3AW WITH TOM ELLIOTT
MONDAY, 6 NOVEMBER 2017
SUBJECTS: Paradise Papers, Labor’s multinational tax avoidance laws and Scott Morrison’s plans to give multinationals and millionaires a tax cut.
TOM ELLIOTT: The Labor Party is onto this, they say it is time for Australia to claim its fair share of taxation. Joining me on the line now is the Shadow Assistant Treasurer, Dr Andrew Leigh. Good afternoon, Andrew.
ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Good to be with you again.
ELLIOTT: What sort of companies or individuals are we talking about here, we're talking about Australian businesses that set up offshore or are we talking about the Amazon and Google of the world? Who are we discussing?
LEIGH: It seems to be a who's who of oligarchs, multinationals, tech companies, mining companies. What's really surprising about this to me is the broad swath of companies that are taking advantage of tax havens. Except of course your local little old Aussie business which doesn't have the advantages the big end of town gets.
ELLIOTT: So when you're talking about tax havens, what's a typical manner in which these are operated?
LEIGH: One of the most egregious examples is if you go to the Cayman Islands on the waterfront you'll find a building called Ugland House. That building is the registered office address for more than 18,000 companies. Of course, they don't actually have staff there, what they're doing is just routing their transaction through the Cayman Islands to take advantage of its generous tax rules. We think that there ought to be one rule for all companies rather than a different rule for the big end of town which lets them exploit tax havens. That's why Labor has put on the table a set of measures on tax havens. For example, if you want to go for a government tender worth more than $200,000 Labor thinks you should tell us your country of tax domicile.
ELLIOTT: Doesn't the Future Fund use Cayman Island tax havens?
LEIGH: It's a matter of making sure this stuff is disclosed. If you're making use of the tax havens I think you need to be absolutely clear with it.
ELLIOTT: What I'm saying is that the Future Fund is effectively an arm of the Government and it uses the same tax havens. So would you prevent the Future Fund from having anything to do with Government?
LEIGH: What's really important is that you have transparency. People have talked about superannuation funds and indeed about the Future Fund, Australians have a right to know what's going on there. While you've got this veneer of secrecy over the whole thing, the only way you'll get to find out what's going on is when you get leaks like the Panama Papers and the Paradise Papers.
ELLIOTT: Sure. Do you regard Ireland as a tax haven?
LEIGH: It's not in the list of tax havens that we would work on. Sure, people can argue at the margins over this. But I think the most egregious offenders have been those that have been unwilling to share information and yet working very hard to try and attract transactions through their jurisdiction.
ELLIOTT: So what you're saying is that you want essentially Australian companies that use tax havens, they have to declare them and if they are using them they can't tender for Government work?
LEIGH: No, we're saying that they would need to disclose their country of tax domicile in tendering for government work. And we’re saying that you're a publicly listed firm you should declare your dealings in tax havens to your shareholders as a material tax risk.
ELLIOTT: Is it the problem though that you've got wildly different tax rates around the world? You've got Ireland which only has a tax rate for companies of between 12 and 15 per cent. That was deliberately done to attract businesses to Ireland. Australia's is of course 30 per cent. Isn't that the fundamental problem here?
LEIGH: Tom it's one thing to compete on the tax rate and it's another to compete based on offering companies secrecy and the ability to white-ant other countries’ tax laws. The thing about tax havens is that they do undermine the tax systems of countries like our own. Our own Tax Commissioner has made comments to this effect. Yet, we've got a Federal Government that wants to raise taxes on average workers while cutting taxes on multinationals which won't go ahead and make companies disclose their tax paid across a range of different countries. They doesn't support proper whistle-blower protection, they won't back Labor on a registry that shows us who really owns Australian firms.
ELLIOTT: I get what you're saying, I do. This gets complex here, to me, taxing profit is actually a bit silly when it comes to companies because different countries define profit differently. There are wildly different tax rates, wouldn't you be better off having a bigger tax on revenue which is very identifiable and hard to get out of? So if therefore if revenue is earned in this country you just tax it in the form of maybe a high GST?
LEIGH: People occasionally talk about that, Tom, but it flounders the further you get up the value chain. So if you're a company which runs a payment system then your profits might be a tiny sliver of revenue. It also creates perverse incentives for vertical integration which I don't think are ideal. So I'm comfortable with the notion of taxing profit – we can debate whether that ought to move closer to accounting profit – but the main thing is making sure the big end of town is paying their fair share.
ELLIOTT: Let's say you're the next Treasurer or Assistant Treasurer, let's say you'll be in Government fairly soon which I think you will be, do you honestly think you'll be able to extract more tax out of the so-called big end of town?
LEIGH: Absolutely. You just have to look at our track record. In the last term of Government, in 2012-13, Labor put in place laws which have brought in nearly $4 billion. What has been extraordinary about the Liberals is that they have patted themselves on the back for laws they voted against while they were in Opposition. Their own laws have barely raised more than the multinational tax ads they've been running trying to persuade Australians they're serious on tax dodgers. But if they were, they wouldn't be offering the big end of town a $65 billion tax cut at the same time as wanting to raise taxes on everyone earning more than $20,000 or so.
ELLIOTT: So does that mean the proposed tax cut which is actually only applying for small companies do you still support that or not now?
LEIGH: We don't support the tax cuts bands extended to the big end of town, we don't think -
ELLIOTT: Do you support it for smaller businesses?
LEIGH: Yes, we've said we support it for businesses under $2 million, we've said we don't support it for billion-dollar businesses. We don't believe now is the right time to bust the budget. This is the biggest single measure on either side of politics. This is a measure which is frankly unaffordable in the Australian budgetary circumstances. The way the Liberals are trying to pay for it is by raising taxes on most of your listeners. At a time when wage growth is incredibly sluggish, when inequality is rising, it just doesn't seem fair that workers on average wages should have their taxes increased so Malcolm Turnbull can give big business a tax cut.
ELLIOTT: Dr Andrew Leigh, thank you for your time.