Wednesday, 14 February 2018
Questions without Notice: Take Note of Answers
Jenny McAllister (NSW, Australian Labor Party) Share this | Hansard source
The government's argument on corporate tax is equal parts sophistry and wishful thinking, and nothing demonstrates this better than a very careful unpacking of Senator Cormann's very glib response to Senator Watt that in Australia we tax profits, not revenue. Let's reflect on what's actually prompting this conversation. Analysis published by the ABC showed that roughly one in five of Australia's largest companies paid no corporate income tax over the last three years. This includes some companies that have been the most vocal in calling for a reduction in the headline rate of corporate tax. Not one of Australia's airlines has paid tax since 2013. Some of Australia's biggest investment banks, including Goldman Sachs and JP Morgan Chase, have not either, and neither have other financial institutions like BNP Paribas, American Express, Barclays bank and the Royal Bank of Scotland, as well as News Corp, Atlassian—supposedly one of Australia's big success stories—and a host of other companies.
Senator Cormann is absolutely correct in saying that Australia taxes profit, not revenue. But that is not the point. It is not the point being made by Labor and it is not the point, incidentally, being made by the ABC analysis. It simply is not credible to argue for a reduction in tax for a bunch of companies, many of whom haven't paid any at all for the last three years. How can you claim that a reduction in company tax is going to lead you to paying workers more or investing more if you are not paying any tax at the moment? It simply isn't credible. The argument that it frees up more cash simply doesn't work, because literally no cash is being expended on tax right now. If you have an accumulated tax loss, a reduction in the company tax rate doesn't affect how much money you've got to spend on other things today—not even a tiny little bit. All it impacts on is how many more years you've got before you need to start paying any company tax at all.
More than that though: Senator Cormann's line about taxing revenue, not profit, is a little disingenuous, to use the word employed by Senator Hume earlier. Let's be clear: for the most part, these companies are very, very healthy. They have a decent listing price. They are able to borrow at reasonable rates. Their executives get performance bonuses, and many of them pay out to their shareholders. In other words, they are profitable by any ordinary understanding of that term. But they don't pay taxes on those profits, because they have very expensive and very comprehensive legal advice which, incidentally, they are then able to write off as a tax expense.
The question for Senator Cormann and the government is this: do they really believe it is fair for these companies to pay even less tax than they do now? After two years of the Senate economics committee on which Senator Hume sits taking evidence about the practices of corporations in structuring their tax affairs to avoid tax, do they really think that these sharp practices are reasonable and ought to be continued?
We are trying to have a public conversation about how to fund the state and the services that every Australian benefits from, and Senator Cormann is palming the public off with glib answers that, frankly, belong in an accounting exam. As economists emphasise, companies don't make investment decisions based solely on the headline tax rate. Instead, companies look to things like roads, rail and other infrastructure, paid for by the Australian taxpayer. They look to the skills of our workforce, educated by the Australian taxpayer. They look to the reliability of our justice system, funded by the Australian taxpayer. If a company is not paying tax then the ordinary Australian is going to think that the company is a leaner, not a lifter. If the government seriously think that the best response to this argument is a technical accounting argument about the difference between profits and revenue, they are more out of touch than I could possibly have imagined.