The Shadow Treasurer, Jim Chalmers, stated that this would be achieved in the following four ways:
- Supporting the OECD's Two-Pillar Solution for a global 15% minimum tax, and ensuring some of the profits of the largest multinationals - particularly digital firms - are taxed where the products or services are sold.
- Limiting debt-related deductions by multinationals at 30% of profits from 1 July 2023, consistent with the OECD's recommended approach, while maintaining the arm's length test and the worldwide gearing ratio.
- Limiting the ability for multinationals to abuse Australia's tax treaties when holding intellectual property in tax havens from 1 July 2023.
- Introducing transparency measures including reporting requirements on tax information, beneficial ownership, tax haven exposure and in relation to government tenders.
Labor stated it would consult with industry on the implementation of these proposed measures, which would not start before 2023.
Labor stated that the measures would raise approximately $1.89b over the forward estimates.
Whilst more details would be required before these measures can be appropriately analysed, these measures are broadly consistent with Australia’s existing commitments under the various OECD initiatives against multinational tax avoidance.
Further, Mr Chalmers has stated that Labor will not adopt the Coalition’s 23.9% tax-to-GDP cap. This suggests that Labor would be willing to allow taxation to increase above this threshold for example due to bracket creep.
Please contact your Grant Thornton representative if you wish to discuss this matter further.