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Dastyari, Sen Sam
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Economics Legislation Committee
(Senate-Wednesday, 21 October 2015)
Department of the Treasury
Mr J Fraser
Senator DI NATALE
Mr J Fraser
Australian Taxation Office
Department of the Treasury
Australian Securities and Investments Commission
Department of the Treasury
Ms J Wilkinson
Foreign Investment Review Board
Australian Competition and Consumer Commission
Australian Competition and Consumer Commission
Ms Melinda McDonald
Australian Bureau of Statistics
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Department of the Treasury
Department of the Treasury
CHAIR: Welcome, Mr Jordan and Mr Heferen and your groups. I have been made aware that you are not particularly wanting to make any comments, so we will go straight to questions.
Senator DASTYARI: I want to note again the incredible work of Mr Jordan and the incredible work he has been doing with the Senate Economics References Committee. Mr Jordan, not only you but your entire team have just been so forthcoming and so helpful. I just want to say how appreciated it is. The feedback we have been given, not just by us but from other professional associations and bodies that are engaging with you on this, speaks incredibly highly. The fact that you refuse to name companies for me is something that I will have to live with.
CHAIR: I sense a 'but' coming.
Senator DASTYARI: No, there is no 'but'. I am very wary of the fact that the government has recently introduced a bill to combat multinational tax evasion and profit shifting by targeting firms which artificially avoid a permanent establishment. I note that there are some Senate rules about asking specifically about legislation, so I will not be asking you specifically about the legislation, but I will be asking you more broadly. Explain to me now—because so much has happened since we have last spoken—the interaction between the OECD process and the recommendations that have come out from that with the legislation that had already been drafted and introduced into the parliament by the previous Treasurer, and how these two measures are going to be able to work together when we start from a broader discussion about tax policy.
Mr Heferen : What the bill that has been introduced attempts to do, as far as possible, is to pick up one of the recommendations in the OECD 15-point action plan. There is one element dealing with firms that would operate in the country and would not have a permanent establishment there—that is, they would not have an entity that would be subject to tax in that jurisdiction. In the process that you are chairing, Senator, on the corporate tax avoidance, with a couple of the multinational organisations that appeared before you, that planning vehicle was discussed.
Essentially, post the United Kingdom introducing their diverted profits tax, it is a matter of public record that the then Treasurer was very keen to make sure that Australia was going to be a leader in setting an example to his counterparts in other countries about what needed to be done to crack down on the issue of multinational tax avoidance. The United Kingdom introduced their diverted profits tax, which has an element of dealing with what the MAAL legislation attempts to do—that is, a company that does substantive business, in this case, in Australia, but actually purports not to, so not having a permanent establishment, and the Australian business who receives the service actually pays a bill overseas. The diverted profits tax dealt with that as well as transfer pricing, so that is where they actually have a presence in Australia but then pay very little tax on the basis that a lot of the costs they incur, particularly for the use of intangibles, would go back to their parent or subsidiary and end up in a low-tax jurisdiction.
The government, through the budget process, decided to take the route of dealing with the absence of the permanent establishment issue, and that was the one where, in your committee, both Microsoft and Google discussed how they arrange their affairs—as a matter of public record—and not deal with the transfer pricing issue. We were quite confident that would be the way forward that would deal with most pernicious forms of tax avoidance but at the same time make sure that what Australian put in place would be consistent with action item 7 of the 15 point action plan, dealing with the absence of a permanent establishment. We had to actually provide the advice and do the drafting and get draft legislation introduced before the OECD had actually provided its report. But, as you are no doubt aware, we are part of a working group. We were fairly confident of where they would end up but were not certain, but on the balance of making sure that, firstly, Australia was leading the way in dealing with the most obvious forms of tax avoidance, it was a balance that the government at the time thought it was important to do; hence the MAAL legislation being introduced.
What you can do is then look at action item 7, look at the MAAL legislation—not you personally, Senator, but I am sure others could do that—and see that they are both targeting the same thing. The MAAL stops short of where the OECD recommends to go, but it is also accompanied with large penalties. In terms of a tool to actually deter the most obvious forms of avoidance, we think it would be quite effective.
Senator DASTYARI: You have touched on what I was going to ask, Mr Heferen. I have to say the legislation that was introduced by the former Treasurer was a substantial piece of legislation. I think that it is somewhat unfortunate that, in the way that events worked, the timing was in the same week as the change in government, so perhaps the enormity of what was being proposed got overshadowed, in part, because of that. That is just a reality of politics. But I think there were some very good measures in it. Following that, there has obviously been the release of the OECD process. Is there an anticipation that we will get through the process of implementing these waves of reforms that have been proposed? There may be an amendment process—I am sure parties like mine may have amendments in the Senate; that is a discussion that we will have in the chamber. Following that there will be another round or another tranche of legislation. Is that what Treasury is planning for?
Mr Heferen : At the end of the day these are matters for the government, but the process that we would follow is that the action item dealing with a permanent establishment is to be implemented through the multilateral instrument, action item 15—the one at the end that says: 'There is a set of these 14 action items that we can deal with through domestic law. There is also a set that needs to be dealt with through treaties with other countries.' There are 30,000 or 40,000 tax treaties—it might not be that many, but there are a large number—that exist between all the countries who have tax treaties. The idea of each one being renegotiated to put in place these new elements would be nonsensical.
Senator DASTYARI: Farcical, yes.
Mr Heferen : What the OECD has proposed—and the G20 has agreed—is the OECD work to develop a multilateral instrument, that is almost like a codicil that goes over the top of all treaties to say, 'Those ones need to be put in place by treaty; here is the new arrangement.' That is where action item 6 would be dealt with—the one dealing with PE. We would be looking for that process to then—
Senator DASTYARI: That would have a legislative component to it, obviously?
Mr Heferen : That is right. The countries will then have to endorse the multilateral instrument. The multilateral instrument will then take effect over all treaties. That is dealing with the PE issue—a firm having an absence of a permanent establishment and therefore a taxing entity in the country.
The other set deals with transfer pricing. At the moment the transfer pricing rules are pretty strong. They were updated a few years ago but the OECD has come out with three action items specifically on transfer pricing to encourage countries to move to best practice. We would be looking at those very closely to say, 'Do Australia's current transfer pricing laws actually meet the standards which the OECD is requesting of its members in other countries?' I think it is fair to say that we are still working through that. I want to work through it with counterparts from other countries as well to make sure that we have a level alignment, an important thing, so that countries are moving at the same time.
Senator DASTYARI: Is the anticipation next year or the year after?
Mr Heferen : To the extent that transfer pricing rules would be changed, the program for that is a matter for the government. If we had a view working in consultation with colleagues at the tax office that by keeping the rules as they are and not moving quickly to what the OECD has suggested, if we had a view that that would in fact be disadvantageous for Australia's anti-avoidance mechanisms, we would, as you would expect, be saying that quick action needs to be taken. My suspicion is that what we have is pretty close to what best practice is and so it may be that the actual changes may be minimal, if any. It may be that what we have are as tight as can be, but it is fair to say that that is an issue we need to turn our minds to.
Senator DASTYARI: In terms of the recent legislation which has been introduced to the parliament, the explanatory memorandum to the final bill mentions 1,000 companies that may be captured by it and 100 that are likely to have to restructure their tax affairs. I note that prior to the introduction of the bill, the Treasurer spoke about 30 companies. Can you explain the discrepancy between the number of companies.
Mr Heferen : The quickest way of looking at that is that the original exposure draft had a requirement in it that if the company has a billion dollar turnover, that a related company does substantial business in Australia but the billing goes to an offshore subsidiary and the money ends up in a no- or low-tax jurisdiction. The idea there was based on the arrangements where typically the money would, in Australia's case, be channelled by the company through Singapore—in the old days it used to be through Ireland and the Netherlands—and then to a no- or low-tax jurisdiction somewhere else in the world. Through the consultation process, it became apparent that the expression 'no or low tax' caused a lot of concern—that is, people were saying, 'What if it's just a straightforward business being done in Singapore and Singapore has a tax rate of 18 per cent, would that be low tax?' Certainly compared to 30 per cent it is low but it did not really get at the issue of putting it into basically a zero-tax country. So that was dropped. Because that was dropped, in the bill that was introduced there is no or law tax; it just remains the fact that money is sent offshore and there is a purpose to avoid Australian tax. That meant that the companies that were channelling through to effectively a zero or very low tax jurisdiction—that was where the 30 came from. Now it is a question of tax avoidance it broadens the scope. The 80 or the 100 that are sometimes bandied around are the ones that conceptually would be in there but then there is still a question of whether they are doing it because of tax avoidance. Obviously that is something that the ATO would have to be satisfied of.
Senator DASTYARI: On these two things, I note that the OECD Tax Director Pascal Saint-Amans indicated that in his view Australia's multinational tax pool had been 'superseded by the release of OECD's best action plan'. That is not the case, is it?
Mr Heferen : No.
Senator DASTYARI: That is his view and he is entitled to his view over in Europe.
Senator Cormann: Our view is that our legislation essentially complements the very important work that was done by the OECD when it comes to—
Senator DASTYARI: That was my understanding, too. I just wanted to check that that was right. So it is fair to say then, Mr Jordan, that you expect that 1,000 figure is the companies that will be affected by the bill. You would have helped provide the advice. I assume you have been involved in the preparation of this bill. The Treasury takes carriage of it, but you have been part of the process, I would assume.
Mr Jordan : Yes. My understanding is that the 1,000 companies are the total population of foreign, non-resident companies who have a turnover greater than $1 billion and have some operation here in Australia. The vast majority of those would simply have a look at this and say: 'That legislation has no impact. I might just sell the product directly into Australia. I might have a subsidiary that I simply sell product to and that sells it to Australian customers. I might have a subsidiary that has a manufacturing plant here that creates product and sells.' So, for the vast majority of that total population, it would be a very straightforward task to work out that the legislation would have no impact.
Mr Heferen from Treasury is quite correct in stating that the increase from 30 to 80 was because of that element of the profit from the economic activity in Australia to end up in a no- or low-tax jurisdiction being dropped. So the population of companies that we thought might well be within the ambit increased from 30 to 80. They were ones that demonstrated the attributes. Just to recap, you might well have a sales force here that is a subsidiary, employs people, leases premises or offices, does advertising, and goes out dealing with customers and negotiating contracts with customers. But, once that contract is actually concluded, the sale itself—as you would know from your other committee—is booked to a foreign affiliated company, and the operations here in Australia simply get reimbursed for the salaries, the rent and the on-costs of the sales force. The argument is that the sales force itself is not a permanent establishment and that there is little value—this is what we would challenge strongly—created here in Australia by the activities of the sales force. That is something that we take issue with even under the existing law, but that is a separate issue here. That is why this population went from around 30 to around 80. As Mr Heferen also indicated, it might not be that all of those 80 are directly impacted, but they would certainly need to spend more time analysing their situation, and we would certainly—I presume in our compliance area—at least be having discussions with those 80 to work out the purpose of them having a sales force and booking the sales overseas and the nature of those activities.
Senator DASTYARI: How will the existing transfer pricing provisions or the controlled foreign company rules interact with the new law? Will the new law act as a measure of last resort, with other tax provisions taking precedence? Is it the safety net at the bottom?
Mr Jordan : Part IVA is often referred to as a provision of last resort. You would seek to apply other provisions first before you would ever go to part IVA. The MAAL, the multinational anti-avoidance legislation, is an amendment to part IVA. So generally we would not necessarily have that as the first provision that we would bring out.
Senator DASTYARI: So it is the net to catch them.
Mr Jordan : It is a safety net provision. It is not quite so easy to say whether it is MAAL or transfer pricing, because they are not even booking the sale here. It is not like the sale is booked here, like some of the other ones that appeared before your other committee that said, 'We book the sales here and then they back out.'
Senator DASTYARI: The transfer pricing.
Mr Jordan : By transfer pricing for royalties for intellectual property or cost of goods. You saw in the pharmaceutical industry some of the pricing aspects there. That is the transfer pricing part. These ones do not even have the sale here to get into transfer pricing. Transfer pricing could well apply to the reimbursement of their costs. Remember I just said that they would have their sales force here, and the foreign affiliate would pay the cost plus a margin. We often have a dispute with them as to the amount of the margin, because they say there is little value; there is a small margin of maybe five per cent—cost plus five per cent or something like that; sometimes it goes up to cost plus eight per cent—and we say that that is often a very small margin for what I believe and we believe is a very valuable activity: a sales activity. Call me old-fashioned, but it does not matter how good the intellectual property is—if you do not sell it to anyone, it is not that valuable to you.
Senator DASTYARI: I understand, and, again, as to the bits of the legislation as I have seen it, I think there are some really, really good measures in there and it is actually a really comprehensive piece of legislation. Will there be amendments or are there people like me who would perhaps argue that we need to go further? That is a different matter, but it is quite substantial. As to the scope of the problem: I know you have said repeatedly, Mr Jordan, that we need to clarify and understand that we are talking about a small group of actors within this space that have perhaps played at, using my language, the sharper end, where they have done things that are often within the law, sometimes robustly worthy of being tested, but questionable in terms of where we want to go with tax policy—hence, from time to time, we update our laws. As to the way in which companies book their sales, you are right: there are two; there is the booking it here and then transfer-pricing back, and then there is the booking it straight overseas. I can give you the examples; I am sure you are well aware of them. There is evidence on the public record. Google came and confirmed that Google ads are actually booked straight out of Singapore; they are not even booked in Australia. I know you know of many other cases, but that is one that is already on the public record. Is this a growing problem?
Mr Jordan : It is a growing problem because more of our consumption as a nation will be and is occurring through the digital delivery of a service or of an activity, whether that is advertising or the accessing of entertainment products—books and all sorts of things of that nature. It is a growing problem not just in the digital delivery but also in that whole notion of procurement hubs and marketing hubs as well, which, again, are a different feature from what we are talking about. That is why this legislation is quite important for the future because, just like you saw, the diverted profits tax in the UK was at a rate of 25 per cent; the UK's rate is either at or going to 20 per cent. So some companies—and Amazon, I read in the media, came forward, as I understand it, and said, 'We will now restructure our operations to book our UK sales in our UK subsidiary and pay tax at 20 per cent,' because they did not want to carry the risk of having an extra five per cent. I think Mr Heferen mentioned that there are some significant penalties attached to the MAL provisions—up to 100 per cent. So I would suspect we will see—and we are already seeing—some approaches to us to work through how restructures might occur, because similarly they do not want to see the risk of effectively paying 60 per cent tax rather than 30 per cent tax here in Australia.
Senator DASTYARI: So what you are saying is: the spotlight being put on the issue, in addition to the hanging legislation or legislative response, is already seeing tax revenue changes in behaviour?
Mr Jordan : There is potential behavioural change, because I believe that with the focus across the OECD, and with the action plans and with the G20's endorsement thereof, and with the likely domestic adoption of a number of those action items by many countries, in combination with the UK taking an approach with their diverted profits and Australia taking an approach with the bill—the MAL—that some companies might well be thinking, 'We've had a good run; this is a higher risk; therefore, we will allow profits to lie where the economic activity that gave rise to those profits was generated and pay tax there.' It does, though, focus us back into transfer pricing, because as soon as these companies that are currently booking sales offshore book them in their subsidiary here in Australia, the question will then become: what are they paying in expenses for the intellectual property et cetera? However, we have really strong laws there in transfer pricing, and I do not see right now that this will be subject to discussion—obviously a great need to extend those at all after the OECD action items. We would like to have those tested in the court at some point, because they are not tested. They are new laws that do give us additional powers, and in some cases powers of reconstruction that we never had before. So I see that as being an important complement.
When we talk about the MAL being superseded by the OECD rules, well, I do not agree with that, because whatever the rules are, whatever the OECD action item rules that become adopted are, this is a good little safety net to have sitting there into the future. People are already asking: will you see mark 2 of aggressive tax planning? Will they look at the OECD rules and ask: how can we engineer structures that get around the actual operation and the intent of these rules? So I think the MAL is not a short-lived thing. It could well be a useful safety net provision to avoid any of these newly engineered mark 2 structures.
Senator DASTYARI: Related to that, you talk about digital companies and how people book Uber. I know there is currently a matter before the courts, isn't there?
Mr Jordan : There is a matter around the GST and the requirement to have those drivers who provide tax related travel, under the definition of the GST, being required to register. That is the only matter in the court. But I think it has been publicised that they fit into a category of having a sales force here in Australia, like some of those other companies.
Senator DASTYARI: With Uber, it is booked overseas, isn't it?
Mr Jordan : I have to start to think of what is in the public domain or not.
Senator Cormann: The service is provided here—it is accessed here.
Senator DASTYARI: So it is booked here?
Senator Cormann: The service is provided here.
Senator DASTYARI: If I get into an Uber I am obviously getting the service here.
Mr Jordan : I am not quite sure what their submission to your committee said—and it has been published on the web site—so you would probably know more about that than I would. So it is probably better that I do not comment on the actuality. There is a number of categories. There is UberBLACK, which is a limousine driver. They are already registered for GST—they charge GST on their Uber fares. There is UberTAXI, who are taxi drivers who switch off their taxi and switch on Uber. They are already registered for GST and charge GST. Then there is UberX, which is the part-time driver using their own car. They are the ones impacted particularly by our guidance that we believe, under the GST law, they are providing taxi related travel and therefore they need to register, regardless of the $75,000 threshold. That has been a feature of the GST law ever since it came in on 1 July 2000.
Senator DASTYARI: That was an ATO ruling that you had independently and then you advised government, or did not advise government, or had no interaction with government?
Mr Jordan : We did a ruling on the whole sharing economy, or collaborative consumption, as it is sometimes referred to, so it was not a ruling just on Uber. It covered things like Airbnb, Taskmaster and all sorts of things that handy-people can get onto and get jobs. There are all sorts of things. So we gave guidance across a number of these involving sharing economy or collaborative consumption. I am not sure of the timing, but somewhere along the line, like we do with every ruling, we would have sent a minute up saying that we are about to publish this. I know there was certain public commentary made by certain spokespeople for Uber, which I thought was quite misleading, and I said so at the time. They called into question our integrity and the consultation process, which I thought was quite astounding to do.
Senator DASTYARI: In terms of consultation, this is coming from people who disagree with you on parts of public policy. There is no doubt that the consultation process and the transparency of the ATO are beyond reproach.
CHAIR: That is fairly universal.
Senator WILLIAMS: There are reported to be about 15,000 with Uber. Has the ATO identified how many there actually are?
Mr Jordan : I will pass over to Mr Neil Olesen, the Second Commissioner responsible for compliance, but I do know that there was a significant spike in the number of ABN registrations for transport related activities that we suspect. It was just before that date—I think it was 1 August. Leading up to that there was a substantive spike in ABN registrations, which you need to do to be able to collect and pay GST.
Senator WILLIAMS: Mr Olesen might be able to give us an update.
Mr Olesen : The short answer is no—not yet. We are in the process of accessing some of the data that will give us the ability to identify who the drivers are. When we have that data we will be able to do the analysis that will confirm what the numbers are.
Senator WILLIAMS: Uber has taken the issue to court. I was reading this in an article 'Uber takes legal action over meaning of taxi in GST fight' in The Sydney Morning Herald. You made it quite clear where you stand, Mr Jordan. You just clarified that with Senator Dastyari. Does the ATO have any estimate of the shortfall in GST collected from Uber drivers who claim they do not have to pay? Do you have any idea how much you are missing out on?
Mr Olesen : We do not have a specific estimate of what we might collect by way of GST, for a number of reasons. One is that we do not have an estimate of the actual number of drivers. The related question about trying to estimate the GST that might be collected here is: what is the transfer from existing taxi travel into other kinds of taxi travel—
Senator DASTYARI: What they have said is that Uber Australia Pty Ltd is a wholly owned subsidiary of Uber International Holding BV, which is based in the Netherlands. Uber BV in turn indirectly is a wholly owned subsidiary of Uber Technologies.
Senator WILLIAMS: Based in the Netherlands?
Senator DASTYARI: For tax I think.
Senator WILLIAMS: You certainly have had more people register since you said in this report on 7 October: 'the ATO basically tells Uber drivers to register or we are coming after you'.
Mr Olesen : We have been clear about how we think the law applies in these circumstances. 'Coming after you' is a fairly colourful phrase.
Senator WILLIAMS: I am sure you did not set the headline!
Mr Olesen : Our emphasis is in trying to make sure that the drivers for Uber and other sharing activities are aware of what their obligations are under the law. So, in seeking to identify who they are, our first course of action will be to get in touch with them and help them to understand what their obligations are.
Mr Jordan : I think there was a recent article in The Australian by Ben Butler in which some freedom of information material was released. It was stated there that we have tried to work with Uber in a very cooperative way. We understand some drivers come into the system and leave within a month—they do not particularly want to keep doing it. We said we would happily work with them to get informed of this and facilitate their entry or exit from ABN and GST and all that sort of thing. I think the headline read, 'Tax man's GST deal rebuffed by Uber'. So we have been trying to facilitate this as easily as possible—to do bulk registrations, to issue the ABNs to the people. But I suppose it takes two sides to any transaction to facilitate easy things to happen. Certainly, we have been willing on our side to make things as easy as possible for the Uber drivers to comply with the obligations we believe exist.
Senator WILLIAMS: Clearly, they have a distinct advantage over taxis. For example, the third-party insurance premium of a taxi would be a hell of a lot higher than just the basis car. We can raise that with the ACCC this afternoon.
Mr Jordan : We have made it quite clear that our position is not impacted by any of the state regulatory or licensing. We are purely looking at the definition under the GST law. We have a position on that and we think it is pretty solid.
Senator WILLIAMS: Going to the issue of the ATO winding up companies. September's numbers were second only to the record of 582 wind-ups filed by the ATO in May, and far exceeds the 92 per month long-term average. September's numbers were 568, I think. It appears the ATO has been very proactive in winding up SMEs. The number increased enormously, looking at May and September.
Mr Jordan : We have changed some of the parameters of the timing in which we initiate that action. We still are the party that initiates it in a minority of cases.
Senator WILLIAMS: Why did you change that? It appears to me you have been far more proactive in selling companies up over the last six months. Have you had a direction from government to do that?
Mr Jordan : No—
Senator WILLIAMS: You run this independently of government, of course?
Mr Jordan : Yes, we run absolutely independently of government. But in working with the industry and with receivers and liquidators it became evident that we had a very high threshold—something like $300,000-plus for a corporate—
Senator WILLIAMS: And you have brought that back to $30,000, haven't you?
Mr Jordan : At this stage I might call on Second Commissioner Leeper, who is anxious to say something.
Mr Leeper : It is certainly not true to say that we apply thresholds, and it is certainly not true to say that we are the majority of wind-up actions. In the year to date—the year ending 31 July, because the figures take a while to stabilise—the ATO has initiated just under 20 per cent of wind-ups, and we are a creditor or a party in a further 44 per cent. We are not the majority instigator of wind-up activity. That said, our analysis of the dynamics of the debt sector in the small business sector indicates that we have been a bit too cautious and a bit too passive in letting small businesses get into a very, very deep hole before we have taken action. So one of the things we have been doing is looking to see whether there are signs of insolvency. If there are signs there we believe the appropriate action is to commence wind-up action where appropriate.
I will also point you to the inspector-general's recent report on debt practices in the ATO, where we were criticised for not taking timely enough action on wind-ups and bankruptcies, with the effect that the companies that are in difficulties spread that difficulty to their creditors and just made the problem worse across the sector. So we still take a very conservative approach. We are much less likely to commence wind-up activity than any commercial party in that marketplace.
Senator WILLIAMS: Have you heard of Jamieson Louttit & Associates?
Mr Leeper : Not directly.
Senator WILLIAMS: I have an email here in which they say, 'It is like a shotgun has gone off. It seems like carnage is hitting small business.' They go on to say—but I think this is a bit exaggerated—'My thought is that the government is just short of money. To me it is as simple as that.' Jamieson says 'the wind-up application threshold was $300,000 in the past but has now dropped to $30,000 and the government is not as forgiving about entering into arrangements with small business.' You just referred to the point about it going from $300,000 down to $30,000 as not being true.
Mr Leeper : Can I make those figures very clear. Last year I asked for some data to be pulled. It will take me a few seconds to set this out. What was the average debt owed to the tax office at the point at which we started wind-up action? It was over $300,000. What was the average debt owed to the tax office—just us—when the commercial marketplace started that action? It was $30,000-odd. So we were giving them a much greater piece of rope to get themselves into grief with. It is not a threshold. That was just data about the average amount of debt at the point at which we said we needed to act. That will have come down. I think the last figures I saw said that the debts are on average well over $200,000 before we started any wind-up action. We are not being as aggressive as the commercial marketplace but we have tightened our stance to a degree.
Mr Jordan : I should say that wind-ups are very much a last resort situation. This is at the end of the road. We work with small businesses—
Senator WILLIAMS: Especially if liquidators get in there and get their share of the cream, if there is any cream.
Mr Jordan : Often there is a liquidator or a receiver appointed before we have taken any official action in that regard, because we are trying to work with the business to have a reasonable payment plan. Often it is only after the commitments made under the second, third or fourth payment plan have not been met that we actually take any stronger actions. I sometimes hear that we are clamping down on small business and not being reasonable. Our view is that we should work with small business where we think they have some viability to get out of their problems. We use some fairly sophisticated tools now for business viability assessment. We now publish this information on our website for small businesses to actually enter their own data and see where they sit on the scale of industries they are in. I think that is a very useful service we can do for small business. We are really working closely with small business across a range of activities. Debt is just one of the activities that is unfortunate. But, as Mr Leeper said, where there are debts to us there are debts to employees, to superannuation, to suppliers—
Senator WILLIAMS: You have made your point, Mr Jordan.
Mr Jordan : It is a last resort matter.
CHAIR: We will suspend for lunch.
Proceedings suspended from 13:01 to 13 : 46
CHAIR: I welcome back the Australian Taxation Office, the Department of Treasury Revenue Group and Cabinet Secretary Senator The Hon. Arthur Sinodinos AO.
Senator Sinodinos: Good to see you, Mr Chairman, and you, Senator Dastyari.
Senator DASTYARI: Mr Jordan, just going back to the previous discussion we were having regarding Uber, I note that Uber has made some correspondence to government, and, I think, elsewhere regarding the consultation process leading into the decision that was made by the Australian Taxation Office regarding the GST treatment of things collected. I will just read this from them: 'Under freedom of information, documents reveal the Australian Taxi Industry Association was provided with advance copies of ATO's guidance notes and information and that they were consulted and Uber wasn't.' Do you want to just comment on that?
Mr Jordan : I do not know the particular correspondence that has gone to some members of parliament, but I am not surprised we do not have a copy, because, even one that was sent to me and leaked to seven journalists, as I understand it, and published in various newspaper articles—some months later I still had not actually received that letter, notwithstanding a number of journalists had it. I think I eventually got it three or four months after it was dated, which was a curious situation. I find the statements of Uber quite odd, because we both know what actually happened. We had entered into consultations with them some six or seven months prior to issuing guidance. We had worked with them and their advisers over many meetings, many phone hook-ups, to try to come to a mutually agreeable position. We could not do that. We provided them with our final draft guidance that we were about to publish and we could not get any meaningful cooperation around registration to facilitate their UberX drivers to register for ABN. As is normal process, because this did cover Airbnb and other sharing-economy, collaborative-consumption-type entities, we provided a confidential draft to that to the taxi industry, as well as, I understand, the hotel industry, accommodation associations et cetera—normal process to say: 'Here is something that we will be releasing on this particular date. This is for your information and we would like you to keep that confidential until the release date.' This then got transferred into public commentary around what was said in appropriate consultation. It was somehow stated—
Senator DASTYARI: To clarify, I believe the point from Uber, and you are right, was not that they were not consulted as part of the process. Their point was that bodies that should not have been consulted, namely the ATIA, was consulted.
Mr Jordan : As we do with all rulings that affect industries, we release it to the bodies so that they are aware of what we are doing where there might be some impact on their industry. It was, I think, quite an odd situation to publicly say things that we knew were not correct. I tried to correct that record, in some respects, by making a commentary that I was quite surprised that they were saying things that we knew were not correct.
Senator DASTYARI: On that, I note the Uber submission to the parliamentary inquiry. I know in the past you have made comments on submissions in which other people have commented on their own tax affairs. The point Uber make—and they state quite clearly—is that Uber Australia complies with all relevant Australian tax obligations. I note that when similar claims were made by BHP, Rio Tinto and others, you pointed out whether or not some of those claims were under review. Is that a claim that you are looking at?
Mr Jordan : I would prefer not to get into the specifics of individual companies, but we do take a risk-based approach when we look at the companies that we should audit and review. Part of assessing a risk is the transparency of the company. If you were to have a company that was not transparent with us, had not cooperated particularly well with us and, in fact, had made publicly incorrect statements, that could impact on our view of them. If they are making incorrect statements publicly that we know are incorrect, based on other material available to us, where are they making other incorrect statements? How far do they take that sort of attitude or approach in their dealings with the ATO?
Senator DASTYARI: Are they being audited?
Mr Jordan : I think you just asked that question, and I think I said I would prefer not to talk about that, but we take—
Senator DASTYARI: But I thought I would ask it again.
Mr Jordan : a risk-based approach.
Senator DASTYARI: I have realised that, if I keep asking the same question, sometimes people give me more than they mean to!
CHAIR: Behave yourself!
Senator DASTYARI: Let me word it slightly differently. Are there audits, reviews or investigations currently underway looking at what you referred to as sharing economy companies. There is a group of them; there is a list of 50 companies, and some of them are bigger names than others. Are there reviews underway into any of them?
Mr Jordan : If you leave out the phrase 'sharing economy' but ask if there are reviews or audits of those 80 companies that we talked about earlier that are impacted by the MAL, the answer to that is 'yes'.
Senator DASTYARI: Would the type of structure seen by sharing economy-type companies fall within the structures of those 80 sharing economy companies?
Mr Jordan : Some of those are typical to that. In their own submission to your committee, under their corporate structure heading, they say:
Uber Australia provides certain support services—such as local marketing promotions to potential riders and drivers … Uber BV pays Uber Australia for the performance of those services.
Senator DASTYARI: I can check this, but I assume Uber BV is the Norwegian parent company.
Mr Jordan : It is Dutch. I mentioned earlier that that is the typical sort of scenario about the sales force being here, not providing much value and being the type of activity reimbursed for its costs plus a small margin. On the information that they provided to you, which I understand is publicly available on the website, that would look like a similar situation.
Senator DASTYARI: I think we have covered that issue quite well.
Senator BUSHBY: My questions are not so much about how technology is being used to disrupt traditional industries but more how technology might be applied to streamline the work that you do and the compliance burden of taxpayers. I understand that there are submissions that have been received by the ATO and Treasury, and probably other arms of government, in relation to one such proposal. I am interested in that specifically but also, more broadly, what you might be looking at in that regard. But the proposal that has been raised that I am aware of is that business activity statements could basically be done away with by the relationship with banks and by using accounts, and the small business, using the yet-to-be-developed platform, could possibly just, as they bank it, give you all the information you need and pay their GST as they go. Are you aware of that proposal?
Mr Jordan : There are a number of proposals floating around that are future oriented. One of those is a thing like a point-of-sale type of arrangement so that, if you are making a sale and that sale directs certain money to your bank account directly from the person's credit card, is it feasible to look at a calculation of GST there and then and a remittance of the GST so that that takes out part of your reporting obligation because it happens automatically? Another way is that we are looking at how we can tap into natural systems, in other words, systems that already exist for your normal business purpose, not for any taxation arrangement. Part of that might be if a business deposits all their cash takings in their account, runs all the credit card receipts through a particular account and only pays outgoings from that account. With the approval of the business, could we have that information fed to us so that we could look at their actual transactions on a quarterly basis, calculate the relevant BAS amounts for them, notify the business and they say, 'Yes, I'm willing to accept that,' and pay? So it is really around how to reduce the level of compliance by tapping into natural systems, as they are referred to, and using the greater technology that is out there in the marketplace, with software providers building some of these requirements into the normal accounting function of the business.
Senator BUSHBY: The first bit that you were talking about, which is the BAS, was what I was aware of, where they put it into a particular account and it potentially pays their GST. But your second comment that you went on to was talking about related but similar approaches. That highlights that you, personally, have considered these things. What is the ATO actually doing?
Mr Jordan : We are standing back and saying, 'How can we provide a better service to small business and alleviate some of the administrative functions?' Another proposal, because some of these are complementary or alternative, is this standard business reporting. There is software being developed that hopefully will be available at the end of this financial year where people can use software that defines terms in a similar way—so you do not have 20 definitions of 'salary' floating around—and if people use that type of software, either through their accountants or directly, their software can talk to our software and we can extract the relevant information, calculate quarterly instalments based on actuals and notify the small business of the quarterly payment, and at the end of the year we can actually calculate their tax return for them. So that is another way, but that is dependent on the software providers of accounting packages developing this standard business reporting approach, which is becoming more attractive to people but still has quite a small take-up rate.
Senator BUSHBY: My question goes a bit further than that though. You are obviously aware of different possibilities. What is the ATO doing to progress those? If somebody comes to you with the proposal that I was aware of, what does the ATO do? Do they say, 'Thanks very much for letting us know,' and then put it to the side? Do you have a working group? Do you have resources that are devoted in the ATO to examining these types of proposals to see whether they could work? What resources do you have attributed to that?
Mr Olesen : We have been in conversation with a range of stakeholders that would be involved in that kind of thinking: software developers, the banking industry, people involved with the creation of the new payments platform that has been put in place. In those conversations we have talked about some of the possible future scenarios that could play out—with the right settings, with the rights standards, with us providing our services in the right way—that would allow partners like software developers, say, to build into their platforms or the banks to put into their platforms newer ways of doing things than are currently possible. It is an active piece of thinking. We are just now working through conversations with the DTO and with other players in the space to map out a path forward in how we might be able to progress that thinking in. Including, in particular, if there is a straight question here about precisely our role—to the extent that those mechanisms can help with businesses meeting their compliance obligations with tax with the superannuation system—is for us to make sure that we can make services available that integrate what we need from people. That is our particular role. There are some broader questions in there about setting standards that might allow software to integrate with the banking system and those kinds of things—which are a bit bigger than just the tax office's ordinary role. We will work through with players like the Digital Transformation Office and other players in government about exactly how that conversation is taken forward.
Mr Leeper : We are in discussion with the National Online Retailers Association because, again, there is a slight risk of differential standards being set up for the exchange of financial information around invoicing. There is a potential and very significant application of standard business reporting in the electronic invoicing space across the financial sector. We are not driving that. We are a party in those discussions. From what we can see at the present time, the savings to the economy there could be profound. All of these things that we have spoken about are based on the simple proposition that the vast majority of taxpayers are trying to pay their tax on time. It is our job to make it as simple and as convenient as possible. The technology comes in behind that, but it is just around that simple service proposition. How do we make it really simple for you to comply with your tax obligations?
Senator BUSHBY: The reason why am asking is that examples of Uber, Airbnbs and other things are examples of how technology is disrupting, and that is happening in an organic way. The bureaucracy is that you will find too many things you have to look at. Sometimes they have simple solutions and they can just be allowed to happen. I just want to make sure that government, the ATO, has a good look at these things to make sure that if there are simple solutions, they can be embraced. I do agree that the potential benefits for taxpayers, in compliance and in other ways, could be massive. It could be quite ground-breaking stuff. I just want to know that there are resources that are looking at these things and you are not trying to put too many roadblocks in the path of things that actually make sense.
Mr Jordan : Absolutely, it is a fundamental part of our reinventing the ATO program to see how we can provide a better client experience using natural systems, better technology and that sort of thing. We have formed a R&D lab. When you said, 'Is there an area in the ATO that can take that,' there was not before but there is now; where we can take up a potential solution to something and effectively test it out. We use this agile process about 'quick sprints' and 'scrums'—there is a whole way of doing things; as opposed to the waterfall approach, where we spend a long time and a lot of money and when we get to the edge it is either a go or a no-go. Whereas, here you have two week sprints and daily discussions about progress to see if this is worthy of investment. It is a whole new approach utilising modern management and technological approaches to analyse potential issues.
Senator LEYONHJELM: Mr Jordan, I wanted to ask you a few questions about your approach to GST in relation to Uber and Uber drivers. I am curious as to how you arrived at the conclusion that Uber drivers should pay GST from their first dollar. What was the difference and the reason for treating them differently from others who do not pay GST until they reach the threshold? Can you explain that, please?
Mr Jordan : Under the GST law, the legislation that came in 1 July 2000, there was a definition around taxi travel. I understand the background was that in other jurisdictions they did not have differential thresholds and so they had dual markets. You had a taxi part-time driver not charging VAT in a lot of places, which could be quite high—20 per cent or so—and others that did. The design of the legislation was that if you provide taxi-related travel, and the definition of that is that you have a car available for public hire to transport a person for a fee. That is why limousine drivers were always brought into this GST net. If you are a limo hire-car driver and you are a part-time one, which there are a lot of, you have to register and collect GST, just like part-time taxi drivers have to.
Senator LEYONHJELM: From the first dollar?
Mr Jordan : From the first dollar. So the only difference is that everyone has a $75,000 threshold except if—and I think I am right in saying that it is the only exception to that—you provide taxi-related travel. With that, you have to register and pay from the first dollar. There are three categories of Uber drivers, as I understand it. There is UberBLACK, the hire-car drivers, limo drivers—they are already registered and under their Uber fares they already charge GST. There is UberTAXI, which are actually taxis, and they also charge GST when they are using the Uber platform. It was UberX that the focus was on, which is the part-time driver using their own car. I go to lengths to say we are not involved in state regulations. It is purely the definition of taxi-related travel under the GST act, such definition having been there from 1 July 2000.
Senator LEYONHJELM: Sorry, Chair, did you say this has been gone over?
CHAIR: Yes, we have discussed Uber quite a bit this morning.
Senator LEYONHJELM: Where I was heading with this was two aspects which perhaps have not been examined. One is that Uber has complained that the taxi industry was consulted on this and that they would not be consulted about a matter affecting the taxi industry, so it seemed that their competitors' advice was sought in a situation their competitor is not a party to this. How do you answer that?
Mr Jordan : It is just absolutely wrong and incorrect.
Senator LEYONHJELM: You did not consult the taxi industry?
Mr Jordan : I will go through the history again. What happened is that, six or seven months before we put out our guidance in the middle of this year, we commenced discussions, consultations, with Uber and their advisers, but no-one else at that time. We also had discussions with various other accommodation providers—Airbnb et cetera—because this was across the whole collaborative-consumption sharing economy; it was not just ride sharing; it covered a whole host of different providers of activities. Over many months, many meetings, many phone hook-ups and many exchanges of documents and information, we could not come to any meaningful agreement with them. They had a view; we had a separate view.
We tried to work collaboratively with them to facilitate the registration of the drivers in a bulk way. If they gave us the drivers' names and addresses, we would bulk register them and we would work with them as to how to make it as easy as possible for the drivers. They declined to cooperate with us in that regard. When we released the guidance about 10 days or maybe two weeks beforehand, as is normal practice, we shared that with, I think, the Australian Hotels Association and the Accommodation Association—for motels, hotels et cetera—as well as with the taxi industry, being industries that had an interest in what we were about to release. This then got portrayed as us having inappropriate consultation with the taxi industry—as us only consulting with the taxi industry. That is false and entirely misleading, and it is known to be false and entirely misleading by those people at Uber. I am puzzled as to why they would want to publicly portray something that we know from our information is simply incorrect.
CHAIR: Are you going to continue on, Senator Leyonhjelm? We have covered all of this while you have not been here and, with the utmost respect, the commissioner has already had all this before.
Senator LEYONHJELM: I have one more that I do want to ensure I have an answer for, so maybe I will just read the Hansard later on. I am just wondering, in the context of producing this determination that applies to Uber drivers, whether you did a net revenue analysis—whether you looked at the cost of implementing it relative to the revenue you will collect.
Mr Jordan : I am not aware of us doing an analysis precisely in that way, but we are required to administer the law. The law, in our view, required UberX drivers to be registered for GST. Our view was that they were providing taxi-like travel, because there was a car available for public hire to transport a person for a fee. That seemed to us to be pretty clearly what UberX drivers were doing and it was already what UberTAXI and UberBLACK drivers had agreed to do, and they were collecting GST. It is not so much a net benefit analysis that we have to do; we have to apply the law, and that is our view. That is why we tried to minimise the cost to drivers by working cooperatively with Uber, but they rebuffed our offer to work cooperatively and minimise the compliance costs for their drivers.
Senator LEYONHJELM: I have some questions for Treasury Revenue Group, but that is all I have for the ATO. I want to ask about estimates that were provided to the health department on tobacco clearances. In response to a question on notice from me regarding advice to Treasury from the health department in October last year, Treasury stated:
Treasury advised that clearances of tobacco fell by 3.4 per cent in the 2013 calendar year relative to the 2012 calendar year.
Treasury also advised that publication of more detailed data related to tobacco excise was limited by concerns regarding taxpayer confidentiality. On 10 August this year, Treasury published more detailed data related to tobacco excise in its freedom of information disclosure log. My first question is: how was this publication possible in the context of the taxpayer confidentiality point raised earlier?
Mr French : As I understand it, we have had further discussions with the tax office and with Customs and I think the view we had reached earlier was that there were issues around taxpayer confidentiality because there are a very limited number of participants in the market. Subsequent to that, I would need to take on notice the details of the arrangements, but, as I understand it, we agreed with those agencies that those taxpayer confidentiality issues no longer applied.
Senator LEYONHJELM: So this more detailed information that was made available or provided, did you release that to the health department?
Mr French : We released some information in relation to an FOI request we had received and we consulted with other agencies.
Senator LEYONHJELM: Are you aware if the health department was alerted to it, received it or sent it?
Mr French : We consulted with other agencies, including the health department, prior to the FOI being released.
Senator LEYONHJELM: The assumption would be that they would have to have got it. The data that Treasury originally provided to the health department were for the 2012 and 2013 calendar years. Why was this the case when the most relevant period for assessing the impact of plain packaging is the year starting 1 December 2012 and the year starting prior to 1 December 2012?
Mr French : I would have to take that on notice.
Senator LEYONHJELM: Did you—I do not think you did—warn the health department of potential problems from using calendar year data to inform a change that was only operational from 1 December rather than 1 January? Do you know why that was?
Mr French : I would have to take that on notice as well.
Senator LEYONHJELM: Thank you—if you would, please. My understanding is that the health department was not warned of potential problems from using data for the 2013 calendar year, which included a 12½ per cent tax increase from 1 December 2013. Is my understanding correct, and, if that is the case, can you throw any light on why not?
Mr French : Again, I would need to check our records on that—
Senator LEYONHJELM: On notice, please.
Mr French : on notice.
Senator LEYONHJELM: Okay.
Mr Heferen : Senator, can I just check what we are taking on notice there. Are we taking on notice that, in giving the information—
Senator LEYONHJELM: Did you warn the health department—
Mr Heferen : That there was a tax increase?
Senator LEYONHJELM: Did you alert the health department that using data for the 2013 calendar year included a 12½ per cent tax increase from 1 December 2013—so using calendar data, but there was a tax increase on 1 December 2013?
Mr Heferen : But what we are checking is whether we warned the health department that there was an increase in tax in that year?
Senator LEYONHJELM: The health department are relying on your data; that is right. We are wondering why they are drawing the conclusions that they are.
The Treasury's release of monthly data on its freedom of information disclosure log—I am going back to Mr French, I think—indicates that you could provide data for the year starting 1 December 2012 just as easily as you could for the 2013 calendar year. It also indicates that you could provide data for the year prior to 1 December 2012 just as easily as you could for the 2012 calendar year. Am I right about that?
Mr French : I do not have the data in front of me, so I cannot be certain, but my recollection of the release of information was certainly from monthly data.
Senator LEYONHJELM: I might ask you to take on notice why the calendar year data was released rather than data for the applicable period for the policy implementation. Professor Sinclair Davidson published an article entitled 'Department of Health telling porkies on plain packaging' on the Catallaxy Files website on 19 August this year and in the IPA's FreedomWatch on 20 August this year. In that article, Professor Davidson takes the monthly data on your freedom of information disclosure log to replicate your figures for the 2012 and 2013 calendar years and your calculation of a 3.4 per cent decline between these periods. He also calculates figures for the period starting 1 December 2012 and the year prior to 1 December 2012, and the change from one period to the other is negative 0.8 per cent. Have you done this calculation yourselves? Could you confirm that the 0.8 per cent decline between the periods is correct?
Mr French : I have not seen the reports you are referring to. We are happy to have a look at them.
Senator LEYONHJELM: It is not so much the report; it is doing the calculations yourself.
Mr Heferen : We will take it on notice.
Senator LEYONHJELM: Thank you.
CHAIR: Senator Leyonhjelm—
Senator LEYONHJELM: Yes, all right. You really want me to stop; do you?
CHAIR: I want to be fair. If you could tell me how much longer you are going to be, I just want to try—I do not want to get an anonymous letter like Senator Heffernan did from somebody out the back saying that I am a shithouse chair.
Senator LEYONHJELM: You don't?
CHAIR: No. Excuse the expression, but I am sure Senator Heffernan would not mind me quoting it. I do actually want to be efficient if I can.
Senator LEYONHJELM: All right. I would hate you to get a letter like that. Carry on.
CHAIR: No, finish up your line of questioning.
Senator LEYONHJELM: In the data you released on your freedom of information disclosure log, the monthly figures for the ATO are net of tobacco products destroyed with the introduction of plain packaging, but the monthly figures for Customs are not. However, the figures covering the six-month period from December 2012 to May 2013 are provided for refunds under the tobacco refund scheme operated by Customs. The document on your freedom of information disclosure log implies that this tobacco refund scheme relates to tobacco products destroyed with the introduction of plain packaging. Is that correct?
Mr French : That is my understanding.
Senator LEYONHJELM: Your document states that the figure for refunds under the tobacco refund scheme 'cannot be related to monthly net clearances on a comparable basis to other Customs data presented in this document', so we cannot allocate these refunds to specific months prior to the introduction of plain packaging, when tax was originally paid. Would that be correct?
Mr French : That is what Customs has advised us.
Senator LEYONHJELM: But it isn't it true that we know that these refunds relate to tax paid at some time in the period prior to 1 December 2012?
Mr French : I would have to check the details of that. I will take it on notice.
Senator LEYONHJELM: If that is so, can't these refunds be subtracted from the total clearances in the year prior to 1 December 2012 so as to get clearances through Customs in the year prior to 2012, net of products for which refunds were provided under the tobacco refund scheme?
Mr French : Again, Senator, we could take this on notice.
CHAIR: Do you want to put them all on notice?
Senator LEYONHJELM: I am almost at the point where I am about to do that. I think, given that I have given Mr French enough grief already, I might put the remainder on notice. Thank you, Mr French.
Senator KETTER: In the interests of time, there are a number of questions I will put on notice for you, but I just want to ask you about the Treasurer's announcement about $86 million which has been provided to the ATO to drive compliance efforts around the anti-tax-avoidance measures. My question is: is this new funding, or has this been drawn from elsewhere within the agency's budget?
Mr Olesen : I think you are talking about the funding that was given to us for work on international structuring profit shifting?
Senator KETTER: Yes, that is right.
Mr Olesen : That was money that was provided, I think, two years ago in a four-year envelope to the tax office, in return for which we made some undertakings about what kinds of results we thought we would get through doing some focused work on multinationals and how they shift profits, as well as looking at other, broader issues in the international sphere. So it is not brand-new funding. I think we are about halfway through the four-year window of the funding that was provided to us.
Senator KETTER: In which year was it provided?
Mr Olesen : It would have been 2011-12 or 2012-13—one of those. I would need to check. I can take the detail on notice if you like.
Senator KETTER: All right. This question arises from Mr Hockey's valedictory speech—I think these questions might be to you, Mr Heferen. In his comments about negative gearing, he made a comment that negative gearing should be skewed towards new housing. I am not sure if you are aware of that. My question is: has Treasury undertaken any modelling or other work looking at various scenarios or changes to negative gearing?
Mr Heferen : No.
Senator KETTER: Can you explain?
Mr Heferen : I am not sure if I could add anything!
Senator KETTER: At some point in the last five years, you would have looked at negative gearing, I presume?
Mr Heferen : It is entirely possible that at some point within the last five years someone somewhere in the Treasury has examined the issue and the issue the former Treasurer raised about whether negative gearing ought to be quarantined somehow, either in the amount or to kinds of houses. It is entirely possible. In the current context, though, it is not an issue.
CHAIR: He was referring to new homes. That was the context of his comment.
Senator KETTER: You are saying you have not done any work about negative gearing being directed towards new residential housing?
Mr Heferen : That is right; we have not.
Senator KETTER: You have not?
Mr Heferen : When you say 'work', I am inferring that you mean some serious analysis about what it might mean.
Senator KETTER: Nothing? No advice at all?
Mr Heferen : Not that I recall.
Senator KETTER: Can I ask you to take it on notice.
Mr Heferen : I can take that on notice, and we will do a thorough document search. For how long would you like us to go back?
CHAIR: Oh, stop! Come on!
Senator DASTYARI: The tradition says that you do not go back earlier than the current government.
Senator KETTER: Yes, let us just look at two years.
Senator DASTYARI: Maybe we should leave it at the time of the Abbott government! That is the tradition—that you do not go into previous governments.
CHAIR: I did yesterday, and look what I found.
Senator KETTER: My final range of questions relates to the tax expenditures statement and the proposition that occasionally there is distributional modelling done in relation to the tax expenditures statement. This has apparently been reported at a recent House of Representatives Standing Committee on Tax and Revenue hearing. I want to find out: have you conducted any distributional modelling in respect of concessional taxation of employer superannuation contributions?
Mr Heferen : For the contributions made by an employer for an employee—
Senator KETTER: Yes.
Mr Heferen : or are you talking about the entire concessional treatment of contributions?
Senator KETTER: It is item C3.
Mr Heferen : Yes, I think that is the concessional treatment of contributions.
Senator KETTER: Employer superannuation contributions.
Mr Heferen : I beg your pardon. Mr French may be able to help.
Mr French : I think we responded to a question on notice at the last estimates hearing that we had done some distributional analysis in relation to the superannuation tax expenditures, C3 and C6. Those have been published, and we have given the committee the links to that material.
Senator KETTER: Okay. Is this modelling conducted every year?
Mr French : No, it is not.
Senator KETTER: What is the most recent year that the modelling was done?
Mr French : We did some modelling in 2012, and then there was some further modelling done in 2014 in the context of the Financial System Inquiry.
Senator KETTER: Can you table the modelling for these items?
Mr French : I think we have supplied them. Yes, we have supplied them to the committee already.
Mr Heferen : So we can certainly provide them to this committee as well.
Senator KETTER: I have just a couple more questions. In broad terms, what does the modelling for the superannuation tax concession items show about how the benefits of these concessions are distributed across the community?
Mr Heferen : I think that, when we talk about the concessional treatment, 'benefit' is a tricky word because it implies people are given something. By definition, because the contributions tax is a flat rate and the benchmark it is measured against is the progressive income tax scale, the person who is on a higher marginal rate, rather than being taxed at 45c plus the Medicare levy plus the debt levy, if instead the money goes into superannuation, is taxed at 15 per cent. By definition, they will have that, if that is referred to as a benefit, and then they would have the biggest. If someone, for argument's sake, is on the minimum wage, working part time, and their taxable income is below $20,000 with the tax-free threshold plus the low-income tax offset, their contribution to superannuation will only be taxed at 15 per cent, so they will obviously be not nearly as well off in terms of that being a benefit as the top marginal rate taxpayer.
Senator KETTER: Is there also modelling done in respect of capital gains tax items within the tax expenditures statement?
Mr French : Not to my knowledge.
Senator KETTER: That is E6, E5 and E11.
Mr Heferen : When you say modelling, are you saying distributional modelling about who the people are who have the most capital gains and are subject to the discount?
Senator KETTER: Yes.
Mr Heferen : No, I am not aware of us doing that in relation to the tax expenditure statement.
Senator KETTER: All right.
Mr Olesen : To keep our slate clean for this hearing, I can confirm that the funding for the ISAPS program, the International Structuring and Profit Shifting program, commenced on 1 July 2013. So we are now in year 3 of that program.
CHAIR: We have one more question from Senator Canavan who is going to finish us up.
Senator CANAVAN: I want to ask about Comcare. At the last estimates, Mr Jordan, you mentioned your general unhappiness about the deal you currently have with Comcare, particularly the cost of that arrangement for insurance. I wondered if you have had any success in negotiating a better deal or in looking at alternative options to save the ATO and the taxpayer money?
Mr Jordan : There has been some movement, but not a lot, because of the extraordinary focus we have had on this over the last couple of years. Working with Comcare to encourage them to take some more focused decisions on some of these cases, our premium has gone down a little. I still think there is a lot further to be done, and we would certainly prefer to have some contestability available rather than a monopoly supplier through Comcare only.
Senator CANAVAN: That reduction that you have been able to achieve, is that something that has been done or negotiated with a number of agencies, or is it something bilaterally?
Mr Jordan : I can only talk about ours because we have been trying to work more directly in having a say on the claims from ATO employees and reducing the length and number of those, which has been reflected in our premiums. But I believe we still pay, and in any reasonable comparison to the private sector, a multiple of fees that I believe we should be paying.
CHAIR: Thank you to all of the officers from revenue and tax. We will see you in February. I do have some questions and I will them on notice.