The Australian Opposition has vowed to close the multinational tax avoidance loophole if it wins the federal election on May 21.

Labor outlined on Wednesday that it plans to claw back AU$1.9 billion over forward estimates -- a modest AU$500 million per year -- by supporting the Organisation for Economic Cooperation's (OECD) two-pillar solution, and ensuring profits of multinationals with over AU$1 billion in revenue, particularly digital firms, are taxed on products or services sold.

As of November, 141 countries and jurisdictions signed up to the OECD's arrangement, including Australia, which will see multinationals be subject to a minimum tax rate of 15% from 2023.

Labor said it will also limit debt-related reductions by multinationals to 30% of profits, consistent with the OECD's recommended approach. Similar approaches have already been adopted by the US, UK, Germany, Japan, Sweden, and other European countries.

Additionally, Labor wants to limit the ability for multinationals to abuse Australia's tax treaties when holding intellectual property in tax havens, as well as introduce reporting requirements on tax information such as how much tax multinationals pay in the jurisdictions they operate, beneficial ownership, tax haven exposure, and in relation to government tenders.

"The Treasurer was happy to praise these global developments made by the OECD and others in multiple press releases but he has taken no meaningful steps to make sure multinationals pay their fair share of tax in the countries where they make their profits," claimed Labor on Wednesday.
 
"[Prime Minister] Scott Morrison and [Treasurer] Josh Frydenberg cannot simultaneously mount a scare campaign on these tax proposals while they pretend to support global efforts on multinational tax avoidance. They can't have it both ways."

Labor added the measures outlined will not be enforced until 2023 to ensure that "there is the right amount of time to consult with industry on the implementation of these rules, which carefully target activities deliberately designed to minimise tax -- without creating an extra burden on legitimate business activity".

The proposed moves by Labor echo a similar pledge that US President Joe Biden made last year when he too wanted to "level the international playing field" and make sure large corporations pay their fair share of tax by raising the corporate tax rate from 21% to 28%.

Australia introduced multinational anti-avoidance laws back in 2016. Under those laws, companies operating with an annual global income of more than AU$1 billion in Australia are required to lodge their general purpose financial statements to the Australian Taxation Office, if they are not already doing so with the Australian Securities and Investments Commission.

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