A recently released discussion paper has found that Australia finds Bitcoin as becoming a threat to the country’s tax system. The paper said new technology and globalisation are among the main factors pushing multinational practices to engage in tax avoidance.
According to the paper, news ways transacting such as Bitcoin were not considered when the current tax system was first designed. The country’s tax office claimed Bitcoin and other cryptocurrencies threaten tax collection. It found that the new developments make it difficult for a specific company in a certain country challenging. Concerns were also raised about the ability of companies to relocate profits somewhere else to minimise tax.
The report acknowledged the fact that digitisation and globalisation are positive developments to society but having a globalised economy also meant companies have many options to move their activities and assets. It said technology has increased the opportunities of multinational companies to resort to legal means to reduce their tax liabilities.
Some of the biggest tech companies with operations in Australia like Apple and Google have been previously scrutinised by the Australian Taxation Office due to their alleged exploitation of the legal mechanism. This allows companies to shift their profits in Australia to low-tax countries and keep losses in Australia so they can pay tax under a lower rate.
In the days leading up to the G20 summit in Brisbane in 2014, Australian Treasurer Joe Hockey described companies that practice tax avoidance as “thieves,” reports ZDNet. He said multinational companies choosing to shift profits somewhere else were “stealing” from the country and community.
Australia has become a hostile environment for cryptocurrencies as well. The Australian Tax Office has clarified tax incentives that had Bitcoin operators like Coinjar move offshore to avoid double taxation. In the report, the ATO said every non-resident company that generates taxable income from Australian sources will be required to pay tax in Australia.
The report suggests that Australia is looking for ways to curb the trend of multinational corporations using legal strategies to avoid paying high taxes. While the government acknowledges the risk of discouraging local investments if Australia will begin raising corporate tax rates, it was still determined to close such “loopholes” in taxation.