Key Points:
Changes to the tax system need to be based on a real,
not perceived, flaw.
The new buzz words in tax law and policy are "base
erosion". There is an implication that this is a major fiscal
issue caused by the digital age.
The Assistant Treasurer has been vocal, saying "the
international rules that govern taxation have passed their use-by
date. Designed for the industrial era, the tax rules have failed to
keep pace with the rapid changes in global commerce."
While this sounds plausible, a closer examination of the facts
suggests some political hyperbole might be at play.
There is no denying the digitalisation of the world has led to
increased profit mobility. But at the same time, there is really
nothing new under the sun. The base erosion concept has been around
for decades, and a variety of rules have been developed to deal
with multinational companies.
