What is the difference between 30 per cent of zero and 20 per cent of zero? Correct: precisely $5227.27 less than a Bronwyn-Bishop-taxpayer-funded helicopter trip from Melbourne to Geelong.
A reduction in the corporate tax rate, as unrelentingly espoused by the business lobby in its pro-GST campaign, may be a good thing. It may make Australia more competitive. The more pressing thing though is getting multinationals to pay any income tax at all.
The government has no mandate to hoist the GST by 50 per cent, hitting the country’s poorest, when the very richest – the foreign multinationals – pay proportionately next to nothing. To do so would be to kow-tow to the large political donors who fund the major parties.
If the corporate tax rate over the past seven years had been 20 per cent, rather than the present 30 per cent, US financial services giant American Express would still not have contributed one red cent to the national coffers. Thanks to dubious tax arrangements, its Australian business has paid no net tax in seven years.
What of Johnson & Johnson, Pfizer, GSK, Merck Sharp Dohme, Eli Lilly, Novartis, AstraZeneca, Roche and Sanofi? The nine from Big Pharma paid a paltry $85 million in income tax between them last year – despite racking up $8 billion in sales and receiving $3.5 billion in subsidies from the Australian taxpayer.
How much would Google pay on its $2 billion plus in Australian sales a year if the corporate tax rate were lowered? Very little. Google runs its entire Australian advertising shebang through Singapore; it doesn’t even pay GST. Neither does eBay. The ecommerce juggernaut books the bulk of its Australian sales in Bern, Switzerland. Over 12 years, eBay has forked out just $6.2 million in income tax, even though it runs a program with the Tax Office to bust small traders.
Meanwhile, eBay’s sister company PayPal has blithely booked more than $1 billion of its $1.2 billion in Australian sales through Singapore. “Service fees” is the excuse, although, counter to its obligations under the Corporations Act, it fails to disclose the details.
Part 4a of the Tax Act says that the “dominant purpose” of a transaction must be commercial, rather than tax driven (you can bet your bottom dollar this PayPal scheme is tax driven) but the Tax Office doesn’t test Part 4a in court much. Chevron knows this too. Not only did it manage to skive out of paying tax last year altogether, the Australian Tax Office (ATO) even wrote the oil giant a cheque for $5.7 million.
Then there’s Rupert Murdoch’s News Corp, deemed by the ATO to be the worst tax avoider in corporateAustralia. In response to a story here about News siphoning $4.5 billion of Australian income offshore virtually tax free, a News executive conceded to a Senate committee that the company had “internally generated goodwill” of $7 billion.
Err, slight problem, the accounting standards don’t permit a company to recognise internally generated goodwill.
Then there is Australia’s top bookmaker William Hill, leading merchant bank UBS, oil giant Shell, our biggest coal producer Glencore, the Singapore shenanigans of BHP and Rio. The list of multinational tax offenders wends on.
This is the tip of the iceberg. Forget the Bottom of the Harbour Scheme, the ramifications of this Bottom of the Ocean Scheme have become clear. Despite the corporate growth of the past decade, the growth in corporate tax receipts has stalled as the tax avoidance fraternity – led by directors and Big Four audit firms – has become ever more aggressive.
The professions have placed the interests of themselves and their biggest clients above their own standards and ethics while governments have simply let things slide. The rot coincided with the rise of the United States digital giants as traditional multinationals rationalised their tax avoidance on the view, “if they don’t pay tax, why should we?”
Ironically, the Business Council of Australia – whose members include some of the nation’s most egregious avoiders – has been calling for “leadership” on tax reform.
Along with the Big Four, such peak bodies continue to host their conferences and pump out press releases calling for tax reform. This is akin to Bronwyn Bishop calling for reform to politicians’ expenses claims.
How long can they continue to treat Australians as fools? While multinational tax avoidance remains so rife how can government possibly claim a democratic license to hit ordinary Australians with a hike in the GST?
As for the chimera of multilateral tax reform, that governments in the US and Europe would ever sign up to an OECD deal which saw their own multinationals pay more tax on Australian earnings, well that is just a pipe dream, or worse, a convenient pretext for doing nothing.