2017 Budget Roundup: Edition Four



With another budget deficit looming there is a an increased pressure on the government to finally crack down on multinational companies. While the 2016 budget addressed the issues of tax avoidance by multinationals and implemented some policies to tighten regulations, is more still needed?

A review of two year’s worth of financial data in the lead up of the 2016 budget of multinational tech companies showed that they had collectively reduced their tax by a combined $5.4 billion dollars. The review was of companies including Google, Yahoo!, Microsoft and Samsung and was for 2013 and 2014. So how did they do it? Mainly through tax avoidance techniques such as debt loading which is also known as thin capitalisation. By shuffling debts of offshore divisions to Australia it artificially lowers the taxable earnings. A report by the University of Technology Sydney found that multinational tech companies were only paying an average of 7.5% tax.

However, a report into multinational pharmaceutical companies such as Procter & Gamble, Roche, Glaxosmithkline, Sanofi-Aventis Australia and Pfizer showed that they has the lowest tax rate of just 5.7%. The report was funded by 1700 GetUp! supporters paid for the release of 200 financial reports.

This week it has been announced that Chris Jordan has been reappointed to his role as Tax Commissioner, two years ahead of his term expiring. "Mr Jordan's term as Commissioner of Taxation, and Registrar of the Australian Business Register, which had been slated to conclude at the end of 2019, will now run until February 29, 2024," Mr Morrison said. This comes as a result of the strong leadership he has shown with implementing the multinational tax avoidance laws.

Last week the ATO was successful in their case in the Federal Court against Chevron where they were ordered to pay back $300 million in taxes. The ATO are expected to raise more than $4 billion in additional tax liabilities in the coming year. Chevron has a further $41 billion in similar income that is still to be assessed. But this ruling also has further ramifications, Shell for instance in Australia has made $60 billion in revenues over 3 years, and has paid zero tax. Exxon is in a similar boat, they have paid no Australian taxes, yet its parent company in the US was paid record dividends.

So while the laws for our ‘Google Tax’ which is more formally known as the Diverted Profits Tax has been implemented and begun cracking down on companies it may take some time before we start to see some real results. Mr Jordan has reported that there are 71 audits under way in the large business area covering 59 multinational corporations.

The Government is happy with their policy and believes that 12 months in it is starting to deliver on its promise. So we wouldn’t expect any additional policies or changes in the 2017 budget.

As we edge closer to the Budget announcement stay tuned for Edition Five or get in touch with any questions you want answered contact us so we can make sure we keep bringing you relevant updates throughout the lead up to the Budget in May 2017.

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About Author

Michael Derin
Michael Derin

Michael Derin, Azure Group's Founding Partner and Chairman has over 28 years’ experience as a qualified Chartered Accountant within the business and commercial sectors. Michael works across our Technology, Corporate Advisory and CFO operations, managing highly complex projects to success.

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