Labor will support the global push for multinationals, like Google and Facebook, to face a minimum 15% tax rate and also limit debt-related deductions – measures which it says will raise $1.89bn over the forward estimates.
The shadow cabinet was meeting on Wednesday morning to sign off on the details of the long-telegraphed policy ahead of an announcement later in the afternoon.
Guardian Australia understands Labor will commit to supporting the Organisation for Economic Co-operation and Development’s “two pillar” solution to ensure multinational enterprises are subject to a minimum 15% tax rate from 2023.
Labor will also limit debt-related deductions by multinationals to 30% of profits, which it says is consistent with the OECD’s recommended approach – while maintaining the “arm’s length” test and the worldwide gearing ratio.
The policy will also include transparency measures including new reporting requirements on tax information, beneficial ownership, and tax haven exposure.
About 140 countries have backed the OECD position, a move that would force the world’s biggest companies to pay a fair share of tax. Under the landmark reforms, a new taxing right will be created enabling countries to levy a slice of the profits generated by a handful of the world’s biggest firms, based on the sales generated within each country’s borders.
Labor’s new budget strategy to be released on Wednesday notes Australians have been paying more tax and “losing out on funds that should be available for vital services like Medicare, aged care and child care while multinationals have been using tax havens and tax avoidance schemes to avoid paying tax in Australia”.
The document also confirms the opposition is not proposing tax reforms beyond the changes affecting multinationals. It also commits Labor to delivering the stage three tax cuts which predominantly benefit high-income earners.
The Morrison government has previously signalled support for the OECD framework. The treasurer, Josh Frydenberg, has argued those proposals will help to reduce corporate tax arbitrage and profit shifting.
But last week, Scott Morrison gave an “ironclad guarantee” that the Coalition would not raise taxes in the next term of parliament if he wins on 21 May – which prompted the opposition to query whether the government remained committed to multinational tax avoidance.
Morrison has also reaffirmed the government’s commitment to capping tax receipts at 23.9% of GDP. Labor’s budget strategy document says the opposition is “not attracted to the current cap and does not believe it needs to be revisited, given that both sides will not approach it in the forward estimates”.
As well as the crackdown on multinationals, Labor’s budget strategy will include undertaking an internal audit of what it terms “rorts and wasteful spending” and trimming commonwealth spending on consultants and labour hire.
But the policy document seen by Guardian Australia contains no explicit commitments to offset new expenditure with savings measures. The Morrison government also suspended its own fiscal rules during the pandemic as it rolled out billions in economic stimulus.
Labor’s budget strategy document notes “the best way to fix the budget and pay down debt is to lift growth and boost incomes, and the best way to improve the economy and lift growth is to make smart and responsible investments to expand productive capacity, so the economy can grow faster than debt”.
It says the economic plan for the next term, in the event Anthony Albanese wins on 21 May, will “begin with expanding the capacity of the economy so that it can grow faster than debt” and judging spending “based on the quality, not just quantity, of investment to ensure our policies are the most efficient ways to achieve maximum economic benefit”.
The document touches on expenditure restraint by saying: “Labor understands that there is not scope to spend on every good idea and that we can’t undo the damage done over a decade in one budget or even one term – and that we need to prioritise and sequence and be responsible.”
