TOM ELLIOTT:
Kelly O'Dwyer good afternoon.
KELLY O'DWYER:
Good afternoon Tom.
TOM ELLIOTT:
Now how developed is this idea for a Google tax, as it's being called by the financial review?
KELLY O'DWYER:
Well I know that that's the colloquial expression for it. We're calling it a diverted profits tax. It's a tax that was developed over in the UK. We've put some enhancements on it and we are implementing this new tax in Australia to make sure that large multinational companies pay the right amount of tax on the profits that they make in Australia and to make sure that we have greater transparency for the Australian Taxation Office by imposing a 40 per cent penalty tax rate and requiring an upfront payment of a diverted profits tax liability.
TOM ELLIOTT:
OK so if I buy a song from iTunes, which is Apple, and I think legally I'm actually purchasing from Apple in Ireland, where the corporate tax rate is only 12 per cent, you're saying that if Apple doesn't give some of that revenue to the Australian Government you'll slap them with a 40 per cent impost. Is that correct?
KELLY O'DWYER:
In essence that's correct, that's a very simplified version of what we're looking at doing here. We've already got some of the strongest laws in the world on anti-avoidance for tax and we make no apology for that. But we are making sure that we take a belts and braces approach to this so that everyone understands that if we are owed tax, whether it's a multinational or anybody else, that that tax is paid to the Australian people. Because if we don't collect every dollar that's owed to the Australian people, it means that there are less services, less infrastructure being built, and it means there is an increased burden on other law-abiding taxpayers and it's simply not right.
TOM ELLIOTT:
Well I get that but I'm trying to think of the actual mechanics of collecting it. I mean, for example, if legally that song I buy is legally owned in Apple of Ireland and it's delivered to me down the wires via the wonder of the internet, how do you at the Australian Tax Office or the Department of Treasury argue that song and the profits that accrue from that song that Tom Elliott has bought should be taxed in Australia? How do you do that?
KELLY O'DWYER:
Well we've got a number of ways that we can do that. We're basically looking at the second limb of the UK's diverted profits tax and introducing that legislation in Australia by looking at companies that are using contrived arrangements to shift their profits overseas to avoid the tax here, which is what you're describing. And we've got two tests that we look at, and I won't bore your listeners with too much of an explanation of it other than to say it's an "effective tax mismatch test", which means that basically if multinationals are saving around 20 per cent in tax on the tax that they ought to have been paying, as a result of paying tax overseas rather than paying it here in Australia, that will trigger that; and we're applying an "insufficient economic substance test", which means that if it's reasonable to conclude, based on the information that's available to the Australian Taxation Office, that the arrangement is designed to secure a tax reduction, then they'll be caught within the net.
TOM ELLIOTT:
OK, it sounds to me like you're going to have to rely a lot on the cooperation of companies like Google. If you go to them and say give us complete data of all transactions done with you by Australian companies and individuals, do they have the obligation to hand that information over to the tax office here?
KELLY O'DWYER:
So what this does specifically is it actually strengthens the powers of the Australian Taxation Office. Because what it's doing is it's in effect giving them the ability to raise an assessment against the multinational company and they then are hit with a penalty tax of 40 per cent and then they have to come back and justify why that isn't an appropriate assessment.
TOM ELLIOTT:
OK let's assume this works, let's assume because I know the legislation is only in the draft stage and there's all sorts of devil in the detail that you got to work out, but let's assume it does sort of work out that companies that are paying less than I think the figure is 24 per cent of Australia will be hit with a penalty. How much extra corporate tax do you reckon you might raise in a year?
KELLY O'DWYER:
Well we think it's around about $100 million a year that we will raise –
TOM ELLIOTT:
$100 million? That's not that much given the total debt is up around $400 billion and the annual deficit is about $50 billion, is it not?
KELLY O'DWYER:
Well the deficit is very high, which is why the Government is looking at making sure we also are very prudent with our spending as well. But let me say this – no one is suggesting that this is going to be the silver bullet to deal with the debt issue that was created by the former Labor Government. No one is saying that this is going to solve it, probably other than some people in the opposition who like to pretend that this will fix all of the problems. But it is an important integrity measure within our taxation system to make sure that we are getting every tax dollar that's owed to the Australian people.
TOM ELLIOTT:
OK will thank you for explaining that, and I do want to pursue this in greater detail at a later date when more of the information about this new tax comes through. Just very quickly, the Cabinet reshuffle if you can call it that, today Greg Hunt the former industry minister has taken over from Sussan Ley, who had [inaudible] a week or so ago for the expenses scandal. Is health a portfolio that Greg Hunt wants?
KELLY O'DWYER:
Absolutely. I mean obviously the circumstances where not circumstances that anyone in the Government wanted but Greg Hunt is someone who has a family history that is well versed in health matters, his mother was a nurse, his wife is a nurse, and he's been actively interested in this area for a very long period of time. I'm very confident that he's going to make a great health minister, and he's also the Minister for Sport in addition to his responsibility now as Minister for Health.
TOM ELLIOTT:
And finally, are we going to be able to put this problem that so many Australians have of politicians on both sides rorting their expenses. Are we going to be able to put that to bed soon? Because to me it's very difficult for politicians like you to stand up and tell us how we should all pay more tax and do this and that when at the same time the perception out of Canberra is that pollies have their snouts in the trough so to speak.
KELLY O'DWYER:
Well Tom, we are taking very decisive action on this. The Prime Minister has said that this is not a situation that can continue. I understand why people would be absolutely furious about some of the information that's come to light, I do understand that, the Government understands that. That's why we're changing the system and it's why we embrace the support that we're now receiving from the Labor opposition and also the crossbenchers to make changes to that system in the first half of the year. People need to have confidence that the system is going to work and we've heard the message loud and clear and actions now are absolutely taking place.
TOM ELLIOTT:
So there'll be a new set of rules about expenses and the sorts of people that monitor these expenses?
KELLY O'DWYER:
There's going to be a new integrity commission. Again, we've looked at overseas examples of this, the Prime Minister's talked about how the UK has got a very effective integrity commission that's looking at the expenses that are used by parliamentarians and that it in effect has real time reporting so that anyone can get online and search the expenses of their parliamentarian or any parliamentarian in Australia and be able to actually find out how their tax dollars have been spent. I'm perfectly comfortable with that and I think it is the right thing to do because, as we all know, people work hard for their money and any money that they hand over to the Australian Government in their taxes needs to be spent prudently.
TOM ELLIOTT:
Indeed, Kelly O'Dwyer thank you for your time.