Andrew Leigh

TACKLING TAX HAVENS 

A Shorten Labor Government will clamp down on unsubstantiated allowances for travel to tax havens and target ‘passport shopping’ through measures raising more than $9 million over the forward estimates.

Globally, around $600 billion of profits are estimated to be shifted to tax havens, representing almost 40 percent of multinational profits

Tax havens are used by drug-runners, extortionists and money-launderers. They are used to hide the proceeds of fraud, corruption and tax evasion. According to one estimate, around four-fifths of money in offshore bank accounts is there in breach of other countries’ tax laws.

Under Australian tax law, a company executive can receive tax-free allowances related to travel to Bermuda, Panama and similar jurisdictions.

As such travel is unlikely to be for purposes of creating assessable income in Australia, claims for unsubstantiated tax-deductible allowances in tax havens would be automatically denied under a Labor Government. Exceptions would require a detailed application to the Commissioner of Taxation.

This proposal will not affect the overwhelming majority of travel and meal allowances for employees, and is targeted to ensure that no additional compliance cost is put on firms who do not engage in higher-risk tax jurisdictions.

Labor will also add an integrity measure targeting people who ‘shop for citizenship’ in tax havens to avoid the automatic reporting and exchange of tax and financial account information on foreign tax residents.

‘Passports for sale’ or ‘citizenship for sale’ by tax havens are deliberately structured to undermine the OECD’s Base Erosion and Profit Shifting program, particularly the Common Reporting Standard.

Under a Labor Government, all individual Australian taxpayers would need to notify and declare to the Australian Taxation Office if they have residency or citizenship of any other jurisdiction and the name of that jurisdiction. False declarations to the Australia Taxation Office would attract penalties.

These measures will increase revenue by $9 million over the forward estimates, and follow the Tax Haven Transparency measures Labor announced last year:

• Mandatory shareholder reporting of tax haven exposure.Companies must disclose to shareholders as a ‘Material Tax Risk’ if the company is doing business in a tax haven.
• Government tenderers must disclose their country of tax domicile.All firms tendering for  Australian Government contracts worth more than $200,000 must state their country of domicile for tax purposes
• Develop guidelines for tax haven investment by superannuation funds. The Australian Tax Office (in collaboration with the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority) will develop guidelines for responsible investment by superannuation funds.
• Publicly accessible registry of the beneficial ownership of Australian listed companies.This will allow everyone to find out who really owns our firms. Shareholders should not be able to use complex structures and sham ownership to avoid complying with corporate transparency rules.
• Public reporting of country-by-country reports.High-level tax information about where and how much tax was paid by large corporations (over $1 billion in global revenue) will be released publicly.
• Whistleblower protection and rewards.Provide protection for whistleblowers who report on entities evading tax to the Australian Taxation Office. Where whistleblowers’ information results in more tax being paid, allow them to collect a share of the tax penalty (a reward of up to $250,000).
• Public reporting of Australian Transaction Reports and Analysis Centre (AUSTRAC) data. Require the annual public release of international cash flow data.
• Australian Taxation Office disclosure of settlements and reporting of aggressive tax minimisation.Require that the Australian Taxation Office’s annual report provide information on the number and size of tax settlements.

When revenue gets lost to tax havens, Australians ultimately have to pay higher taxes or suffer cuts to vital services.

Only Labor can be trusted to get tough on tax havens, and restore fairness to our tax system.

FRIDAY, 21 SEPTEMBER 2018 

Authorised by Noah Carroll, ALP, Canberra.