View: New Aussie rules apply for MNCs

Now that Australian Labor Party (ALP) leader Anthony Albanese has ousted the conservatives from power and is ready to take over as prime minister, he will also bring with him an election promise to hike corporate tax rates for multinational corporations (MNCs).

Tax evasion by large MNCs has been one of the major problems in Australia for decades. Historically, the US has boasted the largest number of MNCs in the world. But in the last decade, the global footprint of Indian MNCs is also very much visible. Indian MNCs have been quick learners capitalising on internalisation, both in speed and scale. The new Australian administration is likely to crack down on MNCs and will also make their operation tougher in the country, especially if they are contributing to pollution and environmental degradation.

MNCs hold a significant amount of wealth, their sheer size giving them power and global networks that, in turn, make them ideal candidates to be at the forefront of any economic plan to revive a country’s, and indeed the global, economy. It is imperative that Australia acts swiftly to rebuild its economy to bolster employment, reduce inequality and resume business activity in the wake of the Covid pandemic.

MNCs have the capability and capacity to promote more foreign direct investment (FDI), increase trade, improve research and development (R&D) and drive innovation. As such, MNCs will play a critical role in reshaping the new functionality of post-pandemic Australia. At a time when Australia needs MNCs to drive local investment, innovation and employment, increasing taxes and encouraging offshoring of operations would not be the wisest move.

Furthermore, with governments around the world eager to direct foreign capital to their own Covid-ravaged economies, Australia may have to contend with a lot more competition if it wishes to remain competitive to its own companies relative to foreign MNCs operating in Australia.

India will remain one of Australia’s strongest trading partners. However, Indian MNCs that have established businesses in Australia are likely to face challenges under the new dispensation with the latter’s zero-carbon pledge and clean energy production. Unless these MNCs, along with Australia’s largest mining corporation BHP, radically change their business strategies on climate risk, the pressure of tax increase and operating without compliance to climate risk mitigation will challenge their fate in Australia under the new government.

Australia has been generous – indeed, lenient – on foreign investors in the past few decades. It is time Australia protects its national interest, and diversifies its foreign trade partners and investors to more than one dominant provider. International investors need to recognise the intangible value they draw by operating in Australia as a result of its growing population, and its economic and legal stability. The time has come for the free-riding on emission-induced businesses and relaxed tax era, which the Googles and the Apples enjoyed for decades, to come to an end.


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