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The Australian government has proposed extensive multinational tax reforms targeting multinational enterprises (MNEs). Here, a DLA Piper partner and head of tax has commented on the potential impacts of the reforms.
The Australian Treasury has released a consultation paper proposing a set of tax reforms that seek to address tax avoidance practices by MNEs.
Three reforms are proposed:
Partner and head of tax at DLA Piper, Jock McCormack, said the proposed measures would have a significant impact on many multinational groups and entities operating in Australia.
The reforms will inevitably impact inbound and outbound investment across industries, he noted.
Mr McCormack commented that the reform proposed for limiting interest deductions would effectively reference the economic activity and taxable income of an entity.
“An entity would be required to justify its level of debt relative to its operational performance,” he said.
“Measures to improve tax transparency would require reporting of country-by-country tax information, mandatory reporting of material tax risks, and disclosure of tax domicile for Australian government contracts,” he said.
Many of the proposed tax measures are consistent with, or emanate from, similar initiatives on tax policy reforms that are implemented across the European Union, United Kingdom, United States and countries part of the Organisation for Economic Co-operation and Development.
“These reforms are intended to push Australia towards more global approaches,” he said.
“They are expected to significantly increase overall government revenue in their current form.”
Until 2 September, the government will remain open to responses, which it will consider responses in the drafting of legislation prior to introducing it into Parliament.
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Jess Feyder
