Multinational tax crackdown dismissed as ‘tinkering’

The federal government is continuing its fight against multinational tax avoidance, closing up existing loopholes being exploited by a small number of large companies in its 2017 budget – but one mid-tier firm isn’t convince this will bring results. 

Part of the federal government’s budget 2017 focused on ensuring everyone, including multinationals, is paying their fair share of tax. The budget revealed that the government is toughening up the Multinational Anti-Avoidance Law (MAAL) by extending it to corporate structures involving foreign partnerships and foreign trusts. 

According to BDO national tax director Lance Cunningham, the changes to the MAAL is simply “tinkering” at the edges.

“All theyre doing is really extending the MAAL to situations where people have been using partnerships and trusts instead of just a full corporate structure,” he said.

“It’s something that maybe a few people have been doing but it certainly wont have much of an affect for most people. It was seen as a little bit of a loophole and so theyre really just filling that up. It’s not going to have a wide-ranging affect, I dont think.”

Mr Cunningham said because it’s such a minor change, many accountants won’t be impacted.

“It’s really very much in the big end of town. Its probably only going to be the very large accounting firms that have many clients that will be affected by this,” he said.

Further to the changes to the MAAL, the government also confirmed that the OECD hybrid mismatch arrangement rules will be applied to regulatory capital, according to RSM Australia’s national head of tax, Rami Brass.

“Financial institutions that utilise hybrid entities in aggressive tax minimisation structures to exploit the different tax treatments of their regulatory capital across international borders will be targeted,” Mr Brass said.

“Without these measures, advances from a head company to its foreign subsidiary may be treated as equity in the head company’s jurisdiction and debt in the foreign subsidiary jurisdiction. This may allow the foreign subsidiary to claim a tax deduction for interest payments made to its parent without the parent company being liable for tax on those payments in its home country.”

This measure implements one of the key action items from the OECD Base Erosion and Profit Shifting package.

 

promoted stories