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Recent Media

This section provides a selection of media items posted in the last seven days on issues within TaxWatch’s area of interest. Items of longer-term interest will then be transferred to the monthly archives and may also be filed under he relevant topic in the Tax Policy collection.


ANU study bolsters call for Australian sugar tax

Steven Trask, The Sydney Morning Herald, 7 July 2017

Calls to impose a controversial sugar tax in Australia have been bolstered by a new study led by researchers from the Australian National University. The study, performed in Thailand, suggested that thousands of cases of type 2 diabetes could be prevented every year by cutting out sugary drinks. Lead author Keren Papier, from ANU's Department of Global Health, said the findings could be applicable in Australia. "A reduction in sugary drink consumption is likely to reduce rates of diabetes in Australia," she said. "Several countries including Mexico, the United States, France and Chile have already started acting on sugary drinks by imposing or committing to a sugar tax. "Findings from the United States and Mexico show that applying the tax has led to a 17 and 21 per cent decrease respectively in the purchase of taxed beverages among low-income households." The results came from the massive Thai Cohort Study, which analysed a nationwide sample of almost 40,000 adults between the years of 2005 and 2013. Using a statistical technique called mediation analysis, it showed that diabetes risk increased as more sugary drinks were consumed. "Sugary drinks are an ideal target for public health interventions to help control the type 2 diabetes epidemic since they have no nutritional value and do not protect against disease," Ms Papier said. "Over 4,000 cases of type 2 diabetes could be prevented annually in the Thai population if people avoided drinking sugary drinks daily. "Thai women, who are at double the risk of type 2 diabetes from drinking sugary drinks, would be the main beneficiaries." The sugar tax concept has divided opinion both in Australia and overseas. In February, Assistant Health Minister Dr David Gillespie squashed the idea of introducing a sugar tax. "Cut to the chase: the thing with all of the proponents of sugar taxes, fat taxes, whatever tax, is taxes will make people angry and it won't change what they eat," he said. "This is a day-to-day survival, personal choice issue which transcends economics. People buy what they like and we as a government aren't going to moralise and tell them that we feel better for putting taxes on certain products." The study was jointly conducted with the QIMR Berghofer Medical Research Institute and the Sukhothai Thammathirat Open University in Thailand and results were published in the Nutrition and Diabetes research journal. Top

ATO takes aim at individuals over dodgy expenses

Rosie Lewis, The Australian, 6 July 2017

The Australian Taxation Office will launch a crackdown on dodgy work expenses and rental deductions after revealing the amount of tax individuals had failed to pay was on par with the $2.5 billion owed by large corporations. In a move backed by the major parties last night, tax commissioner Chris Jordan announced the ATO would shift its focus from big business to individual taxpayers and small business, amid warnings that a “startlingly” large number had rorted the system. The agency conducted 350 random audits of people’s tax returns but quickly doubled that number upon discovering “there was a significant element of over-claiming”. “While each of the individual amounts over-claimed is relatively small, the sum and overall revenue impact for the population involved could be significant — in the vicinity of, or even higher than, the large market tax gap of $2.5bn — and that’s just for this category of … work-related expenses,” Mr Jordan said. “This is well and truly in our sights and we will be lifting our education, our support, our attention, our scrutiny and enforcement in this area. We will also work with Treasury and government if we feel there needs to be policy change.” The tax commissioner cited examples of people lodging claims for car expenses where their employer said there was no requirement for them to use their car for work. Another 6.3 million claims were made against clothing expenses at a total cost of $1.8bn. “That would mean that almost half of the individual taxpayer population was required to wear a uniform or protective clothing or had some special requirements for things like sunglasses and hats,” Mr Jordan said. “While many of these claims would be legitimate, I wonder how many people have assumed that they can just claim $150 (the maximum laundry claim without written evidence) regardless of whether or not they have spent that amount on the required items? We want people to get what they are entitled to — no more, no less.” Mr Jordan said preliminary findings from the agency’s “tax-gap analysis” showed many errors ranging from “legitimate mistakes and carelessness through to recklessness and fraud”. A tax gap is the difference between the amount the ATO collects and what it should have collected if every taxpayer were fully compliant. Mr Jordan used his speech to the National Press Club — the first by an ATO commissioner — to unveil the long-awaited figure of unpaid tax by big business — about $2.5bn in 2014-15. He said the relatively low amount contradicted some commentators’ “wild claims” that the big multinationals had avoided paying up to $50bn, when in fact the ATO was receiving 94 per cent of corporate tax owed. But it is other “big pots” of money the tax office will turn its attention to, targeting the $22bn in work-related expenses and $44bn in rental expenses — which he said meant negative gearing had cost $3.6bn in 2014-15. The tax gaps in these markets, Mr Jordan said, could “swamp” that tax owed by big business. “We have to make sure we’re not just focused on one sector, the large corporates, we’re not giving that up … but we feel like we’ve done a lot of work in the last three years in that space,” Mr Jordan said. “We do need to recalibrate into these other areas, the cash ­economy and individuals ... Some people just hear something and there are certain myths out there and innocently. “So, is it a rort? Probably not in that example. But there are people who clearly think they can fudge the figures.” A spokeswoman for Revenue and Financial Services Minister Kelly O’Dywer said it was important everyone paid “their fair share of tax”. The spokeswoman insisted the tax gap for large corporations should narrow because the government had given the ATO greater tax avoidance powers. Opposition Treasury spokesman Chris Bowen supported the ATO’s moves to ensure Australians were “complying with the tax law and paying their fair share”. Mr Bowen said the government needed to get the right tax policy settings in place while keeping across compliance and enforcement measures. “The combination of negative gearing and the capital gains tax discount is not just a major drag on the budget, but it’s also managing to lock out future generations of young Australians from the housing market,” he said. The ATO will formally release its tax-gap analysis for large corporates next month. Top

AustralianSuper 'not concerned' about bank tax

Clancy Yeates, The Sydney Morning Herald, 6 July 2017

The country's biggest superannuation fund has not changed its view on investing in banks as a result of the federal government's major bank tax, despite bank claims the policy will hit all Australians' retirement savings. As AustralianSuper reported returns of 12.4 per cent in its key investment option last financial year, chief investment officer Mark Delaney said he was unconcerned by the impact of the federal bank tax on the country's five biggest lenders. Although he predicted overall returns would be softer in the year ahead, he said that, for a long-term investor, policy changes such as the bank tax were part of the regulatory environment banks faced. "We own bank shares, we own them for the long term. They are a big part of the Australian equity market, and they're a big part of our portfolio for the long term," he said in an interview on Wednesday with BusinessDay. "Given they are a regulated sector, working with the government is a key part of how they manage their business, and at times the government will do things which are favourable to the banks, and at times the government will do things which are unfavourable to the banks. "Bank stocks were off around the bank tax, but they also had substantially outperformed before that. I'm not concerned about it." The view contrasts with claims from the banking industry's peak body, which mounted a campaign against the 0.06 per cent tax on the liabilities of National Australia Bank, Commonwealth Bank, Westpac, ANZ, and Macquarie Group. Australian Bankers' Association chief executive Anna Bligh in May blamed the tax for a sharp fall in bank stocks, adding "every Australian who has a superannuation account will be seeing a loss of value in their account because of this loss of value". The bank tax, which passed the Senate last month, will take about 3 per cent of annual profits. However, last month's home loan interest rate rises from banks could almost offset the impact of the tax, analysts have said. In the year to June, AustralianSuper said its balanced option used by 80 per cent of members returned 12.4 per cent after fees and  taxes.  In the last five years, it has posted an average return of 11.4 per cent a year. However, Mr Delaney said investors should not expect the bumper run to continue, and Australian shares would continue to perform worse than those overseas. The economic environment looked "benign", he said, but sharemarkets would probably not get the boost from investors becoming more optimistic, which occurred last year. "Even though the environment could well be the same, the trigger to get a big price appreciation won't be there," he said. There was also a risk that faster-than-expected interest rate rises from central banks could act as a "headwind" later in the year, he said. In the year to June, Australian shares returned 13 per cent, behind 19 per cent for global shares and 22 per cent for emerging markets. Local shares would continue to lag the world due to the "sluggish" state of the domestic economy, he said. "Australia materially underperformed, and that is despite resources being up 22 per cent last year," Mr Delaney said. "I don't think that's going to change much in the next 12 months." Recent strong returns from infrastructure and commercial property may also soften if interest rates creep up, he said. AustralianSuper has in recent years managed a growing proportion of its assets with its own staff, rather than through external fund managers, and Mr Delaney said this trend had further to run. Its internal team of asset managers, which includes staff in domestic and global equities, outperformed external managers by $100 million. Top

The risks of losing our "tax morale"

Andrea Michaels, InDaily, 4 July 2017

Having reached the end of financial year, our thoughts are turning to tax time. It’s the only time of year most of us give a thought to the ATO. But while most people are mindful to stay within the guidelines, it’s important to crystallise why we need the whole taxation system in the first place, and how it only works if we all play along – both individuals and businesses. The theory around the social norm of compliance is something called “tax morale” and there have been, even to my surprise, countless papers and studies done on it worldwide. It’s obvious that without people paying their fair share of both federal and state taxes, we’d struggle to fund hospitals, schools or infrastructure (and yes, I agree some of our tax money seems to be wasted). So we have good reason to try to understand how important it is for us to be an honest lot, and regard tax cheats with disdain. This is the perfect time of year to check in on ourselves on tax compliance and the level of our tax morale.

It's not just multinationals causing problems

Firstly, some myth-busting. While most of us shake our fists at the multinationals who have concocted elaborate schemes and cunning plans to avoid paying tax at an estimated to cost Australia of $6 billion per year, the fact is our own little indiscretions actually cost the country a fair whack. Australians claim around $21 billion in work-related expenses each year, according to the ATO. While most of this is legitimate, figures from 2014-15 show the ATO conducted around 450,000 reviews and audits of individual taxpayers, leading to ‘revenue adjustments’ (read: forcing people to paying what was actually owed) of around $1 billion in income tax. That’s in just one year and that’s just the small group of taxpayers who drew the short straw. So you can see why we shouldn’t just be complaining about Google or Apple.

Where do we rate on the tax morale scale?

The Centre for Tax System Integrity (CTSI) was established at ANU in conjunction with the ATO to look at issues relating to how the whole system works between government and minions like us and our attitudes to tax policy. It was closed in 2005, but some interesting findings remain. The CTSI found our tax system works largely because it’s a ‘psychological tax contract’ (CTSI, Working Paper No 76, Feb 2005). It only functions at optimum levels when our collective ‘tax morale’ levels (i.e. moral incentives to pay what we owe) are high – and they usually are because we all understand the drill: pay the tax and the government gets stuff done for us. But when the general population starts thinking the tax system is unfair, or tax rates are too high, or it’s widely perceived the government isn’t delivering its share of the bargain, then compliance rates reduce. So, when cultural norms slip and the general consensus says it’s OK to get away with little stretches of the truth on tax returns, we know we’ve hit troubled waters. That’s when we start claiming the coffees that aren’t work-related, or car expenses start being stretched, or we begin attending conferences that aren’t really a self-education expense. Then it’s time for the ATO to hit the panic button. I’ll be looking closely at the 2016/17 statistics to see how we’re tracking given recent attitudes to the state and federal budgets. I think we’ll see the high income tax rates coupled with the Medicare Levy hike start to bite into our morale.

The right balance

While we definitely have some tax reforms we need to work on, overall, I’m sure most of us can see the social benefits of maintaining a fair system that continues to function well. Trust in governments is a key feature globally in measuring tax morale. Maybe Australia might not rate so well right now on the tax morale scale but we need to if we want to get the services and infrastructure we expect from our state and federal governments. Alternatively, we can readjust our expectations and peg them a little lower. Whatever the right balance is between taxing and government spending, I hope at this time of the year everyone can take a moment to understand why we should pay our fair share, no more or no less, and have a happy new financial year while you’re doing it. Top

Coopers Brewery says cheers as South Australia's bank tax is blocked

Simon Evans and James Frost, The Australian Financial Review, 4 July 2017

The chairman of Australia's biggest independent beer company, Coopers Brewery, says the blocking of a proposed state-based bank tax is an important development for South Australia because the tax would have hurt future economic growth. Glenn Cooper, the chairman of the brewer which has a national market share of about 5 per cent of Australia's $14 billion beer sector, said the decision by the South Australian Liberal Party to block the tax by joining with three minor party MPs in the state's upper house of parliament would help shift sentiment and send a strong signal to potential investors. "Stopping this is very important," Mr Cooper said on Tuesday. South Australian Liberal leader Steven Marshall reinforced the Liberal opposition to the tax in his formal state budget reply speech on Tuesday. "The Treasurer seems to think that he can put his hands in the pockets of anyone, anytime he feels," Mr Marshall said on Tuesday. The comments came 12 days after State Treasurer Tom Koutsantonis stunned financial markets on June 22 by announcing the imposition of a state-based bank levy to operate using a similar mechanism to the federal government's major bank levy. An unrepentant Mr Koutsantonis continued to take a swing at the big banks on Tuesday on his Twitter account. He has been critical in the past week of big banks closing branches in South Australia and said on Tuesday that the Australian Bankers' Association, which represents the big banks, were finally celebrating the opening of a new branch - at the Liberal Party's South Australian headquarters. "So nice to open a branch after so many closures," Mr Koutsantonis wrote. Mr Cooper said the state-based bank tax couldn't be justified on the same grounds as the federal government's major bank levy because of the implied guarantee which existed at the federal level for the big four banks and Macquarie, which gave them a funding advantage, with no such guarantee existing at a state level. "To just hop on the back of the federal levy couldn't be justified. To just say - they did it, so we will is appalling," Mr Cooper said. "It's an absolute negative because it's tied to GDP growth," he said. The state-based tax was designed to reap $370 million over the next four years and be levied on a formula of South Australia's share of national GDP, which currently equates to about 6 per cent. The big four banks, ANZ, CBA, NAB and Westpac, have waged a big public campaign against the state-based tax since June 22 and on Monday night applauded the move by Liberal Party leader Mr Marshall to block the bank tax in the upper house of the South Australian parliament. Mr Cooper, who is also the chairman of the national Australian Made, Australian Grown organisation which promotes businesses manufacturing and producing goods in Australia, said the South Australian economy was struggling and needed to do everything it could to attract investment. "Having extra taxes and impositions is not good for business and exporters". Steve Maras, the chief executive of large South Australian commercial and retail property business Maras Group said there were still some legislative complexities to work through in parliament but blocking the tax was overwhelmingly positive news for South Australia. "This is a fantastic win for the state," Mr Maras said on Tuesday. "It's all about confidence," he said. "Taxing your way out of the red is not what we want to see," he added. Despite the optimism surrounding the scuttling of the bill, economists and other experts have pointed out that the state now has a $370 million hole in its budget. ANZ senior rates strategist Martin Whetton said the missed revenue from the bank levy would hurt and the South Australian Government will need to reconsider some expenditure. "No budget can miss such a large percentage of its taxation measures and not feel some pressure," Mr Whetton said. Daniel Gannon, the South Australian executive director of the Property Council of Australia, said that decisions that removed economic handbrakes are welcomed by the property sector. "This is a sensible decision that seeks to remove what would have been a competitive disadvantage for South Australia at a time when we need investment and jobs," Mr Gannon said. Top

ATO signals tax windfall for wealthy

Nick Tabakoff, The Australian, 4 July 2017

The tax office has potentially opened the floodgates for family investment companies across the country to claim back hundreds of millions of dollars in company tax, after issuing a landmark ruling that signals a wave of future ­refunds. The likely refunds would ­extend tax cuts implemented for active trading companies earning up to $25 million in income to passive family investment vehicles that are designed to warehouse, or retain, family wealth. Since 2015, the federal government has reduced the company tax rate for smaller companies by 2.5 per cent to its current level of 27.5 per cent. The Australian Taxation ­Office’s ruling could mean significant refunds and ongoing ­reductions for hundreds of ­thousands of passive family ­investment companies. For ­example, one warehousing $1m of taxable income per year could save $25,000 for each tax year. The Australian understands that the little-known refund issue and the key ATO draft ruling were discussed at length at a high-powered meeting of the National Tax Liaison Group in Melbourne late last month — a meeting ­attended by some of the most senior officials from the ATO, federal Treasury and the tax industry. News of what was discussed at the meeting has in recent days spread through the top echelons of the accounting profession. As BDO senior tax partner Tony Sloan notes: “Everyone is talking about it. The issue is massive. It ­affects a lot of our clients.” However, there could be a sting in the tail if family companies don’t plan their affairs properly. Mr Sloan warned that mum-and-dad shareholders of low-tax companies could be hit if the companies chose to distribute fully franked dividends to them. However, he said many of those types of companies and their shareholders would benefit from the new ruling, particularly wealthy families, as their companies tended to warehouse profits “over years and decades”, and were frequently used as a form of “family bank”. The apparent change of ATO policy emerged in the fineprint of an unrelated draft tax ruling on whether offshore companies were resident in Australia. In it, the ATO appeared to open the way to a broader interpretation of company tax cuts introduced from last year, which saw the tax rate fall from 30 per cent in 2015 to 28.5 per cent in the 2016 financial year and 27.5 per cent in the 2017 financial year and future years. Until the ATO’s draft ruling was issued in March, it had been thought that Australia’s many passive investment vehicles — those mainly used by families and investors to take advantage of a corporate tax rate lower than the general income tax rate — would not be entitled to this cut. When the tax cuts were announced a few years ago, it was made clear they would only apply to companies that carried on a business. However, the ATO has taken a much more generous stance than expected for passive family companies. Its draft ruling states that ­“generally, where a company is established or maintained to make profit or gain for its ­shareholders it is likely to carry on business ... This is so even if the company only holds passive investments, and its activities consist of receiving rents or returns on its investments and distributing them to shareholders.” Sources at the meeting said the ATO had indicated it was working on more detailed guidance on the issue, which would be published “very soon”. “The ATO is aware there is a lot of interest in this topic,” the source said. Mr Sloan said most family investment companies would already have filed a return for the 2016 year at the full 30 per cent company tax rate. He is advising these entities to consider seeking a refund for the 2016 financial year and to review the position for the 2017 financial year. “Even for my own family company, which has a range of passive investments, I filed my return in 2016 at the 30 per cent company tax rate,” Mr Sloan said. “Once the ATO issues its final guidance on this matter that clarifies that passive companies are indeed carrying on a business, I will be looking for a refund as well. I went to a meeting the other day with 10 people in the room, where this issue was discussed. Every person in the room had a family investment company.” The tax cuts affected companies that earned up to $10m in income in 2016-17, rising to $25m this financial year. Top

Petroleum tax: Warning of 'significant damage' to Australian economy if PRRT is replaced

Eryk Bagshaw, The Sydney Morning Herald, 3 July 2017

The author of a landmark report into Australia's petroleum tax regime has warned replacing the existing tax would have damaging consequences despite claims Australia is missing out on billions of dollars in tax from multinational gas exporters. Economist Michael Callaghan, who was selected by Treasurer Scott Morrison to chair a review into the petroleum resource rent tax, defended his findings at a Senate hearing on Monday. "In an increasingly competitive marketplace for investment, I would place a high weight on avoiding policy changes that could potentially significantly damage Australia as an attractive investment location," he told the hearing by phone. "Should investment in Australia be deterred, it would have very damaging consequences to the Australian community and my judgement is we shouldn't take that risk." He told the senators future projects should operate under new tax conditions but rejected the adoption of royalty-style scheme, as has been widely advocated. "By definition the way it's operating now I think is, in some respects, to the detriment of the Australian community," he said. Experts have warned Australian taxpayers are getting ripped off by the scheme that was re-designed by the Gillard government in 2012 and on Monday one of the world's largest mining companies acknowledged "it is not a level playing field". Australia is set to eclipse Qatar as the largest exporter of gas in the world by 2020 but will receive just a fraction of the revenue, $800 million compared to Qatar's $26.6 billion. "We are giving away our resources for nothing," Dianne Kraal a senior lecturer at the Monash Business school told the hearing. She said Australia lagged Papua New Guinea on tax reform for natural resources and urged the government to consider implementing a Qatari style nationwide royalty scheme. Under current regulations companies pay royalties in some states if they are mining on land, but do not pay any royalties to the Commonwealth if they are extracting gas or other resources offshore. The petroleum tax also only applies to companies after they have begun earning super profits, not while they are extracting resources. Australian Tax Office deputy commissioner Jeremy Hirschhorn said revenue from the tax had fallen from $2 billion a year to $900 million over the past decade due to the time it takes projects to get up and running. The revenue from the tax has been cut in half despite company revenues soaring from $5 billion in 2007 to $60 billion in 2017. Mr Hirschhorn said there had been 10 audits of companies paying the tax, with most resulting in an adjustment to how much tax they paid. "We see this as a highly compliant tax," he told the senators. "Whether the rules are right or not is a question for your side of the table." Mining giant Santos, which does not have any projects based offshore but pays state-based royalties for projects on Australian land, said there was a discrepancy between the taxes it paid and those not paid by companies operating offshore. "It is not a level playing field," said Santos' tax consultant Michael Lawry. "It's a completely different fiscal system." Labor has joined with the Greens to accuse the government of avoiding reform at the same time as the multinationals starve the east coast of gas, driving up power prices for consumers. "People are starting to realise it is not a compliance issue, the question is whether or not we have the right settings," said Labor senator Sam Dastyari. "When you look at the effective rate of tax being paid by the offshore gas companies there is a $2.8 billion gap if they were paying the same effective tax rate of the four banks." Greens senator Peter Whish-Wilson said the government did not have the courage to pursue the industry through a mining-tax style campaign after introducing the bank levy. "They haven't got the appetite for the political fight," he said. The government is due to hand down its final response to the review in September. Top

SA bank tax blocked by opposition

Clancy Yeates, The Sydney Morning Herald, 3 July 2017

South Australia's opposition has vowed to block the state government's bank tax in the upper house, after a fierce campaign against the $370 million levy from the powerful banking industry. After a party room meeting on Monday afternoon, opposition leader Steven Marshall said the party would vote against the levy, which he described as "toxic" and "job destroying". The opposition's decision means there will be enough upper house votes to block the tax, which shocked banks when it was announced last month. Several minor party MPs have also said they will oppose the levy. "Jay Weatherill's toxic new tax is a desperate move from a tired and arrogant government," Mr Marshall said. "The Weatherill Labor government's latest tax grab will put a wrecking ball through the struggling South Australian economy by killing off jobs and investment." The opposition had previously signalled it would not oppose the levy, but on Monday it called a meeting to determine its stance on the policy, which is modelled on the Coalition federal government's bank tax. It comes after the country's largest banks have unleashed their lobbying clout to try to kill off the tax, by warning it would have a damaging impact on the state's economy and saying they may ditch investment plans in the state. Banks have also retained lawyers to prepare for a legal challenge, and ANZ Bank last week said it had sold "tens of millions" in bonds issued by the SA government because of risks in the state. Bank bosses welcomed the decision, with Commonwealth Bank chief Ian Narev saying it recognised the need for predictable government policy. "The decision by the SA Opposition to block the bank tax shows a willingness to listen to the community, and show leadership regarding the economic future of the state. ANZ Bank chief executive Shayne Elliott said the Opposition had stood up for the best interests of the state, and the the SA economy was important for the bank's business. "This significant decision for the people of South Australia sends a clear message the state is once again open for business at a critical time for its economy," Mr Elliott said. ver the weekend, polling was published showing a majority of voters in SA opposed the tax, and the Australian Bankers' Association commissioned polling in key marginal seats. The lobby group's chief economist, Tony Pearson, said it was a "sensible decision" to block the tax, which had damaged overseas investor sentiment towards the banks. "The SA bank tax would also place South Australians at a competitive disadvantage to the rest of Australia, at a time when it can least afford to be and when economic policies are needed to attract investment, drive growth and create jobs in the state," Mr Pearson said. The SA bank tax was estimated to hit 0.2 per cent of the earnings of Commonwealth Bank, National Australia Bank, ANZ Bank, Westpac and Macquarie Group, but lenders fear other states may follow suit with their own similar taxes. Western Australia has said it is mulling a bank tax, while other states have played down such a move.   Top

Will the G20 ever end the global problem of tax avoidance and tax evasion?

Tax Justice Network, 3 July 2017

Ahead of the G20 Summit in Hamburg this week our own George Turner has published this op-ed in the German newspaper Die Tageszeitung today. The article discusses why, despite sustained political engagement from world leaders, we are still some way from solving the problem of tax avoidance and tax evasion. Here’s an English translation of the article: Tax justice has become a long established item on the G20 agenda, and rightly so. The leaders met as a group for first time in 2008 in Washington DC. At that first meeting efforts to improve co-operation between tax authorities were discussed. In 2009 leaders committed to ending banking secrecy and protecting public finances. In 2013 the G8 put tax at the top of the agenda for that year’s summit, which called for a comprehensive set of measures to tackle tax evasion by individuals, and tax avoidance by multinational companies. That call was followed up at the G20 meeting later that year. But despite this sustained pressure from the very highest level progress has been slow, and tax evasion and avoidance continue to bleed public services to the tune of billions of dollars a year. Research by my colleague at the Tax Justice Network, Alex Cobham with Petr Jansky of Charles University in Prague, estimates that tax avoidance by multinational companies costs governments $500bn a year. Research by the IMF puts that figure higher, at $600bn. A report released by the British Virgin Islands in June to promote that jurisdiction as a financial centre revealed that this small Caribbean island was home to twice as many financial assets ($1.5 trillion) than previously thought. So why, despite high level political engagement has the issue not gone away? Some progress is being made. Ten years ago when the Tax Justice Network was proposing measures such as country level financial reporting for multinational companies, and the automatic exchange of banking and asset ownership information between tax authorities, we were accused of being utopian dreamers. Now those measures are (slowly) on their way to being implemented, having received the backing of world leaders. However, there is still much to do before we end the scourge of tax avoidance and evasion. Our current tax systems are still stuck in a bygone era when the vast majority of economic activity was conducted by domestic companies. Tax authorities don’t treat companies as global players with global supply chains but instead as a series of national companies joined together by a head office. This system is what creates opportunities for companies to engage in transfer pricing and tax avoidance. Today, in a world of global, multinational companies, many of which have revenues larger than the GDP of some of the countries where they operate, that system is broken beyond repair. What is required is not to fix it, but to change it altogether. What we need is a system where multinationals are treated as single integrated companies, and their profits divided between countries where the real economic activity is taking place. After all, multinationals think and behave as single companies, and so tax authorities should treat them as single companies too. As demonstrated by the ongoing disputes between the United States and the European Union on the activities of US tech companies, moving to such a system is, in the end, a political issue. It requires some discussion on how the profits of international companies should be divided between countries. But currently there is no comprehensive, global political forum where these issues can be hammered out in detail. Although the G8 and G20 have shown considerable leadership, they meet infrequently and have a crowded agenda. They have delegated most of the work on coming up with solutions to the OECD, a policy development institution which does not have global legitimacy, and is perceived to be dominated by the interests of a small, wealthy group of nations. It is also an organisation which is inherently lacking in ambition. In recent years it has twice declared that the age of tax havens is over, the latest absurd pronouncement coming to this G20 meeting in the form of a report on the progress countries are making in implementing global transparency standards. That report names only one nation, Trinidad and Tobago, as not meeting international standards on information exchange. The reality is that the bar which the OECD sets for transparency is so low that passing their test is meaningless. The United Nations has agencies and institutions that deal with a broad range of international issues, from the environment, security, world trade and international development. But it currently has no dedicated agency looking at tax. To build a new tax system that is fit for the 21st century, what is required is a new global consensus. To do that may require more than the occasional statement from the G20 and the well intentioned work of the OECD, but sustained political engagement in a global political institution. Then, rather than make slow progress in combatting this great issue of our time, the international community can make a real impact by ending tax avoidance and tax evasion and helping to provide nations with the funds necessary to address other globally important issues: healthcare, international development and the environment, to name but few. Top