12th Oct 2017

Government letting big fish off the hook

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Government letting big fish off the hook
Ben Hocking

The Australian Taxation Office (ATO) released figures on Wednesday which revealed that large corporations and multinationals avoided paying $2.5 billion in tax in the 2014-15 financial year.

In reality, that $2.5 billion figure is probably a conservative estimate. The ATO figures only include information that large companies are bound to pass on, and don’t include the taxes multinationals are dodging through legal loopholes.

This is the first time the agency has placed a specific dollar value on the ‘tax gap’. The tax gap measures the theoretical difference between the total amount of income tax collected and the amount the ATO estimates would have been collected if 1400 corporate groups with gross incomes of over $250 million were fully compliant.

The figures are remarkable when you consider the lengths to which this Government will go to save a few dollars.



We have been lumbered with a second-class broadband network, because we have been told that we can’t afford better.

Worse still is the fact the Government is constantly pushing to lift the retirement age, because apparently we can no longer afford to pay the Age Pension to 65-year-olds.

This $2.5 billion we are missing, isn’t a one-off figure. The ATO's corporate tax gap estimate covers a seven-year period between 2008–09 and 2014–15. The tax gaps for earlier years were $2.7 billion in 2008–09, $2.3 billion in 2009–10, $2 billion in 2010–11, $2.7 billion in 2011–12, $2.5 billion in 2012–13, and almost $3 billion in 2013–14.

If the Government was serious about cracking down on these large corporations, it could start the budget repair.

Instead, we have money going in the other direction. The Government seems hell-bent on lending allegedly corrupt mining company Adani $1 billion to start an unwanted coal mine that banks will not touch with a ten-foot pole.

It would seem the only way we can ever address tax reform that targets the biggest tax dodgers, is to start with some donation reform, changing the nature of political donations. Perhaps then we can discover the proportion of companies not paying their way, and why they are continually allowed to get away with it.

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COMMENTS

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Raphael
12th Oct 2017
9:37am
ATO as usual blaming corporations for their own incompetence
Frank
12th Oct 2017
1:55pm
The ATO is a much improved organisation from 5 years ago. Give credit where it is due!
Raphael
12th Oct 2017
2:00pm
The 2.5 B is a figure plucked out of thin air
ATO is lying - there is no rotting or evasion let al Me avoidance

Read before you whine
TREBOR
12th Oct 2017
7:40pm
Only as good as the government that funds it, guides its employment and promotion processes, and offers policy that permits it to do its job.
George
12th Oct 2017
9:39pm
"...$2.5 billion figure is probably a conservative estimate". I would say it's a gross under-estimate.

Yes, ATO needs to get their act together, and provide a real estimate by assuming a Minimum Tax on Gross Income without allowing any shonky deductions. Then, start working on recommending sharp laws to prevent avoidance by using the rules. Too hard, I think, as long as Political Donations are allowed from these companies.
inextratime
12th Oct 2017
10:44am
Well that's a sensible comment. Multinationals pay accountants mega bucks to ensure they pay the absolute minimum tax through complicated company structure arrangements, offshore tax havens and manipulation of process designed to disguise financial deals that avoid scrutiny and its all the ATO's fault. Next it will the Police's fault for the existence of criminals.
TREBOR
12th Oct 2017
7:41pm
All transfers of funds to tax havens should incur an automatic differential tax on leaving our shores......
TREBOR
12th Oct 2017
7:43pm
Hard to police - first they send it to Britain where it pays no tax, then France, where it pays no tax, then the United States while pays no tax - since it is in transit and is not recognised by the tax systems yet - THEN it goes to Offshoria and pays 0.5% tax......

Time to tighten it up.

Now you know one reason why the commonwealth public service and I did not see eye to eye - I am at heart an amazing rationalist while they generally wish to float on clouds of political correctness and subservience to their political masters.
Rae
13th Oct 2017
8:31am
The banks manage to get their fees for money transfers TREBOR so the government should be able to as well. Even a 0.5% tax would raise a fair bit.
TREBOR
13th Oct 2017
3:34pm
Indeed it would - some have mooted a 2% or so on cash transfers etc out of Oz, which some (also) have calculated would solve all the fiscal issues.
Ahjay
12th Oct 2017
11:05am
Agree 100% Ben.
Should be prison for corporate tax evasion and political donations.
Who donates without expecting a return ?
They are robbing the poor to benefit the rich.
Old Man
12th Oct 2017
11:10am
Ahjay, the tax is being avoided, not evaded.
TREBOR
12th Oct 2017
7:48pm
Yes, OM - true - but that is an outcome from the rules - and it is the rules that need to be changed. As I've said before - and must have done so here before - the rules for business were originally established in the late 1700's or so to accommodate the wish of the rich to prosper more while retaining their capital.

That meant that companies could be set up by the rich, with their running it and either contributing their own cash or that of others who invested in it, while having no personal liability and thus little real responsibility.

You see this manifested today when a huge corporation 'goes broke' - and the principals get away with uncounted millions or even billions and continue to live the high life without any accountability.

That is why I advocate for a total revamp of business law and rules - so that the business person running the show and benefiting from it in many ways is personally liable for losses.

That would tame a lot of these 'business' people right down. They are not business people - they are pirates.
arbee
12th Oct 2017
11:07am
This article starts off by commenting on the ATO statement but quickly turns into bashing the current government as if it is entirely their fault that there are tax dodging corporations out there. Correct me if I am wrong but doesn't the quoted time frame include the Rudd, Gillard years as well. If you went back in time and compared the amount of evasion to our GDP figures you would probably have the same percentage amounts going right back to the Menzies era. So don't blame the current government but either blame the ATO for not being diligent enough or the crooked accountants that these corporations use. At least the ATO under this government's term has started recouping taxes from the likes of Google and other similar companies.
Old Man
12th Oct 2017
11:20am
Let's all shoot the messenger. The ATO can only operate within the legislation provided by government. If any action is needed to extract more tax from large corporations and multinationals it is up to the government of the day, not the ATO.

Incidentally, large corporations are required to pay more than income tax to governments. The mining companies, for example, pay royalties which are fully deductible from income and I wonder if the full story will show that these avoiders pay other taxes, royalties or levies to various levels of government. Income tax is only a part of corporation and multinational responsibilities to government.
TREBOR
12th Oct 2017
7:51pm
Royalties go to states - not the Feds, and it seems that perhaps that should change as well. Silly to allow one payment and then allow it as a tax deduction.

Companies certainly pay company fees and costs of licencing etc - those are in place partly to offset their opportunity to extract the greatest deductions from their operations and thus reduce their tax. If you like - the fees and such paid by companies are a way of attempting to at least partially offset their ability to shuffle money around until it disappears up its own anus..... the celestial snake eternally devouring itself...
TREBOR
12th Oct 2017
7:53pm
On the subject of royalties - perhaps then it is incumbent upon the Fed to tax the states on THEIR income so as to render fair and equitable treatment to all 'separate legal entities' equally.

What an interesting concept.... let me run with that one for a while...
Triss
12th Oct 2017
12:11pm
I wonder if these are the same companies which donate millions of dollars to political parties at election times.
MITZY
12th Oct 2017
2:57pm
And, according to the above article, 1400 corporate groups with gross incomes of over $250 million were not fully compliant and avoided paying their fair share of tax due to loopholes the squirreling accountants found in the law!
On top of this the government of the day gives these bleeders tax cuts as well?! What average law-abiding taxpayer gets this privileged treatment?! No wonder they all love to operate from Australia.
Triss
12th Oct 2017
9:26pm
If fancy accountants can find loopholes in a law then it was a badly drawn up law to begin with...unless government knew but passed it through anyway. Corrupt practice.
George
12th Oct 2017
9:41pm
Right in both comments, Triss. They need to Ban Political Donations from companies which are only made to get a business return, i.e. in a corrupt way. Also, badly need a Federal ICAC.
DrPolymath
12th Oct 2017
12:20pm
Well of course! Malcolm Turdball and his cabal of Lieberal scumbags are happy to turn a blind eye to the financial hanky-panky of their big-business mates. And stuff the Australian public in general, and Australia's poor - such as pensioners - in particular.
Old Man
12th Oct 2017
12:34pm
Here's a link to those businesses which donated to political parties DrPolymath. See if you can find some that support your theory that big business donates only to the Liberals. I think you'll find that big business donates to both sides. Can we also accept your theory that donations will allow a blind eye to be turned to hanky-panky by those who receive donations even if the donation is to Labor?


http://www.abc.net.au/news/2017-02-01/australian-political-donations-searchable-database-2015-2016/8208090
Frank
12th Oct 2017
1:53pm
A little quick to judge there Dr Pooymouth.
TREBOR
12th Oct 2017
7:54pm
Steady Frank. Not called for.

Major corporation donate to both parties - like taking a bet each way....... pretty simple, eh?

Ban All Political Donations NOW!
Triss
12th Oct 2017
10:50pm
I agree with you, Trebor, it's the only way.
Frank
14th Oct 2017
9:36am
TREBOR, I'm an Australian. I have no time for those who want to call our Prime Minister "turdball." I find that vulgar. You may not like our PM, you may not like the party he represents but such vulgarity is very poor form and shows a lack of class.
Rae
12th Oct 2017
12:54pm
Ben you missed the bit about the deliberate plan for this outcome. 20% of the ATO's experienced management were sacked and replaced with outsourced workers contracted to Accenture to create a business friendly ATO. So we should be praising the government for a job well done. Tax policy in Australia is very very business friendly indeed.
TREBOR
12th Oct 2017
8:02pm
And the rest are contracted senior employees who through being no longer independent under the division of powers, are subject direct to their political masters and must produce results according to those masters or lose their tenure.

Howard's Way..... emasculate the public service more than Joh ever did in Queenslund (where they do things diff'runtly,. you mark my words - when asked about division of powers Joh famously said - "Division of what?"), and make it subservient directly to the government of the day.

I have yet to see 'Labor' doing anything to change that - they love this emasculation of one branch of the division of powers to push their own agenda - which, like the Liberals, is not yours or mine in the main.

For the uninitiated - division of powers in a democracy like ours is between head of state, leader of government/majority party in the house, independent public service, and independent judiciary. then we have amorphous but not directly involved powers in the land such as the military and the police - who are sworn to be non-political as a group while retaining their political affiliations as individuals, the police taking an oath of office to uphold law as written (The Good German) and the military taking an oath to defend the nation against all enemies both domestic and foreign - though sometimes that can become a very blurred issue, i.e. at what point does an elected government become an enemy of the people and of the state???
KSS
12th Oct 2017
1:40pm
There is a world of difference between tax evasion and tax avoidance and the law is the arbiter.

There wouldn't be a taxpayer in Australia (individual or business) who did not legally seek to avoid paying more tax that was absolutely necessary. But then why let facts get in the way of an opportunity to 'bash the Government'.
TREBOR
12th Oct 2017
8:03pm
That's why the laws appertaining to corporations need to be reviewed and probably rebuilt from the bottom up.
Mutley
12th Oct 2017
2:09pm
It's mind boggling to find out that corporate tax avoidance is/has been in excess of $2 billion per year for at least the past 10 years. Where is the watchdog ? Would an unpaid debt in usual circumstances just be written off or would attempts be made to recover the debt through collection agencies or the courts. It's time; it's time the Government stops sitting on it's hands and does something about this appalling mess. And, let's stop blaming previous administrations.
disillusioned
12th Oct 2017
4:58pm
That's the LNP! They haven't got the gumption to go after the tax "avoiders" so they rip it off the pensioners and slash services instead! And as for Adani, why should we lend them money so they can cram it in their own pockets? What a rort!!
Tib
12th Oct 2017
5:16pm
Only 2.5billion please count that again I think you missed some.
ray from Bondi
12th Oct 2017
7:32pm
no worries stamp on the pensioners and poor they are the real cause of all the problems just ask any liberal politician.
TREBOR
12th Oct 2017
7:39pm
Time to install a minimum tax payable like Trump - 30% and we can diuscuss any realistic discussions. If it were Joe or Jo Bloggs theGuv would apply tax to them first, and then allow them to present a case to reduce the amount paid - as happens every year at tax return time for P_AYE.

Time for the same rules for business so they don't get away with too much - let them pay along the way, with a window of no fixed tax for two years during initial setup for a genuine new business (not some branch of an offshore corporation but a local one), and have them pay tax and then place a submission for a reduction or return.

Much better than trying to keep track of their multitudes of cash manipulations along the way to tax time.

Charge them tax first and then get them to prove why they should get some back.
George
12th Oct 2017
9:46pm
Absolutely agree, TREBOR, a Minimum Tax is long overdue as ATO & politicians seem to be incapable of plugging loopholes designed to minimise tax, or shall we say not really interested to do that as they get Political Donations from the same companies.
A Federal ICAC is also a must!
TREBOR
13th Oct 2017
3:31pm
.. for 'realistic discussions' read 'realistic deductions'.... glurg - I'm amazed Heckler and Jeckler haven't got on to that mistake...
disillusioned
16th Oct 2017
11:28am
And If the government gives Adani what it's asking for, it'll be a $3.5 billion "tax gap"! Why are they kow-towing to these unconscionable organisations?


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