Aussie profit-shifting tax tangle shines spotlight on Singapore

THE Australian Senate inquiry into profit-shifting by MNCs has gone predictably. All the representatives from major global corporations such as Apple, Google, Microsoft, News Corporation, Glencore and BHP Billiton held fast to their position that they were complying with Australian tax laws and always paid what is due locally. On the other hand, the inquiry panel at the public hearings last week wanted these firms to disclose how much profit they generated in Australia and how much of that was being moved to low-tax jurisdictions in related-party transactions.

The Treasurer, Joe Hockey, seems to be trapped in the middle. By inclination, he would prefer to act in concert with the OECD (Organisation for Economic Co-operation and Development) and the G-20 nations to bring an end to tax-avoidance schemes. But the end of the mining boom - and the huge tax flows that it generated - means that he desperately needs to collect all the taxes that he can to avoid cutbacks to important public services such as Australia's universal healthcare system. At the same time, he also realises that global firms have no hesitation in using antiquated international tax treaties to outwit local tax authorities. And to compound his predicament, in 2013 his government had thrown out a law compelling the tax authority to publicly disclose taxes paid by companies with revenues of more than A$100 million (S$104 million).

Thus he was forced to back the tax authority which refused to disclose the names of the 10 resources companies that allegedly transferred out a total of A$31.4 billion in the financial year 2011-2012. The figures were released by investigative news reports just before the commencement of the Senate hearings. The reports further alleged that a single company shifted as much as A$11 billion in one year. The Australian Tax Office, an independent statutory entity, held that identifying these companies would undermine confidence in the entire tax collection system and rejected the Senate panel's request for that information. The tax office claimed that confidentiality remained key to getting firms to disclose information (to the tax office) voluntarily.