Australia yesterday said that corporate tax breaks amounted to theft, throwing a spotlight on the issue ahead of European Commission President Jean-Claude Juncker’s arrival in the country for the G20 summit.
Juncker, who took office on Nov. 1, is under intense pressure over generous tax concessions offered to top global companies when he was prime minister of Luxembourg from 1995 to last year.
The commission, the EU’s executive arm, is currently investigating several member states over allegations they offered corporate giants such as Apple Inc, Starbucks Corp and Amazon.com Inc state aid in the form of sweetheart tax deals.
Australia has enthusiastically backed calls to close corporate tax loopholes in its role as host of this weekend’s G20 summit in Brisbane, making it a primary focus of the meeting.
Australian Treasurer Joe Hockey said that the practice of corporations shifting profits from one nation to another to minimize their tax was robbing countries of much-needed revenue and had to stop.
“It is hugely important for the globe that companies pay tax where they earn profits,” he told reporters. “It is theft when someone does not pay the tax that is due to a nation and it undermines the ability of that nation to be able to deliver the sorts of services that are essential to alleviate poverty, to reduce inequality.”
Australian Prime Minister Tony Abbott made similar comments this week, arguing that G20 members needed to work together to ensure its members did not facilitate tax minimization schemes.
Leaked documents made public last week by the US-based International Consortium of Investigative Journalists showed that Luxembourg gave hundreds of global companies huge tax breaks.
However, Juncker defended himself in Brussels on Wednesday, saying the tax arrangements were “perfectly legal” and he had absolutely no “personal involvement” with any of them.
Abbott is expected to push G20 leaders in Brisbane to endorse a common reporting standard for sharing information aimed at increasing transparency and addressing corporate tax avoidance strategies, particularly profit-shifting.
Meanwhile, IMF managing director Christine Lagarde has backed the G20’s pledge to raise economic output by 2 percent in the next five years, but warned it will not create all the jobs needed.
Speaking to the Australian Financial Review from Washington before heading to Brisbane for the G20 meeting, Lagarde said focusing on growth was the right strategy.
Australia has pushed for members to commit to reforms, including cutting red tape and encouraging private infrastructure investment, in a bid to boost the group’s economic output by US$2 trillion.
“Moving the needle up two points over five years is certainly an improvement,” the former French finance minister said in comments published yesterday.
“Is it going to be sufficient to deliver all the jobs that are needed? No. But it’s certainly a step in the right direction if it is implemented,” she said.
In a report ahead of the summit, the IMF said the world economy faced stiff headwinds from sluggish growth in Europe and Japan and a slowdown in emerging economies.
It trimmed its growth forecast for the year to 3.3 percent, from 3.4 percent, citing geopolitical tensions and volatility in financial markets, and urged advanced economies to tackle high unemployment by spending more to generate jobs.
“The recovery is under way but is uneven, fragile and with downside risks on the horizon,” Lagarde told the financial daily newspaper.
On the upside, the Washington-based body said a nearly 20 percent fall in oil prices since September would, if sustained, aid growth. Lagarde said she had a “strong confidence” a deal on the 2 percent goal would be reached this weekend.
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