This evening Wayne Swayne delivered what is arguably the most important budget of his career. There are a number of tax-targeted messages that were announced tonight in the budget, in particular aimed at multi-nationals.
Of those measures announced tonight, the three most significant relate to firstly restricting the ability for multi-nationals to claim tax deductible interest on their debt used to fund their operations. This is done both through the thin capitalisation rules and a specific provision known as Section 25-90.
Secondly there have been changes announced to remove the immediate deduction for mining licenses.
And thirdly there has been a change so that large taxpayers, other than corporate entities, will now be transitioned to join corporate entities in being required to pay their income tax instalments on a monthly basis rather than quarterly.
What is interesting about those top three measures that were announced tonight is that together they are expected to yield about $4billion in revenue over forward projections for the next 4 years.
Compare this to what is happening in the broader tax landscape in relation to other measures that government is currently consulting and contemplating at the moment (and in fact implementing) - the issues paper around based erosion of profit shifting that is due to be released in June this year, changes that are being put through legislation in relation to transfer pricing and also amendments to the general anti-avoidance rule. Some ministers have claimed that this will yield the government the tens of billions of dollars in revenue that will be projected into the future.
The impact of all these developments needs to be assessed in light of what is happening in the broader business agenda outside of tax. The key issues that we’re seeing occupying the minds of business at the moment are around factors such as business reputation that focus on growth, obtaining access to long term funding and also managing short term liquidity. Also seeing business want to find ways to enter new markets overseas.
The developments that I have mentioned in relation to base erosion and profit shifting, changes to thin cap and the impact this has on funding, these are all factors that impact on the wider landscape that is occupying business’ mind.
The other thing to bear in mind of course that with an election coming in later 2013, there is the ability of business to re-engage with the Government on the business tax reform agenda.