The budget will toughen anti-avoidance measures to crack down on the profit-shifting being undertaken by 30 multinational companies that have been identified by the Taxation Office.
It will also apply the GST to digital products and services that are supplied into Australia. This is the so-called “Netflix tax”.
Treasurer Joe Hockey said the second measure would bring in $350 million over the budget period (which will go to the states, as does all GST revenue), but he would not estimate what the first measure might yield.
“We have identified the sums that have been shifted but now actually identifying the actual amount that is required to be remitted in tax is a different story.” He was not going to make the mistake of banking money that was not identifiable, Hockey said.
“It’s not about raising revenue,” Hockey said. “This is about the integrity of the Australian taxation system.”
The government will not name the companies.
The multinationals have set up complicated structures, involving transactions in several countries, so they divert profits they make in Australia to places where there is no or low tax.
The Taxation Office has been embedded in the companies to work out how their arrangements, including the so-called Double Irish Dutch sandwich, operate.
Hockey said that after consultations in the United Kingdom it was clear Australia did not need the British-type Diverted Profits Tax (“Google” tax).
Under the legislation the tax office will have greater power to see through contrived arrangements and the Tax Commissioner will have the power to recover unpaid tax, with a fine of 100% of the amount plus interest.
The stronger powers will start from January 1 but won’t be retrospective. The government hopes that companies will consider it is worth their while to pay the tax rather than trying fresh restructuring to avoid it.
The GST measure aimed at a level playing field for the suppliers of digital products and services in Australia, Hockey said.
It was unfair that a local supplier had to charge GST and the overseas supplier did not.
“When the GST legislation was drafted it did not anticipate the massive growth in the supply of digital goods like movie downloads, games and e-books from overseas,” Hockey said.
The GST will be collected by the suppliers and remitted to Australia. Hockey said there were only a handful of businesses engaged in digital technology transfer, even though the volume of activity was much higher than originally.
The government has been looking at lowering the $1000 GST threshold for goods imported into Australia but a practical problem is the administrative burden that would be presented by the huge number of parcels.
Shadow assistant treasurer Andrew Leigh criticised the uncosted nature of the anti-profit shifting measure. “Joe Hockey himself doesn’t seem to be in command of the detail,” he said. “If the policy isn’t costed Australians shouldn’t take it seriously.”
Labor was happy to look at the details of the so-called Netflix tax, Leigh said.