House of Representatives

International Tax Agreements Amendment Bill 2016

Second Reading Speech

Ms O'Dwyer(Minister for Revenue and Financial Services)

I move:

That this bill be now read a second time.

This bill will amend the International Tax Agreements Act 1953 to give the force of law to the new tax treaty signed by Australia and Germany on 12 November 2015. The tax treaty is known as the Agreement between Australia and the Federal Republic of Germany for the Elimination of Double Taxation with respect to Taxes on Income and on Capital and the Prevention of Fiscal Evasion and Avoidance, and its protocol (the new agreement).

International trade and investment creates opportunities for Australia through the provision of goods and services and the injection of foreign capital.

As our economy transitions to broad based growth it is important that we continue to attract foreign investment. But we need the right policy environment for trade and investment in order to take advantage of these opportunities.

That is why the government has modernised its existing bilateral tax treaty with Germany to reflect changes arising from international developments.

Australians are increasingly concerned about the actions of multinational companies and high-wealth individuals who avoid paying the right amount of tax. This new agreement replaces the old agreement which was signed in 1972, bringing bilateral tax arrangements into the 21st century.

Importantly, the new agreement is Australia's first tax treaty that has incorporated the integrity provisions of the G20/OECD Base Erosion and Profit Shifting project, known as BEPS. These provisions are designed to minimise tax avoidance opportunities and ensure that multinational corporations pay the right amount of tax.

This new agreement includes the BEPS minimum standards for protecting against treaty shopping, to counter the channelling of investments through conduit companies to exploit treaty protections and avoid Australian tax.

The new agreement will:

strengthen the integrity of Australia's tax system and help detect and prevent tax evasion by authorising the revenue authorities of Australia and Germany to exchange taxpayer information on all taxes imposed in either country.
enable mutual assistance in the collection of outstanding tax debts.

This is an important landmark in the fight against multinational tax avoidance and strengthens the government's already tough tax anti-avoidance laws.

The new agreement will also improve tax certainty for business by introducing new anti-discrimination and arbitration rules, as well as a range of rules to prevent potential double taxation.

From a trade perspective, the new agreement will create new opportunities for Australian businesses by reducing withholding tax rates, helping to create a more favourable bilateral investment environment and making it cheaper for Australian business to access German capital and technology.

The new agreement will also expand treaty benefits for income received by Australian managed investment trusts and certain German collective investment vehicles, and establish source country taxation of pensions in limited circumstances.

The new agreement will enter into force following the enactment of this bill.

This new agreement will further enforce the already strong economic ties between Australia and Germany and will encourage trade and investment that will support Australian businesses and our economy.