Tuesday, 16 June 2020
Last Wednesday, 10 June, I spoke here in the Senate about the Australian construction giant Lendlease and, in particular, about the fact that, although the company has generated tens of billions of dollars in revenue and profit before tax, has raked in a billion dollars of federal government construction contracts and is now dipping into the JobKeeper wage subsidy, it hasn't paid any corporate tax for years—not a brass razoo.
I had some strong things to say about the chair of the Lendlease board, Michael Ullmer, who has, quite wrongly, been honoured with an AO for a long career in corporate number-crunching and the pursuit of profit without social conscience. Predictably, this didn't go down well with Lendlease. These corporate executives rarely like to have the spotlight turned on them—at least, not unless it's been directed at them by their own team of PR flunkies.
Last Thursday, the day after that speech, I received a letter from Mr Ullmer and the Lendlease group CEO and managing director, Steve McCann. I hadn't mentioned Mr McCann in my speech last week, and it was remiss of me not to do so. So I shall fill in some details about him now. Steve McCann has been with Lendlease for 15 years, and CEO since 2009. Prior to his appointment as chief executive officer, he was Lendlease Group's finance director and the chief executive for Lendlease's investment management business. McCann, like his boss, Mr Ullmer, is a lifelong corporate number-cruncher. Prior to joining Lendlease he had 15 years experience in property funds management and investment banking. With degrees in finance and law from Monash University, he's a member of the Business Council of Australia and the Property Council of Australia. McCann appears to lack the social pretensions of his boss. He's not on the board of any symphony orchestra or art gallery. He doesn't feel the need to cloak his corporate wheeling and dealing in some engagement with high culture. Instead, he enjoys the country air at his sprawling mansion, once used on The Biggest Loser TV series, in the exclusive Sydney suburb of Duffys Forest. And if you've done as well as McCann has as a corporate account and lawyer you can certainly indulge in your hobbies, which in his case are racehorses and punting.
Although he has been described by other investment bankers as one of the finest leaders in business, it's hard to see McCann as any sort of corporate exemplar. After all, his single achievement has been to radically minimise Lendlease's corporate tax liabilities to the point of not paying corporate tax for the last five years. Just to recap, and this is according to the tax office's tax transparency data: over the last five years, from 2013-14 to 2017-18, Lendlease generated $43 billion in revenue and they didn't pay a cent in corporate tax. There is lots of greyness—
An honourable senator interjecting—
And you ought to come along to the Senate Economics Committee and listen to the tax commissioner as he talks about the difference between being responsible and being unlawful. Then you might learn something.
Lendlease realised a profit before tax of more than $5 billion, delivered an annual return on equity to security holders of 11.7 per cent and returned over $2 billion to security holders. But, again, not a cent of corporate tax was paid. Lendlease's own report showed that they still paid no tax in 2018-19, and that they don't expect to pay any at any time soon.
In their letter to me last Thursday Lendlease's Chairman Ullmer and CEO McCann remonstrated at some length, pointing out that for the 10 years prior to 2014 Lendlease paid more than $400 million in corporate tax in Australia. That may well be so but, in effect, Mr McCann has underlined the fact that Lendlease stopped paying corporate tax shortly after he became the CEO and managing director. Ullmer and McCann were also keen to highlight that in 2019 Lendlease paid, collected and remitted $384 million of direct and indirect taxes, plus $446 million of employee PAYG withholding taxes for 2018-19. I'm not quite sure what their point is there. Perhaps it's news to Lendlease that employee's PAYG tax is actually paid by the employees! By the workers! And yet they're claiming that that's been paid by them as Lendlease. That's their warped sense of social responsibility. That isn't Lendlease paying tax.
Ullmer and McCann further emphasised that over the five-year period to June 2018 the company made distributions of approximately $1.9 billion to security holders in Australia. Lendlease estimates that the tax ultimately payable would be in the vicinity of $225 million to $325 million for resident security holders. But, again, that isn't tax paid by Lendlease, that's tax paid by its investors on their gains.
Perhaps the most striking thing in Lendlease's letter, however, is the company's unembarrassed confirmation that they're accessing the JobKeeper scheme, sucking off the taxpayer. According to Lendlease, some 15 per cent of its 9,200 workers—that's some 1,400 employees—are being paid through the wage subsidy program administered by the federal government. Lendlease claims that it's strictly in line with government guidelines in the JobKeeper legislation. That may be so, but it's an extraordinary state of affairs. Notwithstanding the COVID-19 pandemic, Lendlease's business is proceeding apace—especially construction work for the Defence department. According to the Australian government's own figures and announcements, Lendlease is a company that has been awarded nearly $800 million in federal construction contracts so far this year, 2020, and it's still only June. So you've got to ask: how can a company that's receiving hundreds of millions of dollars in government contract work and pays not a cent in income tax on billions of dollars of revenue be allowed to milk taxpayers through JobKeeper? It doesn't make any sense and it's not moral—it might be legal. So it's a good question for Lendlease and it's a very good question for the government too.
With respect to Lendlease's lucrative retirement village business, vehicles for the company's most impressive tax dodges, Mr Ulmer and Mr McCann are keen to shift responsibility onto the ATO, arguing their approach has been informed by the ATO's relevant ruling covering development, operation, purchase and sale of retirement villages. Perhaps, but Lendlease's self-serving interpretation of that ruling has been problematic. Ulmer and McCann point out that Lendlease provided input to the consultation process on the draft tax determination issued by the ATO in November last year. I can imagine that they've been very active in this regard. Companies like Lendlease have deployed legions of tax lawyers and accountants to push back at the ATO's efforts to counteract aggressive tax planning and minimisation. As I said last week, the ATO may yet catch up with Lendlease; we'll have to wait and see.
In closing their letter, Ulmer and McCann expressed a desire to meet with me to discuss their company's tax affairs and the utilisation of the JobKeeper wage subsidy. They said they'd await my response. I'm happy to meet with them. The first question I'm going to ask them is about their warped perspective that they pay PAYG when they don't; it's workers that do that. And we'll ask them when they're going to change their business model to have a socially responsible position where they contribute to the very environment in which their company thrives.
In conclusion, I should add that Lendlease's correspondence is part of a counter-battery fire that I've been encountering in response to my campaign to shine the light on corporate tax dodging. Business giants aren't used to seeing some political shellfire lobbed about their corporate headquarters. They don't like being named in parliament. They're more used to politicians quietly knocking on their door and holding out a begging bowl, asking for political donations. When someone like me comes along and puts in a few rounds to highlight their personal responsibilities as directors for immoral tax dodging strategies and lack of social responsibility, they tend to feel a bit wounded, and some form of counterattack, usually drafted by their corporate minions, generally follows. I expect a few more shots, but I won't be deterred and I will be calling out more corporate tax dodgers.