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22 January 2015

Aid to poor countries unnecessary if companies paid taxes, says Foreign Minister Julie Bishop

An international system of law based on nation states is the best way to build peaceful and prosperous societies, Foreign Minister says.

Washington: International development aid from wealthy nations to the poorest would be unnecessary if companies paid tax in the nations where they reaped their profits, the Foreign Minister, Julie Bishop, has told a conference in Washington, DC.

"In legitimately striving to improve returns to their shareholders, global companies big and small structure their affairs and businesses to minimise paying tax, while operating within the law," she told an audience at the Brookings Institution, one of America's most respected think tanks.

"Tax collectors face tremendous difficulty capturing taxes on revenue from their domestic jurisdictions.

"While such corporate behaviour is understandable, developing countries are estimated to lose between $US35 billion and $US160 billion in revenue each year.

"If all companies paid taxes on profits in the countries in which they are derived, this would largely negate need for global aid flows or development assistance," she said.

She said the total spent on development aid in 2013 was $US135 billion, less than the upper estimate of lost tax revenue.

Ms Bishop's speech focused on the increased challenges facing nation states in an age of globalisation, including the threats of terrorism, as well as corruption, narco- and cybercrime.

She said the international system of law based upon nation states remained the most effective way of building peaceful and prosperous societies even given these new threats, and the spreading regions of lawlessness in areas controlled by self-proclaimed caliphates such as the Islamic State and Boko Haram.

She said crime, corruption and terrorism thrived hand-in-hand in regions like this.

"We're fighting in the Middle East today for this very reason, to end the opportunities that lawlessness and weak sovereignty provide for criminal networks to grow," she said.

Ms Bishop likened the criminal networks to the terrorist networks, noting IS, which she called Daesh, had an annual income estimated by Forbes magazine to be $US2 billion.

Ms Bishop said the United States had led the global collective response to these threats and therefore received "its share of the credit .. and more than its share of the blame when things had not worked out".

The US should not have to bear the burden alone, which was why Australia sought to – at a minimum – make a "responsible and proportional contribution to protect the rules-based international system".

"I believe with the alliance [with the US] comes the responsibility to share the burdens – both in material terms and in providing creative and proactive policy input," she said.

The Coalition government has been criticised for its unprecedented cuts to Australia's aid budget, from $5 billion now to about $3.4 billion in three years.

Ms Bishop is visiting the United States to hold meetings with defence and security officials, including the National Security Agency director Admiral Michael Rogers and CIA director John Brennan, as well as the Secretary of State, John Kerry, and Vice-President Joe Biden.

Talks focused on co-operation in counterterrorism and intelligence, as well as strategies to tackle the threat of fighters returning from Syria.

On Tuesday night she attended President Barack Obama's State of the Union address.