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Labor's tax inquiry to ask if regulators are 'soft' on tax avoidance
Sydney Morning Herald April 21, 2016 - 12:15AM
Nassim Khadem Deputy Editor, BusinessDay
Tax Commissioner Chris Jordan will be asked to address concerns that tax authorities have been "soft" on tax avoidance at a Senate inquiry hearing on Thursday.
The inquiry, which follows the explosive revelation of the Panama Papers by the International Consortium of Investigative Journalists – more than 11.5 million documents that were hacked from Panamanian law firm Mossack Fonseca, alleging tax evasion, money laundering and other crimes by wealthy individuals and politicians.
The papers have prompted a global hunt for criminals, and raised questions about the inability of tax regulators to ensure multinationals pay their "fair share" of tax.
It is estimated trillions of dollars is lost globally each year due to crime, corruption and tax evasion. The local cost of tax avoidance is also high, with estimates United States corporations avoid an estimated $2 billion of tax in Australia each year by shifting their profits to low or no-tax countries.
Mr Jordan, who is chair of the Joint International Tax Shelter Information & Collaboration network (JITSIC), which includes the heads of tax administrations from 38 countries, will give an update on a recent trip to Paris where the administrators met to discuss strategies such as better information sharing.
He will be joined by other ATO senior executives including Deputy Commissioner International, Mark Konza, Deputy Commissioner Private Groups and High Wealth Individuals Michael Cranston, and Deputy Commissioner Public Groups Jeremy Hirshhorn.
The inquiry will also hear from Four Corners investigative journalist Marian Wilkinson, who was one of more than 300 journalists involved in the ICIJ investigation, Tax Justice Network Australia director Mark Zirnsak, and from academics including University of Sydney Business School senior lecturer Shumi Akhtar and University of Technology accounting professor Roman Lanis.
Labor has called the inquiry as multinational tax avoidance has been at the centre of political debates in Canberra during the past year, and will be one of the key policy issues leading to the federal election, likely to be held in July.
The May 3 federal budget is also expected to include policies to fight multinational tax avoidance, including changes to thin capitalisation rules that put restrictions on the ability of multinationals to get debt deductions for their investments. The Turnbull government plans to reduce from 60 per cent to 50 per cent the amount of debt a multinational company can load into their Australian operation.
Senator Chris Ketter, chair of the Economics References Committee, which is holding the inquiry, said the public wanted governments to "clean up unethical business practices".
"We've held multiple hearings around the bad behaviour of multinational companies and the Panama Papers have really helped to set the groundwork for further scrutiny," he said.
The Labor inquiry follows last year's Senate inquiry into corporate tax avoidance – which had been initiated by former Greens leader Christine Milne.
Executives from some of the world's biggest multinationals including US technology companies such as Google, Apple, Microsoft, sharing-economy services such Airbnb and Uber, as well as miners BHP Billiton and Rio Tinto, were called before that inquiry.
The executives were quizzed on why they use tax havens in Bermuda, as well as incentives given in low-tax nations such as Singapore and Ireland, which allow these companies to devise tax minimisation strategies and pay lower tax rates.
The new Labor inquiry comes as overseas governments scramble for solutions to stop multinational tax avoidance amid widespread public dissatisfaction.
On Tuesday night the International Monetary Fund, the Organisation for Economic Co-operation and Development, the United Nations and the World Bank Group announced a "platform" for regular discussions among the four organisations.
Its members will hold regular meetings with representatives of developing countries, regional tax organisations, banks and donors, and will work together in designing strategies to fight multinational tax avoidance, as well as ensure better information sharing and greater transparency.
The World Bank and the International Monetary Fund recently warned tax avoidance has had a "tremendously negative effect on our mission to end poverty".
Japan’s subs bid is seen as the weakest
The Australian April 21, 2016 12:00am
Brendan Nicholson
Japan’s bid for the $50 billion submarines contract is understood to be considered the weakest on the table as cabinet’s Nationa¬l Security Committee finali¬ses its decision on who will design the navy’s new fleet of 12 boats.
Companies from Japan, France and Germany are lobbying hard in an 11th-hour push to win what is, even by international standards, a massive defence contract.
The Australian has been told the Japanese bid was considered the weakest and that of the French company, DCNS, the strongest.
The NSC set aside much of Tuesday and yesterday to examine a recommendation by an expert¬ Defence Department panel headed by former submarine commander Rear Admiral Greg Sammut, considered one of the Australian Defence Force’s smart¬est, most diligent officers.
Rear Admiral Sammut gave the ministers a lengthy and highly detailed briefing on the three options. The NSC recom¬mendation still has to go to the full cabinet.
A Japanese official in Tokyo told The Australian that while he was confident his country had the best submarine, he felt its lack of experienc¬e in exporting military material may have resulted in it submitting a weaker bid than the other two contenders.
Missing out on the contract would be seen as very serious in Japan, which views the bid as the cornerstone of a closer defence relationshi¬p with Australia.
For a time, with Tony Abbott as prime minister, it appeared that Japan was set to be awarded the contract without any competition.
If Japan loses, Malcolm Turnbull will be at pains to stress to his counterpart Shinzo Abe that the defence and security relationship will strengthen whoever builds the submarines.
The head of the Australian operati¬ons of Germany’s shipbuilder TKMS, John White, has strongly rejected claims that it would cost up to 30 per cent more to build the submarines in Aus¬tralia rather than overseas.
Dr White told The Australian his company had assured the government it could build the submar-ines in Australia for $20bn, the same price as they’d be built for in Germany. “We made it clear that the project could be under¬taken in Australia at a price no more than $20bn and that price would not vary,” Dr White said.
“With our vast experience of building submarines both in our Kiel shipyard and for foreign navies in their own countries, we have adopted a proven approach using a digital shipyard system which means no cost variations unless the customer has changed its technical requirements during the -design and build process.”
Dr White, who headed the very successful Anzac frigate program, said contrary to some claims, an Australian workforce — likely to be 1200 to 1500 people — would cost 11 or 12 per cent less than the TKMS workforce in Germany and would be as productive.
Herve Guillou, the global chairman and chief executive of the giant French DCNS group, said the new submarines must be built in Australia to ensure such a vital strategic asset could be maintained and modernised here.
“After 10 years you have to upgrade things as technology improve¬s to keep up your regional superiority. You need not only a database and a supply chain, you also need engineering know-how and know-why,” Mr Guillou said