practical, financial year). This would show aggregated cash flows to overseas destinations, including low-tax and non-compliant jurisdictions (tax havens).
All companies must state where they pay tax when applying for Government tenders
The measure would not preclude any company from tendering, nor change the ‘value for money’ criteria of procurement. The tender-value threshold for this measure would be for government purchases above $200,000.
Superannuation Guidelines on Tax Haven Investment
Some Australian superannuation firms are known to invest in companies incorporated in tax havens
Task the ATO (in collaboration with ASIC, and APRA re: self-managed super funds) to create/review guidelines for responsible investment for superannuation funds. This would not seek to outlaw such investment (nor presume any illegality), but rather ensure funds are transparent about their dealings in such jurisdictions and what those investments are.
ATO Aggressive Tax Minimisation Settlement Reporting
High-level reporting in the ATO’s annual report on how many settlements were achieved per financial year and associated data
The ATO would include in its annual report high level data about the value and number of settlements above a value of $50 million.