Tax Justice in Australia: Ready, Steady, GO

Steps are underway to launch a Tax Justice Network in Australia. The following meetings have been convened in Melbourne and Sydney to get things underway:

• In Melbourne the meeting is: 10 am – 12 pm, Friday 24 February including a light lunch at the end at the ACTU, 365 Queens Street, Melbourne (near Queen Victoria Market) go to level 4, meeting room 4.1 (Bob Hawke Room).

• In Sydney the meeting is at: 10 am – 12 pm, Tuesday 28 February including a light lunch at the end at the Uniting Church Building, Meeting Room 5, Level 2, 222 Pitt Street, Sydney.

• Contact: Marylou Dellosa, Social Justice Admin Officer, t (03) 9251 5271 | f (03) 9251 5241 e Marylou.Dellosa@victas.uca.org.au to RSVP. Places are limited.

Background: Tax Justice Network Australia

The global Tax Justice Network is keen to facilitate the establishment of an arm in Australia.

The Tax Justice Network aims to:
(a) promote sustainable finance for development;
(b) promote international co-operation on tax regulation and tax related crimes;
(c) oppose tax havens;
(d) promote progressive and equitable taxation;
(e) promote corporate responsibility and accountability; and
(f) promote tax compliance and a culture of responsibility

The Tax Justice Network Australia (TJNA) would focus on measures that have international implications. There would be a particular focus on the role Australia can play in stemming illicit financial flows, especially from tax evasion, across the globe. Such measures benefit both Australia and developing countries. The Network will complement, not duplicate, the work of bodies like the Community Tax Forum (which has a focus on domestic tax reform). Some of its work will support measures being called for by other campaigns, such as country-by-country reporting on tax and revenue by extractive industries.

TJNA will also aim to change Australians’ perceptions corruption is a developing country problem, to seeing corruption as a global problem that requires actions by all countries. It will aim to make Australians aware of the efforts of developing country governments and civil society to stem illicit financial flows and the barriers and challenges such efforts face.

It will have a focus on grassroots action, seeking wide support for the campaign goals of the TJNA from members of the community.

What’s the issue?

Taxation plays a vital role in ensuring a just society and a just world. Money lost by developing countries from ‘illicit financial flows’ is vast. It is lost mainly through tax evasion and tax avoidance[1], but includes other forms of corruption and crime. Anti-corruption non-government organisation, Global Financial Integrity, estimated collectively developing countries lost US$1,264 billion in illicit financial flows in 2008, much of this money laundered through secrecy jurisdictions. Africa lost US$64 billion in illicit flows, while the Philippines lost US$16.4 billion, India US$21.5 billion and Indonesia US$16.5 billion. Globally overseas aid in 2009 was only US$120 billion.

In 2008, international management consultancy Oliver Wyman estimated that there was $10 trillion of assets deposited in tax havens around the world. With so much tax revenue lost due to international evasion and avoidance by large companies and wealthy individuals, governments are forced to either reduce public spending and/or increase taxation on less mobile, small companies or poorer individuals.

Australia is not immune from losing tax revenue to tax evasion and tax avoidance by wealthy individuals and multinational companies. The Christian Aid commissioned calculations also found that Australia lost 1.1 billion euros in tax revenue through trade mispricing to the EU in the period 2005 – 2007 and US$1.5 billion in tax revenue through trade mispricing to the US in the same period.

Why Now?

Since the global financial crisis the international community has recognised the need to deal with tax evasion, tax havens and corruption to a greater extent than in the past. The G20 has been moving to act on a number of measures that the TJN, and other NGOs, have been calling for to address these issues. The Financial Action Task Force, the international body that sets the rules on combating money laundering, is in the process of making recommendations to tighten up the rules to deal with tax evasion and government officials stealing public funds and attempting to hide them offshore.

The US Government introduced the Dodd-Frank Wall Street Reform and Consumer Protection Act, which requires companies in the oil, gas and mining sector listed on the US Securities and Exchange Commission to have to report on their revenues, profits and taxes and royalties paid to governments on a country-by-country basis. It has also been taking legal action against Swiss bankers who have been assisting US tax evaders.

India has demanded the global rules on dealing with tax information exchange be altered to assist developing countries in combating illicit financial outflows.

Within the Australian Government there is greater support for addressing tax evasion and the role tax havens play in all illicit financial flows.

As a member of the G20 Australia has a role to play at the global level to combat illicit financial flows. Project Wickenby, which aims to combat tax evasion from Australia through tax havens, has provided a multi-agency example other countries could follow.

What will the TJNA ask for?

Organisations joining the TJNA will have a say in what the campaign asks for, provided it falls within the mandate of the global TJN as outlined above. It also makes sense for TJNA to adopt a number of the campaign asks of TJN, these being:

Objective 1.Automatic Tax Information Exchange
Establishment of an international agreement that would require tax authorities to automatically share information in relation to individuals and corporations, with appropriate safeguards on privacy. Such a system already exists in Europe, and is reported to work well in reducing tax evasion by European citizens.[5]

Objective 2. Country by Country Reporting
Introduction of legislation requiring oil, gas and extractive industry companies to report publicly their revenue, profits and taxes and royalties paid on a country-by-country basis.

Objective 3. Better disclosure of ownership and know your customer rules for financial institutions
There is a need for transparency of beneficial ownership of trusts and companies to combat corruption and tax evasion and enhanced ‘know your customer’ rules by financial institutions on government officials and politicians (known as Politically Exposed Persons). Countries, including Australia, should create mandatory national level registers or any other structure that discloses the beneficial ownership of companies and the beneficiary of trusts.