The Australian Labor government has introduced a bill to establish a 15 percent global and domestic minimum tax for all multinational companies. This new standard will apply to companies with a revenue of $1.2 billion (US$805.67 billion or 750 million euros) starting from Jan. 1, 2024.
Australia’s current company tax rate for businesses with a turnover of $50 million is 30 percent. However, there has been criticism from ministers and the Greens regarding multinational companies avoiding taxes.
Treasurer Jim Chalmers and Competition Minister Andrew Leigh stated on July 4 that these measures align Australia with many other nations, including major economies, that are cracking down on multinationals to ensure they pay a fair share of taxes. They emphasized that preventing a global race to the bottom in company tax benefits all Australians, as lower taxes for multinationals mean higher taxes for individuals and domestic businesses.
The government’s economic plan aims to combat inflation and reduce the cost of living while improving the budget. This move is part of the Albanese government’s commitment to the OECD and G20’s Two-Pillar Solution, a multilateral agreement involving 140 nations. The OECD and G20 have been working on the Base Erosion and Profit Shifting (BEPS) project since 2013, with the United States changing its stance on a global tax rate under the Biden administration.
Despite these efforts, some economists oppose the idea of a global tax system. Robert Carling, a former executive director of the New South Wales Treasury, believes that a global tax rate would disrupt the free market, as tax breaks are essential for developing countries to attract investment. He expressed concerns about how this could hinder tax competition between countries, which he views as a positive and productive aspect of the market.
Overall, the introduction of a global and domestic minimum tax for multinational companies reflects the government’s goal of addressing cost of living issues and ensuring fair taxation practices.
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