Karen McNamara (Dobell, Liberal Party) Share this | Link to this | Hansard source

My question is to the Minister for Small Business and Assistant Treasurer. Will the minister explain what actions the government is taking to ensure that multinational companies do not avoid paying tax?

Kelly O'Dwyer (Higgins, Liberal Party, Minister for Small Business) Share this | Link to this | Hansard source

Thank you very much to the member for Dobell for her very important question. Every Australian taxpayer needs to be confident that multinational companies that operate in Australia and make money in Australia pay tax in Australia. The Australian government is leading the fight against multinational tax avoidance. During our presidency of the G20 last year and in partnership with the OECD, Joe Hockey as Treasurer led this work and deserves our praise and our thanks. He understood that tax avoidance strategies exploit gaps and mismatches in the international tax system, which has struggled to keep pace with the changing times, such as now having globally integrated supply systems, and the disruptive nature of internet and digital technologies.

In the last fortnight the government has introduced multinational tax avoidance legislation to ensure that those companies that are making sales in Australia but booking revenue offshore are subject to tax in Australia. We are doubling penalties for those who choose to break the rules through transfer-pricing and profit-shifting schemes, and we are implementing the OECD country-by-country reporting to give the Australian Taxation Office the ability to assess transfer-pricing risk. We have also taken action on harmful tax practices and pursued rules to prevent tax treaty abuses. We have asked the Board of Taxation to consult on the OECD recommendations to combat hybrid mismatches. Before this, though, the government had previously passed legislation to tighten thin capitalisation rules to stop multinationals from claiming excessive tax deductions and to close other tax loopholes.

The government has provided $87 million over three years to review companies that have undertaken international restructures or significant related-party cross-transactions. This has already yielded significant results, with the ATO raising $400 million in tax liabilities thus far. Base erosion and profit-shifting activities give large multinational businesses an improper advantage over local small business and family businesses, who then have to shoulder more of the tax burden. Government activities are restoring confidence in the integrity of our taxation system through these actions, in which we are leading the world.