HOW THE FAT DUCK SLIMMED ITS TAX BILL
The Age, 19 December 2018
In the 1600s, Louis XIV’s finance minister famously described the art of taxation as being to get the maximum amount of feathers from the goose, with the least amount of hissing. At London’s Fat Duck restaurant, they’ve taken a different approach. By using tax havens, Heston Blumenthal’s restaurants appear to have goosed the tax authorities. By flying the profits to the tax haven of Nevis, which charges no company tax on the profits of foreign companies, the famous restaurant chain seems to have feathered its own nest at the expense of the rest of us.
Heston Blumenthal, who also operates the Dinner restaurant at Melbourne’s Southbank, isn’t the only one apparently using tax havens. By one estimate, four out of every ten dollars of multinational profits are now routed through tax havens. Dubbed ‘Treasure Islands’ by one expert, places like Panama and Bermuda have become infamous for their willingness to house companies and their unwillingness to share information about them.
But what we do know is pretty worrying. According to arecent report, the Cayman Islands now has 106,291 active companies, which is almost twice as many companies as people (by comparison, Australia has one company for every ten residents). The vast majority of these firms have zero staff, zero floor space, and zero local sales. The reason they’re there? They want to pay zero tax.
Those in tax havens are hanging around with some distinctly unsavoury types. Drug lords? Check. Extortionists? Check. Terrorists? Check. As the Panama Papers and Luxembourg Leaks have revealed, tax havens have become a hiding ground for some of the most nefarious people on the planet.
So what can Australia do about it? For starters, we can stop people claiming a tax break for flying to tax havens to check on their investments. Under a Shorten Government, if you want a tax deduction for travel to a tax haven, you’ll have to prove it was related to creating taxable income in Australia. No more getting a tax break to dodge tax.
If you’re a firm that’s listed on the share market, you’ll be required to disclose to your shareholders your tax haven shenanigans as a ‘material tax risk’. Because it is.
Want to get a government tender? If the contract is for more than $200,000, prepare to tell us your firm’s country of tax domicile. As a recent report by the Centre for Corporate Tax Accountability and Research points out, major recipients of Australian government work do not have a perfect track record of paying tax.
Another area in which more transparency will help drive better behaviour is in corporate ownership. Our share registry is famously opaque, with complex structures and sham ownership obscuring who actually holds firms. A publicly accessible registry of beneficial ownership will show who truly owns Australian companies.
We also need to ensure that superannuation funds are doing the right thing with their $2.7 trillion in investments. A Shorten Government will task the Australian Tax Office – in collaboration with the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority – to develop guidelines for responsible investment by superannuation funds.
There are good moral reasons why millionaires and multinationals shouldn’t be allowed to use tax havens to avoid paying their fair share. Most of us pay our taxes not because we’re scared of being caught out, but because we think it’s the right thing to do. When people start to see the tax system as biased or broken, it can lead to a downward spiral. Tax dodging by the few erodes trust by the many.
But we also need to stop the abuse of tax havens in order to fund the fair go. Since the Coalition came to office, debt has doubled, with net government debt now topping $13,000 for every Australian. With inequality as high as it’s been in two generations, it would be unjust and unreasonable to balance the budget off the backs of the poorest.
To ensure that every community has quality public schools and hospitals, we need resources to restore funding cut by the Liberals and Nationals. To ease pressure on family budgets, we need to end the Medicare freeze and give tax breaks to middle-income and low-income workers. To build new infrastructure and restore apprenticeships, we need to stop the lurks and close the loopholes.
The era of tax havens must come to an end for the ultra-rich, for multinationals, and even for international restaurant chains. Because no matter how enticing your entrees, you shouldn’t be able to duck taxes.
Andrew Leigh is the Shadow Assistant Treasurer.
Authorised by Noah Carroll, ALP, Canberra.