Australia’s biggest firms found to have dodged taxes
by Jonathan Pearlman, The Straits Times, September 30, 2014, page A6
AUSTRALIA has signalled that it will take a tough stance against tax avoidance after a report showed the nation’s biggest companies have engaged in largescale tax dodging and channelled profits through Singapore and Hong Kong as well as tiny offshore countries.
The report, released yesterday by United Voice, a trade union, and the Tax Justice Network, a non-government group, examined a decade’s worth of financial records for the country’s largest companies.
It found that almost a third of the biggest 200 Australian companies have been paying less than 10 per cent tax – or a third of the 30 per cent corporate rate – leading to more than A$80 billion (S$89.4 billion) worth of forgone tax from 2004 to 2013.
The report prompted calls by MPs for tougher enforcement and higher penalties for evasion.
Australia’s Finance Minister Mathias Cormann signalled yesterday that he wanted to tighten oversight of tax collection.
“Our expectation is that any business that generates profits in Australia pays their fair share of tax in Australia,” he told Sky News. “We are very conscious of the need to remain vigilant and we are working with the tax office to further improve the effectiveness of tax administration in Australia and to pursue whatever other responses may be required.”
The report examined the use of offshore tax-friendly jurisdictions by Australian firms and found that Australian companies had 561 subsidiaries in Singapore, followed by 373 in Hong Kong, 252 in Malaysia, 230 in the British Virgin Islands and 120 in Mauritius.
The report noted that some companies have legitimate reasons for setting up subsidiaries in some larger jurisdictions such as Singapore and Hong Kong. But it said many Australian companies failed to give explanations for why they based subsidiaries in particular locations or failed to list all of their subsidiary companies.
The findings emerged as Australia seeks to use its position as host of the G-20 leaders' meeting in November to urge international action against tax avoidance.
The Tax Justice Network - an alliance of unions, charities and church and aid groups - said it was particularly concerned about "profit shifting", a practice which typically involves companies loading debt onto their Australian arm and their profits onto subsidiaries in lower tax jurisdictions.
The organisation has not accused companies of breaking the law but urged the government to require greater financial disclosure as well as automatic exchanges of information between international tax authorities.
"The tax minimisation practices of a minority of very large companies have a significant and disproportionate impact on Australia's corporate tax revenue base," the report said.
One of the worst named offenders in the report was media mogul Rupert Murdoch's Twenty-First Century Fox, which used the most number of offshore subsidiaries and was credited with the highest amount of avoided tax per year: A$1.6 billion.
Mr Murdoch was quick to go on the offensive. He tweeted yesterday, referring to a big win over Australia's tax office last year: "NO tax avoidance by News, Fox or any Murdochs in Australia. Courts ruled, so move on!"
