The Senate committee investigating corporate tax avoidance will this week recommend changes to government procurement processes aimed at levelling the playing field for Australian suppliers who pay tax in this country.
The Labor-chaired Senate Economics References Committee is due to table its interm report on corporate tax avoidance for discussion, including initial recommendations that include measures to force the Australian Taxation Office to publicly reveal bad corporate behaviour. The final report is scheduled to be handed down in November.
The interim report includes a recommendation that government procurement officers be required to find out where a potential suppliers are domiciled for tax purposes.
The recommendation aims to force departments and agencies to consider the tax implications of awarding a tender. Where tenderers are offering equivalent price, quality and value for money, procurement officers would then need to understand where tax would be paid on the transaction.
Further, the committee will recommend that where a department or agency selects a supplier that is domiciled offshore for tax purposes, the agency head, departmental secretary and Minister must be informed of the decision.
It is not clear whether such disclosures would then to be made public. But committee chair Senator Sam Dastyari was yesterday telling anyone who would listen that the more information about corporate tax behaviour was made public, the better the outcomes would be for Australian taxpayers.
Macquarie Telecom, with the support of Australian digital transformation specialist Squiz, has been driving a campaign to have tax issues divulged as part of the procurement process.
In its submission to the economics’ committee, Macquarie Telecom argued the current tax arrangements put local companies at a competitive disadvantage compared to their multinational rivals, which we able to use a variety of balance sheet mechanisms to shift tax liabilities to lower cost tax jurisdictions.
A spokesman for Senator Dastyari confirmed to InnovationAus.com that the inquiry would include the recommendations in relation to procurement. The devil will be in the detail, and the precise wording of each recommendation is not clear, and the local industry will have between now and November to shore up its wording.
Macquarie Telecom had argued in its submission that buying products and services from companies engaged in aggressive tax minimisation schemes, the Government was in the perverse situation of using tax-payer funds to undermine Australian industry.
The move to Cloud-based digital services across government would mean government would enter more contracts of increasing value on which local taxes could be easily avoided. This corporate tax evasion by offshore providers has been looming as a disaster for the local industry.
Senator Dastyari made clear his own desire that tax avoiders be “named and shamed,” and as much information about the tax practices of corporate avoiders and minimizers as possible be put into the public domain. The committee will recommend that the ATO publish a register of the worst offenders.
“If you’re prepared to engage in the dodgiest, trickiest and sharpest practices in so far as tax is concerned, you should have to justify that publicly,” Senator Dastyari said.
“The worst tax offenders should be named and shamed, and should have to justify publicly why they are taking the stance they are taking,” he said.
”The more public disclosure, the more information that is out there, the better the outcomes will be.”
Senator Dastyari said a handful of Australia’s largest companies, together with a group pf multinationals, were using company privacy protections inappropriately to fight any transparency measures.
He did not say what specific legislation or other regulatory mechanisms would need to be reformed in order to implement such transparency.
Senator Dastyari was especially scathing of the US multinational tech companies that appeared before the committee, and specifically argued these companies do not behave in their home markets in regard to tax as they do in Australia and other international markets.
“If these companies were to behave the same way in Australia as they do in the United States, it would be a very different arrangement,” he said.
“If you look at the big multinationals, the tech companies – the Googles, the Microsofts, the Apples – they pay their American taxes on transactions that occur in America.”
“It is the international taxes that we have serious concerns about, and where we need to test – with robustness – the legitimacy of these transactions.”
The Senate Economics References Committees is understood to have been planning to table its draft report on Corporate Tax Avoidance on Monday, but may now delay its publication until later in the week.