Editorial
Tax craven

Late on Wednesday night, the Coalition and the Greens struck a deal on tax avoidance that will see Australian companies with revenues greater than $200 million a year forced to make public their accounts.

As part of the deal, multinational companies with turnovers of $1 billion or more will have to file general purpose financial statements in Australia, as ASX-listed companies do.

These measures are each important and incomplete.

A little earlier in the week, Mark Zuckerberg had a daughter and announced that over time he would give away 99 per cent of his holdings in the company he founded, Facebook.

“Like all parents, we want you to grow up in a world better than ours today,” he posted in an open letter to his child, Max, on the social networking site.

“While headlines often focus on what’s wrong, in many ways the world is getting better. Health is improving. Poverty is shrinking. Knowledge is growing. People are connecting. Technological progress in every field means your life should be dramatically better than ours today.

“We will do our part to make this happen, not only because we love you, but also because we have a moral responsibility to all children in the next generation … Our society has an obligation to invest now to improve the lives of all those coming into this world, not just those already here.”

The two events – Zuckerberg’s announcement and the crackdown on tax avoidance – are not connected. But together they frame an important question.

Based on the company’s current valuation, Zuckerberg’s promised bequest is worth about $45 billion. A company filing said that “during his lifetime, he will gift or otherwise direct substantially all of his shares of Facebook stock, or the net after-tax proceeds from sales of such shares, to further the mission of advancing human potential and promoting equality by means of philanthropic, public advocacy, and other activities for the public good.”

Philanthropy from the very rich is to be welcomed. As Microsoft founder Bill Gates has shown, giving can have a contagious effect. Non-commercial research can be made viable. People can be dragged from poverty. Global initiatives can be started.

But for Gates, as for Zuckerberg, this generosity comes at the expense of tax. This is true of much commercial altruism. Zuckerberg’s gift is a reminder that he has shirked responsibility to a state revenue system that is itself concerned with “promoting equality” – however flawed that system might be.

According to Facebook’s first annual report after its public offering in 2012, it paid no tax on its $1.1 billion US profit. Instead, the company received net tax refunds of $429 million.

At this year’s senate inquiry into corporate tax evasion, Microsoft revealed it offshored most of its Australian profits to Singapore – $2 billion, against the $100 million booked here.

Each year, $25 billion of revenue from the top 900 Australian companies is lost to tax minimisation.

This is tax that should have been used for health, for education, for social welfare, for foreign aid. Its absence produces the very inequalities Zuckerberg now announces he intends to address.

This is not to dismiss Zuckerberg’s intentions, or the intentions of other philanthropists. But it is a reminder that in avoiding tax and then making donations they privatise government responsibilities.

Corporate ingenuity has its benefits in combating global problems, but it also suffers from its whims. And the public should rightly ask which is better: an agile but unaccountable philanthropy, or a properly resourced state.

Both can exist, but one will always be at the expense of the other.

This article was first published in the print edition of The Saturday Paper on Dec 5, 2015 as "Tax craven". Subscribe here.

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