Canberra, Thursday 14 March 2002

New research on tax evasion: 'fiscal termites' breed contempt

Tax evasion has become ordinary practice for the wealthiest individuals and corporations turning the original aim of taxation on its head, an ANU academic claims. Professor John Braithwaite, from the ANU’s Centre for Tax System Integrity in the Research School of Social Sciences, has called for international efforts to stop “fiscal termites” based on his studies of tax cheats.

“There are quite a lot of people with wealth of more than $30 million who pay less than $20,000 tax each year, which is a lot less than many households on an average income pay. Average earning people actually pay more tax in absolute terms than some of the wealthiest people in Australia,” Prof Braithwaite said.

“The richer a person or a corporation is, the easier it is for them to avoid paying tax because they can afford to hire accountants and tax lawyers to set up expensive methods of financial engineering."

Prof Braithwaite said tax evaders were undermining the integrity of current tax systems by moving their money around world markets to avoid paying tax, using the now common practice of "financial engineering" and playing tax systems off against each other. In some companies the tax department has even become a profit centre.

"Tax evasion is affecting compliance throughout the community. When the big end of town is seen to be using tax havens to avoid paying tax, it undermines the whole community's voluntary tax compliance and breeds contempt.

"Many of the largest corporations are paying expert accountants to write their profits off against their losses and, by sending profits to tax havens with low tax rates and keeping their losses in countries where higher tax rates apply, they are sometimes able to avoid paying tax completely.

"Countries need to work together to make tax evasion a more difficult and expensive option for the wealthy. Recent aggressive tax laws in the United States have only resulted in large corporations shifting a lot of their tax planning into international tax arbitrage.

“This is a problem that needs to be dealt with at an international level. We need to change our enforcement strategies to become more sophisticated and make sure they address matters like tax havens and tax evaders,” he said.

For more information please contact: Professor John Braithwaite, ANU Research School of Social Sciences, 02 6125 2332 or Genevieve Turville, ANU Public Affairs, 02 6125 6125 or 0416 249 245

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Last Modified Tue, July 16, 2002