Putting fairness first means protecting tax transparency, Business Spectator, 24 July 2015
What do the Watergate affair, Project Wickenby and Jeffrey Wigand’s revelations about Big Tobacco have in common? They are all instances where increased transparency identified dodgy dealings and put an end to practices that weren’t in the public interest.
Transparency can also keep people on the straight and narrow by letting them know in advance that their actions will be scrutinised. That’s why companies must register the names of their directors with the Australian Securities and Investments Commission, and why politicians like me have to provide public reports on our financial interests.
The last Labor Government saw that transparency empowered citizens, so we created the MyChild, MyHospitals and MySchool websites. For the same reason, we also introduced laws requiring the Australian Tax Office to publish information about the income and tax paid by companies earning more than $100 million. There has been growing concern in the past few years that some big firms aren’t paying their fair share of tax; improving transparency is one way to tackle this.
There are only around 2,000 companies in Australia that currently earn enough to be included in this reporting when the tax office releases the data later this year. But right now the Abbott Government is trying to exclude over 800 of them from the rules so that they can continue keeping their tax affairs secret.
In trying to sell this as something other than an attempt to shield big companies from scrutiny, the Abbott Government has so far cycled through a handful of different arguments – none of them convincing.
When the government first floated its intention to roll back these laws last year, Liberal ministers suggested this was because of a security risk to the owners of these big firms.
That argument was dropped fairly quickly when the Treasury, Australian Tax Office, Attorney-General’s Department and Australian Federal Police all lined up to say they’d given no such advice about the laws creating a security risk.
Next, the government suggested that tax secrecy is fundamental to the integrity of our system, and these laws reveal too much information about companies. Some ministers cited the example of Japan, which scaled back its own tax transparency laws for privacy reasons a few years ago.
I agree that confidentiality is an important principle for individual taxpayers and even many businesses. But there needs to be a balance between privacy and the public interest. The corporations currently covered by the transparency law represent just 0.09 per cent of all companies doing business in Australia. If you're turning over more than $100 million annually, you're among the most successful firms in Australia.
So there is a legitimate public interest in knowing whether they are paying their fair share. The recent Senate inquiry into corporate tax avoidance heard evidence about some companies paying effective tax rates of 2 per cent and less. These laws make public basic details about the income and tax paid by big firms so that we can better understand the contribution they’re really making to Australia.
The Japanese case is also a false flag. Where our laws apply to companies earning over $100 million a year, the Japanese threshold was set much lower – at the equivalent of about $435,000 in today’s money. This meant that instead of capturing around 2,000 corporations, the laws applied to over 84,000companies as well as up to 180,000 individual taxpayers. Given that the Japanese threshold was 200 times lower than Australia's, it’s a bit sneaky for Liberal minsters to suggest these two laws have much in common.
Most recently, the government has raised the spectre of big supermarkets like Coles and Woolworths squeezing their suppliers in business negotiations if they find out how much they earn.
Does anyone really believe these major companies don’t already have access to detailed financial information about the firms they buy from? I can look up IbisWorld’s business database right now and tell you the annual revenue of dozens of Australian food manufacturers. I’d be willing to wager the big supermarkets have access to far better sources of industry information than I do.
The real reason for this rollback slipped out a few weeks ago when one of the Abbott Government’s junior ministers said he is worried about unleashing ‘the politics of envy’ if Australians have access to more information about big companies.
What he presumably means is that Australians might be envious of how little tax some of these firms really pay. Some of those who are suffering under the government's cuts might also envy the way that the Abbott Government always seems to prioritise billionaires over battlers.
The current laws will help hold companies accountable and let us see where there are problems that need fixing to create a fairer tax system. It doesn’t matter what excuses they use – a government that actively undermines transparency and tax fairness is a government that does not have the best interests of the Australian community at heart.
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