PwC scandal should remind Albanese to stay strong on multinational tax secrecy

It was a breath of fresh air to hear Anthony Albanese, when sworn in as prime minister, commit to tackle inequality. There was a palpable shift in one of America’s closest allies. It brought hope to everyone pushing for a new economic paradigm.

Reversing the enormous growth of inequality of recent decades is one of the great challenges of our time. It won’t happen if corporations don’t pay their fair share of taxes, and today, by and large, they don’t.

Australia is a wonderful place to do business, with good infrastructure, a well-trained labour force and a well-functioning government that effectively implements a rule of law. All this requires money. Yet some of the richest companies seem unabashedly willing to accept these benefits without reciprocating by providing their share of the costs.

Multinationals are particularly successful in tax avoidance. We all know the tricks these global giants play, setting up complex structures to ensure profits are declared in tax havens rather than where the real economic activity occurs. Governments lose hundreds of billions of dollars in tax revenue every year. This undermines local business, forces increases in taxes paid by ordinary citizens, and siphons revenue that’s crucial for a well-functioning society, even for services on which their profitability depends. A crucial step in addressing tax avoidance is to strip away the secrecy that shields this activity from public scrutiny.

This is why the Independent Commission for Reform of International Corporate Taxation (ICRICT), the international body of eminent experts that I co-chair with economist Jayati Ghosh, demands that states require multinational corporations to file country-by-country reports and to make this information public.

A country-by-country report is a simple spreadsheet mapping out a multinational’s activity everywhere that it operates, its employment, revenues, profits (or losses) and taxes paid. This information, if made public, would allow all – governments, citizens, workers, academics, investors, and journalists – to assess a corporation’s tax practices. This would allow for an informed say in tax policy and efforts to reduce inequality.

The Global Reporting Initiative (GRI) has developed a tax standard, including public country-by-country reporting, that is regarded as the gold standard. It is supported by large global corporations and some of the world’s biggest investors. While many companies have adopted this standard, it remains voluntary.

Many corporations, and especially the tax dodgers, do not disclose this information, which means no one can assess whether a corporation is a tax avoider. Because the information is already collected by virtually all corporations, the costs of requiring such disclosure is minimal. Not surprisingly, there is opposition – mainly from the tax avoiders whose nefarious ways would be exposed.