4 October 2022

Interview with Liam Bartlett, 6PR Mornings

LIAM BARTLETT:

During the Federal Election campaign you might recall one of the promises from the Labor Party was to fix the national debt in part by clawing back some money – more money – from the multinationals who were able to manipulate the tax system here in Australia and pay next to nothing. Now, at the time that was driven by Dr Andrew Leigh, who has moved on to become the Assistant Minister to the Treasurer, Jim Chalmers, responsible for Competition, Charities and Treasury. And he joins us on the program from our studio in Parliament House. Dr Andrew Leigh, good morning.

DR ANDREW LEIGH:

Good morning, Liam. Great to be with you

BARTLETT:

Good to catch up with you. You’ve talked about trying to make these companies pay their fair share. You and I have had that conversation on this program before. Now that you’re in government, what exactly are you doing to make that happen?

LEIGH:

Liam, we’re cracking down on two particular deductions, one is around the use of debt to shift profits into low or no-tax jurisdictions. This is the sort of shenanigans where a multinational company sets up a loan from a low-tax jurisdiction to Australia and then tries to deduct the interest payments. We’re going to close down that loophole through a series of reforms that we’ve been consulting on with industry.

And the other one is to ensure that firms aren’t using royalty payments in order to minimise their taxes. Again, this is a payment which is made to the low or no-tax jurisdiction which becomes a deduction in Australia – which can end up driving down the multinational’s tax bill. All of this will add money to the budget bottom line, Liam, but it will also add fairness to the system, because we don’t want small businesses starting up where they’re competing against a multinational with one hand tied behind their back – feeling that unless they set up a subsidiary in the Cayman Islands they’ll never be able to compete with the multinational.

That’s not good for business, not good for the economy. So we need that level playing field, and that’s one of the reasons we’re pushing forward with this multinational tax reform.

BARTLETT:

And where are those two reforms? Are they – where are they in the pipeline exactly? Have they been written up? Is there draft legislation?

LEIGH:

You can expect to see those in the budget and then legislation flowing afterwards. They’re two reforms we took to the election. We were very clear with the Australian people. We intend those to start in the middle of next year. We’ve consulted with industry to make sure that this fits well with the tax architecture as we’ve got it right now. And, of course, it sits alongside our transparency measures to make sure that Australians have better visibility into the taxes that are paid by firms which are tendering for government work, that are listed on the stock market and for those very big global entities.

BARTLETT:

And what about this other idea of a flat 15 per cent minimum rate, minimum tax rate globally? Is that going to get up?

LEIGH:

Yes, so that will be a proposal which came out of the OECD/G20 process last year. It was an agreement between 130 countries, the so-called two pillar agreement. Pillar 1 assigns taxing rights across market jurisdictions for the very biggest tech firms. Pillar 2 sets a global minimum tax of 15 per cent and tries to stop that race to the bottom in company taxes. So no longer are you deducting from countries which have corporate tax rates below 15 per cent.

I think that’s an important reform. It’s great to see the rest of the world signed up to it. And today Jim Chalmers and I put out a consultation paper which will, again, ask for the views of industry in how Australia should go about implementing these important reforms.

BARTLETT:

You’re asking industry to comment on that? I mean, is that a little bit like, you know, asking the fox if he wants to stay in charge of the hen house?

LEIGH:

Well, these are pro-business reforms, Liam. I’m very keen to see business prosper, and that includes multinationals. I want multinationals to be creating more jobs in Australia, doing more research in Australia, but spending less time worrying about tax loopholes and boondoggles.

BARTLETT:

Well –

LEIGH:

I think that ought to be the ambition of any economist in Australia who wants to see Australia grow well. Foreign capital is welcome, but it’s not a licence to avoid paying your fair share.

BARTLETT:

Well, that’s the point, isn’t it? I mean, we want to see more companies like Google and have the advantage of all the things they offer, but we don’t want to see them just come in like Google and hoover things off and take off to another country. I mean, with this 15 per cent minimum rate, for example, will it only get up, Doctor, if it’s a global agreement.

LEIGH:

No, I believe there’s an advantage to countries actually to move forward on this, Liam. There’s a so-called first-mover advantage which sometimes is the opposite to what you see in international reforms. So we’ve already got the UK out there with draft legislation to implement pillar 2. I'm keen for Australia to be in the vanguard of early-moving countries.

We ought to be setting the standard globally, making clear to other countries that you can implement these reforms and do so in a reasonable, fair and balanced way that engages with business, that works to build a stronger and a more productive economy that sees us creating more jobs and also advantages small firms that are moving into the space that a multinational might have occupied. If you want to compete with a tech giant, you want to be doing so on a level playing field.

BARTLETT:

So when you say first mover, are you saying that we can do it unilaterally? We can say, “Look, if you want to do business here in Australia it’s 15 per cent bottom line”?

LEIGH:

That’s how it’s designed. And so there’s an advantage to countries that move earlier because they’re able to in the short term garner a higher share of the tax revenue. That was intention when policy-makers were designing these reforms last year. And it’s a good reason for Australia to be among the early-moving countries.

None of this is simple. You know, with multinational tax, the devil is always in the detail. But there’s an advantage to Australia in being in the vanguard.

BARTLETT:

This consultation invitation, how do companies get in touch with your office to make that submission?

LEIGH:

Just go to Treasury.gov.au. You can download the consultation paper there. And we’re also open to views from civil society, from organisations representing workers or employers, from people who are just interested in the tax system themselves. There’s a lot of expertise in Australia and we want to tap into that expertise to make sure we get this right. This was an historic agreement last year, but the agreement is only worthwhile if it actually translates into changes in laws. And that’s what we’re looking at implementing. That OECD agreement won’t be part of what we do in the budget. But it will be a focus of next year and beyond.

BARTLETT:

And, Dr Leigh, on another note – pardon the pun – how are you going with the $5 note? Do you want us to remove the Queen’s face?

LEIGH:

Well, Liam, that’s not a priority for us to decide immediately. I’m responsible for the Mint, and so certainly looking at the changeover of the effigy on the coins. That will happen at some stage next year as we move from to having for the first time a king on the coin. We’ve never had a king on Australian decimal currency before. But the decision of the note is yet to be made. That will lie with Jim Chalmers and Cabinet. It will be made in the fullness of time, but we’re not in a rush to make that.

BARTLETT:

When do the coins start coming out? When do the new ones come off the production line?

LEIGH:

It will be some time next year. We’re yet to receive the effigy from the Royal Mint. And so there’s a sort of formal process where the Royal Mint sends out an effigy. That’s then confirmed with Buckingham Palace. There’s testing of the dies because each die needs to sustain some 150,000 to 200,000 coin printings. And so you’ve got to make sure the effigy works efficiently. And then the coins will come out into circulation.

For any conspiracy theorists out there, I can assure people that coins containing the visage of Queen Elizabeth II will be legal tender in perpetuity, so no-one needs to worry that their old coins won’t still continue to be good.

BARTLETT:

Well, arguably they may become more valuable.

LEIGH:

They may over time. Although there’s some 15 billion decimal coins that have been printed with Her Majesty’s effigy, so there’s not exactly a scarcity problem out there right now.

BARTLETT:

Not exactly fitting the category of limited edition.

LEIGH:

Exactly. Exactly. And, you know, there’s a range of collectible coins the Mint produces as well. There’s been strong enthusiasm for those over recent months. And you can understand it. The Queen first graced Australian coins when they were shillings and pence, and so the idea that we would now be moving to a new monarch on our coins is a very unusual one. It’s quite a moment in Australian history, I guess which befits an historically long reign.

BARTLETT:

It’s no small thing, yeah.

LEIGH:

Absolutely. And a reminder of the change that each of us in time will have in our hands, might drop into a vending machine or a parking machine. Anyway, coins aren’t used by everybody, but they’re still pretty popular out there. And I imagine many Australians will be pretty excited the first time that they hold a coin in their hand that features King Charles on the back rather than Queen Elizabeth.

BARTLETT:

Small change is no small change.

LEIGH:

You’re full of the puns today, Liam!

BARTLETT:

Look, stay with me on this. Listen, one final question for you: I just can’t resist this given that you’ve chosen to spend the time with us in our parliamentary studio, which is very nice of you. I know you’re busy. What about that 5 cent coin? Is the rumour true that you’re going to get rid of it?

LEIGH:

Yes, so the challenge with getting rid of the 5 cents is the rounding problem. So when we got rid of the 1 and 2 cents it was very easy – 1 and 2 go down, 3 and 4 round up. But now you’ve got an even break where the question is what happens to 15 cents? Does that round down to 10 cents or up to 20 cents? Because there’s no obvious answer, that’s held up the removal of the 5 cent coin. But the 5 cent coin now does cost more than 5 cents to produce, so certainly it’s an issue you would deal with if there was a simple response. Because there’s not a simple answer to it, I suspect we’ve got 5 cent coins for a long time to come, to coin a phrase.

BARTLETT:

Dr Andrew Leigh, thanks for your time this morning. Great to catch up with you.

LEIGH:

Real pleasure, Liam. Thank you.

BARTLETT:

Dr Andrew Leigh there Assistant Minister for Competition, Charities and the Treasury.