Show me the money

Alex Downie wants to take an axe to tax… evaders.

dollaz

Contrary to expectations, the Irish-Bermudan Double-Dutch sandwich is not a gluten-loaded delight, nor an biracial sex act. It is a tax avoidance strategy employed by transnational companies including Apple, Google, Starbucks and Microsoft.

It works like this: your payment for the iPad you bought last week, or that Caramel Ribbon Crunch Frappucino we’re all judging you for drinking, is directed to an Irish ‘paper company’, which ‘sells’ the product to Australian retailers. Royalties are then funneled through Holland and tax-free Bermuda. These companies have, legally, dodged most of their Australian tax obligations.

This is only one of many schemes employed by transnational companies to avoid tax, and the sheer magnitude of tax avoided is astounding. The Economist recently estimated large companies and wealthy individuals have stashed around $20 trillion in tax havens – a figure which is 66 times the estimated $300 billion cost of permanently ending world hunger.

In Australia, corporate taxes are meant to take 30 per cent of a company’s profits. Companies have circumvented this by carefully classifying their revenues as anything but profit. For instance, Apple has paid the Australian Tax Office only $193 million on the $27 billion worth of Apple products bought by Australians since 2002. Apple’s substantial tax savings can probably help explain its generous executive compensation – Apple CEO Tim Cook made $74 million in 2013 – as well as its accumulation of an enormous $158.8 billion cash stockpile.

This tax shirking has provoked the ire of a wide range of politicians, competitors, and lobby groups. Australian competitors complain about the unfairness of paying more tax than Australian offices of multinational companies. As The Sydney Morning Herald has pointedly noted, Google and Fairfax both earned roughly $2 billion last year. While Fairfax, which had suffered a $275 million pre-tax loss, paid $38 million in tax, Google’s total tax expense was less than half a million.

Politicians have also jumped on the bandwagon, with senior politicians from both sides of the isle complaining that businesses should “pay their fair share” of tax. This is because regardless of the truth to Hockey’s warnings of a ‘budget emergency’, there are huge tax revenues at stake. It would cost only $42 million to restore the recently axed Aboriginal Legal Service, a program which helped Aboriginal people transition back into society after release from jail, and it would cost $87 million to reverse all of the Abbott government’s cuts to the arts.

One striking element of the tax avoidance described is that many of its perpetrators are otherwise lauded as good corporate actors. Starbucks, which last year paid corporation tax in the UK for the first time in five years, is noted for offering its workers generous health insurance, holiday time and retirement packages, and just announced a plan to offer free college tuition to both full and part-time workers.  Google is committed to diversifying the notoriously male-dominated tech industry, and its initiatives include an offer for three free months of coding for any women and minorities interested in tech.

Perhaps, then, the solution to tax avoidance is to draw attention to those companies not paying their share. Starbucks made the decision not to claim certain tax deductions last year after pressure from politicians, campaigners and customers.

Google’s unofficial corporate logo is ‘don’t be evil’. Perhaps public ‘tax shaming’ is all that is needed to ensure it – and other companies not paying their share – fulfills that promise.