- Australia criticised for stalling on tax evasion
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Multinational businesses will be able to avoid more in tax than is being saved by many welfare tightening measures, the opposition has claimed.
Target acquired, ammunition primed
Fairfax polling reveals voters remain unconvinced by the budget and the Prime Minister - Labor uses one to target the other in Monday's question time.
Labor's assistant treasury spokesman Andrew Leigh has criticised the Abbott government for rolling back transparency measures and proposing such a light touch on regulation that the revenue base will be eroded.
"Under Labor, we set about closing loopholes that allow multinational companies to pay a lower rate of tax than Australian small businesses, but much of that is now being reversed,'' he claimed.
"Since coming to office, the Abbott government has pledged to address base erosion and profit shifting at the G20, but their only legislative actions have been to give more than a billion dollars back to multinationals in unnecessary tax breaks.''
The former economics professor said the government's rhetoric about fixing a claimed ''debt and deficit disaster'' in the budget did not stack up against its moves to reduce regulation and thus effectively allow companies to engage in profit shifting.
He listed five measures - three from the budget and two announced by Treasurer Joe Hockey late last year, which together amount to revenue foregone over the budget's four-year period of more than $1.13 billion.
They are: deferring the start date for reforms to the offshore banking regime at a cost of $180 million; not going ahead with changes to third party compliance reporting and data matching at a cost of $113 million; and not proceeding with changes that would have put so-called ''multiple entry consolidated groups'' or multinational companies on the same tax footing as domestic companies, at a cost of $140 million. All figures are listed in the government's Budget Paper No.2.
Two other measures announced before the budget will cost a further $700 million in revenue. These are the closure of loopholes allowing multinational companies to shift profits to countries where taxes are low and costs to higher tax jurisdictions, as well as a tightening of offshore banking rules to close further loopholes.
Announcing the latter two in November as part of a major clean out of announced but not yet legislated initiatives of the previous Labor government, Treasurer Joe Hockey said the changes would provide ''certainty to business and significantly reduce red tape and associated cost''.
The government says the opposition claim is based on false assumptions including that all of the measures announced by the previous government would either result in increasing revenue or were even implementable in a legal sense.
Mr Hockey's office advised that some of Labor's proposals had been deferred rather than abolished such as the reforms to the offshore banking unit, and plans to beef up third party compliance reporting.
However, further assessment by Treasury officials had found three other measures were ''unimplementable'' and ''undeliverable'' because they would have caused severe disruption to Australian businesses.
The government has been advised that changing the tax rules for ''multiple entry consolidated groups'' would be ''completely unimplementable'' from a drafting and enforcement perspective.
It has also advised that predicted revenue from offshore banking units had been vastly overstated, and that tightening so-called thin capitalisation rules - whereby multinational firms claim interest payments on borrowings to minimise taxable income - would discriminate against Australian businesses looking to expand abroad.
The charge of soft treatment for the big end of town came as Labor launched a coordinated parliamentary attack on the budget on Monday directing question after question to Prime Minister Tony Abbott claiming low income families would be up to $6000 a year worse off under this budget.
Labor leader Bill Shorten cited NATSEM modelling, which had found a single income family with two children in school on $65,000 would be up to $ 6303.88 worse off under the welfare changes.
Mr Abbott argued such families would still receive thousands in assistance. He said Labor had engaged in a cash-splash with borrowed money, declaring the Coalition would not lumber future generations with the debts of excessive spending now.
But Labor's Nick Champion said the government had taken a political risk with the cuts to pensions and entitlements.
''It's pretty hard to defend - it's aimed at Howard's battlers and is a savage rollback of his legacy, all while they give massive cuts to corporates and miners,'' he said.