Minimum global tax to eliminate ‘dodgy accounting tricks’, says assistant minister
The bill to implement 15 per cent global and domestic minimum taxes for multinational enterprises has been introduced into Parliament.
The Labor government introduced three new bills into Parliament on Thursday to implement a 15 per cent global minimum tax and Australian domestic minimum tax for certain multinational entities with an annual global revenue of at least €750 million.
The legislation forms part of the government's plans to support the Two Pillar Solution agreed to by Australia and 135 other countries.
Assistant Minister for Competition, Charities and Treasury, Dr Andrew Leigh, said the legislation will align Australia with approximately 60 jurisdictions which have all taken steps to implement either a global or minimum tax.
"By implementing these minimum taxes alongside other lead jurisdictions as part of a coordinated global approach, Australia will be making a key contribution to prevent a race to the bottom on corporate income tax rates," Assistant Minister Leigh said.
"Establishing a floor on tax competition will lead to a fairer domestic and international tax system."
Assistant Minister Leigh said the minimum tax measure would reduce the incentive for multinationals to shift profits away from Australia to low-tax jurisdictions, with the 15 per cent minimum tax rate applying irrespective of which jurisdiction a multinational operates in.
"It will also improve the competitiveness of smaller domestic businesses in Australia, due to the reduced tax advantages available for multinationals," he said.
The legislation would help prevent multinational entities from engaging in "accounting tricks and dodgy behaviour" that results in profits being shifted offshore to lower tax jurisdictions, said Assistant Minister Leigh.
"Among the shenanigans, we've seen shell companies created in low or no tax jurisdictions, allowing multinationals to funnel huge profits into secret locations where they have zero employees and no physical office," he said.
"We've seen one part of a multinational group purporting to owe another part of the same group a huge amount of debt, shifting profits by paying large amounts of interest to itself in another country, and deducting those payments from their Australian tax bill."
Speaking before Parliament, he noted that an estimated 10 per cent of corporate tax income is lost to global profit shifting.
He also stressed that Australia relies more heavily on corporate tax compared to other jurisdictions.
"Multinational tax avoidance means less resources available to fund our schools and hospitals and means that small businesses face unfair competition from large multinationals that are using tax dodges that aren't available the smaller firms," he said.
Assistant Minister Leigh said the legislation will ensure that all companies large and small pay their fair share.
"These examples of companies exploiting tax lurks are only possible for companies with cross-border operations. This gives them an unfair advantage over local firms and comes at a cost to other participants in the economy as an unfair advantage. It ultimately weighs on the broader health of the economy and limits productivity, economic growth and wages."
Under the reforms, the first global and domestic minimum tax returns would not be due until 30 June 2026, which he said would provide multinationals with time to adapt their compliance and reporting systems.
