Tax avoidance is systemic and big business has the resources – and the globe – to play games with the ATO, writes John Passant.
AMID ALL THE JOY the passage of the marriage equality bill has given us, the same old stuff resurfaces every day.
20 gay refugees remain encased in the panopticon that is Manus Island — an Island in Papua New Guinea where homosexuality is a criminal offence punishable by 14 years imprisonment.
Sickeningly, Malcolm Turnbull claimed credit for the equal love victory. This, from the man who imposed a survey and months of suffering for LGBTIQ people.
Marriage equality has been a decades-long struggle for equality. Those who have fought and suffered day in day out for years deserve our thanks — not Johnny-come-lately show ponies, like slick Mal.
It was a great show of unity. It was, however, a unity around a class-divided society in which homophobia, racism and xenophobia abound. Holding hands with the bosses and their politicians is not going to change that.
If we look at tax, for example, we can see we are not all Australian — or at least not all Australian taxpayers.
Last financial year, I paid $10,000 in income tax. That is $10,000 more than the combined income tax that 732 big businesses (36% of all big businesses) paid in toto in 2015-16 on their combined $500 billion Australian revenue. Yes, these 732 paid no income tax on a turnover of $500 billion. Zero. Zilch. Nothing. Not a cent.
Exxon is just one example. The whole 732 big businesses paid absolutely no income tax on their combined gross revenue of $500 billion.
Every year since 2015, the ATO has issued tax transparency reports on big business that show more than one in three big businesses pay no income tax. And every year, the Treasurer tells us how their new legislation is fixing all this up. And every year, the Commissioner of Taxation hides behind "market forces", company losses or figures that prove the exact opposite of what is asserted. All to protect these big business tax bludgers.
Enough is enough.
But, but, but.... the Commissioner stutters, companies make losses every year. True. But what about those businesses that make losses year in and year out in Australia? What sort of business makes losses year in year out? Could they be large Australian and foreign multinationals shifting profits offshore to avoid Australian tax?
While somewhere between 20% and 30% of the top 5,000 companies listed on the Australian Stock Exchange make accounting losses in each financial year, that alone does not explain why 36% of big businesses make tax losses and pay no income tax in any income year. Tax avoidance is an important part of the answer.
Let’s play with some figures. The "worst case" scenario in good economic years is that 20% of big businesses do not make a profit that income year. So what explains the 36% of big businesses who pay no income tax? Does this mean 16% are avoiding tax?
Let’s exclude legislated tax avoidance from our analysis — things like accelerated deductions or exempt income for big business.
‘My rough back of the envelope calculations for specific business tax expenditures in 2015 is $7.6 billion. That doesn’t take into account other lurks, like the capital gains tax discount, from which business, as well as other mainly well-off taxpayers, benefit.’
It also does not include the tax discount for superannuation funds (about $30 billion) or unquantifiable business or business-inclusive tax expenditures. Let’s assume, say, to be generous, $50 billion of the untaxed $500 billion is big business tax expenditures or legislated tax avoidance. That leaves $450 billion, of which in good years 16% might be attributable to tax avoidance. That is about $72 billion, which, at a big business company tax rate of 30%, would yield almost $22 billion in tax.
Tax payable by the companies actually fell from $41.9 billion to $38 billion, year on year. Oh, but 2015-16 was a bad year for mining companies, the Commissioner bleats. True, which is why, supposedly, more than 60% of all mining companies in Australia made tax losses in the 2015-16 income year. 60%? Seriously? That is not much more than the 57% of mining companies with losses in 2013/14.
There are other reasons too, which the Tax Commissioner knows about only too well. He has taken BHP and Rio Tinto to court over their "marketing hubs" in Singapore — hubs through which they channel billions of dollars of sales and profits.
We can get a sense, too, of the type of good corporate citizen some companies much in the news are. Adani, for example, has three companies in Australia. They had a combined revenue of $734 million in 2015-16. They paid no income tax.
Rupert Murdoch’s News Australia Holdings Pty Ltd had revenue of $2.9 billion but paid no income tax. While The Australian makes a loss, the big volume Daily Telegraph and Herald Sun may be profitable. We cannot tell from the figures how News Australia ends up paying no tax on $2.9 billion. Given that News Australia was the ATO’s highest risk big business taxpayer in 2015, instead of refunds of $927 million, I suspect the ATO is going over the latest figures with eagle eyes. The problem is that the law, in practice, is not able to really catch the big players. This applies not just to the 732 big businesses who paid no income tax but to that very large number of big businesses who pay some tax but have effective tax rates of less than 20%.
Small business and workers do not. So the ATO is going after the low hanging fruit of small business and the cash economy and work-related expenses. Of course, catching tax and employer superannuation guarantee cheats is important, but why isn’t the same verve and resolve focussed on the captains of industry and their companies?
Meanwhile, 732 big businesses are laughing all the way to the bank — be it in tax havens like the Cayman Islands, the City of London, or in places like Sydney, Melbourne and Perth.
It took 40 years of struggle for some sort of equality for LGBTIQ people to be won. The battle for tax equity is a millennium-long battle — as the Magna Carta, the Poll Tax Revolt of 1381 (and 1990), the English Civil War, the American Revolution, French Revolution and the Eureka Stockade all show.
Maybe the time has come for people to drag out the fiscal guillotine and lop off the financial heads of all the big business tax avoiders.
Read more by John Passant on his website En Passant or follow him on Twitter @JohnPassant. Signed copies of John's first book of poetry, Songs for the Band Unformed (Ginninderra Press 2016), are available for purchase from the IA store HERE.
This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivs 3.0 Australia License
It adds up. Subscribe to IA.