TREASURER:
Well, there's two announcements today and I'm joined by the Commissioner of Taxation. I very much appreciate all the work he’s put into these different announcements. Firstly, today I introduced the multinational anti-avoidance laws into the Parliament. Australia is leading the world in cracking down on multinationals that are not paying their fair share of tax. After having discussed this legislation at the G20 last year, and also having announced it in the Budget, I followed up at the G20 in Ankara two weekends ago and came to an agreement with the Chancellor of the Exchequer, and notified the G20 that Australia was going to introduce this legislation which is the toughest in the world against those companies not paying their fair share of tax. As a result, after the Taxation Office, being embedded in 30 companies, the laws will apply to over 1,000 multinationals operating in Australia that have a global turnover of more than a billion dollars. I understand a number of multinationals have already come forward to identify profits previously unseen in relation to their activities in Australia, and are prepared to restructure their businesses to pay their fair share of tax in Australia. Secondly, the crack down of the Coalition Government in relation to foreign investment continues. I can advise you that, as of today, there are now over 500 investigations into over one billion dollars of residential real estate that may be held unlawfully by foreign nationals in Australia. We have already announced seven divestments in relation to property. I can announce today that I have signed for the further divestment of property, including properties in Labrador, Queensland, Ardross in Western Australia, Elizabeth Bay in Sydney, Underdale in South Australia and Stretton in Queensland -held by people from Singapore, Indonesia, the United Kingdom and China. The lowest value purchase price was $265,000, the highest $8.1 million. They have 12 months to sell the properties under the amnesty that we have provided until the end of November. So we are getting on with the job of enforcing the laws. There has been no enforcement and no successful order for at least the last 20 years. But we have taken this decision to ensure that there is integrity in the foreign investment regime and that those people who unlawfully hold Australian residential real estate are caught. I reaffirm again, that we now have investigations into people unlawfully holding residential real estate, 500 investigations for properties in excess of a billion dollars in value, and we will continue to police the laws. And with the increased power associated with the laws currently before the House of Representatives we are absolutely confident that Australians can once again have faith that the foreign investment rules are being complied with. Commissioner.
COMMISSIONER:
Thank you Treasurer. Firstly, on the multinational anti- avoidance legislation, the Tax Office very much welcomes the introduction of this legislation which will significantly impact and encourage large multinational entities to book their sales here in Australia from sales that clearly have arisen from sales activity here in Australia. The new laws will make it a lot easier for the ATO to bring to account, to drag back into the Australian tax net, that sort of activity, that clear economic activity resulting in sales that is presently booked somewhere overseas, typically in low or no taxing jurisdictions where the profits are ultimately diverted to. We have a lower standard, the existing anti-avoidance laws require the sole or dominant purpose test. Over the years that's been [inaudible] down somewhat by the courts and was a very difficult test for us to meet. We now have the test of one of the principal purposes, that’s in line with the OECD equivalents in anti-abuse of treaties, and it will make it, that lower test threshold, will make it a lot easier to bring to account, back into Australia, the profits that are clearly being diverted out of Australia. Importantly, this arises from any tax benefits that arise after 1 January 2016, not schemes entered into after that time. The Treasurer's made mention - and is absolutely correct - that a number of these large corporates either directly or through their advisers, have approached us to try to get some understanding of the tax implications of unwinding this. I hope we raise no revenue from these new provisions because I hope that these multinational companies will do the right thing, will restructure their investments into Australia in such a way that they leave the profit that clearly arises from this economic activity back here in Australia, and have that subject to our 30 per cent company tax rate.
JOURNALIST:
Commissioner, if they do do that, what kind of…
TREASURER:
Do you want to say something about foreign investment?
COMMISSIONER:
Just on the foreign investment if I could make a couple of comments there. We are working on around those 500 investigations at the present time. The majority of those are community referrals, community dob-ins. So we’re going through those in a fairly systematic way. There are about 50 people already devoted from the ATO in this area. And we are bringing to bear our immense data analytics. When we look at the fees we get from immigration, the fees we get from AUSTRAC, getting information from all the land titles offices, running that against all tax returns; we are seeing examples of very young people who are here on maybe a student visa never having lodged a tax return, yet acquiring properties of say $5 million. This does cause us to have some spin-off benefits by being the Tax Office. We will be looking also - where’s the income if people have these places rented - how come you have not disclosed income? We will be looking closely at where the source of those funds have come from, checking to see whether it's previously untaxed income here in Australia or in the worst case, has it come from the proceeds of crime? We will be taking strong action and a lot of our work now is encouraging people to come forward before the first of December to make use of that concessionary penalty regime up until that time. We will particularly be focusing our attention on third party facilitators. No longer will the accountants, the lawyers, the buyers’ agents, the real estate agents be immune from activity because they will be subject to very strong civil and criminal penalties after 1 December, so I am encouraging them to come forward because we will be focusing our attention there because a lot of these foreign nationals don't understand trusts or these blind trust complex corporate structures that the lawyers are putting them into to hide the real beneficial ownership of these properties. So we will have a lot of specific attention against those third parties who knowingly facilitate the illegal acquisition of Australian real estate.
TREASURER:
Fran?
JOURNALIST:
Commissioner or Treasurer, sorry to interrupt before but, you say you hope you make no revenue from these measures and this new penalty regime, but what about the revenue that will be added to the bottom line by these companies restructuring and doing what they should be doing? What’s that going to add? What are we missing out on?
COMMISSIONER:
We know there are billions of dollars of sales revenue that are not being booked here in Australia. Now that is the gross element. Because of the nature of their point that they're not subject to tax here, we don't have a lot of information around their cost structure. So these aren't the typical transfer pricing ones that book sales here and then back out a lot of the profit by the costs of goods. You would have seen some of that in the Senate inquiries, in some of the companies, and some of the industries. So we know there are billions of dollars. That’s gross. So we have to look at what the profit element of that is and have a much better understanding of their true cost of sales, not some inflated cost of sales with a lot of that going through to tax. So we would expect hundreds of millions of dollars’ worth of revenue at least, but it’s billions of dollars of sales. But you have to make sure you understand the difference between the gross sales figure and the profit figure which is subject to tax.
TREASURER:
As you know, Fran, I deliberately did not put a number on this in the Budget. And why - because you’ve got to go through case by case, identify how much profit they actually legitimately made in Australia and then apply the tax rate. Wayne Swan made the mistake of putting a number on the mining tax then spent it. There was no mining tax revenue as you know. I have always been conservative with the numbers.
JOURNALIST:
Treasurer, so you talk of hundreds of millions of dollars. That’s a drop in the ocean when you look at the overall tax revenue the Commonwealth gets and needs for the future. Is today's activity enough to get enough revenue from multinational profit shifting?
TREASURER:
To get enough revenue. I see every dollar as precious…
JOURNALIST:
Can the Government do anything further than what it's announcing today?
TREASURER:
Well, what we have announced today - there wasn't universal agreement in the G20, particularly from one very large country that was a little upset about it. But I have been running this for two years and we've been running very hard on it. It is patently unfair for a large multinational with sophisticated structures not to pay its fair share of tax when I go to the local book store in Lane Cove Mall and he has to pay tax. I mean it's just patently unfair. So on the two areas - GST on online products - the legislation will be introduced in the next sitting fortnight, I finally got that through the state treasurers and that legislation is going to ensure that anyone that purchases products overseas via the internet from Australia pays GST as they would if they went down to the local shopping centre. The second one is multinationals paying their fair share of tax. Now, in the United Kingdom they introduced an integrity measure that got worldwide headlines. I can't use the commercial name but it was - you know what it is. That tax. We’ve taken a different approach but we have worked closely with the Chancellor of the Exchequer. I had Treasury officials go over to England to discuss the matter with the Treasury over there. It's working. It's working.
COMMISSIONER:
Could I just say, that the Treasurer should be acknowledged for his personal leadership of this issue. The UK did something earlier, and Australia has been the only other country in the G20. So I think we should acknowledge the leadership that the Treasurer has demonstrated by getting this legislation up into the House because it will give us, it will give us, the ATO, significant new powers to drag back into the Australian tax net income from sales where the economic activity is clearly arising.
JOURNALIST:
[Inaudible] There's a lot more revenue leakage going on than just hundreds of millions of dollars. So is something else needed in the future?
COMMISSIONER:
Look, there are all the action items that are coming through later this year to the finance ministers meetings in Turkey, the leaders’ meetings. There will be presumably adoption by the G20 of the 15 action items next year. All countries will be looking at how to adopt that in their domestic legislation. So we will see some very integrated and very, sort of, wide ranging new proposals in the international tax arena that hopefully will provide a greater and easier way to allocate profits of multinationals.
TREASURER:
The first tranche on base erosion and profit shifting happened last year under our leadership and the second tranche is coming before the G20 leaders in Anatole and we discussed them in Turkey. I had a lengthy discussion with Angel Gurria, the Head of the OECD. We're backing that base erosion plan. We've been right at the forefront of advocating for it, but it's not the same as what we are doing on multinationals. We’re going further, but it is not going to be in conflict with what the OECD is doing.
JOURNALIST:
Mr Hockey, can I ask you two questions. What do you think of Malcolm Turnbull's decision to extend Family Tax Benefit B – [inaudible] supposedly trying to cut down on middle class welfare - and can I ask you, do you anticipate being in your role this time next week?
TREASURER:
Well, are there any other questions on tax? No? [laughs]. Okay.
JOURNALIST:
How will the Government be offsetting the $25 million cost [inaudible] - sorry $23.25 million.
TREASURER:
The Tax Office is very well resourced. We’ve given the Tax Office some additional funding support, particularly in relation to Foreign Investment Review Board investigations. As you’d know, the Foreign Investment Review Board was in Treasury. It was poorly resourced. When I came in we made a decision to have significant application fees for foreign investors in relation to the purchase of everything from property to companies. That raised the revenue that exceeded even the funding requirements for us to put it into the Tax Office and make that happen. Okay.
JOURNALIST:
Can I just ask about online purchases - how is that exactly going to work? Is there going to be some obligation for companies to do it, or are you just basically asking them nicely?
TREASURER:
This is the challenge. A number of countries around the world have introduced this equivalent legislation in relation to online purchases. There are companies like Amazon and Facebook and others that are prepared to work with countries, wherever they may be located, to apply consumption taxes should that country request it. That’s because they actually don't pay the tax themselves, it's their customers that pay the tax. So I am absolutely confident and the Commissioner might add that those sort of companies will work with the Tax Office to apply GST to their sales in Australia, because they're doing it in other countries around the world. And that’s because they want to be good, global corporate citizens.
COMMISSIONER:
That’s absolutely right. All the large suppliers do comply with domestic laws. It is more or less on a voluntary basis, but they do wish to be seen to be complying with local laws. Now there's - and that is the vast bulk of sales in terms of percentages - there's a multitude of small suppliers. Let’s wait and see how that turns out. Wait and see the size of that and work out if there are some other measures that might be feasibly introduced to pick up on more of those.
TREASURER:
In relation to the question earlier, I understand there are more details to be worked out in further discussions on Family Tax Benefit. And as for the second question, that is up to the new Prime Minister.
JOURNALIST:
Given the events of Monday, can I just take you back to the beginning of the year. I think it's fair to say that you decided perhaps wisely to keep all options on the table when it came to tax reform. That you indicated, for example, that you supported looking at superannuation again, that was ruled out. It looks like you were supporting a bank deposit tax - that was ruled out again. Now that Tony Abbott is gone, do you think that those two issues should be revisited?
TREASURER:
Well, clearly the Prime Minister’s going to determine his ministry and lay down his policies. The economic directions we’ve taken over the last two years have helped to make the economy $68 billion larger, 300,000 more jobs. There are no apologies for the collective decisions made.
JOURNALIST:
That’s not what I asked. I didn't ask that…
TREASURER:
I know what you asked, and I’m giving you the answer that I choose to give. That’s normal - I don't get to ask your question, you don't get to answer me mine…
JOURNALIST:
Treasurer, would you be willing to serve in another portfolio and given there is now going to be a full cabinet discussion on the effects test can I ask why that hadn't happened beforehand?
TREASURER:
Well James, I’ve had discussions with the Prime Minister. We will leave it at that and see what happens.
JOURNALIST:
Mr Hockey, Malcolm Turnbull had a huge swipe at the economic narrative of the Abbott Government. Are you gutless for not resigning as Treasurer?
JOURNALIST:
Treasurer, apparently details of yesterday’s cabinet meeting have been leaked to Ray Hadley in Sydney. Stuff like the length of the meeting, the apparent mood of the Prime Minister as he sat in it and so forth. Given you were such a steep critic of a lack of loyalty two days ago, how would you characterise the leaking of cabinet details on the first full day of the new Prime Minister’s tenure and can you tell us, give us any idea, as to where you think those details might have come from?
TREASURER:
No.
JOURNALIST:
Would you characterise those for us?
TREASURER:
No, well I haven't seen them…
JOURNALIST:
Treasurer you mentioned you had discussions with the Prime Minister. Has he offered or suggested or floated any other portfolio for you?
TREASURER:
As all of you know, and you see it all, I am instinctively a loyal person. You know that. I see the job that I have as one being loyal to the Australian people. That’s why I am doing my job. It's what I'm here for, to be loyal to the Australian people, to do what is right for them. In relation to Prime Ministers, I have always been loyal and supportive of leaders. And that’s not going to change. I'm sorry, but I don't disclose discussions, I don’t.
JOURNALIST:
Did you last week, on Monday, accuse Malcolm Turnbull of not being loyal?
TREASURER:
I’m not going to - I was asked that question by the Labor Party yesterday in Parliament and I refer you to that answer.
JOURNALIST:
It's been reported today that Scott Morrison has been offered Treasury. I’m sure you are not going to confirm that, but do you expect to be in this job next week?
TREASURER:
No I am not going to answer that question and I am not going to speculate on it, Fran. I am not going to take anything out of context. I don't want you to take me out of context. I have a job to do. It's what I swore on the bible to the Governor General I would do. I am continuing to do my job to the best of my ability.
JOURNALIST:
On Monday, Malcolm Turnbull basically made the point that there needs to be a new economic narrative and basically it hasn't been sold to the Australian people. Do you admit that perhaps there were missteps along the way? What should happen now?
TREASURER:
As I said, you can always do more to better sell something and you can always do more to strengthen the Australian economy. That is why this is an unfinished task. It’s unfinished. But, you know, we got rid of five taxes - guys, job creation in Australia is 10 times what we inherited. 10 times! The best thing I can do is help Australians to get a job and it's hard. The Australian economy is restructuring. It is restructuring but we are managing it. Australia is managing it better than any other comparable country in the world. I am very proud of that for my nation, but we should aspire to do better and there is nothing wrong with that aspiration.
JOURNALIST:
How is Mr Abbott and do you expect him to continue in politics?
TREASURER:
Well, that will be a matter for him. We’ve had numerous excellent chats and these are issues for other people. I am not going to speculate on it Fran.
JOURNALIST:
Assuming you are not Treasurer next week and looking back on this time 10 years into the future, what would you want your legacy as Treasurer to be?
TREASURER:
I am not going to buy into that. Have we got any other questions? Jacob you haven't asked one.
JOURNALIST:
Do you want to maintain the job? Do you want to keep the job and finish what you started to do?
TREASURER:
I want to make a difference for Australia. What I laid down 20 years ago in my maiden speech it hasn't changed. It hasn't changed. I want to do my very best for my country. Simple as that.
JOURNALIST:
This morning Ray Hadley was reading out the names of people who voted for Malcolm Turnbull…
TREASURER:
I don't think he would have read out my name…
JOURNALIST:
There are a lot of Liberal supporters who are angry at Monday night's events. What is your message to them about any anger over the removal of Tony Abbott and any reluctance to accept the new Prime Minister?
TREASURER:
My message is - the worst thing you can possibly do is see a change of Government. We had six years of Labor. It was bad in policy, bad in principle. They did some things right, but they did a hell of a lot of damage to the country. We are collectively doing our best to improve Australia and we will continue to do it. We will continue to do it. Now just two more, Lane you haven't asked one. Fran, you have to put your hand up! [laughter] Lane.
JOURNALIST:
Do you want to stay in the ministry in some capacity?
TREASURER:
I’ve have had discussions with the Prime Minister about that and I will leave it to those discussions.
JOURNALIST:
Question for the Tax Commissioner - you just said what a good job Treasurer Hockey had done on the international stage and international tax avoidance. Do you believe he should stay in the job?
COMMISSIONER:
I think I will leave the politics for the politicians.
TREASURER:
Mark, we will go to you.
JOURNALIST:
We heard today that Minister Dutton offered his resignation to the Prime Minister. Have you offered yours?
TREASURER:
I’m not discussing what I discussed with the Prime Minister.
JOURNALIST:
Mr Hockey is this press conference a statement to the Prime Minister, a plea to him that you would like to stay as Treasurer?
TREASURER:
No, not at all.
JOURNALIST:
Treasurer, do you believe that the Government's chances have actually improved? You talked about the worst thing being a seat in Government to the Opposition. Do you believe that the Government's chances of surviving the next election have now improved?
TREASURER:
I will leave that to the commentators.
JOURNALIST:
What's the personal impact of the last few days been to you?
TREASURER:
That’s a bit self-indulgent. I’ll leave it there and thank you all for coming.