Australia rejects UN global tax reform, despite talking a ‘big game’
Australia's tough stance on global tax avoidance was undermined by its vote against a “genuine” attempt to fix a “broken system”, academic says.
Despite advocating against global tax avoidance, the Australian government voted against a UN resolution to strengthen the taxing rights of less economically developed nations in November last year.
Kerrie Sadiq, professor of taxation at Queensland University of Technology, told Accounting Times the resolution was a "genuine attempt" to fix a "broken system."
Sadiq and Richard Krever, professor of tax law at the University of Western Australia, wrote that Australia talks a “big game” on global tax avoidance, but its actions at the UN are “hard to square.”
The Australian government has released draft legislation which, if passed, will require all companies with global revenues of at least $1.2 billion to pay at least 15 per cent on the profits they make in the country.
Since 2021, more than 140 countries have promised to do the same as part of a united push against multinational tax avoidance led by the OECD and the G20.
“An international tax system where big multinationals pay their fair share is better for small businesses, better for taxpayers, and better for the economy,” said Treasurer Jim Chalmers.
In November, the UN General Assembly passed a resolution that would give developing nations a greater say in reforming the international tax regime.
The resolution, which is the starting point for a UN tax convention, was designed to be a “counterbalance” to the OECD global tax which, Sadiq said, was developed “with a strong focus on developed nations.”
“It is a pushback against what it sees as the self-interest of OECD nations in wanting to set the rules.
In effect, the resolution aimed to grant stronger taxing rights to the countries in which multinationals generate their profits, rather than those they call home.
The idea was first entertained over a century ago by the UN’s predecessor, the League of Nations, wrote Sadiq and Krever.
At the time, experts at the League determined the fairest model would be one in which taxing rights were granted to those countries in which the profits are generated.
“Rich capital-exporting nations objected. They wanted more taxing rights for themselves and fewer for the nations in which their corporations operated,” they said.
Overwhelmingly, the General Assembly voted in favour of the resolution – with notable exceptions including Australia, Canada, the US, and New Zealand.
“What most of the 125 nations that put forward the resolution had in common was that they were poorer and played host to multinational corporations,” wrote Sadiq and Krever.
“What Australia and most of the other nations that opposed the resolution had in common was that they were rich industrial countries whose multinational corporations invested offshore.”
Australia did not give reasons for its decision to vote against the resolution. Instead, a New Zealand representative spoke on its behalf.
They explained the UN resolution “reflects a narrow appreciation of existing international tax arrangements,” adding “It focused on developing a binding legal arrangement without first assessing gaps in the current system.”
Sadiq said the negative vote among wealthy member nations “confirms the century-old division between the world’s richest countries represented by the OECD and the poorest represented by the UN over taxing rights.” While the UN resolution was successful, countries will not be bound by it.
Australia is taking action on a range of international tax reforms, including excessive debt deduction rules and public country-by-country reporting. For these, and the global minimum tax, it is “to be commended,” said Sadiq.
The problem is these changes are “closely tied to the OECD international tax reform agenda,” and acting on a UN initiative could be perceived as “breaking away from those ties.”
