General concerns with the bill
This chapter explores the general concerns raised by stakeholders in
relation to the bill.
The views expressed by stakeholders were largely split between those
that sought international consistency in the approach to base erosion and
profit shifting (BEPS), and those that considered the bill did not go far
enough to address the BEPS problem. A number of submissions also called for a
Addressing multinational tax avoidance
The provisions of the bill do not
go far enough
A number of stakeholders broadly supported the bill as a 'step in the
right direction' but considered that it did not go far enough to address the
risks posed by BEPS.
For example, the Tax Justice Network Australia did not believe that the bill by
itself would be enough to address the problem of tax avoidance on its own.
Mr Martin Lock, a former employee of the ATO, was more forthright is his
analysis and concluded that:
Rather than confront the problem of tax base erosion by
foreign and Australian multinational companies who increasingly exploit or
circumvent our outdated and cumbersome tax regime...the Bill merely tinkers at
the edge of the law by proposing insignificant changes to an inherently obtuse
and uncertain anti-avoidance provision.
Some stakeholders had concerns about the efficacy of the bill. For
example, the CPSU indicated that its members:
...have expressed an expectation that there may be a range of
new tax avoidance techniques that are adopted in response to the Commonwealth's
And this view was supported by the Tax Justice Network Australia which
contended that multinational enterprises:
...may seek other methods to avoid paying taxes in Australia on
their profits made here [in Australia].
In addition, Greenpeace Australia Pacific believed the proposed laws
would make already complex taxation laws more complex and still be vulnerable
to new tax avoidance strategies.
Overlap with the international base
erosion and profit shifting project
Other stakeholders raised concerns about Australia implementing
unilateral actions to address BEPS in advance of a coordinated response being
agreed to by the G20/OECD BEPS Project.
The Tax Institute noted that:
The Bill seeks to move ahead of the OECD process which has
better prospects of effectively addressing deficiencies as it involves
KPMG indicated that, by acting alone, Australia may:
...create a harmful precedent—that of addressing international
tax issues unilaterally, rather than adopting globally coordinated measures—and
damage international consensus.
The Commissioner indicated that the proposed bill was consistent with
the direction of the G20/OECD BEPS Project:
When we talk about the MAAL [multinational anti-avoidance
law] being superseded by the OECD rules, well, I do not agree with that,
because whatever the rules are, whatever the OECD action item rules that become
adopted are, this a good little safety net to have sitting there in the future.
The Australian Financial Markets Association noted that the bill's scope
may be wider than just the most egregious tax avoidance arrangements and, as
such, may have unintended consequences that have:
...real potential to increase Australia's sovereign risk and
undermine our attractiveness as [a] destination for foreign capital.
That said, the CPSU cited the European Network on Debt and Development
which has concerns about the ability of the BEPS package to ensure that
multinational corporations pay taxes in the jurisdictions where the economic
activity takes place and value is created.
The committee believes that Australia has some of the strongest tax
integrity rules in the world and that the measures in this bill, along with
other budget measures, will strengthen the tax system even further. According
to the Treasurer:
The strong measures already taken by the Australian
Government are entirely consistent with the final OECD recommendations. The
Government's measures attack the heart of multinational tax avoidance problem,
whilst ensuring Australia remains an attractive and competitive place to do
Accordingly, the committee considers that the provisions of the bill
strike the right balance between addressing tax avoidance and not placing
excessive compliance burdens on business, particularly small and medium
enterprises. Further, the committee is satisfied that the measures are
consistent with the G20/OECD proposals.
General provisions of the bill
The measures proposed in the bill are due to apply from
1 January 2016. Given that the bill is unlikely to be passed until
very late in 2015, stakeholders were concerned that affected companies may not
have sufficient time to organise their affairs, particularly in relation to
Country-by-Country reporting, to facilitate compliance by 1 January 2016.
EY contended that it was not feasible to have a commencement date such a
short time after the bill's enactment and suggested that the commencement date
be no earlier than for income years commencing on or after 1 July 2016.
Similarly, the Tax Institute submitted that the proposed application date
should be deferred by at least 6 months but preferably no less than 12
months, or that penalties should not be imposed in the first year of
The committee notes that the bill gives the Commissioner some
flexibility in implementation. In relation to the MAAL specifically, the
Explanatory Memorandum noted that:
The ATO has indicted that it can adopt a flexible approach to
administering the law for companies that are in the process of restructuring
but do not have their new arrangements in place on 1 January 2016. For
multinationals that voluntarily approach the ATO, penalties can be waived and
specific arrangements can be made regarding compliance.
The Australia Institute noted the OECD's concerns that tax avoidance is
aggravated by limited enforcement resources. It questioned whether the forward
estimates will be sufficient to cover court and other costs to counter
litigious multinationals, and what would happen if there was a 'cost blowout'.
The CPSU also raised concerns about staffing and resources, and, in
If the Commonwealth is serious about tackling multinational
tax avoidance, the ATO will require significantly higher levels of staffing and
In response, the ATO has repeatedly contended at Estimates hearings and
hearings of the Senate Economics References Committee that it is able to
discharge its duties adequately, including tackling multinational tax
avoidance, with current resourcing levels. Indeed, the Commissioner has
indicated previously that:
I am very proud of the ability, expertise and integrity of
the people we have working on our large corporate cases and I am extremely
confident of our capability moving forward.
Given the overlap of the bill with the work of the OECD, a number of
submissions called for a post-implementation review.
KPMG indicated that it will be important to align the implementation of Country-by-Country
in Australia with the OECD Implementation Guidance in order to maximise the
benefits and reduce the compliance costs of standardised global reporting.
Chartered Accountants Australia and New Zealand noted the potential for
double taxation to arise and looked to ensure consistency with other
jurisdictions in approach taken for the MAAL. They went on to submit that:
...the Government should introduce the MAAL with a formal
commitment to review the appropriateness of the law in say three years, when
Australia's position on the planned multilateral instrument to amend double tax
agreement is known.
The Explanatory Memorandum noted that the ATO is well placed to monitor
the effects of the proposed measures on the behaviour of corporate taxpayers. Treasury
indicated previously that:
The Treasury and the ATO are
continually examining our tax system to identify areas where tax payers are
engaged in egregious tax avoidance, consider where new compliance initiatives
might be best targeted and also advise government of how our laws could be
improved to deal with these issues.
The government is committed to taking the lead to address multinational
tax avoidance and this bill begins the process of implementing the BEPS
The committee notes the concerns that were raised in submissions
relating to the general provisions of the bill. It believes, however, that
these concerns can be adequately addressed through taking a flexible approach
to implementation and ongoing policy development.
In addition, the committee notes that the government is providing the
ATO with additional funding to ensure that it has the resources available to
implement, oversee and enforce the provisions of the bill.
Finally, the government is satisfied that the ATO and Treasury are well
placed to actively monitor implementation and advise the government if
amendments or further legislation is required.
The committee recognises, however, that different jurisdictions may take
different approaches to implementing the G20/OECD BEPS Action Plan. By taking a
lead role and seeking to implement some actions early, there is a possibility
that the enactment and implementation of the measures in this bill could create
inconsistencies with the laws of other jurisdictions and/or result in
unintended consequences for businesses and tax administrators.
The committee recommends the government undertake a post‑implementation
review of the measures contained in the bill within 3 years of enactment.
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