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Emergence of new technology proving to be problematic for Australia’s tax system

Emergence of new technology proving to be problematic for Australia’s tax system

CANBERRA: The emergence of new technology is proving to be problematic for Australia’s tax system, according to a new discussion paper by the Australian government.

The government’s Re:think tax discussion paper, released, points to new technology, along with the digitisation and globalisation of the economy, as being among the prime suspects behind the trend for multinational companies to engage in tax avoidance practices.

“New ways of transacting, including cryptocurrencies such as bitcoin, were not contemplated when the current tax system was designed,” the paper said. “These developments make determining the appropriate tax outcome for a particular company in a specific country difficult, and raise concerns about the ability of companies to relocate profits to minimise their tax.” While digitisation and globalisation of the economy are positive developments, said the paper, a globalised economy means that companies have greater choice about where to locate their activities and assets, including intangible assets such as intellectual property.

“This has increased the opportunities for multinational companies to use legal means to minimise their tax liabilities, through multinational tax avoidance, also known as Base Erosion and Profit Shifting (BEPS),” it said.

BEPS refers predominantly to situations where the interaction of different tax rules allows profits to be shifted away from the countries where the activities creating those profits take place, leading to low taxation or even no taxation.