It was a day of high obfuscation as some of the world’s best known multinationals faced the Senate inquiry into corporate tax avoidance. Every one of them – Chevron, Shell, Uber, AirBnb, and their advisers from PwC Ernst & Young, KPMG and Deloitte – were exemplary corporate citizens, according to their testimony.
Under examination of their tricky tax affairs however, their rhetoric was not so reassuring. Uber’s chief in Australia was unable to inform the Senate how much tax his company paid in Australia and was asked, “You know this is a corporate tax inquiry?”
Likewise, Airbnb’s boss took the opportunity to tell the Senate the touching story of Margaret, a customer whose life had been blessed by the opportunity to rent out her granny flat. “Sharing their home is part of life,” he said.
Like Uber, which books all its Australia revenue through the Netherlands, Google, which books its through Singapore, and eBay, which sends its directly to Zurich, Airbnb books its sales – earned by Australians selling services to other Australians in Australia – to Ireland.
Once again, in this rolling series of Senate inquiries into corporate tax chicanery, further devious, Byzantine tax schemes had been exposed. It is critical for the nation these hearings continue.
Wednesday’s hearings came against the backdrop of ructions in Federal Parliament last week when two amendments proposed by the Senate to the government’s multinational tax reform bill were unceremoniously dumped by the government the next day.
So determined was the government to help billionaires and multinationals conceal their tax affairs that it killed its own bill. The first amendment, forcing multinationals to file proper (General Purpose) financial statements was to have thrown sunlight on their intercompany loans and other dealings with offshore associates designed to rip millions out before tax could be paid.
The second was the preposterous “Kidnapping” amendment, which would have ensured greater transparency by billionaires. Both thrown out; the whole bill nixed, presumably after some 11th hour desperate lobbying by powerful vested interests.
Their facilitators batted questions away with the usual aplomb. Despite no less than eight partners from PwC, E&Y, Deloitte and KPMG appearing before the inquiry, none were able to provide comment on the undeniable trend for multinationals filing cut-down “Special Purpose” financial statements. E&Y even tried to argue that as the multinational parent companies lodged full financial statements in their homelands, that was good enough disclosure in Australia.
Nonsense. As one of the senators pointed out, just because Johnson & Johnson filed properly in the US it did not therefore include detail about large intercompany loans from offshore to its Australian subsidiary. Their other rehearsed lines were sung from the same predictable song-sheet: “unintended consequences” of reform, the danger of acting unilaterally and not adhering to OECD reform agendas, the burden of disclosure, and even the line that increased information might be misinterpreted.
The Australian Accounting Standards Board (AASB) also appeared. And they appeared to pretty much agree that big companies should file General Purpose accounts, though – bear in mind the AASB is stacked with Big Four people – any reform should be done in via a thorough consultation process. Anybody with the leanest experience of a consultation process would lose hope.
The day capped off with the Tax Commissioner Chris Jordan and three tax office heavies who took the opportunity to have a decent swipe at Chevron, Uber and Airbnb.
The ATO of course has been in a prize fight with Chevron in the Federal Court for years, and recently won, only to have it confirmed by Chevron on Wednesday that it would be appealing the court’s decision. It cost the Tax Office an estimated $10 million so far and Chevron perhaps $15 million. The outcome of the appeal would not be known until at least 2016. But then the last judgment took a year; and then there’s always the High Court.
There is much at stake. This is the first transfer price case on the pricing of money. The one they just won involved loans by Chevron overseas to Chevron Australia of $US2.5 billion. Since then though, Chevron has lent Chevron Australia $36.5 billion. It borrows the money at less than 2 per cent and Chevron Australia pays 9 per cent by the time they do an unnecessary currency swap into Australian dollars and make the loans unsecured so they can charge more.
Chevron Australia has more debt from its parent than the $35.1 billion budget deficit of this entire nation – and at usurious rates. This is how they get the money out before they have to pay tax on it, at the interest line.