KPMG tax partner Grant Wardell-Johnson says Trump would tell the world to “get stuffed” when it comes taxing US multinationals. Photo: Daniel MunozAustralia may have tougher laws aimed at recouping more tax from multinationals, but that won’t stop the incoming US President Donald Trump telling us to “get stuffed” in the fight for more revenue from US-based companies, a KPMG tax expert says.
President-elect Donald Trump has two major changes affecting multinationals under his tax reform agenda. First, he wants to cut the corporate income tax rate from 35 per cent to 15 per cent.
Second, he wants to introduce a special corporate tax repatriation holiday rate whereby corporations with money stashed overseas would be able to pay a tax rate of just 10 per cent on that income in order to bring it back into the United States.
Such a move would benefit multinationals like Apple and Microsoft which currently have billions stashed overseas.
But it would not be great for Australia, said the leader of KPMG’s Australia Tax Centre, Grant Wardell-Johnson.
Mr Wardell-Johnson said if Trump gets his tax reform passed, it wouldn’t really matter how strong Australia’s laws, or those of other countries, are.
Trump would be likely to be of the view that they can “get stuffed”, he said.
The OECD’ plan aimed at ensuring profits are taxed where economic activity is earned, known as Base Erosion and Profit Shifting (BEPS), will be implemented by governments around the world over the coming years.
Tax experts have already warned this could usher in tax revenue wars.
This was highlighted in a recent case where the European Commission found Apple was not entitled to a special tax deal in Ireland.
Apple was ordered to pay up to €13 billion ($19 billion) in back taxes, plus interest, to Ireland after the Commission found the software giant had received “illegal state aid”.
Mr Wardell-Johnson said Trump’s proposed policies would increase the odds of such disagreements.
He said the United States had sided with Apple in viewing that decision as being “out-of-step, retrospective and quite extreme”.
Mr Wardell-Johnson said countries that do not cut their tax rates would be “outliers” and this would have a negative impact on their economy.
KPMG chairman Peter Nash said we could see “bidding wars” between nations to attract investment. “We would be very exposed should that [bidding] war erupt,” Mr Nash said.
On Friday it was revealed that almost 700 multinationals with operations in Australia paid zero tax in years gone by.
The corporate tax transparency report published by the Australian Taxation Office showed that more than a third of large public and private companies paid no tax in 2014-15.
The ATO says it is now fighting seven large multinationals for about $2 billion in revenue.
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