Contributed by Joe Montero
Foreign multinationals operating in Australia are being driven mad by debate in the Senate over stronger tax transparency laws that apply to them. It’s not that the discussion in the Senate is about putting an end to the corporate tax avoidance industry. it is about introducing a little more disclosure to the Australian Taxation Office (ATO), and that the information should be available to the public.
This has been enough to prompt into action a large group of foreign based multinationals to go onto the offensive. Led by the giant conglomerate SwissHoldings, claiming to represent 62 Swiss based multinationals, and Roche, the German based pharmaceutical giant, have in effect, threatened an investment strike.
This is what SwissHoldings, which owns Nestle, Philip Morris, Johnson and Johnson, and Schindler, in its portfolio of companies, included the following in its submission.
“We are deeply concerned about this measure and kindly ask to clarify how an Australian regime could obligate such public disclosure of non-Australian information of foreign groups including that of our member companies.
“We kindly ask that at the very least, the enactment of any legislation is delayed such that our member companies can better assess its consequences on their entire global operations and their current and proposed future investments in Australia.”
Make no mistake. The implied threat is real.
Similar submissions to the Senate by PwC and the other and the other three of the big four corporate advisory firms underlined the position. Deloitte explicitly warned Australia not to risk a push back.
The threat should be taken seriously.
Imagine the outcry if unions threatened to damage the economy if the government didn’t do what they are told. There would be an outcry from politicians. Editorials up and down the country would be proclaiming a calamity if the threat is tolerated. But when the multinational corporations threaten, there is a wall of silence. This just goes to prove how much power these multinationals have in their hands.
Labor is in government and talking. But what is being proposed is only a watered-down version of its own policy. The promise had been to ensure an end to the corporate tax avoidance industry. now it is only about greater disclosure.
The present debate revolves around what is being called “country-by-country” reporting. This means that information about the financial affairs of foreign based multinationals, including their tax strategies, should be passed on and available to the public.
It is enough to drive these multinationals into an offensive. We can assume they fear the impact on public opinion and the demands for change that might be fanned by disclosures. If this is the case, there must be damning information, including how the Australian tax system is manipulated for creative accounting to understate profit and the use of tax free havens.
Then there is the PwC scandal involving the mechanics of how this tax evasion takes place. More disclosures of this type would be incredibly inconvenient.
This is why there is a push back, and why we can expect this to become more pronounced soon.
One thing we must understand is that a big group of multinationals, and not just the Swiss based ones, are intent in their shared goal of making this a no-go area for Australia.
Australia’s interests would not be served by complying with their wish.