Senate inquiry demands answers from low-tax companies
Forty of Australia’s biggest companies will be asked to explain their tax affairs to a Senate committee investigating corporate tax avoidance.
Companies shown, in a recent report, to have the lowest “effective tax rate” over the past decade and to operate the most subsidiaries in tax havens have been given the chance to outline their tax strategies before the committee decides which corporate leaders to call in to appear before public hearings.
The Senate can subpoena witnesses and committee chairman Sam Dastyari has vowed to use that power if the inquiry encounters resistance from big business.
Companies that will be invited to explain their persistently low tax contributions, according to the report, include shopping centre company Westfield, building products firm James Hardie, motorway group Transurban, Sydney Airport, Telstra, SingTel and Echo Entertainment, owner of Sydney’s Star casino.
The Greens, who led the push to form the tax inquiry, have vowed to call multinationals Apple, Google and Swiss-based miner Glencore to face questions about their tax contribution to Australia.
The report, Who pays for our common wealth?, found almost a third of the nation’s largest companies are paying less than 10¢ in the dollar in company tax and some companies, including global broadcaster 21st Century Fox and Toll Holdings, operate dozens of subsidiaries in low-tax jurisdictions such as the Cayman Islands, the British Virgin Islands and Bermuda.
A recent tax justice report in the United States found that US companies that claim to have business in tax havens declared profits that equate to $870,000 for each person that lives in those three tiny island nations.
There is a certain office block, known as Ugland House, in the Caymans that is the registered address of 18,857 companies.
The Australian report, funded by the Tax Justice Network – a group of charities, churches and unions – has been dismissed by big business and the Corporate Tax Association for failing to understand the legitimate ways companies, particularly property trusts, avoid paying the statutory 30 per cent corporate tax rate.
It found James Hardie had paid an effective rate of zero tax over the past decade. A spokeswoman for James Hardie declined to comment on the committee’s request for explanation.
The committee will include with its “please explain” notice a copy of Treasurer Joe Hockey’s speech of last week in which he declared: “Let me be very clear, a tax cheat is a thief.”
Senator Dastyari said: “The committee acknowledges that there may be valid reasons for having a lower than expected effective tax rate but there are many questions that have been raised in recent months.
“We’re also interested in an explanation as to the location and reason for some of their subsidiaries. We hope that we do not have to hold a hearing in the Virgin Islands.”
The committee will ask to hear from corporate leaders who have expressed concern at tax avoidance in big business, including Wesfarmers boss Richard Goyder, who recently called on companies to “pay tax in the communities in which they operate” or risk their reputations.
Billionaire retailer Gerry Harvey said it was “morally wrong” to avoid paying tax in your home country.
A spokesman for Transurban said its chairman, Lindsay Maxsted, had explained on numerous occasions why the company’s effective tax rate was low. He said infrastructure companies such as Transurban relied on investments that reduced their tax in the short term.