Melissa Clarke:
As we mentioned a moment ago, just under a third of large companies paid no tax in the last financial year, according to the latest ATO transparency report. It’s the first time in over 10 years the number has dipped below 30 per cent. But there are some notable companies not paying tax, including Optus’ parent company Singtel and Netflix. I spoke to Assistant Treasurer Daniel Mulino a short time ago.
Daniel Mulino, thanks very much for joining me on the program.
Daniel Mulino:
Oh, thanks for having me on, Mel.
Clarke:
So, we’ve got a lot of topics to get through today. There’s certainly a lot going on, but one of those things is the report that we’ve had from the ATO about large corporate entities and their rates of paying tax, and it’s at the lowest level we’ve seen since they’ve been tabulating this. It’s only around 28 per cent of companies paying no tax. Why is that?
Mulino:
Yeah, so, look, I think this is a really welcome report, and it contains a number of elements. One of them is that the overall tax take from large corporations is over $100 billion for the second year in a row. In addition, what the report says is that the rate at which corporates are voluntarily paying their full tax has gone up to something in the order of 96 per cent. But also that the proportion of large corporates paying no tax has dropped below 30 per cent to 28 per cent for the first time ever.
Now, there are often reasonable reasons why a large corporation may pay no tax. That could include the fact that it might make a loss in a year, or it might be carrying forward losses or it might have very large investments that it’s writing off. But what we’re really keen to ensure is that the ATO has the resources to make sure they find out all situations where companies need to pay tax, and that they are fully resourced to ensure that’s happening. So, seeing that rate come down is – is important.
Clarke:
And do you think that is because of the compliance action that’s being taken by the ATO? Or are there other reasons why we might have a better rate of companies paying tax?
Mulino:
It could be due to a number of factors, but an important factor would be the ATO’s capabilities and enforcement actions. So, we’ve invested something in the order of $3 billion over the last 3 years in the ATO’s capabilities in this area, in terms of their enforcement capabilities, their valuation and forensic capabilities when it comes to large corporations and wealthy individuals. And it’s estimated that’s going to pay off in terms of $15 billion extra in revenue. So, that’s a really worthwhile investment for the Australian community and the Australian Government.
Clarke:
Now, you’re looking at the numbers all the time, but there are probably a lot of Australians who still think, gee, around a third of large corporations not paying any tax at all. Is that really a sense that the system has the balance right? Would you need to look at changing deductions or offsets to make sure that companies really are paying the tax that they should be?
Mulino:
So, as I mentioned, we have a – there are a number of reasons why individual companies may, in a particular year, not pay tax. Look, we have a really robust tax system, but what we need to ensure is that we’re always improving the ATO’s capacity to dig into the affairs of each individual taxpayer, particularly large ones, given how material they are, so –
Clarke:
And that’s compliance with the current laws, we’re not suggesting those that aren’t paying any tax aren’t complying with the laws. I guess the question is more, are you satisfied with a taxation system that, working as it does, still means that around a third of large companies aren’t paying any tax? That’s reasonable –
Mulino:
Yeah. Broadly, I think the system is, is working quite well. And as I said, you know, you would expect that companies that are making a loss in that year wouldn’t be paying income tax. That’s a pretty standard way that an income tax system would work. And so what we’re seeing, though, is over the last decade, there’s been quite a material shift from 36 per cent of companies not paying any tax down to 28. So, we feel that that’s really bringing it, you know, much, much closer in line with the current legal arrangements, which I think are broadly right.
Clarke:
We’ve seen Donald Trump withdraw the US from the global tax floor that was agreed by many nations to try and prevent companies from shifting their operations to tax havens. The ATO says we’re not seeing the impact of that. When do you think we might start to see what, if any, impact that might have in Australia?
Mulino:
So, I don’t know precisely. But look, what I would say is that there have been a number of important initiatives over the medium term to try to ensure that advanced economies all move together when it comes to corporate tax arrangements.
So, at the OECD, there was the BEPS program, which was the Base Erosion and Profit Shifting. And that was a really important arrangement where all of the advanced economies came together and agreed to move tax arrangements in alignment as much as they could to reduce the opportunities for large multinational corporations to profit shift. So, I very much support continued arrangements in that vein.
Clarke:
And they’re still possible to be effective without US involvement?
Mulino:
Well, look, any time a large economy diverges from aligned action, that does put at risk the overall arrangements. But look, what I’d say is that the OECD program remains in place. We’ve got some important initiatives which Minister Leigh has put into place in the last parliament, which have been legislated, so this remains a priority for us.
Clarke:
All right, I want to move on to GST distribution, because you do have a review of that underway. The Productivity Commission is looking at it. A number of the states are pretty unhappy with the current model. Do you think their concerns are legitimate, or do you think that states always just complain a bit when the distribution changes and they’re on the losing side of the change?
Mulino:
Well, look, I think, as far as, you know, I’ve ever seen the GST arrangements, it’s never been the case that everybody’s happy with it. It’s more often been the case that there’s a whole range of suggestions, and that’s fine. Look, it’s a really important part of our tax distribution arrangements.
The review that the PC is going to undertake is a requirement under the legislation, and I think it’s really important that the distribution is reviewed from time to time. I think that the PC is the right place for that to happen and I think we now just need to wait to see what their work shows.
Clarke:
They’re going to look at the floor that has been put in place, that’s seeing WA get extra top‑ups to make sure that they’re not worse off. If the Productivity Commission recommends that that be changed, would you take the Productivity Commission’s recommendations?
Mulino:
Well, I don’t want to preempt what they come up with, so I think. But basically, I think the Treasurer has done the right thing in referring this to the PC. And I think, you know, we’ll –
Clarke:
But there’s no guarantee that whatever the PC recommends that you’ll adopt?
Mulino:
Yeah, and look, the Treasurer will receive that report and then the government will respond after that’s been considered.
Clarke:
Does that leave a bit of uncertainty for WA if they’re not sure if this would continue, because it’s not clear if you would follow a recommendation to change it or not?
Mulino:
No, I think it’s very normal that when a review of this sort is undertaken, that the relevant minister would say, I want to wait for the review, and then I would consider it and then take any of my recommendations to Cabinet. That’s a completely normal process. So, I wouldn’t see that there should be any perceived uncertainty there.
Clarke:
Alright, well, you’ve also got the states very frustrated with the negotiations going on around public hospital funding. Of course, that is also tied up with NDIS arrangements and foundational supports to make sure that people can be diverted off entering the NDIS in the first place in the future.
We’ve also got the state saying that they’re frustrated around aged care provision, saying that the feds aren’t doing enough to make sure that people can get out of hospital. So, there’s a lot of funding arrangements, particularly in areas where there is significant growth, that I know you and the economic team really want to see those costs constrained to make the budget more sustainable.
So, can you give us an update of how those negotiations are going with the states, particularly the hospitals deals? Because if that isn’t signed, it’s very hard to get all of these other areas under control.
Mulino:
Well, look, as you point to, firstly, there’s a lot of moving parts here. Moving parts in the sense that different parts of our care economy are all interrelated, firstly. And secondly, that we’re talking about a range of areas, whether it be healthcare or the NDIS or aged care, that involve multiple levels of government, sometimes all 3 levels of government. So, these are complex negotiations.
Look, I’d just start from the proposition that when it comes to healthcare in particular, we went to the election with a very strong suite of policies that were, I’d say, the most important first priority set of issues discussed during the election and they’re now being implemented, whether it be bulk billing, urgent care clinics and so on. There are negotiations going on with the territories and they are interrelated with other issues like foundational supports, which I think is a really important step forward –
Clarke:
It is really important, but it’s meant to be done by the end of the year, and that’s becoming rather close. Are you going to be able to make that end‑of‑year deadline, or are we going to have to kick over another 12 months of the existing arrangements to keep negotiations going?
Mulino:
Yeah, I mean, look, I don’t want to comment on the details of the negotiations that the Minister for Health is engaged in with his counterparts and other ministers. But what I would say is that the Commonwealth government has always stated that it is more than open to good faith discussions on these complex issues. And Minister Butler and other ministers involved with different areas that you’ve alluded to have said the same thing. Look, these kinds of discussions are always complicated, but look, I’m confident we’re going to land on good outcomes.
Clarke:
Alright. I do want to ask one of the key pieces of tax reform that we know the government intends to do is changes to taxation on superannuation accounts with balances over $3 million. When can we expect that legislation to go before the Senate?
Mulino:
So, that remains the government’s policy. And for me, it’s a really important part of our tax mix, our tax policy. It’s a very well‑designed, well‑targeted measure that I think is important for the sustainability and fairness of our super system.
Clarke:
Yep.
Mulino:
As for which specific sitting week, the parliament is a complex creature. We’ve been talking about complexity. So, I’m not in a position to –
Clarke:
Yeah. It’s going to be before the end of the year, though?
Mulino:
I’m not in a position to talk about which week it will – potentially come in –
Clarke:
But before the end of the year?
Mulino:
Look, I’m not sure exactly when it will enter parliament, but what I would say is that it’s, it remains an important government commitment, and I think –
Clarke:
Well, if it’s important, wouldn’t you, wouldn’t you be trying to legislate it sooner rather than later?
Mulino:
I think, you know, it’s something which is going to improve our tax system. And it’s just a matter of the government, you know, figuring out all the different elements of policy that we need to fit into the next few weeks.
Clarke:
Needing to get all the crossbenchers on board.
Mulino:
Look, I think that, all I’d say is that this remains an important policy commitment.
Clarke:
All right, one last issue. Of course, defence is not your portfolio area, but as a member of the government’s senior team, we have got the signing of the Pukpuk Treaty between Australia and Papua New Guinea, which has perhaps come a few weeks later than anticipated. But you must be pleased that the Papua New Guinea’s cabinet has signed that deal now.
Mulino:
Yeah, I think this is a really important development. It elevates our relationship with PNG to the same level that we have with the US and New Zealand. It’s a really important treaty. It contains the highest level of, you know, commitments to each other. But also contains really important commitments in terms of enabling individuals from each country to have opportunities to work very closely with each other’s armed forces. So, for me, it’s a really important regional deal, and it was important to see that step through each of the country’s cabinets, and that’s now happened, and that’s really important.
Clarke:
All right, well, we’ll see plenty more about that in the next day or so, I’m sure. But Daniel Mulino, thanks very much for going through those issues with me today.
Mulino:
Thanks very much, Mel.