- by Anna Pha
- The Guardian
- Issue #2060
Photo: Gusztáv Galló – publicdomainpictures.net (CC0 Public Domain).
Who pays taxes, who doesn’t, and how they are spent are matters that affect all working people. Taxation is a class question. Multinational corporations are syphoning off billions of dollars by shifting profits to tax havens where they pay little or no tax.
While the Australian Tax Office (ATO) chases small fry like teachers, tradies, and nurses, multinational corporations and the rich have sophisticated tax avoidance schemes designed by companies such as the now-discredited PwC, and pay nothing or next to nothing.
If you earn $56,000 a year as a PAYG taxpayer, you can expect to pay 15.2 per cent tax on that income. Yet, US oil major Exxon made a staggering $56 billion selling oil and gas – drilled from seabeds around Australia – and has not paid a single cent in tax here in eight years.
Chevron, Virgin, Amcor, and numerous other multinationals have paid zero income tax in Australia for years despite raking in billions of dollars in profits. Others such as Santos (marginal tax rate of 2.36 per cent), have paid peanuts. Chevron, however, has turned over a new leaf paying $30 in tax last year – $30!
Japanese-owned logistics company the Toll Group made $44.3 billion in Australian revenue over the last eight years. They’ve paid tax at a margin of 0.84 per cent.
These multinationals claim profit margins on capital invested are zero or close to zero. Yet they keep operating in Australia. They would not do that if they weren’t making huge profits.
In its State of Tax Justice 2021 report the Tax Justice Network estimates that governments globally lost income tax of US$312 billion (AU$470b) in just one year.
This is money that could have been spent on people’s services, on education, health care, public infrastructure, pensions, housing, or the NDIS.
Multinationals use tricks like “transfer pricing”; borrowing from a foreign party such as a subsidiary of the same parent company, and then paying exorbitantly high interest rates. The interest is untaxed and siphoned offshore to a tax haven like the British Virgin Islands, Switzerland, or Hong Kong.
Trade unions, tax justice groups and other organisations have campaigned hard and long for strong measures to curb tax avoidance by multinationals. The Albanese government promised to take action during its 2022 election campaign, and again at the time of its October budget.
In April 2023 the Albanese government released draft legislation “Making Multinationals Pay Their Fair Share – Integrity and Transparency” that was seen as ground-breaking by advocates of tax reform.
The draft bill requires large multinationals to publicly report on how much profit they make and what taxes they pay in every country where they operate instead of publishing the information as a total sum. This would include details of interest on loans and other expenses paid to related operations such as in tax havens.
It also requires multinationals to publicly divulge corporate structures such as subsidiaries and trusts. An estimated 2500 companies with an income of more than $1 billion that have operations in Australia, regardless of where their headquarters are based, would be affected.
Companies such as Exxon, Apple, BP, Coca-Cola, and McDonalds are among those that would be held to account.
Known as “public country by country reporting” or PCbCR, the public and governments in Australia and around the world would gain greater corporate transparency on how and where these companies make their profits and avoid taxes.
PCbCR has the potential to expose profit transferring and equip campaigns for tax reforms – a vital first step towards countering tax avoidance.
Jason Ward, Principal Analyst, at the Centre for International Corporate Tax Accountability & Research said: “The Australian government is showing global leadership by introducing public country-by-country reporting for multinationals. This move will increase transparency and accountability and shine a bright light on where and how multinationals shift profits to avoid the obligation to help fund essential public services and infrastructure around the world.”
Welcoming the legislation, Public Services International (PSI) said, “With this information we can continue to campaign to make corporations pay a fairer amount. It will be particularly important for government revenue in low income countries that rely more heavily on corporate taxes for revenue. Importantly it will now set a precedent for other countries to introduce robust standards and paves the way to normalise the practice.”
The Financial Accountability and Corporate Transparency (FACT), who work towards a fairer international tax system, said “Understanding where multinational corporations are doing business and paying – or not paying – taxes is a vital step towards ending the era of corporate tax avoidance that has robbed governments worldwide of much-needed revenues and exacerbated global inequality. FACT applauds the Australian government for its leadership on this important initiative.”
“The introduction of this legislation in Australia is a game-changer in the fight for a fairer, more transparent international tax system,” said Ian Gary, executive director of FACT.
The legislation was due to come into effect on 1st July this year. This date has been pushed back a year and the draft bill gone to a Senate Committee to report back by 31st August.
The government said it would “continue to engage with stakeholders on our commitment to introduce a public country-by-country reporting regime.”
Labor appears to have succumbed to pressure from heavy lobbying on behalf of alarmed multinationals.
The Australian Financial Review (AFR) reports that a coalition of ten fund management associations representing members around the world with more than $120 trillion in investments, sent a letter to Treasurer Jim Chalmers. In it they warn that the bill “would be inconsistent with the international consensus as it would require every multinational entity with any Australian activities to disclose publicly extensive information regarding every country in which it operates.”
For “international consensus” read “consensus by multinational corporations.”
They said the plan violated tax base erosion and profit shifting co-operation around the world, “and may undermine future global co-ordination” the AFR says, unintentionally confirming the necessity for the bill.
The Business Council of Australia, the resources sector and other corporate lobby groups have joined the chorus of protesting multinationals.
It is also believed that the Organisation for Economic Cooperation and Development (OECD) under the leadership of Australia’s former Coalition Finance Minister Mathias Cormann has intervened. The OECD, known as the rich countries’ club, is strongly opposed to transparency and accountability and has a sordid record on the question of tax avoidance.
REFORM LONG OVERDUE
Ordinary workers do the heavy lifting when it comes to funding government services and millions of Australians will be hit by a tax hike as the low-and middle-income tax offset of up to $1500 is removed this year. At the same time the wealthy will benefit from the forthcoming stage three tax cuts, and the multinationals continue to ship out Australia’s resources and billions of dollars in profits.
The more you make, the less the tax take. That’s capitalism.
The government stands by as price gouging by these corporations continues to deliver record profits. The worst offenders are to be found in the heavily polluting, greenhouse gas emitting corporations.
Labor’s important tax initiative is now threatened. Labor MUST stand its ground, stand up for the working people of Australia and around the world.
Write to your MP and Senators demanding that the original draft bill be passed. Remind them of Labor’s commitment and that it was elected to serve the people of Australia, not foreign corporations.