Mauritius is one of the most popular tax havens used by multinational corporations operating in Australia, an Oxfam report found. Photograph: Neil Farrin/Getty Images/AWL Images RM
The Oxfam Report calls on government to strengthen Australia’s multinational tax avoidance laws and make financial reporting requirements more transparent
The federal government lost an estimated $6bn in revenue in 2014 as a consequence of tax avoidance by multinational corporations with Australian operations, according to a new Oxfam report.
It also found investments in global tax havens from Australian-based companies have been growing each year.
They were estimated at US$56.4bn in 2009, but that number increased to US$79.1bn by 2014, according to the report.
Oxfam’s new report, The Hidden Billions: How Tax Havens Impact Lives at Home and Abroad,calls on the federal government to strengthen Australia’s multinational tax avoidance laws, and make financial reporting requirements more transparent, to try to tackle the problem of multinationals siphoning money through tax havens.
“Tough talk by politicians has not resulted in enough policy change to really tackle multinational tax avoidance,” the report says.
“We need to know which Australian-based companies are dodging tax and by how much. This means full transparency of the tax affairs of large companies is needed if Australia really wants to lead on policies that will prevent tax dodging.
“Modify current legislation so that multinational companies with an income of 250 million or more, and which function in or from Australia, are required to publicly report on their incomes, employees, profits earned, and taxes paid, in every country in which they operate.
“This will make the use of tax havens more transparent, and make it harder for large corporations to continue to shift profits out of the poorest nations,” it says.
Oxfam’s research relies on analysis of foreign investment data from the International Monetary Fund (IMF), using two separate econometric models.
The first model estimates investment flows from Australian-based corporations being channelled through tax havens, and the second estimates the extent of profit being shifted offshore as a result of multinational corporations using tax havens.
It admits that one of the constraints of the IMF data used in its study is that the specific multinational corporations participating in the survey cannot be identified because all responses are confidential and the data is reported in aggregate terms only.
Nevertheless, Oxfam still found multinational corporations operating in or from Australia used at least 20 tax havens in 2014, with the most popular based in Mauritius, Singapore, Ireland, the Netherlands, Malaysia, and Hong Kong.
“Our analysis of IMF data shows that in 2014, US$10.35tn was invested in tax havens identified in this study. Of this, an estimated US$79.13bn was from Australian investments in 20 tax havens,” the report says.
“In other words, around $1 in every $100 found in tax havens is from Australian-based multinational corporations. Based on Australia’s use of tax havens, we estimate that in 2014, around US$7.7bn of profits were “hidden” in tax havens, and around US$2.3bn of tax revenue was ripped out of developing countries.
The report’s analysis of IMF data also shows developing countries “bear the brunt” of tax-dodging by multinational companies with Australian operations.
It estimates the annual losses in essential public services in 33 developing countries, due to multinational companies with Australian operations using tax havens, is worth about US$2.3bn.
It says the total projected tax losses between 2015 to 2020 will be roughly US$13.6bn.
“Our data shows that the biggest impact is on developing countries in our own region,” the report says.
“Over the next five years for instance, we estimate that Indonesia will be deprived of US$360m that could go towards education, and Papua New Guinea – one of Australia’s poorest neighbours and a recipient of substantial investment from Australia – stands to lose around US$17m in expenditure that could go to providing essential services.
“Australia is part of this global problem,” the report says.
“At a time when inequality is worsening around the world, and fighting extreme poverty is harder than ever before, we are calling on the Australian government to act swiftly.”
The Turnbull government passed legislation last year cracking down on multinational tax avoidance.
The legislation applies to companies with a global income of at least $1bn, but Oxfam is calling on the government to reduce that income threshold to $250m so it covers more companies.
It is also calling on the government to consult with the IMF and the Organisation for Economic Cooperation and Development to develop a list of tax havens, and legislate disincentives to prevent companies from using tax havens.
“Transfer the burden of proof to companies, requiring them to demonstrate a legitimate reason for investing in a listed tax haven,” the report recommends.
Originally published in the Guardian 9 June 2016
