Big business set to face Senate tax avoidance inquiry

Tax avoidance takes centre stage this week with a parliamentary inquiry due to hold its first public hearings.

The Senate inquiry into Tax Avoidance and Profit Shifting will start taking evidence from major technology and mining companies.

The inquiry was prompted by a report which found tax minimisation strategies employed by Australia’s largest companies are costing the federal government more than $8 billion in lost revenue each year.

The Senate committee is examining the effectiveness of Australia’s current tax laws, the work of the Australian Tax Office and whether more transparency is needed to deter profit shifting and tax avoidance.

Tax avoidance is not illegal: it’s the use of tax laws to reduce the amount of tax payable.

Tax evasion is the illegal evasion of taxes by individuals, corporations or trusts.

Greens leader Christine Milne, who initiated the inquiry supported by Labor, says there needs be greater transparency about how corporations organise their tax affairs, and the way they’re treated by the Tax Office.

In calling for the inquiry she told the Senate there’s rising community and political concern that multinational companies are not paying their fair share of tax in Australia.

“Australians are absolutely fed up with the fact that the government has gone after ordinary people, making their lives harder, and has let the big end of town completely off the hook. According to the Tax Office, most corporates pay the tax they are required under Australian law. If that is the case, there is a lot wrong with the Australian law when it comes to tax avoidance and tax evasion.”

Representatives of Google, Apple, Microsoft, News Corp and the mining corporations BHP Billiton, Rio Tinto and Fortescue Metals Group are due to appear before the committee.

Treasurer Joe Hockey has already said the government is considering legislation to force multinationals to pay tax in Australia and has given extra funding to the tax office to track down offenders.

“The ATO has additional resources to identify whether those companies are not paying their fair share of tax in Australia. This is part of a coordinated effort from the Australian Government. There is a global warning message to multinationals. You have to pay tax where you earn the profits. Wherever you are located, the developed world has had enough. The developed world has had enough. We are not going to cop this sort of minimisation and in certain circumstances avoidance and even evasion. We’re not going to cop that any more.”

Mr Hockey is also tipped to use the May budget to unveil new measures to address profit shifting.

The federal opposition acknowledges there is a problem.

It recently launched its policy for dealing with multinational tax avoidance.

The Opposition’s Treasury spokesman, Chris Bowen, says currently, big international companies doing business in Australia are able to minimise their tax obligations by paying tax offshore or by taking advantage of tax loopholes.

“This is a matter of fundamental fairness for Australian businesses. Those businesses who can’t afford or who aren’t able to engage in complex international debt shifting deserve a fair go. Small, medium or large we need a level playing field for Australian businesses. It’s not fair for ordinary Australian taxpayers, whether they be individuals or businesses, to see this sort of money shifting going on to reduce and eliminate tax debt in Australia.”

Deputy chair of the Senate committee, Liberal Senator Sean Edwards, says ensuring profits made in Australia are taxed in Australia is a priority for the Government.

But he’s told the ABC Australia shouldn’t take action that’s not aligned with the rest of the world.

“I know that the Treasurer has tightening this whole tax minimisation through transfer and profit shifting well and truly in his sights, and I think that he’s identified that as a significant area of revenue. I think that we’ve got to be careful that we don’t get out of step with what the rest of the global community – and indeed that infers the marketplace – is doing because we could put Australia at a disadvantage. But we can’t have companies generating profits in Australia and not paying their fair share.”

The committee is holding public hearings in Sydney, Canberra and Melbourne and is expected to hand down its report at the beginning of June.