Increasing financial literacy among young people is really important. That's why I was pleased to contribute to The Wealth Academy's latest edition of Teenfinca magazine.
The Economics of Today, Teenfinca
In an experiment on food choices, students were asked to choose between some free junk food or a free piece of fruit. Half chose junk food, and half chose fruit. They were then asked to come back a week later. Upon their return, they were asked whether they would like to switch their choice. Hardly anyone who’d chosen junk food switched to fruit, but two thirds of those who’d said fruit switched to junk food on the day. As the old joke goes: what’s the best day to start a diet? – Tomorrow.
One of the fundamental ideas of economics is the notion of discount rates, meaning that we value things less when they are further away in time. If you offer me $100 now or $100 in a year’s time, it’s reasonable that I’d prefer the money now. Even if I didn’t want to spend it, I could put it in the bank or buy some shares, and the money would be likely to be worth more tomorrow.
But in recent years, economists have noticed something odd about how people discount the future. The difference between today and tomorrow seems to be treated differently from any other one-day delay. For example, if I ask you to choose between $10 in ten days’ time or $11 in eleven days’ time, you’ll probably wait the extra day. But you’re more likely to opt for $10 today over $11 tomorrow. In both cases, the deal is the same – a day’s delay buys you another dollar. But the magic of ‘now’ is often too tempting to refuse.
LABOR’S TAX INVESTMENT PAYING DIVIDENDS
Evidence at the Senate’s inquiry into multinational profit shifting shows Labor’s major investment in tax office compliance is getting results.
In the 2013-14 Budget, our government gave the Australian Tax Office $109 million to increase compliance checks on offshore marketing hubs and business restructures.
It is this compliance program which has led to BHP being handed a $522 million tax adjustment after an investigation by the tax office.
More audits of offshore marketing hubs are currently underway thanks to Labor's program. Tax Commissioner Chris Jordan has told the inquiry he expects to issue further tax adjustments worth hundreds of millions of dollars.
FAIRFAX BREAKING POLITICS
MONDAY, 27 APRIL 2015
SUBJECT/S: Scott McIntyre; pension assets test; marriage equality.
CALLUM DENNESS: Joining me now is Labor member for Fraser in the ACT and Shadow Assistant Treasurer, Andrew Leigh. Good morning.
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Good morning, Callum.
DENNESS: Now we saw SBS presenter Scott McIntyre sacked over the weekend for tweets that were labelled by Communications Minister Malcolm Turnbull as offensive, inappropriate and despicable. Do you think it's fair that someone has lost their jobs for airing an opinion that was controversial?
LEIGH: Ultimately this will come down to the employment contract that the particular journalist has with SBS, but I do think that the tweets were offensive and were wrong.
DENNESS: No irony here that some of the people most outraged by these tweets were some of the same people that were involved in the 18C debate?
LEIGH: I think it is important to remember, on the issue of free speech, that the rubber hits the road when you're talking about opinions with which you disagree or find distasteful. That's separate from the question as to what a particular employment relationship was, but I do think we want to make sure that we've got space in the broad Australian public debate for a wide range of views.
HOCKEY’S TAX CONTORTIONS CAN’T HIDE LACK OF PLAN
Joe Hockey is still flailing around looking for a plan to tackle multinational tax avoidance with only weeks to go to the Budget.
When Labor announced our $7.2 billion package to ensure multinationals pay their fair share by targeting debt loading and deductions, the Treasurer dismissed it within hours.
Yet today Mr Hockey seems to have had a change of heart, with reports the budget may include measures to stop companies loading debt into their Australian operations.
This would be a clear acknowledgement from the Treasurer that Labor has had it right all along.
Speech to the Tax and Transfer Policy Institute Conference
Australian National University
Thanks for having me here today. It’s great to see the positive influence that the Tax and Transfer Policy Institute (TTPI) is having in its short life. I’m reliably informed by my staff that TTPI Director Miranda Stewart has been at every tax event that they have attended since I started my term as Shadow Assistant Treasurer. I’m not sure whether to feel sorrier for Miranda or for my staff.
It’s great to be in a room full of people who are excited by tax policy as I am. It’s not always an easy topic to get people excited about, and this challenge is by no means unique to me. I read with interest in Crikey last week that the ATO has commissioned BuzzFeed to come up with some funny tax stories. Their efforts so far have included ‘Your Superannuation Explained, But With Dogs’ complete with hilarious dog gifs. I doubt it’s going to win BuzzFeed a Walkley, but I respect the ATO’s willingness to try new things to get people interested in their tax affairs.
I’d like to speak briefly today about where I think tax reform is up to currently in Australia, my views on ways forward and finally an update on the opposition’s tax policy process. I hope you’ll find it interesting, even if my remarks are not accompanied by any LOLcats.
I’m going to keep my remarks relatively free of political commentary, but tax is inherently political, so I hope you will indulge me if at times I sound a little less like an economics professor and a little more like Labor’s Shadow Assistant Treasurer.
Toughen up tax for the big end of town, Business Spectator, 20 April
The Australian Parliament is currently deep into an inquiry into corporate tax-dodging. The investigation has been sparked by real concern in the community that some big firms aren’t paying their fair share. That’s not surprising when, in the past few weeks alone, we’ve seen reports about our 900 biggest firms paying an average of only 19c in the dollar in tax, and major multinationals sending billions offshore to Singapore and beyond.
Some of the tax lawyers and accountants who’ve come before the Senate’s hearings have tried to bamboozle with detail about their Byzantine tax structures. But in fact, one of the main methods companies use to shift profits overseas is as simple as lending money from one place to another.
When we think about lending, we tend to imagine a transaction between a bank and borrower who have no relationship with each another. But this is by no means the only way to borrow money, whether as an individual or a business.
Just as you might have borrowed money from your parents to buy your first car, multinational firms often lend cash from one arm of the company to another.
The argument companies make for this is that they know the affairs of their subsidiaries better than a bank does. This generally means one arm of a company can borrow more money at a better rate from another arm than they could from a bank.
MONDAY, 20 APRIL 2015
SUBJECT/S: Budget; Wayne Swan.
STEVE CHASE: Andrew Leigh, good morning.
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Good morning, Steve.
CHASE: Do you have any sympathy for Mr Hockey's predicament, his deficit problem, given the prevailing circumstances? We've just heard from Deloitte Access Economics that we've got weak wages growth, we've got poor company profits and all this is undermining the Government's budget plans and we could be headed for a recession?
LEIGH: Steve, I think the Deloitte report paints a concerning picture about the Australian economy. They speak about the U.S. doing a little better than expected, China doing a little worse than expected. But they also make very clear that despite Eric Abetz's claims, wages growth is the lowest it's been in a decade. These are challenging circumstances, but of course, Peter Costello faced an Asian financial crisis and Wayne Swan faced a global financial crisis so, Joe Hockey ought to be able to deal with iron ore prices coming back now to where they were in 2008.
CHASE: Well how is Labor going to contribute to meeting that challenge you've outlined there. Are you going to help the Government in this time of crisis?
LEIGH: We certainly will be. We've put on the table a plan to fairly tax multinationals that returns $7 billion to the budget bottom line over 10 years. We've been leading the debate about superannuation tax concessions. We think it's vital that an Opposition is engaged with these sorts of debates rather than just sniping from the sidelines as we saw for the last few years. If the Government wants to take our multinational tax policy I'm happy to sit down and work it through with them and then we'll vote for it in the Parliament. That would certainly help return the budget to surplus a little speedier than Joe Hockey's so-called quality trajectory.
Why inequality is a feminist issue, Debrief Daily, 19 April
Lilly Ledbetter started work as a supervisor at Goodyear Tire and Rubber plant in Alabama in 1979. She worked there for the next two decades. Towards the end of her time at Goodyear, she began to suspect that she was earning less than her male colleagues. An anonymous note in her mailbox confirmed it. Despite being praised by her bosses, they had given her smaller raises than the men who worked around her.
Over the course of her time at Goodyear, pay discrimination cost Ledbetter more than $200,000 in salary. Worse, because the statute of limitations had passed, she couldn’t recover it. The story led President Barack Obama to sign the Lilly Ledbetter Fair Pay Restoration Act, which guarantees that such a situation cannot recur in the US.
Pay discrimination is often categorised as a ‘women’s issue’, but it goes further than that. Injustice at work undermines the sense of fairness that is fundamental to a healthy workplace. By paying Ledbetter less, Goodyear hurt her financially. But it also failed to live by the principle of equal pay for equal work. Because the Ledbetter family had fewer resources, they all suffered from Lilly’s mistreatment.
Many Australians were left feeling like Lilly Ledbetter a few weeks ago when figures came out that showed the gender pay gap is now at a 20-year high. Among full-time workers, the average male weekly wage is $1559, while the average female wage is $1276. In other words, blokes get an 18.2 percent wage premium every week of the working year.
That premium isn’t simply about the presence of dangly bits. To understand what’s going on, it’s vital to recognise that pay equity for women is interlinked with pay equity across the workforce. The remorseless rise of inequality is the main culprit for the rising gender pay gap.
$41 MILLION HIT TO BELCONNEN FROM IMMIGRATION MOVE
The huge economic cost of moving the Department of Immigration out of Belconnen has been revealed today.
Shifting the department would drain $41 million a year from local shops and cafes, seriously undermining the viability of these businesses.
Modelling from Urbis handed to the Canberra Times shows federal public servants spend about $45 each per workday in the businesses surrounding their workplaces.
With over 4,000 staff currently based at the department’s complex in Belconnen, these workers pour millions into the local economy each year – whether buying coffee, picking up their groceries or getting a quick haircut.
Hockey loses $7.2 billion by refusing to accept Labor's multinational tax plan - Joint Media Release
BILL SHORTEN, CHRIS BOWEN & ANDREW LEIGH
HOCKEY LOSES $7.2 BILLION BY REFUSING TO ACCEPT LABOR’S MULTINATIONAL TAX PLAN
New analysis from the Parliamentary Budget Office shows Labor’s multinational tax package will generate growing revenue beyond the forward estimates, with Labor’s policy now projected to raise $7.2 billion over the next ten years.
Labor’s plan will shut down loopholes which allow big multinational companies to send profits overseas, ensuring they pay their fair share of tax, just like everyone else has to.
The package is forecast to raise $1.9 billion over the next four years, but the PBO now forecasts this to grow to $7.2 billion over ten years as loop holes are closed, and a fairer share of tax is paid by multinationals.
Yet with just four weeks left until the Budget, the Treasurer is still refusing to take up Labor’s offer of a detailed briefing on these tax measures. Shadow Treasurer Chris Bowen wrote to Joe Hockey almost a month ago offering to step him through our package, but so far the response has been silence.