Modernising transfer pricing rules : as useful as moving deck chairs on the Titanic

Multinational Enterprises (MNEs) operating in Australia should pay taxes in Australia on profits made in Australia. However, MNEs are routinely under paying tax in Australia and abroad, by shifting their profits to no and low tax jurisdictions, with devastating effects on government revenues. The Australian tax laws with respect to the taxation of MNE's operating in Australia, called transfer pricing rules, are being modernised. The modernisation is aimed at ensuring that the Australian rules are aligned with the recent changes made to similar rules promulgated by the OECD. Changing the transfer pricing rules will not prevent MNE's from avoiding tax into the future. This article will demonstrate that changing the rules will be as effective at stopping profit shifting as moving the deck chairs on the Titanic was in avoiding an iceberg and sinking.