16 October 2015
Transcript - #2015054, 2015

In the role of: Minister for Small Business and Assistant Treasurer [21 September 2015 - 18 July 2016]

Interview with Alan Jones, 2GB

SUBJECTS: Foreign investment, Australian Government Action on Multinational Tax Avoidance, tax reform

JONES:

Minister good morning.

MINISTER O'DWYER:

Good morning Alan, lovely to be with you.

JONES:

Congratulations on your appointment.

MINISTER O'DWYER:

Thank you.

JONES:

Can I just begin by reading you a letter because this occupied a lot of time on the programme yesterday, there were calls everywhere but it is summed up by F Riley from Mount Isa writing today and I quote ‘China declares the South China Sea as Chinese territorial waters, the Chinese buy the port of Darwin, Chinese interests buy land, real estate, and milk farms galore. Hello! Is anyone in Canberra awake?' Now this was in the wake of this announcement by the Northern Territory government that they are leasing the port of Darwin to a Chinese owned company and senior defence officials are saying there are concerns about the security implications of a Chinese company owning such a significant link between us and Asia, the port of Darwin. Now I know you are not the Government, you are just a Minister; do you have a response to that?

MINISTER O'DWYER:

Well the first response I'd have, Alan, to that is of course no deal should ever occur that threatens our national security interests. That is the base line. The decision that has been made to lease the port of Darwin for 99 years is a decision that has been made by the Northern Territory government. Now they have worked with the Department of Defence to cover off any national security concerns in relation to that 99 year lease and in anticipation of the lease arrangements, the Department of Defence has secured access arrangements to the Port, those access arrangements are for 15 years plus a 25 year option, and separately the Department of Defence has been working with the Northern Territory government spending millions of dollars on an alternative barge facility which will be fit for purpose for defence needs where they can load and unload…

JONES:

Yeah but hang on. But Kelly, China own the bastard thing, this doesn't pass the pub test. We conduct border integrity operations there. It is like you know me going into your house to conduct some very, very sensitive personal discussions with others and you are at the sink doing the washing up. I mean there are significant territorial tensions just north of Darwin in the South China Sea. This doesn't pass the pub test. Is the Federal Government going to approve this?

MINISTER O'DWYER:

The first point I would make, Alan, is that we have to rely on the information that is provided by the Department of Defence, now they have been working with the Northern Territory government in relation to this decision. So I trust our national security advisers to make the best decisions and to give us the best advice in relation to our national security.

JONES:

But what does your own judgement tell you? I mean senior defence officials are saying there are concerns about this, I don't know what the Department – they are just bureaucrats, unelected bureaucrats. But senior defence officials are saying there are concerns about the security implications of a Chinese company, and this is just common sense, owning a significant link between us and Asia, the port of Darwin.

MINISTER O'DWYER:

The sources you are referring to are in the media unnamed, the actual advice from the Defence Department is different to what you have just said, Alan.

JONES:

But if you were just Kelly O'Dwyer an Honours graduate from Melbourne University, you are not a politician, you are a mother and you are sitting at home listening to the news and you hear that the port of Darwin is being leased to Chinese interests for 99 years don't tell me you wouldn't raise your eyebrows and say well hang on, hang on the South China Sea is now Chinese territorial water, they're buying land, they're buying real estate, they're buying milk farms, now they have got control of the port, wouldn't you raise your eyebrows?

MINISTER O'DWYER:

What I would say is has the Department of Defence been consulted? What do our national security advisers say about this?  But there is a further point, you asked whether or not the Commonwealth has any role in approving this and they actually – we don't and I will tell you why. We have no legislative head of power here. You would probably be aware, although this is quite technical, that when it comes to urban land there are exemptions that exist under our Foreign Acquisitions and Takeovers Act for State and Territory governments that are selling urban land to someone else. They don't actually have to go through the Foreign Acquisitions and Takeovers Act, for non-urban land there is that threshold limit before which it comes to the Foreign Investment Review Board and that is $252 million. Now the non-urban land here is less than that threshold. Where we do have a role to play is when a foreign government is looking to acquire an interest we under our foreign investment policy can intervene to approve or not approve that particular purchaser but the Prime Minister and Treasurer are aware of the way that the current rules work at the moment and we are looking at ways to ensure that our strategic assets fall under the foreign investment framework.

JONES:

I tell you what, it doesn't pass the pub. Look we could talk forever. I should say to my listeners this is not this lady's portfolio so whether you agree with the answer or not she's certainly given a very competent answer. I don't agree with any of this I have to tell you. I just think this is absolutely ridiculous but then what am I? I'm just a dumb Joe citizen out there. I tell you what…

MINISTER O'DWYER:

I don't think anyone would describe you like that Alan.

JONES:

Well I tell you what, the public out there agree with the points that I just made to you. They can't understand all this but look I'll just come to this business about corporate tax evasion and we may not get time to cover all these things today but I do want you to come back about this because there is a tremendous amount of interest on the corporate tax evasion issue. Just a couple of things though, because a whole heap of people listening to you – hundreds of thousands of people this morning – are not incorporated. They just pay personal income tax.

MINISTER O'DWYER:

That's right.

JONES:

Do you think when we're talking about “tax reform” then we talk about bracket creep, the GST, superannuation, big companies avoiding tax, federal income tax is 100 years old this year, in the tax review, is there any consideration about the simple principle of lowing taxes to encourage greater economic activity?

MINISTER O'DWYER:

Of course there is Alan, of course there absolutely is. We are seeing the burden of taxation very much on the PAYG tax earners…

JONES:

Absolutely.

MINISTER O'DWYER:

…who at the moment, if you're on an average income, it won't take too many years before you are going to be in the second highest tax bracket. Now just consider that. Average income, second highest tax bracket. That's pretty extraordinary and we can't continue to have the tax burden fall upon people who are working hard to provide for their families and to provide opportunities for their future…

JONES:

Let me just interrupt you there. I mean $180,000 isn't a lot of dough. Now at $180,000 they are paying 47 cents but that's ratcheted up by two extra taxes that have been imposed on this, that's the Medicare levy of 2 per cent and then this temporary budget repair levy of two per cent if you're over $180,000 that's 49 cents in the dollar, that's 19 percentage points higher than the company tax rate. No wonder people are out there employing accountants to try and avoid their tax.

MINISTER O'DWYER:

You're absolutely right, it's 49 cents for every dollar over $180,000…

JONES:

…Yeah.

MINISTER O'DWYER:

… and that's very significant but you're right that we need to make sure that everybody is actually paying their fair amount of tax and that's why the Government is taking a very strong stand in relation to multinational tax avoidance...

JONES:

I'll come to that in a minute but I just read in July this year that 40 Australians with incomes of $2.5 million, are paying no tax at all but they forked out $700,000 each on accountants. Now we're cutting off our nose to spite our face aren't we?

MINISTER O'DWYER:

We have to make sure that everybody is paying the appropriate level of tax and we don't want to disproportionally have the tax burden fall to people who are trying to do the right thing…

JONES:

But it is. Because as Malcolm Turnbull said in 2005, Kelly, people with substantial assets, he said this in 2005, are able to structure their affairs so the bulk of their income is earned through corporations which pay a 30 per cent tax rate. The only people said Malcolm Turnbull in 2005, who pay 47 cents are by and large PAYE.

MINISTER O'DWYER:

And that's why we're looking at this issue Allan. That's exactly why we're looking at this whole issue around tax to make sure that we can build a competitive economy where people who work hard are rewarded for their effort and get to keep the money that they earn, more of the money that they earn, so that they can make choices about what they think is important, whether it's their children's education, whether it is putting more money into their business. Let's not forget, so many of those taxpayers we talk about are small business people as well. Not all of the small business owners are companies, a lot of them, quite a large majority of those small business owners, are paying tax in the ordinary course of events.

JONES:

Well I want to talk to you about small business but perhaps that will have to stay until next week. What people are worried about out there on this tax avoidance issue, and you handled this very well if I might say so in Question Time this week, but the problem doesn't go away. This Senate inquiry revelled that outfits like American Express have effectively paid no income tax in Australia for seven years despite earning $8 billion from Australian customers over the same period. How do you claw this stuff back?

MINISTER O'DWYER:

I don't want to talk about any specific taxpayer, but what I would say is that we have given significant resources to the Australian Taxation Office to very specifically look at companies that have undertaken international restructures or who have very significant levels of related cross border arrangements. They initially started their investigations with around 30 companies; we're up to about 80 companies.

JONES:

Yeah but where are you getting? See Chevron, you say you don't want to talk about particular issues, I do because my listeners are writing to me. They had an operating revenue in Australia every year since 2011 of over $2.5 billion Australian and they got $30 million in refunds. Holy Nelly.

MINISTER O'DWYER:

We are, this is a serious issue Allen, this is the reason why we've actually brought into the parliament legislation around multinational anti-avoidance to make sure that the tax is properly being paid by multinationals, that they are not able to avoid it. We are doubling the penalties…

JONES:

Well you practiced in corporate law, sorry to interrupt you, you practiced in corporate law and corporate tax. Now you know that pensioners in relation to their investments in order to determine whether they are entitled to the pension have what is called a deeming rate. Why shouldn't we at least initially have a deeming corporate tax rate for companies like BHP and Apple who trade in Australia but have overseas corporate headquarters and consequently from the perspective of the Australian battler, this lot are believed to pay very little Australian tax. Shouldn't we have a deeming corporate tax rate if we can have a deeming rate for the pensioner?

MINISTER O'DWYER:

What we need to do is we need to make sure that if they are operating in Australia, if they are earning income in Australia that they are paying tax in Australia and that's the principle that we start from. That each multinational company that earns money here should be paying tax in Australia and that's why we have given additional powers to the Australian Taxation Office to be able to investigate and prosecute those people who are not paying their fair share of tax here. That's why we have been leading the world when it comes to the changes announced...

JONES:

I know Kelly but, I know, but Shell as we stand reportedly paid no tax in Australia for three years despite its Australian service stations generating $60 billion worth of sales over that period. Now we've run out of time, can we come back next week?

MINISTER O'DWYER:

Very happy to Allan.

JONES:

Ok, I don't want to interfere with the baby feeding period or any of that stuff.

MINISTER O'DWYER:

Don't worry, that's happened before now.

JONES:

Ok. Alright so we'll talk next week.

MINISTER O'DWYER:

Terrific.

JONES:

Thank you for your time that's Kelly O'Dwyer the Assistant Treasurer.