Corporate tax minimisation costs governments $US1 trillion says accounting insider

Quote:

The big four accounting firms have been branded as aggressive, unethical, and accused of "perpetrating the greatest tax crimes in history" by a leading corporate tax authority. At least $US1 trillion in tax revenue is lost worldwide, and $50 billion in Australia, as a result of aggressive tax minimisation schemes established by the four giant firms who audit the books of nearly all the world's major companies, said George Rozvany, a 32-year veteran of the corporate tax industry. "And I'm a conservative man, I think the figure is actually much higher," he told the ABC. "It's very clear to me that the big four accounting firms are the masterminds of international tax avoidance. "They work with government to deliver what they want for their clients. It's not set in a social context; it's designed to deliver an outcome for their clients." "The people who are most affected are the most underprivileged in our society, those without a voice. The homeless, foreign aid programs." Mr Rozvany spent 32 years working in the corporate tax field, for Ernst and Young, Coopers and Lybrand (now PwC) and the defunct Arthur Anderson. He was head of tax for chemical giant ICI in Australia as well as for the world's largest insurer, Allianz. Mr Rozvany is Australia's most published author on transfer pricing, a technique that multinational companies are using increasingly to shift profits from high tax to low tax jurisdictions. While his legal texts explained how to work within the law, Mr Rozvany argues that sham transfer pricing arrangements are now out of control. "Transfer pricing behaviour clearly is the greatest concern because it's very easy for a transfer pricing expert to dress up a sham transaction as a real commercial transaction," he explained. "I'm talking about service arrangements, intellectual property transfers, such as patents or use of patents, and perceived transfer of goods, sham loans between related parties, but in reality it's all about providing services at too high a price which then shifts [income] to a lower tax jurisdiction." Major firms 'simply too big', should be broken up Mr Rozvany likens the aggressive structures the big four accounting firms have developed for profit shifting to corruption, terrorism and Mafioso activity. "They're all following the same financial sore," he said. "Basically tax avoidance, corruption, terrorism: the money comes from somewhere. And the money typically needs to be hidden for the purpose of the perpetrators. I don't believe the big four are involved directly in terrorism, but their structures are more than likely being used. He cited the Luxembourg Leaks, which revealed the role of major accounting firms in global corporate tax minimisation as evidence of their aggressive tax behaviour on behalf of clients. "Sham structures have been set up in Luxembourg, again, looking like normal commercial transactions but really with a view to being taxed in Luxembourg at 1 per cent as opposed to a 25 per cent or 30 per cent rate in another country," Mr Rozvany observed. "The cost to the international community is enormous." Mr Rozvany argues that the big four should be broken up, and their tax and audit functions separated out into separate firms, a view shared by some European politicians and regulators. He is advocating for the use of anti-trust laws to create eight separate accounting firms and eight tax law practices. "They're simply too big," he argued. Mr Rozvany also advocates for an "ethical tax principal" that would allow companies that adhered to established tax rules, and did not engage in aggressive tax minimisation practices, to qualify for a discounted company tax rate.

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Quote:

'Many things were once legal' The head of tax at Chartered Accountants Australia and New Zealand Michael Croker disputed the critique of the big four accounting firms. "I don't think there is an ethical free zone that these companies or their advisors can inhabit. They are closely monitored by the ATO, by other regulators," he said. We have a really robust tax office, on the job, almost continuously auditing these large companies. "They're backed up by a range of legislative measures which the Government has recently improved in terms of mandatory disclosures, 'come in for a chat' type legislation where these companies and their advisors have to go into the ATO and discuss their commercial arrangements and inter-company tax structures that may be suspicious in the eyes of the ATO and the community. "So they (the big four) are very risk averse, they are very conscious of making sure they stay within the legal parameters and give advice according to the law and, increasingly, within the spirit of the law." However, Mr Rozvany said just because something is legal does not mean it is ethical. "It's an interesting thing, 'within the law'," Mr Rozvany said. "Many things were once legal. Rape and paedophilia were once legal. "If you set up a sham transaction in a tax haven with a view to shifting profits from a high tax jurisdiction to a low tax jurisdiction that should be considered unacceptable to the international community."

There's legal and there's right.... you decide which you want.....

Yeas, saw that on ABC News.

A staggering $B50 each year!!!!!  The ATO ought to leave the Mum and Dad petty cheats (and we all are......don't lie to me about that) alone and dedicate their entire resources to getting that fortune back.

Fifty Billion Dollars every year!

But, I guess there is zero chance of that under a Liberal Govt.

Corporate tax minimisation costs governments $US1 trillion says accounting insider


Damn socialist, you're all just jealous. Everyone knows the real burden is the dole bludgers

Yep it's a global problem and there are certain countries which cooperate & derive wealth out of assisting the tax avoidance industry
And it's not just the micro countries you commonly hear about, such as Bermuda or the Bahamas or Grand Cayman.


The Netherlands is a favoured destination for certain transactions because they don't tax royalties, which commonly are associated with intellectual property.
They also are the location for anonymous "post box" arrangements.
Ireland has been infamous as the home of various s schemes such as the "double Irish".

It is however not a problem capable of easy solution as long as you have different tax systems, the corporate veil and no complete international agreement.

bogarde73 wrote on Jul 11^th, 2016 at 7:51pm:

there are certain countries which cooperate & derive wealth out of assisting the tax avoidance industry And it's not just the micro countries you commonly hear about, such as Bermuda or the Bahamas or Grand Cayman.

I don't know about the others, but the Caymans certainly don't derive any real wealth from it. Their zero corporate tax policy means the only way they can derive any sort of real income through tax is through the GST. And they have over $500 Trillion in profits go through their shores in any given year.

In a doco. I saw a couple of month ago they built a new school using funds donated by the millionaires living on the islands, but the govt. can't afford to pay teachers to man the school because they don't raise enough tax revenue. Now the school sits there empty. 

Grappler Deep State Feller wrote on Jul 11^th, 2016 at 7:36pm:

There's legal and there's right.... you decide which you want.....

No, there is only legal.

crocodile wrote on Jul 11^th, 2016 at 8:47pm:

Grappler Deep State Feller wrote on Jul 11th, 2016 at 7:36pm: There's legal and there's right.... you decide which you want..... No, there is only legal.

Only until it is deemed to be wrong.... then it is set right... all law is flexible and needs to change to suit requirements, especially when it is clear it is not doing its job.

Nothing legal is fixed..... but it is, instead, bound by the Rule of Law as a kind of constitution for law-making.... something that, when applied under a Grappler government, will throw out certain legislative thrusts imposed on us over the past forty years or so, with the express aim of reducing us under despotism.

crocodile wrote on Jul 11^th, 2016 at 8:47pm:

Grappler Deep State Feller wrote on Jul 11th, 2016 at 7:36pm: There's legal and there's right.... you decide which you want..... No, there is only legal.

A bit of hyperbole from the socialists with the thread title, if they were avoiding tax they would end up in jail.

The socialist dim wits should listen to Milton Friedman or even Kerry Packer who said you should get your head checked out for mental illness if you paid any more tax than you have to.

http://www.youtube.com/watch?v=LnwYoOeWZGA

Baronvonrort wrote on Jul 11^th, 2016 at 10:15pm:

crocodile wrote on Jul 11th, 2016 at 8:47pm: Grappler Deep State Feller wrote on Jul 11th, 2016 at 7:36pm: There's legal and there's right.... you decide which you want..... No, there is only legal. A bit of hyperbole from the socialists with the thread title, if they were avoiding tax they would end up in jail. The socialist dim wits should listen to Milton Friedman or even Kerry Packer who said you should get your head checked out for mental illness if you paid any more tax than you have to. http://www.youtube.com/watch?v=LnwYoOeWZGA

That, my son, is precisely why we have company tax - and at a reasonable level of 30% on profit ONLY ... an amazing deal that Jo and Joe Bloggs don't get.... and that is why it should be raised and not lowered... because of the opportunity to hide tax.

The alternative is to tax the Packers of the world for everything they get for free as a fringe benefit contributing to a deemed level of real income.

How about that then?

Grappler Deep State Feller wrote on Jul 11^th, 2016 at 10:48pm:

Baronvonrort wrote on Jul 11th, 2016 at 10:15pm: crocodile wrote on Jul 11th, 2016 at 8:47pm: Grappler Deep State Feller wrote on Jul 11th, 2016 at 7:36pm: There's legal and there's right.... you decide which you want..... No, there is only legal. A bit of hyperbole from the socialists with the thread title, if they were avoiding tax they would end up in jail. The socialist dim wits should listen to Milton Friedman or even Kerry Packer who said you should get your head checked out for mental illness if you paid any more tax than you have to. http://www.youtube.com/watch?v=LnwYoOeWZGA That, my son, is precisely why we have company tax - and at a reasonable level of 30% on profit ONLY ... an amazing deal that Jo and Joe Bloggs don't get.... and that is why it should be raised and not lowered... because of the opportunity to hide tax. The alternative is to tax the Packers of the world for everything they get for free as a fringe benefit contributing to a deemed level of real income. How about that then?

Ideally, it should be abolished. Not entirely practical with the benefit of limited liability but needs to be much lower.

crocodile wrote on Jul 11^th, 2016 at 11:29pm:

Grappler Deep State Feller wrote on Jul 11th, 2016 at 10:48pm: Baronvonrort wrote on Jul 11th, 2016 at 10:15pm: crocodile wrote on Jul 11th, 2016 at 8:47pm: Grappler Deep State Feller wrote on Jul 11th, 2016 at 7:36pm: There's legal and there's right.... you decide which you want..... No, there is only legal. A bit of hyperbole from the socialists with the thread title, if they were avoiding tax they would end up in jail. The socialist dim wits should listen to Milton Friedman or even Kerry Packer who said you should get your head checked out for mental illness if you paid any more tax than you have to. http://www.youtube.com/watch?v=LnwYoOeWZGA That, my son, is precisely why we have company tax - and at a reasonable level of 30% on profit ONLY ... an amazing deal that Jo and Joe Bloggs don't get.... and that is why it should be raised and not lowered... because of the opportunity to hide tax. The alternative is to tax the Packers of the world for everything they get for free as a fringe benefit contributing to a deemed level of real income. How about that then? Ideally, it should be abolished. Not entirely practical with the benefit of limited liability but needs to be much lower.

And taxation then based on income tax according to the scales and as determined by a thorough examination of documents every year and a sifting of their activities?  That would cost companies more... most would be paying in the highest bracket......

Every 'entity' pays tax on income.... why should companies be any different?  And again - company tax is in place to partially offset the ability to shift profits and incomes to non-tax bearing activities.

Grappler Deep State Feller wrote on Jul 11^th, 2016 at 11:41pm:

crocodile wrote on Jul 11th, 2016 at 11:29pm: Grappler Deep State Feller wrote on Jul 11th, 2016 at 10:48pm: Baronvonrort wrote on Jul 11th, 2016 at 10:15pm: crocodile wrote on Jul 11th, 2016 at 8:47pm: Grappler Deep State Feller wrote on Jul 11th, 2016 at 7:36pm: There's legal and there's right.... you decide which you want..... No, there is only legal. A bit of hyperbole from the socialists with the thread title, if they were avoiding tax they would end up in jail. The socialist dim wits should listen to Milton Friedman or even Kerry Packer who said you should get your head checked out for mental illness if you paid any more tax than you have to. http://www.youtube.com/watch?v=LnwYoOeWZGA That, my son, is precisely why we have company tax - and at a reasonable level of 30% on profit ONLY ... an amazing deal that Jo and Joe Bloggs don't get.... and that is why it should be raised and not lowered... because of the opportunity to hide tax. The alternative is to tax the Packers of the world for everything they get for free as a fringe benefit contributing to a deemed level of real income. How about that then? Ideally, it should be abolished. Not entirely practical with the benefit of limited liability but needs to be much lower. And taxation then based on income tax according to the scales and as determined by a thorough examination of documents every year and a sifting of their activities?  That would cost companies more... most would be paying in the highest bracket...... Every 'entity' pays tax on income.... why should companies be any different?  And again - company tax is in place to partially offset the ability to shift profits and incomes to non-tax bearing activities.

There are a number of errors in your assessment. The distributions to the company shareholders are taxed at the receiver's marginal rate less the imputed company tax rate. Where the company happens to be domiciled is completely irrelevant. Even where tax treaties are in place, the shareholder must still make up the difference between the corporate tax rate and their specific marginal rate.

There are only two things that a company can do with their profits. They can either distribute it to the shareholders as in the above point or reinvest it. There is nothing else. The reasons we see these minimisation schemes is to reduce the tax payable on retained earnings. That's the bit that is reinvested and contributes to labour productivity growth. Also the bit that is solely responsible for the rise in living standards and real wages.

Higher corporate tax rates mean that the cost of each increment of labour productivity is marginally higher and is to the detriment of wages growth. Right now, capital productivity is in the shithouse and we are seeing the consequences with zero wages growth despite decent growth in labour productivity.

Higher corporate tax rates are borne more by the providers of labour than by the providers of capital. You're shooting yourself in the foot. It's not the free kick to the big end of town that you think it is.

Baronvonrort wrote on Jul 11^th, 2016 at 10:15pm:

crocodile wrote on Jul 11th, 2016 at 8:47pm: Grappler Deep State Feller wrote on Jul 11th, 2016 at 7:36pm: There's legal and there's right.... you decide which you want..... No, there is only legal. A bit of hyperbole from the socialists with the thread title, if they were avoiding tax they would end up in jail.

Incorrect.

Tax avoidance is legal.

Tax evasion is not.

crocodile wrote on Jul 11^th, 2016 at 11:29pm:

Grappler Deep State Feller wrote on Jul 11th, 2016 at 10:48pm: That, my son, is precisely why we have company tax - and at a reasonable level of 30% on profit ONLY ... an amazing deal that Jo and Joe Bloggs don't get.... and that is why it should be raised and not lowered... because of the opportunity to hide tax. The alternative is to tax the Packers of the world for everything they get for free as a fringe benefit contributing to a deemed level of real income. How about that then? Ideally, it should be abolished. Not entirely practical with the benefit of limited liability but needs to be much lower.

And if company tax is abolished, what then? Do we shift to a full user-pays system for companies where companies pay the FULL COST of EVERY service that is currently subsidised by taxpayers?

Each 457 visa costs the taxpayer about $25,000 per year (unemployment benefits for one unemployed Australian is about $14,000 plus support services for one unemployed person is another $11,000). Companies only pay about $2,000. The cost of each 457 visa should be increased to $25,000 per person per year to meet the full cost of that visa to the taxpayer.

Every university graduate costs up to $200,000 for their degree and companies currently pay nothing when employing graduates (other than the salaries). Companies should make a contribution to pay for those graduates, such as an auction for the best graduates from any course. It's better though simply to tax all companies to fund a well-educated workforce so they can benefit.

Corporate welfare costs the Budget tens of billions. Every cent of corporate welfare - and this includes drought assistance - would need to be scrapped.

We currently subsidise company vehicles that travel on roads that everyone else pays for. No more vehicle subsidies. Instead, company vehicles would need to be taxed for every kilometre they drive. Because fuel excise doesn't cover the full cost of roads, they would need to pay an odometer tax every year that varies according to the size of the vehicle that could be as much as $1 per kilometre. And no more company discounts from toll roads either. Full price!

And this is just a few examples. Companies use a lot of resources and services that are paid for by taxes, and it's simply nonsense to expect them to pay no tax while not contributing to the cost of services they use.

Grappler Deep State Feller wrote on Jul 11^th, 2016 at 10:48pm:

That, my son, is precisely why we have company tax - and at a reasonable level of 30% on profit ONLY ... an amazing deal that Jo and Joe Bloggs don't get.... and that is why it should be raised and not lowered... because of the opportunity to hide tax.

The 1500 largest companies make a combined profit that is about 10% of their turnover. They only pay tax on their profits, so their tax burden is about 3% of their turnover. That is not a large tax burden. Someone working full time on the minimum wage pays a higher percentage of their tax on their gross income (about 10%) than these largest companies.

So we can tax companies on turnover, not profit, and use the proceeds of the turnover tax to reduce tax on profits. With a turnover tax, no deductions would be allowed. Something like a 1% turnover tax would be fair, if paired with a reduction in the tax on profits to 20%, or even 15% if we also abolish dividend imputation and make deep cuts to corporate welfare.

Dividend imputation made sense when the company tax rate was 49% but if company taxes were lowered to 15%, dividend imputation really makes no sense anymore and the administration costs become significant. And as for corporate welfare, much of it is just largesse for private profit. We pay so much corporate welfare to foreigners, we spend more subsidising wealthy foreigners than we spend subsidising poor foreigners with foreign aid.

If you think a 1% turnover tax is too high or a mad idea, just consider that income tax for private individuals can be as high as 45%. If individuals can bear a 45% top rate of income tax, companies can bear a 1% turnover tax.

Bam wrote on Jul 12^th, 2016 at 9:35am:

Something like a 1% turnover tax would be fair,

plenty much in line with what I was thinking as a solution to all the multinational tax avoidance.

It's not like they're suddenly not going to sell their products here if we do introduce it.

Bam wrote on Jul 12^th, 2016 at 9:35am:

The 1500 largest companies make a combined profit that is about 10% of their turnover. They only pay tax on their profits, so their tax burden is about 3% of their turnover. That is not a large tax burden. Someone working full time on the minimum wage pays a higher percentage of their tax on their gross income (about 10%) than these largest companies.

...and just how many people do the top 1500 largest companies employ?  How much tax do these people pay?  How much of that turnover is on-spent into the economy that employs the rest of the tax-payers who pay all the welfare and the ever compounding cost of Govt?  :(

All the Left's anti-corporate mentality does is shoot the economy and hence the electorate as a whole in the foot.  ::)

Bash the top 1500 companies and you just bash everyone.... :-?

Swagman wrote on Jul 12^th, 2016 at 9:43am:

How much tax do these people pay?

THEY pay the tax, not the company. Trying to credit the company for taxes that others pay is despicable

Swagman wrote on Jul 12^th, 2016 at 9:43am:

Bam wrote on Jul 12th, 2016 at 9:35am: The 1500 largest companies make a combined profit that is about 10% of their turnover. They only pay tax on their profits, so their tax burden is about 3% of their turnover. That is not a large tax burden. Someone working full time on the minimum wage pays a higher percentage of their tax on their gross income (about 10%) than these largest companies. ...and just how many people do the top 1500 largest companies employ?  How much tax do these people pay?  How much of that turnover is on-spent into the economy that employs the rest of the tax-payers who pay all the welfare and the ever compounding cost of Govt?  :( All the Left's anti-corporate mentality does is shoot the economy and hence the electorate as a whole in the foot.  ::) Bash the top 1500 companies and you just bash everyone.... :-?

35% of those top 1500 companies pay no tax for various reasons - no profit that year, carried forward losses applied against profits and so on. Some of these companies are profitable companies that contrive to avoid tax. Every one of those companies that pay no tax are contributing nothing to the tax take and are being supported by everyone else, even though they use services that are paid for by taxes. If we brought more companies into the tax system, the tax burden for other companies and individuals can be lowered.

You're the one that keeps posting about the tax burden being borne by so few. That includes companies, so why are you against the idea of a turnover tax?  :-?

Swagman wrote on Jul 12^th, 2016 at 9:43am:

Bam wrote on Jul 12th, 2016 at 9:35am: The 1500 largest companies make a combined profit that is about 10% of their turnover. They only pay tax on their profits, so their tax burden is about 3% of their turnover. That is not a large tax burden. Someone working full time on the minimum wage pays a higher percentage of their tax on their gross income (about 10%) than these largest companies. ...and just how many people do the top 1500 largest companies employ?  How much tax do these people pay?  How much of that turnover is on-spent into the economy that employs the rest of the tax-payers who pay all the welfare and the ever compounding cost of Govt?  :( All the Left's anti-corporate mentality does is shoot the economy and hence the electorate as a whole in the foot.  ::) Bash the top 1500 companies and you just bash everyone.... :-?

All of which is irrelevant, Swag - the fact is they have earned income by utilising all those resources, the same as Jo and Joe (the workers they employ) did using their resources, and companies do not pay income tax at the same rate as Jo and Joe Bloggs, and are constantly pushing for lower and lower tax.

How about we slug them with the tax scale that the individual pays - then listen to the whines...  instead of 30% the majority would be paying the top bracket....

How many workers would give their eye teeth to pay the lowest bracket, especially in the current climate of hidden inflation (mainly through privatisation) reducing the purchasing power of your dollar while raising your costs of living... thus putting pressure upward on incomes to match.....