In recent years sophisticated tax avoidance practices have received increasing scrutiny from advocacy groups such as the Tax Justice Network.
Such organisations campaign to highlight unethical practices that serve to ensure global multinational corporations pay as little tax as possible.
The practice of shifting profits to low-tax secrecy jurisdictions such as Singapore, Switzerland, Luxembourg, Ireland, the Netherlands and the Cayman Islands is one particularly notable tax minimisation method.
In this scenario corporations artificially shift profits from ‘high tax countries’ where they may have a base to subsidiaries operating in secrecy jurisdictions.
This type of aggressive tax avoidance has been further highlighted by the Senate Economics Committee inquiry into corporate tax.
Released on 17 August, the Committee’s interim report includes a range of recommendations aimed at tackling tax evasion and avoidance.
Dr Mark Zirnsak, spokesperson for the Tax Justice Network in Australia welcomed the interim report as a step in the right direction.
“The Committee has made welcome recommendations to greatly increase transparency around the tax paying behaviour of multinational corporations,” he said.
“Transparency is one of the best deterrents to corporate tax dodging.
“The senators on the Committee have clearly been persuaded that too many companies are getting away with dodging the taxes they should be paying in Australia.
“The senators are to be commended for the work they have done in bringing to light the extent and depth of corporate tax avoidance in Australia.”
As well as increasing awareness of the problem the Committee also reported that “tax incentives afforded by overseas jurisdictions to some multinational companies are facilitating aggressive tax minimisation and erosion of Australia’s tax base.”
The report also noted that some companies have consistently avoided giving straight answers to senators that verged on contempt for the committee process.
While acknowledging the report as a step in the right direction Dr Zirnsak also signalled the need for greater protections for whistleblowers.
“We hope the Committee will go further with its recommendations in its final report,” he said.
“We hope the Committee recommends protection and rewards for whistleblowers.
“Australia needs to adopt laws similar to those successfully used in the UK to require companies and tax advisers to disclose any potentially dodgy avoidance scheme they are proposing to use.”
For more information on supporting the Tax Justice Network in Australia contact the Justice and International Mission unit on (03) 9251 5271 or email jim@victas.uca.org.au.
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