5AA MORNINGS WITH LEON BYNER
WEDNESDAY, 16 JUNE 2021
SUBJECTS: Multinational tax avoidance and tax havens; tax fairness
LEON BYNER, HOST: Now, ever wondered how your Netflix statement bills to a company in the Netherlands and gets to you, why people who place Facebook ads are charged by a company in Ireland, and why the tiny island of the Bahamas is the sixth-largest foreign owner of Australian farmland? Bet you didn't know that, eh?
Back when most multinationals produced manufactured goods, taxation was pretty straightforward: profits were taxed in the country where the goods were produced and where the firm was headquartered. But these days, firms are sneakily shifting profits into low-tax jurisdictions. Two-fifths of multinational profits now pass through tax havens and so-called investment hubs, and of course, that means that a lot of those places, I would have thought that the place where you do business is where you pay your tax. Not necessarily.
I want you to meet, again, a bloke who I think is one of the finest economic minds we've got. He's the Shadow Assistant Minister for Treasury, Dr Andrew Leigh. Andrew, this seems to put an unfair burden on the ordinary taxpayer, doesn't it - and good morning.
ANDREW LEIGH, SHADOW ASSISTANT MINISTER FOR TREASURY AND CHARITIES: G'day, Leon. Yes, you're absolutely right. When multinationals don't pay their fair share, that doesn't take away the need to spend on schools and hospitals, it just means the shortfall has to be made up for by pay-as-you-go taxpayers and regular small businesses. Your typical Adelaide business can't hide profits in the Cayman Islands, so they end up being stung more when multinationals pay less. It's in the interest of the whole economy to make sure that multinationals pay their fair share, but I don't see very much enthusiasm about that from the current Federal Government.
BYNER: No, well, now, we do know that the Group of Seven rich nations are committed to a global minimum company tax rate, but of course, this recognises that a race to the bottom in corporate tax is ultimately self-defeating. When you've got multinationals dodging tax individuals and small businesses have to pay more, so I guess the question for the Federal Government is: is this going to be part of a problem or a solution? What do you reckon the Government should do?
LEIGH: They need to stop engaging in this race to the bottom on company tax. Scott Morrison was leading the charge for Australia to cut our company tax rate a couple of years back, but you've now got Britain and the United States going in the opposite direction, raising company tax rates, and that recognises that everyone loses when we have one of these races to the bottom. It's important to make sure that there is a minimum standard of tax that's paid.
There's been a lot of work going on with this. Australia used to be in the steering position on these efforts, but increasingly now we've slipped towards the back. We've left it to others to make the running on this issue, which is a mistake because Australia stands to gain a lot from getting multinational tax right.
BYNER: Now, we understand that tax havens are used by drug lords, terrorists, extortionists, money launderers. North Korea use tax havens to hide the proceeds of the sale of nuclear technology. We know that narcotics is an issue. How do you reckon we need to get around this so that we don't keep putting undue pressure on the normal mums and dads small businesses?
LEIGH: Leon, we need to make sure that tax havens are persona non grata in the international conversation, they're basically outside the pale for civilised investors. That involves setting out some guidelines for superannuation funds to guide their investments in tax havens, but it should also mean making sure that dealings in tax havens are much better scrutinised. If you're a firm that's tendering for government work, for example, I reckon you should have to disclose to taxpayers if you've got headquarters out of a tax haven.
BYNER: I saw some data and I'll get you to explain this to people. I was astounded when I saw it. That's why I want to share it with the people of our state. Offshore wealth in tax havens has been estimated to exceed $100 billion. How can that be?
LEIGH: You're very well informed on that, Leon. That's an estimate that comes from a group of economists who've carefully analysed wealth in tax havens, partly informed by things like the Panama Papers, which provided a window through a big data leak as to how much is held in those accounts. When they scrutinised it, it looks like about four-fifths of the money is held in breach of other country's tax laws.
It also looks like a lot of the money is held by not just the wealthy, but the super-duper wealthy. Indeed, about half of that is held by the top 1/10,000th of a per cent, so it's money which the ultra-wealthy are using to avoid paying tax in their home countries.
There's another reason why we need to be cracking down on them. Not only the fact that, as you said, they're home to extortionists, money launderers, and drug dealers, but also the fact that they're facilitating tax evasion.
BYNER: I want to ask you about June 30, which is not far away, where everybody will be doing their tax return or getting an accountant to help them out or whatever, but we've had COVID and a lot of people have been absolutely pounded by it, so how does it look this year? Do you think the tax office are going to be amenable to the fact that there's been an enormous amount of hardship which has been placed on people that previously was not there?
LEIGH: I hope they'll certainly take that into account. I suggest when people have had hardship that they go to the tax office before tax filing deadline and let them know that you need an extension. They always look on that better than if you come to them after missing the deadline.
It's certainly been an incredibly tough year for so many families and businesses. I speak to travel agents in my electorate who are wondering how long they need to keep on going on the smell of an oily rag, because of course the majority of the profits for a travel agent don't come from domestic travel, they come from overseas travel. It's not their fault that the border's been shut down, affecting their businesses and their employees.
BYNER: So, if you were suggesting a fairer tax policy during this COVID time, what would you suggest?
LEIGH: It's really important to look after low- and middle-income earners. Labor supported the low- and middle-income tax offset that the Government put in place during the budget, and recognised that extending the instant asset write off is important for encouraging businesses to invest.
But then we've got to do more long-term reform. We need an energy policy that puts downward pressure on energy prices at the same time as dealing with dangerous climate change. I've heard from many people in the manufacturing sector that the cost of energy is a huge issue, and the lack of a policy there has been hurting their bottom line.
BYNER: Well, thank you for coming on today. That's the Shadow Assistant Minister for Treasury, Dr Andrew Leigh, giving us his view.
Authorised by Paul Erickson, ALP, Canberra