Australia falls short of global tax reform goals
Hold-ups in international talks and parliament have derailed Treasury targets to implement the OECD’s two-pillar agenda, a report has found.
The government has fallen short of its target to sign and implement key global reforms aimed at curbing multinational tax avoidance, a recent Treasury report has revealed.
Treasury’s annual performance review, released last week, showed that Australia failed to sign the first pillar of the OECD’s tax agenda and failed to pass domestic legislation to give effect to the second pillar as planned.
“Treasury is reporting that this measure is not achieved,” the report said.
The two-pillar solution was agreed by member states of the OECD/G20 inclusive framework on base erosion and profit shifting in 2021.
Pillar one aims to tax big tech, pharmaceutical and other multinational companies in the country where they earn revenue, countering the practice of profit shifting, while pillar two would introduce a global minimum tax rate of 15 per cent.
Protracted OECD negotiations as well as delays in parliament were cited as reasons for the missed targets.
“Pillar one has not been settled by the more than 140 countries of the OECD inclusive framework, and the multilateral convention has not yet been opened for signature by the OECD,” the report said.
“Treasury’s ability to achieve this target is heavily dependent on the OECD’s progress and intent to finalise and announce a complete pillar one package that opens the multilateral convention for signature.”
The current impasse in negotiations stems from geopolitical and economic disagreements and meant that the convention did not open for signature by the OECD’s self-imposed deadline of 30 June this year.
Treasury also missed its target of implementing domestic legislation to give effect to pillar two’s domestic minimum tax (DMT) and the income inclusion rule (IIR) in accordance with the progress and timelines of the OECD.
While plans to legislate the DMT and IIR were announced in last year’s federal budget, the bill has not been passed and is in its second reading stage in the Senate.
“In this reporting period, legislation has been drafted and consultations held on the draft legislation,” Treasury said.
“Once tabled and passed by Parliament, it will ensure that the DMT and the IIR entered into effect from 1 January 2024.”
The annual report also discussed Treasury’s participation in international tax negotiations, with officials attending 162 meetings over 12 months.
It said the Treasury had remained “steadfast” during talks to protect Australia’s tax revenues and interests while balancing and maintaining Australia’s political position with other jurisdictions.
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