JAMES VALENTINE, HOST:
The Australian Taxation Office has settled a decade long dispute with Rio Tinto, and Rio Tinto have paid $1 billion in unpaid taxes after an investigation of its Singapore marketing hub. Now this is all being done by the ATO’s Tax Avoidance Task Force. Have done an excellent job in the last few years – Google, BHP, Apple, ResMed, Microsoft have all settled bills with the ATO, and this task force has helped raise $26.3 billion in tax liabilities and $49.9 billion in cash. Does this mean we're getting more money in? Is there more money to come? And when someone like Rio pays a billion dollars in tax avoidance, does it change their tax set up for evermore? Are we gonna receive money from more money from Rio in taxes for evermore, or do we just go back to having another case? Dr Andrew Leigh joins us, he’s an economist and Labor MP. He's been campaigning on multinationals paying more tax and is across these kinds of issues. Dr Andrew Leigh, good morning.
ANDREW LEIGH, ASSISTANT MINISTER FOR COMPETITION, CHARITIES AND TREASURY:
Good morning, James. Great to be with you.
VALENTINE:
It does seem like the task force is very effective.
LEIGH:
It really does. And it's a reminder of the great work that public servants do out of the public eye, diligent, tireless, and in this case, returning a billion dollars to the budget bottom line. It's come as a result of resources companies using so called marketing hubs, which are a pretty strange arrangement. You've got iron ore being dug out of the ground in Australia, sold to Japan or India or China, and yet marketed through Singapore, which just happens to have a much lower tax rate than Australia. And what's great about this settlement is it doesn't just secure back taxes. It also ensures that going forward, taxes will be paid in Australia on commodities that are dug up in Australia.
VALENTINE:
Well, I suppose that was, that's yeah, that's sort of my main point that I'm wondering with Google and Apple and Rio, and other companies. Does a moment like this change their tax relationship to Australia, or are we just settling a case and we start another case?
LEIGH:
I think it needs to. I mean, we've had a lot of fancy accounting with fancy names. Apple engaging in what was called Leprechaun Economics. Microsoft doing the Single Malt, and Google and Facebook using the Double Irish with a Dutch sandwich. All whacky names for some questionable accounting practices, which your average small business isn't engaging in, James. And that's my main concern with this, that it's putting Aussie local businesses at a competitive disadvantage when they're up against tax dodging multinationals.
VALENTINE:
Exactly. Either give us all a double Dutch sandwich or stop everybody else from doing it. One or the other would be fair. Is it, are we seeing more revenue from companies coming into Australia staying in Australia?
LEIGH:
Yeah, we are. But the Tax Office is only as good as the laws that it's given. So that's why Labor went to the last election with plans to close a couple of abused loopholes around deductions of debt and misuse of royalty payment deductions. And we're also really committed to implementing this big international agreement that was struck last year between more than 130 countries. A good agreement, but the rubber hits the road when it actually gets implemented in domestic legislation. So I'm working very closely with Jim Chalmers and the Treasury Department to get that into law.
VALENTINE:
Right. And so this will make a difference? What's, what's the kind of prediction? What other companies do you think will be brought into line?
LEIGH:
It's not about targeting particular companies, but it's about targeting particular tax practices. So if you've got no debt owing to the banks but mysteriously you're using debt deductions to minimise your Australian tax bill, or if you're setting up unusual arrangements around royalty payments, you're routing things through the Cayman Islands where you don't actually have any employees in the Cayman Islands, all those sorts of things we need to crack down on.
VALENTINE:
There's global moves to try and deal with this kind of thing. What on the table there?
LEIGH:
So this international agreement with more than 130 countries was struck by the OECD and G20 last year. Two pillars, one applies to mega firms - more than $20 billion in annual turnover - and that ensures that their tax is paid where they're selling their products. And then there's another part of the agreement, which goes to a global minimum tax, making sure that we're not engaging in a race to the bottom in company tax and setting a 15 per cent global floor.
VALENTINE:
And did that hit some roadblocks the other day? The US does have concern, the US was on board and now not?
LEIGH:
The decision by Senator Joe Manchin to say that he's not going to support legislation in the short term I think is concerning. And we'll obviously be working with our friends in the Biden administration to ensure that they’re still signed on and implementing the deal.
VALENTINE:
Because, I mean I often wonder, if we go back a few years and a lot of these companies weren't paying their taxes, I would sort of wonder in my mind, what difference would it make to our budget? Are we missing $50 billion? Are we missing $20 billion? Can we put an estimate on it?
LEIGH:
The measures we took to the last election were certainly worth hundreds of millions of dollars, and we'll be looking under every possible rock to see what we can find. It's about fairness at the end of the day, James. We need to make sure that companies who are using public services such as rail lines, ports, roads are making a reasonable contribution to that. And that firms are competing based on being able to offer great products and affordable prices, and do terrific research and development – not competing based on who can find the best tax lurk.
VALENTINE:
Yeah. Andrew Leigh, thanks so much.
LEIGH:
Thanks so much, James.