Tax transparency in Corporate Australia

IT IS good that Singapore Telecommunications has mounted a robust defence of its tax position in Australia. Last week, it was accused of avoiding more that A$700 million (S$781 million) in taxes over a 10-year period by the Tax Justice Network, an advocacy group, in a report compiled with a local charity. SingTel has made it clear that, as a company with operations in more than one tax jurisdiction, not all its profits are subject to the 30-per cent Australian tax rate. All the multinationals named in the report will soon have an opportunity to defend themselves again before an Australian Senate inquiry into tax avoidance.

So why did this report surface now? It has much to do with Australia's domestic politics. Several tax raising bills of the Liberal-National coalition government are languishing in the Australian Senate for want of majority support. The government is trying to coax some minor party senators to change their minds about backing these measures. The Tax Justice Network report was timed to show that the government of Prime Minister Tony Abbott has been derelict in collecting taxes from big corporations; thus, there is little justification in trying to impose new taxes on ordinary working Australians. The report claims that about a third of the top 200 firms listed in the Australian Stock Exchange paid only a tax rate of 10 per cent, sometimes less. One way or another, using legal loopholes, these listed companies avoided paying about A$80 billion from 2004 to 2013, the report claims. These ASX 200 companies over the last decade paid an average of 23 per cent in taxes, instead of the statutory corporate tax rate of 30 per cent. The government was thus being cheated of A$8 billion in revenue every year.

While the report has been criticised for inaccuracies and methodology, it must be freely admitted that some multinationals do aggressively pursue tax avoidance strategies. But whose fault is that? Companies can hardly be faulted for using available laws to reduce their tax burden.