Panama Papers Shine Spotlight on Multinational Tax Avoidance - ABC 774 Melbourne

E&OE TRANSCRIPT

RADIO INTERVIEW

ABC 774 MELBOURNE

TUESDAY, 5 APRIL 2016

SUBJECT/S: Multinational tax avoidance; Labor’s positive plans for the economy; Latest newspoll.

RAFAEL EPSTEIN: Andrew Leigh is the Shadow Assistant Treasurer in Bill Shorten's Cabinet so he is the assistant to the Shadow Treasurer, Chris Bowen and he'd be responsible for economic and fiscal policy should Labor win the next election. Andrew Leigh good afternoon.

ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Good afternoon Raf, how are you?

EPSTEIN: Would you do anything differently especially around this offshore tax havens?

LEIGH: Look absolutely we would, Raf. The first thing to say is that while we were in Government we put in place a multi-billion dollar package cracking down on multinational tax avoidance and unprecedented tax transparency laws. In 2013 the Liberals voted against both of those. We are now calling on the Liberals to adopt Labor's multinational tax plan that delivers $7 billion over the course of the next decade by closing loopholes. They’re refusing to do that.

 EPSTEIN: Can I ask you a question about that policy, I'm sure you've got others. Is the Government saying that that policy on multinationals is only worthwhile if they can see the costings that you've used? The Parliamentary Budget Office is independent, they've costed it, that's where you're getting your figures on how much it will bring in. But if you were confident about your policy wouldn't you release the settings and the costings that the PBO used?

LEIGH: Look Raf, we are confident in the Parliamentary Budget Office costings. It's a straightforward change we are proposing and if the Government would like me to talk through it with them I am very happy to do so. 

EPSTEIN: This was the first of your big policies, it's been out for more than twelve months.

LEIGH: That's right. 

EPSTEIN: So why not just make those costings public? What is the problem with that?

LEIGH: We've made absolutely public what this will raise and we've been clear how it will raise it. There are three debt deduction rules in our tax code at the moment, two of those don't have strong economic basis behind them we propose get of rid of them. That leaves you with one debt deduction rule and it narrows the scope of companies to deduct intra-company debt. It is one of the main tricks that big companies use to minimise their tax in Australia. Beyond that we also think that we ought to raise the penalties for failing to lodge country-by-country accounts. Right now the Government is proposing penalties that are about $5000. Now if you streak across the Sydney Cricket Ground you pay a higher fine than they reckon a multinational should pay for failing to lodge their country-by-country reports. 

EPSTEIN: One other detail that the Government often throw at you is that Treasury believes that your multinational tax policy would have an economic impact. They use a quote from Rob Hefernan, Deputy Secretary to the Treasury, he says "the proposed changes to the current thin capitalisation rules would inevitably compromise economic activity". So has the Deputy Secretary to the Treasury got that right or wrong?

LEIGH: Raf, we are confident that this is something that is entirely consistent with Australia attracting foreign investment. But the big question here is, do we want to run a tax code that says “Come and invest in Australia. We have a humdinger of a loophole that will attract you here”. Or do we want to be a country that has fair taxes, that doesn't offer a loophole to multinationals that isn't available to a tradie operating in Melbourne, and which says that the reason that you should come and invest in Australia is because we've got a great education system, first class healthcare system, and terrific infrastructure. That's a choice that Australia makes. With inequality now as high as it has been in 75 years, I am astounded when I hear the Liberals backing in the big end of town. You know they are always hard on Medicare but they seem to be pretty soft on multinationals.

EPSTEIN: Just one more chance that quote from the Deputy Secretary to the Treasury, Rob Hefernan who says your multinational changes would "compromise economic activity". Is that wrong?

LEIGH: We don't believe that there is going to be an economic impact from closing a debt deduction that doesn't have good economic intuition. What these companies are doing, Raf, is that they are effectively saying they are going to load up on debt to their Australian subsidiary even though they don't owe very much to the banks. What we propose is that if you owe a lot to the banks you should be able to deduct a lot of debt in Australia. But you can't simply use your intra-company borrowings in order to move the tax burden out of Australia. That's just not fair on the rest of us. I believe that a fair tax code is entirely consistent with getting strong foreign investment.

EPSTEIN: I suppose one other way that you could prove your bona fides about how tough you may be is if we consider one case that has come up in this massive leak of data. So Wilson Security have contracts with defence and immigration, the ABC is reporting that they have half a billion dollars worth of contracts including running detention centres on Nauru and Manus. It now seems clear that while they weren't legally in control, technically two brothers in Hong Kong who have been gaoled for bribery have a role in Wilson Security. Would you toughen up the conditions under which Government contractors are issues and the way that you check the company structures for those who win Government contracts?

LEIGH: I think it's a perfectly fair question to ask. If you're going for Government contracts in Australia or indeed if you are asking Australian shareholders to invest in you, you should have to be more transparent about your tax arrangements. The time needs to come to an end where companies think that they can engage in dodgy dealings in an offshore tax haven and still earn the respect of the Australian community. One of the great things about the Panama Papers and also the Luxembourg Leaks that we had last year is that it saps the confidence of firms and individuals that they can get away with this sort of behaviour. Suddenly they start to worry that maybe their dodgy dealings aren't so safe after all. And anything that we can do to boost transparency is good. I was appalled when the Liberals lifted the threshold of tax transparency on private firms from $100 million to $200 million. 

EPSTEIN: I'll get to that in a moment. Look 1300222774 is the phone number and here is a big problem we can all see it, people avoiding paying the tax that others are paying. Do you think it would change if we had a change of Government? You've got an election so it's a question worth considering. We are also going to have a chat to the independent Senator Ricky Muir who could be the answer or he'll have a voice anyway to the question of whether we will get an early and double dissolution election. Andrew Leigh is with me, he is the Shadow Assistant Treasurer. Andrew Leigh you often attack the Government for cutting numbers at the Australian Tax Office. They say actually that the numbers began to be cut under the second version of the Rudd Government under an efficiency dividend. They also say that there are more people in international operations in the ATO than there were under the last Labor Government. Is that latter point correct, that there are more people now in the international operations in the ATO than there were under the last Labor Government. 

LEIGH: I'm not sure on that particular break down, Raf.

EPSTEIN: It's important though isn't it that they look at multinationals?

LEIGH: What I do know is that they've cut nearly 5000 jobs and I've got to laugh a little when they say actually it began in the two months in which Kevin Rudd was Prime Minister in 2013.

EPSTEIN: Rudd introduced the dividend, did he not?

LEIGH: He did indeed have an efficiency dividend in that period, a policy that has been in place since the late 1980s.

EPSTEIN: The way the efficiency dividend works, certainly the way it works at the ABC, you cut jobs. So it did start under Kevin Rudd's second Prime Ministership?

LEIGH: Look, the idea that the 5000 job cuts that the Liberals have put in place in the tax office can all be blamed under what happened under 2 months under Labor? Give me a break. These are guys who have constantly been tough on people receiving welfare, on people with disability. But when it comes to going after the big end of time they are very resistant. The top 1 per cent share now according to these new Melbourne Institute numbers as high as it has been in a couple of generations. And we've got the Government refusing to go on Four Corners and defend their multinational tax plans. Maybe they were too busy working away on their company tax cut to talk about multinational tax avoidance. 

EPSTEIN: Are you in with more of a chance, the Newspoll is trending in Labor's favour. Do you think genuinely there are more people willing to consider a Labor Government now than there was maybe six months ago?

LEIGH: Look absolutely we are a real shot. And the reason for that is that we are rolling out policies. We're acting like a Government, which is what Australians expect their Opposition to do. What they don't expect is that they'll have a Government that is behaving like an Opposition, that's in attack mode and fearmongering mode. The Treasurer and the Prime Minister having to do these staged photo shoots pretending to get into a car together to suggest that they're on the same page. Australians want Malcolm Turnbull to be the Prime Minister that he promised that he would be before taking over the job. Rather than simply looking like he is doing an early rehearsal for being an Opposition Leader.

EPSTEIN: Andrew Leigh, thank you for your time.

LEIGH: Thank you, Raf.

ENDS

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