Foreword

Date

The Government has a responsibility to respond to integrity issues in Australia's corporate tax system. Protecting our corporate tax base will ensure that we have a stable source of revenue to fund vital investments in the future, create a level playing field for businesses and ensures that others will not have to pay disproportionately higher taxes.

The Government's actions demonstrate that it takes this responsibility seriously. The Government has recently enacted amendments to strengthen the General Anti-Avoidance Rule (Part IVA) and modernised Australia's transfer pricing rules. In the 2013-14 Budget, the Government also announced a package of measures to protect the corporate tax base from erosion and loopholes. 

As part of this commitment, last year I asked Treasury to prepare a Scoping Paper on the sustainability of Australia's corporate tax base. The paper examines the risks posed by multinational profit shifting and aggressive tax minimisation and identifies potential responses.

The Scoping Paper notes that the preparedness of Governments to respond to integrity issues, the effectiveness of the Australian Taxation Office (ATO) and a strong compliance culture among Australian businesses have helped to sustain Australia's corporate tax base. 

However the paper highlights that data limitations make it difficult to accurately assess the extent to which Australia's corporate tax base is currently being impacted by base erosion and profit shifting. Following on from the Government's recent amendments to increase the tax transparency of large corporate entities, the paper makes a number of recommendations focusing on how we can better identify, understand and respond to emerging risks in our corporate tax system.

A clear finding of the Paper is that global tax settings have failed to keep pace with changes in the global economy. This has, justifiably, led to growing concern around the world that some multinationals, while acting within the law, are taking advantage of outdated international tax laws to reduce the taxation contribution they make to the countries in which they operate.

Updating the rules to address the deficiencies in the tax laws is beyond the scope of any one country acting alone — it requires the cooperation of the international community. With the support of the G20, the OECD has developed an Action Plan to address key pressures in the international tax system, to be implemented in a joint OECD and G20 project.

As G20 chair in 2014, Australia can play a prominent role in determining and driving the base erosion and profit shifting reform agenda.

The preparation of the Scoping Paper has been assisted by a Specialist Reference Group made up of members of business, tax professionals, academics and the community sector. It has also benefited from submissions from stakeholders in response to an Issues Paper.  This reflects the fact that there are many groups in Australia that have an interest in the international tax settings within which we operate. I would like to thank all those who have been involved in this process.

A number of the recommendations in the paper are focused on increasing awareness of the risks facing Australia's corporate tax system and the paper highlights that the OECD and G20 have established liaison groups to bring business, academic and civil society contributions into policy considerations.  I would therefore also like to encourage all interested groups to remain engaged and involved in these issues as international momentum for change in this area builds.

The Hon David Bradbury MP Assistant Treasurer