Australian Senate Votes to Embed Global Minimum Tax Standard Into Law

U.S. Secretary of State Antony Blinken listens as Mathias Cormann, Secretary-General of the Organization for Economic Cooperation and Development, speaks during a press briefing at the OECD's Ministerial Council Meeting, in Paris, France October 6, 2021. Patrick Semansky/Pool via Reuters

The Australian Senate has passed legislation to enforce a 15 percent global and domestic minimum tax rate for all multinational corporations locally.

Starting Jan. 1, 2024, companies with annual revenues exceeding $1.2 billion (€750 million or US$805.67 million) will be subject to this new standard.

Treasurer Jim Chalmers and Competition Minister Andrew Leigh issued a joint statement on Nov. 27, saying the tax laws would help fund critical services such as healthcare, education, and defence.

The statement added that the minimum tax standard was part of a coordinated global approach led by the OECD to crack down on tax avoidance.

Currently, Australia’s corporate tax rate stands at 30 percent for businesses with a turnover of $50 million or more. However, both ministers and the Greens have long criticised multinationals for tax avoidance.

According to the May 2023 federal budget, the measure is expected to raise $370 million in tax receipts over the next five years, with an administrative cost of $111 million.

Global Standard in Taxation

This initiative is part of the Australian government’s ongoing commitment to the OECD and G20’s Two-Pillar Solution, a global multilateral agreement aimed at establishing a global tax standard.

Since 2013, the OECD and G20 have worked on the Base Erosion and Profit Shifting (BEPS) project, although the United States, under previous administrations, resisted the idea of a global tax rate.

However, the Biden administration adopted a different position and supported the initiative.

Economist Says Smaller Jurisdictions Will Be Unable to Compete

Despite the support, some economists have expressed concerns about such measures.

Robert Carling, former executive director of the New South Wales Treasury, stated that such a system could disrupt the free market, particularly as tax breaks often serve as the only tool for developing or smaller jurisdictions to attract investment—like Singapore and Ireland.

“I think it’s an attempt to frustrate tax competition. Tax competition between countries is always good, and a productive thing. And this would frustrate it. There’s no other way of looking at it,” Carling, a senior fellow at the Centre for Independent Studies, previously told The Epoch Times.

Movement Will Stall Amid New US Leadership’s Rise

Meanwhile, the change of U.S. leadership could put the brakes on the global initiative.

President-elect Donald Trump has committed to reducing the U.S. corporate tax rate to 15 percent, a broader strategy aimed at attracting overseas companies to set up directly in the United States.

Barnaby Joyce, federal Nationals member for New England, said this would likely lead to capital flight from Australia.

The CEO of the Business Council of Australia, Bran Black, echoed these worries, highlighting Australia’s 30 percent corporate tax rate, which is the third highest among OECD countries, after Portugal and Colombia.