Transfer Pricing

This page is from the 2016 election campaign. I am leaving it here as a record.

Transfer pricing refers to prices that subsidiaries of a multinational company pay or receive for goods, services and intellectual property sold between different parts of the company. Tax minimisation through transfer pricing is the practice where multinational companies manipulate these prices so that profits are declared in low-tax jurisdictions.

For some types of multinational companies the most effective solution would be to simply not allow the Australian subsidiary to deduct anything bought from other subsidiaries or head-office. The obvious candiates would be companies which just import products into Australia to distribution networks which they own. In practice, that would mean that such companies would divest themselves of their distribution networks. If, for example, the company/companies that distributes Apple products in Australia were not owned by Apple, it/they would have no incentive to pay Apple excessive prices for the products.

Where interest paid on loans to other parts of the multinationals are above market rate, the part above market rate would not be tax-deductible.

The government would establish lists of countries which are tax havens. Primary tax havens would be the designation for countries with extremely low tax rates and vastly more shelf companies than real companies. Secondary tax havens would be countries that have quite low tax rates where profits are often shifted to such as Ireland and Singapore. No money paid to any company in a primary tax haven would be tax-deductible (Also dividends paid into tax haven would attract extra tax). Expenses incurred in secondary tax havens would only be tax-deductible if it is for something genuinely produced there.