While the government, the opposition and Jacqui Lambie were engrossed in days of debate over the burqa this week, it was heartening to see somebody in Canberra looking after the broader interests of the nation.
Greens leader Christine Milne managed to get two vital senate inquiries going: one into tax evasion by corporations and the other into the “gold plating” of electricity networks, which has been the main driver of rising energy bills.
Milne did not pull her punches on tax. It won’t have escaped the tax cognoscenti that the inquiry is into corporate tax “evasion” rather than “avoidance”. Avoidance is the legal one, evasion illegal.
The silence from the business lobby has been chilling. Nary a word uttered by the chief executives’ union, Business Council of Australia, nor from the Institute of Chartered Accountants and CPA Australia, normally so expansive in their discourse on matters of national import.
The most recent tax stuff on the institute’s home page runs thus: “A special consultation forum has now been established for the ATO, practitioners and tax software developers to collaborate on the project.
“… the new ATO way of doing things is already impacting the tax profession. All taxpayer segments are being encouraged to deal with the ATO online and – if the ATO’s data analysis indicates that individuals and small business are compliant – they’ll rarely be bothered by the ATO in the future (a ‘light touch’ approach).”
Much is made of the “need to collaborate internationally” to pursue tax reform. No surprise there. They know the G20 efforts to curb tax avoidance should amount to nothing.
No surprise either that the ATO’s “new approach” is lauded by tax professionals. Its architect, a former KPMG partner and ATO commissioner Chris Jordan receives the sort of acclaim from industry that Katie Perry gets from eight-year-old girls.
Were there a peak body for Katie Perry fans, they might steal the institute’s motto nec timens nec favens (without fear or favour).
The thing about tax is that so much resides in an arcane netherworld where there is no right or wrong, legally. There is only the game of how far a corporation can push the envelope, how far it can stretch the law without being dragged into the Federal Court.
Avoidance only becomes evasion if the authorities drag you off to court and win. If they force a settlement, it is secret. So when a company pays little or no tax while claiming it obeys the law, it is likely that the law has simply not been tested.
In this “new approach”, where tax practitioners expect to be “rarely bothered” by the ATO, the emphasis is on negotiated solutions cordially struck behind closed doors rather than litigation. Denuded by successive governments of its resources, its top ranks pensioned off in redundancies, the ATO is no longer the menace it once was.
More voices needed
It was terrific to see Wesfarmers’ chief executive Richard Goyder and Harvey Norman chairman Gerry Harvey speak on the subject this week.
Goyder called on companies to “pay tax in the communities in which they operate” and said the debate on avoidance was shifting from a legal one to one of ethics.
“My personal view is that the tax issue will become a bigger one for companies, and will go directly to their reputation. You are starting to see that happen now and, frankly, I think it should,” he said.
Billionaire retailer Harvey said it was “morally wrong” to avoid paying tax in your home country. Indeed, as Harvey Norman already operates in Ireland and Singapore, it would be easy for him to dodge tax.
Others such as the head of Google Australia, Maile Carnegie, have decried the media “naming and shaming” corporations on tax. Sadly, naming and shaming is the only thing which works. Without naming and shaming, there would have been no parliamentary inquiry.
Now, there is finally the prospect that real people may have to come out of hiding, front a public forum and explain how it is that their corporations reap billions of dollars selling goods and services in Australia to people in Australia while paying virtually no tax.
In the extraordinary lengths to which they go to avoid tax, aided and abetted by government, Facebook provides a classic case. Although it has a market value of $US200 billion ($228 billion) and sales of $US10 billion-plus, Facebook managed to win an exemption from the corporate regulator in order to class itself as – to quote the exemption, “a small pty company controlled by a foreign coy which is not part of large group”.
What part of $200 billion is not large? The point is that it did that to skive out of having to file consolidated financial statements in which it would have to provide greater disclosures on tax and transactions with its associates offshore.
If government had the will, it would insist from tomorrow that all large companies and their subsidiaries here file consolidated accounts.
The failure of transparency and proper disclosure had made it open season for big tax avoiders in this country. We don’t need G20. What we need is more corporate leadership in the mould of Goyder and Harvey and some spine from our political leaders.
The government has yet to back Milne’s inquiry. Are they patsies for big tax avoiders? Let’s ask them next week. We can ask William Hill for its odds on a “no comment”.