Private Healthcare Australia has released its submission to Treasury's consultation on multinational tax integrity and enhanced transparency.
According to the submission, while its 34 members are not "directly affected by multinational tax minimisation strategies, our members are heavily exposed to the high costs charged by foreign device suppliers who simultaneously pursue strategies to minimise the tax they pay in Australia."
The association says the linkage is significant. "It is important to note that the Commonwealth Government’s average contribution of 25 per cent of PHI premiums via the PHI [private health insurance] rebate means it contributes around $625 million annually to the revenues of medical device companies. As noted below, even this partial contribution is more than double the total domestic income taxes paid by medical device companies supplying to the private sector."
It calls for action on removing the "favourable tax treatment" employed through mechanisms such as management fees, intangible assets and debt shifting."
"...one of the most concerning practices is their use of multiple tax havens including Singapore to stage delivery of devices from their manufacture source, commonly the USA, to Australia, often via Europe and almost certainly via Singapore," it says.
"This is in part due to the tremendous incentive provided by high Australian prices guaranteed by the Prostheses List, where the incremental difference in wholesale sales price must be booked prior to local delivery in order to take advantage of preferred international tax jurisdictions.
"In addition to stripping precious tax dollars out of Australia, this also creates the absurd opportunity for the Australian arm of the GME to sell these devices to New Zealand at a lower price than the goods are imported from Singapore at and thus record a tax deduction."
The association says the Australian Taxation Office should "engage in a comprehensive review" of why multinational enterprises routinely report 1 to 3 per cent tax paid in Australia, "despite uniquely high local prices and little to no local investment" and focus on the use of transfer pricing.