It looks like Australia has had enough of major corporate tax cheats and the slow progress towards country-by-country reporting that the objections from the Big 4 accountancy firms and the International Accounting Standards Board have created, all designed to prevent governments and the public knowing just what multinational corporations do in each state in which they operate.
The result is that, as the Guardian has just reported:
Australia will force corporate giants such as Google and Apple to disclose their tax arrangements in an effort to curb alleged tax avoidance by multinational corporations.
The increasingly borderless global economy means big firms often have no tax liability in a country, even with a major local presence, assistant treasurer David Bradbury said on Wednesday.
In Australia, multinationals including the local arm of Google have been accused of shifting income to countries such as Holland or Ireland where tax rates are lower.
"This should not be a guessing game," said Bradbury after releasing measures that would require about 2,000 large and multinational businesses, including miners BHP Billiton and Rio Tinto with yearly revenue of A$100m (£69m) or more, to have their tax details published by the government.
"The government intends to improve transparency around how much tax large enterprises are paying. We want to make sure that large multinational companies are paying their fair share," he said.
All of which is excellent news. Full country-by-country reporting would be even better, but candidly in the face of such piecemeal demands multinational corporations will be crying out for country-by-country reporting soon as a way of ensuring a consistent approach to tax disclosure can be adopted.
It is of course almost inevitable that the move has been opposed by opposition conservatives; they are always, of course, in favour of tax abuse and in favour of anything that prevents tax being collected. The move is expected to help the raising of an additional $1bn from IT companies, and others.
I stress this is not the long term goal I am seeking, but in the short term I warmly welcome and applaud this move. If a few more governments joined in we'd be well on our way to massive increases in tax transparency and disclosure on a worldwide basis. And that has to be in the best interests of 99% of the world's population.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
I am still sceptical that any international agreement will ever resolve this issue. Those that think it will are missing the point and advocating a policy that will be doomed from the start.
Tax havens succeed because they are small. Because they are small they need less tax revenue. Therefore they can undercut large countries but actually increase their own corporate tax revenues by attracting large companies to their jurisdiction. I see no prospect that such countries will ever give up this competitive advantage voluntarily.
If a country is truly sovereign then it should be able to act unilaterally without regard to what other countries are doing. This includes its tax policy. In which case why do we need bilateral tax treaties with other countries? Surely all they do is transfer sovereignty away from the respective country. We need a new approach. That means changing how we tax multinational companies of which country-by-country reporting is just the first step.
Transfer pricing can be tackled quite easily by taxing each company on the basis of its turnover in each country pro rata. Forget about what it says its UK profit is (it probably doesn’t know anyway). If its UK operation represents 20% of its global turnover then tax it on the basis that 20% of its global profits are in the UK as well.
If it tries to shift its profit overseas by the use of royalty payments, then tax the royalty payments at the same rate as corporation tax or higher. In fact the taxation of all royalties needs to be far higher up the political agenda than it currently is.
If it uses interest on loans from its own parent or subsidiary to reduce its UK profit, (e.g. GSK see http://www.bbc.co.uk/news/business-17993945) then change the rules on which loans qualify for tax relief. Then disqualify any loan that isn’t from a UK financial institution that is regulated by the FSA, or from any company or institution that shares any significant commonality of ownership with the borrower.
Between them those three policies alone should eradicate most of the significant abuses. None require international consensus. All could be implemented tomorrow with the requisite political will, of which there is none!
You ignore the fact that many tax havens are having a dire economic time
And don’t tax corporations at all
I agree withholding tax on royalties etc is important but your tax haven analysis is just wrong
My tax haven analysis is not the main point of my comment. The fact that we don’t and shouldn’t need international agreements to tackle tax avoidance is.
To demonstrate this I outlined three policies to counter current and longstanding avoidance practices that could be implemented now. The question is why our politicians/legislators still take no notice and fail to act when they clearly can. They doth protest too much, methinks!
I have consistently said there is a lot that can be done domestically
But not all