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Successive Australian governments have claimed that Australia has been and will be in the forefront of countries that respond positively to the recommendations of the OECD’s Base Erosion and Profit Shifting (BEPS) project by taking action against international tax planning by multinational enterprises. This presentation discusses Australia’s recently enacted Diverted Profits Tax, the 2015 Multinational Anti Avoidance Law, Australia’s proposed adoption of the OECD’s hybrid mismatch recommendations, and its proposed adoption of the OECD’s Multilateral Instrument for modifying Tax Treaties. The presentation argues that these actions will produce a complex and conceptually incoherent Australian international tax regime. The regime will still discriminate against foreign investors into Australia and while providing an incentive for Australian businesses to minimise their foreign tax will now threaten them with a targeted general anti avoidance provision looming over them when they do so. The presentation highlights the dangers of: (a) copying provisions from other jurisdictions without properly considering their interaction with foreign law and existing domestic law; (b) the adoption of recommendations which make domestic law treatment of transactions depend on their treatment in another jurisdiction; and (c) the adoption of a multilateral instrument which, due to the amount of alternative options available, will affect existing bi-lateral tax treaties in diverse, and possibly unpredictable, ways. The presentation will argue that the problem of BEPS is better addressed by readjustments of domestic tax rules to produce more neutral and less discriminatory cross border investment environments.
C John Taylor is a Professor in the School of Taxation and Business Law in the Business School at UNSW, Sydney, Australia. Professor Taylor’s main areas of research have been: capital gains tax; corporate – shareholder taxation; international tax; taxation treaties; and tax simplification. He has been a contributing author to all editions of Understanding Taxation Law (Lexis Nexis, 2002, 2004, 2009, 2010, 2011, 2012, 2013 and 2014, 2015, 2016, 2017). His sole authored book, Capital Gains Tax: Business Assets And Entities was cited several times in the decision of the High Court of Australia in FCT v Murry (1998) 193 CLR 605 and in several other Australian court decisions. John was the Inaugural Honorary Research Fellow of the Taxation Institute of Australia and in that capacity was the principal author of Beyond 4100: A report on measures to combat rising compliance costs through reducing tax law complexity, Taxation Institute of Australia, 2006. From 2006 to 2007 John was a consultant to the Australian Department of the Treasury on specific anti-avoidance provisions in the income tax. John is currently a Visiting Fellow at the Tax and Transfer Policy Institute at the ANU Crawford School of Public Policy.