Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Economics Legislation Committee—Senate Standing—Coronavirus Economic Response Package Amendment (Ending Jobkeeper Profiteering) Bill 2021—Report, dated October 2021


Download PDF Download PDF

October 2021

The Senate

Economics Legislation Committee

Coronavirus Economic Response Package Amendment (Ending Jobkeeper Profiteering) Bill 2021

© Commonwealth of Australia

ISBN 978-1-76093-294-7 (Printed Version)

ISBN 978-1-76093-294-7 (HTML Version)

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivs 4.0 International License.

h

ttps://creativecommons.org/licenses/by-nc-nd/4.0/.

Printed by the Senate Printing Unit, Parliament House

iii

Members

Chair Senator Slade Brockman LP, WA

Deputy Chair Senator Anthony Chisholm ALP, QLD

Members Senator Jess Walsh ALP, VIC

Senator Andrew Bragg LP, NSW

Senator Susan McDonald NATS, QLD

Senator Rex Patrick IND, SA

Participating Member Senator Nick McKim AG, TAS

Secretariat Mr Mark Fitt, Committee Secretary Ms Stephanie Gill, Research Officer Ms Taryn Morton, Research Officer

PO Box 6100 Phone: 02 6277 3540

Parliament House Fax: 02 6277 5719

Canberra, ACT 2600 Email: economics.sen@aph.gov.au

v

Contents

Members ............................................................................................................................................. iii

Abbreviations ................................................................................................................................... vii

Chapter 1—Introduction .................................................................................................................... 1

Referral of the inquiry ......................................................................................................................... 1

Purpose of the bill ................................................................................................................................ 1

Background ........................................................................................................................................... 1

JobKeeper .................................................................................................................................. 1

Analysis of JobKeeper .............................................................................................................. 3

Summary of the bill ............................................................................................................................. 5

Item 1 ......................................................................................................................................... 5

Item 2 ......................................................................................................................................... 5

Commencement ................................................................................................................................... 6

Legislative scrutiny .............................................................................................................................. 6

Human rights implications ................................................................................................................. 6

Financial impact ................................................................................................................................... 7

Regulation Impact Statement ............................................................................................................ 7

Conduct of the inquiry ....................................................................................................................... 7

Structure of the committee's report ................................................................................................... 7

Acknowledgements ............................................................................................................................. 7

Chapter 2—Views on the bill............................................................................................................ 9

Views relating to Item 1 of the bill .................................................................................................. 11

Views relating to Item 2 of the bill .................................................................................................. 11

Limited support for introducing repayment mechanism ................................................. 12

Support for the publication of large entities' JobKeeper information ............................. 15

International experience .................................................................................................................... 21

Committee view ................................................................................................................................. 22

Additional comments—Labor Senators ........................................................................................ 25

Dissenting report—Australian Greens Senators ........................................................................ 27

Appendix 1—Submissions and additional information ........................................................... 35

Appendix 2—Public hearings ......................................................................................................... 37

vii

Abbreviations

ACCR Australasian Centre for Corporate Responsibility

ACTU Australian Council of Trade Unions

ASA Australian Shareholders' Association

ASIC Australian Securities and Investments Commission

ATO Australian Taxation Office

CY calendar year

DPE Domino's Pizza Enterprises Ltd

EM Explanatory Memorandum

FY financial year

GPFS general purpose financial statements

OM Ownership Matters

PBO Parliamentary Budget Office

the act Coronavirus Economic Response Package (Payments and Benefits)

Act 2020

the bill Coronavirus Economic Response Package Amendment (Ending

Jobkeeper Profiteering) Bill 2021

the committee Senate Economics Legislation Committee

1

Chapter 1 Introduction

Referral of the inquiry 1.1 The Coronavirus Economic Response Package Amendment (Ending Jobkeeper Profiteering) Bill 2021 (the bill) was introduced into the Senate on 21 June 2021 by Senator Nick McKim (Australian Greens) as a private senator's bill and read

a second time on the same date.1

1.2 On 24 June 2021, the Senate referred the bill to the Senate Economics Legislation Committee (the committee) for inquiry and report by 20 June 2021. 2 On 11 August 2021, the Senate granted the committee an extension to report by 1 October 2021. The Senate granted a further extension on 1 October 2021 to report on the inquiry by 15 October 2021.

Purpose of the bill 1.3 In his second reading speech, Senator McKim, explained further the intent of the bill:

[S]omeone has to hold greedy big corporations to account in this country… [I]f you're making enough money to buy a private jet or pay executive bonuses, then you should pay back JobKeeper … This will [list of large entities that received JobKeeper] end the Morrison Government-approved secrecy around JobKeeper profiteering … Simply appealing to these billionaires' better natures won't work … It's time to force the billionaires and the big corporations to do the right thing and pay back JobKeeper.3

Background

JobKeeper 1.4 The bill seeks to amend the Coronavirus Economic Response Package (Payments and Benefits) Act 2020 (the act) which provided the authority for the JobKeeper Payment scheme—a wage subsidy to assist employers during the COVID-19

pandemic—that was announced and commenced on 30 March 2020.

1.5 In a joint media release the Prime Minister the Hon Scott Morrison MP and the Treasurer the Hon Josh Frydenberg MP stated:

The $130 billion JobKeeper payment will help keep Australians in jobs as [well as] tackle the significant economic impact from the coronavirus.

1 Journals of the Senate, No. 103, 21 June 2021, pp. 3632-3633.

2 Journals of the Senate, No. 106, 24 June 2021, p. 3757; Selection of Bills Committee, Report No. 7

of 2021, 24 June 2021, p. [3].

3 Senator Nick McKim, Senate Hansard, 21 June 2021, pp. 55-56.

2

…The payment will be open to eligible businesses that receive a significant financial hit caused by the coronavirus.4

1.6 To be eligible for JobKeeper, employers needed to satisfy—amongst other elements—the decline in turnover test:

 their business has an aggregated turnover of $1 billion or less (for income tax purposes) and they estimate their turnover has fallen or will likely fall by 30 per cent or more; or  their business has an annual turnover of more than $1 billion (for

income tax purposes) and they estimate their turnover has fallen or will likely fall by 50 per cent or more; and  their business is not subject to the Major Bank Levy.5

1.7 The JobKeeper scheme ended on 28 March 2021 and the Treasurer said:

Today the temporary emergency support program JobKeeper comes to an end. It has achieved its objectives of supporting businesses and saving jobs, preserving employment relationships and delivering much needed income support across the economy.

JobKeeper was an economic lifeline which helped keep around a million businesses in business and 3.8 million Australians in a job at the height of the pandemic. The Reserve Bank of Australia estimated that JobKeeper saved at least 700,000 jobs.6

1.8 Early reporting on JobKeeper profiteering can be traced to

Dr Steven Hamilton7 who told the committee 'I've written more on JobKeeper than anyone else'.8 Initially, Dr Hamilton along with other academics, Anthony Forsyth and David Peetz reported that '[t]argeting only businesses experiencing a revenue loss limits profiteering'.9 Several months later, Dr Hamilton reported with Chris Edmond that:

There's been talk of businesses gaming revenue to qualify (most firms need only say they expect revenue to fall by 30 per cent in a single month to qualify for the entire six months) … By deleting just two words in the JobKeeper regulations, eligibility could move from being once and for all to being month by month. If a business expected revenue to recover in the

4 The Hon Scott Morrison MP and the Hon Josh Frydenberg MP, Prime Minister of Australia and

Treasurer, '$130 billion JobKeeper payment to keep Australians in a job', Media Release, 30 March 2020.

5 Department of the Treasury, Fact sheet: JobKeeper Payment—Protecting integrity, 15 October 2020.

6 The Hon Josh Frydenberg MP, Treasurer, 'JobKeeper', Media Release, 28 March 2021.

7 Dr Steven Hamilton is Assistant Professor of Economics at The George Washington University,

visiting scholar at the ANU Crawford School's Tax and Transfer Policy Institute and former Chief Economist at Blueprint Institute.

8 Dr Steven Hamilton, Assistant Professor of Economics, The George Washington University and

Chief Economist Blueprint Institute, Proof Committee Hansard, 23 July 2021, p. 1.

9 Steven Hamilton, Anthony Forsyth and David Peetz, 'Australia's $130 billion JobKeeper payment:

what the experts think', The Conversation, 30 March 2020, (accessed 1 July 2021).

3

following month, they would no longer qualify. This wouldn't preclude them from qualifying again later should economic conditions deteriorate …10

Analysis of JobKeeper 1.9 Detailed reports have also been produced, including by Ownership Matters (OM)—a governance advisory firm that 'advise[s] institutional investors who rely on the audited financial statements of listed entities to make investment

decisions and to ascertain the financial health of a listed entity'—on the effect of JobKeeper and other government subsidies for Australian Securities Exchange (ASX) 300 companies during May-August 2020 (original release September 2020) and the calendar year 2020 (updated release in March 2021). During the calendar year 2020, OM found:

 Approximately 32 per cent (95 of 299) ASX 300 listed entities disclosed they had received government subsidies in calendar year 2020.  Aggregate government subsidies received by ASX 300 for CY20 [calendar year 2020] was $3.786 billion, with JobKeeper accounting for

more than 60 per cent—at least $2.453 billion across 75 entities.  JobKeeper recipients also received $1.036 billion via government subsidies in other countries (or under other schemes).  Another $295 million in other government subsidies (including foreign

governments) were received by entities that disclosed no JobKeeper receipts.  The six largest JobKeeper recipients—[Qantas] QAN ($726 million), [Crown Resorts Ltd] CWN ($254 million), [Flight Centre Travel Group]

FLT ($195 million), [Star Entertainment Group] SGR ($152 million), [Eagers Automotive Limited] APE ($129 million) and

[G8 Education Ltd] GEM ($102 million)—accounted for approximately 63 per cent of all JobKeeper payments.11

1.10 Part way through the delivery of JobKeeper, Treasury released a fact sheet outlining how the scheme's integrity was being protected 'from the eligibility requirements to specific rules to address contrived schemes and fraud'.12 This fact sheet also included the reporting and record-keeping in place to verify compliance:

 Entities report to the Commissioner of Taxation information about themselves and their employees and on a monthly basis payments made to employees, information on turnover and other matters relevant to their entitlement; and

10 Chris Edmond and Steven Hamilton, 'How to make JobKeeper work through an extended

recovery', The Australian Financial Review¸ 27 May 2020, (accessed 1 July 2021).

11 OM, Update on JobKeeper & other government subsidies in ASX300, 17 March 2021, p. 1.

12 Department of the Treasury, Fact sheet: JobKeeper Payment—Protecting integrity, 15 October 2020,

p. 1.

4

 ATO conducts compliance and audit activities.13

1.11 Also, in relation to reporting, the Australian Securities and Investments Commission (ASIC) issued a guidance note on financial reporting—that included JobKeeper—under COVID-19 conditions requiring:

Entities should appropriately account for each type of support and assistance from government, lenders, landlords and others. Both the financial report and operating and financial review should prominently disclose significant amounts, the commencement date and expected duration of support or assistance. Examples include JobKeeper, land tax relief, loan deferrals and restructuring, and rent deferrals and waivers.14

1.12 At Budget Estimates 2021-22, Senator Jess Walsh questioned ASIC about examining entities' JobKeeper reporting.15 On notice, ASIC reported that its financial reporting surveillance program reviewed 255 financial reports of listed entities and found 75 separately disclosed the amount of JobKeeper receipts. Further, ASIC stated:

It is not practical for ASIC to provide the total number of entities that had disclosed JobKeeper receipts in their financial reports. More than 28,000 financial reports are lodged with ASIC annually.16

1.13 Treasury conducted a review of the first three-months of the JobKeeper payment—to determine if there should be any changes before its scheduled end on 27 September 2020 and an extension—that was released in June 2020. Overall Treasury found:

… an extension to JobKeeper is needed, coupled with a fresh eligibility test to ensure that JobKeeper is well targeted.17

1.14 The Australian National Audit Office is conducting a review into the administration of the JobKeeper scheme and is due to report in December 2021.18

1.15 Since the hearings, Treasury has released a report titled ‘Insights from the first six months of JobKeeper’ which presents Treasury analysis on the first six months of the JobKeeper Payment (to 27 September 2020), reflecting on the

13 Department of the Treasury, Fact sheet: JobKeeper Payment—Protecting integrity, 15 October 2020,

p. 2.

14 Australian Securities and Investments Commission (ASIC), '20-157MR Focuses for financial

reporting under COVID-19 conditions', Media Release, 7 July 2020.

15 Senator Jess Walsh, Proof Senate Hansard, 2 June 2021, pp. 60-61.

16 ASIC, answer to questions on notice BET085, Senate Economics Legislation Committee,

2 June 2021 (received 16 August 2021).

17 The Treasury, The JobKeeper Payment: Three-month review, June 2020, p. 39.

18 Australian National Audit Office, Administration of the JobKeeper Scheme,

https://www.anao.gov.au/work/performance-audit/administration-the-jobkeeper-scheme (accessed 10 August 2021).

5

design and initial impacts of JobKeeper as a key element of the Government’s macroeconomic response to COVID-19.19

Summary of the bill 1.16 The bill amends the act—inserts one schedule that contains three definitions and two items—to prevent large entities from profiteering off JobKeeper payments by deferring input tax credits and introducing transparency via the

publication of information.20

Item 1 Inserts definitions for annual turnover, JobKeeper payment and JobKeeper scheme in section 6 of the Act.21

Item 2 Inserts section 19A, defining when an entity has profiteered from JobKeeper payments, and setting out that such entities will have their entitlement to claim input tax credits delayed for a ten year period or until the entity voluntarily pays the sum which it profiteered from JobKeeper payments, whichever is the earlier. [Item 2] … also inserts section 19B, requiring the Commissioner of Taxation to publish information about each entity that has received JobKeeper payments.22

Defining profiteering 1.17 Section 19A sets out when an entity or group of entities has profiteered from JobKeeper payments. An entity has profiteered from JobKeeper if during a financial year an entity:

(a) received one or more JobKeeper payments—that is a payment under the JobKeeper scheme from 1 March 2020 to 28 March 2021; (b) carried on business in Australia; (c) annual turnover—that is the total proceeds of sales of goods and/or

services; commission income; repair and service income; rent, leasing and hiring income; government bounties and subsidies; interest, royalties and dividends; and other operating income—for the financial year was more than $50 million; and (d) made a profit, paid a dividend and/or paid a bonus to an executive of the

entity.23

19 Department of the Treasury, Insights from the first six months of JobKeeper, 2021,

https://treasury.gov.au/publication/p2021-211978 (accessed 13 October 2021).

20 Explanatory Memorandum, p. [2].

21 Explanatory Memorandum, p. [3].

22 Explanatory Memorandum, p. [3].

23 Bill, item 2, proposed subsection 19A(1).

6

1.18 A group of entities will have profiteered from JobKeeper if during a financial year the above elements are present for any one of the entities in the group or the group of entities together and in addition 'the entity is a member of a group of entities that is a group of a kind prescribed by the rules'.24

Deferring input tax credits 1.19 Where an entity or group of entities has profiteered from JobKeeper payments, its entitlement to the input tax credit for a creditable acquisition or a creditable importation will be deferred until the earlier of:

 ten years; or  the entity voluntarily pays the Commonwealth an amount equal to the total amount of JobKeeper payments received by the entity or the relevant profit amount—total amount of profit, dividends paid and bonuses for applicable

financial years—if that amount is less than the total amount of JobKeeper payments and gives the Commissioner of Taxation written notice of the payment amount and date the payment was made.25

1.20 This proposed section is effectively introducing a 'repayment mechanism'.

Publication of information 1.21 Section 19B requires the Commissioner of Taxation to publish information— name of the entity and the entity's ABN; total amount of JobKeeper payments received by the entity; details of any voluntary payment the entity has made;

and any further information prescribed by the rules—for an entity that received JobKeeper payments and its annual turnover for a financial year during this time is more than $50 million. This information is to be published on a publicly available website as soon as practicable.26

Commencement 1.22 The bill commences the day after it receives royal assent.27

Legislative scrutiny 1.23 The Senate Standing Committee for the Scrutiny of Bills has no comment in relation to the bill.28

24 Bill, item 2, proposed subsection 19A(2).

25 Bill, item 2, proposed subsections 19A (3) - (8).

26 Bill, item 2, proposed section 19B.

27 Bill, proposed section 2.

28 Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest 10 of 2021, 13 July 2021, p. 17.

7

Human rights implications 1.24 The Parliamentary Joint Committee on Human Rights made no comment on this bill thereby indicating that the bill 'do[es] not engage or only marginally engage[s], human rights; promote[s] human rights' and/or permissibly limit[s]

human rights'.29

1.25 The Explanatory Memorandum (EM) stated that the bill does not engage any of the applicable rights or freedoms and concluded that the bill is compatible with human rights as it does not raise any human rights issues.30

Financial impact 1.26 The EM provided no assessment of the bill's financial impact.

Regulation Impact Statement 1.27 The EM provided no Regulation Impact Statement.

Conduct of the inquiry 1.28 The committee advertised the inquiry on its website and wrote to relevant stakeholders and interested parties inviting written submissions by 9 July 2021. Following the extension of the inquiry, submissions were reopened

until 3 September 2021.

1.29 The committee received seven submissions, which are listed in Appendix 1.

1.30 The committee held two public hearings for the inquiry:

 Friday 23 July 2021 in Canberra; and  Friday 10 September 2021 in Canberra.

1.31 The names of witnesses who appeared at the hearing can be found at Appendix 2.

Structure of the committee's report 1.32 The committee's report comprises the following chapters:

 Chapter 1 provides background and explains the provisions of the bill; and  Chapter 2 outlines the views on the bill.

Acknowledgements 1.33 The committee thanks the individuals and organisations who assisted the committee with its inquiry, particularly those that made written submissions and participate in the committee's public hearing.

29 Parliamentary Joint Committee on Human Rights, Human rights scrutiny report 9 of 2021,

4 August 2021, pp. 11-12.

30 Explanatory Memorandum, p. [4].

9

Chapter 2 Views on the bill

2.1 This chapter considers the views received by the Senate Economics Legislation Committee (the committee) on the Coronavirus Economic Response Package Amendment (Ending JobKeeper Profiteering) Bill 2021 (the bill) which seeks to amend the Coronavirus Economic Response Package (Payments and Benefits) Act 2020 (the Act) which provided the authority for the JobKeeper Payment scheme.

2.2 As noted in Chapter 1 of this report, the committee received seven submissions and undertook two public hearings.

2.3 Only one submission dealt with the definitional matters outlined in Item 1 of the bill. All other input addressed Item 2 proposals, which included the proposed section 19A on defining profiteering and deferring input tax credits and the proposed section 19B on the requirement for the Commissioner of Taxation to publish JobKeeper information.

2.4 Whilst the publication of entities' JobKeeper information was viewed favourably, the retrospective nature of the deferral of input tax credits for large entities that profiteered off JobKeeper payments was considered a shortcoming. Specific concerns and recommendations were also raised to improve the drafting of the bill and its operation.

Overview of comments on the bill 2.5 Generally, submitters agreed with the bill’s overall intent and noted that there was a community expectation that firms which do well ought to consider repaying the Jobkeeper payments.

2.6 Officials from the Department of the Treasury told the committee that ‘about a million business’1 had received the JobKeeper payments which had been heavily weighted to small businesses:

Around 90 per cent of businesses that received JobKeeper payments had a turnover of below $2 million. Another six per cent had a turnover of between $2 million and $10 million, and another 1.4 per cent had a turnover of between $10 million and $50 million. Those numbers relate to the first six months of the JobKeeper program.2

1 Mrs Philippa Brown, First Assistant Secretary, Fiscal Group, Department of the Treasury, Proof

Committee Hansard, 10 September 2021, p. 10.

2 Ms Jennifer Wilkinson, Deputy Secretary, Fiscal Group, Department of the Treasury, Proof

Committee Hansard, 10 September 2021, p. 10.

10

2.7 Treasury’s Deputy Secretary, Ms Jennifer Wilkinson outlined the background and the intention of the JobKeeper scheme during the committee’s second public hearing, advising that,

JobKeeper was introduced—just in terms of how unbelievably uncertain the environment was, both from the health and an economic perspective. We had confidence which had dropped to record lows, both business and consumer confidence, and we had a very uncertain outlook for the unemployment rate.

JobKeeper did a number of things. It kept businesses connected to employees—the wage subsidy component. It was also providing income support to individuals. If you recall, individuals who were not working any hours with a business could receive JobKeeper through the business rather than joining the unemployment queue. JobKeeper also provided broader macroeconomic support and, in our view, was an important element in stabilising confidence and stabilising the decline in the economy at that time.3

2.8 Mr Dean Paatsch, Director, of Ownership Matters (OM), a proxy and governance risk adviser to institutional investors, told the committee that OM became interested in the JobKeeper program upon learning that 'the Treasury had designed the wage subsidy so that three-quarters of the benefit would accrue to shareholders and thus have the potential to materially affect the results of the ASX 300 companies that we analyse.'4

2.9 The Australian Shareholders' Association (ASA) stated in their submission that each year prior to the Annual General Meeting season, it publishes ‘focus’ guidance 'as a way of ensuring companies are aware of our expectations.' The ASA shared its focus for this year:

For 2021, the focus issue relating to remuneration reporting is relevant to this Bill:

“The impact of COVID-19 on companies and their executive remuneration should be examined. Companies should give close consideration to repaying Government-funded COVID-19 payments before rewarding executives or paying dividends.”5

2.10 The Commissioner of Taxation, Mr Chris Jordan from the Australian Taxation Office (ATO) stated that as part of the development of the scheme it had designed compliance assurance mechanisms that enabled it to undertake checks to ensure that those who received the payment were eligible and for those that weren’t eligible, the payment was recovered. Mr Jordan explained:

3 Ms Jennifer Wilkinson, Deputy Secretary, Fiscal Group, Department of the Treasury, Proof

Committee Hansard, 10 September 2021, p. 11.

4 Mr Dean Paatsch, Director, Ownership Matters (OM), Proof Committee Hansard, 23 July 2021, p. 6.

5 Australian Shareholders' Association (ASA), Submission 2, p. [1].

11

We did our compliance intervention on 1,600 entities, 480 of which were large. We found that 95 per cent of the 1,600 were within the rules of claiming. Clearly there were some that were not, and we've already recovered $194 million, and we're pursuing another $89 million, with $6 million in dispute, and we've decided not to pursue $180 million because it went to small businesses who made a genuine attempt—maybe a mistake, but they had paid it on to their employees. That was a very fundamental requirement. They did pay it on to their employees.6

2.11 Mr Jordan noted that in terms of the design of the program the key priority was:

… to ensure that what was developed was operable or implementable because one of the key features was to try to get the money out the door, firstly, as quickly as possible from the start of it, and secondly, as quickly as possible from their [public and private entities] application to get it.7

2.12 Both Treasury and ATO noted in their evidence, that while both provided advice on possible clawback mechanisms to the Government, both agreed that the scheme’s primary importance was to, as Mr Hirschhorn summed it up for the committee:

… [T]o get the money out into the community, so businesses could continue to operate and not lay off their staff, but also to do it with integrity.8

Views relating to Item 1 of the bill 2.13 Item 1 of the bill inserts various definitions for annual turnover, JobKeeper payment and JobKeeper scheme into section 6 of the Act.

2.14 ASA suggested that some definitional terms in the bill should be more precisely articulated to calculate an entity's repayment amount, in particular:

Company profit for ASX listed companies usually means taxable, underlying or statutory profit. Remuneration schemes have variable components some of which have the nature of a bonus. … We see the reference to entities to mean legal entities. Listed companies may incorporate a large number of legal entities. 9

Views relating to Item 2 of the bill 2.15 Item 2 of the bill, as outlined in Chapter 1 proposes inserting two new sections to section 19 of the Act; section 19A and section 19B.

6 Mr Chris Jordan, Commissioner of Taxation, Australian Taxation Office (ATO), Proof Committee

Hansard, 10 September 2021, pp. 4-5.

7 Mr Jordan, ATO, Proof Committee Hansard, 10 September 2021, p. 2.

8 Mr Jeremy Hirschhorn, Deputy Commissioner of Taxation, ATO, Proof Committee Hansard,

10 September 2021, p. 3.

9 ASA, Submission 2, p. [2].

12

Limited support for introducing repayment mechanism 2.16 While there has been a general acknowledgement in the ASX reports of receipt of government subsidies, there is limited support for entities returning JobKeeper payments in accordance with the repayment mechanism set out in

the bill—that is to defer input tax credits for large entities that profiteered off JobKeeper payments until the earlier of ten years or the entity repays its JobKeeper payments.

2.17 The Australian Council of Trade Unions (ACTU) 'support[ed] requiring companies to repay JobKeeper they have profiteered from'.10 Mr Joseph Mitchell of the ACTU regarded the repayment mechanism as 'quite clever' and noted that it 'also giv[es] companies that do have the capacity to repay the opportunity to do so immediately'.11

2.18 The committee received two submissions from entities that repaid JobKeeper payments and their reasons for doing so are set out below.

Box 2.1 Explanations of entities that returned JobKeeper payments Domino's Pizza Enterprises Ltd (DPE):

As the uncertainty over [DPE's] operations and trading conditions had passed, and the Company had demonstrated its ability to continue to trade, DPE determined in October 2020 to return JobKeeper received in that Financial Year, $922,000, despite continued eligibility. Subsequently, DPE determined the Company would pay back $792,000 in JobKeeper assistance received in the prior financial year. These returns were completed in Financial Year 2021.12

Toyota:

We believed it was appropriate to volunteer to return the monies to the Australian government, and minimise the cost imposition placed on the Australian taxpayer. As revenue and profitability outlook improved, Toyota wanted to do the right thing as well as avoid any unnecessary reputational risk. We sought advice from the Australian Tax Office on how to return monies and in January this year, Toyota in good faith voluntarily returned the $18,200,000 in support we received covering the period June to September 2020.13

10 Australian Council of Trade Unions (ACTU), Submission 3, p. 2.

11 Mr Joseph Mitchell, Workers' Capital Lead, ACTU, Proof Committee Hansard, 23 July 2021, p. 16.

12 Domino's Pizza Enterprises Ltd (DPE), Submission 4, p. [2].

13 Toyota, Submission 7, p. 1.

13

2.19 Professors Rabee Tourky and Rohan Pitchford were both of the view that 'where a business has profited from JobKeeper [the repayment mechanism] should be direct and involuntary'.14

2.20 Likewise the Australasian Centre for Corporate Responsibility (ACCR) supported the bill’s intention of 'where relevant, return[ing JobKeeper payments]'.15

Technical issues with proposed repayment mechanism 2.21 Concerns were raised regarding the proposed repayment mechanism's drafting and application, as discussed below.

2.22 Generally, views were in opposition to the retrospective nature of the repayment mechanism.16 Some alternative approaches to address the issue, that large entities were profiteering off JobKeeper payments, were also put forward.

2.23 Ownership Matters noted its concern about the exclusion of private entities from any form of recording of benefit:

… we note that there is no requirement for any private company to separately record whether it had paid “a bonus to an executive” in any period, which may present a significant practical impediment to the Bill's operability.17

2.24 Professors Tourky and Pitchford noted '[w]hile the hold on claiming goods and Services tax (GST) input credits provides an incentive to businesses to make voluntary payments, there is no direct enforcement mechanism, and this indirect mechanism could potentially have unintended consequences'.18

Retrospectivity 2.25 A number of submitters and witnesses expressed their opposition towards the repayment mechanism's retrospective application for the following reasons:

 sovereign risk of the retrospective changes;19  retrospective taxation nature; 20 and

14 Professor Rabee Tourky and Professor Rohan Pitchford, Submission 6, p. 1.

15 Australasian Centre for Corporate Responsibility (ACCR), Submission 5, p. [2].

16 See, for example, Mr Mitchell, Proof Committee Hansard, 23 July 2021, p. 17; Dr Steven Hamilton,

Assistant Professor of Economics, The George Washington University and former Chief Economist, Blueprint Institute, Proof Committee Hansard, 23 July 2021, p. 5; Mr Paatsch, Committee Hansard, 23 July 2021, p. 8; Ms Fiona Balzer, Policy and Advocacy Manager, ASA, Proof Committee Hansard, 23 July 2021, p. 11.

17 OM, Submission 1, p. [2].

18 Professor Tourky and Professor Pitchford, Submission 6, p. 1.

19 Dr Steven Hamilton, Proof Committee Hansard, 23 July 2021, p. 5.

20 Mr Paatsch, Proof Committee Hansard, 23 July 2021, p, p. 8.

14

 difficulty with long term decision making.21

2.26 Ms Fiona Balzer of ASA added 'I think that shareholders do believe that Australia doesn't have a tendency to have retrospective changes to the law'.22

2.27 As mentioned above, concerns were raised about the risks of retrospective disclosure regarding the ATO Commissioner’s ability to administer tax laws and the provision of data supplied in support of individuals' tax arrangements.

2.28 The Commissioner stated that if this information were to be made public it would compromise the ATO’s ability to administer these laws, having a potentially profound impact on compliance and how taxpayers interact with the tax system and ATO.

2.29 In responding to the order for production of documents and raising his own public interest immunity claims, the Tax Commissioner in his letter to the President of the Senate stated:

Requiring disclosure of protected taxpayer information to the Parliament will harm the public interest by undermining public confidence in the Commissioner’s ability to keep taxation information confidential and the administration of the tax system beyond the administration of the Coronavirus Economic response package more generally. That is, it has the clear capacity to discourage the open and full disclosure of information to the Commissioner which is necessary for the effective administration of the tax system.23

Impact take-up of government programs 2.30 Domino's Pizza Enterprises also raised a potential unintended consequence of retrospectivity in the bill on the take-up of government programs:

DPE is concerned about the potential in relying on future government criteria that may retrospectively be changed, which may require a more conservative approach in relying on such criteria. This could have the unintended consequence of reduced take-up of government programs,

which would have a negative effect on the community, particularly if the intention of those programs is to create fast, stimulatory impact for the benefit of the broader economy.24

21 Ms Balzer, Proof Committee Hansard, 23 July 2021, p. 11.

22 Ms Balzer, Proof Committee Hansard, 23 July 2021, p. 11.

23 JobKeeper payments—Order of 4 August 2021—Letter to the President of the Senate from the

Commissioner of Taxation (Mr Jordan), dated 12 August 2021, responding to the order and raising public interest immunity claims,

https://parlinfo.aph.gov.au/parlInfo/search/display/display.w3p;query=Id%3A%22publications%2 Ftabledpapers%2F50a3e732-47f5-4095-bf25-3da19f92ce07%22, (accessed 13 October 2021).

24 DPE, Submission 4, p. [2].

15

Application 2.31 Professors Tourky and Pitchford would have liked to see the bill applied 'to all businesses who profiteered from JobKeeper, regardless of their annual turnover':

While large corporations have greater public recognition, there is no reason in principle why taxpayer funds should be lining the pockets of any corporation that has profiteered from JobKeeper.25

Support for the publication of large entities' JobKeeper information 2.32 All evidence supported the publication of large entities' JobKeeper information,26 for transparency and public scrutiny reasons as outlined below.

2.33 Mr Paatsch and Dr Steve Hamilton both agreed that they could not 'see any downside in doing it' and 'it's hard to argue against that', being the publication of JobKeeper information for large entities.27

2.34 The ACTU stated in its submission that it would have preferred the publication of this information from the outset, and called for it publication 'immediately'.

This transparency register should be established immediately to ensure that the Government and the companies which received public monies are held accountable for its use 28

2.35 Furthermore, some suggestions were made on how to improve the publication of JobKeeper information. This included noting a brief comparison of Australia's and New Zealand's wage subsidy repayments, the latter having implemented a transparency register.

Transparency 2.36 A specific requirement of the bill under section 19B, attempts to address the need for transparency by showing which entities received payments and how well they had faired through the pandemic. A number of submissions and

witnesses supported the publication of information on the basis that it would enable greater transparency.29

25 Professor Tourky and Professor Pitchford, Submission 6, p. 1.

26 See, for example, ACTU, Submission 3, p. 2; DPE, Submission 4, p. [2]; ACCR, Submission 5, p. [2];

Professor Tourky and Professor Pitchford, Submission 6, p. 1; Dr Steven Hamilton, Committee Hansard, 23 July 2021, pp. 3 and 5; Mr Paatsch, Proof Committee Hansard, 23 July 2021, p. 8, Ms Balzer, Committee Hansard, 23 July 2021, p. 10.

27 Mr Paatsch, Proof Committee Hansard, 23 July 2021, p. 8; Dr Hamilton, Proof Committee Hansard,

23 July 2021, p. 3.

28 ACTU, Submission 3, p. 2.

29 ACCR, Submission 5, p. [2].

16

2.37 DPE stated that the publication of large entities' JobKeeper information 'would align with community expectations regarding the appropriate use of public funds'.30

2.38 Further, DPE noted the importance of the prudent use of public funds, and the opportunity for public commentary and debate regarding the use of those funds. DPE published the amount of government support it received, including JobKeeper, in our updates to the Australian Securities Exchange.31

2.39 The ACTU reiterated the importance of the public having access to such information, to '… [create] a clear line of sight of the payments made and who they're made to'.32

2.40 As a representative of shareholders, Ms Balzer stated:

… I think it's beholden on listed companies, particularly, to have clear disclosures and, in terms of complying with the ASIC [Australian Securities and Investments Commission] requirements, to then make that public.33

… having nowhere to hide—by having transparent reckoning of what JobKeeper has been received by each company—would also be helpful.34

2.41 The ACCR noted that this additional information would assist investors make more informed choices. The information would:

… guide [investors] engagement with companies on their use of government subsidies. It will assist investors in assessing whether companies have engaged in responsible stewardship of their human capital to secure long term performance of the company or whether they were focused on the short term benefit of shareholders and executives.35

2.42 Mr Mitchell made a broader tangential statement on the importance of transparency for all government programs:

We think it's a really good idea to make sure that the government and the public have line of sight of who received the sums, how they received them and how they went. It's a really important way to make sure that any program is transparent. We expect that there's transparency associated with every other expense of government. The government is very proud of

30 DPE, Submission 4, p. [2].

31 DPE, Submission 4, p. [2].

32 Mr Mitchell, Committee Hansard, 23 July 2021, p. 13.

33 Ms Balzer, Committee Hansard, 23 July 2021, p. 10.

34 Ms Balzer, Committee Hansard, 23 July 2021, p. 11.

35 ACCR, Submission 5, p. [2].

17

the program. We're proud of our participation in it. We should be happy with the scrutiny.36

2.43 Further, Dr Hamilton was of the view that greater transparency would also increase compliance:

… there is actually pretty good evidence from academics overseas that more transparency in business tax affairs leads to more compliance, because the shareholders are aware of what the companies are doing and the companies feel compelled to do the right thing.37

2.44 On a related note, the ACCR made the connection between transparency via publication of information on large entities' JobKeeper payments and repayment of JobKeeper payments:

We believe that further transparency, as proposed in this bill, will assist in the repayment of unneeded subsidies.38

Annual turnover threshold $50 million 2.45 Ownership Matters recommended in its submission, and at the public hearing, lowering the annual turnover threshold for entities that are required to publish information on JobKeeper payments—based on the bill, and thereby including

private entities—noting that the majority of entities fall outside the present reporting requirements.39

2.46 Senator McKim asked Mr Paatsch whether the bill ought to be passed:

Senator McKIM: Do you think the parliament should pass this legislation?

Mr Paatsch: I would not be in favour of the retrospective taxation nature of it, no. But the bill ought to be passed. A public register, I think, is good public policy and I don't see that there is any downside in doing it, to be honest.40

2.47 However, Dr Hamilton, whilst in favour of transparency, also noted that the annual turnover threshold should not be so low that it could violate the privacy of very small businesses.41

2.48 Finally, Mr Paatsch considered that failure to the lower the threshold would make the publication of information 'less effective'.42

36 Mr Mitchell, Committee Hansard, 23 July 2021, p. 16.

37 Dr Hamilton, Committee Hansard, 23 July 2021, p. 3.

38 ACCR, Submission 5, p. [2].

39 Mr Paatsch, Proof Committee Hansard, 23 July 2021, p. 6.

40 Mr Paatsch, Committee Hansard, 23 July 2021, p. 8.

41 Dr Hamilton, Committee Hansard, 23 July 2021, p. 3.

42 Mr Paatsch, Committee Hansard, 23 July 2021, p. 6.

18

Data collection, scope and publication 2.49 Ms Balzer indicated that the collection and publication of information as proposed in Section 19B, about each entity that has received JobKeeper payments may require additional assistance:

We just feel that in terms of what an entity receives they might need additional work to make this transparency beneficial for all, in terms of pulling together all the ABNs under an entity.43

2.50 Professors Tourky and Pitchford told the committee that they would like to see more information published than is proposed in the bill.

There is an important need for firm-level data on JobKeeper recipients. Not only will this provide the public with transparency over of the JobKeeper scheme, it will also create research opportunities to identify the intricacies of how JobKeeper was used by businesses, and the effects of JobKeeper on workers. However, more data should be provided and published than is proposed. In particular, data regarding the composition of workforce, hours worked, worker entitlements, gender, and ethnic background of workers, and other demographics of workers should be included. 44

Repaying JobKeeper payments 2.51 As mentioned at the commencement of this chapter, the seven submissions received generally agreed with the bill’s overall intent, though many noted that there was a community expectation that firms which do well ought to

consider repaying the Jobkeeper payments.

2.52 The committee notes the advice prepared by ASIC regarding the need to disclose to shareholders the amount of JobKeeper subsidy received by the listed entity, and ASA’s advice, in particular where it states that 'Companies should give close consideration to repaying Government-funded COVID-19 payments before rewarding executives or paying dividends.'45

2.53 The committee also notes OM analysis that approximately 90 per cent of all of the JobKeeper pledged for return comes from public companies and not private entities. In addition, OM noted that:

OM is aware of four ASX companies outside the ASX 300 (Australian Clinical Labs, Peter Warren Automotive, Universal Store and Dusk Group) that have repaid $40.7 m[illion]. Additionally Toyota Motor Corporation Australia (a public company in Japan) has acknowledged that it has repaid $18 m[illion].46

2.54 The ACTU stated that it supports the bill and its purpose to improve transparency of the JobKeeper program. In particular, it supports the recovery

43 Ms Balzer, Committee Hansard, 23 July 2021, p. 11.

44 Professor Tourky and Professor Pitchford, Submission 6, p. 1.

45 ASA, Submission 2, p. [1].

46 OM, Submission 1, p. [2].

19

of public money which has been paid in the form of a wage subsidy to large corporate entities which remained highly profitable during the pandemic and which, in many cases, also paid executive bonuses to wealthy directors and executive officers.47

2.55 Professors Tourky and Pitchford advocated that repayment mechanism for business that have profited from JobKeeper ought to be direct and involuntary:

… [T]hat the repayment mechanism where a business has profited from JobKeeper should be direct and involuntary. While the hold on claiming GST input credits provides an incentive to businesses to make voluntary repayments, there is no direct enforcement mechanism, and this indirect mechanism could potentially have unintended consequences. Further, the

proposed bill should be applied uniformly to all businesses who profiteered from JobKeeper, regardless of their annual turnover. While large corporations have greater public recognition, there is no reason in principle why taxpayer funds should be lining the pockets of any corporation that has profiteered from JobKeeper.48

2.56 The committee also received submissions from firms that had decided that it was appropriate to repay the subsidy. Both Dominos and Toyota told the committee that they 'wanted to do the right thing' as well as avoid any unnecessary reputational risk.49

2.57 Treasury and the ATO were both asked whether they had considered and advised on the inclusion of a clawback mechanism for the repayment of the subsidy in the original design. ATO told the committee that while it assisted with operability of the program the policy advice regarding the design of the program was a matter for the Treasury:

The design of the program was a matter for our colleagues at Treasury. In terms of our input, yes, we worked with Treasury to ensure that what was developed was operable or implementable because one of the key features was to try to get the money out the door, firstly, as quickly as possible from the start of it, and secondly, as quickly as possible from their application to get it. So, yes, we discussed this in detail with our Treasury colleagues.50

2.58 Mr Jordan did note however, that through the ATO’s compliance mechanism it had 'clawed back $470 million … and there's a little bit more to come' in regards to pursuing non-compliance in the program.51

2.59 Mr Hirschhorn, when questioned by Senator McKim, on whether Treasury had asked ATO if a clawback mechanism would have been implementable replied:

47 ACTU, Submission 3, p. 1.

48 Professor Tourky and Professor Pitchford, Submission 6, p. 1.

49 Toyota, Submission 7, p. 1; DPE, Submission 4, p. [2].

50 Mr Jordan, ATO, Proof Committee Hansard, 10 September 2021, p. 2.

51 Mr Jordan, ATO, Proof Committee Hansard, 10 September 2021, p. 2.

20

The concept of a clawback mechanism was discussed but, given the policy decision not to have a clawback mechanism, the question falls away.52

2.60 Ms Wilkinson explained the reason why a clawback mechanism wasn’t included in the program design stating:

This was a matter we put quite some thought into. When you're thinking about this question, you have to think carefully about the context of the situation when JobKeeper was introduced—just in terms of how unbelievably uncertain the environment was, both from the health and an economic perspectives. We had confidence which had dropped to record lows, both business and consumer confidence, and we had a very uncertain outlook for the unemployment rate. We were certainly concerned. We were also aware of the fact that the JobKeeper payment was going to have a very high take-up amongst small- and medium-sized businesses, and we were aware of the, shall I say, 'respect' which those businesses afford the ATO. They take their interactions with the ATO seriously and are very mindful of the powers that the ATO has.

So we were definitely concerned that if there had been a clawback mechanism then take-up would have been lower and businesses would have been more cautious about it. Remember: JobKeeper payments had to be passed through to employees, so it wasn't the case that a business could get JobKeeper payments and just have them sit on its balance sheet; they had to be passed through to the employees. So small businesses would have had to think about how, if down the track they didn't end up having the fall in turnover that they expected, they would find that money.53

2.61 Further, Ms Wilkinson stated that:

I should also add that JobKeeper did two things: it wanted to halt the decline in employment, which was clearly happening in the weeks before it was announced, and we also wanted to support the recovery. We were concerned that if there were a clawback mechanism there would be a disincentive for businesses to come back as quickly as possible if things didn't turn out to be better than expected, and we were concerned that businesses would have less of an incentive to pivot their businesses towards new opportunities, for example. Both of those things were going to be really important for the recovery. So it was a judgement that we had to make; it was a careful, on balance and professional judgement at the time and in the circumstances.54

2.62 Since the hearings, Treasury has released a report on its website, Insights from the first six months of JobKeeper, which outlines, among other analysis, its position on the likely effect of a claw back mechanism:

A mechanism to claw back payments from businesses that performed better than expected was not included, reflecting a desire to avoid any disincentives for businesses to adapt and recover. The introduction of such

52 Mr Hirschhorn, ATO, Proof Committee Hansard, 10 September 2021, p. 3.

53 Ms Wilkinson, Department of the Treasury, Proof Committee Hansard, 10 September 2021, p. 11.

54 Ms Wilkinson, Department of the Treasury, Proof Committee Hansard, 10 September 2021, p. 11.

21

a mechanism would likely have reduced the overall level of activity and muted the recovery.

At the time of the JobKeeper review in June 2020, it was judged appropriate to maintain JobKeeper in its current form for a further three months, even though there was evidence some businesses that were initially heavily impacted were showing signs of recovery. This judgement reflected the still heightened uncertainty surrounding both the pandemic and the economic recovery, the weak economic conditions at the time, and the role that JobKeeper was playing as part of the broader macroeconomic response. Eligibility for JobKeeper moved from an assessment of anticipated decline to actual decline in turnover as the recovery strengthened.55

International experience 2.63 The committee received some evidence that other countries have published information on domestic entities that received wage subsidies during the Covid pandemic.

2.64 The ACTU told the committee that both New Zealand and the United Kingdom considered the publishing of entities' wage subsidies as a 'sensible step'.56

2.65 Mr Paatsch suggested that 'the existence of a completely open and transparent register of all wage subsidy recipients [in New Zealand] also played a role' in repaying wage subsidies and provided the following comparison:57

Australia: $89.3 billion expended. Pledged for return Treasury numbers presented to the parliament: $225 million, or a quarter of one per cent. New Zealand: AUD$12.35 billion—that's assuming a very generous exchange rate—with $673 million actually physically returned, which is 5.45 per cent of the scheme.58

2.66 The committee is unaware of any country with a wage subsidy scheme that has implemented a clawback mechanism on a retrospective basis and there is considerable variation in the design of the scheme across different countries.

2.67 Treasury noted in its recent JobKeeper report arrangements in other countries:

2.68 In other countries, governments introduced a range of schemes to promote job retention. Each scheme was designed and implemented differently to suit national circumstances and requirements. Some schemes used an actual turnover decline or actual evidence on the furloughing of

55 Department of the Treasury, Insights from the first six months of JobKeeper,

https://treasury.gov.au/publication/p2021-211978, p. 1. (accessed 13 October 2021).

56 ACTU, Submission 3, p. 2.

57 Mr Paatsch, Committee Hansard, 23 July 2021, p. 6.

58 Mr Paatsch, Committee Hansard, 23 July 2021, p. 9.

22

employees, and others determined eligibility on an expected decline in turnover. Where expected turnover decline was a condition of eligibility, jurisdictions took different approaches, with some, such as New Zealand and the Netherlands, requiring businesses to repay part or all of the subsidy if the anticipated declines did not eventuate. Others, such as Ireland, advised that the subsidy would not be recouped if the projection was found to be reasonable.59

Questions on Notice - Government agencies 2.69 The committee provided a written question on notice to the ATO and ASIC separately, requesting a list of proprietary companies that are required to submit general purpose financial statements (GPFS) including the name of the

company, net income (profit), amount of JobKeeper payments received and any other information from GPFS that the ATO or ASIC could put into the spreadsheet. In response the ATO stated that it could not provide the information due to secrecy provisions in the Taxation Administration Act 1953.60 ASIC provided a list via the ATO that included the company name, date of most recent GPFS received and document reference number. ASIC informed the committee that providing the additional information requested, would be an unreasonable diversion of resources.61

2.70 Further questions were put on notice during the committee’s 10 September hearing. The committee reporting date was extended by a fortnight to accommodate requests from both the ATO and Treasury for extensions to providing answers to the questions. While the ATO managed to provide answers to the questions by the new agreed deadline, Treasury failed to meet the deadline. Answers to the questions of notice were eventually submitted by the Treasury to enable them to be considered in this Report.

2.71 The committee would remind all officials that it not only has the power to ask for documents and specific information publicly, it is the duty of public officials to provide such information to a parliamentary committee when requested particularly when no public interest immunity claim has been accepted by the Senate.

2.72 The committee also reminds officials that it can receive and consider any information that officials deem sensitive in-confidence as has been done in many past inquiries.

59 Department of the Treasury, Insights from the first six months of JobKeeper,

https://treasury.gov.au/publication/p2021-211978, p. 15. (accessed 13 October 2021).

60 ATO, answers to written questions on notice, 5 July 2021 (received 12 July 2021).

61 ASIC, answers to written questions on notice, 5 July 2021 (received 9 July 2021).

23

Committee view 2.73 The committee notes that, thankfully, pandemics are few and far between. Reflecting on the evidence from the Treasury and ATO, the committee commends the government and the agencies' quick action to support

businesses particularly small business owners who have borne the brunt of the pandemic lockdowns. The committee believes that JobKeeper was an unambiguously successful program that saved jobs and businesses across every sector of the economy.

2.74 The committee supports transparency of government processes to ensure accountability but remains concerned by the bill allowing for undefined ‘further information’ to be published as prescribed by the rules in the Act. Neither the bill nor the Explanatory Memorandum provide any examples of what may be considered or included as ‘further information’. As such, the committee is concerned about how this provision may impact entities, particularly small businesses.

2.75 The committee notes that there is significant opposition to the proposed section 19A inserting a repayment mechanism. The proposed repayment mechanism and its retrospective nature have raised some technical concerns with its implementation which also concerns the committee. Rather than prescribing punitive measures in a time of considerable angst, the committee supports entities who have successfully managed their businesses and who subsequently find they did not require the government assistance and chose to voluntarily repay the JobKeeper payments. The committee commends those who have done so already and supports those who are considering such a path. The committee believes it is up to business to make their own decisions based on their own circumstances within the law.

2.76 The committee notes that it expects officials, as per Standing Orders, to comply regarding the laws set down by the Parliament for the provision of information.

Recommendation 1

The committee recommends the bill not be passed.

Senator Slade Brockman Chair Liberal Senator for Western Australia

25

Additional comments—Labor Senators

1.1 Labor will oppose this bill.

1.2 When Labor first proposed wage subsidies to get Australians through the worst of the recession, Scott Morrison and Josh Frydenberg dismissed Labor’s idea as dangerous. When the Government changed their mind Labor welcomed it.

1.3 Labor supported JobKeeper in the parliament and has acknowledged the important role that the policy played in maintaining connections between employers and employees during the height of the pandemic.

1.4 Since then a number of issues have come to light in relation to the implementation and transparency of the program. This includes that $19.7 billion was paid to businesses despite their turnover increasing over the same time period.

1.5 Labor welcomes any businesses who choose to voluntarily repay JobKeeper if they received the payment but have subsequently found that they do not require the assistance.

1.6 Labor is not seeking to clawback any of the JobKeeper support that any business received. Labor will not introduce any retrospective requirements on businesses who received JobKeeper. The lie that Labor would impose some kind of a retrospective clawback is a desperate attempt by the Government to distract from their mistakes.

1.7 However, unlike Britain, Canada, New Zealand and the United States, Australia has no public register of firms that received wage subsidies. Labor believes that the Australian Tax Office should publish the names of larger firms that received JobKeeper.

1.8 The Australian public deserve a clearer picture of how funds in the nation’s most expensive public program were spent. As the witnesses and Chair’s report note, a transparency register has merit from both a policy and governance stance, we would welcome the government’s support in implementing a suitable mechanism.

1.9 Labor believes our economy and our society can be stronger after COVID-19 than it was before and that small businesses can be a big part of this story.

Senator Anthony Chisholm Senator Jess Walsh

Deputy Chair Committee Member

Labor Senator for Queensland Labor Senator for Victoria

27

Dissenting report—Australian Greens Senators

1.1 JobKeeper was the biggest single government spending program in Australia’s history. And, thanks to this government’s wilful negligence, it also became the biggest corporate welfare rort in Australia’s history. $20B of public money was paid to entities who rather than going backwards during the pandemic, actually had an increase in turnover.

1.2 The government has fessed up to $13.8B in JobKeeper payments that went to Australian companies who had an increase in turnover, which amounts to 29 per cent of all payments included in that analysis.1 But they are hiding the details of an estimated further $5.9B paid to other entities, who also got JobKeeper and then had an increase in turnover.2 This includes billions paid to multinationals companies such as:

 global eyewear retailer Specsavers, controlled by Welsh billionaire Doug Perkins, and domiciled in the Channel Island tax haven of Guernsey;3  the largest manganese miner in the world, Consolidated Minerals, controlled by Chinese billionaire Jia Tianjiang, and whose parent company

is domiciled in the Channel Island tax haven of Jersey;4 and  Louis Vuitton, the global fashion brand synonymous with luxury and opulence, 5 owned by French billionaire, Bernard Arnault, who became the world’s richest person earlier this year.6

1.3 This is obscene. Quite literally, the Australian public purse has been used to line the pockets of the world’s richest man. The government knew this was happening and did nothing to stop it. From very early on, the warning signs

1 Treasury, The JobKeeper Payment: Three-month review, June 2020.

2 PBO analysis concludes that $19.7B of JobKeeper payments went to entities that experienced an

increase in turnover; Treasury excludes from its analysis of payments to entities that experienced an increase in turnover: payments made to not-for-profits, new businesses and businesses that were part of consolidated group, and payments made after September 2020.

3 ABC 730, Companies that received millions in JobKeeper but then doubled their profits,

15 September 2021, https://www.abc.net.au/7.30/companies-that-received-millions-in-jobkeeper-but/13543814, (accessed 14 October 2021).

4 Michael Roddan, Tax havened Chinese miner enjoys JobKeeper, Australian Financial Review,

3 August 2021, https://www.afr.com/rear-window/tax-havened-chinese-miner-enjoys-jobkeeper-20210727-p58ddk, (accessed 14 October 2021).

5 Shane Wright, Louis Vuitton puts $6 million of JobKeeper in its handbag, Sydney Morning Herald,

3 September 2021, https://www.smh.com.au/politics/federal/louis-vuitton-puts-6-million-of-jobkeeper-in-its-handbag-20210903-p58op6.html, (accessed 14 October 2021).

6 David Dawkins, Bernard Arnault Becomes World’s Richest Person As LVMH Stock Rises, Forbes,

24 May 2021, https://www.forbes.com/sites/daviddawkins/2021/05/24/bernard-arnault-becomes-worlds-richest-person-as-lvmh-stock-rises/?sh=57c8a5cd2ad9, (accessed 14 October 2021).

28

were there that JobKeeper was resulting in a massive transfer of public money to private wealth. But the government refused to introduce the most basic of integrity measures that would have stopped the flow of public money to tax-dodging multinationals and their billionaire owners. And now they won’t tell us how much these multinationals and billionaires profited on the public purse.

1.4 The bill would fix this problem and recover billions of dollars that could be used to fund better public services or help with the transition to a clean energy economy. It would do this by:

 establishing a mechanism to claw-back JobKeeper payments from companies with over $50 million in turnover who ended up being profitable or who paid executive bonuses by withholding GST input credits; and

 establishing a public register of companies with over $50 million in turnover who received JobKeeper payments.

1.5 Unfortunately, the opposition has said that they do not support the claw-back of JobKeeper in any form. Despite regular criticism of JobKeeper payments to profitable companies, the Labor Party has ended up on the same side as the very billionaires and big corporations who made off like bandits. On JobKeeper rorts, the Labor Party are all bark and no bite. And, in being so spineless, they end up running cover for the government on an issue for which they should be relentlessly held to account. Anything less is an implied endorsement of the default position of the Morrison Government, which is that public spending programs are there to funnel money to their corporate mates who are in on the fix.

1.6 In arguing against the claw-back of JobKeeper payments to profitable companies, both the government and the opposition have used the strawman of the negative impact that it would have on small businesses. Neither have provided a credible argument why companies with a turnover of more than $50 million—which is who would be affected by this bill, and who are not by any reasonable definition small businesses—could not afford to and should not be made to pay back a public subsidy which they did not end up needing.

1.7 Irrespective, the claw-back mechanism included in this bill—the withholding of GST input credits—is inherently tied to the turnover of a company. So, in the event that there is a company with a turnover of more than $50 million, who got JobKeeper, and who ended up being profitable, but has subsequently had a decrease in turnover such that their ability to repay may be compromised—which is very unlikely—then their eligibility for GST credits will have been reduced by virtue of their turnover having reduced, hence their repayment of JobKeeper would be also be reduced. In other words, the bill will only affect those who are in the best position to repay.

29

1.8 More positively, since the introduction of this bill, the Senate—with the support of the Greens—has passed an amendment to a government bill for the establishment of a public register of JobKeeper recipients with a turnover threshold of $10 million. The Greens support amending this bill to that end and have circulated an amendment to this effect.

Recommendation 1

1.9 The bill be amended to change the turnover threshold for the publication of information about entities that received JobKeeper payments from $50 million to $10 million.

Recommendation 2

1.10 The bill as amended be passed.

The most basic integrity measure 1.11 JobKeeper was integral to Australia having got through the first phase of the pandemic as well as we did. When uncertainty was at its peak, the parliament provided resounding support for the establishment of a wages subsidy to with

the aim of:

...supporting business and job survival, preserving the employment relationship, and providing needed income support.7

1.12 Although the parliament considered many amendments to the Bills that would have improved JobKeeper and made it fairer—particularly in relation to eligible employers and employees—the Bills enabling the establishment of JobKeeper payments were introduced, read and agreed unanimously by both houses of parliament in a single day. It was Team Australia moment made possible because of the goodwill provided by non-government members and senators to the government.

1.13 This goodwill included the latitude given to the Treasurer to develop detailed rules to implement payments consistent with the intent of JobKeeper as announced by the government:

The payment will be open to eligible businesses that receive a significant financial hit caused by the coronavirus. 8

1.14 Nowhere in parliament on that day, 8 April 2020, did the government mention that JobKeeper might be paid to and kept by profitable companies. And, implicit in the passage of the bills, was that parliament did not endorse the payment and keeping of JobKeeper to profitable companies

7 Treasury, The JobKeeper Payment: Three-month review, June 2020, p. 7.

8 The Hon. Scott Morrison MP, Prime Minister, The Hon. Josh Frydenberg MP, Treasurer, $130

billion JobKeeper payment to keep Australians in a job, Media Release, 30 March 2020.

30

1.15 It was incumbent upon the Treasurer, having been given powers to make rules suitable for the implementation of JobKeeper consistent with the government’s announcement, to ensure that any business that received JobKeeper, but that didn’t end up needing JobKeeper, would be required to return the money.

1.16 This is a standard caveat on income support payments: if you receive government support based upon a decline in income, but you don’t end up having that decline in income, then you have to pay it back. If it's good enough for JobSeeker recipients, it’s good enough for Australia’s biggest and most profitable corporations.

1.17 A claw-back mechanism—or a retest of actual turnover after three months— would not have hindered the roll out of JobKeeper to legitimate applicants. Business could still have been eligible for and received JobKeeper based on a projected decline in turnover. They would simply have had to return the payment if they didn’t end up being adversely affected.

1.18 A claw-back mechanism would only have reduced the rollout of JobKeeper to the extent that businesses, who knew from the outset that they didn’t need JobKeeper, didn’t apply for it in the first place, which is how subsidy programs are meant to work. There would have been no downside for businesses.

1.19 But the government did not introduce a claw-back mechanism. As a result, $20 billion has gone to those that didn’t need it. That’s around $800 for every Australian citizen that, instead of being used to create a better nation or help those in need has been used to boost the profits of a select number of businesses.

1.20 The Government is defending the payment of JobKeeper to profitable companies as a form of fiscal stimulus. The Treasurer has argued that a clawback mechanism would have:

...withdrawn support from the economy and lessened the broader macro-economic effect of the policy.9

1.21 But instead of providing support that was targeted and proportionate, JobKeeper profiteering has been arbitrary and distortionary. Those who were honourable and who stood on their two feet have been penalised. At a time when we were all being urged to ‘pull together’, the Government devised a scheme that split the nation between those who got on the gravy train, and those who didn’t.

1.22 Businesses who didn’t apply for JobKeeper, often because they assumed that they would actually have to meet the turnover test, are now furious. With the

9 Josh Frydenberg, JobKeeper did the job it was meant to do, and quickly, The Australian,

10 September 2021, https://www.theaustralian.com.au/commentary/jobkeeper-did-the-job-it-was-meant-to-do-and-quickly/news-story/300ead2179c9e0ee1f47c9df9f6354f7, (accessed 14 October 2021).

31

economy now teetering again following another sustained period of lockdowns, these businesses are looking at their competitors, who fared no worse than them, but because they applied for and got JobKeeper, are now in a better position and are better able to withstand the current economic downturn.

1.23 While the Government refused to clawback public money to profitable companies, they have been willing to pursue income support recipients who also received JobKeeper. At last count, Centrelink had recovered $32.8 million in JobKeeper payments made to some of the least affluent members of our society.10

1.24 At the other end of the spectrum, billionaires’ have seen their wealth skyrocket since the beginning of the pandemic. A good number of them, such as the international elite listed above, and local tycoons like Gerry Harvey, Solomon Lew and Kerry Stokes, have become more filthy rich with the help of JobKeeper payments to their profitable companies.

1.25 This level of inequity, from one business to the next, between company owners who have seen their dividends rise, and workers whose wages are stagnant and security is tenuous, and between billionaires and those on income support, is what makes the JobKeeper rorts so tangible for so many people.

Early warning signs 1.26 Treasury prepared a report in June 2020 analysing data on JobKeeper recipients obtained from April 2020 Business Activity Statements filed by large companies with the ATO. The report stated that:

The underlying data also show that 15 per cent of JobKeeper recipients experienced an increase in turnover in April 2020 compared with one year previous [emphasis in original].11

1.27 This turned out to be a massive underestimate, with closer to 30 per cent of the first phase of JobKeeper, from March 2020 to September 2020, going to companies whose turnover increased.12

1.28 The report suggested that this April 2020 data should be read with caution:

10 Luke Henriques-Gomes, Centrelink orders JobKeeper recipients to pay back $32m, while

profitable businesses allowed to keep funds, The Guardian, 10 August 2021,

https://www.theguardian.com/australia-news/2021/aug/10/centrelink-orders-jobkeeper-recipients-to-pay-back-32m-while-profitable-businesses-allowed-to-keep-funds, (accessed 14 October 2021).

11 The Treasury, The JobKeeper Payment: Three-month review, June 2020, p. 32.

12 Department of the Treasury, Insights from the first six months of JobKeeper, 2021,

https://treasury.gov.au/publication/p2021-211978, p. 45.

32

...with just one month of actual turnover data it is premature to make any judgement about whether there are businesses being supported by JobKeeper that may not merit support.13

1.29 Be that as it may, the government appears to have made no effort to respond to these early warning signs. In fact, elsewhere the report definitively suggests that the payment of JobKeeper to businesses whose turnover had not been impacted was insignificant:

...if support was to be withdrawn just from those organisations whose turnover has fully recovered to pre-Coronavirus levels, only a relatively small fraction of businesses would be expected to be in this position.14

1.30 This claim was baseless and wrong, and it demonstrates that the government wilfully ignored early evidence that a significant portion of the biggest government spending program in the nation’s history was going to businesses who didn’t need it.

1.31 This was despite the Treasury report laying out how the government could— and should—have responded to the early evidence that 20 per cent of JobKeeper was being misdirected:

An obvious change the Government could make would be to reassess eligibility in light of the more favourable circumstances of some businesses.

Practically, this could be done by using a fresh test of turnover decline, using measured or actual turnover change rather than projected change when businesses first applied. The virtue of a fresh test is it would ensure that the JobKeeper Payment remains well targeted.15

Hiding the full story 1.32 During the course of this inquiry, Treasury and the ATO have been less than forthcoming with data about the payment of JobKeeper to entities who ended up experiencing an increase in turnover, a point made in the Chair’s report.

Despite multiple requests, neither agency provided information to the committee prior to the release of the Treasury report on Monday 11 October 2021. This is despite this Treasury report stating that:

Since November 2020 de-identified JobKeeper microdata has been made available to government researchers, academics and public policy institutes.16

13 The Treasury, The JobKeeper Payment: Three-month review, June 2020, p. 32.

14 The Treasury, The JobKeeper Payment: Three-month review, June 2020, p. 36.

15 The Treasury, The JobKeeper Payment: Three-month review, June 2020, p. 36.

16 Department of the Treasury, Insights from the first six months of JobKeeper, 2021,

https://treasury.gov.au/publication/p2021-211978, p. 48.

33

1.33 Prior to the release of the Treasury report, this created the farcical situation of data regarding payment of JobKeeper to companies becoming available to the public through the release of analysis for parliamentarians by the Parliamentary Budget Office based on the very same data that neither the ATO or Treasury would provide directly to the committee.

1.34 Even after the release of the Treasury report, the full story is far from clear. Despite making much of the figure of $13.8B going to entities that experienced an increase in turnover, the Treasury report fails to adequately explain that this analysis does not include payments of JobKeeper made to not-for profits, new businesses and businesses that were part of consolidated groups (i.e. multinationals). And, rather than this $13.8B being a component of the total $70.3B for Phase 1 of JobKeeper, it is a component of only $47.6B of Phase 1 of JobKeeper.

1.35 Which means, from what we know for sure, 29% of the first phase of JobKeeper went to companies that had an increase in turnover. If this rate were to hold for the $22.7B of JobKeeper Phase 1 excluded from the Treasury analysis, then another $6.6B has gone to companies that experienced an increase in turnover from Phase 1 alone. This is in accord with PBO findings that the total amount of JobKeeper that went to companies who experienced an increase in turnover was $20B.

A little bit of sunlight 1.36 Since the introduction of this Bill, analysis of public reports issued by companies that received JobKeeper and increased their turnover has given this issue salience and piqued the conscience of some of corporate Australia. The

ATO informed the committee that 62 businesses have repaid $203 million, and that another 13 have also approached the ATO regarding repaying JobKeeper.17

1.37 However, as important as public scrutiny has been in forcing these 75 companies who didn’t need JobKeeper to voluntarily repay it, there are at least another 1,200 companies with a turnover greater than $50 million who had an increase in turnover who haven’t approached the ATO about repaying JobKeeper.18 And, even among those who have repaid, not all of the money has been returned. For example, Harvey Norman has repaid $6 million received by the parent company, but a further $16 million claimed by franchisees has not been repaid.

17 Australian Taxation Office Tabled Opening Statement to Senate Economics Legislation Committee

- Inquiry into the Coronavirus Economic Response Package Amendment (Ending JobKeeper Profiteering) Bill 2021. Proof Committee Hansard, p. 1.

18 Department of the Treasury, Insights from the first six months of JobKeeper, 2021,

https://treasury.gov.au/publication/p2021-211978, p. 17. (accessed 14 October 2021).

34

1.38 This illustrates the shortcomings of transparency alone as a mechanism to recover JobKeeper from those who didn’t need it. Nevertheless, transparency of government programs such as JobKeeper is about a broader principle of the right to know how much and which private enterprises are benefiting from public subsidies. Which is why a public register of businesses who received wage subsidies was a feature of such schemes in many other developed nations, and is why such a public register, as proposed by this Bill, should be introduced in Australia.

Senator Nick McKim Greens Senator for Tasmania

35

Appendix 1

Submissions and additional information

1 Ownership Matters Pty Ltd  Attachment 1  Attachment 2

2 Australian Shareholders Association 3 Australian Council of Trade Unions 4 Domino's Pizza Enterprises 5 Australasian Centre for Corporate Responsibility 6 Professor Rabee Tourky and Professor Rohan Pitchford 7 Toyota Motor Corporation Australia Limited 8 Confidential

Additional Information 1 Tax Commissioner's letter to the President of the Senate tabled in the Senate 12 August 2021. Referred to during the public hearing in Canberra on 10 September 2021.

Answer to Question on Notice 1 Answers to written questions on notice by ASIC. Asked by Senator Nick McKim; received 9 July 2021. 2 Answers to written questions on notice by ATO. Asked by Senator Nick

McKim; received 12 July 2021. 3 Australian Taxation Office (ATO): Answers to questions on notice from the public hearing in Canberra, 10 September 2021 (Received 1 October 2021).

Jobkeeper clawback mechanisms. 4 Australian Taxation Office (ATO): Answers to questions on notice from the public hearing in Canberra, 10 September 2021 (Received 1 October 2021).

Jobkeeper amounts overpaid by entity type. 5 Australian Taxation Office (ATO): Answers to questions on notice from the public hearing in Canberra, 10 September 2021 (Received 1 October 2021).

Jobkeeper amounts (over)paid by entity type. 6 Australian Taxation Office (ATO): Answers to questions on notice from the public hearing in Canberra, 10 September 2021 (Received 1 October 2021).

Value of Jobkeeper payments disaggregated under various categories. 7 Australian Taxation Office (ATO): Answers to questions on notice from the public hearing in Canberra, 10 September 2021 (Received 1 October 2021). 8 The Treasury: Answers to questions on notice from the public hearing in

Canberra, 10 September 2021 (Received 12 October 2021). IQ21-000084 Jobkeeper Review—Downturns.

36

9 The Treasury: Answers to questions on notice from the public hearing in Canberra, 10 September 2021 (Received 12 October 2021). IQ21-000085 Jobkeeper Figures.

10 The Treasury: Answers to questions on notice from the public hearing in Canberra, 10 September 2021 (Received 12 October 2021). IQ21-000086 Jobkeeper advice to Treasurer's Office.

11 The Treasury: Answers to questions on notice from the public hearing in Canberra, 10 September 2021 (Received 12 October 2021). IQ21-000087 Treasury officials.

12 The Treasury: Answers to questions on notice from the public hearing in Canberra, 10 September 2021 (Received 12 October 2021). IQ21-000088 Jobkeeper Review—Deloitte.

13 The Treasury: Answers to questions on notice from the public hearing in Canberra, 10 September 2021 (Received 12 October 2021). IQ21-000089 Jobkeeper payments.

14 The Treasury: Answers to questions on notice from the public hearing in Canberra, 10 September 2021 (Received 12 October 2021). IQ21-000083 Jobkeeper Review—Turnover.

Tabled Documents 1 Australian Taxation Office (ATO): Opening statement from the public hearing in Canberra Friday, 10 September 2021

37

Appendix 2 Public hearings

Friday, 23 July 2021 Committee Room 2S3 Parliament House Canberra

Assistant Professor Steven Hamilton, Private capacity

Ownership Matters Pty Ltd  Mr Dean Paatsch, Director

Australian Shareholders Association  Mr Joseph Mitchell, Workers’ Capital Lead

Australian Council of Trade Unions  Ms Fiona Balzer, Policy & Advocacy Manager

Friday, 10 September 2021 Committee Room 2S3 Parliament House Canberra

Australian Taxation Office (ATO)  Mr Chris Jordan AO, Commissioner  Mr Jeremy Hirschhorn, Second Commissioner—Client Engagement Group  Ms Emma Rosenzweig, Deputy Commissioner—Strategy & Support

The Treasury  Ms Jennifer Wilkinson, Deputy Secretary—Fiscal Group  Mrs Phillippa Brown, First Assistant Secretary—Labour Market Policy Division  Mrs Belinda Robertson, Assistant Secretary—Operations Branch  Mrs Laura Berger-Thomson, Assistant Secretary—Employment Policy

Branch