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Mark Bou Mansour ■ Australia’s new transparency law is “tax havens’ kryptonite”

PRESS OFFICE

Australia’s new transparency law is “tax havens’ kryptonite”

The Australian government has announced1 today new requirements on multinational corporations to publicly disclose their country by country reporting, a type of reporting method designed to expose and deter multinational corporations from shifting their profits to tax havens. The Tax Justice Network developed the world’s first proposal for an accounting standard for country by country reporting in 2003.2

Reacting to the announcement, Alex Cobham, chief executive at the Tax Justice Network, said:

“Australia showed true leadership today by being the first country to cast away the anonymity shamelessly granted to corporate tax abusers and require multinational corporations to come clean about their taxes.

“Australia loses over USD $5 billion in tax every year to multinational corporations shifting profit into tax havens3 – that’s more than the amount the government will spend on the newly announced childcare package over the next 5 years.4

“We know broadly how much tax Australia loses to corporate tax abuse every year, but not which multinational corporations are behind it. That’s because Australia previously used a watered-down version of the transparency measure it adopted today that allowed multinational corporations to stay anonymous when reporting their profits and tax.

“The watered-down transparency measure was set by the OECD, a club of rich countries, some of which are the world’s biggest tax havens5, that has been setting global tax rules for decades. By going beyond the OECD today and requiring multinational corporations to disclose their profits and tax publicly, Australia’s new tax transparency measure will help the country recover the billions it loses to tax havens every year.

“Multinational corporations will no longer be able to cook their books without everybody seeing it.

“The measure will also help lower income countries that have been locked out of accessing data by the OECD – despite the fact that these are the countries that lose the greatest share of tax revenues to multinational corporations’ abuse. The tax that lower income countries lose each year to tax havens is equivalent to nearly half their combined public health budgets.6

“Public country by country reporting is tax havens’ kryptonite. When the Tax Justice Network first proposed country by country reporting in 2003, it was designed to specifically eliminate the secrecy that gives multinational corporations the power to hide their profit in tax havens. Some countries have adopted hollow forms of country by country reporting since then that keep that secrecy intact, negating the point of the transparency measure. But a number of multinational corporations in recent years have voluntarily disowned the secrecy and started publicly disclosing their country by country reporting under the Global Reporting Initiative (GRI) standard, the gold standard for public country by country reporting.7

“We urge Australia to deliver the full benefits of their leadership by adopting the GRI standard for the required reporting, which is supported by investors and a growing number of leading multinational corporations because it provides much more rigorous and robust data than the heavily-lobbied OECD standard.

“We urge the EU to draw courage from Australia’s example, and to raise their own forthcoming requirement for public reporting to include all countries, not only EU member states.8

“We urge the US to follow suit, starting with the Securities and Exchange Commission which we understand is considering making public country by country reporting a requirement for all US-listed companies.9

“Finally, we applaud the work of our partners TJN-Australia and CICTAR10 in supporting the development of Australia’s leadership against multinationals’ tax abuse, and the Australian Labor Party for adopting and sticking to its manifesto commitments. The Australian government can show further leadership by supporting the start of negotiations on a United Nations tax convention, now being discussed at the UN General Assembly11, which could finally deliver the effective and inclusive, global tax reforms that are required.”

-ENDs-

Notes to editor

  1. The Australia government announced the new country by country reporting requirements today in its new Budget October 2022-2023.
  2. More information on country by country reporting is available here.
  3. Data from the State of Tax Justice 2021, published by the Tax Justice Network with the Global Alliance for Tax Justice, Public Services International and FES, which finds that the world loses $483 billion in tax a year to global tax abuse committed by multinational corporations and wealthy individuals.
  4. More information on the announced childcare package is available here.
  5. OECD countries and their dependencies ranked among the highest countries on the Tax Justice Network’s Corporate Tax Haven Index 2021, a ranking of countries most complicit in helping multinational corporations underpay tax.
  6. Data from the State of Tax Justice 2021, which finds that lower income countries collectively lose the equivalent of 48 per cent of their public health budgets.
  7. More information on the GRI standard and on demands from investors on the OECD to adopt the standard is available here.
  8. The EU’s attempt in 2021 at adopting public country by country reporting rattled multinational corporations’ woodwork but failed to deliver meaningful transparency. The attempt was characterised by shameless lobbying by companies that benefit from financial secrecy – the French government’s position was revealed to have been directly written by lobbyists, and the outcome reflects that entirely. More information is available here.
  9. More information on the US SEC (Securities and Exchange Commission) considering public country by country reporting is available here.
  10. Read CICTAR’s statement welcoming the Australian government’s announcement here.
  11. Countries have begun discussions at the United Nations this month over whether to establish a UN tax convention – which could slash the scope for tax abuse by multinational companies and wealthy individuals, in the biggest shakeup in international tax rules for a century. More information is available here.