Senate rejects Turnbull’s multinational tax shield

By Leith van Onselen

Last night, the Senate overturned the Turnbull Government’s controversial Better Targeting the Income Tax Transparency Laws Act, which was passed just one month earlier and attempted to shield multinational companies from disclosing how much tax they pay, after it was revealed by Fairfax Media that the Senate had been “astroturfed” by a fake organisation supporting the Bill. From The Canberra Times:

In a stunning change of heart, crossbenchers Nick Xenophon and Ricky Muir reversed their previous position in support of an exemption for privately owned companies with revenues of more than $100 million a year.

The Greens, supported by Labor, led the push to reverse the exemption in response to a Fairfax Media investigation, published Monday, which revealed one of the key stakeholder organisations used to justify exempting the largest private companies was actually a front group without any members.

The Family Office Institute Australia, which was quoted at length in a Senate committee report, was established in August by two lawyers and a Canberra lobbyist who represent Australia’s ultra-rich in disputes with the Australian Tax Office.

Greens Senator Peter Whish-Wilson said… the Senate had been “astroturfed” and “conned” by the Family Office Institute.

With the legislation now returning back to the lower house, the Turnbull Government must now decide whether to accept the Senate’s amendments requiring public disclosure of tax paid, or reject the amendments and in the process overturn its 2015 Budget measure giving the ATO greater powers to prevent global companies from using “artificial or contrived arrangements” to avoid their tax obligations.

The Greens senator that moved the new amendments, Peter Whish-Wilson, hailed the successful Senate vote as a “great win for tax transparency”. From The Guardian:

“Companies and wealthy individuals shouldn’t be able to get away with hiding their tax affairs from the public for made up reasons like kidnapping risk”…

“The Greens, ALP and crossbench have worked constructively together in the public interest today, while the Liberals were busy trying to protect their big business mates.”

Labor’s Shadow Assistant Treasurer, Andrew Leigh, followed suit:

“The government’s attempts to gut Australia’s tax transparency laws were always wrong-headed and out of step with the kind of transparency Australians expect”…

“In reversing the decision to carve out private firms while adding in valuable safeguards, the Senate has greatly improved the government’s multinational tax bill.”

Meanwhile, Assistant Treasurer, Kelly O’Dwyer, is standing firm for the Government:

“The Australian taxation office has the power to look at all of the financial and tax arrangements of Australian-owned private companies. These amendments will do nothing to increase the ATO’s powers”…

“The delay of the multinational tax bill will stop increased penalties for multinationals who flout the law and don’t pay their fair share of tax.”

Democracy works best when there is transparency. And shielding large companies from publicly disclosing their tax payments breaches this fundamental requirement.

Some of the excuses used against public exposure are also utterly ridiculous and included:

  • Risk of kidnapping.
  • Breaching the human right of privacy.
  • Information could be used to exert commercial pricing or other leverage or advantages over companies.
  • Reputational damage or additional costs to protect reputation.
  • Eroding public confidence in the integrity of the tax system.
  • A family company’s children and adults will be burdened by people seeking money and undue harassment.

In reality, the only valid reason why the ATO should not be forced to disclose the tax affairs of private companies is because they are already doing so in the annual financial reports filed with the Australian Securities and Investments Commission (ASIC). In these cases, there is perhaps no point adding another layer of disclosure regulation into the mix.

The logical solution in this case is to reform the existing ASIC disclosure regime so that all companies beyond a threshold size must place an annual financial report on the public record.

Whatever the approach, the solution is not more secrecy as advocated by the Coalition.

It is only fair that Australian taxpayers know whether large companies are also paying their fair share of tax. It will also help build confidence and integrity in the tax system, which will become more important as workers are called on to pay more and more tax via bracket creep.

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Unconventional Economist

Comments

  1. Turnbel is the same type of prick all of them are, protect the wealthy at all costs. I bet he knew gst would cause even more of a decline in property because of input costs but sells it to the poor like he’s all for them. If he really cared he would not have helped these rich people.

    • The media (MB included) love Malcolm Turnbull.

      It’s like they never learnt from the Tony Abbott debacle. They ignore all the blokes faults, shamelessly plug for the bloke and report his coma inducing waffle as solid policy.

      • Idiotic comment. We call it as we see it.

        Only two month ago we were receiving abusive emails claiming we were a bunch of Labor/Greens loving hacks, anti-Coalition, blah blah blah. Now we are coping daily abuse for being pro-Liberal and pro-Turnbull. Which is it?

        Maybe you commenters should take a look in the mirror for political bias.

      • “Idiotic comment”

        I don’t imagine shaming people instead of trying to convince/educate is an ideal approach (esp. to encourage subs). But hey, it’s your site.

      • “Only two month ago we were receiving abusive emails claiming we were a bunch of Labor/Greens loving hacks, anti-Coalition, blah blah blah. Now we are coping daily abuse for being pro-Liberal and pro-Turnbull. Which is it?”

        If you’re going to try and be fairly balanced in your political commentary then you’re going to cope it from all sides. That’s life.

      • Only two month ago we were receiving abusive emails claiming we were a bunch of Labor/Greens loving hacks, anti-Coalition, blah blah blah. Now we are coping daily abuse for being pro-Liberal and pro-Turnbull. Which is it?

        Usually a good sign. Keep it up.

    • ErmingtonPlumbingMEMBER

      “the Turnbull Government must now decide whether to accept the Senate’s amendments requiring public disclosure of tax paid, or reject the amendments and in the process overturn its 2015 Budget measure giving the ATO greater powers to prevent global companies from using “artificial or contrived arrangements” to avoid their tax obligations.”

      How convenient, Turnbull can now help out all his former Goldman Sachs clients avoid their tax obligations and blame the left for the business as usual result. He is a smug bastdard.

      Watching a 5 min news summary on the ABC yesterday on the Whitlam dismissal, the final piece was a clip and quote from a young malcom turnbull on the event, ..after which the 3 news presenters literally gushed all over him.
      The café latte/champaign socialists of the ABC and inner-city trendies are completely hypnotized by this functionary of the global plutocracy.

      Sure he might be charming and a good bloke but this man is a true and cunning enemy to those who oppose “business rule”, a much greater threat than the Catholic Conservative Baffoonery we got from Abbott.

      • @ EP –“Sure he might be charming and a good bloke but this man is a true and cunning enemy to those who oppose “business rule”, a much greater threat than the Catholic Conservative Baffoonery we got from Abbott”

        Summed up perfectly — BEWARE – – the smiling assassin !

  2. In Norway, everyone in the country has their income tax return published online – I personally would not have a problem with this system in Oz. Shame is a powerful incentive to pay your tax – especially for the C-suite types who have such a rose tinted view of themselves as wealth creators, leaders, pillars of society etc. If you are so virtuous, prove it by paying your taxes

    http://www.theatlantic.com/business/archive/2011/07/in-norway-everyones-income-is-public-and-so-is-tax-paid/242386/

    • Terrible idea. I don’t equate virtue with paying tax.

      Anyway, if ya can’t beat ’em, join ’em:

      “When independent traders in a small Welsh town discovered the loopholes used by multinational giants to avoid paying UK tax, they didn’t just get mad.

      Now local businesses in Crickhowell are turning the tables on the likes of Google and Starbucks by employing the same accountancy practices used by the world’s biggest companies, to move their entire town “offshore”.

      Advised by experts and followed by a BBC crew, family-run shops in the Brecon Beacons town have submitted their own DIY tax plan to HMRC, copying the offshore arrangements used by global brands which pay little or no corporation tax.”

      http://www.independent.co.uk/news/uk/crickhowell-welsh-town-moves-offshore-to-avoid-tax-on-local-business-a6728971.html

      • Why is it a terrible idea? Reasons?

        The hospital, ambulances, fire brigade, school, water, electricity, streetlights and police should be withdrawn from the little Welsh town you mention. I wish them well.

      • Now local businesses in Crickhowell are turning the tables on the likes of Google and Starbucks […]

        “Crickhowell, tired of others shitting in their nest, have decided to turn the tables by shitting in their nest as well.”

      • “Terrible idea. I don’t equate virtue with paying tax. ”

        No, you equate virtue with helping foreign companies avoid paying tax on Australian assets.

        So virtuous that you receive your 30 pieces of silver every fortnight.

      • Terrible idea: publishing every individuals tax information
        Paying tax virtuous behaviour: no, compulsion exists and what about half the population that pays no tax – unvirtuous?
        Crickhowell: for mild amusement
        Rusty: see my comment below; monthly 😉

      • “and what about half the population that pays no tax – unvirtuous?”

        That’s been proven wrong. What The Australian mean’t was half the population are a net drawer on the government. Which is not news.

      • Paying tax virtuous behaviour: no, compulsion exists and what about half the population that pays no tax – unvirtuous?

        Depends. Are they engaging in complex schemes involving multiple levels of misdirection across different jurisdictions and countries to avoid paying that tax so they can keep it for themselves, while taking advantage of all the benefits that tax revenue supposedly pays for ?

        My guess would be no.

        Pretty easy to fix the “problem” of poor people not paying tax: increase their wages so they earn enough to do so.

        “Compulsion” exists against committing murder as well, yet we generally consider not doing so to be “virtuous” even without considering it.

        As usual, minebot, you are a solid contra-indicator on morality issues.

  3. FiftiesFibroShack

    The “risk of kidnapping” excuse was a mistake. It caused many to question the credibility of those making the arguments against increasing transparency, not only that, people laughed at it – never a good sign.

    • So how would a potential kidnapper decide not to kidnap someone based on that fact that person’s tax return is unavailable meaning they earn more than $200m. I never ever heard of anyone asking for more than few million in ransom (it’s impractical because even $5m on cash is already a car full of money)

      libs and Turnbul must think Australians are complete idiots who would believe in this rubish

  4. Who paid for the lawyers and lobbiest to create the front group with no members?

    It sounds like something Gina Rhinehart would do.

    • That’s a tough question…

      “But what is the Family Office Institute and why should its views help justify dismantling disclosure laws?

      Registration documents held by the Australian Securities Investment Commission show the institute was established on August 6 this year – six days after the bill was introduced to Parliament and a fortnight before it was referred to the Senate committee.

      Two of its three directors – Malcolm Stewart and Daniel Appleby – work for the low-profile law firm Speed & Stracey, a specialist tax advisory.

      The firm, located on Macquarie Street in Sydney, boasts on its website of representing “a substantial number of BRW ‘Top 10’ and ‘Top 200’ individuals and their family and related … businesses”. But by far its biggest client is billionaire Frank Lowy and his family.

      One of the firm’s founders, Robin Speed, is the longtime secretary of the Lowy Institute for international policy.

      He also established the Rule of Law Institute, which patrols the corridors of power for legislation that may threaten the interests of business. Its board members include Malcolm Stewart and David Lowy.

      Mr Appleby has represented Mr Lowy in tax disputes with the ATO, according to reports in the Australian Financial Review and the Sydney Morning Herald.”

    • It sounds like something Gina Rhinehart would do.

      That’s what I thought too. And now look how Morrison is bleating, trying to protect his paymaster’s interests 🙄

  5. I’m disappointed that they needed the astroturfing evidence to change anyone’s opinion about these exemptions.

    • I don’t believe these Senators deserve any thanks for the turnaround on this.

      The “Family Office Institute”, shit, that should have been enough to raise questions as to whom and what they are.

      • I don’t believe these Senators deserve any thanks for the turnaround on this.

        I’d cut Muir some slack. He’s still only learning about the rats nest of morally bankrupt parasites he’s been thrown into.

        Xenophon has no excuse.

  6. For nearly 1500 years, the dominant dogma influencing the western world was Christianity and the power of their various churchs. Religious codifications pretty much ruled everyday life, they helped maintain the social order and the divine right of rulers to continue ruling over their subjects, the laws of the land were shaped by the influence of the churchs.

    Eventually, and unsurprisingly, thanks to be seeing to be “doing God’s work” they were largely exempt from paying tax, indeed, more often than not received a tithe from the general population in gratitude for their piety and good works.

    Moving forward to the present if an alien was to arrive on earth and ask the question as to what was the main global religion or belief, it is quite likely that they would decide that Corporatism and the belief of unfettered capitalism is the dominant social belief the planet.

    This is probably best personified by Goldman Sachs’ Blankfein saying that he’s merely a banker “doing god’s work.”

    Corporations now shape our laws, they employ a huge percentage of the population, like the churchs use to. They are the social structures that now contain or control a vast percentage of the earth’s resources, so is it little wonder that they should start viewing themselves in the same light as Churchs use to, and under the pretext of “doing God’s work”, should be exempt from paying tax – after all, in their eyes, they create employment, innovation and grow the economy.

    Economists are now elevated to the positions of high priests, explaining and diving the cycles of the economy, like priests use to interpret the movement of the stars. Economic laws have been codified in a jargon every bit as impenetrable to the lay man as ancient Latin, which allows them to cast anyone who challenges their notions as unbelievers to be cast out as heretics, or crazy unbelievers, and the general population, knowing no better are in no position to question them.

    If things continue the way they are going, then it won’t be long until not only do Corporations pay no tax, but we all pay a tithe to them for looking after us and doing God’s work.

    • I’ve always see it from the historical purview not unlike the Tudors, keep the same system, but, installed themselves as the deity figure.

    • It won’t be long ? We’re already there.

      But meanwhile, Churches continue to go about their affairs with very little transparency, despite the fact they continue to enjoy the benefit of tax free status. The newly elected Abbott Govt moved very quickly to try and knobble the Charities and Not for Profits Commission (ACNC), with mostly Catholic and some other religious lobby groups working behind the scenes very effectively. This was in spite of the fact that most (non-religious) charities welcomed the oversight of the ACNC.

      There is a good reason many Churches don’t want transparency – their business affairs give the lie entirely to their purported charitable works. They take advantage of their Public Benevolent Institution status to run businesses in competition with commercial organisations, despite the fact many of those businesses (retirement villages in particular) are being run on an wholly commercial basis, with absolutely no connection to the relief of poverty or distress which is a condition of having PBI status.

      While it is keeping the business community honest, the ATO would do well to take a much closer look at the financial affairs of this country’s biggest Churches.

      • I remember a partner joking about how a major Australian religion came to him for tax structuring and minimisation advice for their commercial operations. He was old school and a wonderful bloke and straight out asked them if they felt that was consistent with the basis of their religious beliefs – they went away with their tail between their legs … But probably just went to another adviser…

        It’s an interesting thought that corporatism and financialisation are the new religions and they too now feel their tax exempt rights are Devine…

    • Don’t we already pay a tithe to them in the form of subsidies, exemptions, and a lower probability of being prosecuted by the courts?

    • I asked an Indian mate about the different religions once and he replied “there is only one religion now – money”.

      And sure we can unpack this to corporatism and consumerism etc, but the point is salient and true – as a global culture we all have a new religion…

  7. Can’t help but wonder if Australia were to simply impose a flat rate of tax for corporations of say between 5-10% a lot of energy could be diverted from chasing down every $. Might even encourage multinationals to domicile here – instead of Singapore or Ireland…

    • I’m inclined to agree – it’s a losing battle. Let’s focus on taxing the local rent seekers where avoidance is very difficult.

    • Or we can approach it from another view.

      Say automakers, sick of paying the proper amount for workers in Australia, move operations to Thailand. However these Thai workers still don’t earn enough money to buy these cars they manufacture.

      What the other side of the equation is in a market place is the value of the buying power of the customer. Thai’s may make the cars, but they’ll never be the customers. They still need Australian wage earners to be the customers……..

      except many people in Geelong and Elizabeth are no longer customers because their jobs are in Thailand.

      Now where we once had automakers in Geelong as customers, we now have Thai autoworkers and Geelong ex-autoworkers… neither of whom are customers.

      Eventually they stop making cars because there are no customers. The increased dividends to a select few car making shareholders don’t buy extra cars to make up the shortfall.

      No, how about this, for the privilege of being allowed to enter the Australian market place, where valuable high wage customers can be found, corporations be charged 30% company tax for the privilege.

      If they don’t want to pay 30%, they can be excluded from the Australian market place, and restrict their customers to Thailand… who have paltry 3rd world wages, and no customers to sell their cars to.

      That’s the difference between pro-market and pro-business.

      • Good comment – just charge a market entry fee based on turnover – we can make this suit each industry.

        As it stands all large corporates effectively negotiate their tax rate…

      • 2d, what a load of bs.

        Lets see if MS, Apple, Google etc are likely to walk away from their profits made here if forced to pay the appropriate level of tax. Not fcuking likely.

        Btw, are making up for lost time? I guess you’re still paid by the post!

      • 3d, you remind me of a rat they uncovered when they lifted the tin in the article above.
        Selfish prks need to be continually referred to as such,… you selfish prk.

      • ErmingtonPlumbingMEMBER

        Sorry 3d, but im with 8mil.
        Your clearly sounding like a prick on this one.
        Whos interests do you think your representing in this thread?

    • HK is 15%, Singapore similar (depending, as we have seen lately) and they (business) still whine incessantly about the level of tax. In HK labour laws are pretty weak, you can be terminated with 3 moths pay, no reason needed other than “lost confidence” with no redress, BUT still they whine about too much labour protection.

      Business will not be happy until they are paying nothing.

      • Probably where it’s heading from a global perspective. But not in the brains trust at the Australian Senate. Nope. Nope. Nope. They’ll dig in. Make investment here even more unattractive. Inadvertent offshoring I’ll call it.

      • Thank God for Ricky Muir and the Australian senate. One of the last remaining ethical and forward thinking institutions in the country.

        Pettis had a good line about foreign investment the other day. In a beggar thy neighbour world, more foreign investment means more unemployment (paraphrasing).

    • You don’t imagine that Singapore, Ireland et al will not respond in kind ? That the next step then is to remove any regulation of wages ? To which all other contenders respond in kind. Then the next step is removal of environmental protections or other regulatory barriers. To which all other contenders respond in kind ?

      You fancy we’ll win that race to the bottom ?

      This is the neolib wet dream writ large. Everyone for themselves. Security for capital holders. For those not viewing from the cheap seats, I’m sure it will all be very entertaining.