ADAM SHIRLEY:
Dr Andrew Leigh is the Assistant Minister, Federal Minister for Competition, Charities and Treasury.
Dr Leigh, riddle me this, how is it that a multinational, highly profitable company can operate in Australia at effectively a zero tax level and yet, you, I, lots of people listening are paying a much higher percentage in tax? Is that fair?
ANDREW LEIGH:
Morning, Adam. Great to be with you and your listeners and certainly, it's not fair if multinationals are getting away without paying their fair share. It was a big priority of ours at the last election. We made clear we would come to office and close multinational tax loopholes and focus on a number of the tricks that multinationals have used to reduce their taxes.
One of those, which we have legislation now in the Senate, is using debt deductions. Basically, the multinational sets up a loan arrangement where the Australian company is paying a loan to a low‑tax jurisdiction and then uses the interest deduction to reduce its tax bill. We're closing that down. It's slow going. The Liberals and the Greens have sent it off to a second Senate inquiry, which is slowing its progress through the Senate, but I'm confident we'll get there in the end and close that particular loophole.
SHIRLEY:
I'm guessing they have different reasons for wanting a second look at it, depending on what side of politics you're on. I mean, in the end, will it make sure that these big, big profitable businesses pay more tax for the work they are doing and the profits they're making in this country?
LEIGH:
It certainly will. It'll add to the revenue base, but it's not the only thing we're doing. There was a global agreement organised by the OECD and the G20 that set a 15 per cent minimum floor on company taxes around the world. That's been important because Australia draws higher than higher‑than‑average share of our tax revenue from company taxes. So a race to the bottom on company taxes is particularly damaging for us. We're working on enacting that minimum tax, that's important for Australians and for the integrity of our tax system and then we're moving on to transparency, with a world‑leading country‑by‑country reporting system that will ensure that Australians are able to see where tax is being paid by big multinationals.
SHIRLEY:
I get that this is not the kind of thing that any government can just decide to change and ensure these big businesses put a bit more tax into the place that they're making profits. But why is it that a lot of big businesses can operate in this way in a country like Australia when most of us are flogging away at work and paying a far higher percentage of our wage into government taxes?
LEIGH:
One way to understand the problem, Adam, is that in the olden days, where most production was physical things, it was harder to pretend that you were producing in a place where you really weren't. These days, a lot of multinationals are producing weightless goods, producing bits and bytes rather than widgets, so they're able to move the legal location of their production around to suit their tax arrangements.
We've been focused on cracking down on that ever since we came to office. It's been an important priority for us to make sure that multinationals pay their fair share. There's more to do on this, it is an ongoing challenge , but we know from work by experts such as Gabriel Zucman, that about two‑fifths of multinational profits are now going through tax havens and that's too high.
SHIRLEY:
What makes it a challenge? I mean, is it these businesses threatening to pull out of Australia if you decide as a government you're going to charge them more in tax? Is it the fact that these people, these CEOs, are in high places and influential in government circles? Because as a worker bee, I do not understand that and I never have.
LEIGH:
I think of multinational tax as an ongoing process of whack‑a‑mole. It's important that the laws are continually updated to crack down on inappropriate arrangements. One the Tax Office has been going after in the last decade has been the use of marketing hubs. Our two biggest miners, Rio and BHP, reached agreements with the Tax Office, collectively amounting to a billion dollars, in which they agreed to cease their use of marketing hubs, effectively selling iron ore from Australia to China or Korea via Singapore. Closing down on that arrangement, was an important measure by the Tax Office and again, that's only enabled by stronger laws.
SHIRLEY:
And if I look at a couple of people's favourites, tongue in cheek there, if we look at places, I guess industries like the gas industry, who mine a lot of stuff and then sell a lot of it overseas, I mean, are these sort of companies also behaving like this? And if they are, why is any government of any persuasion allowing it?
LEIGH:
There was a big settlement with Chevron which went to the issue of debt deductions. The one I talked about at the outset, they had been found to be using an inappropriate scheme with a loan which had an internal loan that had a very high‑interest rate and was allowing them to deduct very large amounts of taxes.
The other measure we've taken, is that Jim Chalmers, in the last Budget made changes to the Petroleum Resource Rent Tax, so you weren't able to completely offset your liabilities using deductions. The practical effect of that is the West Coast projects will start to pay Petroleum Resource Rent Tax this decade, whereas otherwise, they wouldn't have paid it until the next decade. It brings forward a substantial amount of the tax and means ultimately that ordinary mums and dads don't have to pay as much if multinationals are paying their fair share.
SHIRLEY:
Adam Shirley with you on ABC Radio, Canberra. Dr Andrew Leigh is as well, the Federal Assistant Minister for Competition Charities and Treasury, and he is the Federal Member for Fenner.
This texter is wondering, and it is on people's minds in the capital region as well as other parts of the world. This texter is wondering, Dr Leigh, can you ask if anything happened with negative gearing in parliament this week? I was going to ask you about further consideration of negative gearing capital gains. Is there anything going on behind the scenes that we should know, Dr Leigh?
LEIGH:
No, that's not been a priority for us. Our priority has been delivering the tax cuts for every taxpayer in Australia. So, every Canberra taxpayer is going to get a tax cut on the 1 July. That package passed the Senate this week despite saying that they were going to vote against it, ultimately, the Liberals supported it and that's a great thing for all Canberrans. We want Australians to earn more and keep more of what they earn.
SHIRLEY:
You mentioned there's a second reading of this multinational tax bill underway. When do you anticipate that will actually be processed and that that will be made law?
LEIGH:
It's going to depend on the Senate committee process. The unusual thing the Liberals and the Greens did last year was that after having one Senate inquiry, the government made a number of small technical amendments to address the issues raised in that Senate inquiry and the Liberals and the Greens said, well, right, we're going to have another Senate inquiry. This is very rarely done. The practical effect is that means that the bill takes longer to get through the parliament. I'm confident we'll get there at the end, but I think the needless delaying tactics from the Liberals and the Greens haven't been good for the cause of multinational tax compliance.
SHIRLEY:
Well, I'm sure many people listening might be pleased if, in fact, you continue to try and get serious on multinational tax avoidance. I guess what they end up paying will be the proof that you're doing it or not. Thank you for your time today.
LEIGH:
Real pleasure, Adam. Thanks for the deep dive into multinational tax.