Multinational tax details to be kept secret
The OECD’s head of tax has rejected calls to publicly release country-by-country breakdowns of taxes paid by multinationals, despite growing pressure from community and transparency groups.
Agencies such as Transparency International and a host of community groups are putting pressure on the OECD and G20 leaders at the summit in Brisbane this weekend to ensure the information is made public, so that companies such as Apple and Google can be held accountable for the amount of taxes they pay.
But Pascal Saint-Amans – who is leading the OECD plan to stop multinationals shifting profits, known as base erosion and profit shifting (BEPS) – said the information was too “commercially sensitive” to be made public.
Prime Minister Tony Abbott and Treasurer Joe Hockey have put tax firmly on the agenda for the G20 summit.
Under the OECD’s current plan, endorsed by G20 leaders, detailed tax information about the amount of tax paid by companies in each country would be collected, but kept private to ensure confidentiality of taxpayer information.
Mr Saint-Amans said there was consensus between OECD and G20 leaders to keep the data collected private and the OECD would not do anything that would jeopardise the progress already made.
“Making it public would make it extremely more difficult to be agreed to,” he said. “For the potential benefit of NGOs to know this you may deprive tax administrations of all this information. We want country-by-country reporting but this [information collected] will remain with tax administrations.”
The OECD’s Common Reporting Standard (CRS), under which signatory nations’ financial institutions would agree to automatically exchange tax information with each other’s tax authorities, has already been endorsed by G20 leaders.
“This would be a crucial part of the OECD’s action plan and another major step towards global transparency in tax affairs,” said KPMG tax partner Jenny Clarke.
But policy advocate at Transparency International, Maggie Murphy, said the European Union was from next year requiring extractive companies and the banks to publicly report their information. “It seems pessimistic to think the OECD couldn’t push this through,” she said.
“We believe that it is necessary to shed light on how multinationals operate. Plans for country-by-country reporting within the BEPS process, should be public. This would have avoided what is now known as the Luxembourg Leaks scandal, and would help citizens, investors, governments and businesses make informed decisions,” Ms Murphy said.
In Australia, companies such as Rio Tinto already publicly report their tax information. And from next year Australia’s Tax Commissioner Chris Jordan will begin publishing the tax information of Australia’s top companies on its website.
Rio Tinto chief Sam Walsh has previously said he was happy with country-by-country reporting. “Transparency exposes where money is spent. Less corruption means less risk. We need to tackle corruption wherever it festers.”
The head of another major NGO, ONE France director Friederike Roder said while country-by-country reporting was a positive move, the information collected should be made public. “The revelations of Luxleaks highlight the urgency for action – the G20 must decide on a public reporting standard this weekend,” she said.
But Mr Saint-Amans said the OECD plan on country-by-country reporting, on which guidance would be delivered over the coming months, would mean multinationals would be accountable to tax authorities and thereby “much more careful in their tax planning”.
Mr Saint-Amans also dismissed criticisms of the Abbott government for agreeing to the automatic exchange of information a year later than most other nations. More than 50 countries have now signed up to the plan to share information, and most will start sharing by 2017. Australia will not have its systems ready until 2018.
Mr Saint-Amans saidAustralia coming on board a year later than others would “not make a big difference”.
He said in the coming months the OECD would also change rules around “permanent establishment”.
The OECD in October released a discussion paper that proposed changing the definition of “permanent establishment” in the tax rules, which currently means a company must have a physical presence to be charged tax. Companies such as Apple and Google have been able to avoid paying tax by saying that they do not have a permanent establishment in Australia and moving their profits to countries like Ireland and Singapore.
Mr Saint-Amans said this would no longer happen once the OECD changes were implemented.
He said the practice by digital companies of structuring all their profits in low-tax nations, when substantial economic activity was taking place in other nations was unfair and would be stopped. Companies had been able to “move the profit from two digits to one low digit” simply because of these old tax rules.
“This has happened for the past 25 years because the definition of permanent establishment was flawed,” Mr Saint-Amans said. “We are fixing this; we are saying you can change your contracts but if your activities don’t significantly change you still pay the tax.”
He said the fact that B20 leader Westfarmers managing director Richard Goyder and others were saying changing the rules would result in Australia collecting less tax from mining companies was an argument being used to deflect attention from the real issue, which was that many companies currently pay no tax in Australia. “When people don’t want things to change, they can use whatever they can,” Mr Saint-Amans said.
