3 August 2015
Many multi-national companies use complicated corporate structures involving layers of tax haven entities and accounts to disguise or alter the character of their income in ways that (often legally) reduce their corporate tax bill, a process known as ‘tax avoidance’ (in contrast to ‘tax evasion,’ which is illegal). These strategies can be wildly successful, bringing their tax bills down to zero or even triggering a tax refund from the government, while they enjoy massive profits.
Apart from closing loopholes in tax treaties and tax laws one at a time,a way to bring public pressure to bear on rampant tax avoiders, is to require them to own up to their tax schemes. Global Financial Integrity (GFI) has campaigned for all multinational companies to be required to publicly disclose basic financial information, such as their sales, profit, taxes paid, and number of employees, in each individual country in which they operate - “country-by-country reporting”. If implemented this will not only help both rich and poor countries better enforce and amend their tax laws,(GFI estimates that a conservative US$991.2 billion left developing countries in illicit financial outflows in 2012 alone) but it will also make free markets more transparent for investors and the public at large.
In a significant step forward in Australia that has also been the focus of a campaign of groups such as the Justice and International Mission unit (JIM)of the Uniting Church, Baptist World Aid and the global Tax Justice Network, companies with more than $1 billion of revenue globally, but which operate in Australia will now be required to provide ether financial details on a country-by-country basis to the Australian Taxation Office (ATO) from 2016. The ATO can then share the information with tax authorities of other countries however the information will not yet be made available to the public.