TYRES AND TAX HAVENS
The Herald Sun, 29 December 2018
At its worst, Melbourne’s Stawell tyre dump held nine million tyres. The tyre recycling firm that owned the site was refusing to clean it up. Authorities were worried about the fire risk. Eventually, the Environment Protection Authority stepped in. Over two months, they took away 380 truckloads of tyres, at a cost to the taxpayer of $4.5 million.
But when they looked at where to send the bill, the Authority discovered something fishy. Ownership of the dump had been shifted from the Used Tyre Recycling Corporation to a firm called Internet Marketing Solutions Corp. It was based in Panama. That’s right - one of Melbourne’s ugliest eyesores was technically owned by an internet company based in a beautiful nation on the other side of the world.
The tyre dumpers weren’t the first to use a tax haven to dodge their obligations to society. Tax havens are used my moneylaunders and counterfeiters, kidnappers and illegal arms dealers. Mexican drug kingpin Rafael Caro Quintero is just one of many to park his profits in a tax haven.
Once upon a time, people used to argue that there was nothing wrong with tax havens - that they merely provided their clients with simplicity, and a refuge from the complexity of corporate law that characterises advanced nations. Sure, they might be bit reluctant to share client details, but isn’t everyone entitled to some secrecy?
These days, that argument has gotten harder to sustain. Data breaches such as Lux Leaks and the Panama Papers have revealed the murky underbelly of tax havens, where oligarchs rub shoulders with companies that are willing to use every trick in the book to avoid paying taxes.
Recently, intrepid economists have delved into these data to see what they teach us about tax havens. They conclude that far from being benign, most of the money in tax havens is there in breach of other countries’ tax laws. Research by the International Monetary Fund finds that companies’ use of tax havens has run rampant, with two-fifths of multinational profits now being channeled through tax havens.
Among individuals who use tax havens for their personal affairs, the new wave of research has busted the myth that tax haven users are just like you and me. Matching leaked data with European tax returns, estimate that half the money in tax havens is held by the top 0.01 percent - the richest 1/10,000th of the population. Tax haven users aren’t just rich, or even superrich. They are, as my sons might put it, super-duper-rich. Some of the offshore private banks that run their operations out of tax havens have a minimum buy-in of a million dollars. Most Australians don’t have those kinds of sums down the back of the couch. And yet when the experts have estimated the value of assets held in tax havens by wealthy Australians, they conclude that it may be as much as $100 billion.
So what can we do about tax havens? Over the past few years, Labor has announced a suite of policies to tackle the problem. We would require listed companies to tell their shareholders about tax haven dealings as a ‘material tax risk’. A firm that wants a significant government tender would need to notify the government if it was based in a tax haven. Individuals who have residency in a tax haven would need to tell the tax office. We would work with superannuation funds to develop guidelines for investments in tax havens, and implement changes to the share registry to reveal who really owns Australia’s firms.
We also need to close the loopholes. Right now, individuals who travel to tax havens can automatically claim a tax deduction for their flights, and a $400 daily allowance for expenses. A Shorten Government would tighten these lurks, requiring anyone who seeks a tax break for travel and expenses in tax havens to prove that their activities are related to earning income in Australia. Is it really fair to get a tax break for minimising your tax?
Australians shouldn’t have to put up with long waiting times for elective surgery, underfunded public schools and a lack of aged care places. As a nation, we are rich enough to do these things. As a people, we are ambitious enough to aim to be the best in the world. Mediocrity has never been the Australian way.
If we want to pay down our government debt, offer tax relief to middle Australia, and improve schools and hospitals, the only solution is to close tax loopholes. And among the biggest loopholes on the planet are tax havens such as Bermuda, the Cayman Islands and the Virgin Islands. It’s time to get tough on tax havens and those that exploit them.
Andrew Leigh is the Shadow Assistant Treasurer.
Authorised by Noah Carroll, ALP, Canberra.