The Contradictions of International Tax
9 August 2016, by Miranda Stewart
Prompted by increased political populism globally and heinous financial revelations such as those in the Panama Papers, there is increasing pressure in Australia and elsewhere to crack down on international tax evasion. So, what steps are been taken? And what are the prospects of a secure tax collection regime that can cross borders?
The issue of international tax evasion was directly addressed in the 2016 Budget and it played a significant role in the recent Australian election campaign. Treasurer Scott Morrison said in his budget speech earlier this year, “Everyone has to pay their fair share of tax, especially large corporates and multinationals, on what they earn here in Australia. The Turnbull government has been listening to the Australian people on this issue and is taking action.”
He is not alone among treasurers in discussing tax evasion on a global scale. In the midst of uncertainty about other geopolitical issues including Brexit, China’s South China Sea excursions and Turkey’s coup, international tax diplomacy continues. Nationally and across borders, governments and international organisations are responding to public calls for action on tax avoidance by high-wealth individuals and multinational enterprises by enhancing cooperation.
In Australia, a high-profile senate inquiry into tax avoidance has called evidence from major companies as well as the Australian Taxation Office (ATO) and will report in September. Similar inquiries have been held in other countries including the US and France.
It’s partly in response to the extraordinary work of the International Consortium of Investigative Journalists, which has been driving debate with its explosive Lux Leaks expose in 2014 and the Panama Papers revelations that began in May. The information highlights the use of tax havens to hide assets and accounts of high wealth individuals. The Panama Papers continue to make waves as more data is released, most recently about the secret companies and assets of high-profile leaders and business people from African countries.
There are now significant efforts being made to address international tax avoidance at a multilateral level. The first Inclusive Framework meeting of the OECD-G20 and other interested countries on multinational tax avoidance wrapped up in Kyoto, Japan at the beginning of July. It was part of the OECD-G20 Base Erosion and Profit Shifting (BEPS) project which started in 2013 and for which Australia sought to lead the way during its G20 presidency in 2014.
The Inclusive Framework now includes more than 80 countries on an equal footing, seeking to work together to deal with corporate tax base erosion and profit shifting. Asian countries have been slow to get involved; the Kyoto meeting was the first to include countries such as Papua New Guinea, Pakistan, Bangladesh, Hong Kong and Singapore.
In another part of the OECD-G20 BEPS project, nearly 100 countries have signed the multilateral convention on tax administrative cooperation and committed to automatic tax data exchange. China has signed up and is seeking to lead in tax diplomacy. To that end, it hosted the 105th Forum on Tax Administration including 46 countries in Beijing in May 2016.
Read the full article at Austaxpolicy blog