2GB MONEY NEWS WITH LUKE GRANT
THURSDAY, 20 OCTOBER 2022
SUBJECTS: BUDGET, STAGE THREE, MULTINATIONAL TAX MINIMISATION, APEC FINANCE MINISTERS’ MEETING, EMPLOYMENT RATE
LUKE GRANT: But still five days to go until the budget is delivered and a whole lot of promises still to come. Something that was outlined as part of the election commitments was the move to limit tax avoidance by multinational companies. One of those government members driving that campaign is Andrew Leigh, who is the Assistant Minister for Competition, Charities and Treasury, and I'm delighted to say he's on the line. Now, before we get to budget matters, I saw a piece he wrote about multinationals paying their fair share of corporate tax in Australia. And I want to get to that as well, but there's so much to talk about, Andrew. But employment, according to the ABS, with employment increasing slightly by around 1000 people, the number of unemployed increasing by about 9000 people. This is from their statement today, the unemployment rate rose by less than 0.1% remained at 3.5 in a rounded term. Do you reckon we've reached the point where the rate now might head the other way? What's your feeling about this?
ASSISTANT MINISTER FOR COMPETITION, CHARIRTIES, AND TREASURY DR ANDREW LEIGH: Well, I'm really hopeful we're going to keep the unemployment rate low. Because full employment really does help to drive wage growth and to ensure that people get jobs who wouldn't have otherwise get a look in. We know that it's only in full employment that people who have unconventional CVs, who are minorities, finally get a chance to get jobs. So we need to spread the benefits of economic growth and low unemployment is a great way of doing that. It's why full employment was such a big priority at our Jobs and Skills Summit that we held recently. Because Labor knows how much it matters for Australians.
GRANT: Okay, the budget comes around in a few days now, next Tuesday, and we did hear the Treasurer today reveal that the cost of the Stage Three tax cuts would rise by $11 billion a year. We know that that won't be a thing for a couple of years, but it's obviously in the thinking of government right now. You and I, last we spoke about integrity and your commitment. It was impressive to hear that the government you elect says what they're going to do and then, just oddly enough, does what they said they were going to do. You end up a bit behind the eight ball here, don't you? If the language is all about the costing of this, it feels to many of us mere mortal taxpayers that you're about to change the landscape, change, in fact, what you promised. Do you still have the view that Stage Three tax cuts is not an issue that you intend to play with?
LEIGH: Yes, our policy hasn't changed and we won't be changing the Stage Three tax cuts in the budget.
GRANT: I know you said there'll be no change in this budget, but what about subsequent budgets? I'm referring here to Stage Three.
LEIGH: Well, our policy hasn't changed. We've been very clear that our focus is on multinational tax reform.
GRANT: Okay, fair enough. Let me ask you now about what you were saying in relation to multinationals. And again, if you can look for Andrew Leigh piece, it's really important reading. You get a sense of just how easy it's been for multinationals to rip off jurisdictions. I suppose that is what they're doing by moving taxes that should be paid in one country to another country, where there's no effective corporate tax rate. So, again, you meant you talk about arthritis drug manufacturer in the USA. Would you mind just expanding on that a little for us, Andrew.
LEIGH: This is a company called AbbVie, which produces arthritis medication. And despite the fact it was doing three quarters of its sales in the US, was only reporting 1% of its income in the US, far more was being reported in a tax haven, Bermuda, I think it was, in which it had no employees whatsoever. And so you've got this company shifting profits off overseas, magically making the tax bill go away, while at the same at the same time managing to make millions of dollars from its drugs. It's a good drug manufacturer, but there's no reason that it needs to behave badly when it comes to tax affairs. So the message that all multinationals will be getting from the budget that Jim Chalmers will hand down on Tuesday night is that we're not going to put up with multinational profit shifting. We expect multinationals to pay their fair share, to make their contribution to the public services and to compete on a level playing field with Australian small businesses.
GRANT: How does a multinational just cop that right, things have changed in Australia. We've got to play by their rules. Now, isn't too much of their time spent on tax minimisation?
LEIGH: Well, for good multinationals, it's not. Good multinationals recognise they have an obligation to pay their fair share of tax in countries in which they operate, and that they need to be competing based on research and development. Now, Australia welcomes investment from multinationals. We know that multinationals, on average, pay higher wages and do more research and development. But we don't want those few multinationals who are dodging taxes to be getting away with it. And undermining the trust that Australians have in the system. Australia has benefited from foreign investment, but foreign investors don't have a licence to dodge taxes. The Albanese government has been clear that the rules have changed here. And unlike the former government, we are getting serious on multinational tax dodging.
GRANT: How do we make sure that the company says, well, look, Australia is a medium market at best, let's go and put our product elsewhere, for example, is that one of the outcomes that they say, right, Australia has got tough on this, we can spend more money in other countries, more of our product in other countries, and not worry about playing ball in Australia. Is that a fear or not likely?
LEIGH: It's such an important question, Luke. I think the answer to that is we've got to work with likeminded nations to make it clear that there isn't a way in which multinationals can play off one country against the other. So I've been engaging with counterparts in other nations, talking about what they're doing on multinational profit shifting, ensuring that we're working together. There was a big OECD/G20 agreement last year. Implementing that speedily is a real priority for our government and cooperating to ensure that we got a race to the top, not a race to the bottom on company taxes.
GRANT: Good stuff. You've been participating remotely in the APEC Finance Minister's meeting this week. Australia has a number of protections from the full brunt of a recession, but what consensus is there from other leaders around the world that do similar jobs to you that we're going to be okay with this? What was the message and what did you learn from it?
LEIGH: Well, the key message I was hearing out of the APEC Finance Ministers meeting was that the global economy has been hit hard by Russia's illegal invasion of Ukraine. We heard the way in which that's increased European gas prices more than fourfold, the way in which it's driving down forecast to global growth, it's expected to be only 2% next year, and the way in which global inflation has now gone above 8% this year. So we do need to have policies that ensure that fiscal and monetary policy is working in concert with one another and that we've got collaboration across countries to unlock some of those supply chain blockages which are causing real problems for consumers around the world.
GRANT: I know there's been some last minute changes or improvements or whatever it might be to the budget to account for the cost that no doubt the government will have to meet in some of this flood damaged Victoria, New South Wales, Tasmania, wherever else it heads next. It's awful. Is that work complete yet, Andrew?
LEIGH: Well, we're doing our best to incorporate those expenses to the extent that we're able to in the budget and ensuring that we're cracking down the rorts and the waste that was left to us by the former government. We've got that trillion dollars of debt without an economic dividend to show for it. So we do need to make sure that every dollar in the budget is delivering. But for Australian families, they know that they'll be getting a budget that delivers cheaper childcare for more than a million families, cuts the cost of medicines, funds more university and TAFE places, and increases paid parental leave to six months.
GRANT: What do you reckon the headline will be the morning after the budget? If you think it deserves a tick and it gets one other than Bread and Butter Jim, which I claim is my own, what do you see, potentially? What would you like to see as a headline?
LEIGH: Look, I'm not the headline writer. I'm really focused on ensuring that we deliver to the Australian people and others will report on that. This would be a solid, sensible, workmanlike budget which aims to take the initial steps in clearing up the mess that we're left. But it's going to take more than one budget to clean up the mess of nine years of Coalition mismanagement. We've got to do more to invest in the sources of growth, recognising that when we invest in dealing with supply chain issues, when we ensure that we've got better evaluation at the heart of government and a more competitive economy, then we lay the foundations for the productivity growth that we know underpins rising living standards. Productivity growth has been lousy, Luke, as you so well know. And only getting productivity going again is going to give us that sustained lift in living standards that Australian households need.
GRANT: Okay, well, I stole the word solid and sensible from what you just said there. So if I see that anywhere, firstly, I'm saying to you, you can write headlines. And secondly, I'll know it's probably got the tick that you were hoping it to get. I have to say it's always good to talk. Andrew Leigh, the Assistant Minister for Competition, Charities and Treasury. Stay well.