Australia said corporate tax breaks amounted to theft on Thursday, throwing a spotlight on the issue ahead of European Commission head Jean-Claude Juncker’s arrival in the country for the G20 summit.
Juncker, who took office on November 1, is under intense pressure over generous tax concessions offered to top global companies when he was prime minister of Luxembourg from 1995 to 2013.
The allegations are politically explosive at a time when many EU countries are still struggling with the impact of austerity, particularly since Juncker is spearheading a call for tax reform in his new role.
The Commission, the EU’s executive arm, is currently investigating several member states over allegations they offered corporate giants such as Apple, Starbucks and Amazon state aid in the form of sweetheart tax deals.
Australia has enthusiastically backed calls to close corporate tax loopholes in its role as host of this weekend’s G20 summit in Brisbane, making it a primary focus of the meeting.
Australian Treasurer Joe Hockey said the practice of corporations shifting profits from one nation to another to minimise their tax was robbing countries of much-needed revenue and had to stop.
“It is hugely important for the globe that companies pay tax where they earn profits,” he told reporters.
“It is theft when someone does not pay the tax that is due to a nation and it undermines the ability of that nation to be able to deliver the sorts of services that are essential to alleviate poverty, to reduce inequality.
“Australian Prime Minister Tony Abbott made similar comments this week, arguing that G20 members needed to work together to ensure its members did not facilitate tax minimisation schemes.
Leaked documents made public last week by the US-based International Consortium of Investigative Journalists showed Luxembourg gave hundreds of global firms huge tax breaks.
The “Luxleaks” papers showed that billions were funnelled through the tiny duchy using complex financial structures that allowed more than 340 companies to slash their tax liabilities.
Companies named in the documents include household names such as IKEA, Pepsi, Amazon and AIG.
Juncker defended himself in Brussels on Wednesday, saying the tax arrangements were “perfectly legal” and he had absolutely no “personal involvement” with any of them.
He has also pledged the support the European Union’s commitment to fighting tax fraud.
Abbott is expected to push G20 leaders in Brisbane to endorse a common reporting standard for sharing information aimed at increasing transparency and addressing corporate tax avoidance strategies, particularly profit-shifting.