23/10/17

Australians 'wising up' to use of tax havens, says Andrew Leigh

(The Guardian) -- Andrew Leigh, the shadow assistant federal treasurer, has said companies using offshore tax havens to “get around corporate tax” in Australia risk losing what they save in tax via damage to their reputation.

Speaking to Guardian Australia in the wake of revelations Adani has expanded its use of tax havens for its local operations, Leigh said the Australian public was “wising up on tax havens”.

Leigh said his comments were not directed towards any particular company, but that most use of tax havens was “clearly about trying to get around corporate and individual income tax” and the public had grown averse to supporting businesses “that don’t pay their fair share of tax”.

However, Australia remained “very much a laggard” in tackling the issue, with the Turnbull government offering “zilch, zip, nada” in the way of a policy response, Leigh said. That was despite the Australian tax commissioner, Chris Jordan, and others recognising that global coordination on tax needed to “focus on the harm that’s done by tax havens”, Leigh said.

“These are places in many cases with more companies than people,” Leigh said. “They’re set up effectively in order to drain revenue from the rest of the tax system.”

Guardian Australia revealed on Wednesday that Adani had registered companies for its Australia solar business that were held by the wealthy Adani family via private companies in the Cayman and British Virgin islands.

Adani declined to comment on the arrangements but its Australian chief executive has previously dismissed any suggestion the local operations would be “hiding profits” via holding companies in tax havens.

Former Labor treasurer Wayne Swan the same day labelled BHP Australia’s “worst tax dodger” over a $1bn dispute with the tax office over its use of low-tax Singapore as a marketing hub for its Australian coal. Swan said it was “high farce” that BHP’s chief executive, Andrew Mackenzie, had been given a $1m bonus “for enhancing transparency and tax reputation”.

Company tax in Australia is 30% but private companies in Singapore – including parent companies of Adani’s Australian businesses – have access to a concessionary rate of 5%. The British Virgin Islands charges no corporate or income tax, while the Cayman Islands charges no corporate or income tax on money earned elsewhere.

Leigh said if he were a director of a corporation with tax haven links, “I would be saying to other members of the board that saving a little bit of tax this year isn’t worth it for the reputational risk that it will cost in the future”.

Asked why a corporation would choose to have tax haven companies in its structure, Leigh, a former economics professor at the Australian National University, said: “It’s got to be about minimising tax.”

He said the Turnbull government had “shown very little interest in engaging on tax havens, very little recognition even of the threat that tax havens pose to a well-functioning tax system”.

By contrast Labor in May released proposals to force transnational businesses to come clean on their tax haven links and how much tax they paid worldwide, Leigh said.

Companies with more than $1bn revenue worldwide would have to publicly report tax paid in each jurisdiction, and all companies that did business in tax havens would “have to disclose that to shareholders as a material tax risk”.

Companies playing fast and loose in tax havens are not doing their shareholders any favours.

“Companies which are playing fast and loose in tax havens are not doing their shareholders any favours, given that the world is likely to move strongly against tax havens in coming years,” Leigh said.

Under the proposals, companies would also have to declare their “country of tax domicile” if tendering for a government contract, and superannuation funds would have to work towards disclosure rules for tax haven investments.

Leigh said Labor’s measures could be passed “through parliament before the end of the year if the government was serious about it”.

He said there was a risk that a need for joint global action on tax havens “becomes not a goal but an excuse” for doing nothing.

“I think we need to recognize there’s actually a bunch of good things Australia can do,” he said. “We are in the 20 largest economies in the world, so it’s not a matter of us wringing our hands and saying, ‘we’re a little tadpole, we can’t possibly act.’

“We’re a serious economy, others do look to what we do. If we’re not cracking down on tax havens, the world has a right to ask why not.”

A spokesman for the federal treasurer, Scott Morrison was contacted for comment.