A RESEARCH report released by the Uniting Church’s Justice and International Mission (JIM) unit – Secrecy Jurisdictions, theASX100 and Public Transparency – found 61 of the top 100 Australian companies currently have subsidiaries operating in secrecy jurisdictions.
These include countries such as Singapore, Hong Kong, Jersey, the British Virgin Islands, the Cayman Islands, Panama, Samoa, Liechtenstein and Luxembourg.
The (JIM) unit is a member of the Tax Justice Network (TJN), a collection of individuals and organisations calling for a fairer tax system. The TJN defines secrecy jurisdictions as: “Any country or territory whose laws may be used to avoid or evade taxes which may be due in another country under that country’s laws.”
Director of the JIM unit, Dr Mark Zirnsak, has urged Australia’s biggest companies not to establish operations in secrecy jurisdictions, particularly if the primary motivation is low regulations against global standards to deal with cross-border financial crimes.
Dr Zirnsak has asked Australia’s top 100 companies to follow the lead of oil and gas and mining companies Rio Tinto, Newcrest Mining, Resolute Mining, Oil Search, PanAust Limited and Paladin Energy, and voluntarily provide greater transparency around their finances on a county-by-country basis.
The report stressed that the location of subsidiaries in known secrecy jurisdictions should not be viewed as prime facie evidence of any attempt by Australian companies to avoid paying their fair share of tax.
“We recognise that there are often legitimate reasons for a multinational company locating a subsidiary in a secrecy location,” the report states.
“However, at the same time choosing to set up companies in secrecy jurisdictions, when other choices exist, can reward the government of that jurisdiction for maintaining laws which can facilitate tax evasion, money laundering and tax avoidance.
“It can also undermine corporate transparency and accountability more broadly.”
The report noted Australia is also losing revenue to tax evasion and tax avoidance by wealthy individuals and multinational companies.
According to Christian Aid-commissioned research, Australia lost $3 billion between 2005 and 2007 in trading with the US and the European Union through what is known as ‘transfer mispricing’.
This refers to goods and services being sold at artificial prices between subsidiaries of the one company located in different countries. This shifts profits to places with lower taxes rather than leaving them in the place they were actually generated.
Project Wickenby is a multi-agency taskforce headed by the Australian Taxation Office. Consisting of eight federal departments and agencies, it was formed to identify and, where applicable, prosecute individuals and companies involved in tax evasion.
By June 2011, its findings had resulted in 23 criminal investigations, with 62 people charged and 18 convicted of serious offences. It has raised more than $1 billion in tax liabilities and collected more than $563 million.
Throughout this time, fund flows from Australia to Liechtenstein decreased by 80 per cent, to Vanuatu by 50 per cent and to Switzerland by 22 per cent. Overall fund flows from Australia to 13 secrecy jurisdictions decreased by 15.8 per cent.
Dr Zirnsak said the TJN is encouraged with the federal government’s efforts at the international level.
“We hope the government continues to pressure secrecy jurisdictions to end their status as such, by being willing to effectively co-operate with other governments in combating tax evasion, tax avoidance and money laundering,” Dr Zirnsak said.
“We also ask the federal government to support the growing trend towards making automatic exchange of information on tax matters between tax authorities of different countries the global norm, with appropriate safeguards for privacy and to ensure the information is not used for illegitimate purposes.”
Dr Zirnsak also hopes that multi-national companies themselves will realise the impact that tax avoidance has on the wider community.
“We would encourage companies to be transparent about the purpose and function of subsidiaries in secrecy jurisdictions and voluntarily report revenue, profits, staff levels and taxes paid in each jurisdiction in which they operate,” he said.