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The OECD helped persuade Australia to water down a law that would have required thousands of multinationals to publicly say where they pay tax.
Two people familiar with the discussions told the Financial Times that the Paris-based organisation 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.
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.
However, the Australian bill would have exposed unprecedented details about companies’ tax affairs in each country they operate — a move campaigners say could have helped clamp down on tax avoidance by forcing companies to reveal how much of their revenues are booked in low-tax jurisdictions.
About 2,500 multinationals with Australian activities and annual revenue above A$1bn (US$669mn) would have been affected, including tech giant Meta, oil company BP and AIA, the insurer.
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.
“There was heavy, heavy opposition from the OECD to the bill and that was one of the critical factors behind the decision” to pull back from the measure, one person with knowledge of the situation said.
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. And crucially the OECD country tax reports are not shared with the public.
Alex Cobham, chief executive at the Tax Justice Network, a pressure group, said: “It is genuinely shocking to see it confirmed that the OECD lobbied its own member country against introducing a key measure to fight corporate tax abuse.”
Jason Ward, principal analyst at the Centre for International Corporate Accountability and Research, another pressure group, said he was very concerned by the development. “It’s a tragedy for everyone involved except for the [multinationals] who get to hide their affairs.”
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.
The OECD said: “As a platform for collaboration on international rules and standards, the OECD commonly shares its knowledge and experience relating to the understanding and interpretation of rules and standards that may be negotiated and agreed by sovereign jurisdictions.”
It added that this included “advising governments of potential differences that may exist between their own proposals and those robust international standards”.
The organisation said those standards had been agreed by more than 140 countries and jurisdictions through a joint project between the OECD and the Group of 20.
“Ultimately, domestic policy decisions remain the domain of these sovereign jurisdictions to propose and agree as they see fit,” the OECD added.
One person within the Australian Treasury said the OECD’s intervention was not the sole reason for the government’s climbdown. The person pointed to fierce criticism from domestic and international businesses that had warned that its proposal would expose sensitive commercial data and put companies doing business in Australia at a competitive disadvantage.
Japan and Japanese business group were at the forefront of challenging the measure, the people told the FT. The Japanese ministry declined to comment.
Keidanren, Japan’s biggest business lobby group, said it had expressed concerns to the Australian embassy last month that the new bill would undermine the OECD’s 2015 agreement. Sharing the information publicly would be problematic in terms of protecting confidential and sensitive corporate information, added a Keidanren official.
Public submissions to the proposed measures also revealed strong lobbying from trade groups, including SwissHoldings — which represents the interests of 62 Swiss-based multinationals such as Nestlé, Roche — and the Australian Financial Markets Association, whose 130 members include several banks such as Deutsche Bank, Bank of China, Bank of America, Citigroup and BNP Paribas.
The bill was also opposed by the Big Four accountancy firms, including PwC Australia, which has been embroiled in a scandal that revealed some of its partners who had advised the government on anti-avoidance tax law shared confidential information about those plans to attract business.
Ward said it was “not a good look for a Labor government to be seen to be taking indirect orders from a Liberal finance minister” — referring to Mathias Cormann, who is head of the OECD and was previously an Australian finance minister for the Liberal party.
The Australian government told the FT it “remains committed to improving corporate tax transparency”.
“The public country-by-country reform attracted broad stakeholder interest and the government is taking some additional time to reflect on this feedback,” the government added.
Additional reporting by Kana Inagaki in Tokyo
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