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Economics References Committee
Corporate tax avoidance

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WILKINSON, Ms Marian, Journalist, Four Corners, Australian Broadcasting Corporation

Committee met at 10:18

CHAIR ( Senator Ketter ): I declare open this hearing of the Senate Economics References Committee's inquiry into corporate tax avoidance and aggressive minimisation by Australian companies and multinationals operating in Australia. The Senate referred this inquiry to the committee on 2 October 2014 for report by the first sitting day in June 2015. The Senate has extended the reporting date for the inquiry on a number of occasions, and as a result the reporting date has ultimately been extended to 22 April 2016. The committee has received 127 submissions so far, which are available on the committee's website. Three submissions have been received as confidential.

These are public proceedings, although the committee may determine or agree to a request to have evidence heard in camera. I remind all witnesses that in giving evidence to the committee they are protected by parliamentary privilege. It is unlawful for anyone to threaten or disadvantage a witness on account of evidence given to a committee. Such action may be treated by the Senate as a contempt. It is also a contempt to give false or misleading evidence to a committee. If a witness objects to answering a question the witness should state the ground upon which the objection is taken and the committee will determine whether it will insist on an answer, having regard to the ground which is claimed. If a committee determines to insist on an answer a witness may request that the answer be given in camera. Such a request may also be made at any other time. A witness called to answer a question for the first time should state their full name and the capacity in which they appear. Witnesses should speak clearly and into the microphones to assist Hansard to record proceedings. I ask everyone to ensure they have switched off or turned to silent their mobile phones.

Thank you for appearing today, Ms Wilkinson. If I might say at the outset, thank you so much for the very important work that you are doing, as well as your colleagues in the International Consortium of Investigative Journalists. It is certainly making a difference. I invite you to make a brief opening statement, should you wish to do so.

Ms Wilkinson : I would like to preface my remarks by stating the obvious: I am here as a journalist, not a law enforcement officer nor a policymaker. My role is simply to shine a light on issues of public importance. Tax fairness, tax avoidance and evasion, money laundering and white-collar crime are of huge interest to the Australian public, and that is why we at Four Corners and the ABC became involved in the Panama Papers project.

The background to the project and its post-publication impact is what I can address today. On 4 April, over 100 news organisations around the world, including the ABC, released a series of reports on the offshore financial world under the banner line 'The Panama Papers'. The story was based on 11.5 million leaked records from a little-known Panamanian law firm, Mossack Fonseca, a firm that creates offshore shell companies on an industrial scale. Some 214,000 companies, trusts and foundations were created over the years. With 30 offices around the world—from Panama to the British Virgin Islands, Hong Kong to New Zealand, the Czech Republic to Brazil—Mossack Fonseca has a huge footprint in the offshore world.

The Panama Papers investigation by journalists began a year ago after an anonymous source contacted reporter Bastian Obermayer from the German newspaper Suddeutsche Zeitung. The volume of the material and its implications led the German paper to ask the International Consortium of Investigative Journalists, ICIJ, based in Washington, to contact its members around the world and ask them to join in analysing the extraordinary material. As a long-time member of the ICIJ, I was approached by its director, Gerard Ryle, and Four Corners Executive Producer Sally Neighbour agreed to collaborate on the project last year with members of the ABCs national reporting team. TheAustralian Financial Review's Neil Chenoweth joined the project, as did reporters from The Guardian Australia.

From the outset of Four Corners' involvement, it was clear that the documents revealed both legal and potentially illegal activity. Respected companies and individuals, including former and current world leaders, were in the files along with convicted fraudsters, tax evaders, drug dealers, political cronies and accused money launderers. The files connected a vast network of offshore companies and individuals not only to Mossack Fonseca but also to leading banks, wealth advisers and layers of service providers. They revealed a complex web of offshore dealings that raise serious questions about the enforcement of financial regulations, about how beneficial owners of an offshore entity—how that is established—and about the pervasive use of nominee directors and nominee shareholders to shield beneficial owners, and about the use of the offshore system for tax avoidance, money laundering and evading UN sanctions.

The files revealed offshore companies connected to the Prime Minister of Iceland, the family of Pakistan's Prime Minister, close associates of Russian President Vladimir Putin and the late father of the British Prime Minister David Cameron. Among the hundreds of Australian names in the files were some convicted criminals and long-time targets of the ATO-AFP task force Project Wickenby. The latter was confirmed by the ATO Deputy Commissioner Mark Konza, who appeared in the Four Corners program. Many Australian companies were in the Mossack Fonseca files using their services legally. They included Australian mining and resource companies—in particular, companies that service the mining industry—along with building companies and some of the biggest foreign investors in Australia. Wilson Security's ultimate holding company in the British Virgin Islands was also serviced by Mossack Fonseca. The issue our experts raised in interviews is the lack of transparency around these dealings. They stress that the corporate use of the offshore tax haven system leaves the door open to the exploitation of these jurisdictions for illegal purposes.

In the Mossack Fonseca files we saw examples of tax haven regulators trying to discover the true beneficial owners of companies registered in their jurisdictions. At times, it appears even Mossack Fonseca itself was unaware of the true beneficial owners of companies set up at the request of banks, wealth management companies and other service providers. Indeed, one nominee director living on the Gold Coast told us his identity and passport had been stolen and had been used to set up companies in Eastern Europe, indicating the lack of regulation or its enforcement in tax havens like the Seychelles and the British Virgin Islands.

The publication of the Panama Papers was remarkable because it allowed ordinary members of the public around the world, and in Australia, to get a real insight into the world of tax havens and their widespread use by corporations and wealthy individuals. It comes as national and international concerns over tax avoidance and money laundering are escalating rapidly, as we saw in the reaction to the publication of the Panama Papers. The publication has spurred tax authorities and governments to promise to step up efforts to address the issues raised by the leak.

As you know, the Prime Minister of Iceland has resigned following the publication of details about his family's offshore holdings. The British Prime Minister, David Cameron, has pledged a cross-agency task force to investigate the revelations concerning Britain in the Panama Papers, while moving to publish his own tax affairs. George Osborne, the UK chancellor, has called for the creation of an international blacklist of tax havens and for the global community to deploy clear sanctions against any country or territory that continues to facilitate tax evasion. Spain's finance minister has announced an investigation after a Spanish minister was forced to resign over revelations about his dealings. India, Switzerland, Hungary and the Netherlands, among many other countries, have also agreed to set up investigations. As has been reported, the Australian Commissioner of Taxation has been active in the OECD's response to the revelations. The IMF chief, Christine Lagarde, has called on countries to think outside the box in tackling cross-border tax evasion, and the president of the World Bank described the revelations in the Panama Papers as 'very, very damaging to the bank's mission to end extreme poverty'.

As a journalist, my role is to report on these issues. Only by sticking to that role can journalists continue to act in the public interest. In this case, I would also like to put on record that the Panama Papers revelations were the result of the work done by all the members of the ICIJ who participated in the project—especially the German reporter Bastian Obermayer, his colleague Frederik Obermaier and the ICIJ's director and deputy director, Gerard Ryle and Marina Walker Guevara. Thank you.

CHAIR: Thank you very much, Ms Wilkinson, and, once again, congratulations for the work that you are doing. I want to firstly look at the extent of the Australian involvement in the Mossack Fonseca files. Something like 800 or so Australians are involved there. Do you believe that that is the full extent? Have the full 11½ million documents been analysed to establish whether or not there are other Australians involved?

Ms Wilkinson : There could well be others. One of the things we found is that so many owners and beneficial owners were hidden behind layers upon layers of nominee directors and cut-outs—it was very difficult to ascertain. I do know that next month the ICIJ is hoping to put the names of all the offshore identities—the over 200,000 companies—online for people to analyse. I think there may be more developments there. I do not think you can simply state that the 800 is it.

CHAIR: From your experience working with your colleagues internationally, are there similar operations to Mossack Fonseca around or is Mossack Fonseca the biggest game in town when it comes to this issue?

Ms Wilkinson : That was the thing that was made clear to us: Mossack Fonseca is just one firm doing this. It is obviously an important firm with a very wide global reach, but I think the thing that was of the most surprise to all the people working on this was how many people are involved in this offshore system—how many service providers. You would get to one service provider and behind them there would be a more elaborate one and then behind them there would be a more elaborate one and they would be in contact with the leading foreign banks. So the system is incredibly extensive and I imagine very difficult to follow for tax investigators.

CHAIR: Finally, in discussions with your international colleagues, how does Australia compare with other countries in terms of whether it is an easy or a hard jurisdiction with respect to this transparency issue?

Ms Wilkinson : I think Australia is obviously considered far better than a lot of other jurisdictions, but I think there was a feeling that it was really very difficult to know how much of this could be tracked down. Even in our own simple investigations, you would find people were supposedly beneficial owners of companies who could not possibly be owners of those companies. There seemed to be indications in not only Australia but also elsewhere that a lot of this could well be for money laundering rather than even just tax evasion. It would be incredibly difficult to unravel.

Senator EDWARDS: Are you happy to table your opening statement?

Ms Wilkinson : Yes, sure.

CHAIR: Could you make it available to us now, so we can have a look?

Ms Wilkinson : I have one copy.

CHAIR: Thank you.

Senator DASTYARI: I will be very brief, because I am very conscious of time. Ms Wilkinson, thank you for that fantastic opening statement. I have to say that it is much nicer being on this side of the table asking you questions than having you ask us questions. The International Consortium of Investigative Journalists has in its possession several terabytes of information. As I understand, there is a view towards releasing that over a period of time. Could you elaborate on how that information is going to be released?

Ms Wilkinson : Yes. ICIJ is a journalistic organisation; it is not a WikiLeaks -type operation. So there are huge concerns about genuine privacy issues and the fact that material has to be filtered by the journalists, so it is not released holus-bolus. I do understand from the director, Gerard Ryle, who I spoke to the other day, that they are hoping to have the actual offshore company lists online in May and that will be accessible.

Senator DASTYARI: That is the entire list of all the companies online in May?

Ms Wilkinson : As far as I know, yes.

Senator DASTYARI: I have one final question. With respect to the information that was revealed through your program, the bit that surprised someone like myself—and obviously this committee has been working for over a year now on this issue and we have seen quite a few different types of examples of it in an Australian setting—was not the information itself or the fact that there are companies like this in a place like Panama, which is a known tax haven, behaving in this way, but the industrial scale in which these operations were held. Again, we know there are tax havens and we know these kinds of activities occur in tax havens. It was the industrial-style business model that has been built around that, and I wonder if you could slightly elaborate on that.

Ms Wilkinson : I think the thing that deeply shocked everyone involved—although the source of these documents is anonymous, and this is precisely what motivated the source—was the scale of it and the depth of the potential illegal activity here as well as legal activity. But what really surprised me as we went into this project with journalists from every continent was that every continent, almost every country, was involved in this. The scale of it is really staggering and the sophistication is really staggering as well.

Senator DASTYARI: And this is one firm in one tax haven?

Ms Wilkinson : This is one firm, and it was stressed at to us that there are other firms doing exactly the same.

Senator EDWARDS: I have a quick question. I might come back to you with this if we still have time. Who owns the German newspaper that ICIJ gave the data to?

Ms Wilkinson : I will have to take that on notice. In fact, I am not quite clear on who owns Süddeutsche Zeitung.

Senator EDWARDS: Do you know how the ICIJ is financed?

Ms Wilkinson : Yes, I do. It is largely from non-profit organisations, amongst them the Ford Foundation and the Packard foundation, and I know the Australian philanthropist Graeme Wood has also recently given money to employ a couple of Australian researchers. It is a non-profit organisation, so its donors are largely foundation donors.

Senator EDWARDS: Are you a member of the ICIJ?

Ms Wilkinson : I am, yes.

Senator EDWARDS: And the ABC?

Ms Wilkinson : I work for the ABC, but I have been a member of the ICIJ since about 1998, shortly after its founding.

Senator EDWARDS: Thank you.

Senator WHISH-WILSON: Metaphorically speaking, if we had a whole series of brown paper bags being shuffled around the world that governments did not want to look into or couldn't see the money there would be a riot, but instead this is happening electronically.

I am interested in the Tax Justice Network, to whom a lot of us have been talking over the years. They make an obvious point about the US and the UK being two of the biggest offenders, generally speaking, around aggressive tax minimisation or tax avoidance. Why do you think there was very little information in this dump around US individuals or US companies. Does that strike you as being odd?

Ms Wilkinson : No, not really. There were several factors involved, I think. Part of it, as was explained to me, is a kind of geographical carve up about the way these firms work. You will find, for example, Mossack Fonseca is very big in Latin America, in Hong Kong and in parts of Europe. There will be other firms that service more of the American clients. I think in previous leaks that the ICIJ has handled they have revealed a lot more American clients. There was also a factor in that some of the large news organisations in America decided not to participate in the project at the outset, so that it was other American news organisations, like, for example, the Miami Herald, that did participate. As I understand it, there now are efforts by The New York Times and The Washington Post to get access to some of the material to analyse it for the very reasons that you were talking about.

Senator WHISH-WILSON: Could you enlighten the committee as to why, perhaps, those US news organisations did not participate in the first place. I understand this is one of the biggest investigative journalism efforts in history.

Ms Wilkinson : I think it is purely an internal matter where they do not choose to collaborate with other media organisations, and this was an operation where everyone did have to agree to a set deadline and certain other confidentiality issues.

Senator WHISH-WILSON: It concerns me more broadly about the US stance on these issues, considering they are leading massive multilateral deals, like the Trans-Pacific Partnership Agreement in our area, which has lots of rules and regulations that we sign up to but does not seem to have anything on information sharing or increasing transparency around tax issues.

Ms Wilkinson : I guess I cannot comment on that.

Senator WHISH-WILSON: Take it as a comment. In terms of the ability and time it has taken to get here, can you tell the committee about the complexity of looking at things like beneficial ownership of these front companies and these trusts. If it is something you can do as a combined journalistic effort, how easy should it be for governments to do something similar?

Ms Wilkinson : I think it is extremely difficult to get to. One of the things that we found, even in the internal communications between the financial regulators in some of these tax havens, was that they were finding it difficult to get to. I know there has been more recent legislation, and I am sure the tax commissioner can update you on that, to try and force much more disclosure of beneficial ownership, but there were extremely strong measures taken by service providers not to reveal beneficial ownership. In the particular case I was looking at, the regulators got back to the Ukrainian service provider who was behind a whole lot of other service providers, and in the end they just nominated a lawyer in Moscow as the alleged beneficial owner, which you knew was not true. So I think that disguising beneficial ownership has been a huge issue, and one of the former tax officials we spoke to said getting, even in Australia, a working definition of true beneficial ownership is absolutely crucial.

Senator WHISH-WILSON: Did you get yourself a couple of Dobermans and a safe house while you were doing this?

Ms Wilkinson : I think we were more concerned for our Russian colleagues on that front.

Senator McALLISTER: Thanks, Ms Wilkinson. In your opening statement you made reference to a vast offshore network of leading banks, wealth advisers and layers of service providers. Could you elaborate on the role that you see banks playing in this system and what their interests are in concealing beneficial owners or minimising tax? Why is that in the interests of these financial institutions?

Ms Wilkinson : It is obviously a service that is important to their clients, and there were in the documents internal struggles even between Mossack Fonseca and the banks about beneficial ownership questions. The foreign banks in particular were very keen about establishing structures for clients without necessarily wanting to give up beneficial ownership details. I know that there has been progress on this issue because of, in fact, the US investigations, where various banks have been exposed on this. But my observation through seeing these documents is that the banks are still very slow to reform on this, especially when they are operating in offshore jurisdictions.

Senator McALLISTER: And so the banks are working on behalf of their clients.

Ms Wilkinson : Exactly.

Senator McALLISTER: And, in facilitating transactions on behalf of their clients, they are engaged either directly or indirectly with the creation of these entities.

Ms Wilkinson : Yes, in many cases using intermediate service providers that therefore put them at arm's length on the creation of a lot of these companies.

Senator McALLISTER: Moving to a separate question, in simple terms, what is in it for the jurisdictions that have established these tax havens?

Ms Wilkinson : I think it is incredibly important for those jurisdictions. This is certainly what we discovered when we were looking at places like the British Virgin Islands and Panama. A large amount of their national wealth comes from this. They fear that, without these financial industries which are attracted to the weak regulation in these countries and territories, their economies will collapse. So there is a very strong feeling there—in fact, a strong antagonism, especially to journalists, I think, who want to write and publish on these issues.

Senator McALLISTER: In terms of measures and multilateral efforts to improve oversight of these jurisdictions, have you uncovered any promising strategies? What do you perceive as the most promising strategies?

Ms Wilkinson : I do not know if I am qualified to talk about that, and I am sure the tax commissioner can fill you in much more expertly on that issue. I will say that a lot of us participating in the Panama papers project were stunned that, I think just weeks before publication, Panama was given a tick by the global financial authorities for improving its transparency. This came at a time, as you know, when the senior partner in Mossack Fonseca, Ramon Fonseca, was a senior adviser to the Panamanian President, and he, of course, has been forced to step aside from that position since this scandal broke.

Senator McALLISTER: Yes. Thank you.

Senator EDWARDS: I am just on the rather extensive ICIJ website here, just going through all the stories which have emanated. I can find the 'Donate' button, but do they publish their list of donors?

Ms Wilkinson : Yes, and in fact I can make it available to you. I thought I had it here. I probably do have it here somewhere, but I can certainly make it available to you. They did give it to us.

Senator EDWARDS: They have published it, or they have given it to you?

Ms Wilkinson : Yes, they have published it. I think it should be on the Panama Papers site but it is certainly on their website. It is a very big website so—

Senator EDWARDS: It is.

Ms Wilkinson : I can get you a link to it.

Senator EDWARDS: Thank you very much.

Senator SMITH: From the media reports we know that there were some hundreds of thousands of clients with Australian connections. As a result of that, we understand that 800 clients are under investigation from the ATO. In your evidence you noted that the documents revealed both legal and potentially illegal activity. Do you have a sense of proportionality? Do you have a sense, particularly in the Australian context, of what proportion might be legal and what proportion might be illegal activity?

Ms Wilkinson : I would say the overwhelming proportion would probably be legal. I think that one of the points that was made in the program, and has been made since by OECD members and others—in fact, even by President Obama in his press conference on this—is that it goes to the issue of whether the laws need to be tightened. I would imagine that especially for corporations that are listed on the stock exchange et cetera you would find that their activities would be considered absolutely legal.

Senator SMITH: Did I hear you correctly in your response, I think to Senator Ketter's question, that Australia's response is considered far better than other jurisdictions? And, if I did hear you correctly, what are some of the characteristics of Australia's response that others regard as being better than others?

Ms Wilkinson : Despite recent criticisms, I think that Australia's regulatory system is considered far better than jurisdictions like Panama or for that matter a number of countries in Latin America, in South-East Asia and other countries. This is especially because of the role that people like the Federal Police, the Federal Police task force and Austrac play. I think that no-one doubts from looking at this material—including I am sure the ATO—that much more needs to be done. Australia is not an island in terms of regulation, and I think, as the tax commissioner has said, it has to operate in the international world and work within the international fora.

Senator SMITH: In your opening statement you talked about some of the hundreds of Australian names in the files being convicted criminals and long-time targets of the joint ATO-AFP task force Project Wickenby. For Australian agencies some names would have been a surprise, but it does sound like you are—

Ms Wilkinson : Other names would not have been a surprise at all.

Senator SMITH: The Australian response could have been slightly ahead of what international journalistic organisations, like the one that you participate in, were actually discovering?

Ms Wilkinson : In some cases I am sure they were, yes.

Senator XENOPHON: The program named a number of well-known Australian companies including Wilson Security and the link with the Kwok brothers, who were convicted in Hong Kong—

Ms Wilkinson : One of them was convicted.

Senator XENOPHON: and who are no longer nominally involved in the company. In terms of process, this got to air on 4 April. What opportunity did you give them to comment on your allegations in respect of those companies?

Ms Wilkinson : I approached the company several weeks before publication.

Senator XENOPHON: So they had plenty of time to respond?

Ms Wilkinson : Absolutely, yes, to the specific issues about ownership of the company and the ultimate holding company behind Wilson Security.

Senator XENOPHON: And in terms of other companies that were named?

Ms Wilkinson : They were also approached several weeks before publication.

Senator XENOPHON: And they were, on the whole, less than forthcoming?

Ms Wilkinson : The CKI companies were less than forthcoming. BHP did engage extensively on a background basis, but declined to be interviewed for the program.

Senator WHISH-WILSON: I suppose this is the last question. Tax justice more broadly seems to be an obvious concept to lots of people. Why do you think this parallel universe—this opaque structure—exists? Why haven't governments actually done something about it?

Ms Wilkinson : That is extremely hard for me to say, Senator. I can only quote a long-time US congressional senate investigator, who we interviewed extensively for the program and who has looked at this issue over probably about 30 years. His view was that the corporate use of the offshore system allows the opaqueness and its exploitation for criminal purposes to keep going, and that in order for changes to be made corporations have to make some sacrifices on transparency in order to create a system that is more transparent for everyone.

Senator WHISH-WILSON: Do you expect David Cameron's international corruption meeting on 12 May to take this issue seriously now that you and your group have released these papers?

Ms Wilkinson : Certainly. I think Thabo Mbeki has sort of recently put out a statement on this on the back of the OECD meeting and this upcoming meeting because the project found quite extremely disturbing places in the African continent of both cronyism and corruption in the Panama papers. From the point of view of countries like South Africa and Indonesia, they will be very keen to see some change around this.

Senator LAMBIE: First of all, I want to thank you, your colleagues and Four Corners. I tell you what, you have shown a lot of courage. It has been a long time coming. It is nice to be able to see some of these big boys finally being held accountable. The first question I have is: do you have any view on what sort of changes to the law would deal with the legal means used to move profits offshore?

Ms Wilkinson : I think that is a really important question. I do not pretend to have the knowledge or the expertise to answer that, but it is certainly a question we were asking ourselves. I will be extremely interested to listen to yours and others' questioning of the ATO commissioner today to find out what new laws they think they do need.

Senator LAMBIE: Do you believe more Australians and companies operating in Australia could be revealed in the papers?

Ms Wilkinson : Yes, I do believe that with further investigation and inquiry they will.

CHAIR: Finally, I have a follow-up question from Senator McAllister's line of questioning. The involvement of Australian banks and financial services in this exercise with Mossack Fonseca—do you see evidence of that?

Ms Wilkinson : There were certainly some banks involved. I think part of the problem that we had was that the material on the Australian banks was very fragmented and it was difficult to discover the documentation that we needed to find out exactly what was going on. I think that it will be interesting to see whether the Australian Taxation Office has gotten further with that.

CHAIR: Thank you very much again, Ms Wilkinson.