By Dr Helen Szoke. Oxfam Australia Chief Executive; Advisory Board member, Melbourne School of Government
Benjamin Franklin wrote that in this world nothing is said to be certain but death and taxes.
But he could never have foreseen the emergence of multinational corporations that appear able to dodge at least one of these certainties by avoiding billions of dollars in taxes with disturbing ease.
Today, new Oxfam research highlights just how much the tax-dodging of Australian-based multinationals costs the Australian taxpayer, as well as people living in some of the poorest countries of the world.
The figures are staggering. Based on the latest available data, nearly AUD $9 billion that could be spent on schools, hospitals and other critical infrastructure in Australia and poor countries is instead being hidden by Australian-based multinationals in tax havens.
Tax haven use by Australian-based multinationals cost Australia around USD $5 billion (AUD $6 billion) in lost tax revenue annually, and cost developing countries an estimated USD $2.3 billion (AUD $2.8 billion) every year.
Meanwhile, the use of tax havens by Australian-based multinationals is on the rise.
At a time of ‘Budget black holes’ and hard-working Australians being told that as a nation we must ‘live within our means’, it’s clear that tax avoidance by multinationals and the mega-rich is drastically reducing these means.
And Australians aren’t happy about it. An Oxfam-commissioned survey released today shows just how annoyed people are becoming about big corporations not paying their fair share. Ninety per cent of Australians think the Government should do more to stop multinational corporations avoiding paying tax in Australia and in every country in which they operate.
Furthermore, 90 per cent of Australians believe the Federal Government should legislate to prevent all multinationals operating in this country from moving their profits to tax havens to avoid paying tax here.
This is not surprising, nor unreasonable. It stands to reason that Australians would want to know why they are losing around USD $5 billion dollars in tax revenue every year, money that could be spent on services like schools and hospitals.
For developing countries, with few social safety nets, and where people struggle to have enough to make a living and feed their families, the situation is dire.
We’ve found that of the USD $172 billion of tax revenue lost to developing countries in 2014 from the tax-dodging of multinationals operating globally, around 33 per cent – or USD $56 billion – would have been spent on essential public services. This includes USD $29 billion for schools and USD $15 billion for hospitals in some of the poorest countries of the world.
Closer to home, the impact of tax-dodging Australian-based multinationals is largely concentrated in our own backyard, the Asia-Pacific region, where there are lot of Australian investments.
We estimate that over the next five years, USD $125 million (AUD $171 million) will be ripped out of public education in the Philippines – money that could have gone towards building 1700 classrooms per year. Our estimates also suggest that the Philippines will lose out on USD $21 million (AUD $ 29 million) in public sanitation expenditure – money that could provide more than 14,000 permanent toilets per year.
Meanwhile, during the same period, it’s estimated that Indonesia will be deprived of around USD $360 million (AUD $493 million) that could have gone towards education, and PNG stands to lose around $USD 17 million (AUD $23 million) in expenditure on essential services such as hospitals, schools, clean water and sanitation.
This is deplorable, given that in PNG, 60 per cent of the population don’t have access to clean water. Due to poor water quality and inadequate washing facilities at schools, for example, it’s not uncommon for children to become sick and miss out on lessons.
Recent revelations in the Panama papers about a hidden international financial system that allows thousands of big businesses and super-rich individuals to conceal billions of dollars that they should be paying in tax (through the use of tax havens, for example) has led to the average pay-as-you-go taxpayer to ask what the government is doing about it.
Political parties are certainly aware of the issue and talking tough on cracking down on tax- dodging multinationals. But their actions so far don’t match their rhetoric.
The Government’s announcement of a new tax on multinationals that shift profits overseas and greater resourcing of the ATO for a tax avoidance taskforce is welcome. But the increased resourcing is against the backdrop of sackings of thousands of ATO employees over recent years. The new ‘diverted profits tax’ is a good measure, but it only kicks in if big business reduce their tax payable in Australian by 20 per cent. This means that companies can keep shifting profits by claiming tax deductions up to this threshold.
What’s needed is tax transparency. Neither party has committed to make public the country-by-country reporting of financial information – including taxes paid - for large companies.
There’s no reason this should remain hidden. We’re calling on both parties to make it public so we can see whether companies operating in Australia are paying the right taxes - both here and in the poor countries that surround us.
The US, EU, Canada and Europe have already moved to greater public information being shared by high-risk companies – such as in the mining and banking sector – and if Australia really wants to be at the forefront of clamping down on this problem we need to follow suit and make country-by-country reporting public for all large multinational companies.
Lifting this veil of secrecy would make it harder for multinationals to bury their earnings and tax responsibilities under a mountain of legal loopholes and tax tricks. This would make the use of tax havens transparent and curb their use – meaning billions of dollars back into the coffers of rich and poor countries alike.
It would also be a very popular move with the Australian electorate.
This article was co-published with the Age
Image credit: Flickr/Marina & Enrique