The play "ENRON" at the New Theatre in Newtown, Sydney has lessons for the Australian government as it considers how to deal with tax avoidance by Google and Apple. The performance Last night had strong performances from the large cast, a strong script and imaginative set. The Australian Treasury, Law Society and the Auditing and Assurance Standards Board should arrange block bookings.
The play by Lucy Prebble is the story of how Enron's downward slide started with questionable business practices which were not challenged by regulators and moved on to outright fraud. The show used metaphor to explain complex accounting schemes in an entertaining way. But one scene which had floor traders bidding for a slice of bread was a little abstract for me.
Most telling was a scene where Skilling explains how the government regulations on energy trading are written by people not as smart as him and he feels obliged to take advantage of the loopholes in the law. This might be said of the loopholes used in tax laws by Apple and Google to avoid paying tax in Australia, using the "Double Irish Dutch Sandwich".
Lax laws place honest company executives in a difficult moral dilemma: should they act ethically and pay tax, or use the loopholes as their competitors do? The Australian Treasury has issued a 28 page "Implications of the Modern Global Economy for the Taxation of Multinational Enterprises Issues Paper" (May 2013). The Australian government needs to move quickly to close the loopholes, not only to stop billions of dollars in tax avoidance, but to lessen the moral risk of future Enrons.