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Profit shifting by multinational corporations represents "one of the biggest challenges we face in the modern age," the Australian Assistant Treasurer has argued.
David Bradbury warns that international tax rules have become "progressively out-dated" for the digital age. He claims that with economic activity increasingly driven by the intangible "assets of the digital age," companies are now able to "shuffle their income into countries that apply little or no tax and can even give rise to income that is 'stateless' and not subject to tax anywhere." The international tax architecture, on the other hand, grew out of an industrial era, when "economic activity was centred on the production of physical commodities" and profits were taxed in the country where they were earned.
For Bradbury, added complications include the "notion of 'tax law shopping,' where companies take advantage of the mismatches between the laws in different countries," and "the massive money shuffles where multinationals load up their profitable operations in countries like Australia with deductible debt and shift taxable profits into countries where they pay little or no tax."
Bradbury is concerned that organizations engaging in such practices receive a competitive advantage. He does not want to see families, pensioners and small businesses "left to foot the bill."
For these reasons, Bradbury believes that protecting jurisdictions' revenue bases against erosion represents both a pressing priority, and a significant challenge for lawmakers. Although the Gillard Government is in the process of amending Australia's tax laws, Bradbury contends that international cooperation is vital if any crackdown is to be successful.
Bradbury makes clear that the Government "will not be taking a backward step in tackling profit shifting and global tax avoidance," and "will continue to push for global action."
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