Global civil society calls on Australian senators to hold firm and deliver corporate tax transparency

LEADING INTERNATIONAL ORGANISATIONS WRITE TO AUSTRALIAN SENATORS, AS LEGISLATION FACES ‘WILD’ CORPORATE LOBBYING

With the Australian Senate poised to vote on long-delayed, world-leading legislation on corporate tax transparency, international civil society organisations and leading economists have written to the Independent senators whose votes could be pivotal, urging them to resist damaging amendments that have been tabled by the main opposition party.¹

This unusual step reflects the global importance of the legislation. If passed, the legislation would deliver world-leading level of transparency, by requiring publication of key country by country financial data for all multinational corporations operating in Australia.² Tax Justice Network-Australia, along with CICTAR (Centre for International Corporate Tax Accountability & Research) and other civil society and union member organisations, has long campaigned for this simple transparency measure, and led the organisation of the global letter.

The Australian government has been subject to unprecedented lobbying against this proposal, including by the OECD, US government and corporates.³ The main opposition party have now brought forward amendments which would allow multinationals to self-certify that any reporting is commercially sensitive, and thereby delay any publication for five years.⁴

The potential swing votes on the Australian legislation are those of three Independent Senators, and so the global letter is addressed to them specifically. The signatories write:

“[W]e urge you to reject the Opposition’s attempt to insert a mechanism to provide the multinational corporations with a self-assessment mechanism where they can declare any information as ‘commercially sensitive information’, to be revealed only in five years. Such a clause will undoubtedly be abused by multinational corporations involved in tax avoidance and profit shifting.

“The basic transparency provided by country by country reporting does not enter into areas of commercial sensitivity. No such mechanism is therefore required – and nor could it legitimately be used by companies. There is zero evidence to suggest that any multinational is commercially dependent on hiding the location of its economic activity from the public, or its competitors.

“There is, however, abundant evidence of multinationals having hidden cross-border tax abuse schemes in such a way as to generate an unfair advantage over others. Those who lose out when such schemes remain hidden include the small and medium-sized businesses which are responsible for the majority of Australia’s employment and economic value added, and typically do not participate in such schemes.”

Mark Zirnsak, coordinator of Tax Justice Network-Australia, commented:

“Australia has taken an important responsibility here, and its vital that the Senate now delivers. This is a measure that will help Australian businesses and Australian taxpayers, by shedding the disinfectant of sunlight on multinationals’ tax affairs, so we can hold them to account. And that sunshine will travel round the world, doing good for the rest of the world too. If ever there was a win-win for policymakers, this is it!”

Alex Cobham, chief executive at the Tax Justice Network, added:

“The global range of signatories to this letter, from leading economists and major international NGOs to key civil society actors from the global South, tells you everything you need to know about the international importance of progress on this vote. The world is looking to the Australian Senate to take the next step towards this basic transparency measure which can save us all tens of billions of dollars by curbing multinationals’ tax abuse.”

Country by country reporting is a basic transparency measure that the Tax Justice Network and a growing global movement including investors have championed since 2003.⁵ By requiring multinationals to provide information about the scale of economic activity in each jurisdiction, as well as declared profits and tax paid, country by country provides a window on the scale and nature of profit shifting. This gives tax authorities the opportunity to target their audits and investigations more tightly, and also gives the public the opportunity to hold both the tax authorities and the multinationals to account. Investors meanwhile benefit from a clearer understanding of the operations and tax risks of corporations.

Where country by country reporting has been introduced (so far only in a more piecemeal fashion), independent research has shown that the measure delivers significant behavioural improvement and increases in tax revenue – and making the data public substantially increases the benefits. Building on that research, the Tax Justice Network has estimated that at least 1 of every 4 tax dollars lost to multinational corporations using tax havens can be prevented through this measure – equating to additional tax revenues worldwide of some US$89 billion, if comprehensive, public country by country reporting was introduced.⁶

The legislation before Australia’s Senate is therefore of global importance – both because of the greater transparency it will provide directly, and because of the momentum it will add to efforts to obtain that truly global coverage of country by country reporting, potentially through the negotiation of the UN framework convention on international tax cooperation which will begin in early 2025.⁷

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Read the open letter

Notes to editor

1. The Tax Justice Network and Tax Justice Network-Australia are publishing an open letter to Independent Senators Lambie, Payman and Tyrrell. The open letter is published online here.
2. Country by country reporting is an accounting method designed to expose profit shifting by multinational corporations. The method requires multinationals to report profits and losses for each country with operations, making it impossible for multinationals to move profits around the world for the purposes of underpaying tax without getting caught. Prior to country by country reporting, multinational corporations were required to only publish the global sum of profits and losses without country-level details. This made it possible to move profits into tax havens before declaring them to tax authorities without getting caught. Evidence discussed in the State of Tax Justice 2022 report (see note 4 below) shows that the transparency measure has been effective in increasing the tax paid by reporting companies, but more than twice as effective when reporting companies were required to disclose their country by country reports publicly instead of privately to a tax authority – demonstrating the value of public accountability in making this deterrence measure more effective. More information about country by country reporting is available in the State of Tax Justice 2022 report.
3. Despite repeated denials from the OECD, the Financial Times reported that the organisation that in theory should support stronger tax transparency had indeed lobbied the Australian government not to go ahead. More details here.
4. As the letter to the Independent Senators notes, the amendment of concern contains “the Opposition’s attempt to insert a mechanism to provide the multinational corporations with a self-assessment mechanism where they can declare any information as ‘commercially sensitive information’. The concealed information will be revealed only in five years. Such a clause will undoubtedly be abused by multinational corporations involved in tax avoidance and profit shifting.” The multinational corporation that lobbied for this amendment at the final Senate hearing on this legislation provides a very clear example of why tax dodging multinationals want to keep their profit shifting in the dark and away from public scrutiny.
5. For a more detailed discussion of the history and development of country by country reporting, see Cobham, Janský and Meinzer, 2018, A half century of resistance to corporate disclosure, Transnational Corporations 25(3).
6. The State of Tax Justice 2022 provides analysis on the effectiveness of country by country reporting, and reveals that requiring multinational corporations that are already disclosing country by country reporting privately to disclose this reporting publicly can prevent $89 billion in cross-border corporate tax abuse a year – equivalent to preventing 1 of every 4 tax dollars lost to multinational corporations using tax havens to underpay tax. The report is published online here, with the full calculation.
7. Further details of the UN agreement on the terms of reference for negotiation of a framework convention on international tax cooperation are in our press release here.