Australian Treasurer Jim Chalmers unveils the 2023 budget

Australian Treasurer Jim Chalmers unveils the 2023 budget in the House of Representatives on May 9, 2023 in Canberra.

(Photo: Martin Ollman/Getty Images)

OECD Pushed Australia to Drop Plan Aimed at Showing Where Corporations Pay Taxes

"What little credibility the OECD had is now in tatters," said one campaigner. "The OECD makes promises about ending global tax abuse but was evidently doing everything it could behind closed doors to protect tax abusers."

The Financial Timesconfirmed Friday that the Organization for Economic Cooperation and Development lobbied Australia to weaken a law that would have compelled about 2,500 highly profitable multinational corporations to reveal where they pay taxes, eliciting outrage from tax justice advocates.

Citing two unnamed people familiar with the discussions, FT reported that the Paris-based club of wealthy nations "pressured Australia's ruling Labor government to drop a crucial part of a new finance bill that would have required some multinationals to publicly disclose their country-by-country tax bills."

"This shows the true colors of the OECD."

According to the newspaper, "The OECD, which has driven efforts to force the world's largest companies to pay their fair share of tax, believed the bill would have undermined its own efforts to make multinationals' affairs less opaque."

Campaigners were incredulous given that the legislation the OECD enfeebled "would have delivered the biggest transparency breakthrough to date on the taxes of multinational corporations," as the Tax Justice Network put it.

The advocacy group estimates that multinationals shift more than $1.1 trillion of profit into tax havens annually, costing the world $312 billion per year in foregone corporate tax revenue. It also calculates that at least 1 of every 4 of those lost tax dollars could be saved if corporations were required to publish country-by-country reporting data.

"The OECD yet again doing the bidding for big business, the only winners here," tweeted Nabil Ahmed, economic justice director at Oxfam America.

Ahmed's observation was shared by Isabel Ortiz, the former director of social protection at the United Nations' International Labor Organization, who said, "This shows the true colors of the OECD and who [it is] serving."

Australia's original proposal "would have exposed unprecedented details about companies' tax affairs in each country they operate," FT reported, aiding efforts to crack down on tax evasion by forcing an estimated 21% of the world's multinational corporations—including many of the biggest firms in history—to come clean about "how much of their revenues are booked in low-tax jurisdictions."

As the newspaper explained:

The bill was expected to clear the Australian parliament in June and come into force on July 1. However, the version of the bill that passed last month removed crucial disclosures, with the Australian government announcing a delay of the planned public country-by-country tax reporting regime for a year.

People close to the decision said officials from the intergovernmental body had stressed to the Australian Treasury that countries that signed the 2015 OECD agreement did so on the basis the tax reports would not become public.

"This is not a good look for the OECD," the Fair Tax Foundation wrote on social media. "Their work is by definition consensus-based and often lowest common denominator. If a country wants to push on and do something more substantial, they should applaud, not oppose."

David McNair, executive director of global policy at the anti-poverty nonprofit One, argued that "this story seriously undermines the OECD's credibility in the one area that it was leading in recent years."

"I hope it prompts some soul searching on the mission and values of the organization," he added.

"OECD has put itself firmly on the side of secrecy—on the side of tax abuse—against one of its members. That's an extraordinary state of affairs."

As FT observed, "For the past decade the OECD has spearheaded global efforts to close loopholes and restrict the use of tax havens after it was asked by the G20 in 2013 to address the growing problem of corporate tax avoidance."

"While large multinationals already report some country-by-country data to tax authorities under an international agreement brokered by the OECD in 2015, the Australian proposal would have disclosed additional new data points," the newspaper noted. "And crucially the OECD country tax reports are not shared with the public."

FT's article corroborates earlier reporting by the Center for International Corporate Tax Accountability and Research (CICTAR) and the Tax Justice Network.

Two weeks ago, immediately after the Australian government unexpectedly postponed key components of its landmark bill, both groups suggested that "lobbying against the legislation by multinational corporations and their professional enablers may have been bolstered by the OECD itself—the organization which claims to set international tax rules in order to reduce corporate tax abuse."

In the wake of FT's bombshell story, Tax Justice Network chief executive Alex Cobham said in a statement that "what little credibility the OECD had is now in tatters."

"The OECD makes promises about ending global tax abuse," said Cobham, "but was evidently doing everything it could behind closed doors to protect tax abusers."

Cobham called it "genuinely shocking to see it confirmed that the OECD has lobbied its own member country against introducing a key measure to fight corporate tax abuse."

"Public country-by-country reporting, when it arrives, will increase revenues around the world to the tune of billions of dollars, by exposing the most egregious profit shifting," Cobham continued. "Investors will benefit from reduced risk in their shareholdings, and employees will benefit both from lower risk and from the chance to negotiate fairly based on a true reporting of the profits of their work. Smaller and domestic businesses will benefit from a more level playing field, instead of a system that subsidizes multinationals' tax bills by effectively granting them immunity from abuse."

"OECD has put itself firmly on the side of secrecy—on the side of tax abuse—against one of its members. That's an extraordinary state of affairs," he added. "And it couldn't send a clearer signal to countries wondering whether the OECD's proposed tax rules will help them to curb tax abuse. They won't, and countries should pursue their own alternatives while preparing for negotiations to establish a proper tax body at the United Nations instead."

As economic historian Adam Tooze pointed out, the OECD strong-armed Australia's left-leaning government while being led by Mathias Cormann, a right-wing Australian who previously served as the country's finance minister.

On Saturday, Cormann said in a statement that "the OECD has a proud record of facilitating global cooperation on tax policy and administration, to help ensure globally effective measures to tackle multinational tax avoidance."

"Suggestions the OECD pressured Australia into weakening legislation to tackle such tax avoidance are false," he claimed.

Cobham criticized Cormann's response, pointing out that the OECD secretary-general goes on to admit that the body's experts "raised a number of technical issues," after which Australian lawmakers watered down their proposal.

According to Cobham, the "possible unintended consequences" brought up by OECD experts are "flat wrong." He added that "Cormann seems to have confessed that the OECD did lobby Australia to weaken their proposals to fight corporate tax abuse... and also that they used a false threat to do so—one which, as experts in their own standard, they surely knew was erroneous."

Join Us: News for people demanding a better world

Common Dreams is powered by optimists who believe in the power of informed and engaged citizens to ignite and enact change to make the world a better place.

We're hundreds of thousands strong, but every single supporter makes the difference.

Your contribution supports this bold media model—free, independent, and dedicated to reporting the facts every day. Stand with us in the fight for economic equality, social justice, human rights, and a more sustainable future. As a people-powered nonprofit news outlet, we cover the issues the corporate media never will. Join with us today!

Our work is licensed under Creative Commons (CC BY-NC-ND 3.0). Feel free to republish and share widely.