Transcript - RN Breakfast with Fran Kelly




SUBJECT/S: Tax Evasion and Mossack Fonseca

FRAN KELLY: The unprecedented worldwide leak of those secret financial files has refocused attention in this country too on tax evasion. Eight hundred individuals and some of the country’s biggest companies have been linked with the Panama-based law firm Mossack Fonseca, which helps it clients set up offshore entities in countries like the British Virgin Isles.

Former Treasurer Wayne Swan has been campaigning for a long time against what he calls the stench of tax he evasion which he says is demolishing Australia's tax base. Wayne Swan, welcome back to Breakfast.

WAYNE SWAN: Good morning, Fran.

KELLY: The Panama Papers have exposed the murky world of tax avoidance, money laundering and in some cases outright corruption. Do you think this is going to be the wakeup call the world needs to really stamp out tax evasion once and for all?

SWAN: Well, I certainly hope so. I certainly hope that it is globally. I certainly hope it puts a rocket under the international response to this epidemic. What we can see here is the erosion of tax bases across the developed and developing world which in itself is not only a threat to budgets – a threat to fiscal stability, but I think in many ways a threat to democracy, because what we are seeing here is lawlessness. What we are seeing here is the behaviour of some of the most respected corporates in the world in a way which demolishes trust in government and trust in business. So, I think it is critical that we act strongly domestically but strongly internationally.

KELLY: You've been engaged in this for a long time, you were at the G20 back in London in 2009, which agreed on a global crack down on tax havens. You were there at the Moscow meeting, which adopted a framework to tackle what’s known as base erosion and profit shifting, but all the evidence suggests that tax evasion has grown as a problem since then not diminished?

SWAN: Yes, it certainly does. We announced what’s known as the OECD BEPS process in Moscow in 2013 and basically what we've seen since then is the G20 drop the ball, and the truth is that the power of big money is at work behind the scenes and governments are not acting as they should to stamp out this rampant tax evasion. G20 has just been twiddling its fingers, it has not been acting swiftly enough or strongly enough, and the same can be said of the Australian Government who is dragging its feet on the whole OECD BEPS process and has opposed just about every step of the way any action that Labor took in Australia to stamp out rampant tax evasion.

KELLY: Well, let’s talk about the power of big money because you told Parliament in February that aggressive tax minimisation by Australian companies would cost the Budget $26 billion over four years and one of the companies you zero in on is BHP, which is Australia's biggest tax payer. BHP Billiton, according to Mossack Fonseca files, BHP is associated with at least 19 companies and entities in the Virgin Islands but this perfectly legal under current rules for BHP or anyone else to set up these structures, isn't there? There’s no evidence of illegal tax evasion?

SWAN: Well, I'm not entirely sure about all of that. BHP and Rio, for example, have already been exposed through the Senate inquiry for funnelling billions of dollars through tax havens and tax shields like Singapore, which has had a dramatic impact on the Australian budget. They have been the subject of audits behind the scenes by the Australian Tax Office for some period of time and my point is this...

KELLY: And the fact that they have repaid $1 billion in top up taxes suggests that the Government laws are working.

SWAN: No, it doesn't, because I think there are other things going on behind the scenes that we don't know about which are secret. BHP Billiton and many other companies have been aggressively challenged by the tax office and I pay full credit to them. We don't know the extent to which the tax office is challenging many of these companies behind the scenes. But my point is this when respected companies like BHP and Rio are engaged in such aggressive tax avoidance, minimisation and evasion, what it does is normalise that behaviour and if those companies with that standing, with those reputable boards, can behave in this way then what we actually see is the green light to everybody else to get out there and do it. And we can see from the records that came out through the process that was on Four Corners. Something like 800 high net worth Australians are also involved in one way or another.

This epidemic of tax havens is something that we have to deal with globally and we have to deal with domestically, and it needs to be cracked and cracked really hard because what it does is erode any faith in the system. For example, if you're a punter out there and you’re paying an average rate of 30, 40 on you know, on higher incomes, nearly fifty cents in the dollar, and you turn around and see that half of foreign owned companies in Australia paid no tax in 2013/14, that really does destroy your faith in the process and in government itself.

KELLY: That is not the case to be fair to BHP it is Australia's largest tax payer and it says repeatedly that it does not engage in aggressive tax planning but never the less as you say it has been forced...

SWAN: Well, that is misleading, Fran, as I said in the Parliament…

KELLY: Well, it has been forced to that top up payments…

SWAN: As I said in the Parliament that is absolutely misleading, the figures bandied around by the minerals councils and BHP about the rates they pay are simply wrong. The mining companies in Australia would be lucky to be paying twenty cents in the dollar at an effective rate. BHP does pay a lot of tax but the truth is it should be paying a lot more and it’s avoided a hell of a lot. That is true for BHP and many other companies in Australia.

KELLY: And let’s talk about some of those other countries, the role banks are playing because ANZ, Westpac, NAB, Commonwealth they've all been linked to the release of these Mossack Fonseca documents in different ways. I'm not going to ask you so much whether they have questions to answer but does this feed into what you’re saying there – how average Australian feels about for instance, a government that wants to cut company tax in next month’s budget

SWAN: Well, that's a farce. It's completely a farce for the Government to claim they want to cut company tax when the effective company tax rate paid by all companies paid in Australia is about 24 cents in the dollar not the 30 headline nominal rate. So, the government has been disingenuous in its arguments about company tax. There is no case for a company tax rate [cut] when so many companies are not actually paying the nominal rate or anywhere near the nominal rate. What this is an argument about, from the Government, is about to shift the tax burden onto ordinary working Australians [and] away from corporates and high net worth individuals

KELLY: You're listening to RN Breakfast our guest is the former Labor Treasurer Wayne Swan. Just very briefly if I can Wayne Swan, the Government is also saying the money you outlined in the Gillard government for health funding, Gonski and hospitals is fantasy money. That you never provided it and fact is the revenues haven't come back and your budget wouldn't have held up.

SWAN: Well, that's a lie, Fran. The fact is they were accounted for in the 2013/14 Budget – it’s all there in black and white and the fact that they then published a Budget saying it was accounted for in the 2013/14 Budget confirms that. But the fact is that they are seeking to find an excuse to rip money out of health and education but anyone who wants to see how it was accounted for you can go there and see it in the 2013/14 Budget. You can see all the savings we made and the revenue measures to fund this into the future it’s all there in black and white but they get away with claiming that it’s not because they got an ideological agenda to rip the guts out of health and education.

KELLY: Okay, and just very, very briefly, I'm sure you've seen today's Newspoll, do you agree with Sam Dastyari – this is going to be a very tight close election, could Labor win?

SWAN: Well, given the behaviour of the Government and given the really solid performance that Bill Shorten and the Opposition who have got fully funded promises all on the table and the Government being all over the shop and in the pocket of big companies, I think we're in with a shot.

KELLY: Wayne Swan, thank you very much for joining us

SWAN: Thank you