Monday, December 10, 2012

Let's impose a special tax, on Apple, Google, and Starbucks

Starbucks, Google, Apple, eBay and other ‘shape shifting’ corporations that route their business through intermediaries located in tax havens may soon face an Australian tax from which other corporations will be exempt.

The idea will be discussed at a special reference group set up to advise Treasury on a scoping paper that will set out the extent of multinational tax minimisation and ways the Australian government respond.

The 14-member reference group is laden with critics of multinational tax practices including ACTU assistant secretary Tim Lyons, Serena Lillywhite of OxFam Australia, Jason Sharman of the Centre for governance and public policy at Griffith University, Mark Zirnsak of the Uniting Church and Tax Justice Network and Frank Drenth of the Corporate Tax Association.

Others appointed by assistant treasurer David Bradbury include the executive director of Treasury's revenue group Rob Heferen who will chair the group, foreign investment review board chair Brian Wilson, former Tax Commissioner Michael D’Ascenzo and public policy specialist Greg Smith who served on the Henry Tax Review.

The only corporate representative is Ross Lyons, a tax executive at Rio Tinto. The consulting firms PwC, Deloitte, Ernst & Young and Clayton Utz are also represented.

Mr Bradbury has asked Treasury to report by the middle of the year, using the specialist group as a sounding board.

“This isn’t just a reporting exercise,” Mr Bradbury said. “That’s pointless without recommendations for ways of collect tax from corporations that make money from the Australian without paying proportionate tax"...

“Some significant multinationals are deriving considerable revenues from Australian economic activity but paying tax out of proportion to that gain.”

In the United Kingdom Starbucks has taken the "unprecedented" step of pledging to pay £20 million ($30.6 million) corporate tax it says it does not owe offering as a gesture not to claim deductions for royalties it pays to its Amsterdam office.

The move has enraged rather than calmed critics such as Liberal Democrats tax spokesman Stephen Williams who said it confirmed corporations such as
Starbucks seemed to think paying tax was voluntary.

Niv Tadmore, a Clayton Utz partner who be on the Australian specialist group said the tax rules were relics of the when doing business in a country like Australia meant “setting up a shop or a factory here or coming here every six months”.

One idea would be a withholding tax notionally applying to all corporate income but from which companies headquartered in nations with tax treaties would be exempt.

“You point it at everyone and have exceptions for countries bound by treaty obligations, that’s the polite way of doing it,” he said.

In today's Sydney Morning Herald and Age

John Kay, in the Financial Times last week:

“The repeated revelations that many major companies pay little or
no tax, even if they do so by legal means, fuels a public sense that tax is mainly
for little people. We need only look at Greece to see how socially, politically and
economically corrosive that perception can be... Well conceived apportionment
is the best – perhaps only – answer to the problem presented by multiple company
tax jurisdictions.”


Assistant Treasurer David Bradbury has today announced the members of the specialist reference group on multinational corporate taxation.

The formation of this group, made up of business representatives, tax professionals, academics and the community sector, is the first step in Treasury’s examination of multinational tax minimisation strategies and its risks to the sustainability of Australia’s corporate tax base.

“The way companies do business is changing and we need to ensure that international tax systems keep pace,” said Mr Bradbury.

“I have asked Treasury, led by Revenue Group head Rob Heferen, to begin work on a scoping paper that will set out the risks to the sustainability of Australia's corporate tax base from multinational tax minimisation strategies and identify potential responses.

“The specialist reference group will feed into that process, with Treasury drawing on members’ knowledge and expertise.

“We don’t want to see a future where hard-working Australian families and businesses have to pay disproportionately high taxes because multinational corporations are not pulling their weight.

“We need to make sure that we are doing everything possible through our domestic laws to keep up with the changing nature of global commerce in the information age.

“More importantly, Governments all around the world need to re-examine many of the key rules of international taxation, which are not keeping up with the changing business models and tax planning arrangements of many multinational companies.”

Members have been appointed to the group in their personal capacity, based on their high level of expertise in this area, rather than as representatives of particular organisations.

A key role of the specialist reference group — and the key focus of the Treasury paper — will be to build community understanding of the nature of the challenges we face.

In addition to the meetings of the specialist reference group, Treasury will also consult directly with interested stakeholders.

The first of several meetings of the reference group will be in February. The Government will release the Treasury scoping paper for public consultation in mid‑2013.

Specialist Reference Group membership:

Rob Heferen (Chair)
Executive Director, Revenue Group
The Treasury

Michael Bersten

Michael D’Ascenzo AO
Expert in tax policy and administration
Commissioner of Taxation (2006 – 2012)

Frank Drenth
Executive Director
Corporate Tax Association of Australia

Serena Lillywhite
Mining Advocacy Coordinator
OxFam Australia

Ross Lyons
General Manager – Tax, Asia Pacific
Rio Tinto

Tim Lyons
Assistant Secretary

Peter Madden

Jason Sharman
Director, Centre for Governance and Public Policy
Griffith University

Greg Smith
Adjunct Professor, Australian Catholic University
Senior Fellow, The Melbourne Law Masters

Tony Stolarek
Ernst & Young

Niv Tadmore
Clayton Utz

Brian Wilson
Foreign Investment Review Board

Mark Zirnsak
Director, Justice and International Mission Unit
Uniting Church

Recommended Reading:

. Google: Don’t Be Evil, Don’t Pay Tax - Mike Seccombe, Global Mail

. How savvy multinationals curb their tax bills, Ben Butler and Georgia Wilkins

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