Accounting giants say corporate tax advice is within the law

Major accounting firms say they are not doing anything illegal in helping corporations to minimise tax liabilities.

KPMG’s managing partner Rosheen Garnon faced the second day of the Senate inquiry into tax avoidance, which has so far heard Australia is missing out on billions of dollars in tax every year through avoidance and the use of loopholes.

“When we give advice and it relates to structuring it is done within the law, we always act within the law,” he said.

Senator Christine Milne raised concerns that KPMG and other major accounting firms advertise their abilities to aggressively minimise tax for clients.

“What these companies are doing is legal,” rebutted Ms Garnon.

She went on to repudiate suggestions by Senator Milne that the company’s offices in tax havens are acting immorally.

“If the clients have a commercial reason to be there, we will be there,” Ms Garnon added.

Google, Apple, Newscorp and Microsoft conceded to the inquiry yesterday that they do send Australian revenue offshore to more tax effective jurisdictions, but all insisted what they are doing is legal.

Microsoft admitted that the $2 billion it makes in Australia annually goes straight to Singapore, where the company tax rate is significantly lower.

Ernst and Young partner Rob McLeod told the committee Australia’s best bet was to keep working on multilateral tax reform through the OECD.

“Australia has no choice but to ride that process and keep the pressure on, like many other countries will be doing, to have a speedy conclusion,” he said.

“Because the alternative of a single and unilateral solution for joint problems, I believe, will not deliver the dividends that Australia will be looking for.”

That is backed by KPMG, which welcomes a change to tax laws but stresses that it needs to be well thought though and take into account the modern digital economy.

It wants the government to wait until an OECD report paper on the matter is released in September.

“We need to understand where we are going to go with the global changes, understand what impact that will have for the Australian tax base and be sure there should be a good debate about what else we should do,” Ms Garnon told the inquiry.

But Treasury deputy secretary Robert Heferen was more equivocal on whether Australia could act along.

“I think it would depend entirely on what was in that tax reform,” he said.

He told the committee that while Treasury is unable to accurately estimate how much tax revenue is being lost, the fact that 20 per cent of revenue comes from corporate tax makes Australia particularly vulnerable.

“This probably matters more to us than almost any other country,” he added.

The OECD report is expected to outline how multi-national businesses should be taxed.

Ms Garnon raised concerns about whether the ATO and Treasury will have enough resources to be able to move through that quickly.

KPMG has defended its program of having its employees embedded in Treasury and the tax office.

Senator Milne raised concerns about the conflict of interest arising from placing workers in government offices.

“You embed people in Treasury, you embed people and back they come and so you’ve got people writing the laws are also working with people who have an aggressive business in avoiding the laws,” the Senator argued.

Ms Garnon dismissed these concerns, saying that there is only one current KPMG employee working in Treasury and that they have no policy input.