Big business gave the Australian Senate the middle finger salute during Economics References Committee hearings into tax avoidance.
Not surprisingly, it was hard to get any information out of them about their tax avoidance activities. This put further heat on Joe Hockey, who effectively let them co-write last year’s budget.
Tony Cudmore, the corporate affairs president of multinational mining giant BHP, and the head of group tax, Jane Michie, refused to answer questions about whether the ATO was auditing them to recover unpaid tax. Cudmore also refused to give details of the income and tax going through its Singapore hub, although these figures are apparently publicly available. According to the Financial Review, Google Asia Pacific paid just US $5 million in Singapore tax on US $2.6 billion revenue (including an estimated US $1.5 billion from Australia untaxed here) which was booked through the Singapore hub.
Chris Jordan, the current Commissioner of Taxation and former partner with big business tax advisers KPMG, the man who has sacked 3000 tax officers with another 1700 to come, refused to tell the Senate who the tax avoiding companies were. Joe Hockey backed him up.
The Treasurer and Commissioner don’t want the Australian people to know how little tax big business pays. This would undermine the Government’s austerity program and the neo-liberalisation of tax law, policy and administration.
Despite all the attempts at verbal avoidance, the hearings showed us once again that the real leaners in Australian society are the big business tax avoiders.
Apple shifted $6 billion in profits last year from Australia to Ireland and paid only $80 million in tax. We already knew that between 2002 and 2013 it had sales revenue of $26.7 billion here yet paid only $193 million in tax to the Australian Tax Office, or 0.7 per cent of turnover.
It is not just one bad Apple. In 2011 Google had $2 billion in revenue from Australian advertisers. That year it paid $781,461 tax in Australia.
In 2011 ATO Deputy Commissioner Jim Killaly told us that between 2005 and 2008 40 per cent of big business paid no income tax. The United Voice/Tax Justice Network report, “Who pays for our Common Wealth?” showed that “within the ASX 200 companies nearly one-third have an average effective tax rate of 10 per cent or less.”
What explains this drive to avoid tax? At the hearings Google’s representative Maile Carnegie said:
“We are not opposed to paying tax. What we’re opposed to is being uncompetitive… So we structure ourself to be competitive.”
Google Chairman Eric Schmidt spelt this out in more detail in an interview with Bloomberg Business a few years ago. This is what he said about his company’s tax avoidance activities around the globe, which have seen it funnel almost $10 billion into tax haven Bermuda, saving $2 billion in taxes:
“I am very proud of the structure that we set up. We did it based on the incentives that the governments offered us to operate.”
“The company isn’t about to turn down big savings in taxes. It’s called capitalism. We are proudly capitalistic. I’m not confused about this.”
Business tax avoidance is systemic. It requires a systemic response, not deliberately half-baked attempts from both the Abbott government and proposals from Labor that give the impression of doing something without actually doing much at all.
At the end of March the government released its Tax Discussion Paper, called Re:think. True to its origins in the bowels of neo-liberalism, the paper is about finding new tax bases or “improving” the current ones to slug the working class and the poor more and cut taxes on big business. Yes, that same big business that already avoids tax like the plague.
If the current tax laws are getting too hot for big business, what better way for them to reduce (that is “legitimately” avoid) their tax than by getting their friends in parliament to change the law?
Re:think will also be used as a threat—if we can’t raise more tax from the poor and working class we’ll have to cut spending on public health, education, transport, pensions, and on and on.
The revelations about how little tax big business pays undermine any proposals for new or increased taxes on workers and the poor, or cuts to government spending. Every time Abbott or Hockey talk about the need to reform our tax system or cut social spending on workers and the poor, we now have a simple rejoinder—stop the cuts and tax the rich.
By John Passant
John is a former Assistant Commissioner of Taxation. He ran the ATO input into international tax reform before he retired in 2008. He joined Solidarity in March this year and will be speaking at the University of Wollongong at 12.30 pm on Thursday 23 April in Room 19:2040 about stopping the cuts – tax the rich. For details of further talks in Canberra and elsewhere contact solidarity [at] solidarity.net.au