Forget raising tax on multinationals

…because private capital is free to roam the world.  Accountants do so much to help companies come up with aggressive tax strategies. Michael West exposes corporations and their accountants over and over, his latest 28 Nov 2015.  I agree with Michael West’s suggestion that “it would be in the national interest for the Big Four audit firms to be stripped of their duties auditing multinationals. That task should go to the Auditor-General as the industry seems unable to cope with the conflict of interest of sticking to its own professional standards while serving the interests of its global clients.” I hope the CPSU takes up this argument. Michael West’s later conclusion to the article was disappointingly tame by comparison “Auditors should be required to rotate every four years.” Not nearly strong enough to counteract the drive of corporations to minimise tax.

Alex Malley, chief exec of CPA Australia accidentally made a case for taking a lot more than auditing into public ownership when he explained how accountants are duty bound to help globally mobile capital get the best deal on tax (23 Nov 2015).

“Companies with operations in multiple jurisdictions will seek to maximise their opportunities to reduce their tax bill.  And if I work for one of these entities, it’s what I would want them to do – keep the company strong, working on new projects, employing more people.  Equally, if I’m a shareholder of one of these entities, it’s what I would expect them to do, within the rules.

“And this is a key point.  Australia already has one of the toughest anti-avoidance regimes of any jurisdiction so if there is overreach, action can be taken.  [The Senate inquiry and Michael West may be rolling on the floor laughing at this point – ed.]

“Blatant, artificial and contrived arrangements are not on. Our anti-avoidance laws empower the ATO to strike down such arrangements, and it is in court on a number of matters seeking to do exactly this.

“The central problem here is not necessarily the behaviour of multinational entities; it’s that our tax regime is plainly uncompetitive compared to many jurisdictions and actually encourages money to flow overseas. As the former boss of US computer chip maker Qualcomm recently said: “If you can choose between San Antonio and Shanghai, and you pay no taxes [in] one place and 25 to 35 per cent at home, you’re encouraged to move jobs overseas.”

“This is the reality of competitiveness in a global, interconnected marketplace where capital and labour are increasingly free to move around.  It’s globalisation writ large – where cherished notions of jurisdictional borders and pristine domestic tax arrangements are breaking down.  In this reality, the challenge for policy makers is to find the acceptable middle ground between companies who, on the one hand, have an obligation to pay their share of tax but an understandable interest in making that share as small as possible, and governments who want a bigger slice.”

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