Enforce company tax, don’t browbeat welfare recipients

Chris Fotinopoulos / 11 March 2017

Tackling global tax avoidance requires long-term vision, but it’s what Australia needs, writes former RSA board member Chris Fotinopoulos.

Source: Enforce company tax, don’t browbeat Centrelink welfare recipients – Crikey

Whenever politicians call for budget repair, ask how they plan to stem the billions that flow out of the country through tax-minimisation schemes favoured by certain global corporations.

Not only is there a public insouciance to such schemes, there is political reluctance to do anything significant about it. It seems far easier to shake down the underprivileged than recoup revenue lost to the tax-privileged few.

The Minister for Human Services, Alan Tudge, stated early this year that Centrelink’s debt-retrieval program had identified $300 million in overpayments to welfare recipients, which would undoubtedly go some way towards budget repair.

But IKEA alone could do a lot help to cover this figure. As identified in a report produced by the Australian Tax Office, IKEA’s tax bill for 2014 was $14 million, which is just 1.82% of its $766 million turnover. And according to documents lodged with the Australian Securities and Investments Commission, IKEA enjoyed even better sales and earnings last financial year after posting sales of $969.5 million in the 12 months to August 31. But the cost of advertising, depreciation, wages, “franchise fees” and “other expenses” reduced IKEA’s pre-tax profit to $37.5 million from which the company paid just $10.7 million in tax.

I’m no tax expert, but the financial impost seems a little light for an organisation that does a lot of business in Australia.

All businesses, from large multinationals to family-run shops, seek to maximise profits. And many do so by manipulating their finances, as my dad did when he ran the family milk bar four decades ago. Despite no formal education, he juggled multiple sets of books with the acumen of a financial expert.

Much like a hunter who keeps his shotgun and ammunition in a separate sections of the home, he ensured that the “real” retail figures where close at hand in a spiral-bound notebook in a valise under the bed while the “official” book was readily available beneath the shop counter for the tax auditor to peruse.

[Wayne Swan: no Australia Day honours for tax cheats]

Unethical as his bookkeeping practices were, they did not insulate his business against the bigger players. Eventually, due to the franchise-friendly conditions of the ’80s, coupled with the relaxation of trading hours, the local milk bar fell by the wayside to 7-Eleven, the “take away” to McDonald’s, the local hardware to Bunnings, and the family-run furniture shop to IKEA.

Out of all the mega-stores that vied for the largest showroom in the southern hemisphere, it was Ingvar Kamprad’s IKEA that revolutionised, with a simple turn of an Allen key, the Australian home.

When Australians are not entertaining in their homes, they’re decorating, restoring, extending, reconfiguring, redesigning or tarting them up. And any business that meets efficiently and inexpensively our perpetual appetite for home improvement is bound to do well.

The key to selling turns on marketing. And IKEA’s prime marketing objective is to sell its saintly aura. Just like the Catholic Church, IKEA gives. And going by its slick advertising campaigns, IKEA gives to the displaced. It gives to the stateless. It gives to humanity. And, in the ultimate act of giving, Kamprad gave his entire fortune to a charity dedicated to “preserving architectural integrity worldwide”. Recompense, perhaps, for the lobster-trap stores designed to ensnare unsuspecting shoppers in a maze of fluorescent-lit corridors crammed with stuff.

But IKEA’s ostentatious acts of “giving” neatly offset the financial gains that are kept safe in tax-friendly jurisdictions such as Luxembourg and the Netherlands.

Homewares is where the money is, and Kamprad built his homewares empire away from home. He fled his high-taxing homeland of Sweden in 1973 for the tax forgiving Switzerland, making him a refuge of sorts, which probably explains his company’s sympathy for those who flee their country of birth for a place where hopefully, one day, they too will be accepted into the “IKEA family” — a phrase that IKEA has registered as its trademark. Pick up the current issue of the IKEA catalogue or, as Chuck Palahniuk describes it in Fight Club, “the new bathroom pornography”, and you will learn about IKEAs dedication to the displaced by providing “dignity, safety and privacy to refugees in camps” in the form of a flat-pack under its “Better Shelter” program.

[Why Australia’s economy is failing]

Impressive as the Swede may be, his controversial business practices are overshadowed by the tax-avoiding behemoths of Google, Uber and Amazon, whose presence in Australia is becoming increasing prominent.

Tackling global tax avoidance of this magnitude requires long-term vision, political courage, global co-operation and a genuine commitment to ethical revenue raising practices.

Last year, the EU proved that this is possible by publishing a list of non-co-operative jurisdictions with the purpose of screening and imposing sanctions on countries that refuse to change unethical tax practices. And just as Europe confronted corporate cozening by working with its economic partners, so should Australia look to its regional partners to do the same.

Australia, as a founding member of Asia-Pacific Economic Co-operation, can use its influence to build an economic environment where, as stated in a key report produced by APEC’s business advisory council to APEC economic leaders in 2015, “legal certainty, absence of corruption, regulatory enforcement [and] fundamental rights …” are central to economic policy.

Sounds like a call for reform to revenue-raising systems that target those who have very little to give while allowing corporate giants to take more than they deserve.

All the more reason.