Grant Wardell-Johnson comments on Multinational Anti-Avoidance bill

Grant Wardell-Johnson on Multinational Anti-Avoidance

"Today’s Bill is much simpler than last month's Treasury Exposure Draft. However, the disadvantage is that taxpayers will be denied three "get-outs" which were in the ED, which allowed the taxpayer to argue that the anti-avoidance rules should not apply.

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  • The rules did not operate if the arrangement was not “designed to avoid tax”. The words “designed to” have caused significant difficulty in tax law and so have understandably been removed.
  • The rules did not apply in the absence of a direct or indirect relationship between the profits arising from the arrangements and a “low or no tax jurisdiction”. This would have been difficult to establish in the absence of a clear definition of a low or no tax jurisdiction, although many practitioners expected that this may have been defined.
  • The rules did not apply if the profits, which would otherwise have been in Australia, were located in a country where there was substantial economic activity. Again there would have been difficulty surrounding the meaning of those terms.

The bill’s anti-avoidance rules are wider than in the ED, and will put extra pressure on the meaning of “a principal purpose”, reflecting that there can be “more than one principal purpose”. Although the wording of the bill is simpler more taxpayers are going to need to work out whether they are ‘in or out’. How the ATO applies these provisions will be critical and early guidance will be important.

On Country by Country reporting: "Australia is an early adopter of the Country by Country (CbyC) reporting part of the OECD’s Action plan. The CbyC provisions included in today’s bill are very broad and much of the detail has been left till later down the track. We had hoped the bill would include 'carve-outs' for where the Australian subsidiary is only 0.2 percent or less of the global Multinational Company’ revenue, but this may arise later."

"Companies need to start thinking now (at board level) about how their CbyC reporting will look and be construed by different countries’ revenue authorities. There will almost certainly be more tax disputes. Multinationals should think about doing a dry run. They should also consider the whole transparency issue with the Senate Inquiry interim report as well as several EU states calling for these reports to be made public."

For further information, contact:

Ian Welch

Senior Communications Manager, KPMG Australia

Mobile: +61 400 818 891


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