• Australia: tax leader or tax laggard?

    Posted by Mark

    12 August, 2013

    Tax dodging by multinational companies puts a brake on reducing poverty by denying governments in developing countries adequate revenue to provide for their people.

    The Federal Government recently released its broad outline on what it proposes to do to address tax dodging.

    While the Government acknowledges there are tax problems for developing countries, it is not seeking to be a leader in finding solutions.  The report notes that, “Australia has a clear national interest in and seeks to support the development of other countries”; however, the focus will remain on protecting Australia’s own tax system from tax dodging.

    By cracking down on tax dodging in Australia, the Government will help ensure it has enough in its pocket to meet its promises to lift the aid budget. However, just relying on aid does not allow developing countries a stable pathway out of poverty. Curbing tax dodging by multinational corporations is essential if they are to be able to collect enough tax to fund the essential needs of their people.

    Tax avoidance cartoon

    The Government report made four fairly minimal recommendations. The most promising is that Australia consider greater exchange of information with other tax authorities around the world. This helps all tax authorities get a better understanding of the financial dealings and structures of multinational corporations, making it harder for these companies to conceal their profits in places where they pay little or no tax. It also helps address problems where multinational enterprises have been able to claim the same deduction from their tax bill in more than one country. Automatic exchange of information between tax authorities is something Micah Challenge has been campaigning for through the Shine the Light campaign.

    The report also committed "to build the capacity of emerging and developing countries by sharing expertise and knowledge.” Sharing of tax expertise can help ensure tax laws are enforced in developing countries which will make tax dodging harder.

    The report appears to throw its weight behind the wealthy countries’ club, the OECD, to lead the tax reform process with the involvement of the G20 countries. This would exclude most developing countries from a seat at the table in ensuring the solutions that are developed benefit them. Australia has also committed to supporting the 15 point action plan released by the OECD.

    On the positive side, the report also states that, “Australia’s interests are usually best served by using its influence to advance initiatives that result in a net global benefit”. This suggests the Government will seek outcomes likely to benefit developing countries.

    Sadly, an action that Australia could take immediately, requiring all multinationals registered in Australia to report on their operations, including revenues and expenditures, for every country in which they operate (country by country reporting) is not on the agenda. As a transparency tool, country by country reporting (already required by the US and EU for multinationals in many industries) is one of the building blocks of a fairer global tax system. Micah Challenge will continue to campaign strongly for Australia's political parties to require this level of transparency from all multinational companies that operate here.

    If Australia is to play an effective role in ensuring developing countries are not cheated out of their fair share of tax, there will be a need to shine a light not only on the tax dodging activities of multinational enterprises in developing countries, but also on the global solutions developed by the OECD to address the problem. Only then can we hope to ensure developing countries have enough revenue to provide for their people.

    Australia needs to be a leader, not a laggard, in ensuring that the global tax system works for the poor.

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    Mark Zirnsak is the Director of the Justice and International Mission of the Uniting Church in Australia (Synod of Victoria and Tasmania). Mark also sits on Micah Challenge's Campaign Strategy Group. 

    Image source: http://www.mhpbooks.com/u-s-blocks-plan-to-to-close-tax-loopholes-exploited-by-companies-like-amazon-apple-and-google/tax-avoidance/