Hon. J.B. Hockey
Senator the Hon. Mathias Cormann
Minister for Finance
Acting Assistant Treasurer
Fairfax Media this morning ran a story on tax by Heath Aston. The story is wrong. The Government has not let corporate tax avoiders off the hook.
The specific measure to abolish the 25-90 deduction in the story relates to changes Labor proposed to the tax act in 2013, but did not bother to legislate when they were in Government.
Upon coming to office, Treasury advised us that the abolition of 25-90 should not proceed.
The Treasury said that to do so would result in significant increases in complexity and compliance costs. They also said it would impede legitimate taxpayer activity in investing offshore.
For example, Australian companies restricted from expanding onshore due to market dominance tests within the competition laws, would then be penalised from legitimate expansion offshore, which in turn would penalise Australian shareholders.
This would make the revenue from the measure essentially unrealisable.
The decision not to proceed with this aspect of Labor's proposed law was not an ideological policy choice. It was a practical decision because the draft law could not be satisfactorily implemented.
The impracticality of this measure has also been dealt with in depth at Senate Estimates. Mr Rob Heferen, Treasury Executive Director of Revenue said, 'I think it is fair to say that, through public consultation on that, it became apparent that the proposal that stood would not be a sensible proposal to proceed on.' (Source: Mr Rob Heferen, Treasury Executive Director, Senate Estimates, 5 June 2014)
The Government is firmly committed to ensuring that Australian tax is paid on profits earned in Australia.
Since coming to office we have passed legislation to amend the thin capitalisation laws with the Bill receiving Royal Assent on 16 October 2014.
We have also ensured that the Australian Taxation Office (ATO) will be able to access information on financial accounts people hold in other countries as well as Australia. If individuals open bank accounts in other countries then there is a common reporting standard that will give the ATO the information it needs to combat tax evasion. This standard will apply from 1 January 2017.
Thirdly, through the G20 we have focussed on a 15-point plan to combat base erosion and profit shifting delivered by the OECD.
We have taken this action with no thanks to the Labor Party.
Labor needs to stop talking and start acting consistent with its rhetoric.
Right now they are standing in the way of the Government legislating a Labor tax measure designed to improve the Budget bottom line by more than $1 billion over the forward estimates.
Namely, Labor in Government decided to remove special additional R&D tax subsidies for companies generating more than $20 billion in assessable income.
Now in Opposition they are standing in the way of us giving effect to their legislation.
Jennifer Clark - 0402 970 419
Mike Willesee 0408 383 076
Karen Wu - 0428 350 139