How 76 profitable companies left Australian taxpayers $5.6 billion out of pocket


The biggest multinational companies operating in Australia are paying half the 30 per cent corporate tax rate on average, according to a new report delivered just weeks out from a budget expected to target multinational tax dodging.

A review of two year’s worth of financial data lodged by multinationals including Google, Yahoo!, Microsoft and Samsung found profit-making companies reduced their tax bills by a combined $5.4 billion in 2013 and 2014.

Three tax avoidance experts from the University of Technology Sydney found the average rate of tax paid was 16.2 per cent – or less than the income tax rate paid by a working nurse in Australia.

They found the main tax avoidance techniques are debt-loading, also known as thin capitalisation, where Australian subsidiaries are hit with massive interest bills by offshore divisions of the same company as a way of artificially-lowering taxable earnings here, and profit alienation.

Profit alienation is where Australian divisions are forced to pay large intellectual property fees to divisions based in tax havens and low-tax jurisdictions.

The report suggests that multinational pharmaceutical companies – some of whom were called before the Senate’s inquiry into tax avoidance and criticised for using profit alienation – have the lowest effective tax rate of just 5.7 per cent of their local profits.

The Australian earnings of multinationals pharma companies including Procter & Gamble, Roche, Glaxosmithkline, Sanofi-Aventis Australia and Pfizer were scrutinised as part of the review by UTS academics Ross McClure, Roman Lanis and Brett Govendir.

The report was funded by 1700 GetUp! supporters, whose contributions paid for the release of 200 financial reports lodged with Australian regulatory authorities.

Multinational tax avoidance is shaping as a key election battleground, with a leaked post-budget television advertisement script suggesting the Turnbull government will announce a tax avoidance crackdown, potentially saving billions.

In March last year, Labor announced its first tax policy, a package aimed at limiting profit-shifting that it said would claw back $2 billion for the budget bottom line over fours years.

The issue of international tax evasion has taken on a new dimension since the Panama Papers leak exposed endemic tax avoidance across the globe.

Australian Tax Commissioner Chris Jordan will front a special hearing of the Senate tax avoidance inquiry on Thursday after trying to co-ordinate a global regulatory response to the Panama Papers scandal.

The UTS report found multinationals in the tech sector paid an average 7.5 per cent tax rate.

Companies like Apple, Google and Microsoft were heavily-criticised after they appeared before the Senate inquiry.

Daney Faddoul, a senior campaigner at GetUp!, said the tax lost in 2013 and 2014 would be greater if all multinationals were included in the review instead of just the largest 76 profit-making companies in the top 100.

“Everyday Australians are paying tax at a higher rate than billionaire corporations like Chevron, Apple and Google. These foreign multinationals are inflating their losses and shifting their profits to rob Australia of crucial investment in our local hospitals and schools,” he said.

The budget will be handed down on May 3.

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