Treasurer Josh Frydenberg has signed Australia up to the new global tax deal which will be put before a Treasurers meeting later this month for final approval.
It’s estimated Australia could gain up to $3 billion in extra tax revenue a year under the international overhaul aimed at helping countries share the spoils from multinational firms like Facebook and Google.
One hundred and 39 countries have signed on to the new framework initially struck at the G7 last month with implementation targeted for 2023.
The continued resistance to paying corporate taxes by big tech companies, most of them of US origin has forced the move.
It aims to end tax avoidance by making global enterprises pay an effective rate of around 15 percent and giving smaller countries more tax revenue.
They would ensure multinational enterprises with revenues of $1.2 billion pay a fair share of tax in which ever country they operate.
The deal has Australian economists divided on its impact here. Our current corporate tax rate is 30 percent, twice that proposed by the agreement.
While some say Australia would lose money on the deal others say it would force more companies to pay up rather than avoid paying via loopholes such as offshore accounts or unclear regulation.
It should prevent Facebook and Google from citing Ireland, which hasn’t signed up as it has a corporate tax rate of 12.5 percent, as their tax base and hopefully stop the tech giants sending revenue overseas.
That’s the aim anyway but there are hurdles still to come which signatories hope will be resolved by the G20 meeting in October.
