Multinational companies in Australia will soon lose their assets if found guilty of dodging taxes. This follows the move to vest extra powers to the Treasurer for targeting errant foreign companies. According to Treasurer Scott Morrison, all foreign investment applications would undergo stringent tax scrutiny.
Their taxes will be calculated on the basis of what they earned in Australia. Morrison also announced the establishment of a new agricultural land foreign ownership register, reports The ABC.
The asset-stripping plan is certain to rattle many multinationals looking for investment in Australia. “The Government is committed to ensure that companies operating in Australia are paying taxes on their Australian earnings. Where companies fail to do so I will have powers to take action, including ordering divestment of Australian assets,” Morrison said in a statement.
This is the latest in the tax crackdown offensive by the Federal Government. The process will also see more powers to the Australian Taxation Office.
The Treasurer said foreign investors have to comply with Australian taxation laws. They must heed to the directives of the Australian Taxation Office. Information will be sought from investors whether they have transactions with non-residents. If so, relevant provisions in the laws such as transfer pricing or anti-avoidance measures will be applied on them.
However, Labor’s shadow assistant treasurer Andrew Leigh slammed Morrison’s announcement. He said the plan was short in details.
“The Treasurer’s announcement that the Foreign Investment Review Board will now consider tax issues as part of its national interest assessment process is another attempt to look tough on multinational tax,” he said in a statement.
Morrison also warned against any breach of the new conditions by the Foreign Investment Review Board (FIRB). Any violation would invite prosecution, fines and finally divestment of assets. The ATO had been urging the government to tighten penalties on erring multinationals. Many MNCs were allegedly shifting profits to low-tax havens to avoid tax liability in Australia. It meant Australia is losing hundreds of millions of dollars in taxes.
Meanwhile, a study conducted by more than 80 journalists from different countries revealed how corporations have been abusing tax laws. It noted that many businesses are managing official “comfort letters” from tax havens like Luxembourg. Such letters become a ruse to avoid taxes in other countries, reports eTax.
The study said MNCs have moved their income to other offices and subsidiary companies operating in low tax zones. They include places like Luxemburg, Bermuda, British Virgin Islands and Singapore. At the same time, MNCs move their debts to high tax jurisdictions like Australia to seek waiver on debts and expenses.