The Turnbull government has welcomed the support of the Labor party for the new laws that will add more teeth to the government's crackdown on multinational tax dodgers. The government also offered to consider the suggestions of the opposition in improving the scope of the legislation.

Labor formally announced its support for draft tax laws, introduced by former treasurer Joe Hockey, seeking stiff penalties on companies indulging in tax avoidance and profit shifting, the AAP reported.

Coalition's tax plan

The coalition's tax plan will come into force on Jan. 1, 2016 and target more than 1,000 multinationals operating in Australia and which earn more than AU$1 billion as global annual revenue. The large scale tax avoidance of such companies has been posing a risk to Australia's tax base.

Under the new law, there will be country-by-country reporting to ensure greater visibility and transparency in the tax structures of multinationals.

Labor's shadow assistant treasurer Andrew Leigh told parliament that the party has been proactive in calling for more action on multinational tax avoidance and will not stand in the way of reforms that tighten the tax net, “no matter how small or insufficient these may be.”

“We are taking a constructive approach to protecting Australia's revenue base,” Leigh said.

The government, on its part, expressed its willingness to incorporate many of Labor's proposals in the government's bill. The government’s view was articulated by Assistant Treasurer Kelly O'Dwyer, who said the government was happy to consider amendments to the legislation that will plug loopholes, allowing companies to take their profits offshore. Though O'Dwyer did not project a figure, she said the new measures would boost tax revenues.

OECD norms

Armed with new laws, Australia is seeking to be the third country in the world to enact a new transfer pricing standard to thwart multinational tax avoidance.

Joe Hockey’s budget papers in May had promised some new laws to target multinationals that “artificially avoid having a taxable presence in Australia.”

There is more urgency now, in the light of Australia’s compulsion to sign up to the Organisation for Economic Cooperation and Development’s new transfer pricing documentation standards that will take effect from Jan. 1 2016, reported The Guardian.

Singapore factor

The Australian Taxation Office said in early 2015 that Australian companies sent nearly AU$388 billion to offshore companies in 2013. Singapore was the biggest recipient of such funds.

An Australian parliamentary panel that conducted an inquiry into the issue of transfer of revenue earned in Australia to other jurisdictions also found large scale offshoring of profits to other tax jurisdictions.

Singapore has been a favourite for many foreign-based multinational corporates such as Google and Apple as a regional base for operations in the Asia-Pacific. But many Australian mining multinationals, such as BHP Billiton and Rio Tinto, have also set up operations in Singapore as a marketing hub, the Strait Times reported.

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