Govt targets multinational tax rules
The proposed changes to transfer pricing rules will ensure multinational corporations operating in Australia pay the correct amount of tax on their income, according to Assistant Treasurer Bill Shorten.
'Transfer pricing' refers to the practice by multinational corporations of buying or selling products and services from one part of the firm in a different country. These transactions affect the profit firms make in each country, and consequently the amount of tax they are required to pay.
The changes to Australia's taxation laws will bring Australia into line with international best practice when it comes to transfer pricing, Shorten said.
"International thinking on transfer pricing has moved on since the current transfer pricing rules were inserted in the income tax law," Shorten said.
He added that recent court cases had suggested Australia's laws were "out of kilter" with international norms.
"While there is a strong argument that tax treaty rules already operate independently of the domestic rules, the Government has decided to put this beyond doubt to promote consistency between Australia's rules and the international approach," he added.
A consultation paper on the proposed changes to the Income Tax Assessment Act 1936 is available on the Treasury website. Submissions are open until 30 November 2011, but further comments will be sought during the legislative drafting process.
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