Hockey Unveils IT Tax Crackdowns: Critics Have Doubts
But critics have been quick to point put some problems the Government may face in collecting.
Hockey said the Government had identified 30 multinational companies he claimed were guilty of diverting profits earned in Australia to “no- or low-tax jurisdictions”.
He did not name the companies, but said Australian Tax Office (ATO) officials had been embedded in them for some months, giving the Government a better understanding of “how these companies have used contrived or artificial tax arrangements such as the much publicised ‘Double Irish Dutch Sandwich’ “. (More usually referred to as the Double Dutch-Irish Sandwich -Ed.)
Hockey said he would launch legislation that would strengthen the anti-avoidance regime, and give the ATO powers to recover the taxes and impose fines that double the avoided amount.
The new regime will apply only to international companies with global revenue of $1 billion or more. It will hopefully take effect from July 1.
But some doubters point out companies like Google, Microsoft and Apple have massive legal resources they may very well muster to fight the new regime in court.
On the proposed “Netflix tax”, the Treasurer said: “When the GST legislation was drafted it did not anticipate the massive growth in the supply of digital goods like movie downloads, games and e-books from overseas.”
Now he believes that, if draft legislation is accepted by the States, revenue from the initiative will be $350 million over the next four years.
However some critics have raised doubts about how effective the Netflix tax will be. Netflix itself has indicated it will probably pay up, but the critics claim the Government will have problems trying to collect from the hundreds of smaller overseas online outfits marketing to Australian customers.
If operators in China or Hong Kong, say, simply decide to ignore the situation, there appears little the Government could do to force them.
Says Chris Berg, writing for The Drum: “It is absolute fantasy that Hockey and the Australian Treasury will be able to impose our taxes on international digital goods providers in any meaningful way.
“Yes, they might be able to convince a few of the big firms to play ball. But many already are playing ball. Apple, for instance, already charges GST.
“(But) those online firms with no Australian base and few Australian interests are unlikely to sign up to this new impost. What’s the Government going to do? Censor them?”
One new tax provision that will doubtless be welcomed by the IT industry is part of a $5.5 billion package that allows more than 2 million small businesses – many not incorporated – to deduct the cost of any new assets costing less than $20,000 each. As well as office furniture, that would clearly include investment in technology.