Cayman Islands: One of several tax havens where companies have entities. Photo: AP
Almost two-thirds of Australia’s top 100 companies listed on the sharemarket have subsidiaries in tax havens or low-tax jurisdictions, a new report shows.
Further, 13 of the top 20 companies have entities in well-known tax havens such as the Cayman Islands, Luxembourg, the British Virgin Islands and Bermuda, including two of the big four banks.
Companies should be willing to be transparent.
The Uniting Church’s Justice and International Mission Unit report, Secrecy Jurisdictions, the ASX100 and Public Transparency, reveals 61 of the top 100 companies, as of April 2011, held subsidiaries in ”secrecy jurisdictions” that have been targeted by tax authorities for sheltering companies dodging tax.
News Corporation, Westfield and the Goodman Group are among the worst offenders, the group said, holding more than 50 entities in low tax jurisdictions each.
The report shows that while many of the companies may do legitimate business in low-tax jurisdictions such as Hong Kong and Singapore, many subsidiaries exist with little evidence of commercial activity.
A subsidiary owned by the Commonwealth Bank called Burdekin Investments can be traced to Ugland House, a resort-style office building in George Town, the capital of Caribbean tax haven the Cayman Islands.
The building is known for housing thousands of post-box companies that exist simply to take advantage of local tax rules.
A spokesman for the bank said it was looking to close the entity and would not explain what it did or whether it had any staff.
The report shows 10 ASX 100 corporations have subsidiaries in Jersey, making it one of the most popular locations for offshore entities among Australian companies, after Hong Kong and Singapore. The Cayman Islands, Luxembourg, Switzerland and Bermuda were also popular destinations, with many companies owning multiple entities in each.
The report comes amid a global crackdown on the elaborate tax minimisation strategies of Apple and Google, which have left governments in Britain and elsewhere in Europe mystified.
This week a US Senate inquiry exposed the elaborate corporate operating structure of Apple, which used subsidiaries in Ireland and Singapore to minimise its tax.
“These are places that fail to meet international standards on transparency, on anti-money laundering laws and on tax law co-operation,” Mark Zirnsak, director of the Justice Unit and author of the report, said. “Companies should be willing to be transparent and public about why these subsidiaries are in these locations given the concerns around inadequate regulation.”
According to its 2012 annual report, Telstra controls 20 subsidiaries registered in well-known tax havens – 11 in the British Virgin Islands, four in Bermuda, four in Jersey, one in Mauritius and one in the Cayman Islands.
The company defended its corporate structure, with a spokesman saying: “Some of the subsidiaries are operating entities, others are companies holding investments in other companies, some are dormant and some are being liquidated.
”We pride ourselves on operating to the highest standards of corporate governance and on creating significant social value, through employment, investment and business activities.”
The report also shows News Corporation has more than 70 subsidiaries across the Cayman Islands, British Virgin Islands, Luxembourg and Mauritius.
The company is registered in the US state of Delaware, which has attracted its own criticism for sheltering a raft of post-box companies taking advantage of the state’s soft tax rules.
Fairfax Media, owner of The Herald, has two subsidiaries based in Singapore and has closed a third that was based in Hong Kong.
The heavy use of offshore units by banks, particularly Macquarie Bank, to minimise tax, has led the federal government to clamp down on the practice in the recent budget. ”If we see gaping holes in our laws then we need to do our best to legislate to close them,” Assistant Treasurer David Bradbury said.
Mr Zirnsak said it was funding for infrastructure and services that ultimately helped companies grow. ”It is governments that provide the infrastructure that allows businesses to flourish.”
He said the report was likely to be a ”significant underestimate” of the number of subsidiaries in secrecy jurisdictions.