BRIAN CARLTON:
The thing we're about to talk about is a position, government position that came out of the last Budget, and it's one of those ones that probably didn't get a lot of attention at the time, but it's a worthy issue. The issue is the large corporates, largely multinational corporates, who offset a bunch of their accounts to what you might call low‑tax jurisdictions, and they're claiming a whole bunch of things called "intangibles", and we'll find out what they are in a minute, intangibles, to reduce their overall tax bill here.
Now, the federal government to its credit is having a bit of a crackdown on this and has produced some draft legislation that they want some feedback on. To have a bit of a chat about exactly what that legislation contains, let me bring in here, if I can, Andrew Leigh, who is the Federal Assistant Minister for Competition, Charities and Treasury. Minister, good afternoon, how are you?
ANDREW LEIGH:
Good afternoon, Brian. Great to be with you and your listeners.
CARLTON:
I appreciate your time today. This is one that probably didn't get a lot of attention on Budget day or in the reviews of Budget, so to speak. The issue is largely as I've described, isn't it, they're sort of shifting their business operations around so that they can claim a whole bunch of deductions here in Australia based on activities overseas, in a nutshell?
LEIGH:
Yeah, that's right, Brian. So if you're a multinational now, there’s a good chance that you are funneling profits through a tax haven. Two out of every five dollars of multinational profits are going through tax havens and low‑tax jurisdictions.
CARLTON:
What's that cost the Budget annually, how much?
LEIGH:
Well, where our measures are projected to put billions of dollars back into the Budget. The fact is that if you're a local business operating out of Nicholls or Gold Creek or Belconnen, you're not going to be stashing your profits in the Cayman Islands; you've got to play by the book, which means that multinationals end up having the playing field tilted towards them.
We want to change that, because we want to get revenue for schools and hospitals, but also because we want fair competition, so companies are competing on serving their customers and looking after their workers, not on trying to find another tax lurk or boondoggle.
CARLTON:
I love that word, "boondoggle". How will the legislation force these companies to pay the appropriate tax? What's the stick?
LEIGH:
We've cracked down on a couple of tricks they've been using. One is debt, and so you set up a subsidiary in an offshore jurisdiction, it loans money to the Australian jurisdiction, and then that money is paid back and the interest is deducted. And the other way is significant royalty payments which are going to low or no‑tax jurisdictions, so you hold your intellectual property in a tax haven, and then you charge Australia for it, and again, you claim a deduction on that. Closing down these deductions puts money back into the Budget.
We're also improving transparency, so making sure that Australians know which jurisdictions firms are operating in, if they're listed on the stock market. Then any company tendering for government work over $200,000 has to disclose its country of tax domicile. And for the really big companies, the billion‑dollar firms, they've got to give us a breakdown of the tax they're paying in all jurisdictions around the world.
CARLTON:
Do you expect them to do that ‑ how can I put this politely ‑ honestly?
LEIGH:
Oh, I do, because there are significant penalties if they don't, and it's a requirement that's coming on from other countries as well. So we're not Robinson Crusoe in this; the European Union has moved to this country‑by‑country reporting, and so a company that's trying to diddle tax authorities around the world is soon going to find itself in strife.
CARLTON:
There's always the risk, isn't there, of companies that do operate in Australia deciding that this is all a little bit onerous and shifting the bulk of their operations to these low‑tax jurisdictions; is that a potential risk?
LEIGH:
I think there's great reasons to operate out of Australia. We've got a highly educated workforce, we've got great institutions, the National Anti‑Corruption Commission, we've got good public infrastructure and a strong rule of law, so countries won't be choosing Australia because we've got the lowest corporate tax rate in the world, they'll be choosing Australia because we’re a great place to do business. We just can't have this race to the bottom in company taxes, and a global agreement a couple of years ago between more than 130 countries set a floor on the tax competition saying that company taxes shouldn't be going below 15 per cent, and where they are, that then countries can take action.
CARLTON:
Okay. We've got 60 seconds here. You were at the COSBOA National Small Business Summit today. What's the general mood of small business in Australia at the moment? A bit stressed I'd imagine?
LEIGH:
Yeah, look, people are certainly feeling the squeeze, but when I was speaking to the small business owners in Melbourne yesterday, I really found that sense of optimism about the Australian Government's focus on productivity and competition. They get it, they understand that we're standing up for the little guy. We want to make sure that there is good competition and more start‑ups. We don't want Australia to be the land of the duopoly, we want it to be the land of a start‑up. So there was a sense of energy in the room, which I really appreciated as the Assistant Minister.
CARLTON:
Okay. Just one without notice, if I may. The Energy Security Board Chair, Kerry Schott's report into the Inland Rail Project, $31 billion, are you going to put a big red line through that?
LEIGH:
My gosh, what a shocking report, you know, you had a project which was starting off at $7 billion, now projected to come in at $31 billion, and according to Kerry Schott, the previous government hadn’t figured out where it started or where it finished. This is just a gob-smacking report, which really speaks to the sort of mismanagement that we saw under the Morrison government, and they failed to plan, and that ended up being a huge cost on the Australian taxpayer.
CARLTON:
How much have they spent already without a meter of track laid?
LEIGH:
I don't have the figure to hand, but I certainly know the projections are $31 billion, and the lack of competence from the body that was set up to manage it was highlighted by the report. You know, they're not bad people, but they simply didn't have the capacity to manage a project of this scale according to the independent report.
CARLTON:
Okay. Will you guarantee that the project will continue, even at that cost, and look, you can imagine in 12 months' time it will blowout again. How high are you prepared to go?
LEIGH:
Look, we've said that we'll continue it, but the recommendation from Dr Schott was to stage the delivery, to prioritise the section from Beveridge to Parkes and to also focus on the other areas of the project which will ensure that we get a good payback. And you know, you have to sort out where it's going to start, where it's going to end. It makes sense to have the structure of the rail sorted out, and we're making sure that we've got the expertise on ARTC that it needs rather than the hand‑picked appointees in the previous government who didn't have the skills or the experience to deliver the project.
CARLTON:
It's what I've been talking about publicly now for more than 30 years, and we're still yet to see a meter of track laid. Just back on the original issue, the multinational tax integrity measures, you're asking for public feedback there. Couple of ways they can do that. I guess this would be ‑ who are you pitching for in terms of feedback?
LEIGH:
Basically we're after stakeholders who are going to be directly affected and those who have been talking about these multinational tax schemes for many years, experts out of think tanks and universities. But anyone's welcome to make a submission, just go to treasury.gov.au, jump on; if you've got views, we'd love to hear them. This isn't an elite activity, the Albanese government is really open to ideas right across the board. People can email me directly if they want to, andrew.leigh.MP@aph.gov.au. I’m always keen to hear from my constituents about multinational tax or anything else that's on people's minds.
CARLTON:
Okay. Fair enough. I've just been advised that the unemployment figures from February have just dropped, pretty good for the ACT, rate is 3 per cent or 2.9, seasonally adjusted. You'd have to be pretty pleased with that, wouldn't you, because higher unemployment was a risk of higher interest rates?
LEIGH:
Yeah. I mean low unemployment does a bunch of things. Of course it means more people have work, but it's also important in other ways in that it starts to put a bit of pressure on employers to raise wages, and we know wage growth has been terribly slow over the previous decade, and it ensures that people who mightn't otherwise have gotten a look‑in get more of a chance of finding work. So people who are newly‑arrived migrants, somebody who's just gotten out of jail, somebody who's been homeless, somebody with a disability, all of those people are more likely to get work when the unemployment rate stays low. That's why full employment is such a big priority for our government. We're pleased with where it is now, the challenge is the policies we’ve put in place to keep it there.
CARLTON:
Bit of pressure on the Reserve Bank to maybe, given those low unemployment numbers, keep the ‑ or go back to a period of raising interest rates?
LEIGH:
Certainly the pause on the rate rises was welcomed by many Canberra households; I know people are feeling the squeeze. The Reserve Bank will make its decisions independently. What we need to do as a government is to provide that cost of relief pressure through cheaper medicines, cheaper childcare that comes in in the middle of the year, the energy bill relief that will be a key part of this Budget. And then longer‑term investing in the skills shortages, and so our free TAFE and additional university places are a core part of making sure that we don't have those supply chain blockages that have been part of driving up prices.
CARLTON:
When will we see the details of the Energy Relief Package, and how long are you prepared to continue that?
LEIGH:
You'll see that on Budget night, on 9 May, so I'd encourage everybody to be tuning in at 7.30 for Jim Chalmers's second Budget speech. That energy bill relief will be a package that will be delivered along with the states and territories, it's a one‑off package recognising the challenges that people are facing, and we've done this alongside the temporary gas price cap; that's another measure that ensures that people don't get hit so badly by these rising energy prices that are fundamentally caused by the war in Ukraine.
CARLTON:
So it also would offset, I would have thought, the promised pre‑election to, what, it's a $275‑odd reduction in your energy bills. That's nonsense, isn't it; not going to happen?
LEIGH:
Well, that was a projection for 2025. We're sitting here in 2023, and you know, lots of things could happen between now and then.
CARLTON:
I hope so. Appreciate your time today, sir. Thank you.
LEIGH:
Always a pleasure, Brian, thank you.
CARLTON:
Andrew Leigh, who is the Federal Assistant Minister for Competition, Charities and Treasury there.