Laura Jayes:
Welcome back, you’re watching AM Agenda. Well, the number of large companies not paying tax has fallen, that is the good news, but there are some 28 per cent of companies that still didn’t pay any tax in the last financial year, and there are still some companies in Australia that have never paid any tax.
Joining me live is Assistant Treasurer, Daniel Mulino. Daniel, welcome to the program, and thanks so much for your time this morning.
It would be inexplicable to many people –
Daniel Mulino:
Thanks for having me on.
Jayes:
– watching who pay their taxes today to think, how is it that 28 per cent of companies still didn’t pay any tax last year?
Mulino:
Well, thanks for having me on, and look, this news is great that corporations are paying tax at very high rates. When it comes to companies that aren’t paying any tax, there can sometimes be reasons why companies will pay low rates of tax, or indeed no tax, for example, if they make a loss, or if they have made very significant investments and are writing that off.
But what we want to make sure is that there aren’t companies who are paying zero tax who should be paying some. And what we see from a lot of the actions that this government’s taking, we’ve invested $3 billion in improving the rigour of our system when it comes to large corporations. We’re seeing more and more companies paying tax.
As you identified, there are 28 per cent of companies that aren’t paying any tax, but that number 11 years ago was 36 per cent. We’ve seen it hovering around a third of companies for quite a while, and now it’s dropped below 30 per cent for the first time and is tracking down, so that’s a welcome development.
Jayes:
What kind of companies aren’t paying any tax, and is it all down to investment and losses, or is there some clever accounting going on, Daniel?
Mulino:
Well, look, I’d say that when you look at companies who aren’t paying tax, it would primarily be – and our system is a strong one, where the tax office has very strong assurance and forensic capabilities, so the vast majority of those companies would be paying tax at the appropriate level.
But what we need to do is to make sure that we’re constantly strengthening our system so that we’re picking out any companies that are paying tax at the wrong level, and the levels at which we’re seeing company tax paid now are materially higher than we’ve seen in the past.
And just again, to point to that $3 billion investment in strengthening our system, that’s going to lead to, it’s estimated, $15 billion in extra payments over the forward estimates. So that’s a really significant pay‑off for an investment in our IT, in our people, in our assurance and forensic capabilities.
Jayes:
What’s your personal attitude towards tax, ‘cause I think even in the last year we’ve seen real world experiences as to what happens if you overtax a system or, you know, there is too much taxing and spending. I look at the tobacco wars, for example, that could be pointed to as an example of overtaxing a market, going back to the well, and then causing an adverse reaction. I look at some of the brain drain and the exodus of millionaires of the UK because of a higher taxing environment.
You know, this is often dismissed by unions, and some economists, that, oh, you can’t overtax, you know, for example, resources in the ground, you can’t overtax big mining companies like that, they won’t just go elsewhere. But that’s not the real‑world experience, is it?
Mulino:
What I would say is that if you take a step back, Australia is at about the average of the OECD for our tax share as a proportion of GDP, and we tax at that level while providing one of the best social safety nets and one of the best government service provision programs right across the areas where government is rightfully involved in providing support to people.
So I think we’ve got a pretty good set‑up in Australia when you look at it from the bigger picture. Our tax take is pretty moderate, but our level of support for the community is at a very high level.
Jayes:
Well, income tax isn’t though, is it?
Mulino:
Now we need to constantly think of ways to take – well, look, I think that we need to constantly look at our tax system, and one of the ways we’ve tried to take pressure off the tax take is to identify savings in our budget. So if you look at the government’s first term in government and this first year of the second term, we’ve identified over $100 billion of savings. The Opposition, when we inherited the budget, had identified zero dollars in savings.
Jayes:
Sure, but –
Mulino:
So we can –
Jayes:
– I’m kind of talking a bit more at a macro level, right –
Mulino:
– identify savings and maintain services, that helps take pressure off the tax take.
Jayes:
Yeah. I mean you say our system is pretty good. I would broadly agree with that, but it’s certainly not perfect, and I mean that’s why we’ve got all these reviews in place, right? How many years have we been talking about inefficient taxes? I wanted to ask you more broadly about the business tax review as well. In that I think there’s a lot of hope because part of that remit is looking at the GST carve‑up. What is your kind of – not to get too philosophical on AM Agenda, but what is your kind of philosophical view on that? Do you agree that that carve‑up needs to be fixed because it is really blocking a package of tax reform that could benefit all Australians, and Premiers kind of need to get out of their silos and think of the greater good in many ways?
Mulino:
Well, Laura, I always consider AM to be a very philosophical forum, so –
Jayes:
Hope not too much.
Mulino:
– it’s an entirely appropriate question.
Jayes:
We want it to be practical, not philosophical.
Mulino:
Yeah. No, look, I’d firstly – if you look at the various reviews underway, the first one I’d point to is the review that the Treasurer identified just a few days ago by Andrew Mills into red tape in business taxation.
Look, this to me is a really practical and concrete measure coming out of the Economic Reform Roundtable. One of the big areas that everybody agreed needs to be looked at is regulation, not necessarily less regulation, but better designed regulation.
And so some of the areas we discussed at the Economic Reform Roundtable were better regulation around environmental and planning approvals around the National Construction Code, but then there’s red tape in areas like business taxation.
Jayes:
Yeah.
Mulino:
So if we can have a really thoughtful and rigorous reduction in red tape, achieving the same policy goals, that’s a clear win.
Jayes:
Is it though?
Mulino:
When it comes to the GST issue –
Jayes:
Yeah.
Mulino:
Sorry.
Jayes:
Sorry, continue on the GST, I don’t want to interrupt you on that.
Mulino:
No, no, no. And just to say, look, broadly speaking I think the GST carve‑up approach that was set up when the GST was originally enacted I think is broadly right that we look to divide it amongst states, taking into account their spending needs and requirements.
Of course it’s not a simple carve‑up, and so it’s constantly in need of review, and that’s appropriate. But in broad brush terms, I think the carve‑up is about right.
Jayes:
The carve‑up’s about right. New South Wales would disagree, so would many of the eastern states that too much money is just going to WA. I mean Saul Eslake called it the worst public policy of the 21st century. It’s not a compliment.
Mulino:
Well, that’s why we’re having a look at the GST distribution. But as I say, when you look at it from the highest level, and you said, you know, let’s look at it from a more philosophical level –
Jayes:
Yeah.
Mulino:
– the GST carve‑up was originally designed to look at it partly as a kind of per capita distribution but also taking into account the fact that different jurisdictions have different needs, and so Northern Territory, for example, has always had a bit of an extra payment per capita.
Jayes:
Sure.
Mulino:
Based on the fact that the provision of services in that jurisdiction is inherently so much harder.
Jayes:
Yeah. Sure. But how do you explain that to WA? NT is the easy example.
Mulino:
Well, one of the other aspects of the GST distribution that has always been an issue, and it’s not just an issue with that WA decision, but has been what happens when a particular jurisdiction has an increase in their revenue at a point in time? How do you adjust for that over time?
So the trajectory of making adjustments in the GST has been a perennial point of discussion between jurisdictions, and that’s one of the things I think that would need to be incorporated in that review.
Jayes:
Do you agree that if it’s not fixed it is a handbrake on broader tax reform and getting rid of some of those inefficient taxes that have been long discussed for the better part of probably 2 decades now?
Mulino:
Well, look, we’ve got a tax suite of policies, which I think go to taxing multinationals more sensibly, and that’s a really important productivity improvement. We have a whole raft of measures, not just in tax but more broadly, which are dealing with better designed regulations.
So I think there’s a whole raft of issues that are already on the government’s agenda, and some additional issues which have come out of the Economic Reform Roundtable which go right to the productivity point.
Jayes:
Okay. Can I ask you about BHP and what’s going on with China at the moment? BHP has essentially said China’s ban is a negotiating tactic. Do you see it that way, and do you see a greater role for government intervention right now?
Mulino:
Well, look, this is essentially a commercial negotiation, so it really wouldn’t be appropriate for me to be commenting on the specifics, but also because –
Jayes:
But it has massive budget implications –
Mulino:
– it’s a commercial negotiation.
Jayes:
– too though, that’s why it’s so relevant.
Mulino:
Yeah, but because it’s a commercial negotiation, I’m not privy to the details of exactly what’s being discussed or where the discussions are up to, so it’s not really appropriate for me to comment on, but, well, look, what I would say, not so much in relation to this specific matter but more broadly is that, you know, this government has had a very constructive relationship with China when it comes to trade, and Minister Farrell has successfully led an engagement with China which has seen the unwinding of all of the trade and positions that were put in place under the previous government. So that’s a very positive overarching development. Look, clearly we’ll be following with great interest how this commercial negotiation proceeds, and you know, I’d be hoping that it’s resolved as quickly as possible.
Jayes:
Don’t you think taxpayers would expect the government to be doing more than just following with great interest? You talk about the good relationship with China. At what point do you use that leverage?
Mulino:
Well, I think, look, this is a commercial negotiation, so that’s where things stand, and it’s really a matter at this point for BHP to engage with the parties that they’re negotiating with in China to resolve this, and as I said, it’s not a discussion which I’m privy to the details of. But I am hoping that this is resolved as quickly as possible.
Jayes:
Great to have you on the show, Daniel Mulino, I appreciate your time today.
Mulino
Thanks, Laura.