Review of International Taxation Arrangements – Consultation Paper

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Review of International Taxation Arrangements – Consultation Paper




I am releasing today the consultation paper Review of International Taxation

Arrangements prepared by the Department of the Treasury. The paper is the

first stage of meeting the Government’s election commitment (in Securing

Australia’s Prosperity) to review aspects of Australia’s international tax


The review will build on the Government’s achievements to date to give Australia

an internationally competitive tax system, including:

  • delivering an internationally competitive 30 per cent company tax rate (down

    from 36 per cent);

  • introducing the GST in place of wholesale sales tax and inefficient transaction


  • reforming capital gains tax, including rollover provisions that facilitate

    greater commercial flexibility; and

  • negotiating in late 2001 changes to the Australia-United States tax treaty

    which will significantly reduce US withholding taxes on dividends paid to

    Australian companies by their US subsidiaries.

Many Australian companies now earn revenue from operations overseas, a fact

reflected in the increase in total capital invested offshore by Australians

from just 9 per cent of GDP in 1980-81 to 62 per cent in 2000-01.

This returns earnings to Australian Shareholders and brings revenue through

the Australian tax system.

It is important that our international tax arrangements do not detract from

the capacity of Australian companies to grow into new markets, while protecting

revenue and integrity needs. The consultation paper therefore examines concerns

raised about aspects of current arrangements and outlines a number of options

for consultation with a view to:

  • ensuring that Australia’s dividend imputation system does not limit the

    ability of Australian companies to attract equity capital for offshore expansion;

  • improving Australia’s attractiveness as a location for internationally

    focussed companies to operate global and regional businesses (examining the

    controlled foreign company rules, Australia’s international tax treaty network,

    the treatment of income repatriated from offshore subsidiaries, conduit income

    arrangements, and corporate residency tests);

  • enhancing Australia as a global financial services centre (examining in

    particular the foreign investment fund provisions and the capital gains tax

    treatment of non-residents investing in Australian managed funds); and

  • improving Australia’s tax treatment of foreign expatriates to enhance Australia’s

    attractiveness to overseas talent.

These areas address the particular matters and others, which I identified for

consideration in my press release of 2 May 2002, which set out the arrangements

for the review.

As a Treasury document, the consultation paper sets out options to provide

a basis for public consultation to be undertaken by the Board of Taxation. I

have asked the Board to report to the Government on the outcome of its consultation

process by the end of the year. The Government will consider its position on

what reforms might be needed once the Board has reported.

It will be important for business and the Board to demonstrate the benefits

from implementing particular options. The Board is seeking written submissions

by 31 October 2002. The Board will make a separate announcement regarding the

details of the consultation process and will also release a separate detailed

consultation plan. Further details, and the Review of International Taxation

Arrangements consultation paper, will be available on the Board of Taxation

website at

I would encourage all interested parties to provide submissions to the Board

of Taxation on the options outlined for consultation in the paper.


22 August 2002

Contact: Niki Savva

02 6277 7340