Multinational Corporate Tax Avoidance in Australia & Australia's Anti-Avoidance Law

Abstract

If multinational companies don’t pay their taxes why the hell should I? It is a question no doubt considered by every taxpayer at some point. Common assumption would have one believe that multinational companies operating in Australia are avoiding the payment of a substantial amount of taxes every year, however, is this the case? This answer is not immediately apparent, indeed, there is a significant divergence of opinion as to the extent of tax avoidance amongst multinational companies operating in Australia and by what means this is being facilitated. This thesis identifies the extent of tax avoidance attributable to multinational companies operating in Australia and establish by what means this is being facilitated. This thesis concludes that the fiscal impact of multinational corporate tax avoidance is less significant than is often stated and that it is primarily being driven by Thin Capitalisation and Transfer Pricing activities. This conclusion is reached by analysing the existing literature and on comparisons drawn with individual taxpayers in Australia and studies examining multinational companies in other jurisdictions. However, it is concluded that the issue of multinational corporate tax avoidance remains significant as it represents areas of structural deficiency in the tax laws and is a contributing factor to tax avoidance and evasion by individuals and other business taxpayers which impacts federal tax revenues to a far greater extent. This thesis assesses the effectiveness of Australia’s current avoidance law in addressing multinational corporate tax avoidance in light of significant international developments in the area. It concludes that Australia’s anti-avoidance laws are reasonably well purposed but that the general anti avoidance law is of limited continued utility. This conclusion is reached by studying the development of Australia’s anti avoidance laws and comparing this with the concurrent development of corporate tax avoidance practices as well as an examination of international developments in anti-avoidance laws targeting multinational companies and Australia’s responses to these developments. This thesis concludes by identifying how the general anti avoidance law might be revised to better address current multinational corporate tax avoidance practices.