PATRICIA KARVELAS, HOST:
By now, most Australians would be feeling the effects of record inflation and rising interest rates, even if you don't have a mortgage. But high commodity prices, which is one of the drivers of that inflation, are also delivering a $27 billion boost to the budget bottom line. And that's, of course, welcome news for the Treasurer as he prepares to hand down his first budget in October. We get two budgets this year with a change of government. And with budget repair a priority, the government has multinationals like Google and Facebook in its sights, canvassing a range of measures to force them to pay more tax. Andrew Leigh is the Assistant Minister for Competition, Charities and Treasury, and our guest this morning. Welcome back to Breakfast, Andrew Leigh.
ANDREW LEIGH, ASSISTANT MINISTER FOR COMPETITION, CHARITIES AND TREASURY:
Thanks, Patricia. Great to be with you.
KARVELAS:
The government's expecting to really get back almost $1.9 billion by closing loopholes around tax deductions from multinational companies. What’s that figure based on?
LEIGH:
That's based on the Parliamentary Budget Office’s costing of our policies, Patricia, and those are policies which are carefully calibrated to ensure that there's a level playing field between businesses. Because at the moment, there's debt deduction lurks that are able to be used by large multinationals that can't be used by their small business competitors. We don't want companies to be competing based on who can find the best tax lurk. We want them to be competing based on offering cheaper prices or better products to consumers, on innovating and they're treating their staff well, rather than on competing between fancy accountants to see who can create the next Double Irish with a Dutch Sandwich.
KARVELAS:
You also want to introduce rules that would force companies to publicly disclose how much tax they pay. How will that result in them paying more taxes? Is that about naming and shaming yourself?
LEIGH:
Well, it's the old Louis Brandis notion that sunlight’s the best disinfectant. And we've seen this in other contexts, such as the annual reporting of corporate tax payments that Labor introduced in our final years in office that comes down every December. The larger resources companies, BHP and Rio, already report through a thing called the Global Reporting Initiative. They do so voluntarily, and I think that's a good marker which may be a way of ensuring that we have more corporate tax transparency for large multinationals. We're only talking about companies with more than a billion dollars of annual turnover, so this will be a small share of firms, but understanding their global tax footprint is important.
KARVELAS:
And there's a discussion paper out now. What kind of feedback are you looking for? What's your timeline for legislating the results of that process?
LEIGH:
These are budget measures, so we're closing submissions on the second of September. We're looking for submissions both from those firms that are affected, but also from Australians who have a strong interest in the multinational tax debate. We know that ensuring multinationals pay their fair share of tax ensures we can fund Medicare and aged care, that we can service the trillion dollars of debt racked up by the former government, and that we can make sure that we put firms on a level playing field. We want this to be a public debate. I mean, the accounting details are often pretty arcane and complicated - Leprechaun Economics and the Single Malt. But the fact is that the underlying concepts are pretty simple: a level playing field for businesses and tax fairness that ensures multinationals pay a share of tax that's appropriate for the profits they're receiving.
KARVELAS:
Last month, Rio Tinto handed over almost a billion dollars in taxes to the ATO to settle the dispute that's run for years. Are there more of these settlements on the horizon?
LEIGH:
The ATO needs to be well funded to ensure that it’s able to crackdown on these unusual arrangements, and this one Patricia came from the so-called marketing hubs. BHP and Rio had been selling iron ore via Singapore, which is a country that as most of your listeners will know does not have a large mining industry. And that led to a settlement - one of them was half a billion, the other was a billion dollars - and an agreement to cease use of that Singapore marketing hub. That's an important win for the Australian taxpayers. But the ATO is only as good as the laws it has got, which is why Labor’s committed to strengthening those laws in the interest of taxpayers.
KARVELAS:
Australia's adopted the OECD framework of a minimum 15 per cent tax on multinationals. How close are we to getting a global agreement on that, so companies can't just move their operations to lower taxing jurisdictions?
LEIGH:
We're working with the other 136 countries to try and ensure that that's implemented as quickly as possible. You want to distinguish between the two pillars of that agreement. Pillar one is applying to super large firms over $20 billion turnover, pillar two to firms over a billion dollars of turnover. And pillar two has a built-in incentive for countries to go earlier. So I'm very keen to ensure that we move swiftly on implementing that. Australians expect that multinationals pay their fair share of tax. We enjoy the products, the Googles and Facebooks that you've mentioned before, but that's not an excuse for these multinationals not paying their fair share of tax.
KARVELAS:
Just on a couple of other issues. The war in Ukraine has pushed some commodity prices like coal and gas to record highs. Companies are making windfall profits. You know, they’re really living large right now. Where's the rationale for refusing to tax those extra profits, given rising energy costs and the state of the market?
LEIGH:
It's about ensuring that we've got confidence in the business sector, and that we have consistent rules going forward. And so windfall taxes are not consistent with an approach that says that companies should know what their taxes are as they go into making business decisions. But we are closing down on those multinational tax loopholes, as I mentioned before, ensuring the Tax Office has the resources it needs to go after lurks and loopholes such as marketing hubs.
KARVELAS:
But lurks and loopholes are just one avenue, right? You exhaust that avenue. Do you think that you should look beyond that, given these record profits?
LEIGH:
One of the things that has been a hallmark of the Albanese Government is wanting to work cooperatively with business and wanting to ensure a no surprises approach. We're very much a government that seeks to do after the election what we said we’d do before the election, and that's what Australians expect. You saw in 2014 the justified outrage from the community when the Abbott Government put in place a series of measures very different from what they’d taken to the previous election. That's not the way in which we intend to govern. We want to be calm, secure, predictable, working collaboratively with the business community for a high productivity economy. That will characterise the Jobs and Skills Summit that's coming up at the start of September. That's the way in which the Albanese Government seeks to work with business.
KARVELAS:
And just finally, and we don't have a lot of time for this, but as Minister for Competition you're targeting excessive market concentration. What can we expect here?
LEIGH:
Competition reform in the early 1990s is one of the big drivers of the productivity growth that came in that decade. So I'm very keen to ensure our competition laws are fit for purpose. There's not many sectors in the economy that aren't dominated by just a few large firms, and it's important that we have the opportunities for scrappy start-ups to compete with the established players. The biggest players in the Australian stock market are almost exactly the same as they were a generation ago. And so we need to ensure that we're also generating that business dynamism that we know is crucial to a high growth, high wage economy.
KARVELAS:
We're out of time. Andrew Leigh, thank you.
LEIGH:
Thanks so much, Patricia.
KARVELAS:
Andrew Leigh is the Assistant Minister for Competition, Charities and Treasury.