Over 1,200 of Australia’s biggest corporations paid absolutely no income tax last financial year, including household names like Qantas, Virgin, Netflix, Canva, and Domino’s Pizza. A bombshell report from the Australian Taxation Office has blown the lid off the staggering scale of legal tax avoidance by major companies operating down under.
Billions in Untaxed Income
The ATO’s annual Corporate Tax Transparency report, released Friday, found that nearly one-third of large businesses – 1,253 companies to be precise – had an effective tax rate of zero in 2022-23. That’s despite many generating astronomical revenues. Netflix Australia alone raked in over $1.15 billion, yet didn’t pay a cent in company tax.
Similarly, both Qantas and Virgin Australia carried forward huge losses from the pandemic to completely eliminate their tax bills, even as travel rebounded. Tech unicorn Canva also paid nothing on its substantial earnings.
How Do They Get Away With It?
Now, the ATO is quick to point out there are legitimate reasons a profitable corporation might have no taxable income in a given year:
- Carrying forward losses from prior years, a common tactic for companies undergoing rapid expansion or weathering a downturn.
- Offsetting profits with eligible deductions and concessions, like the R&D Tax Incentive.
- Using transfer pricing to shift income between divisions in different tax jurisdictions.
Canva, for example, said it received the R&D offset which “helps reduce our income tax payable so we can reinvest even more in innovation.” Mining company MinRes paid no direct tax, but claims an associated entity coughed up $240 million.
Slipping Through Loopholes
Still, the sheer number of mega-corporations and multinationals paying zero tax has raised eyebrows. Are too many companies exploiting loopholes and grey areas to minimize their contributions?
“The Australian community can be assured we pay close attention to those who pay no income tax to ensure that they are not trying to game the system,” insisted the ATO’s Rebecca Saint.
The Tax Office argues that enhanced transparency and disclosure rules in recent years have reined in the worst excesses. And overall corporate tax receipts are up thanks to blockbuster profits in mining and energy.
Loopholes Ripe for Reform
Critics say more reforms are urgently needed to make massive corporations pay their fair share. Ideas on the table include tightening standards for shifting intellectual property offshore, a crackdown on digital giants’ profit-shifting to low-tax jurisdictions, and a minimum “floor” tax rate on global income.
As long as loopholes remain on the books, deep-pocketed corporations will find creative ways to drive down their tax bills to diddly-squat. Meanwhile, small businesses and average workers are left carrying more than their fair share of the tax burden.
Counting the Cost
For a country facing ballooning deficits, an energy crisis, and growing inequality, every tax dollar counts. Corporate titans generating billions in profits from Australian customers have an ethical obligation to pay back into the public purse.
Until the rules are tightened, get ready for another year of jaw-dropping revenues and paltry tax receipts from the big end of town. Will voters and policymakers finally demand an overhaul, or will big business lobbyists win again? The ball is in the government’s court to close these glaring loopholes.
