http://www.youtube.com/watch?v=p5lXcxmB3_E
On 18 June 2014, I spoke with Sky Business host Janine Perrett about why we should crack down on multinational profit-shifting, and the value of having a charities commission for donors and non-profits alike.
E&OE TRANSCRIPT
TV INTERVIEW, PERRETT REPORT - SKY BUSINESS
WEDNESDAY EVENING, 18 JUNE 2014
SUBJECT/S: Multinational tax, profit shifting and private equity; Charities commission
HOST JANINE PERRETT: Welcome Shadow Assistant Treasurer Andrew Leigh.
SHADOW ASSISTANT TREASURER, ANDREW LEIGH: Thank you Janine. You can be cruel when you try, can’t you?
PERRETT: I can. You’re not wearing your black tie! I was sure you’d be there! Was it [the Press Gallery Mid-Winter Ball] not a black tie event?
LEIGH: It is a black tie event. I’ll make the change a little later, staying in my blue collar at the moment.
PERRETT: Ah, okay. There was something I saw today I wanted to talk to you about. While the Prime Minister was away he drummed, he banged the drum about cracking down on multinational tax evaders and I know it’s an issue you talk about. But just before we get to that I noticed a story on this today private equity groups, three of the major ones are petitioning the government to get tax relief on $300 million worth of extra tax they’ll have to pay. Yet again we wonder about this. What is your position on that one?
LEIGH: Well, I haven’t seen the specifics of it. But certainly from the report it did raise an eyebrow or two. I mean, the reality of what we’ve got at the moment is a tax system where companies are too often shifting profits offshore. All that Labor asked to be put in place when we were in government were reasonable rules that prevented companies from shifting profits offshore through asset transfer or debt transfers. You can borrow and tax deduct the interest just so long as the entity is at arm’s length. I don’t think that’s too much to ask from some of those smart private equity boffins.
PERRETT: No, and let’s face it private equity boffins make a fortune out of this country hundreds of millions if not billions and we had the famous Coles-Myer case where they cleaned out the bank account and were out of here before anyone could get anything. The fact is that it seems like this was a move to increase tax, a fair change to the tax and they want some kind of relief? Do you think they haven’t got the memo about the fact that we’re all having to pay even the poorest Australians? Why should they think the age of entitlement’s here?
LEIGH: Well, Janine I admire your characterisation of the changes. But the fact is all of the changes around multinational profit-shifting took place under David Bradbury and Wayne Swan and the only thing the Abbott government has done since coming to office is to give back over a billion dollars to multinational firms. I welcome foreign investment. I think Australia has benefited greatly from it but all we need to do is to close the loopholes that allow companies to shift their profits offshore. I love that Tony Abbott talks about it when he is overseas. I just wish that his action when he is in Australia were towards closing the loopholes rather than keeping them open.
PERRETT: Now, we do know to be fair to them and you found the same problem; this is a huge global problem and will probably take a lot of cross border cooperation. Just give us an example of where they could do something now or where they have backtracked on something tangible that the previous government put in.
LEIGH: Well, here’s one way of thinking about multinational profit shifting: you take subsidiary in a low jurisdiction and you get it to sell a paperclip to the Australian company for a million dollars. Now the Australian company has a million dollar deduction and the subsidiary in the low tax jurisdiction has a million dollars in profits. That loophole Labor closed and the Coalition hasn’t backtracked on that. But there is a parallel trick that can be played with debt and they have kept that one open. That I think is a problem because if you’re a small start-up business in Australia there is no way your accountant is going to allow you to shift your profits off overseas. So you don’t get a level playing field. Good tax reform involves broadening the base and lowering the rate. I think the way in which we ought to be able to aspire to a lower company tax rate in Australia is if we’ve got a broad company tax base, if we close the loopholes, and as you say if we work with other countries because it is a global challenge.
PERRETT: I want to commend Andrew West at the Sydney Morning Herald he’s been doing some fantastic stuff in the last couple of weeks especially on Google - really explaining it’s worth going to look at and I’d say good luck to any government to try and do something about it. They all say the nice words all these big multinationals: “We do no harm”. What I want to know is, is it important enough? Is there an element of bipartisanship here?
LEIGH: Well, absolutely we’re keen to work with the government. The government’s profit shifting package as I said is entirely Labor’s minus a billion dollars. We’ve been encouraging them to put that billion dollars back in because that’s the value of a hospital -
PERRETT: I understand that. But I just wondered why would they forgo a billion dollars when they are desperate for every penny they can get do you think? What excuse…
LEIGH: Janine, I have been scratching my head to be honest. I can understand in certain things where the government is engaging in giveaways to the top end of town, there might be votes in it. I don’t see where the votes are for them in keeping these loopholes open. I think they’re mistaken from a good policy point of view and frankly also from a political point of view.
PERRETT: Okay, final question. I noticed that you have been tweeting about moves by this government to get rid of the charities commission. Now, that was something that was only set us a couple of years ago seemed to be generally welcomed by the charities, helps with transparency and governance – again what reason to get rid of it? Do you think you will get anywhere on this battle or is it gone and what will that mean for the charities?
LEIGH: Well, I’m pretty confident we can make the case here. As you say the charities commission is supported by 4 out of 5 charities. We’ve had an open letter signed by everyone from World Vision to Save the Children to the Hillsong Church to Lifeline and the RSPCA saying: “save the charities commission”. It gives transparency for donors; it allows people to have confidence in donating money to charities just as ASIC gives confidence to corporate investors.
PERRETT: Well, some Andrew…
LEIGH: Well, the argument for abolishing the charities commission in my views is as strong as the argument for abolishing ASIC. Now, Janine you and I could have a reasonable argument about how to make ASIC better but…
PERRETT: Well, not cutting the funding is one thing I agree with you on. But, sorry just on the charities commission are you hoping that they might see the light on this?
LEIGH: I think there’s a strong policy argument here. I don’t think it need be a partisan battle because no side of parliament has a monopoly over transparency and over good governance. We’ve had reports - a handful of reports from the productivity commission, report from parliamentary committees Malcom Turnbull sat on one of them saying that a bespoke charities regulator made sense. And now we’ve got South Australia and the ACT ceding their powers to the federal regulator so charities spend less time doing paperwork and more time helping the vulnerable.
PERRETT: Okay, well let’s hope you win on that one. Again, that seems to be a no-brainer.
LEIGH: Thanks Janine.
PERRETT: Now, off to the ball! Get your dancing shoes and tux on.
LEIGH: Thank you. Bye.
PERRETT: Thank you Andrew Leigh.
ENDS
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