Australian Treasurer Scott Morrison on February 22 announced that he will use his powers to block foreign investment to force large multinationals and other foreign investors pay tax on Australian profits.
The Foreign Acquisitions and Takeovers Act 1975 gives the Treasurer broad powers to prohibit or apply conditions to a foreign investment proposal if he believes that the investment would be contrary to the national interest.
Morrison said he will begin to use this power to “ensure multinational companies investing in Australia pay tax here on what they earn.”
Foreign investors that do not follow a newly published set of conditions may face “prosecution, fines, and potentially divestment of the [Australian] asset,” the Australian Treasurer said.
These conditions state that the investor must pay tax on Australian profits and cooperate with Australian Taxation Office (ATO) information requests.
Moreover, investors must notify the ATO if they enter into a transaction with a nonresident to which Australia’s transfer pricing or new antiavoidance rule may potentially apply.
If taxpayer’s dealings impose significant tax risk, additional conditions may be required.
“These may include requiring the investor to enter into advance pricing arrangements with or seek rulings from the ATO, or comply with other directions from the ATO that are specific to their circumstances,” Morrison explained.
Applicants seeking foreign investment approval will be required to report annually to the Foreign Investment Review Board describing their compliance with the conditions.
The government is “absolutely committed to ensuring that investors in Australia pay the required amount of tax,” Morrison said.
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