Moves by Australia to prevent profit shifting could lead to companies being double-taxed, BCA chief executive Jennifer Westcott told a conference in Canberra yesterday, which was attended by Treasury, the Australian Tax Office and corporate tax executives.
The Australian Tax Office is pursuing 86 companies for tax practices such as base erosion and profit shifting, while 233 companies are under review for tax minimisation tactics in low-tax countries such as Singapore and Ireland.
“Companies are not setting out into the world with tax planning in mind but with ambitions for growth, innovation and prosperity,” Westcott said.
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She urged Australia to take up more competitive tax rates to encourage international investment at a time when capital and workers were increasingly mobile.
“In this environment, our tax rates must be reasonably competitive and our tax laws must be fair, predictable and as simple as possible to encourage investment … Problems are not black and white, but shades of grey,” said Westacott.
Westacott also warned against countries introducing new laws to get a greater share of tax.
“Unilateral and uncoordinated action risks double taxation to the detriment of investment, growth and jobs—or perhaps even double non-taxation,” she said.
But University of New South Wales associate professor of taxation law Dale Boccabella told SmartCompany he disagreed with the BCA’s claim that enforcing taxation law was unfair on multinationals.
“The implication here is there’s a lot of corporate tax in Australia, and that’s partly correct. But that’s not an argument to say you shouldn’t enforce current laws. If you want to reduce corporate tax collection, argue your case to the politicians,” Boccabella said.
“No one is trying to overtax anyone by doing business in Australia. But the claim here is that by simply enforcing current laws, we’re overtaxing.”
Boccabella also said double-taxation wasn’t an issue for companies operating in Australia.
“There are mechanisms in place to prevent this, such as negotiations with other countries’ revenue agencies to ensure the same companies aren’t taxed twice on the same profit,” he said.
Council of Small Business Australia executive director Peter Strong told SmartCompany the use of tax minimisation techniques by multinationals disadvantaged small businesses by hundreds of millions of dollars.
“Small businesses are paying more than they should because big businesses aren’t,” Strong said.
Australian Booksellers Association chief executive Joel Becker told SmartCompany the economic pain inflicted on smaller businesses would ultimately disadvantage the entire Australian economy.
“We often compete with global companies and the competition is fair but when they have an unfair tax advantage by the ability to move income offshore, it disadvantages locally Australia owned businesses and ultimately will do economic damage to those businesses and do damage to the Australian economy,” Becker said.
But Boccabella said Australia is more effective than many countries at enforcing taxation law.
“In terms of base erosion and profit-shifting, Australia is doing better than other countries such as the UK, the US, France and Germany,” Boccabella said.
“We’re not being exploited as much as other countries, but that doesn’t mean we haven’t got a bit of a problem.”
Westacott also used the conference to press for comprehensive tax reform, which the federal government is expected to address in its forthcoming tax white paper.
“Tax now needs to move away from simply being a fiscal proposition to a growth and investment proposition,” Westacott said.