Budget 2015: Treasurer Joe Hockey outlines plans for tax avoidance crackdown, GST for digital products

Updated

The Federal Treasurer has revealed details of his multinational tax avoidance crackdown and a plan to force companies selling digital products to charge the GST.

Joe Hockey said new legislation would strengthen Australia's anti-avoidance regime to deal with 30 companies that were diverting profits offshore.

The move comes after the Australian Tax Office (ATO) spent months embedded in some of the world's biggest firms, including Google.

A number of companies were grilled last month at a Senate inquiry where tech giant Apple denied accusations of running an "international tax avoidance structure".

Mr Hockey told reporters in Canberra that the Government now had a better understanding of how companies have used "contrived or artificial tax arrangements".

"These contrived arrangements have been used to avoid paying tax in Australia and they are very complicated transactions," he said.

"Tomorrow night I will be releasing legislation that strengthens our anti-avoidance regime."

Mr Hockey, who is preparing to deliver his second budget, said companies caught diverting profits would face tougher penalties than those introduced in the United Kingdom.

"The Tax Commissioner will have the power to recover unpaid taxes and issue a fine of an additional 100 per cent of those unpaid taxes, plus interest," he said.

"If we do strengthen our own anti-avoidance measures to ensure the Tax Office has the powers to see through these contrived arrangements, we will be able to recover the tax that should be paid in Australia on the profits that are made in Australia."

Shadow assistant treasurer Andrew Leigh seized on Mr Hockey's inability to reveal exactly how much money was in play.

"Joe Hockey himself doesn't seem to be in command of the detail," Mr Leigh said.

"What we really need is a measure from the Government that's carefully costed. This hiding behind a veil of secrecy is frankly bizarre."

Mr Hockey said it would be "billions" of dollars but that the Government was still working through the structures.

"We can't quantify exactly how much the tax liability is, but this is about the integrity of the Australian taxation system," he said.

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The Tax Institute's Steve Healey said he was concerned the plan was "yet more tinkering with an already complicated tax system".

"We caution against hasty changes ... against the backdrop of extensive global, coordinated efforts to address base erosion and profit shifting," he said.

"This measure has the potential to increase uncertainty and compliance costs in our tax system.

"We have a tax reform white paper process underway and we are keen to ensure this process is not compromised by ad-hoc announcements along the way."

Revenue from 'Netflix tax' to go to states

Meanwhile, the Treasurer said he expected the so-called Netflix tax on digital products, such as streamed content and e-books, to raise $350 million over the next four years, money he said would be given to the states.

"It is plainly unfair that a supplier of digital products into Australia is not charging the GST whilst someone locally has to charge the GST," Mr Hockey said.

"When the GST legislation was originally drafted, it did not anticipate the massive growth in the supply of digital goods like movie downloads, games and e-books from overseas."

Topics: budget, federal-government, tax, corporate-governance, business-economics-and-finance, australia

First posted