Big corporations have too much power over Australia’s tax system, leaving the government with less resources to fund health and aged care, critics say.

“When a nurse is paying more tax than a multinational company, something is deeply wrong.”

So said Greens leader Adam Bandt when launching his party’s plan to clamp down on corporate tax dodging in November.

The Parliamentary Budget Office estimated the Greens’ plan would claw back around $4.5 billion for the public purse, Bandt said.

In December, The Guardian revealed that 168 of Australia’s biggest companies had paid no tax since 2013, despite reaping profits totalling more than $9.85 billion.

They include household names such as property developer Lendlease and the Australian arms of multinationals, including oil and gas major Chevron and German engineering and technology group Bosch.

ATO deputy commissioner Rebecca Saint told The Guardian there were “legitimate reasons why a company may not pay tax”.

The Guardian said some companies, including Lendlease, are part of property trust groups, where paying tax is the responsibility of the investor rather than the company.

Other companies that paid no tax, such as subsidiaries of BHP and Rio Tinto, are members of corporate groups where another entity pays their taxes for them.

SHIFTING DEBT

Under the Greens’ plan, multinational companies would be barred from artificially shifting debt to Australia to increase tax deductions.

The plan would also stop tax deductions for royalties paid to other arms of the same company.

Research by economists from the University of California, Berkeley and the University of Copenhagen has highlighted the extent to which multinational firms shift profits to tax havens to reduce their tax bills.

The research cited the example of Google, which in 2017 reported US$23 billion (A$31 billion) in revenue in Bermuda, a small island in the Atlantic. Bermuda’s corporate income tax rate is zero.

In 2018, the researchers estimated that Australia was losing 10 per cent of its corporate tax revenue, or almost US$7.6 billion (more than A$10.2 billion) through use of tax havens.

However, the Independent Commission for the Reform of International Corporate Taxation, a global coalition of civil society and labour groups, is pushing governments to do more to tackle tax avoidance, “end the era of tax havens”, and stop the “race to the bottom” on corporate taxation.

PAYING FOR COVID

Around the world, the COVID pandemic has led to major increases in government spending and debt to support health, incomes and employment.

The commission says corporate tax avoidance has left governments with fewer resources to cover the costs of dealing with the pandemic.

The commission adds that reductions in company tax “to stimulate reconstruction investment” will be neither economically effective nor socially desirable.

In Australia, critics of the tax system insist that big corporations have too much power.

“They seem to write their own rules,” Bandt says.

“Take, for example, ExxonMobil Australia, which booked $56 billion in total income over the last six years.

“Each and every year, they reduced their taxable income to $0, mostly through a web of deductible payments to other arms of the same company.”

Obscene levels of corporate tax avoidance

Of Australia’s biggest companies, 168 had paid no tax since 2013 despite reaping profits totalling more than A$9.85 billion.

Australia was losing 10 per cent of its corporate tax revenue or almost US$7.6 billion (more than A$10.2 billion) through use of tax havens.

Exxonmobil Australia made A$56 billion in income over the last six years and reduced their taxable income to $0.

Where the parties stand on TAX

 Coalition

Stage-three tax cuts planned to take effect in 2024–25 will remove the 37 cents in the dollar tax bracket, lower the 32.5 cent bracket to 30 cents, and raise the top tax bracket to start at $200,000 compared with $180,000 now.

The Australia Institute, the Australian Council of Social Service and others say the tax cuts are highly regressive and would pay male beneficiaries twice as much as women.

They say someone earning $200,000 a year would receive $174 a week in tax relief, or 73 times the benefit of those earning $50,000 who would save just $2.40 a week.

All up, the cuts are estimated to cost about $184 billion over the first decade.

Labor

The ALP will retain the Morrison government’s legislated stage three tax cuts, which favour high income earners.

It has dumped proposed changes to negative gearing that were taken to the 2016 and 2019 elections.

Labor sources have argued that changing the stage-three tax cuts to make people earning over $180,000 pay more tax would raise too little revenue for the political backlash it could generate.

The Greens

“Every dollar of tax that the government fails to get from a multinational is an extra dollar they have to either take from an Australian worker or cut from schools and hospitals,” say the Greens.

They are pushing for:

• a new corporate super-profits tax of 40 per cent on big companies
• an extra 6 per cent wealth tax on billionaires
• a mega-profits tax on big corporations earning more than $100 million annually
• a crackdown on multinational tax avoidance.