Australia Chomping At The Bit
For a government so constrained by the fiscal straightjacket of a massive budget black hole inherited from the previous administration, the 2015/16 Australian Budget, announced by Treasurer Joe Hockey last week, was actually pretty generous, at least as far as small businesses are concerned. There was the promised tax cut for small companies, a so-called tax “discount” for unincorporated firms and a substantial increase in the tax deduction available to small businesses investing in new assets. All things you’d expect from a conservative Government. Ordinarily, this might be enough to earn Australia an encomium. But then Hockey goes and drops a bombshell. Anyone following international tax developments over the last few months may have noticed Australia chomping at the bit to unleash new tax weapons against BEPS. That horse has now well and truly left the stable with the unveiling by the Treasurer of the ominous-sounding Multinational Anti-Avoidance Law, which has been inspired by the UK’s much-criticized (by tax experts) diverted profits tax. Few would deny that attitudes to tax planning are changing, and that tax mitigation at the more aggressive end of the spectrum is increasingly unacceptable, irrespective of whether it is right or wrong. The problem is, policy makers aren’t taking the time needed to obtain a thorough understanding of the way in which the world of international taxation works, a fact demonstrated by the OECD’s impossibly short timetable for the completion of its BEPS work, which this new law pre-empts in a massive way. In much the same way as the diverted profits tax, the Multinational Anti-Avoidance Law seems to me a knee-jerk reaction designed to curry favor with the public. As a number of commentators and business groups have observed, it could well backfire on the Government.