Sunday, August 28, 2016

The Great Multinational Tax Rort: How We're All Being Robbed, by Martin Feil

Staff review by Chris Saliba


Tax expert Martin Feil explains how multinationals avoid billions of dollars worth of tax. A book sure to make you boiling mad.

Martin Feil has many decades worth of experience working as an advisor to the multinational companies and the Australian Tax Office. As such, The Great Multinational Tax Rort reads much like an insider’s account of the way big business is done.

The rise of globalisation has seen the emergence of some of the world’s most powerful multinational companies. With deep pockets, these multinationals can pay for the best tax avoidance advice. The “big four” accounting firms who create these tax minimisation strategies are dependent on multinationals for a large chunk of their income. Government tax offices, by contrast, are under resourced when it comes to auditing the the complex financial arrangements of the multinationals.

As Martin Feil demonstrates, democratic governments that provide social safety nets, sustained through tax receipts, are losing billions of dollars in income. Apple Australia in recent years has only paid some 3 per cent in tax. How is this tax avoidance done? Through something called “transfer pricing”. This is where the parent company charges inflated prices to its overseas subsidiaries. By loading their subsidiaries up with so many extra charges and debt, they either never post a profit, or when they do it’s a small amount.

where the parent company charges inflated prices to its overseas subsidiaries. The subsidiaries, as in the Apple Australia example, after having paid such high prices to the parent for their goods and services  post either losses or weak profits.

Interestingly, Feil maintains that the rise of multinational tax avoidance coincided with the reduction of import duties, or tariffs. When there is no import tax being paid at the border, an incentive is created to ruthlessly minimise tax.

Multinational tax avoidance is a huge problem. It’s complex and difficult to create legislation to combat. Feil suggests transfer pricing practices by multinationals is  more dangerous to the global economy than the financial crisis of 2007 was. The Great Multinational Tax Rort makes for sobering - actually, quite depressing - reading. For anyone interested in learning about the length and breadth of the problem, how we got here and how difficult it will be to get out, then this book is necessary reading.


The Great Multinational Tax Rort: How We're All Being Robbed, by Martin Feil. Published by Scribe. ISBN: 9781925321647  RRP: $32.99

To sign up for our monthly newsletter, featuring new releases, book reviews and favourite articles from around the web, click here.