There’s a contradiction at the heart of the Australian government’s relationship with the corporate world.

Many large multinational companies use complicated structures to move money they’ve made in Australia from Australian customers to countries that have lower tax rates and pay the tax there. It’s often completely legal.

Federal governments over the past decade — both Labor and Liberal — have joined and pushed global coalitions to stem such practices that erode the tax base and harm Treasury’s ability to fund the services that keep us safe and build our community.

But, again and again, when our government chooses who to spend our money with it frequently chooses companies that are using legal but controversial methods of ‘profit-shifting’ that reduce Australia’s tax take.

These companies are dudding the very client they’ve been engaged by. The client is you.

Profit shifting

Multinational tax minimisation comes in many forms.

It’s important to note that I’m not suggesting the companies noted in this article have done anything illegal.

In repeated statements they say they have met their obligations by paying in accordance with Australia’s tax regulations. I believe them.

There are also legitimate reasons that companies pay no tax in a given year. 

The Australian Taxation Office’s (ATO) eighth corporate tax transparency report covered almost 2,500 big companies and found 32 per cent did not pay any tax. That could be because they made a loss, a big investment that wiped out profit, or claimed tax offsets that reduced their tax bill to nil.

But many are using complex, aggressive, but usually legal, methods to minimise the amount of tax they pay.

Microsoft’s billions

Last month tech giant Microsoft was lauded by the prime minister for a $5 billion investment to build new Australian data centres and expand training programs.

Microsoft is spending the money up-front — it is entirely the company’s investment.

But you’d have to assume the government will pay an unspecified amount in the future to either rent data storage space or use services from the company over time.

That’s because at the announcement it was revealed Microsoft would work with our super-secret Australian Signals Directorate — the national agency responsible for cybersecurity and online warfare — to build a so-called ‘cyber shield’ dubbed MACS (Microsoft-Australian Signals Directorate Cyber Shield).

The prime minister thanked “Brad” (Microsoft president Brad Smith) and others for the deal, speaking at the Australian Embassy in Washington DC.

Billions in revenue but only $336m taxable income

Just last year a global report from the Centre for International Corporate Tax Accountability and Research (CICTAR) revealed the tech company’s global profit margin was 42.3 per cent … but just 4.5 per cent in Australia.

This suggests it is using complex — but legal — methods to shift money and minimise tax.

In the 2020/2021 financial year, Microsoft had total income of $5.02 billion. On a taxable income of $336 million it ended up paying $94 million in tax.

At the time, a Microsoft spokesperson said the company met the laws of countries like Australia.

In the ATO documents, it was revealed that ‘Microsoft Datacenter’ — presumably the part of the business getting a $5 billion injection from head office — had total income of $828 million in the 2020/2021 financial year.

It declared its taxable income was nil. That could be due to losses, it could be big investments, it could be due to debt expenses. We’ll never know.

But we know one thing: that year it paid $0 in tax.

DP World

DP World is one of the biggest port operators in Australia. 

While it’s generated $4.5 billion in total revenue in the the past eight years it has not paid a dollar in corporate income tax.

That’s the contention of a CICTAR report that suggests the company made payments to offshore related entities and has an ownership structure that straddles The Netherlands, the Cayman Islands and Dubai.

All are known as ‘tax havens’, with conditions favourable to multinational companies.

Again, there are no allegations of illegal activity or behaviour by the company or the people who work for it.

Taxpayers have, at least in some part, supported DP World’s success.

From 2006 to 2020, DP World held a Department of Home Affairs contract that saw it paid $138 million for “material handling services”. An earlier (2006-2012) contract with Australian Customs and Border Protection handed the company $70.6 million for “temporary personnel services”. 

The report’s author, CICTAR principal analyst Jason Ward, says governments should not give contracts to corporations that have a track record of tax minimisation.

Limited data sharing

The tax office isn’t allowed to share data with government that would help it make decisions about which companies to use.

Tax campaigners like Jason Ward want public ‘country by country’ reporting for all multinationals, which would allow everyone to see who pays what, where.

The global parent of the Maritime Union of Australia (MUA) is a financial contributor to CICTAR. The MUA is locked in an industrial dispute with DP World over a proposed new pay deal in Australia.

In a statement, a spokesperson for the company defended the amount of tax it pays. 

Consumer power

There’s no suggestion of illegality. Just a suggestion as a consumer.

If you don’t like how a company operates — and they don’t have a monopoly on what you want — you can take your money elsewhere.

• Unhappy with a restaurant’s service? Go to a different one.
• Didn’t like how a cinema manager treated your Mum that time? See the next film somewhere else.
• Oppose the use of palm oil in products? Buy ones that don’t have it.

Governments have this choice too.

But they continue to reward companies that seem to have a low opinion of government and taxpayers.

Profit-shifting doesn’t happen by accident.

It requires extensive work, expensive consultants and a web of complication.

More importantly, it requires people within companies to make deliberate choices about how to pay tax in a country like Australia, where services funded by taxpayers — schools, hospitals, a secure environment, the court system — make them profitable and safe places to do business.

Big numbers

The government will spend $682 billion in this financial year. 

That’s a lot of money.

And they could have even more to play with if they made “pays A lot Of tax In Australia compared to the competition” a key criteria when assessing government contracts.