New report demolishes Liberals’ argument for corporate tax cuts
Multinationals move $16 billion from Australia to tax havens each year.
A groundbreaking report has found that corporate tax rates have been driven lower by multinational corporations shifting profits to tax havens rather than by competition for capital among different countries.
The Turnbull government has argued that lower company taxes will encourage companies to invest in Australia, boost productivity and lift wages.
The study, written by economists from the University of California, Berkeley, and the University of Copenhagen, and published by the National Bureau of Economic Research, debunks this idea.
“Machines don’t move to low-tax places: paper profits do,” it says.
“By our estimates, close to 40 per cent of multi-national profits were artificially shifted to tax havens in 2015. This tax avoidance and the failure to curb it are the main reason why corporate tax rates are falling globally, not tax competition for productive capital.”
Australia’s corporate tax revenue was reduced by about seven per cent by profits moved to offshore tax havens – roughly $5.4 billion in lost revenue in 2017.
The paper outlines how multinational corporations such as Google, Apple and Facebook have changed the global tax system.
“In 2016, Google Alphabet made $19.2 billion in revenue in Bermuda, a small island in the Atlantic where it barely employs any workers nor owns any tangible assets, and where the corporate tax rate is 0 per cent.”