Estimated read time: 3-4 minutes
This archived news story is available only for your personal, non-commercial use. Information in the story may be outdated or superseded by additional information. Reading or replaying the story in its archived form does not constitute a republication of the story.
CANBERRA, Australia (AP) — Australia's top finance official said Monday he will introduce legislation to force global corporations to pay a fair amount of tax on their Australian earnings, potentially boosting government revenue by billions of dollars and adding momentum to international efforts to combat corporate tax avoidance.
Treasurer Joe Hockey said there are 30 corporations that pay little or no tax on the profits from their Australian operations but did not name them.
Under legislation to be introduced to Parliament on Tuesday, the Australian Taxation Office will have the power to charge tax on profits diverted offshore and to fine the corporations an amount equal to the tax evaded.
"We have taken a lead role globally in this regard," Hockey told reporters. "Have no doubt, the rest of the world is looking at this legislation. This is the first of its kind in the world."
Tax officials have been posted to the Australian offices of the 30 companies, analyzing the complicated transactions they use to avoid paying tax.
The problem, known as "base erosion and profit shifting," has stoked public anger at a time when the global economy is still struggling to recover from the 2008 financial crisis. Critics see it as an outrageous example of the powerful being given an unfair advantage, while the poor suffer the consequences of governments being starved of rightful revenue. The companies argue they're not breaking any laws.
Under an arrangement described by Hockey as a "double Irish Dutch sandwich," companies often send profits first through an Irish company to a Dutch company and finally to a second Irish company headquartered in a tax haven. Singapore is also a cog in the system. Hockey said companies often bill from the Southeast Asian city-state for business activity that happens in Australia.
Executives of Google, Apple, Microsoft, News Corp. as well as miners BHP Billiton, Rio Tinto and Fortescue Metals Group were quizzed by a Senate committee last month on their strategies to minimize their taxes bills.
Hockey refused to give details about the 30 companies targeted, but he said they were not all American.
The legislation is part of the government's budget plan for the next fiscal year which begins on July 1.
Hockey said the new taxation powers would not take effect until Jan. 1.
The budget would not include forecasts of how much extra tax the measure would raise. But Hockey said the extra revenue would amount to billions of dollars.
The politically-fraught issue of forcing big, multinational companies to pay more tax was high on the agenda of the annual G-20 summit of wealthy and developing countries in the Australian city of Brisbane in November last year.
There has been an ongoing effort by governments to crack down on tax avoidance. Companies such as Google and Amazon face criticism for moving profits earned in one country to other countries with lower tax rates.
In October, 51 countries signed an agreement to automatically exchange data collected by financial institutions as early as 2017. The move was designed to increase transparency and discourage tax cheats.
Hockey said on Monday that he had discussed Australia's planned legislation with the Organization for Economic Co-operation and Development while in Washington last month for a meeting of G-20 finance ministers and central bankers..
Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
