The federal government has introduced tougher anti-avoidance laws to fight multinationals accused of minimising tax by shifting profits offshore by conferring greater powers to the ATO.
The companies risk attachment of assets or locking of (foreign) bank accounts for recovery of tax dues if they feel the foreign investor is trying to avoid tax.
Under the proposed changes, foreign investors (and their associate companies) will now need to provide any documents or information requested by the ATO “within the timeframe specified” by the agency.
A breach of the tougher conditions could result in the foreign investor being prosecuted, fined or they may be forced to get rid of the asset.
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Contrary to what experts opine, I feel in our modern digitised world, it is necessary for the government to look out for ways to nail cases of tax avoidance and not let the territory become a safe haven/ sanctuary for investing funds and growing income without paying taxes.
The emphasis should be on cohesive growth of the economy. This can not be allowed at the cost of national resources utilisation and not paying taxes for a few multinational companies, especially when an Aussie competitor pays taxes in full and complies with all regulations.
However, this cannot let the Aussie economy be unattractive to these multinationals.
I feel, the way out of this could be creating sanctuaries for Australian companies for certain terms (akin to models in India & China) without hampering international trade agreements/ treaties.
Secondly, this legislation empowers the ATO to act against cases of anti-avoidance by such companies. I feel this definitely is a regressive step, as at times this power can be misused by the ATO in the name of defending Tax Revenue (refer to Vodafone Retro-tax Case in India).
To avoid this, there should be a committee of officers to handle such cases who jointly take these decisions in such case(s) and the aggrieved company should have an easy/ short remedy (route) to fight such a demand.
This, however, does not absolve the government of its role in bringing more people/ taxpayers under tax ambit (rightfully) than short cuts to increase taxes recoveries.