ABC NEWS RADIO WITH GLEN BARTHOLOMEW
MONDAY, 23 OCTOBER 2023
SUBJECTS: ATO’s Multinational Tax Avoidance taskforce; Australian companies using foreign tax havens.
GLEN BARTHOLOMEW (HOST): A new report suggests multinational profit shifting deprived Australia of $11 billion in tax in 2020. The global report from the EU Tax Observatory of the Paris School of Economics suggests Australians hold more than $370 billion in known foreign tax havens, and that multinational companies are shifting profits to lower tax in countries.
Assistant Minister for Treasury, Andrew Leigh, says his government's determined to prevent companies unfairly shifting profits to tax havens, and that the Tax Office has managed to claw back billions in lost revenue. Andrew Leigh, good afternoon.
ASSISTANT MINISTER FOR CHARITIES, COMPETITION, TREASURY AND EMPLOYMENT ANDREW LEIGH: Good afternoon, Glen, great to be with you.
BARTHOLOMEW: Is it concerning it see that more than $370 billion is held by Australians in these so‑called tax haven countries?
LEIGH: Look, I take this report very seriously. Gabriel Zucman who's the co‑lead is one of the best known tax economists working globally, and his work has uncovered a whole range of concerning patterns, which have been one of the reasons that we took multinational tax integrity to the last election.
We've now had the Tax Avoidance Taskforce report that it brought in more than $6 billion over the last year, significantly more than in previous years, and we're moving to close multinational tax loopholes. There's an awful lot to be done, but the bottom line is when multinationals pay less, Australians pay more.
BARTHOLOMEW: You say it's concerning and called it unfairly shifting profits to tax havens. What's the legality of some of these moves? Are people within their rights to do so?
LEIGH: In some cases they are, in some cases they aren't. So the work of the Tax Avoidance Taskforce does is obviously enforcing the law and making sure that firms that are on the wrong side of the law are brought to bear, and that's that $6 billion.
But other activities are presently legal, but we believe shouldn't be. One of these is the use of debt instruments to try and shift money offshore.
In simple terms this is where you set up an entity in a low tax jurisdiction, it lends money to the Australian operation, and then the interest on that money is used as a deduction. It's just another tax lurk which means that multinationals get a leg up over local Australian businesses. So this isn't just about adding to the revenue coffers, it's also about ensuring a level playing field between big and small businesses.
BARTHOLOMEW: You point out a record $6.4 billion has been gleaned from that tax avoidance crackdown by the Tax Office's taskforce. Who from? Let's name some of these companies. Where did this money come from?
LEIGH: Well, we've had over recent years some ATO settlements that have been announced. This year Ampol announced a settlement of $157 million. Last year we had Rio Tinto announcing a billion dollar settlement. ABI, $159 million. Importantly, that settlement with Rio, as for a settlement with BHP a couple of years ago, it involved shutting down a so‑called marketing hub operating out of Singapore. So it wasn't just about paying back taxes, it was also a commitment not to engage in the same practices into the future.
BARTHOLOMEW: There's been some other settlements from people like Google and Apple and Microsoft. Are these ‑ I think the phrase was "locking in future tax outcomes" ‑ so these will have effects in the years to come?
LEIGH: That's right. Chevron, ResMed, among the others. What the Tax Office has been doing, Glen, is making sure that these firms are paying their fair share of tax in the past, but also getting their tax practices right into the future. But the Tax Office’s work is only as good as the laws that back it up, and that's why Jim Chalmers, Stephen Jones and I have been keen to make sure that we update those laws.
There's a big international process, the so‑called Two‑Pillar Solution, struck a couple of years ago in Paris at the OECD. Australia needs to be an early adopter of that, and so we're leading the international conversation on multinational tax fairness, not dragging our heels behind other countries as we were under the former government.
BARTHOLOMEW: The $6 billion figure that's on recovered settlements, for example, that's three times the usual $2 billion that's been gleaned each year from action on company tax avoidance in the past. So do you expect it to continue to grow?
LEIGH: Look, I would like every firm to be paying their fair share. I'd like the take of the Tax Avoidance Taskforce to be nothing, because firms were doing the right thing in the first place. But while we've got firms that are playing fast and loose with the law, we need the Tax Avoidance Taskforce on the job, and we need to make sure that our laws are fit for purpose.
I'm always surprised when we hear people in Parliament taking the side of big multinationals, because effectively they're costing Australians revenue, and also they're costing local companies the chance to compete fairly. Local companies end up competing on a tilted playing field rather than a level playing field, so multinational tax dodging isn't just bad for revenue, it's bad for fairness.
BARTHOLOMEW: I think the taskforce has been funded through to mid-2025. Why put any sort of time limit on it?
LEIGH: It periodically comes up for review, that's just the way in which these things have traditionally been done. But I think people would be gobsmacked if a Tax Avoidance Taskforce that's returned so many more times revenue to the tax base as it's cost the taxpayer didn't get extended. It'll be the sensible thing to do.
BARTHOLOMEW: $200 million investment reaping $6 billion in returns, as you say, makes a certain degree of sense. Last week the Government unveiled some amendments to tax laws that aimed at closing loopholes exploiting, exploited by companies operating across multiple jurisdictions. What do they involve?
LEIGH: Well, this involves making sure that we're engaging constructively with business. This is not about being anti‑business, in fact as I've made clear, it's about being pro‑competition and pro‑business. We've worked constructively with the sector to make sure we don't have any unintended consequences. Ultimately, as we close these loopholes, it will be good for taxpayers, good for competition, good for Australia.
BARTHOLOMEW: Australia, as you say, is part of the OECD's initiative to ensure multinational companies pay an effective 15 per cent tax rate on profits in every jurisdiction they operate in. Where's that up to?
LEIGH: It's due for implementation over the coming years. It's certainly an important agreement, because it stops that race to the bottom in company tax, and for a couple of decades there, Glen, we just saw a steady move towards countries lowering and lowering their corporate tax rates.
That's particularly bad for Australia, a country which has traditionally drawn a disproportionate share of revenue from company taxes. This is really, in my mind, about saving the company tax itself, and enforcing that agreement is going to be important. It ensures that if another country isn't collecting the tax, then Australia can get that top‑up tax, and so there's a strong incentive to move quickly, which is what we'll be doing.
BARTHOLOMEW: You went out with the revenue boost and these tax measures have helped deliver the first budget surplus in 15 years. Can you then afford to pay superannuation on the extended amount of paid parental leave?
LEIGH: We'd love to be able to do it, it's just a matter of juggling that with a range of other budget priorities ranging from the National Disability Insurance Scheme, to the defence spending that we're engaging in. But we've increased a whole range of health payments, the biggest boost to bulk billing in the last 30 years, the biggest increase in expenditure on the Pharmaceutical Benefits Scheme through our cheaper medicines policy.
We've had a range of policies that increased baseline payments, including the biggest increase to Commonwealth Rent Assistance in a generation. So we provide as much support to vulnerable Australians as we can, while also making sure we're delivering the first surplus in a decade and a half.
BARTHOLOMEW: Can't do everything at once.
LEIGH: That's exactly the challenge, absolutely.
BARTHOLOMEW: Look forward to seeing that when that does come around. It is policy after all. Let's see whether the funding is flowing any time soon. Andrew Leigh, thanks for coming on the program today and the many other occasions you've done so.
LEIGH: Yes, thank you, Glen. And I, like many of your other listeners, am really going to miss you when you retire this Friday. You're a remarkable voice on radio. It's hard to imagine News Radio without you and I wish you and your family all the best for the next stage.
BARTHOLOMEW: Kind words, Andrew Leigh. Thank you very much. The Assistant Minister for Treasury joining us there.