Australian corporations caught dodging tax

October 10, 2014

The Who Pays for our Common Wealth report into tax contributions by the S&P ASX 200, Australia’s 200 top stockmarket listed companies, has found that 84% of them paid less than the company tax rate of 30% in the period between 2004 and 2013. This amounts to $80 billion in forgone taxation revenue.

The report, released by the United Voice union and the Tax Justice Network, also found that almost a third of the companies have an effective tax rate of just 10%. Rupert Murdoch’s 21st Century Fox has an effective tax rate of 1%. James Hardy, which made its money on the back of exposing workers to an early death from asbestos dust, paid an effective rate of 0%. The third largest mining company operating in Australia, Glencore, managed to get a rebate last year of $8 million.

In the past five years, the proportion of total tax revenue from business has fallen from 23% to 19%. Over the same period, the proportion of tax paid by individuals increased from 37% to 39%. And this is before taking into account the regressive Goods and Services Tax which falls more heavily on the lower paid and less well-off.

Not surprisingly, the Corporation Tax Association’s executive director, Frank Drenth, dismissed the report by claiming that financial journalists and civil society groups did not have a great track record of analysing tax information from published accounts.

He told the Sydney Morning Herald: “Financial accounts were never specifically designed to facilitate a detailed analysis of a company’s tax performance.” Quite so, but there is a figure in every company’s yearly financial statements that shows precisely how much tax has been paid.

This avoidance of tax is not illegal. Under Australia’s tax regime it is perfectly legitimate.

So how do they manage to do it? One thing in their favour is that the companies are assisted in their tax arrangements by Australia’s four largest accounting firms, Pricewaterhouse Coopers, KPMG, Deloitte and Ernst & Young. Tax lawyers and accountants from these firms are regularly on secondment to the Tax Office, which provides them with some handy information as to its operating procedures and practices.

But the real art of tax dodging is in setting up subsidiaries in tax havens, like Bermuda and Jersey, who have tax rates of 0%. One hundred and ninety six entities have been set up by top 200 Australian companies in these two jurisdictions together with the British Virgin Islands, another notorious tax haven.

BHP and Rio Tinto have between them 1388 subsidiaries in 120 countries. Their tax payments were disclosed in 30 countries but not disclosed in 80 countries.

The Tax Justice Network and United Voice intend to call for a parliamentary inquiry into the failure of corporations to pay their taxes. They would do well to remember that in the period that the report covers, the ALP held office for six years and the Liberal/National Coalition for four years.

There has been a unity ticket of both the major parties in turning a blind eye to these corporate tax rorts for the whole of this period.

There is indeed a budget crisis. It is one of political will to tackle the bludgers who get away with shifting the tax burden to the battlers.

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