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Giant profits, tiny tax bills: time to close loopholes on corporate tax avoidance

For many companies, tax is a cost of business rather than the price we pay for civilised society. The driver for tax minimisation or even avoidance is clear: the less tax business pays, the more profit…

Despite earning $201 million in revenue, Google Australia paid $74,000 in tax last year. AAP

For many companies, tax is a cost of business rather than the price we pay for civilised society. The driver for tax minimisation or even avoidance is clear: the less tax business pays, the more profit it makes.

With the internet shrinking the world, and people able to buy goods and services from around the globe, tax minimisation for big companies such as Amazon, Google and Facebook has become much easier. Australia, like most countries, taxes residents on their worldwide income. We tax non-residents on their income from Australian sources. We have tax treaties with a number of countries, mostly those where we have significant trade and commerce relations. These tax treaties allocate taxing rights to each country and change to some extent the general residence and source taxing rules I mentioned above.

In the past, contracts for the purchase of goods and services from offshore and the dealings associated with them could well have been carried out with a physical branch of the overseas seller in Australia or an Australian resident company. In both cases, the income from that sale would have been taxed in Australia. Our tax laws and our tax treaties reflect this 20th century “physical presence in Australia” model. The internet now makes it possible to contract directly with the overseas seller and challenges that old model and the taxing regimes and tax treaties set up to capture tax for Australia.

Take Google as an example. When you, an Australian resident, put an advertisement on Google, your contract and payment is processed online with Google Ireland, a company resident in Ireland. That has changed recently to Google Singapore, but let’s stick with Ireland for the purposes of this explanation. Australia has a tax treaty with Singapore. Australia also has a tax treaty with Ireland. Like most of our tax treaties, this changes the rules about the taxation of source income for companies. Even if the source of the income is Australia, the treaty gives taxing rights over Irish companies’ income to Ireland.

The one exception is where that income is attributable to a permanent establishment (a branch, for example) in Australia. Google Ireland does have a branch in Australia, but the internet makes its role minor. So much so that the income attributable to Google Ireland’s Australian branch was, so it is argued, very small. Despite the fact that Google made about $1 billion in income from Australian sources, its branch paid only $74,000 in tax. This is because Ireland has the taxing rights over Google Ireland and, by dealing directly on the internet with Google Ireland, you have cut out the Australian branch. I need hardly add that the company tax rate in Ireland is 12.5% compared to 30% in Australia. Furthermore, Ireland’s laws allow that income to be transferred tax-free to other countries, such as The Netherlands, and from there tax-free to a tax haven such as Bermuda.

That was the case with private equity firm Texas Pacific Group and its investment in Myer Emporium. The investment was structured through the Cayman Islands, a tax haven, into Luxembourg, then the Netherlands and then Australia. One of the arguments is that, under the tax treaty between the two countries, the Netherlands and not Australia has taxing rights over any revenue from the sale of Myer (about $1.5billion). The Netherlands doesn’t exercise that right if the income is transferred to a European country like Luxembourg, and Luxembourg doesn’t tax it on the way to the Cayman Islands. So the money isn’t taxed anywhere from Australia to the Cayman islands, and as a tax haven the Cayman Islands certainly doesn’t tax it.

The Commissioner is challenging this treaty shopping arrangement – why not invest directly from the Cayman Islands into Australia, for example? - but the money has flown the coop and the over $700 million in tax and penalties is, in all likelihood, unrecoverable. For many years, tax havens have been a favoured destination for big business. As Nicholas Shaxson says in his magnificent book Treasure Islands: Tax Havens and the Men who Stole the World: “More than half of world trade passes, at least on paper, through tax havens. Over half of all banking assets a third of foreign direct investment by multinational corporations are routed offshore.”

The advantage of tax havens isn’t just or even mainly no or low tax — it is secrecy. Financial institutions and authorities in a tax haven don’t provide information about investment holdings and ownership details to other agencies (for example, the ATO). According to the Tax Justice Network, there is a huge amount of financial wealth (not real property and other assets like yachts) stashed offshore in havens by rich people. The report - The Price of Offshore Revisited – estimates the amount hidden offshore by the top 10 million wealthiest individuals at between US$21 trillion and US$32 trillion. US GDP in 2011 was US$15 trillion. Australian GDP that year was US$1.3 trillion.

Australia produces about 2% of global GDP. If the Tax Justice Network figures are in the ballpark, it may mean of that possible US$32 billion hidden offshore, 2% or US$640 billion could be attributed to high-wealth Australians. A modest rate of return of 5% and an average tax rate of 30% on this hidden income would see Australia’s revenue coffers increased by about $9 billion a year. Australia has made a number of Tax Information Exchange Agreements with tax havens to overcome secrecy rules, but there are a number of problems. The ATO can’t engage in a fishing expedition: it has to know about the Australian resident’s situation before asking for information; the treaties don’t cover all tax havens; and the treaties are moving to a lowest common denominator model that has weak regulatory oversight as a hallmark.

As part of the recent Mid Year Economic Fiscal Outlook announcements, the government gave the ATO an extra $390 million to pursue transfer pricing – where multinationals manipulate pricing to shift profits from Australia to other often low-tax jurisdictions – and tax avoidance more generally. The government estimates this will raise an extra $2.5 billion. For every dollar invested the government gets six more. However, this is not ‘extra’ money for the ATO. It just means the ATO can cover its current program. It is money to save existing programs. With a six to one rate of return, wouldn’t more money to the ATO raise even more revenue from tax avoiders and evaders?

In light of the examples of Google and similar entities, it is clear our tax laws and treaties need updating to capture income from Australia. If the figures from the Tax Justice Network are even close, the use of tax havens to hide wealth is a much bigger problem than revenue authorities have admitted. We need more stringent legislative and administrative action, including more funding for the ATO, to catch the tax cheats and avoiders.

Join the conversation

49 Comments sorted by

  1. Neil Gibson

    Retired Electronics Design Engineer

    Multinational tax avoidance is a huge problem and ultimately the ordinary taxpayer has to make up the shortfall.
    The problem is that strict enforcement will drive companies away from their home country to a lesser taxed regime.However in this age of spin and PR image is everything and shaming businesses like Google who do not pay a fair amount of tax in the country of earned income would be a good start. Tax receipts are readily available and relevant income should not be too difficult to obtain.

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    1. John Passant

      Graduate Teaching Fellow

      In reply to Neil Gibson

      That is a good point. In fact as the case of Google and others show, they will hunt for a country which ahs treaties with major countries like Australia but more importantly the US and European countries and the ability to transit income tax free from them to tax havens. It is interesting Google moved its contracting location this year from Ireland to Singapore, presumably because it was coming under heat in Europe or even Ireland for its tax minimisation. Amazon from memory copped a roasting at a recent UK inquiry with its massive profits attributable to UK sources but paying very little UK tax.

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    2. Paul Buddery

      Geotechnical Engineer

      In reply to Neil Gibson

      "Google moved its contracting location this year from Ireland to Singapore, presumably because it was coming under heat in Europe or even Ireland for its tax minimisation."

      Ireland is now getting the minimum tax from Google.

      Amazon may well have copped a flogging from ignorant politicians, but as this article in The Times points out, it is merely obeying European law:

      http://www.thetimes.co.uk/tto/opinion/thunderer/article3605521.ece

      "Yes, it is true that Amazon pays a lower rate of corporation…

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    3. William Ferguson

      Software Developer

      In reply to Neil Gibson

      PR (or bad PR) can be a very effective weapon, especially in a digital world where trust and reputation are everything.

      It would be nice to cultivate an environment in which companies vied with each other in the "who paid the most tax" stakes. I believe this is common is Japan where corporate reputation is king.

      I don't know how to get there, but it seems more positive than shaming. Though if that is required then I'm all for it.

      Corporations need to understand that they are part of the societies within which they operate. And since they rely on those communities for profits they need to contribute their fair share towards ensuring their continuance and prosperity.

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    4. Dianna Arthur
      Dianna Arthur is a Friend of The Conversation.

      Environmentalist

      In reply to Neil Gibson

      @ Neil Gibson

      "Multinational tax avoidance is a huge problem and ultimately the ordinary taxpayer has to make up the shortfall."

      Nothing could demonstrate this more clearly than the austerity measures being placed on a public who had little to do with the cause of the GFC.

      Wake up Australia, we are not bullet proof. Gifting money to corporates by tax loopholes results in a majority of losers from the government's ability to provide services to the PAYE employees who ultimately foot the bill.

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  2. Whyn Carnie

    Retired Engineer

    Nothing wrong with profit.
    Taxes are a compusory way of funding Government. Nothing wrong with minimising that when Government is so bad at expending its income.
    The best accountants don't work for government, thank goodness.
    What is the comparison between corporate loophole and tax minimisation to the black economy?

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    1. Michael Shand
      Michael Shand is a Friend of The Conversation.

      Software Tester

      In reply to Whyn Carnie

      The corporate loopholes should be pretty straight forward to work out by percentage of GDP but do we have good numbers on the black economy, specific to Australia?

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    2. John Passant

      Graduate Teaching Fellow

      In reply to Whyn Carnie

      Michael and Whyn, most academic and similar estimates for black market activity in Australia, or the cash economy, are that it is up to 15% of GDP, or around $150 billion. The ATO has a program for addressing as best it can the tax element of this. As to loopholes, there is an annual Treasury report on Tax Expenditures (disguised grants through not taxing or allowing extra deductions) which estimates revenue foregone is about $120 billion each year. These are separate but related issues to the international tax avoidance I have dealt with only briefly here.

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  3. Paul Buddery

    Geotechnical Engineer

    I'd have thought being a member of Socialist Alternative is a relevant affiliation. Socialist Alternative believes, inter alia, that:

    "There is no parliamentary road to socialism. Bitter experience has shown that mere tinkering with our society will not end oppression or exploitation. The attempts of parties like the ALP and the Greens in Australia to reform capitalism have always ended in disappointment.

    The capitalist class controls the state, i.e. the army, the courts, the police and the parliament. The capitalist state resists attempts to reform the system and meets challenges to its power with violence. For workers and the oppressed to liberate themselves, revolution is necessary to overthrow this rotten system and to create a new one."

    So, I assume, Mr Passant would prefer that there are no private companies to pay tax and that his call for higher taxes is more of a tactic in the class war between workers and capitalists.

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    1. John Passant

      Graduate Teaching Fellow

      In reply to Paul Buddery

      Oh shock horror. I am a socialist. Wow. I guess the fact that I am a former Assistant Commissioner of Taxation and successfully ran the ATO input into international tax reform is also a black mark against me. And you know what, I want big business to pay tax here and now to fund education, health, transport, and things like really addressing climate change - many of the things the ALP and socialists in it used to believe in. Between 2005 and 2008 40% of big business paid no income tax in Australia. Maybe it is time they did. Along with John Pilger, Gary Foley, Anthony Loewenstein, Jeff Sparrow and 70 others I am giving a talk at Marxism 2013 over Easter in Melbourne (http://www.marxismconference.org/index.php/program/featured-speakers.html). My talk will be on taxing the rich and powerful.

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    2. Paul Buddery

      Geotechnical Engineer

      In reply to Paul Buddery

      The difference would be that you happily declare in your profile that you are a former Assistant Commissioner of Taxation but don't mention your affiliation with the Socialist Alternative.

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    3. John Passant

      Graduate Teaching Fellow

      In reply to Paul Buddery

      Perhaps Paul The Conversation should have a special declaration for all writers and commenters to make. 'I have not, nor have I ever been a member of ...' Fill in appropriate political affiliation.

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    4. Paul Buddery

      Geotechnical Engineer

      In reply to Paul Buddery

      I think an affiliation with a political party which has an antipathy towards capitalism is relevant when the author is discussing corporate tax.

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    5. John Passant

      Graduate Teaching Fellow

      In reply to Paul Buddery

      'I think an affiliation with a political party which has an antipathy towards capitalism is relevant when the author is discussing corporate tax,' says Paul. Oh dear. I suppose applying that logic, all those sympathetic to capitalism should also declare their interests too. This is nothing but unsophisticated McCarthyism. Let's deal with the issues. I should add that I suspect this sort of attitude may explain why for the 17 tax and law jobs in academia I have applied for in the last 12 months I have not had one interview.

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  4. Gavin Moodie
    Gavin Moodie is a Friend of The Conversation.

    Adjunct professor at RMIT University

    Another possibility would be to introduce a financial transactions tax such as a Tobin tax which would be hard to avoid whichever jurisdiction one sought to transfer funds to.

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    1. John Passant

      Graduate Teaching Fellow

      In reply to Gavin Moodie

      Thanks Gavin. I was asked about a Tobin Tax at a very well received presentation I did on my thesis on Marxism and Tax Reform in Australia at the National Graduate Law Conference at the ANU on 18 October and must admit I hadn't until them given it much thought. I am starting to look at it. It doesn't I think however address the world as global oyster practice of companies like Google who can set up their contracting section in tax friendly tax treaty countries, or other international avoidance like transfer pricing. Maybe a financial transactions tax or even a currency transaction tax is as Tobin said just sand in the cogs. But as I say I have only just started thinking about this, so thanks for the suggestion.

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  5. Pat McConnell

    Honorary Fellow, Macquarie University Applied Finance Centre at Macquarie University

    John
    Excellent and timely article, 2013 is shaping up to be the year of Tax Avoidance, already ramping up in US and UK

    What should also be mentioned in this debate is the use of complex derivatives to avoid tax, in particular the use of so-called Total Return Swaps (TRS) which were used, for example, by Bain Capital (read Mitt Romney) to turn income into capital gains, which is taxed at a lower rate. And Romney was far from alone in this.

    Closer to home we have the use of complex derivatives for the purposes of tax avoidance by the Big Four Australian banks which was unearthed by the New Zealand Tax authorities see
    http://theconversation.edu.au/debunking-the-myth-of-our-well-regulated-banks-9333
    and for more detail see
    http://www.risk.net/journal-of-operational-risk/technical-paper/2207237/systemic-operational-risk-smoke-and-mirrors

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    1. John Passant

      Graduate Teaching Fellow

      In reply to Pat McConnell

      Interestingly the ATO recently lost a case in the High Court on dividend stripping involving the Commonwealth Bank. The section - 177EA - was specifically designed for just that type of arrangement and the High Court didn't apply it. The revised part IVA might catch a few schemes for a few years but the judicial battle over tax avoidance is not about the words of the section but competing world views of the roe of the market and the state and so this constant undermining of anti-avoidance provisions may well be a permanent feature of the High Court.

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  6. Gavin Moodie
    Gavin Moodie is a Friend of The Conversation.

    Adjunct professor at RMIT University

    I am not, nor have I ever been, a member of any political party, religion or proprietary company. However, I have been a member of 2 Aussie rules football clubs.

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  7. Gavin Moodie
    Gavin Moodie is a Friend of The Conversation.

    Adjunct professor at RMIT University

    Also relevant to corporate tax is whether one profits directly from corporations by being employed by or owning shares in one. I don't.

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  8. Mike Butler Snr

    Managing Director

    In conjunction with a reading of John Passant's article above, I suggest a viewing on You Tube of Kerry Packer's famous appearance at the 1991 House of Reps Select Committee on the Print Media --- http://www.youtube.com/watch?v=EVIOmU3l0Zo. Towards the end of this short video, Kerry points out to the pollies the difference between tax avoidance and tax minimization. He points out that anyone who doesn't minimize their tax needs their head read because, "as a government you are not spending it that well that we should be donating extra!"
    Very sound advice!

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  9. Chris O'Neill

    Victim of Tony Abbotts Great Big New Tax

    “More than half of world trade passes, at least on paper, through tax havens. Over half of all banking assets a third of foreign direct investment by multinational corporations are routed offshore.”

    Hardly surprising. Google was just taking advantage of Ireland's partial tax haven status so that shareholders resident in tax havens only had to pay 12.5% tax in total of the income earned through their Google shares. Google could, of course, try to set up its business in a complete tax haven but…

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    1. John Passant

      Graduate Teaching Fellow

      In reply to Chris O'Neill

      Chris, the point I was trying to make is that Google in Ireland would pay no tax on income flowed through to other countries and eventually to tax havens. Further, the point about tax treaties is important. If Google set up say in the Cayman Islands and we in Australia dealt with Google in the Cayman Islands then Google Cayman islands would be subject to tax on any income from an Australian source. There is no tax treaty with the Cayman islands. There would be an argument that contracts with Google…

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    2. Chris O'Neill

      Victim of Tony Abbotts Great Big New Tax

      In reply to Chris O'Neill

      "I was trying to make is that Google in Ireland would pay no tax on income flowed through to other countries and eventually to tax havens."

      I thought you said it was 12.5% tax.

      "If Google set up say in the Cayman Islands and we in Australia dealt with Google in the Cayman Islands then Google Cayman islands would be subject to tax on any income from an Australian source."

      I thought you were talking about a product that Google sells to Australians so the money that Australians send to Google…

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    3. John Passant

      Graduate Teaching Fellow

      In reply to Chris O'Neill

      Chris, Ireland has a company tax rate of 12.5%. But things like and Irish shuffle and Dutch sandwich mean that the income as it passes through Ireland may not be subject to tax in Ireland. In other words the treaty gives Ireland the right to tax it; it may not exercise that right.

      I am assuming Singapore ahs the same ability to conduit the income through untaxed to other countries.

      The general rule is that residents are taxed on their worldwide income and non-residents on their income from…

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    4. Chris O'Neill

      Victim of Tony Abbotts Great Big New Tax

      In reply to Chris O'Neill

      "In other words the treaty gives Ireland the right to tax it; it may not exercise that right."

      That's an interesting arrangement. Who and what gets to decide when that right is exercised? I'm not aware of this mechanism existing in Australia.

      "No, you don't have to withhold from the payment."

      So how is any tax going to be applied to payments I make for goods and services I buy from a tax haven? (apart from GST)

      "There are also withholding requirements for interest, dividends and royalties paid to non-residents."

      I'm familiar with the tax rules for those. The distinction is between payments that are plain and simple taxable income like interest, dividends and royalties and payments for goods and services which don't attract withholding tax.

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    5. John Passant

      Graduate Teaching Fellow

      In reply to Chris O'Neill

      Chris, in response to you latest post, the taxing right is given to the resident entity's country under the treaty, except where there is a permanent establishment making money in the other country. In that latter case the source country can tax the income attributable to the permanent establishment (eg branch). The resident country's Parliament makes the tax laws so it would be up to them to determine their scope. Australia has taxing rights over resident companies earning income in say Ireland or Singapore, but does not always exercise the rights in specific circumstances, eg conduit foreign income.

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    6. Chris O'Neill

      Victim of Tony Abbotts Great Big New Tax

      In reply to Chris O'Neill

      Would you be kind enough to provide a direct answer to my question: "how is any tax going to be applied to payments I make for goods and services I buy from a tax haven? (apart from GST)?" I'm talking about buying from a business that has no activity in Australia, apart from exporting goods or services to Australia.

      My guess is that you mean that there is no income tax payable by anyone in such a circumstance.

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    7. John Passant

      Graduate Teaching Fellow

      In reply to Chris O'Neill

      If all the work done in providing the goods or services is done in the tax haven no income tax is payable in Australia. Thus Bermuda for example is a centre for re-insurance and many Australian companies pay for that. No tax payable in Australia because the activity isn't undertaken in Australia. However when i contract with Google to put ads on Google or with facebook to put ads on facebook for Australia, the question becomes what is the source of that income. Arguably it is Australia. having the…

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    8. Chris O'Neill

      Victim of Tony Abbotts Great Big New Tax

      In reply to Chris O'Neill

      "However when i contract with Google to put ads on Google or with facebook to put ads on facebook for Australia, the question becomes what is the source of that income. Arguably it is Australia."

      The question is, what action is it that determines that the source of the income is within Australia? Is it that the servers where those ads come from are within Australia? Is that the situation you are talking about?

      "having the arrangement routed through a tax treaty country saves google or facebook from havign to worry about any such source country argument as a possibility from the ATO because the treaty country will have taxing rights,"

      The question then arises, can that tax treaty country then simply become a transparent front for a tax haven? The tax haven could then provide the benefits to a business of both a tax haven and a tax treaty country.

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  10. Pat McConnell

    Honorary Fellow, Macquarie University Applied Finance Centre at Macquarie University

    Another excellent example of tax avoidance is Microsoft, see for example
    http://www.irishtimes.com/newspaper/finance/2012/0922/1224324270335.html

    Microsoft doesn't produce cars or TVs or anything tangible. It produces bits and bytes that can be shipped anywhere, anytime. Microsoft deals in Intellectual Property embedded in its software.

    In the Microsoft case, the IP was created in the US with the benefit of government tax credits. Microsoft then licenses its IP ( a perfectly legal thing…

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    1. John Passant

      Graduate Teaching Fellow

      In reply to Pat McConnell

      Yes Pat. My understanding is that transfer pricing rules don't apply in the Ireland-US situation, so the Irish subsidiary can be charged lower than average prices for the US IP and then on-sell them at the market price to the world, thus shifting the profit to Ireland and its low tax rate. And maybe then it is flowed through to a tax haven tax free, avoiding Irish tax too. I am not that clear on the eh specifics of the arrangement but that is from a brief reading some time ago the rough outline…

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  11. Geoff Taylor

    Consultant

    Transfer tax arrangements or not, there are still tax advantages for an Australian export company to have its sales office in Singapore.
    One company in Britain is shipping its items to Chicago even though the items then return to British buyers, to avoid VAT.
    And here the ATO ought to be capturing high volume trading data directly (including the TFN of any trading entity) because each less than 45 day-held trade should be a full CGT loss or gain.

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    1. John Passant

      Graduate Teaching Fellow

      In reply to Geoff Taylor

      My understanding is that under Australia's GST arrangements those 'exports' would not be exports and would be subject to the GST law or caught by the anti-avoidance provision.

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  12. John Passant

    Graduate Teaching Fellow

    In my case it might well be a case of a stopped clock being right twice a day, but Assistant Treasurer David Bradbury announced yesterday an inquiry into the tax situation of companies like those I talk about. He specifically mentioned Google and Apple. He deals with the very issues I outlined. Commentary has suggested, echoing my comments, that the problem is that we have a 20th century tax model for 21st century business arrangements. Here is a link to Bradbury's speech, called Towards a fair, competitive and sustainable tax base, and made yesterday, the same day my article appeared. http://assistant.treasurer.gov.au/DisplayDocs.aspx?doc=speeches/2012/013.htm&pageID=005&min=djba&Year=&DocType=

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  13. Whyn Carnie

    Retired Engineer

    John Passant seems to be using this article and the comments to push his own socialist barrow and further his own ends.
    The real issue here is that our Tax system is long overdue for a total overhaul. It is an inefficient means of funding government and government salaries. Political parties remind us that overhaul is overdue then go back to sleep. The ATO is a makework office that produces nothing of value in the nation's Productivity balance sheet other than work for plenty of accountants, lawyers, and educationists.
    Look at the bigger picture John, and move on.

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    1. John Passant

      Graduate Teaching Fellow

      In reply to Whyn Carnie

      Spot on Whyn. No doubt I have corrupted Assistant Treasurer David Bradbury with my evil socialist thinking. You know, those wacky ideas about tax equity and fairness. You haven't read that well known socialist Adam Smith have you on taxation? I think your understanding of the role of taxation, and the ATO, might be a little, how can I put this delicately, simplistic.

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    2. Whyn Carnie

      Retired Engineer

      In reply to Whyn Carnie

      Once upon a time I was a poor, simple, engineer whose professional objective was to define problems, propose and implement simple, cost-beneficial solutions. So your delicate "simplisitc" statement is understandable. I'm still poor and simple.
      John, in your current role of teacher, could you, in short form, let us have your understanding of taxation and the ATO?
      Any ideas how to improve productivity in the ATO would be welcome.

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    3. Whyn Carnie

      Retired Engineer

      In reply to Whyn Carnie

      Back again hoping you could have given some response. In the interim I looked for a definition of Tax and what the objectives of tax ought to be.
      From Macquarie site:
      tax
      / / (say taks)
      noun 1. a compulsory monetary contribution demanded by a government for its support and levied on incomes, property, goods purchased, etc.
      2. a burdensome charge, obligation, duty, or demand.
      –verb (t) 3. to impose tax on.
      4. to lay a burden on; make serious demands.
      5. to take to task; censure; reprove…

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    4. Michael Hay

      retired

      In reply to Whyn Carnie

      Agreed. The tax system in Australia is mired in regulations and loopholes.
      Enter a Flat Tax; like the GST; tax all income earned at a flat rate with the only taxable deduction being wages.
      Make the entry tax level $50,000, to cover lower income and small profit businesses.
      Would be delighted if someone could work out what the tax rate would be in order to equal the present income tax take.
      Please?.

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    5. Chris O'Neill

      Victim of Tony Abbotts Great Big New Tax

      In reply to Whyn Carnie

      Michael Hay:

      "tax all income earned at a flat rate with the only taxable deduction being wages"

      Like that has any chance of ever happening. We can't even stop negative gearing on property loans.

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  14. Geoff Taylor

    Consultant

    Correction to my comment: Sorry, high frequency trading, not high volume.

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  15. Evan Whitton

    Legal historian

    Tax evasion is larceny by trick, the crime of theft by fraud or deceit. If systematic, it is organised crime.
    The Tax Office clearly knows that High Court rulings have favoured tax evaders for more than half a century. John Passant may be able to tell us why the ATO has never mounted a campaign to make that clear to pay-as-you-earn taxpayers who have to make up the difference.
    Perhaps the ATO feels that High Court judges cannot be criticised. Why not? They are not trained as judges; they are lawyers…

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    1. John Passant

      Graduate Teaching Fellow

      In reply to Evan Whitton

      Thanks Evan. Yes the old anti-avoidance provision was destroyed by the Barwick High Court. A new provision in 1981 called Part IVA replaced it.

      As I wrote in 1993 the Courts would look for ways to undermine it too because the debate is not really about what the words of the statue say but about different world views - an unhindered market or a regulated one as being the most beneficial; the state or the market as arbiters of all market relations etc.

      In the last few years the Federal and…

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  16. Gavin Moodie
    Gavin Moodie is a Friend of The Conversation.

    Adjunct professor at RMIT University

    A flat tax would be dreadfully regressive. It would also be easily avoidable by the rich, who can take their increase in wealth as capital rather than as income. It is not worth developing as a proposal.

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    1. Chris O'Neill

      Victim of Tony Abbotts Great Big New Tax

      In reply to Gavin Moodie

      "easily avoidable by the rich, who can take their increase in wealth as capital rather than as income."

      Which begs the question, why is the increase in wealth taxed less than income or not even taxed at all?: http://blog.lvrg.org.au/2007/09/220-years-later-we-still-avoid-issue.html

      One wonders why the so-called Labor Party went along with reducing the tax on rapid capital gains.

      We know what the Liberal Party stands for: preserving the wealth of those who are already wealthy. The question is, when is the Labor Party going to do a less mediocre job of what it stands for?

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    2. Chris O'Neill

      Victim of Tony Abbotts Great Big New Tax

      In reply to Gavin Moodie

      "We know what the Liberal Party stands for: preserving the wealth of those who are already wealthy. The question is, when is the Labor Party going to do a less mediocre job of what it stands for?"

      It's worth pointing out another example of how the Labor Party fluffed it when they could have chosen to leave tax on land alone but instead chose to increase tax on income (or future income to repay the debt) i.e. the Whitlam government chose in the early 1970s to fund a major part of local government, which had previously funded itself, out of federal taxation. Local government was (and still is) quite capable of funding itself from land wealth.

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  17. John C Smith

    Auditor

    We can talk talk but the so called big ends just operate within the law, our local, their local and international. No sovereign nation wants to loose the income their people bring into their countries, the same way we do. But there is a problem when waht is really ours leaks due to our lack of efficiency. Take the TPG -Myer case, waht was the ATO doing until the money left the financial borders. The same applies the so called Wickenby cases. Why did it take so long to collect money from Mr Hogan…

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