The announcement of a Senate inquiry into corporate tax avoidance was barely minutes old on Thursdaywhen this sponsored message appeared on Twitter:
“Access the latest corporate, indirect and individual tax rates from 137+ countries. Download the KPMG Global Tax App. Promoted by KPMG.”
According to KPMG, the corporate tax rate in Bermuda is zero. Same deal for the Cayman Islands and Guernsey. In Australia, the corporate tax rate is 30 per cent, so if KPMG can assist you to transfer profits to one of these islands you may pay zero instead of 30 per cent. In return you will pay KPMG a handsome fee.
The big blue-chip accounting and law firms collectively rake in billions of dollars in fees annually by advising companies around the world how to shift their profits to tax havens and structure their affairs to reduce “leakage” – as tax is dubbed in the trade – wherever possible.
In light of the sheer dollars at stake, there will be much antagonism from the business lobby and its proxies in politics and the media in coming days and weeks.
Already, the response to a report by the Tax Justice Network revealed in Fairfax Media on Monday has been venomous. The report found use of tax havens was on the rise and that almost one third of the Top 200 companies listed on the Australian Securities Exchange paid less than 10 per cent income tax. It named the likes of Rupert Murdoch’s 21st Century Fox (1 per cent effective tax rate) and the Westfield Group as being particularly aggressive.
When it comes to aggressive tax schemes, however, the top companies on the sharemarket pale in comparison with multinationals – tech giants such as Apple and Google and Australia’s biggest coal company Glencore.
Political donations are a big issue, too. It was no coincidence that the government opposed the Greens’ motion yesterday to hold the inquiry. Many of the biggest Coalition donors are also the biggest tax avoiders. Labor, too, gets its fair share.
The government needs to get behind the inquiry now, to prove that it is not in the pocket of big business but is instead a champion of the people who elected it, the ordinary people who pay their fair share in tax.
Some of the issues likely to arise are the lack of transparency in corporate disclosure and by the Australian Tax Office, the lack of proper disclosure in financial reporting and the controversial new approach of the ATO, which favours industry “collaboration” over litigation. It is being labelled as “light touch” and “pleasing” by industry practitioners.
Former top officers of the ATO, as revealed in Fairfax Media this week, are highly critical of the new approach and believe it threatens to further erode Australia’s tax base.