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Budget 2016: Treasurer Scott Morrison targets tax-dodging multinationals, offers relief for small business
By Heath Aston
- Budget 2016: Full coverage
- Winners and losers
- Mark Kenny: The do no harm budget
- Jessica Irvine: Pennies for the rich
- Michael Gordon: Time for the great persuader to sell it
Modest immediate tax cuts for small business will be used to encourage jobs growth, with Treasurer Scott Morrison promising a long-term phase-down in the company tax rate from 30 per cent to 25 per cent.
The government's "enterprise plan" will cost $5.3 billion in forfeited tax revenue over the next four years, with the Treasurer banking on about $3 billion to be clawed back from tax-dodging multinationals.
But the government will be forced to spend $700 million hiring extra officers at the depleted Australian Tax Office to create a team of 1000 specialists go after the notoriously tax agile multinationals, large Australian companies and wealthy individuals.
By 2020, small and medium-sized companies employing half the Australian workforce will be paying 27.5¢ cents in the dollar, with the threshold to pay the relief rate to be wound out in increments to $100 million in turnover by that date.
Treasurer Scott Morrison has announced a long-term phase-down of the company tax rate to 25 per cent. Credit: Alex Ellinghausen
From July 1 – a day before the expected election - 60,000 companies that currently pay 30¢ in the dollar will pay 27.5¢.
Overall, 870,000 companies, employing 3.4 million workers, will be taxed at the 27.5 per cent rate from July 1, with the turnover threshold to qualify for the lower rate increased from $2 million to $10 million.
The threshold will then be pushed out to $25 million by 2017-18, $50 million by 2019-19 and then $100 million by 2019-20.
Within a decade, all companies, including market titans like Woolworths, Wesfarmers and BHP Billiton, will be paying 25¢ in the dollar under the enterprise plan.
Australia has the seventh highest corporate tax rate in the OECD and it is "much higher than our Asian neighbours", according to Mr Morrison.
"Small and medium businesses are driving jobs growth in Australia and must continue to do so. They are also overwhelmingly Australian-owned and more likely to reinvest their earnings in future growth, as they seek to build their businesses," he told Parliament in his Budget address.
The government is bound to use the prospect of declining corporate tax rates as part of its election attack on Labor which has committed to keeping the company rate pegged at 30 per cent to help pay for higher health and education spending.
As revealed by Fairfax Media on Tuesday, the centrepiece of the government's second swipe at tax-avoiding multinationals will be a diverted-profits tax modelled on Britain's so-called "Google Tax".
It hits companies with global revenues of more than $1 billion caught shifting profits offshore with a special 40 per cent penalty rate of tax on that income.
Former Treasurer Joe Hockey shied away from imposing a Google Tax when he introduced the Multinational Anti-Avoidance Law last year.
But Mr Morrison said the government was responding to anger in the community about large companies that have been found to be paying tiny rates of tax in Australia.
The "tax avoidance taskforce" will have 1000 specialists, Mr Morrison said, part of a 55 per cent boost to funding in that area of the ATO.
The ATO has had staff embedded at 30 multinationals to better understand their way of operating.
The Senate inquiry into corporate tax avoidance has exposed tech companies like Microsoft, Apple and Google as making only minute contributions to the public coffers on their local profits and Chevron, the owner of Australia's biggest liquefied natural gas projects, has been hit with a $300 million tax avoidance bill by the Federal Court.
"Everyone has to pay their fair share of of tax, especially large corporates and multinationals, on what they earn in Australia," Mr Morrison said.
"The Turnbull government has been listening to the Australian people on this issue and is taking action."
Labor has already released a $4 billion package to crackdown on profit shifting by restricting how much debt a local subsidiary of a foreign-based multinational apply to its Australian entity. Large, crippling loans that have to be repaid to inter-company divisions based in low-tax countries is a common way of avoiding tax in Australia.
PriceWaterhouseCoopers has urged caution in tightening debt ratio rules because of Australia's reliance on foreign capital.
New whistleblower rules, to begin from January 1, 2018, will allow employees, former employees and advisers to companies to provide information to the ATO with more protection against legal reprisal.