MELBOURNE and SYDNEY, February 6 (IPS) – Australia will become the first country or jurisdiction to require large multinational corporations (MNCs), with a global consolidated income of at least $1 billion Australian dollars, yes public report Country by country (CbC) tax information. The new Labor Government announced on 25 October 2022 in budget paper that the MNC’s public CbC tax reporting will commence from 1 July 2023. Australia’s public CbC reporting rules will apply to all Australian-headquartered companies and those with head office elsewhere has enough domestic relationships.
The announcement received little media attention, perhaps being seen as a technical fix. Not yet public CbC reporting can be an important weapon in the fight against corporate tax evasion in Australia and, more importantly, in low-income and high-indebted countries, which have even lost rates of revenue. greater publicity for tax havens.
All countries in the Organization for Economic Cooperation and Development (OECD), including Australia and the United States, have required large MNCs to separately report CbC tax data under Action 13 of the OECD/G20 project against again Base erosion and profit change (BEPS). In November 2022, the European Parliament approve a directive Public CbC reporting is mandatory for major MNCs in the bloc, with a range of restrictions discussed below, effective June 22, 2024.
Australia’s move comes a month before a fresh push at UN convenes global tax authority to establish international taxation standards, after years of unsuccessful efforts among the world’s richest nations at the OECD.
Losing billions
The Paradise Papers and Luxembourg leak by the International Consortium of Investigative Journalism (ICIJ) shed light on the tax tricks of more than 100 MNCs. Apple alone has moved profits around the world to accumulate US$252 billion overseas. ONE ICIJ Study 2021 revealed that, in just one year, MNCs moved US$1 trillion overseas, depriving the government of hundreds of billions in revenue.
corporate profit transferTraditionally, to avoid taxes, countries have to pay between $500 billion and $650 billion in lost tax annually, according to the report. a report of a high-level council of the United Nationspublished in 2021.
Research by Center for International Corporate Tax Accountability and Research discovered tax evasion by MNCs who withdrew money from public services and workers including in old riding scandal nursing homes in Australia. It exposed How Microsoft gets billions of dollars in government IT Outsourcing Contracts, while raking in more than A$2 billion in profits through its Bermuda-based subsidiaries, where they pay little tax.
Nearly 800 large corporations do not pay taxes in 2020-21, the Australian Taxation Office report reveals. my countryearns around AU$8 billion per year due to profit shifting of MNCs.
Poor countries bleed the most
The ICIJ Study 2021 found that African countries were most “vulnerable” to profit shifting. In 2017, the Tax Justice Network found that low-income countries are the biggest victims of profit displacement.
In some countries such as Zambia and Argentina, losses exceed 4% of GDP. In Pakistan, the loss from profit shifting is 40% of total tax revenue, and in Chad the estimated loss is greater than all taxes collected (106.2% of total tax revenue)!
The Tax equity status 2021 found that low-income countries lost the equivalent of 48% of their public health budgets in total.
Low-income countries are more dependent on corporate taxes for the revenues needed to fund cash-strapped public services, making corporate tax transparency important in tackle global poverty and inequality.
Rich countries serve corporate interests
International tax regulations have been designed by wealthy nations, especially by their club, the OECD. Tax fairness activists, such as the Africa Tax Administration Forum, allege that developing countries are “not at the table” at the OECD, but on the menu, with OECD rules designed to allow multinationals to continue to profit in the southern hemisphere without making a fair contribution.
The OECD standards for tax reporting by MNCs are riddle with loopholes. EQUAL Oxfam pointed outOECD rules do not allow people in low-income countries to access information on profits generated by MNCs or taxes paid in their countries and most tax authorities in those countries. low income as well.
Similarly, the European Union’s CbC report is serious water down. Tax transparency is only required for the 27 EU member states and 21 jurisdictions that are blacklisted or graylisted in their flawed tax havens. Oxfam indicates this means secrets are kept for more than 75% of the nearly 200 countries in the world. The EU also introduced a “company ban clause” for “commercially sensitive information” for five years; and limit reporting to companies with consolidated revenues over EUR 750 million, excluding 85 – 90% of MNCs.
Trade unions play an important role
The Labor Movement has waged a fight to end corporate tax avoidance. Labor’s share in GDP is decreasing from the early 1970s in advanced countries and from the early 1980s in developing countries. Some unions have found that corporate tax avoidance erodes public services workers need and undermines collective bargaining, while increasing corporate power.
The global union federation, Public Services International (PSI), coordinates union action to support public CbC reporting among other tax reforms. PSI joined the drafting technical committee Global Reporting Initiative (GRI) tax standards and working with union pension funds to support the standards, now widely seen as best benchmark on corporate tax accountability.
In Australia, PSI and its affiliates have exposed corporate tax evasion in aged care companies, labor hires and corporations that receive large government contracts and work with unions. to shape the policy platform of the Labor Party.
This notice reflects one of the recommendations made by PSI and the International Trade Union Congress to the Australian Department of Finance in its submission on Multinational tax integrity and enhanced tax transparency.
Can Australia take the lead?
Since being elected in May 2022, the new Australian government has sought to improve its international standing by setting stronger climate goals, strengthening engagement with Pacific island nations, and rebuilding the capacity of the Department of State and Trade. If a government can make good on its promise to implement GRI standards and require public CbC reporting, it will make a significant contribution to the global common good and set a precedent for the EU and other countries. other follow.
In addition to setting new tax transparency standards, the Government of Albanese should assist African countries in promoting a truly comprehensive UN tax convention – which could cut the scope of tax abuses by MNCs and wealthy individuals. Together, these contributions will bring more to low-income countries than the entire Australian development aid budget.
Kate Lappin As the Asia Pacific Regional Secretary of Public Service International (PSI), the Global Confederation of Trade Unions represents more than 30 million public service workers in 154 countries and territories. Kate headed the Asia Pacific forum on Women, Law and Development (APWLD) for eight years and has worked for labor, feminist and human rights movements for more than 20 years.
Anis Chowdhury is an Adjunct Professor, Western Sydney University. He has served as Director of the Department of Macroeconomic Policy & Statistics for UN-ESCAP (Bangkok) and Head of Development Finance for UN-DESA (New York).
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