Joe Hockey breaks pledge to crack down on corporate tax avoiders

Treasurer Joe Hockey has done a backflip on his promise to impose tough tax avoidance rules on multinational companies that shift profits between Australian and subsidiaries overseas.

Australia-based global companies are accused of minimising tax by stacking debt into the subsidiaries and then claiming deductions from the Australian Taxation Office on the interest paid.

For such companies, dividends from international subsidiaries are also tax exempt.

A Treasury issues paper from last year said this practice gives the companies and "unfair competitive advantage" over local rivals and means the tax burden "eventually falls more heavily on other taxpayers".

Mr Hockey pledged in November to "introduce a targeted anti‑avoidance provision after detailed consultation with stakeholders".

But yesterday's Mid-Year Economic and Fiscal Outlook revealed on a single line on page 117: "The government will not proceed with a targeted anti-avoidance provision to address certain conduit arrangements involving foreign multinational enterprises."

Shadow assistant treasurer Andrew Leigh accused Mr Hockey of "sneaking in another giveaway for multinational companies".

Mr Hockey's office referred questions to Finance Minister Mathias Cormann, who released a statement insisting that "no promise was broken".

"Following consultation with stakeholders and the Australian Taxation Office, it became very clear that a targeted anti-avoidance provision would be ineffective," he said.