The tax treatment of debt in Australia may be the subject of another review, with the release of a Treasury paper on "risks to the sustainability of Australia's corporate tax base."The paper revisits many well-known themes, including the tax arbitrage available to multinational enterprises.Multinationals, the paper says, have "a high degree of flexibility in how to structure their affairs… [they] can be well positioned to structure their intra-group dealings in particular ways where there is a tax advantage in doing so.""For example, where a financial instrument has features of both debt and equity it is possible that it would be treated as debt for tax purposes in one country and equity in another. "Tax arbitrage arrangements can exploit these mismatches, in some cases resulting in a net tax loss where there is no net economic outgoing."Multinationals typically have flexibility in how they arrange their capital structure and so can locate debt (and therefore their interest deductions) in profitable parts of the group, reducing the global tax on their business profits. "Where a group finance company is located in a low-tax country the resultant interest income would be taxed favourably (or sometimes not at all), resulting in a reduction in the total tax paid by the group as a whole. "The OECD has noted that the tax treatment of debt means that leveraging high-tax group companies with intra-group debt is a very simple and straightforward way to achieve tax savings at group level."The Treasury paper is mostly silent on issues relating to banks, but does highlight the OECD's work to "develop best practices in the design of rules to prevent base erosion through the use of interest expense."The only real conclusion in the paper is "the need to identify and make better use of information currently available to more clearly analyse the issues."