Sunday 5th April 2015 - 3:43 pm

Whose tax are you paying?

by Alan Thornhill

Analysis

This coming week is likely to be uncomfortable for some of Australia’s top executives.

They will be facing the Senate Economics Committee, at hearings in Sydney, Canberra and Melbourne.

The Committee – one of the toughest in the business – will be conducting “an inquiry into tax avoidance and aggressive minimisation” by companies registered in Australia or just trading here.

The hearings follow weekend reports that just 10 companies channeled more than $30 billion out of this country last financial year, mostly to tax havens overseas.

These executives do have friends in the Federal Treasury, where senior economists believe Australia’s corporate tax rate – at 30 per cent – is both uncompetitively high and expensive to collect.

Some have even been talking – in public – of cutting that rate to zero.

They would prefer to see the necessary revenue collected through a higher goods and services tax, instead.

But that idea is not wildly popular.

However the Tax Office – which will be watching this week’s Committee proceedings very closely – is having none of it.

It noted, in a submission to the Committee, that “while most corporates pay the tax they are required to under Australian law,” others do not.

The ATO identified these as “Some private groups linked to complex group structures.”

It said they:” display more aggressive tax behaviours and characteristics.”

And it added: “Some multinational enterprises engage in complex profit shifting structures.”

The ATO then said:” These present tax avoidance risks threaten the level playing field of business.”

The tax man has a message for all who travel down that path.

It might be summarised as: “We’re watching you.”

Those listed to appear before the Committee, on its first day of this week’s hearings, on Wednesday in Sydney include Ms Maile Carnegie, the Managing Director of Google in Australia and New Zealand, Bill Sample, Microsoft’s Corporate Vice-President (Worldwide Tax) and Tony King, the Managing Director of Apple Pty. Ltd. in Australia and New Zealand.

Steam is already escaping.

Google, for example, has been a favourite target of the Treasurer, Joe Hockey, when he is talking of tax minimisation, through profit shifting.

He has, reportedly, been considering a “diverted profits tax” to tackle international profit shifting.

Even though the independent Parliamentary Budget Office has warned that such a tax – which some are already calling “a Google tax” – risks breaking Australia’s international tax treaties.

Google has clearly been stung, by this kind of talk.

It’s submission, to the Committee, strikes a distinctively defensive note.

It says many countries, including advanced economies, compete for investment adding:-

“Google is exactly the kind of innovative, risk-taking company that many governments are seeking to incentivise, through their tax regimes.”

That includes Australia.

“Australia incentivises investment through its R&D tax credits,” the IT giant said.

Google doesn’t, exactly, add:” So no more snitchy comments, then!”

But some will – undoubtedly – read something very like that into its submission.

Rupert Murdoch’s global conglomerate, News Limited, is also keen to be seen to be pulling its weight, tax-wise.

It has presented a table to the Committee showing that its “actual tax paid – including withholding tax” amounted to an impressive $417.3 million over its past five income years.

But doubts persist.

One broadly based organisation, United Voice, for example declared in its submission to the Committee that:” well known brands such as Apple, Google, IKEA and Chevron have become the public face of corporate tax avoidance.”

It said this had prompted a number of positive responses, including the formation of the Committee’s inquiry.

And, of course, Joe Hockey’s announcement of an audits into ten foreign multinationals operating in Australia.

This should be an interesting week.


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Alan Thornhill

Alan Thornhill is a parliamentary press gallery journalist.
Private Briefing is updated daily with Australian personal finance news, analysis, and commentary.

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