Date posted: 12/09/2022

Submission on Multinational tax integrity and enhanced tax transparency Treasury consultation paper

CA ANZ has lodged a submission on the Multinational tax integrity and enhanced tax transparency Treasury consultation paper

CA ANZ has lodged a submission on the Multinational Tax Integrity and Enhanced Tax Transparency Treasury consultation paper. The proposed measures in the Consultation Paper would:

  1. Amend Australia’s existing thin capitalisation rules to limit interest deductions for multinational enterprises (MNEs) in line with the Organisation for Economic Cooperation and Development (OECD)’s recommended approach under Action 4 of the Base Erosion and Profit Shifting (BEPS) program
  2. Introduce a new rule limiting MNEs’ ability to claim tax deductions for payments relating to intangibles and royalties that lead to insufficient tax paid, and
  3. Ensure enhanced tax transparency by MNEs, through measures such as public reporting of certain tax information on a country‑by‑country basis; mandatory reporting of material tax risks to shareholders; and requiring tenderers for Australian government contracts to disclose their country of tax domicile.

CA ANZ’s key concerns regarding the measures include:

  1. MNE interest limitation rules – ensuring a reasonable transitional period to enable MNEs to rearrange their funding arrangements to comply with the rules, concern that no add-on features have been discussed in the Consultation Paper to mitigate the impact of using an earnings fixed ratio rule for MNEs which face earnings volatility or have projects which have long lead times before earnings arise.
  2. Denying deductions for payments relating to intangibles and royalties – this measure needs to be assessed in terms of how it fits with Australia’s commitments as a member of the OECD Inclusive Framework in relation to the Pillar 2 global minimum tax rules. Also, we query whether this measure is necessary given the existing tax rules Australia has in place to tackle intangibles and royalty payments and the Australian Taxation Office’s current large corporate compliance strategy which has already led to changes in taxpayer behaviour.
  3. Multinational tax transparency - CA ANZ supports well-designed, informative tax transparency rules which are consistent with the global tax transparency rules. However, mandating tax transparency rules now risks inconsistency with other jurisdictions which are yet to formalise their tax transparency rules. Australia also needs to take into account the implementation of Pillars 1 and 2.

Australian multinational tax measures consultation

Treasury consultation paper released on multinational tax integrity and enhanced tax transparency

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