LAST week’s 4 Corners (ABC TV) revealed that files from an offshore law firm showed that the big multinationals organise their finances to avoid paying very much tax. No surprises there, as we have long known this about corporations such as Apple and Nike, but what excited both the media and the public was that these rorts are also practiced by very wealthy individuals such as the Queen, Prince Charles, pop stars, leading sports figures, and members of Donald Trump’s cabinet. Well, perhaps no surprise about the latter.
Having said that it does need to be noted that tax avoidance is not illegal, unlike tax evasion, which most definitely is. The 4 Corners screening revealed that the world’s biggest businesses, heads of state and global figures in politics, entertainment and sport have sheltered their wealth in secretive tax havens. The leak of 13.4m files exposed the global environments in which tax abuses can thrive, and the complex and seemingly artificial ways the wealthy can legally protect their wealth.
Dubbed the Paradise Papers, it revealed, among other details, that millions of pounds from the Queen’s private estate have been invested in the low taxing Cayman Islands, a British territory in the West Indies.
The report also showed extensive offshore dealings by President Donald Trump’s cabinet members, advisers and donors, including substantial payments from a firm co-owned by Vladimir Putin’s son-in-law to the shipping group of US Commerce Secretary Wilbur Ross.
The investigation comes at a time of growing global income inequality. Meanwhile, multinational companies are shifting a growing share of profits offshore, €600bn in the last year alone, as leading economist Gabriel Zucman revealed. “Tax havens are one of the key engines of the rise in global inequality,” he said. “As inequality rises, offshore tax evasion is becoming an elite sport.” Hopefully the disclosures will put pressure on world leaders, including Trump and the British prime minister, Theresa May, who have both pledged to curb aggressive tax avoidance schemes, but we shouldn’t hold our breath waiting for this to happen. The problem is of course that short of world governments unanimously legislating to make tax avoidance as illegal as tax evasion already is, there is no easy solution.
However, there is one action that could seriously put an end to all these sadly legal rorts, which is to crack down on these so-called tax havens, preferably by closing them down entirely, or at least lifting the veil of secrecy they operate under. Interestingly enough, most are British territories.
This has provoked Greens Treasury Spokesperson, Senator Peter Whish-Wilson to propose a very do-able solution. He has called on the Government to call in the UK Ambassador to ask why the UK continues to allow negligent levels of tax secrecy in their Overseas Territories.
“Australia needs to let the UK know that we can no longer tolerate its overseas territories, including Bermuda, the Cayman Islands and the British Virgin Islands, being used by Australian citizens or companies operating in Australia for aggressive tax avoidance and potential tax evasion strategies” the Senator said.
Australia is in the early stages of negotiating a trade agreement with the UK. In Britain’s vulnerable post-Brexit state, our Government must seize the moment and immediately rule out signing any deal which would facilitate further use of the tax and secrecy havens of the UK overseas territories.