Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015 (CTH) Enacted
Wednesday 16 December 2015 @ 9.58 a.m. | Corporate & Regulatory | Taxation
As we have previously reported, in September (16 September 2015), proposed legislation for new laws to combat multinational tax avoidance were introduced into the Commonwealth Parliament; namely, the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015 (the Bill). The new laws proposed by the Bill were aimed at country by country reporting and scheme penalties for larger companies. On 11 December 2015, the Bill received the Royal Assent and is now enacted as the Tax Laws Amendment (Combating Multinational Tax Avoidance) Act 2015 (Cth) (No. 170 of 2015) (the Act).
A Recap of what the Act Does
Essentially the Act implements three measures:
- a new multinational anti-avoidance law;
- stronger penalties for large companies that engage in tax avoidance and profit shifting; and
- country-by-country reporting to give tax authorities greater visibility of multinationals' tax structures.
The three measures are intended to apply to over 1,000 large multinational companies operating in Australia with annual global revenue of $1 billion or more. Companies whose tax schemes it is said by the government's own inquiry ". . . represent the highest risk to Australia's tax base".
For more detail on the Bill see our articles: New Draft Bills in Commonwealth: Multinational Tax Avoidance - and - Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015 (CTH).
Passage of the Legislation
The Bill was passed by the House of Representatives and the Senate on 4 December 2015, which was the last sitting day of 2015 for the Federal Parliament.
As passed, the Bill contained the new Multinational Anti-Avoidance Law (MAL), as well as providing for rules for increased penalties and for country-by-country reporting, measures that had been announced back in May 2015.
Originally, the Bill was agreed to by the House of Representatives on 19 October 2015. It was, however, returned by the Senate on 11 November 2015 with proposed amendments by the Greens and independent senator Nick Xenophon. The Greens amendments were negotiated between the Greens and the Government. The result of the amendments is that, the Commissioner for Taxation (the Commissioner) will be required to publish certain information obtained from the tax returns of private companies where the private company has revenues of more than $200 million (private companies were previously exempt from the reporting information provisions) and further, the Commissioner will require a general purpose financial statement to be lodged.
The MAL - Who's affected
In simple terms, the MAL is to apply to global companies/entities with A$1 billion or more in annual global income (which is to determined in accounting terms on a consolidated group basis), where a foreign entity in the group makes supplies to Australian customers whilst avoiding the attribution of income to an Australian permanent establishment.
ATO Publishes Guideline for Taxpayers on MAL
The Australian Tax Office (ATO) has released a Law Companion Guideline entitled "Section 177DA of the Income Tax Assessment Act 1936: Schemes that limit a taxable presence in Australia" (LCG 2015/2), clause 1 of which states:
"This Guideline discusses Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015 (the Bill), in particular, Schedule 2 to the Bill which deals with schemes that limit a taxable presence in Australia. This Guideline is provided as a measure to assist you with understanding the new law."
In the Guideline, the ATO asks taxpayers likely to be affected by the MAL to enter into early discussions with the ATO who are currently working on transitional arrangements for applying the MAL - see clause 2:
"We (the ATO) would like to work closely with those taxpayers who are likely impacted by the proposedmultinational anti–avoidance law (MAAL) to provide greater certainty with the law."
Reaction and Comment to the Legislation as Enacted
The eleventh hour deal with the Greens which got the legislation through the Parliament is reported by the SMH as being a positive measure because:
"Now multinationals will be required to produce General Purpose financial statements, instead of the skimpy Special Purpose variety with which they conceal their dubious transactions with associates overseas – although under the compromise they may not have to report until 2018."
Commentary on what became known as the "Kidnap Amendment" (the notion that wealthy people might have more cause to fear from criminals and would be kidnappers were their tax affairs to be more widely known), is that the compromise was an advance, the SMH comments:
" – the government ha[s] swallowed the line from lobbyists that billionaires were in danger of being kidnapped if they revealed their revenue and tax information – its $200 million threshold is expected to capture 281 companies rather than the 700 to 800 for which Labor was holding out."
However, even with their limitations the view is that both amendments will bring greater transparency at least for a while or as SMH puts it:
"The billionaires will be aghast at having to disclose how much tax, if any, they pay.
And as one tax lawyer told Fairfax Media this week, they will already be on the phone to their lawyers asking for the best restructuring advice money can buy. Now the game will be hiving off bits of their business – putting the decent taxpaying stuff on the record – and burying the dicier elements into separate entities to get below the $200 million threshold."
TimeBase is an independent, privately owned Australian legal publisher specialising in the online delivery of accurate, comprehensive and innovative legislation research tools including LawOne and unique Point-in-Time Products.
Sources:
Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015 and Tax Laws Amendment (Combating Multinational Tax Avoidance) Act 2015 (No. 170 of 2015) as reported in the TimeBase LawOne Service
Scott Morrison strikes 11th-hour deal with Greens on tax avoidance laws (SMH)
