Australia cracks down on alleged tax avoidance by OTTs

Written by on May 12, 2015 in News with 0 Comments
Australia's Treasurer Joe Hockey. REUTERS/Jonathan Ernst

Australia’s Treasurer Joe Hockey. REUTERS/Jonathan Ernst

SYDNEY (Reuters) – The Australian government on Monday announced a world-leading crackdown on alleged tax avoidance by 30 multinational companies in a move that could force the likes of Apple Inc and Microsoft Corp to restructure their businesses to escape huge penalties.

“These companies are diverting profits earned in Australia away from Australia to no-tax or low-tax jurisdictions,” Treasurer Joe Hockey told reporters in Canberra.

He declined to identify the targets, but said “it’s pretty evident which companies are involved”. Google Inc, Apple Inc and Microsoft Corp revealed earlier this year they were under review by the Australian Tax Office.

The Australian subsidiaries of these global tech titans have all denied any tax evasion.

Australia and Britain are leading steps by countries to tackle large companies over base erosion and profit shifting methods of avoiding tax ahead of coordinated international efforts by the OECD through the Group of 20 leading economies (G20).

Hockey did not detail the content of the proposed new laws, but said they would not contain a profits diversion tax like the “Google tax” introduced by Britain on April 1.

He also declined to say how much money Australia expected to raise through the new laws, which will come into force on Jan. 1 if they pass parliament. More details will be provided in the federal budget due for release on Tuesday.

Companies could be fined up to 100 percent of the amount of tax deemed to be avoided, he added.


Hockey also unveiled a plan to extend the country’s existing goods and services tax (GST) to cover digital products purchased from overseas suppliers.

The so-called “Netflix Tax” would level the playing field between Australian and overseas companies and raise around A$350 million over four years, he said.

“When the GST legislation was originally drafted, it did not anticipate the massive growth in the supply of digital goods like movie downloads, games and e-books from overseas,” he said.

Hockey said the proposed multinational tax legislation was the first in the world and had attracted considerable interest at a G20 meeting in Washington last month.

“There was a lot of interest from other finance ministers who would … perhaps take it to their own countries as well, including China,” he said.

One country watching more warily than most may be the United States, which originally backed the G20 crackdown but has since become concerned about Britain, Australia and other nations lining up against U.S. digital companies as they seek extra revenues to trim budget deficits.

(By Jane Wardell; Editing by Eric Meijer & Shri Navaratnam)

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