Hollywood star Mel Gibson is among the celebrities, sportsmen and prominent business types named by the International Consortium of Investigative Journalists for having business dealings in the tax haven of Jersey.
Most of the others named so far are British. Jersey, after all, is in the Channel Islands. Moreover the ICIJ has done a deal with The Guardian to eke out the names over coming days for maximum publicity; and for a political agenda. The newspaper is linking the identities with their Tory Party donations. It is a neat hustle indeed to buy political influence with the money you should have been paying in tax.
And, yes, they do it here too. The bigger licks go to the conservatives, but both sides of politics get donations from tax avoiders. Australia’s largest coal company, for instance, Glencore Xstrata – which pays little income tax on its enormous coal revenues in this country – donates to both parties, though the Liberals get the lion’s share.
Whether a tax scheme is legal or not, is one thing – perhaps a thing that can only be settled by a tortuous case in the Federal Court at taxpayers’ expense – whether it is ethical, is another. And a large part of the ethics hinges on the source of the income. If you make it here, then siphon it off to Switzerland, you have probably done the wrong thing.
A recent story about Malcolm Turnbull in the Fairfax press put the spotlight on his investment in a vulture fund based in the Caribbean. Let’s not forget that the Future Fund itself has 43 subsidiaries in tax havens, including 35 in the Cayman Islands alone. While we are not flying the flag for these schemes, it should be said a distinction can be made between investment and concealment.
Eugene Wong, Malcolm Turnbull’s former tax manager at PwC, says Turnbull shied away from offshore structures when he had a ”tax problem” in the early 2000s. Along with Trevor Kennedy and Sean Howard, Turnbull had sold OzEmail to MCI WorldCom in 1999 for $520 million. On top of his one-third of that, Turnbull had a large capital gain to deal with from the sale of his partnership shares in Goldman Sachs. He didn’t run his profits offshore, nor did he run with a nursing home scheme, as proposed, and he certainly did not go with a film proposal from the late Babcock & Brown, says Wong.
”To be fair to Malcolm, he chose not to enter into any tax planning and even said it was because he had future political aspirations and didn’t want any tax skeletons in his closet,” Wong told BusinessDay.
The basics of tax law have it that a transaction should not be principally for tax purposes but rather for commercial purposes first. Turnbull appears to be kosher on this.
The affairs of a Mel Gibson, or a Paul Hogan for that matter, are different again. For a start, both of them live overseas. The product that they sell, film, is marketed and sold around the world.
Given the multitude of jurisdictions in which they sell this product, if they did not have an offshore structure their earnings would be eaten up in tax in 40 countries. The point being that having an offshore structure is not necessarily wrong.
Still, the Project Wickenby crackdown stung some high-profile people, including Paul Hogan. (Hogan settled confidentially with the ATO early last year.)
Whether they deserved to be prosecuted is not for debate here. Pinging celebrities is a diversion from the main game. Tax agencies reap big headlines from chasing big names – being seen to be doing their job – while multinationals are making far more money in this country then shuffling it to offshore tax havens.
The likes of Apple, Google, Amazon, Glencore; they rack up billions in income in Australia and pay virtually no income tax. They shift their profits to tax havens. News Corporation even received an $882 million tax rebate last year.
For individuals and corporations alike, the naming and shaming is a good thing, a modest deterrent perhaps for those who are capable of feeling shame. Linking tax dodgers to political donations is a good step too.
But the main game should be enforcing the laws without fear and favour. The laws are already in place, they don’t require the imprimatur of a G20, they just need to be enforced by our sovereign authorities.