CANBERRA: Australian Tax Office has said that Australia’s corporate tax base is in crisis because of tax relief by multinational companies in the country.
The alarming data in these internal documents is at odds with the public position of the Australian Tax Office (ATO), which maintains the tax regime in this country is functioning well and most large corporations pay their fair share of tax.
One of the most telling F findings is a comparison between real trade and international related party dealings. In 2012, Australia’s largest trading partner, China, accounted for 20 per cent of total trade but just a fraction of related party trade, whereas Singapore and Switzerland accounted for 40 per cent of related party trade.
In layman’s terms, the purpose of these related party deals is often to siphon profit out of Australia to avoid paying tax on it. Because Australia has a 30 per cent corporate tax rate, the aim of the game is to declare as little profit in this country as possible, and instead to somehow transfer the profit to a low tax regime such as Singapore, which touts rates as low as 5 per cent for big deals.
Moreover, the FOIs are quite heavily redacted, particularly when it comes to identifying individual offenders. Their $271 billion in related party borrowings (interest-free and interest-bearing loans) accounted for 26 per cent of their total debt in 2012. The financial services and resources sectors between them accounted for more than 70 per cent of total related party borrowings.
As the parliamentary inquiry into corporate tax avoidance looms, lobbying by vested interests has been furious, commensurate with the size of the dollars at stake. Among recent developments, the “big four” accounting firms – the architects and promoters of profit shifting – lifted their collective contribution to political parties, mostly the Liberal Party, by almost 20 per cent last year to $551,498.
PricewaterhouseCoopers and KPMG were the most enthusiastic, collectively doubling their “contribution to the democratic process” during 2013-14.Moreover, the push to shut down proposals for greater tax transparency proceeds apace. In its submission to the inquiry, peak accounting body CPA Australia has called for the government to abandon plans for increased disclosure. Incredibly, its argument is that disclosure leads to uninformed public comment.
“Accordingly, to review taxpayers based predominantly on information they disclose will inevitably continue to lead to uninformed public comment,” CPA said. “This could be both unfair and damaging to company reputations and their businesses, where companies complied fully with their legal obligations but are perceived by some commentators to have paid insufficient tax.”On this logic, if the CPA was about a few thousand years ago it would have advised Moses to stage a cover-up of the Ten Commandments, just in case the Israelite commentators got the wrong idea and challenged the views of the Rabbinical elite.
