Finance Finance News Tax reform must be global, say experts

Tax reform must be global, say experts

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Australia should stay the multilateral course rather than go it alone with new laws to counter tax avoidance by global companies, two top accounting firms say.

PricewaterhouseCoopers tax managing partner Thomas Seymour says achieving sustainable international tax reform needs a multinational approach.

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“I don’t think Australia wants to get into a position of an international tax competition shoot-out on its own,” Mr Seymour told a Senate corporate tax avoidance inquiry.

Going out with the OECD in a pack to get global tax rules changed together – that does not lose our competitiveness in the process – is in the best interests of Australia.”

OECD director for tax policy and administration Pascal Saint-Amans has told the inquiry unilateral action is much less effective.

The Paris-based institution has been working on a so-called base erosion and profit sharing action plan through the G20 since 2013 – which Australia helped to drive further during its 2014 presidency – and is aiming to complete its work by October.

Away from the hearing, Treasurer Joe Hockey has revealed new laws are being drafted to combat tax avoidance outside the OECD’s global approach.

Deloitte Touche Tohmatsu tax policy leader David Watkins told the inquiry base erosion and profit sharing is a threat to the global tax base and current tax rules are not sustainable and need to be modernised.

“In our view we have a global problem that needs a global solution,” he said on Friday.

He said it would not be prudent to jump into some of the measures before an international consensus has been reached.

“We don’t want to find ourselves an outrider.”

Former ATO withholding tax expert Martin Lock says the potential tax revenue from large companies and multinationals is more than the $3 billion in withholding tax that’s already collected.

“We were just seeing the tip of the iceberg,” Mr Lock told the Senate inquiry in Melbourne on Friday.

“If we had proceeded to look in more detail at the whole taxpayer base we would have found a lot more.”

Mr Lock said it was his perception that there were systemic problems in the ATO in how it tackles corporate tax avoidance.