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

My clear advice is that the tax commissioner does not have the discretion that you are suggesting. Why don't I talk you through the reasons the government is opposing your amendment. The government does not support increasing the foreign taxes carve-out from at least 80 per cent to at least 90 per cent of Australian taxes paid, firstly, because we have extensively consulted on this and we believe that we have the right balance here. It is, of course, the precedent in most countries and specifically the UK, which was the first to legislate this diverted profits tax and has the equivalent 80 per cent threshold in its legislation.

This amendment is a bit of policy on the run, we suggest. Increasing the carve-out will not actually help us fight tax avoidance. The companies that the tax office and Treasury have identified as the greatest risk are those companies that are paying 80 per cent or less of the company taxes they would be paying had they been recognising the profit in Australia. Increasing the test to 90 per cent would bring in lower risk companies that are doing the right thing. It would increase compliance costs for the Australian Taxation Office and mean their audit processes would be less targeted. It would also increase the cost of compliance for businesses doing the right thing and reduce business certainty and confidence.

The other point that I would make in response to the issues raised by Senator Whish-Wilson is that it is important to remember that transfer pricing rules will still apply, that the general anti-avoidance provisions will still apply and that this comes over and above all of the other anti-avoidance measures that are already enshrined in our relevant tax laws.

Bills agreed to.

Bills reported without amendment; report adopted.