He said the government had little choice but to enact new laws to combat the scourge of corporate tax avoidance, because it had created a revenue hole in public finances. Miller, formerly a senior partner in audit firms and head of the accounting industry peak body that is now CPA Australia, said the leadership of the profession no longer had the same clout as it did 30 years ago, when he and the Institute of Chartered Accountants collaborated with the government to stamp out the widespread corporate rorting. In 1987, the Australian Tax Office reported that 6688 companies had been involved in bottom of the harbour schemes in which the promoter – a lawyer or accountant – would strip a company of its assets and transfer them to another company, thereby leaving it unable to pay its taxes and creditors, sending it to the "bottom of the harbour". In a submission to the parliamentary inquiry into corporate tax avoidance, Miller said "the avoidance industry" today had massive weight. "For the larger accounting and legal firms it is a major part of their practices and … an important part of corporate culture and bottom-line aspirations.

"In this context one admires those many companies, large and small, whose directors heed the call of true corporate social responsibility and true corporate citizenship and refuse the enticements on offer to aggressively reduce tax. They are today's commercial heroes." Miller said the government had more of a revenue problem than a spending problem and the consequence of tax avoidance and reduced tax collections was that the decent corporate citizens were penalised via higher tax rates. Corporate income tax rates were therefore "higher than necessary", he said. One solution would be to consider taxing revenue rather than profit. Many multinationals load their Australian companies with costs – often high debt – to deliberately produce low profits in this country, and therefore minimise their taxable income. Although taxing revenue would address avoidance by mining companies, it could penalise the likes of retailers, companies with high revenue but tight profit margins, he said. To create a more productive and fairer corporate revenue base "the law needs to be changed", he said.

"Profit-shifting and … international management fees, royalties, intercompany group charges, including interest and all other artificial transactions … which do not have a commercial substance and aim only, as did the "bottom of the harbour" scheme, to minimise tax should be banned as corporate tax deductions. "The law should support good ethics and good citizenship and not leave these qualities in subjective ambiguity." The government does have provisions in the tax legislation – so-called Part 4A – under which it can prosecute companies for transactions whose "dominant purpose" is to avoid tax rather than achieve a commercial outcome. However, the ATO has proven reluctant to prosecute using Part 4A. Miller also said multilateral efforts at reform via international forums such as the Organisation for Economic Co-operation and Development were unlikely to succeed and were used as a scapegoat for inaction by multinationals tax avoiders and lobby groups. What was the bottom of the harbour scandal?

"Bottom of the Harbour" was Australia's greatest corporate tax avoidance scandal. During the 1970s lawyers and accountants who promoted Bottom of the Harbour schemes advised their corporate clients to strip assets from a company, transfer them to another company, and let the first company sink. By doing this, the Tax Office and other unsecured creditors of the failed company were left in the lurch. The scam was perpetrated on thousands of companies and cost the taxpayer an estimated $1 billion short, tens of billions in today's dollars. Although officers from the ATO first identified the rort in 1973, their investigations were effectively covered up. It was not until the Costigan Royal Commission in 1982 that the details of these investigations properly came to light and a paper trail led back to the office of the public prosecutor in Perth. As the scandal developed, there was increasing pressure on the government and the accounting and legal professions to reform. Follow us on Twitter @BusinessDay