8. Conclusions and recommendations

  1. The mechanisms that have helped shape Australia's corporate tax system were developed in the context of a less integrated global economy than we have today. There is growing international concern that many of these key rules, developed many decades ago, have failed to keep pace with changing global business practices.
  2. Reflecting many of the submissions to the Issues Paper, this Scoping Paper concludes that the extent to which base erosion and profit shifting is currently affecting Australia's corporate tax base is unclear. This reinforces the need to identify and make better use of information currently available to more clearly analyse these issues.
  3. However, it is clear that there are real and identifiable risks facing Australia's corporate tax base and the corporate tax bases of other countries. The increasing use of strategies to exploit gaps and inconsistencies in tax treaties, the increased 'digitisation' of the economy and the challenges for the international community to effectively curb the harmful tax practices of some jurisdictions, have all highlighted shortcomings in the international tax framework.
  4. There are some actions Australia can and has taken unilaterally; these are primarily focused on improvements that can be made without significant divergence from international tax settings.
  5. But the key focus of Australia's efforts should be working multilaterally through international organisations to modernise international tax rules.
  6. Given this, this paper makes the following recommendations:

Recommendation 1

a. The current public release of taxation statistics should be expanded to better cover international dealings of multinational enterprises.

b. An annual report on the health of the business tax system should be published.

Recommendation 2

Each of Australia's bilateral tax treaties should be reviewed at least once a decade, in order to ensure that they continue to be in the national interest.

Recommendation 3

Australia should consider exploring options to further improve the way tax authorities work together including through expanded and more timely exchange of information for tax purposes.

Recommendation 4

Australia should endorse the Action Plan which establishes a joint OECD and G20 project with a comprehensive work program to address the key drivers of base erosion and profit shifting.