Australian-first research reveals 29% of Australia's 200 largest listed companies pay an effective corporate tax rate of 10% or less.
The ground breaking report Who Pays for Our Common Wealth? Tax Practices of the ASX 200 examines taxes paid over the last decade by the top 200 companies on the Australian Stock Exchange. The research was conducted by United Voice, one of Australia's biggest unions, in collaboration with the Tax Justice Network Australia,network of individuals and organisations calling for fairer tax systems. It was released on Monday ahead of a briefing of Federal MPs on Wednesday (October 1) in Parliament House.
David O'Byrne, National Secretary, United Voice said, "The community will be shocked to learn that many of Australia's largest corporations can legally eliminate the need to pay tax at all or reduce their tax bill to a rate of 10% or less.
"This report raises serious concerns about Australia's largest corporations and if they pay what they should in tax. The first priority for any tax reform must be to ensure that everyone is paying their fair share.
"In the last five years the proportion of tax received from businesses shrank from 23% to 19%, while the proportion received from individuals rose from 37% to 39%.
"Australia needs to tackle this threat head on. Otherwise, ordinary Australians and small businesses will end up paying more and getting less in return as services are cut," said David O'Byrne.
"A full Parliamentary Inquiry into Australia's corporate tax system is needed in order to get to the bottom of the problem and to investigate solutions for ensuring that our corporate tax system is working as it should," Mr O'Byrne said.
The Senate voted yesterday to establish an inquiry - read more here: Business leaders to face parliamentary inquiry on tax avoidance, by Heath Aston and Georgia Wilkins, The Age, 3 October 2014.
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Key findings on ASX 200 tax practices over the past decade (2004-2013):
- An average effective tax rate of 23% - well below the corporate tax rate of 30%
- 29% have an effective tax rate of 10% or less
- 14% have an effective tax rate of 0%
- The loss of an estimated $8.4 billion in annual revenue compared to the 30% tax rate
- In 2013, 57% of ASX 200 companies disclosed subsidiaries in secrecy jurisdictions (tax havens) – but this could be much higher as reporting is not mandatory
"While many Australian companies pay close to the 30% corporate tax rate, some large corporations aggressively avoid their tax obligations. If tax dodging is allowed to continue there will be pressure on corporations who do not currently use these tactics to start doing so. If that occurs, some of the $70 billion in corporate tax revenue is at risk and Australians face losing services we all rely on," said David O'Byrne.
Mark Zirnsak, from the Tax Justice Network Australia, said, "The frequent use of subsidiaries in secrecy jurisdictions in combination with the shifting of debt and profits is resulting in lost tax revenue in Australia and overseas where it should be paying for essential services to help lift people out of poverty.
"Last financial year a massive $47 billion flowed from Australia to secrecy jurisdictions.
"There are positive steps being taken by the G20 to address tax avoidance, but more needs to be done to ensure Australia leads by example and Australian companies contribute their fair share," said Dr Zirnsak.
"Some of the most common secrecy jurisdictions used by Australian corporations include the British Virgin Islands, Mauritius, Jersey, the Cayman Islands and Bermuda," Dr Zirnsak said.
Update 10 October 2014
It was no surprise that after the release of the shocking report on corporate tax dodging, the apologists for aggressive tax minimisation came out of the woodwork. Here is an Op Ed piece from Mark Zirnsak of the Tax Justice Network Australia, responding to their criticisms: Wanted: More corporate transparency on tax, by Mark Zirnsak, Op Ed in The Age, 10 October 2014