MONDAY, 8 AUGUST 2022
Subjects: Labor’s plans to make multinationals pay their fair share of tax; ATO settlement with Rio Tinto and the use of marketing hubs; JobKeeper
LIAM BARTLETT, HOST: I wanted to talk about the world of commerce ‑ the wild, wonderful, wacky world of tax, in particular, with a revelation in the Financial Review this morning that oil and gas giant Shell has confirmed that it is selling Queensland gas to global customers via a Singapore marketing hub, which of course raises questions all over again about what they call transfer pricing to lower domestic tax payments. In other words, the price you end up selling it to is not necessarily reflected in the amount of tax you end up paying to the country that you draw that product from. It's drawn attention all over again to how the big industry players sell gas offshore. And it also comes hot on the heels, you may recall last month the decision by Rio Tinto ‑ another industry giant ‑ to pay almost a billion dollars to settle the dispute to the Australian Taxation Office over the mining company's use of a marketing hub in Singapore. These marketing hub pricing mechanisms have been around for a while. Now all this leads me sort of back to Rome, so to speak, because you might recall during the election campaign a lot was made of this from the then Labor opposition about forcing the multinationals to pay more tax. And we spoke then to the Honourable Dr Andrew Leigh, who has become now that Labor is in government the Assistant Minister for Competition, Charities and Treasury, and he joins us on the program. Andrew, good morning to you.
ANDREW LEIGH, ASSISTANT MINISTER FOR COMPETITION, CHARITIES AND TREASURY: Good morning, Liam. Great to be back with you.
BARTLETT: Good to catch up with you too. Now, Andrew, we had those conversations. Many of our listeners would remember the sort of the nub of them, and that was your call to make these multinationals pay more tax. And I think we were talking about the potential to earn, you know, high $1 million, maybe $2 million to the public coffers every year from these sorts of companies. Did you see this news about Shell using a Singapore pricing mechanism, Singapore marketing hub, and did that prick your ears up?
LEIGH: I certainly read it with a great deal of interest, Liam, particularly in the light of the marketing hub stories that we had from the Rio Tinto settlements recently and the BHP settlement of a half a billion dollars a couple of years ago. Marketing hubs in the case of resources are on the face of it a little bit strange. When Australians discovered that we were selling iron ore to Korea or India or to China, and that some of the revenue was being booked in Singapore ‑ a country without a large mining industry ‑ then I think people did raise an eyebrow or two. Shutting down those marketing hubs for the iron ore miners was important, and I'm sure the Tax Office is applying appropriate scrutiny to these revelations in the paper today.
BARTLETT: Has anybody from your side of the political fence made any sort of entreaty to the ATO, or will be making any sort of approach to the ATO, to make sure they are looking at it?
LEIGH: I know the ATO is actively looking at marketing hubs. They were a core focus of the 2015 Senate corporate tax inquiry, and the questioning for the Labor senators there went to the resources companies use of them. It's something that the tax office has been scrutinising very carefully because, Liam, if you're exporting resources from Australia, then you should be paying tax in Australia. It's as simple as that.
BARTLETT: No doubt, no doubt at all. I don't think any of our listeners will argue with you about that. So can you give us an update? I mean, how are you going? Where are you at? I take it you haven't lost your appetite since you've entered government to make these multinationals pay more tax, or their fair share of tax I should put it?
LEIGH: That's right, Liam. This is about fairness between resources companies. And so there's no reason why a snappy start‑up resources company should be put at a disadvantage because it's up against a multinational miner that's booking profits in a marketing hub. We want greater competition across the economy, and that means ensuring an environment in which companies aren't competing to find the next tax loophole, but they're competing for great products, great service to customers, improved prices. All of that is what gives you a high productivity economy, not an economy where firms are constantly on the lookout for the next lurk. So we're putting in place in the upcoming months the policies we took to the election around closing down loopholes for debt deductions and misuse of royalties. And then we're going to be working with the other 136 countries who signed up to an agreement last year in Paris, the so called Two Pillar Agreement, to implement that as swiftly as we can.
BARTLETT: When will we see those new measures, Andrew? Will we have to wait until the budget in October? Or will we see proof of that sort of stuff in the next couple of months?
LEIGH: The October budget is when we're anticipating delivering on the promises we took to the election. And in the Two Pillar Agreement, Pillar Two has a strong incentive for countries to move early. You get more revenue the earlier you move to close the loopholes. Pillar One may take longer because that involves a global agreement, and that's the one that affects the very biggest firms ‑ those with a turnover above $20 billion.
BARTLETT: Right. Do you intend to continue to measure this? I mean, is it possible that we'll be able to have a chat in the next sort of seven or eight, ten months and you'll be able to say, ‘look, this is exactly the amount of money we were able to clawback’?
LEIGH: Absolutely. The challenge with this is, of course, there's some delays as you go about implementing it, as you go about cracking down on arrangements which aren't appropriate. But certainly we're expecting that more money will be returned to the budget bottom line. And gosh knows, Liam, the budget certainly needs it given the trillion dollars of debt that we've been left by the previous government, and some of the challenges for needing to spend on important expenditures such as Medicare and infrastructure.
BARTLETT: Well, you know, I saluted your campaign and your passion for it when you're in opposition, but you know these things go, Andrew. Sometimes, with all due respect, sometimes people in your position can get to the power base and all of a sudden lose their memory.
LEIGH: Ah, Liam, I’m never going to lose my passion for good policy and making sure that we've got good economic settings in place. That's why I made the transition from being an economics professor to being in Parliament. I don't want to be here just for show. I want to be here to make a difference. So please, hold me to account. That's exactly what I'd want.
BARTLETT: Excellent. Excellent. And look, just while you're there, you know following our many discussions on the JobKeeper payments, is there anything retrospectively you're going to look at there or you can look at, in terms of any sort of public register? Or do you think the horse has just completely bolted?
LEIGH: I think it has, unfortunately, Liam. It's a reminder of the importance of setting up programs so they have good rules and scrutiny around them. We saw that $20 billion going off to firms driving revenues, and so many Australians would say to themselves “if you gave my household couple of thousand dollars, it'd be pretty unlikely that we would give it to a firm whose revenues were going up”. That's a huge amount of money that was wasted by the former government, and one of the reasons why its gross debt is on track to reach a trillion dollars. We're very determined in this budget to crack down on the rorts and the waste that are left to us by the former government, to ensure that every single dollar in the budget is delivering a community outcome, and the JobKeeper shenanigans sits over our shoulder as we set about putting in place a budget that is right to the Australian people.
BARTLETT: Alright. We'll talk again. That'll be very interesting, that document. Andrew, thank you very much for your time this morning.
LEIGH: Thanks, Liam. Great to chat.
BARTLETT: Dr Andrew Leigh, Assistant Minister for Competition, Charities and Treasury in Canberra.