Australia Stands To Lose $190 Million Per Year Under Terms Of US Treaty

by Mary Swire, Tax-News.com, Hong Kong

15 May 2002

Concerns have been raised in Australia over a proposed new treaty with the United States, designed to increase the former's attractiveness as a location for US multinationals.

The Australian Taxation Office (ATO) has argued that the tax agreement is necessary in order to adapt to the changing international business climate and address concerns raised by Australian companies over high US withholding tax rates.

However, according to a report in the ABC news service on Monday, the Commonwealth would stand to lose around $190 million in revenue as a result of the treaty, a fact which has led many MP's to question the validity of the treaty proposals.

ABC reports that Labor and Coalition MPs have questioned the lack of economic modelling on the new arrangements, and that even the Executive Officer of the Treaties Unit, David Bryant is unable to quantify the potential benefits of implementing the bilateral agreement.

'It becomes far too difficult to do that because of just not knowing what the responses are going to be,' he explained to a parliamentary committee.

However, many experts are likely to argue that this 'piecemeal' approach - making agreements with individual countries - will merely add to the confusion already present in the country's international business sector, and that the ATO would be better advised to wait until after the long-awaited review of the Australian international tax regime before implementing any more changes.

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