Yet another reason to keep FOFA reforms

This morning I spoke to ABC 666 Breakfast presenter Philip Clark about calls for a Royal Commission into the financial advice arm of the Commonwealth Bank of Australia which a Senate inquiry found underpaid victims of a scandal and sought to avoid regulatory scrutiny.



FRIDAY, 27 JUNE 2014

SUBJECT / S: Commonwealth Bank and ASIC report; multinational profit shifting and tax evasion.

PRESENTER, PHILIP CLARK: The Senate Committee into the Commonwealth Bank has called for the country to set up a Royal Commission into the Commonwealth Bank to investigate fraud and forgery and allegations of a cover-up inside its financial planning arm. This issue's been bubbling along for a while, since it was broken in the media about misconduct among CBA financial planners. It's much worse than we had thought. Thousands of Australians lost their life savings as a result of shoddy financial advice. And it ought not stop there. Member for Fraser Andrew Leigh, who's been campaigning in this area and others, is on the line this morning. Andrew, good morning.

SHADOW ASSISTANT TREASURER, ANDREW LEIGH: Good morning Philip, how are you?

CLARK: I'm very well. It's uncovered a pretty dodgy set of dealings inside the CBA which probably does warrant further investigation, doesn't it?

LEIGH: Well it certainly makes troubling reading and it's looking into the Australian Securities and Investments Commission which is the oversight body for financial planners. This is why when we were in government, Labor tightened up the rules around financial advice, because of the Storm Financial affair, Timbercorp - where people not only lost all their money but were left with debts at the end - and Trio. We've had a succession of these corporate collapses. And in our view it wasn't enough to just put all the burden back onto the investors. You had to say financial planners must act in the best interest of the client, and that people had to be opting in to receive financial advice.


CLARK: But what's wrong though with - I mean people listening would say, "Well hang on, we've got a regulator here, ASIC". I mean what's wrong with ASIC - are they scared of the Commonwealth Bank? I mean why weren't they in there protecting people?

LEIGH: Well the report goes through in forensic 500-page detail what the Senators thought could be improved within ASIC. And they do say that ASIC has done a good job in some areas. But they also raise the need for ASIC to get more resources. What's striking about this whole affair though, Philip, is that it's come down at a time when the Government has taken one dollar in eight out of ASIC. They have gutted ASIC's resources, and they're winding back financial protections. They're doing their best right now - Mathias Cormann is trying to wind back Labor's financial protections. So it's a Government which seems to be very strong in taking on the weak, but pretty weak taking on the strong.

CLARK: You're referring to the FOFO reforms, to the Future of Financial Advice reforms here, which the Government is tinkering with. They want to change it, they say, to make it to take into account concerns from the industry itself. But you read a report like this, I must say, it does make your blood boil.

LEIGH: That's absolutely right Philip. And I think it's very clear what the Government is trying to do in winding back financial protections will be good for bankers and it will increase remuneration within the financial sector. It's also pretty clear it'll be bad for pensioners and it will mean that more pensioners will be at risk of losing their life savings. And so, if you put in place a measure like that, after a generation in which we've seen rising inequality, incomes for financial dealers have gone up a whole lot faster than incomes for pensioners, then you're missing the moral duty, I think, that falls upon a government to do the right thing by the most vulnerable.

CLARK: Sixteen past seven. Member for Fraser Andrew Leigh's my guest this morning. He’s done a lot of work and has expertise in this particular area. We're talking about the call yesterday for a Royal Commission into the Commonwealth Bank of Australia over the cover-ups inside their financial planning arms. The report dealing with one of the most serious offenders within Commonwealth Financial Planning Limited, Mr Don Nguyen, being known within the bank as "Dodgy Don". Despite all this being known, it's said ASIC was dragging the chain hugely on taking any action about it. Just one issue this morning too which has arisen, which I know listeners would be concerned to hear, that Australia's biggest coal miner Xstrata, which these days is known as Glencore, and I see one of its chief executives - it's a Swiss-based company - but I see one of its executives is in the  'Rich List' - he's one of the billionaires and one of the top ten income earners in the country. This company, which has earned more than $15 billion dollars of income over the past three years, has paid absolutely zero - not a little bit, but zero - tax. Nothing. 

LEIGH: Well it's an issue - 

CLARK: I mean for people struggling out there, and they look at this, they think - you know, when the government complains we need a tough budget, why don't they do what's obvious and collect the taxes they ought to be collecting from people like this?

LEIGH: Couldn't agree more Philip. When Labor was in government we put in place a package of measures to deal with what's called "profit-shifting". Since coming to office, this government's wound back $1.1 billion dollars of those reforms.

CLARK: But what's the problem here - why can't the tax office collect this money?

LEIGH: Well, what you do in profit-shifting, what a company does, is to move profits to a low-tax jurisdiction offshore. We in government put in place measures that would close those loopholes and particularly close the one that allows you to use debt to shift profits overseas. But what we have seen again is Mathias Cormann and Arthur Sinodinos winding back those reforms. And that's $1.1 billion that has to come from the rest of taxpayers, either in higher taxes or lower services.

CLARK:  Stephen, I happened to be talking to this morning our guy from Patterson security was talking about financial markets overnight. He says the problem with this is that it is not easily solved in Australia alone. Is that a fair comment?

LEIGH: Well, you need an international response but you also need Australia to play a leadership role. Australia is taking this issue to the G20. The government is talking the talk but the only walking they are doing is walking backwards. They’re winding back Labor's reforms. This is an issue that matters to a lot of people. I gave two speeches earlier this week, one to a group called Micah Challenge, a group of young aid activists that have made this their number one priority. And another one to CEDA, which is a group of business leaders who are concerned about this. It's not fair that Australian small business pays more tax because they don't have the instrumentalities to shift their profits overseas.

CLARK: Yeah, that's right there is no budget crisis there's a revenue crisis caused by our unwillingness or lack of ability to collect money that ought to be paid. Is that a fair comment?

LEIGH: Well, $1.1 billion being shifted overseas, being shifted in ways which government could catch, is the price of a new hospital. The government is effectively giving away the price of a new hospital because it won't go hard on profit-shifting.

CLARK: Good to talk with you.

LEIGH: Likewise Philip.

CLARKE: Member for Fraser Andrew Leigh there on a couple of issues which you may well find disturbing this morning.



Be the first to comment

Please check your e-mail for a link to activate your account.

Stay in touch

Subscribe to our monthly newsletter


Cnr Gungahlin Pl and Efkarpidis Street, Gungahlin ACT 2912 | 02 6247 4396 | [email protected] | Authorised by A. Leigh MP, Australian Labor Party (ACT Branch), Canberra.