The Re:think tax discussion paper was released by the Australian government last month, aiming to stimulate discussion on the future of our tax system. A key issue raised in the discussion paper is the challenge the tax system faces from changes in the global economy. Chapter 5 discusses Australia’s relatively high corporate tax rate and the fact that our dividend imputation system does nothing to attract foreign investment to Australia. The opportunities that digitisation and globalisation create for multinationals to legally divert profit to lower taxed jurisdictions is also discussed in the paper.
Some of the other interesting concepts raised in the paper are the possibility of a new flow-through entity (like an S-Corporation in the US), and mutual recognition of franking credits between Australia and New Zealand.
More generally in the media, there has been continued discussion in the media about tackling profit shifting issues, most recently with statements following last week’s G20 treasurers meeting in the United States regarding Australia and the UK working together with the OECD in “developing the very best practices that will absolutely ensure that companies that are earning profits pay tax in the jurisdictions where they earn profits”.
Despite the amount of press coverage of these issues, it is unlikely that the forthcoming Federal Budget to be handed down on 12 May will include any significant immediate changes in international tax.