HON. WAYNE SWAN MP
FEDERAL MEMBER FOR LILLEY
TREASURY LAWS AMENDMENT (ENTERPRISE TAX PLAN NO. 2) BILL 2017
FEDERATION CHAMBER, CANBERRA
WEDNESDAY 18 OCTOBER 2017
***CHECK AGAINST DELIVERY***
The Treasury Laws Amendment (Enterprise Tax Plan No. 2) Bill 2017, I think, aims to complete the coalition's extreme trickle-down economic program by cutting the corporate rate for companies with a turnover above $50 million to 25 per cent. The staggering cost of all these measures is $65 billion. Almost 40 years after the trickle-down economics was first introduced in the US and the UK under Reagan and Thatcher, Malcolm Turnbull is attempting to import the most pure form of this foreign product into Australia. Make no mistake about it, this is a toxic foreign import. It follows the voodoo logic that tax cuts for the wealthy will drive economic growth and improve the lives of everyone in the community from the top down. But, of course, as the record of Reagan and Thatcher shows, company tax cuts are not the silver bullets to achieving economic growth. This point was made yesterday by the RBA's Luci Ellis in her brutal demolition of the Business Council of Australia's propaganda, which has been sprouted by Jennifer Westacott.
Reagan and Thatcher's enduring economic legacy in the United States and the United Kingdom is one of rampant economic inequality, hollowed-out middle classes and armies of working poor. If the BCA and the Liberals have their way, they'll take us down that American road. During my time as Treasurer, I was associated with an attempt to lower Australia's corporate tax rate. Our efforts in government were part of an entirely different context and a much broader package designed to manage the stresses of a two-speed economy by placing more weight on resource rent taxes and less on the corporate rate. As a solution to Australia's current jobs and growth challenges, a corporate tax cut makes absolutely no sense at all. It doesn't even make the top 10 sensible policy responses to Australia's current economic challenges.
Turnbull and the Business Council run the classic trickle-down argument that cutting corporate tax rates will restore Australia's tax competitiveness. Thanks to tax transparency reports legislated by Labor and damning Senate revelations of tax evasion by some of our largest companies, the rationale for Turnbull and the Business Council arguments completely evaporates.
In 2015, as a result of Labor's tax transparency legislation, tax office data revealed that one in three private companies in Australia paid no tax, and one in four public corporate entities in Australia paid no tax. In addition, half of the foreign companies operating in Australia had no taxable income, while 56 millionaires paid no income tax. The revelation really blows Turnbull and the Business Council's trickle-down argument right out of the water, because, courtesy of deductions, deferred losses, minimisation and evasion, public companies in Australia already pay an average of 24 per cent on that taxable income, while private companies pay an average of just 19 per cent. Just last week, we had a conservative estimate from the ATO that an estimated $3.5 billion in tax revenue from large corporates and multinationals was unaccounted for. As the Senate inquiry into tax evasion uncovered, the ATO has confirmed that some of Australia's largest global companies have been engaging in aggressive transfer-pricing activities, costing the public billions of dollars in revenue.
In tax discussions, there is a conventional distinction between legal tax avoidance and illegal tax evasion. The reality is there is a spectrum. Today, I want to discuss the behaviour of one company—BHP. Their behaviour leads me to believe they have operated at the evasion end of the spectrum for over a decade. For years, BHP have claimed to be a global leader in tax transparency and corporate responsibility. We now know nothing could be further from the truth. BHP have an ongoing $1.1 billion tax dispute with the ATO regarding their Singapore marketing hub, dating back to 2003 from 2013. In addition, they have a $300 million dispute with the Queensland government over royalty avoidance through transfer pricing. BHP's 2017 economic contribution report also admits, for the first time, that BHP are also being audited for an additional three years—fiscal years 2014, 2015 and 2016.
Given that BHP is already engaged in a $1.1 billion dispute with the ATO and is now under audit for a further three years, it is clear that BHP is one of biggest tax dodgers, if not the biggest, in Australia. Consider this: last week the ATO confirmed it is currently engaged in disputes worth around $4 billion with large corporates, mostly associated with transfer pricing. This means that over 25 per cent of the value of the ATO's tax disputes are with just one company. BHP's 2017 economic contribution report proves conclusively BHP is a fiscal termite eating away at the foundations of our corporate tax system.
There wouldn't be another company listed in the ASX Stock Exchange which would have a tax liability anywhere near BHP's amount, although Rio may come close. Rio is also involved in aggressive transfer pricing. Clearly, these two companies—BHP and Rio—have not been playing by the rules. These tax disputes are pillaging the Australian Treasury and short-changing the Australian people, pure and simple. BHP and Rio are freeloading off the hard work of millions of workers who haven't had any wage growth in Australia for years and small businesses who are paying their fair share while fighting to balance the books. It is nothing short of a disgrace that BHP continue to claim they are a corporate leader in tax, given their aggressive use of marketing hubs in what is effectively a tax haven—Singapore.
However, the most outrageous aspect of BHP's tax affairs is hidden in their 2017 annual report, with the report for the executive director and his remuneration package. On page 134, the report outlines that the CEO exceeded his performance outcomes in the individual measures category, warranting a million-dollar bonus. When we turn to page 135, we discover one of the key performance indicators of individual measures of that category is 'strong representation on key issues such as transparency and tax'. In essence, the BHP board have awarded their CEO a million-dollar bonus for a billion-dollar bill avoided in tax. It is a million-dollar bonus for organising aggressive tax minimisation through a tax haven, resulting in one of the largest tax disputes in Australian history; a million-dollar bonus for enhancing transparency and tax reputation when the company's tax affairs can only be described as high farce. I'll say it again: a million-dollar bonus for $1 billion avoided in tax.
It is no wonder that, in an effort to restore their reputation, BHP have launched their 'think big' campaign. Thinking big is just an advertising slogan to camouflage what the big Australian has become in the last decade—Australia's biggest tax avoider. When I first began raising BHP's tax affairs in this place in late 2015, the company's chief financial officer, Mr Beaven, took the time to write to me about what an honourable taxpayer BHP really was. The letter made no mention of the ATO dispute, which was not yet public, and instead emphasised that BHP pays a lot of tax. Well, that's nice! But paying a lot of tax doesn't then grant you the right to evade billions in tax. BHP is like that guest at the hotel. It has rented the penthouse, it has had full room service but it has run off and left the bill because it has only paid for a standard room.
BHP have always presented themselves as a model corporate citizen. This behaviour destroys the morale of people who pay tax and who then come to believe that government treats them with contempt by penalising them while sparing the powerful and the wealthy. BHP, just like every other individual and business in Australia, have a legal and ethical obligation to pay all of their tax. Tax isn't an option. Tax isn't a donation. Tax is the price we pay for the institutions and structures, both legal and economic, which have made the Australian economy one of the strongest in the OECD. As a company, BHP have benefited enormously from our institutions and our structures. BHP should pay all of the tax they owe, not an amount that they decide is appropriate. When global and respected companies operate in this cavalier way, it compromises the integrity of the social contract and greenlights others to follow in their tax-avoiding footsteps. With the departure of the former BHP chairman, Jac Nasser, and the appointment of Ken McKenzie, BHP has an opportunity to begin to restore BHP's reputation.
When I first called out BHP's activities in 2015, I didn't blame the CEO or the board. Unfortunately, the self-righteous leadership of BHP shows no sign of remorse or contrition and, instead, have indicated that they will go to the wall claiming their tax dispute is simply about valuation. Well, BHP, the gig is up. I'm not seeking to bury BHP but to implore them to lead by example. For years, BHP have claimed to be a corporate leader. Now it's time to start acting like one and stop hiding behind PR campaigns.
I would have thought that the Treasurer and the other austerity campaigners in this government would be horrified by this behaviour of BHP and others and that they'd be out there publicly condemning it. Instead, we just have deafening silence. If the Treasurer was fair dinkum about acting on tax evasion, he would have been banging the table and condemning this behaviour. Of course, what is really happening here is the Treasurer is dancing with the one that brung him. This bill shows that the Treasurer is happy to blow out the deficit, with an unfunded $65 billion tax cut—unfunded!—and of course to see the budget further eroded by the disgraceful activities of companies like BHP.
At its core, this government is a trickle-down government. This is a government that believes in tax cuts for the rich and the powerful and deregulation for the powerful. It attacks the social safety net at every turn and it has wage suppression in its policy suite for everybody else. All this corporate rate cut will end up in is stock buybacks and dividend payments. And who gets those? Generally people who are pretty well-off. As the RBA outlined yesterday, it will have a minimal impact on jobs and growth in the long-term—a devastating critique of the government's policy yesterday.
In a debate between Luci Ellis of the RBA and Jennifer Westacott from the BCA, Luci Ellis completely destroyed Jennifer Westacott's arguments—but there's nothing new about them. There is a very rich debate about the impact of this sort of corporate tax cutting and, as the Treasury modelling itself shows, it will have a minimal impact on jobs and growth over the long-term in this country. But the government are forging ahead with an unfunded tax cut which is going to blow out the deficit, are tolerant of other companies that are flouting their rules and are stubbing their nose at the Australian people. Why is that? It is because the government are dedicated to serving the top table first—dedicated to the wealthy, of the wealthy and for the wealthy.