Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Hansard source

Firstly, I would like to thank those senators who have contributed to the debate on the Treasury Laws Amendment (Combating Multinational Tax Avoidance) Bill 2017 and the Diverted Profits Tax Bill 2017. The legislation continues the government's strong stance against multinational tax avoidance. It implements three new measures announced in the government's 2016 budget. Most taxpayers, of course, comply with Australia's tax rules and pay the right amount of tax. However, there are some who do not. There are some who try to avoid paying Australian tax by diverting Australian profits to low-tax countries. The measures in this legislation will help ensure that the Australian tax payable by significant global entities properly reflects the economic substance of the activities that those entities carry on. This legislation also encourages multinationals to provide relevant information and cooperate with the ATO to ensure faster resolution of tax disputes.

The diverted profits tax will strengthen Australia's anti-avoidance rules and complement our transfer pricing rules by targeting multinationals who enter into agreements with offshore related parties that lack economic substance to avoid Australian tax by diverting profits to lower tax countries. It is expected that the diverted profits tax will apply in very limited circumstances. Most companies do the right thing and meet their tax obligations. The diverted profits tax is focused on tax avoidance arrangements that are artificial or contrived.

The diverted profits tax will, firstly, allow the commissioner to impose the diverted profits tax on the basis of a reasonable assessment of the available information and, secondly, impose an up-front tax liability payable on the amount of the diverted profits at a penalty rate of 40 per cent. Thirdly, where a multinational challenges a diverted profits tax assessment through an appeal to the Federal Court of Australia, it will generally be unable to introduce information that was not previously made available to the ATO.

We will also introduce tough penalties for multinationals who fail to comply with their tax-reporting obligations. From 1 July 2017, large multinationals that breach their tax-reporting obligations will now face penalties of $525,000 rather than $5,250. The increase is much more in line with the financial size and capacity of large multinationals and will provide greater incentive to comply with their tax-reporting obligations.

The transfer pricing rules will also be updated to give effect to the 2015 OECD transfer pricing recommendations. These changes will ensure that our transfer pricing rules remain in line with international best practice and, together with the diverted profits tax, will help ensure that profits made in Australia are taxed in Australia.

These changes also send a clear message to multinationals and the international tax community that Australia is absolutely committed to combating multinational tax avoidance. We continue to be a leader on the world stage in this regard. We have been at the forefront of international progress in implementing the OECD's base erosion and profit-shifting agenda. We have been an early adopter of the Action Plan on Base Erosion and Profit Shifting recommendations and are taking steps to ensure that our rules not only comply with our agreed minimum standards but are effective across all BEPS issues. We continue to implement the OECD Base Erosion and Profit Shifting Package and are currently progressing work on new rules to enhance the ATO's ability to detect tax avoidance by requiring advisers to report aggressive tax schemes to the ATO.

The government is taking a strong and world-leading but balanced approach to multinational tax avoidance. The Turnbull government has said that enough is enough when it comes to multinationals diverting profits offshore and failing to meet their tax disclosure responsibilities. I commend this legislation to the Senate.

Question agreed to.

Bills read a second time.