Last Friday two news reports perfectly encapsulated why people might feel the economy is rigged against them. First, the ATO released the corporate tax transparency report showing that 28% of companies with annual turnover above $100m paid no tax on their income here. Then came a report by Jonathan Barrett on the impact of the ATO’s new initiative of clawing back old tax debts.
The political reality is if we want a better, more equal society, the government needs to raise more tax to pay for better public services and benefits. But more tax only works if the system is also fair.
As I have said many, many times before, Australia is a very low taxing nation – and this is not without consequences.
It’s not a fluke that Australia is the ninth-richest country in the OECD, but has the fifth-worst rate of poverty among women aged 66 or older (and seventh-worst among men) – we have the worst rate of aged pension for women and the second-worst rates of male aged pension. And not surprisingly Australia raised the 10th-least amount of tax:
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If Australia raised as much tax as Canada – a nation that also has a big mining sector and a population spread over a large landmass – we would have an extra $133bn a year to spend on government services.
That might help lift some people out of poverty.
There’s no secret here – you want to keep retirees out of poverty – have a strong age pension. Those waiting for the free-enterprise fairy to magically lift people out of poverty with its invisible hand will find a nonexistent hand is more accurate:
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So it is good to know the ATO is going after those individuals with years-old debts. That’ll fix it, especially when some of Australia’s biggest companies are not paying any tax at all.
Much like the annual income tax reports highlighting how many millionaires pay no tax, the annual corporate tax transparency release always generates rightful anger at how many large companies also avoid a company tax bill.
This year we are to celebrate that for the first time in a decade, fewer than 30% of companies with turnover of more than $100m went without paying corporate tax:
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And yes, that is good – but cripes, talk about a low bar.
You might think those companies must have had a bad year, or perhaps last year was a dud and so they were carrying forward losses. And sure, that might be the case. But consider oil and gas giant Santos Ltd: 2023-24 marked the 10th year in a row it paid zero company tax. That is despite over that time taking in $46.7bn in revenue:
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At this point all the business advocates will yell that you don’t tax income but profits. And sure, but after a decade are we really saying Santos isn’t making a profit? Especially when you consider Santos’s own 2024 full year report presentation notes it made $1.2bn profit after tax.
I guess that “after tax” part is a bit easier when you don’t pay any.
Other gas companies also treat the tax system as its plaything.
The Japanese company Ichthys LNG is a frequent non-taxpayer. Since 2018-19 they have taken in $43bn in revenue, but not one dollar of taxable income and similarly have not paid one dollar of tax. And neither of course have they paid any Petroleum Resources Rent Tax.
As Patrick Commins reported, while some of the non-paying of corporate tax by some companies is due to carrying over losses and offsets, there is also a lot of shuffling of money around the world.
This gets to the crux of the issue. While we poor taxpayers pay our money where we work here in Australia – and thus are an easy target for the ATO – companies are able to use foreign parent companies and other entities to make it seem as if they made no profit here at all.
Netflix Australia, for example, earned $1.2bn in revenue but had no taxable income at all.
It is tough to estimate the loss of tax revenue from these non-tax paying companies, but we know on average that in 2023-24 the companies that paid tax did so equivalent to 3.6% of their total income.
Given the companies that paid no tax had a total combined income of $651.7bn, if we assume the same percentages, we are talking $23.7bn extra tax.
This is why the government worked with the OECD to introduce a global 15% tax minimum. It also last year introduced laws requiring public country-by-country reporting on tax, income and profits. This prevents hiding money in tax havens such as Monaco, Jersey, Panama and the Bahamas.
But here’s the rub – Donald Trump, with the compliance of the G7, killed the global tax minimum. And US companies are now furiously lobbying Trump and his commerce secretary to treat our public country-by-country reporting as a trade barrier.
While it is fine to argue that the international financial system makes this hard, it is also why suggesting a company tax cut is needed to spur investment sounds pretty hollow. And should individuals come to feel that they are the ones being unfairly punished for not paying tax while large companies get away legally paying nothing, trust in both the tax and political system can quickly falter.
Greg Jericho is a Guardian columnist and policy director at the Centre for Future Work
