WAYNE SWAN MP
MEMBER FOR LILLEY
E&OE TRANSCRIPT
RADIO INTERVIEW
ABC RADIO BRISBANE DRIVE WITH STEVE AUSTIN
FRIDAY, 16 FEBRUARY 2018
SUBJECTS: Corporate tax cut; Super profits tax; Labor’s tax transparency legislation; Tax minimisation and evasion; Banking Royal Commission; Populism.
STEVE AUSTIN: The Labor Member for Lilley here in Queensland and former Federal Treasurer, Wayne Swan is warning that support for populism and anti-establishment parties in advanced economies is at its highest level since the Great Depression. And he’s warning that we need to avoid what he calls the Trumpification of Australian business. And front‑and‑centre is the calls for reducing corporate tax rates – a debate that’s been taking place in Federal Parliament in this last sitting. I spoke with Wayne Swan and asked him to roll out his argument for me.
WAYNE SWAN, MEMBER FOR LILLEY: It’s the aggressive presentation of what I’d call an extreme trickledown economic agenda, which simply involves tax cuts for the rich, deregulation – particularly privatisation – and wage suppression for everybody else. And the heart of the Federal Government’s current economic agenda is an unfunded $65 billion business tax cut. So that’s an extreme agenda and that’s the Trumpification of Australian business. Because they’ve been in that zone for the last four or five years.
AUSTIN: Now when you were Federal Treasurer, you also were going to – you also liked the idea of tax cuts for business. But I think you had a trade-off with it as well though, didn’t you?
SWAN: Yes, so it was a very big trade-off and a rearrangement of business taxation. Essentially, what we were saying was we had to have an emphasis upon super profits, if you like, through resource rent taxes. And for those companies that weren’t doing very well elsewhere in the economy – because you might recall the language then was of a two‑speed economy – with a booming mining sector and everyone being left behind, we said we would look at tax cuts for those sorts of businesses in the environment of having those very profitable businesses paying much more tax. Now at that stage you might recall those presentations from us were, in their entirety, opposed by the business community and the Liberal Party.
AUSTIN: You did strike – you eventually set up, I think – they agreed to it, and you agreed to it, and you set up a business working group where they were supposed to find ways to cut expenses, I think from memory.
SWAN: That’s right, yep. To get rid of all the big tax loopholes which come through transfer pricing and debt dumping. What I didn’t know –
AUSTIN: What happened to that? Why did that collapse and what happened to that?
SWAN: Because they opposed closing the loopholes to fund a lowering of the rate.
AUSTIN: Specifically the big miners?
SWAN: The big companies right across the board, but the big miners as well. But what I didn’t know at that stage was the extent of the tax evasion that many of those companies who opposed those changes were engaged in at the time.
AUSTIN: For instance?
SWAN: We now know – courtesy of legislation that I passed in 2013, the Tax Transparency legislation – just how many of our big companies are actively trying to evade tax through transfer pricing, use of a tax haven like Singapore and other tax havens, the Cayman Islands and so on. That has been much more widespread than I was ever informed about when I was Federal Treasurer. But thankfully we were making changes at that time. For example, changes that we made to transfer pricing have resulted in a very successful case that the Tax Commissioner [Chris Jordan] has taken against Chevron. And that should now result in the recouping of billions of dollars from some of our biggest miners like BHP and Rio.
AUSTIN: So that was tax evasion rather than tax minimisation?
SWAN: Well there’s a thin line between tax minimisation and tax evasion. But when you’re looking at this aggressive use of tax havens, as they have, it’s closer to evasion than it is to minimisation.
AUSTIN: I’m speaking with Wayne Swan, ALP Member for Lilley here in Queensland, also a former Federal Treasurer. This is ABC Radio Brisbane. The ABC released research yesterday that showed that one in five of Australia’s top companies haven’t paid tax in the last three years and Qantas hasn’t paid any for the last decade. What does that reveal?
SWAN: A couple of things. It reveals the size of the tax evasion that’s taking place by a number of our large corporates. But having said that, there will be valid reasons why a number of those companies haven’t been paying tax in recent times. Because they’re business has been disrupted, there’s been huge capital expenditures, and so on. Now that doesn’t involve aggressive minimisation or evasion. But when a very profitable company, an extremely profitable company, that has been profitable, is not paying tax, then that’s a sure sign that they’re involved in aggressive minimisation and/or evasion. And the Tax Commissioner himself has said this. Even when it comes to companies who pay a lot of tax, like BHP and Rio, they have been involved in very aggressive minimisation-stroke-evasion. And BHP for example, which is all over the air saying what a good corporate citizen it is, is among the largest companies that owe a large amount to the Tax Office through the use of transfer pricing.
AUSTIN: Qantas hasn’t paid tax in a decade nearly; however, of course they haven’t really made a profit in a decade and haven’t returned a dividend at all to shareholders in the last nine years at least. So how do you see something like Qantas?
SWAN: Well I’m puzzled with Qantas because yes, there will be valid reasons, and they do make very big capital purchases, so that’s partly explicable. But jeez, they go out and aggressively suppress the wages of their workforce, yet their CEO and senior executives get very large increases in pay. So I don’t say that Qantas is at the same level in its activities that we’re seeing from BHP and Rio, and companies like Chevron, and many of the big high-tech companies, but it’s worth a look and it’s a point of legitimate debate.
AUSTIN: Now, Australian banks. At a time when there’s a banking Royal Commission, ironically, Australian banks have been paying tax because they are domiciled here, they can’t transfer-price. They are one of the few examples of paying almost the full corporate tax rate.
SWAN: That’s right, that’s true. The major retailers, which are also not international – although that’s changing with Aldi and other companies coming to the market, but Coles and Woolies – because they’ve been Australian companies, have not had the opportunities that anyone that’s international has used, to try and evade tax. And ditto with our banks. Because they’ve not been internationalised – that is, our trading banks, it’s not the merchant banks here we’re talking about – but they’ve been paying a full freight as well. And they could pay more. And indeed, the government has moved in that direction in recent times.
AUSTIN: So your real target of criticism, I guess, is the big miners, the big resource companies?
SWAN: Well it’s international companies almost across the board. But in the case of Australia that really does boil down to the big miners. And this is a real problem, because essentially, they are making super profits, which takes us back to where we started this discussion just before – to those proposals about super profits taxes.
AUSTIN: Now Scott Morrison has been pointing out for the entire last session of Federal Parliament that the LNP, or the government, has brought in tougher laws to claw back and stop much of that tax avoidance.
SWAN: Yes they’ve been dragged kicking and screaming to take some steps –
AUSTIN: But they have done it, you acknowledge they have done it.
SWAN: Well, dragged kicking and screaming to it, because when we were moving our proposals in the Parliament, both in government and opposition, they opposed them tooth-and-nail.
AUSTIN: In your speech, on how to avoid the Trumpification of Australian business, you say, and it’s a pretty accurate quote: “if businesses here don’t recognise and adjust to the new paradigm, we will also succumb to the same populist uprisings that have occurred in the United States and the United Kingdom.” So what do you say – that business here in Australia needs to adjust?
SWAN: Well they need to be much more responsive to, and listen to, their workforces and the community that they operate in. And at the moment, the argument that has been mounted by the Business Council for this corporate rate cut, is just pure rubbish. It doesn’t stand up in economic terms, but they continue to trundle it out. So the public are pretty sceptical about the business community and you can see that in all of the polling that is being done on their proposal for this massive corporate rate cut, which is not even funded! So they government’s going to put, straight to the budget deficit, $65 billion worth of tax cuts without funding them. Now, if Labor had walked in and said something about that, they would’ve been screaming and screaming about it. I think large businesses are, fundamentally, out of touch. They suffer from what I call a blindness of affluence and I think they’re out of touch with most in their supply chain – small- and medium-sized businesses as well. But they suffer from a blindness of affluence. Many of our senior corporate leaders don’t live or have contact with average Australians. They live in the wealthiest postcodes and they get trapped in an environment which, if you like, divorces them from the experiences of Australians on a day-to-day level.
AUSTIN: If what you say is true, though, that’s going to come back and bite them, though, isn’t it?
SWAN: Well I think it’s already coming back and biting them. You see, what we’ve seen around the western world is an increasing concentration of income and wealth amongst a smaller and smaller elite. We’ve seen the hollowing out of middle classes – not as much in Australia, but we’ve seen the hollowing out of middle classes particularly in the United States and Great Britain and many other countries. And we’ve seen a lot of wage suppression for the rest. Now, Australia’s avoided the worst of that over the last 20 to 30 years, because there’s been a social contract which has been expressed in a much more progressive tax system, a commitment to programs like Medicare and tertiary education and so on. But we are now seeing, in this country, much more of the polarisation that flows from the suppression of living standards for the great bulk of working people on low and middle incomes.
AUSTIN: But companies here are in a competitive global environment –
SWAN: But companies here have record profitability – that’s the point!
AUSTIN: But they’re in a competitive environment in a low-tax Asian neighbourhood–
SWAN: And they’re doing very well.
AUSTIN: What do you argue, that they have to drop the profit motive?
SWAN: No – the profit share in the Australian economy is at record highs and the wage share is as low as it’s been since they’ve collected the data.
AUSTIN: That’s Wayne Swan, Labor’s Member for Lilley and a former Federal Treasurer.
ENDS
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