In the Treasurer's sights are the so-called ''thin capitalisation'' arrangements adopted by companies where they load up debt in parts of the business located in high tax jurisdictions in order to minimise taxable income. From The Age, June 27, 2014. This would reduce the amount of debt a company can carry on its books relative to its asset holdings. Under the new system, the maximum ratio of debt to equity a company can present in its structure will drop from 75 per cent under the current rules to 60 per cent. Companies with debt levels beyond that threshold will automatically attract the special attention of the Australian Tax Office.

A second measure is designed to limit the deductable costs associated with interest payments. Exemptions from so-called ''non-portfolio dividends'' have been used by companies to effectively game the taxation system by having such funds treated as interest instead of debt repayments. Mr Hockey, who is battling to save large tracts of his first budget from an intransigent opposition and a hostile Senate, said such corporate tax reform was vital. "We are determined to create a level playing field for taxation of businesses so that a large multinational faces the same tax environment as a small business on the corner,'' he said. With Australia chairing the G20 later this year, Mr Hockey is leaning on his counterparts in the world's leading economies to establish what has so far proved to be highly elusive in international tax reform: co-operation.

"We need a global solution to a global problem and we need a solution that will work and is not cosmetic,'' he said. But while he is enacting some aspects of the previous government's approach, he remained critical of the opposition overall, after significant parts of the Labor tax plan proved either ''unimplementable'' according to Treasury officials, or was deemed likely to create unforeseen problems. "Labor had cosmetic solutions and we need real solutions,'' Mr Hockey said. The moves, some of which have not yet been detailed, could see $2 billion returned to government coffers over the next four years. The government move will blunt a renewed attack on it by the opposition which has accused it of allowing more than $1.1 billion in corporate tax revenue to slip through its fingers, while adopting tough measures to clamp down on seniors and the unemployed.

Tax evasion and tax minimisation are endemic problems for sovereign governments as companies shift debt and equity between various arms to minimise the overall bill. Practices include internal loans at high interest rates which are used to redesignate funds as costs rather than income. Loading As Fairfax Media reported a week ago, Glencore was able to book massive deductions by using expensive internal loans of nearly $3.5 billion with interest rates of up to 9 per cent which was around twice the interest rate of commercial funding. While it did this, it also lent money to ''related parties'' at no interest. Follow us on Twitter