Andrew Leigh

E&OE TRANSCRIPT

RADIO INTERVIEW

RN BREAKFAST

THURSDAY, 15 OCTOBER 2015

SUBJECT/S: Malcolm Turnbull’s Cayman Island portfolio

FRANK KELLY: Andrew Leigh is Labor's Shadow Assistant Treasurer and he joins me now. Good morning, Andrew.

ANDREW LEIGH, SHADOW ASSISTANT TREASURER: ‘Morning Fran, good to be with you.

KELLY: Yes or no: are you accusing the Prime Minister, Malcolm Turnbull, of inappropriate conduct when it comes to his tax affairs?

LEIGH: Fran, this certainly is something that most Australians wouldn't look to do. If most Australians found themselves in possession of a little bit of extra money, they would probably use it to pay down the mortgage or – 

KELLY: Hang on a second; let's go back. Yes or no: are you accusing the Prime Minister of inappropriate conduct when it comes to his tax affairs?

LEIGH: It's certainly unusual conduct, Fran.

KELLY: Why is it unusual, to have your money invested through managed funds?

LEIGH: Few Australians, I believe, if they found themselves in possession of a bit of extra money, would decide that the best thing to do is to buy into a Cayman Islands-based venture fund with a minimum $1 million buy-in.

KELLY: That kind of talk – isn't that just the politics of envy we're hearing here?

LEIGH: No, Fran. I have no quibble with Malcolm Turnbull's personal wealth. The question is his decision, as Mitt Romney did in the past, to locate significant amounts of that in the Cayman Islands. The Cayman Islands has been on the radar of tax authorities for decades. They've been criticised by the OECD for their excessive secrecy; they've indeed been criticised by our own tax commissioner, Chris Jordan, who described them as a tax haven. They have, after all, more companies than they have people, and they have a single building which houses 19,000 companies. Labor's concern is that at a time when we're discussing tax transparency and ways of cracking down on multinational tax, we have a Prime Minister with unusual tax arrangements in a tax haven.

KELLY: You keep saying things like that – unusual tax arrangements – but the Prime Minister told the Parliament he invested in managed funds to avoid any conflict of interest. He said it was an agreement signed off on by the Secretary of the Department of the Prime Minister and Cabinet as Malcolm Turnbull tried to make sure that he was at arm's length from any investment decisions. What is unusual about that? Isn't that appropriate?

LEIGH: Fran, we certainly haven't said that anything is illegal, nor that the particular funds haven't been disclosed.

KELLY: No, but you say it's unusual. What is unusual about a Minister of the Crown, let alone a Prime Minister, making moves to try and put his wealth at arm’s length from any investment decisions?

LEIGH: Fran, if you want to put your wealth at arm’s length you could easily choose, for example, an Australian-based index fund which simply takes a slice of the Australian stock market, investing effectively in all ASX 200 companies.

KELLY: So if it's not appropriate, is Labor also taking aim at Australian Super and many of the other Australian superannuation funds that have investments in funds that are housed in the Cayman Islands?

LEIGH: Fran, I think there is a world of difference between putting your money in a superannuation fund and letting them choose their investments, and deliberately choosing to buy into a particular Structured Investment Vehicle in the Cayman Islands.

KELLY: You've got to be careful though, I mean, is any of your super currently invested in any entity based in a tax haven or based in the Caymans?

LEIGH: Fran, the point is that when most Australians put their money into super, they leave it to the superannuation trustees to sort it out. Most Australians aren't making a deliberate decision to park significant amounts of money in a jurisdiction that has been described by the tax commissioner as a tax haven.

KELLY: Can I take from that you don't know where your super funds are?

LEIGH: It's simply the fact that when you make a decision to put money into superannuation, you leave that to the trustees. You're not actively choosing to invest in a tax haven. Fran, we're having a debate with the Liberals in Parliament at the moment over tax transparency for big Australian companies. They want more secrecy; we want more transparency. We're having a debate over our multinational tax package. We think that we ought to be cutting down on some of these tax loopholes that are used by big multinational firms; the Liberals think we ought to leave it open. In that context I think it's perfectly appropriate to have the same conversation that the United States had in 2007 and 2008 about Mitt Romney's decision to locate a significant amount of his investments in the Cayman Islands.

KELLY: What Malcolm Turnbull has invested in is a managed fund. He doesn't make decisions about where that managed fund then invests or houses itself, does he? I mean, he's trying to do arm’s length – that's the point, isn't it?

LEIGH: When you make a choice to invest in a Cayman Islands-based vulture fund, you're making a particular investment decision that says something about your willingness to engage with a tax haven. The Cayman Islands have been a concern to sensible tax authorities for many years. They've been concerned about the ways in which their light-touch financial regulation and their complete absence of taxes affects the tax base in other countries.

KELLY: So the absence of taxes, that was the point the Prime Minister zeroed in on yesterday. He says he pays his taxes in full. All taxes are paid in full, in Australia. Is he wrong? Are you suggesting that isn't true?

LEIGH: What the Prime Minister would have you believe is that this is some kind of tax maximisation scheme –

KELLY: No, I think he's said he pays all his due taxes.

LEIGH: He has been very careful with that. What happens when you invest in Cayman Islands vehicles is they are able to differentially treat management fees; they're able to move money that might have been dividend money into capital gains; they're able, for example to defer tax liabilities. As we know, a range of tax planning instruments are about deferral of tax liability.

KELLY: So are you suggesting these managed funds of the Prime Minister's, based as they are in the Cayman Islands, mean he is having to pay less tax? He might be paying all the tax due but it is less tax – is that what you're saying?

LEIGH: Yes, there's certainly investment vehicles which exist only in the Cayman Islands. Something like a Structured Investment Vehicle, for example Fran, is a financial structure which was basically set up to take advantage of the Cayman Islands' very unusual tax laws: not having company tax, not having income tax. I don't think Australians would imagine that Malcolm Turnbull's decision to put money into a range of different Cayman Islands-based funds is in order to maximise the return to the Australian taxpayer.

KELLY: We really do have to go but just briefly, are you saying that Malcolm Turnbull should withdraw from these funds?

LEIGH: I don't believe it is appropriate for someone who is looking to do the right thing on multinational tax avoidance to be investing in one of the biggest tax havens in the world.

KELLY: Andrew Leigh, thank you very much for joining us.

LEIGH: Thank you, Fran

ENDS

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