The biggest settlement in Australian tax history - Transcript, FIVEaa





Subjects: ATO settlement with Rio Tinto, JobKeeper

LEON BYNER, HOST: The Australian Government has welcomed the settlement reached between the ATO and Rio Tinto, which will pay approximately - listen to this - $1 billion, in one of the largest tax settlements in our tax history in this country. Now this represents, as I understand it, quite a drawn out - and we're talking here drawn out in years - hard work by the Tax Office. It's a significant win for everybody, because the community will ultimately benefit in terms of lower taxes. But that's a lot of money. $1 billion. Let's talk to a bloke who is, I think, one of the most qualified economics experts in the Australian Parliament. Highly revered, both by universities and economics experts. I'm talking about the federal Assistant Minister for Treasury, Dr Andrew Leigh. Andrew, thank you for coming on today.


BYNER: This problem appears to have taken a while to get it all together. Is that because there's been a degree of avoidance here, which of course - avoiding tax is not illegal, evading is - so I'm just asking, has there been some avoidance here?

LEIGH: That’s a really astute question, Leon. I mean, it goes back to the Senate corporate tax inquiry in 2015, where a series of questions from Labor senators revealed that resources companies were selling iron ore from Australia to places like India or China or Japan, but they were routing the payments via Singapore. And the only apparent reason for that seemed to be that Singapore has a significantly lower company tax rate than Australia. The use of these so‑called marketing hubs led to a half billion settlement with BHP in 2018, and then this $1 billion settlement with Rio was announced yesterday. The biggest settlement in Australian history, and a real testament to the hard work of those Tax Office officials in chasing down this revenue.

BYNER: This might be a dumb question, but what happened to the concept – or was there never such a concept - if you do business in Australia, you pay tax in Australia?

LEIGH: That's one of the good things about this settlement, Leon, that it locks in the principle that tax will be paid in Australia on commodities that are dug up in Australia and sold overseas. So it's not just settling back debts. It's also enshrining that principle going forward. But of course, the Tax Office can only do as much as they can with the laws it's got. And that's why Labor went to the last election promising to close a couple of other multinational tax loopholes, as well as to move swiftly to implement this big international agreement around putting in place a global minimum rate of company tax, so we don't have a race to the bottom in company tax, which then of course means that all of your listeners pay more.

BYNER: Why have we struggled with multinational taxes in the past?

LEIGH: I think it's because increasingly a lot of production has been moved into tax havens. There's been a lot of tax competition, and then some of these jurisdictions have advertised to multinationals that they're a place to do business. So you've seen tricks like the Double Irish with a Dutch sandwich, one called Leprechaun Economics-

BYNER: Leprechaun Economics! [laughter]

LEIGH: Exactly. Taking advantage of particularly low company tax rates in certain countries. And that doesn't just mean less revenue. It's also really unfair on the local businesses, who then have to compete with a tax dodging multinational. If you're a start‑up, you're not routing your tax payments through the Cayman Islands - you're just doing the right thing, and trying to come up with good ideas to be as productive as you can. And that's what we want companies to do. We don't want them to be competing on the latest tax lurk. We want to be competing on the best product for the best prices.

BYNER: Is that happening as much as you'd like?

LEIGH: Not as much as I'd like. But that's why we're committed as a government to closing the multinational tax loopholes. It's good for good businesses, because businesses recognise that they need a social licence to operate. Now one of my favourite stories in this space, Leon, is when it was revealed a few years back that Starbucks UK had paid zero company tax for three years straight. And they were so embarrassed out of that, they actually said, ‘look, we'll make a voluntary tax payment of at least £10 million a year for the next couple of years’, just in order that their customers didn't all walk down to the next cafe down the road. So there is a recognition among good companies that you need to pay your taxes, because they support building the public services that companies and individuals rely on.

BYNER: Where are we with the tech giants, have you got them in your sights?

LEIGH: We're not targeting particular firms. We just want to make sure that we have rules which are fair across the board. And certainly there have been moments in which the tech giants have been using these sorts of tricks. So the Double Irish with a Dutch sandwich I mentioned before was used by Google and Facebook. Leprechaun Economics was a tag for the way in which Apple organised its tax affairs. So there's instances in which some of these large tech firms have moved around the location of their apparent production. To be honest, Leon, it's much easier when you're producing bits and bytes than when you're producing widgets to pretend that a country is the place where it's really adding value.

BYNER: Are you going after the countries where - there are companies in these countries where they might have got JobKeeper, and they really didn't need it.

LEIGH: That money is gone. Unfortunately, the horse has bolted and taken with it some $20 billion of taxpayer money-

BYNER: $20 billion.

LEIGH: - which went off to went off to firms with rising revenue. And that's one of the reasons we've got this trillion dollars of debt.

BYNER: I've got to ask you, how did we make such - because normally, when policies are committed for amounts of money that's given for assistance, we don't make the error where we're out an amount of money like $20 billion. That'll buy a lot of social help and services for the people of our country. So what happened? What went wrong there?

LEIGH: I think the former government just took their eye off the ball, Leon. They didn't realise that there was so much money going into firms with rising revenue. And when they did realise, they were reluctant to swallow their pride and change the scheme. Had they done that in a timely fashion, then much less money would have been wasted. My estimate is if they'd stepped in quickly, then almost half of the money could not have been paid out to firms that just didn't need it. Now JobKeeper was an important program. It saved jobs, but it didn't save jobs where it went to firms with rising revenue. That was just adding to the government debt while padding profits of firms that were already profitable.

BYNER: So what happens now? Are we're still chasing a lot of money from companies?

LEIGH: We're making sure that we're looking at every government expenditure as rigorously as possible. So Katy Gallagher and Jim Chalmers are running the ruler over government spending, because we need to treat government funds as carefully as we would treat money in our own bank accounts. And the former government’s setting up of slush funds, carpark rorts and all of the rest was an attitude to the public finances that is really shocking to me, Leon. This idea that they were spending public money like it was Liberal Party money, rather than recognising their sacred duty as custodians of the public finances, to make sure that every government dollar got the best return for the community.

BYNER: Andrew Leigh, thank you. He's the Federal Assistant Minister for the Treasury, and a very smart academic too.

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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.