Modified tax treaty tabled by government

The federal government has released draft legislation that will allow it to quickly modify existing bilateral tax agreements to implement internationally agreed tax integrity rules. 

The draft bill contains amendments to the Tax Agreements Act to give the force of law in Australia to the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting (Multilateral Convention).

The Multilateral Convention is a multilateral tax treaty that will enable jurisdictions to quickly modify their bilateral tax agreements to give effect to internationally agreed tax integrity rules.

"Release of this draft legislation represents an important step towards the completion of Australia's domestic processes to give the Convention the force of law in Australia," said Minister for Revenue and Financial Services Kelly O'Dwyer.

"Implementing the Convention will help ensure that multinationals pay the right amount of tax on their Australian income. 

"The Convention will complement the government's strong track record in preventing multinational tax avoidance and ensure that Australia remains at the forefront of global efforts to improve tax system integrity."

HLB Mann Judd tax supervisor Lauren Whelan said there would be limitations on the treaty due to the fact that some countries had yet to sign the new arrangements.

"A welcome advantage of the new Multilateral Treaties is that, unlike the old Mutual Agreement Procedure, they include an arbitration process that will come into play whenever the respective tax authorities are unable to reach agreement on the application of the treaty to a particular situation or transaction," said Ms. Whelan.

"It is also worth noting, however, that several countries, most notably one of Australia's major trading partners, the USA, have not signed on, so this will be a significant limitation on the benefits to be gained from the new treaty arrangements."

Accodex chief executive Chris Hooper said that he could understand the rationale behind the convention, but questioned its effectiveness.

"There is a constant struggle or conflict of interest in corporations generally, and multinational corporations as well, where on one hand they have to satisfy their fiduciary duties to shareholders to maximise shareholder returns and maximise profits, and part of that is minimising taxation so on the one hand they are compelled by corporations law to minimise taxation, and on the other hand, they are compelled by taxation law to pay the 'right amount'," said Mr Hooper

"So it is hard to make a statement in terms of whether this is the right thing to do because it is at odds with the corporation's law but we'll see how effective it is in the long term."

You can read the draft legislation in full here, and all interested stakeholders are encouraged to make a submission by Friday, 23 February 2018.


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