New laws hit tax havens

AUSTRALIA has finally released

details of new tax laws designed to stop companies domiciled there from using tax havens such as the Cook Islands, Western Samoa or Vanuatu to avoid Australian corporate tax. It has been estimated that A|>6 bil lion in corporate income is locked away in the tax havens. Accountants have pro tested that the proposed new law, to be enacted before the beginning of the new financial year on July 1, will cast its net too wide and will also mean retrospective taxes on companies which have siphoned profits off in tax havens.

It is two years since Australian treasur er Paul Keating first mooted the law, and the draft still has to be fine-tuned before it is introduced into the House of

Representatives. The parliamentary com

mittee which investigated the use of tax

havens found that many large Australian companies used them including News Corporation, BHP, Elders IXL and

Bond Corporation.

The new system will make tax payable when accrued and earned, rather than waiting for it to be repatriated to Austra lia, Keating said, when releasing the new draft law (which covers 119 pages), that some companies’ offshore transactions may no longer be profitable.

Legal firms claim the new legislation will directly hit the bottom-line perform ance of many companies which use off shore tax havens. But an accountancy firm, Ernst and Young, has argued in a submission to the government that not just tax havens will be affected by the new law; it will hit at companies trying to compete abroad. □