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Transcript of press conference: Canberra: 16 September 2015: multinational tax avoidance; foreign investment in real estate; leadership; Family Tax Benefit; economy



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HON J.B. HOCKEY Treasurer

TRANSCRIPT

PRESS CONFERENCE, CANBERRA WEDNESDAY, 16 SEPTEMBER 2015

E&OE…………………….

TREASURER:

Well, there's two announcements today and I'm joined by the Commissioner of Taxation. I very

much appreciate all the work he’s put into these different announcements. Firstly, today I

introduced the multinational anti-avoidance laws into the Parliament. Australia is leading the

world in cracking down on multinationals that are not paying their fair share of tax. After having

discussed this legislation at the G20 last year, and also having announced it in the Budget, I

followed up at the G20 in Ankara two weekends ago and came to an agreement with the

Chancellor of the Exchequer, and notified the G20 that Australia was going to introduce this

legislation which is the toughest in the world against those companies not paying their fair share

of tax. As a result, after the Taxation Office, being embedded in 30 companies, the laws will

apply to over 1,000 multinationals operating in Australia that have a global turnover of more

than a billion dollars. I understand a number of multinationals have already come forward to

identify profits previously unseen in relation to their activities in Australia, and are prepared to

restructure their businesses to pay their fair share of tax in Australia. Secondly, the crack down of

the Coalition Government in relation to foreign investment continues. I can advise you that, as

of today, there are now over 500 investigations into over one billion dollars of residential real

estate that may be held unlawfully by foreign nationals in Australia. We have already announced

seven divestments in relation to property. I can announce today that I have signed for the further

divestment of property, including properties in Labrador, Queensland, Ardross in Western

Australia, Elizabeth Bay in Sydney, Underdale in South Australia and Stretton in Queensland -held by people from Singapore, Indonesia, the United Kingdom and China. The lowest value

purchase price was $265,000, the highest $8.1 million. They have 12 months to sell the properties

under the amnesty that we have provided until the end of November. So we are getting on with

the job of enforcing the laws. There has been no enforcement and no successful order for at

least the last 20 years. But we have taken this decision to ensure that there is integrity in the

foreign investment regime and that those people who unlawfully hold Australian residential real

estate are caught. I reaffirm again, that we now have investigations into people unlawfully

holding residential real estate, 500 investigations for properties in excess of a billion dollars in

value, and we will continue to police the laws. And with the increased power associated with the

laws currently before the House of Representatives we are absolutely confident that Australians

can once again have faith that the foreign investment rules are being complied with.

Commissioner.

COMMISSIONER:

Thank you Treasurer. Firstly, on the multinational anti- avoidance legislation, the Tax Office

very much welcomes the introduction of this legislation which will significantly impact and

encourage large multinational entities to book their sales here in Australia from sales that clearly

have arisen from sales activity here in Australia. The new laws will make it a lot easier for the

ATO to bring to account, to drag back into the Australian tax net, that sort of activity, that clear

economic activity resulting in sales that is presently booked somewhere overseas, typically in low

or no taxing jurisdictions where the profits are ultimately diverted to. We have a lower standard,

the existing anti-avoidance laws require the sole or dominant purpose test. Over the years that's

been [inaudible] down somewhat by the courts and was a very difficult test for us to meet. We

now have the test of one of the principal purposes, that’s in line with the OECD equivalents in

anti-abuse of treaties, and it will make it, that lower test threshold, will make it a lot easier to

bring to account, back into Australia, the profits that are clearly being diverted out of Australia.

Importantly, this arises from any tax benefits that arise after 1 January 2016, not schemes entered

into after that time. The Treasurer's made mention - and is absolutely correct - that a number of

these large corporates either directly or through their advisers, have approached us to try to get

some understanding of the tax implications of unwinding this. I hope we raise no revenue from

these new provisions because I hope that these multinational companies will do the right thing,

will restructure their investments into Australia in such a way that they leave the profit that

clearly arises from this economic activity back here in Australia, and have that subject to our 30

per cent company tax rate.

JOURNALIST:

Commissioner, if they do do that, what kind of…

TREASURER:

Do you want to say something about foreign investment?

COMMISSIONER:

Just on the foreign investment if I could make a couple of comments there. We are working on

around those 500 investigations at the present time. The majority of those are community

referrals, community dob-ins. So we’re going through those in a fairly systematic way. There are

about 50 people already devoted from the ATO in this area. And we are bringing to bear our

immense data analytics. When we look at the fees we get from immigration, the fees we get from

AUSTRAC, getting information from all the land titles offices, running that against all tax

returns; we are seeing examples of very young people who are here on maybe a student visa

never having lodged a tax return, yet acquiring properties of say $5 million. This does cause us to

have some spin-off benefits by being the Tax Office. We will be looking also - where’s the

income if people have these places rented - how come you have not disclosed income? We will

be looking closely at where the source of those funds have come from, checking to see whether

it's previously untaxed income here in Australia or in the worst case, has it come from the

proceeds of crime? We will be taking strong action and a lot of our work now is encouraging

people to come forward before the first of December to make use of that concessionary penalty

regime up until that time. We will particularly be focusing our attention on third party facilitators.

No longer will the accountants, the lawyers, the buyers’ agents, the real estate agents be immune

from activity because they will be subject to very strong civil and criminal penalties after 1

December, so I am encouraging them to come forward because we will be focusing our attention

there because a lot of these foreign nationals don't understand trusts or these blind trust complex

corporate structures that the lawyers are putting them into to hide the real beneficial ownership

of these properties. So we will have a lot of specific attention against those third parties who

knowingly facilitate the illegal acquisition of Australian real estate.

TREASURER:

Fran?

JOURNALIST:

Commissioner or Treasurer, sorry to interrupt before but, you say you hope you make no

revenue from these measures and this new penalty regime, but what about the revenue that will

be added to the bottom line by these companies restructuring and doing what they should be

doing? What’s that going to add? What are we missing out on?

COMMISSIONER:

We know there are billions of dollars of sales revenue that are not being booked here in

Australia. Now that is the gross element. Because of the nature of their point that they're not

subject to tax here, we don't have a lot of information around their cost structure. So these aren't

the typical transfer pricing ones that book sales here and then back out a lot of the profit by the

costs of goods. You would have seen some of that in the Senate inquiries, in some of the

companies, and some of the industries. So we know there are billions of dollars. That’s gross. So

we have to look at what the profit element of that is and have a much better understanding of

their true cost of sales, not some inflated cost of sales with a lot of that going through to tax. So

we would expect hundreds of millions of dollars’ worth of revenue at least, but it’s billions of

dollars of sales. But you have to make sure you understand the difference between the gross sales

figure and the profit figure which is subject to tax.

TREASURER:

As you know, Fran, I deliberately did not put a number on this in the Budget. And why - because

you’ve got to go through case by case, identify how much profit they actually legitimately made

in Australia and then apply the tax rate. Wayne Swan made the mistake of putting a number on

the mining tax then spent it. There was no mining tax revenue as you know. I have always been

conservative with the numbers.

JOURNALIST:

Treasurer, so you talk of hundreds of millions of dollars. That’s a drop in the ocean when you

look at the overall tax revenue the Commonwealth gets and needs for the future. Is today's

activity enough to get enough revenue from multinational profit shifting?

TREASURER:

To get enough revenue. I see every dollar as precious…

JOURNALIST:

Can the Government do anything further than what it's announcing today?

TREASURER:

Well, what we have announced today - there wasn't universal agreement in the G20, particularly

from one very large country that was a little upset about it. But I have been running this for two

years and we've been running very hard on it. It is patently unfair for a large multinational with

sophisticated structures not to pay its fair share of tax when I go to the local book store in Lane

Cove Mall and he has to pay tax. I mean it's just patently unfair. So on the two areas - GST on

online products - the legislation will be introduced in the next sitting fortnight, I finally got that

through the state treasurers and that legislation is going to ensure that anyone that purchases

products overseas via the internet from Australia pays GST as they would if they went down to

the local shopping centre. The second one is multinationals paying their fair share of tax. Now,

in the United Kingdom they introduced an integrity measure that got worldwide headlines. I

can't use the commercial name but it was - you know what it is. That tax. We’ve taken a different

approach but we have worked closely with the Chancellor of the Exchequer. I had Treasury

officials go over to England to discuss the matter with the Treasury over there. It's working. It's

working.

COMMISSIONER:

Could I just say, that the Treasurer should be acknowledged for his personal leadership of this

issue. The UK did something earlier, and Australia has been the only other country in the G20.

So I think we should acknowledge the leadership that the Treasurer has demonstrated by getting

this legislation up into the House because it will give us, it will give us, the ATO, significant new

powers to drag back into the Australian tax net income from sales where the economic activity is

clearly arising.

JOURNALIST:

[Inaudible] There's a lot more revenue leakage going on than just hundreds of millions of dollars.

So is something else needed in the future?

COMMISSIONER:

Look, there are all the action items that are coming through later this year to the finance

ministers meetings in Turkey, the leaders’ meetings. There will be presumably adoption by the

G20 of the 15 action items next year. All countries will be looking at how to adopt that in their

domestic legislation. So we will see some very integrated and very, sort of, wide ranging new

proposals in the international tax arena that hopefully will provide a greater and easier way to

allocate profits of multinationals.

TREASURER:

The first tranche on base erosion and profit shifting happened last year under our leadership and

the second tranche is coming before the G20 leaders in Anatole and we discussed them in

Turkey. I had a lengthy discussion with Angel Gurria, the Head of the OECD. We're backing

that base erosion plan. We've been right at the forefront of advocating for it, but it's not the

same as what we are doing on multinationals. We’re going further, but it is not going to be in

conflict with what the OECD is doing.

JOURNALIST:

Mr Hockey, can I ask you two questions. What do you think of Malcolm Turnbull's decision to

extend Family Tax Benefit B - [inaudible] supposedly trying to cut down on middle class welfare

- and can I ask you, do you anticipate being in your role this time next week?

TREASURER:

Well, are there any other questions on tax? No? [laughs]. Okay.

JOURNALIST:

How will the Government be offsetting the $25 million cost [inaudible] - sorry $23.25 million.

TREASURER:

The Tax Office is very well resourced. We’ve given the Tax Office some additional funding

support, particularly in relation to Foreign Investment Review Board investigations. As you’d

know, the Foreign Investment Review Board was in Treasury. It was poorly resourced. When I

came in we made a decision to have significant application fees for foreign investors in relation

to the purchase of everything from property to companies. That raised the revenue that

exceeded even the funding requirements for us to put it into the Tax Office and make that

happen. Okay.

JOURNALIST:

Can I just ask about online purchases - how is that exactly going to work? Is there going to be

some obligation for companies to do it, or are you just basically asking them nicely?

TREASURER:

This is the challenge. A number of countries around the world have introduced this equivalent

legislation in relation to online purchases. There are companies like Amazon and Facebook and

others that are prepared to work with countries, wherever they may be located, to apply

consumption taxes should that country request it. That’s because they actually don't pay the tax

themselves, it's their customers that pay the tax. So I am absolutely confident and the

Commissioner might add that those sort of companies will work with the Tax Office to apply

GST to their sales in Australia, because they're doing it in other countries around the world. And

that’s because they want to be good, global corporate citizens.

COMMISSIONER:

That’s absolutely right. All the large suppliers do comply with domestic laws. It is more or less

on a voluntary basis, but they do wish to be seen to be complying with local laws. Now there's -

and that is the vast bulk of sales in terms of percentages - there's a multitude of small suppliers.

Let’s wait and see how that turns out. Wait and see the size of that and work out if there are

some other measures that might be feasibly introduced to pick up on more of those.

TREASURER:

In relation to the question earlier, I understand there are more details to be worked out in further

discussions on Family Tax Benefit. And as for the second question, that is up to the new Prime

Minister.

JOURNALIST:

Given the events of Monday, can I just take you back to the beginning of the year. I think it's fair

to say that you decided perhaps wisely to keep all options on the table when it came to tax

reform. That you indicated, for example, that you supported looking at superannuation again,

that was ruled out. It looks like you were supporting a bank deposit tax - that was ruled out

again. Now that Tony Abbott is gone, do you think that those two issues should be revisited?

TREASURER:

Well, clearly the Prime Minister’s going to determine his ministry and lay down his policies. The

economic directions we’ve taken over the last two years have helped to make the economy $68

billion larger, 300,000 more jobs. There are no apologies for the collective decisions made.

JOURNALIST:

That’s not what I asked. I didn't ask that…

TREASURER:

I know what you asked, and I’m giving you the answer that I choose to give. That’s normal - I

don't get to ask your question, you don't get to answer me mine…

JOURNALIST:

Treasurer, would you be willing to serve in another portfolio and given there is now going to be

a full cabinet discussion on the effects test can I ask why that hadn't happened beforehand?

TREASURER:

Well James, I’ve had discussions with the Prime Minister. We will leave it at that and see what

happens.

JOURNALIST:

Mr Hockey, Malcolm Turnbull had a huge swipe at the economic narrative of the Abbott

Government. Are you gutless for not resigning as Treasurer?

JOURNALIST:

Treasurer, apparently details of yesterday’s cabinet meeting have been leaked to Ray Hadley in

Sydney. Stuff like the length of the meeting, the apparent mood of the Prime Minister as he sat

in it and so forth. Given you were such a steep critic of a lack of loyalty two days ago, how

would you characterise the leaking of cabinet details on the first full day of the new Prime

Minister’s tenure and can you tell us, give us any idea, as to where you think those details might

have come from?

TREASURER:

No.

JOURNALIST:

Would you characterise those for us?

TREASURER:

No, well I haven't seen them…

JOURNALIST:

Treasurer you mentioned you had discussions with the Prime Minister. Has he offered or

suggested or floated any other portfolio for you?

TREASURER:

As all of you know, and you see it all, I am instinctively a loyal person. You know that. I see the

job that I have as one being loyal to the Australian people. That’s why I am doing my job. It's

what I'm here for, to be loyal to the Australian people, to do what is right for them. In relation to

Prime Ministers, I have always been loyal and supportive of leaders. And that’s not going to

change. I'm sorry, but I don't disclose discussions, I don’t.

JOURNALIST:

Did you last week, on Monday, accuse Malcolm Turnbull of not being loyal?

TREASURER:

I’m not going to - I was asked that question by the Labor Party yesterday in Parliament and I

refer you to that answer.

JOURNALIST:

It's been reported today that Scott Morrison has been offered Treasury. I’m sure you are not

going to confirm that, but do you expect to be in this job next week?

TREASURER:

No I am not going to answer that question and I am not going to speculate on it, Fran. I am not

going to take anything out of context. I don't want you to take me out of context. I have a job to

do. It's what I swore on the bible to the Governor General I would do. I am continuing to do

my job to the best of my ability.

JOURNALIST:

On Monday, Malcolm Turnbull basically made the point that there needs to be a new economic

narrative and basically it hasn't been sold to the Australian people. Do you admit that perhaps

there were missteps along the way? What should happen now?

TREASURER:

As I said, you can always do more to better sell something and you can always do more to

strengthen the Australian economy. That is why this is an unfinished task. It’s unfinished. But,

you know, we got rid of five taxes - guys, job creation in Australia is 10 times what we inherited.

10 times! The best thing I can do is help Australians to get a job and it's hard. The Australian

economy is restructuring. It is restructuring but we are managing it. Australia is managing it

better than any other comparable country in the world. I am very proud of that for my nation,

but we should aspire to do better and there is nothing wrong with that aspiration.

JOURNALIST:

How is Mr Abbott and do you expect him to continue in politics?

TREASURER:

Well, that will be a matter for him. We’ve had numerous excellent chats and these are issues for

other people. I am not going to speculate on it Fran.

JOURNALIST:

Assuming you are not Treasurer next week and looking back on this time 10 years into the

future, what would you want your legacy as Treasurer to be?

TREASURER:

I am not going to buy into that. Have we got any other questions? Jacob you haven't asked one.

JOURNALIST:

Do you want to maintain the job? Do you want to keep the job and finish what you started to

do?

TREASURER:

I want to make a difference for Australia. What I laid down 20 years ago in my maiden speech it

hasn't changed. It hasn't changed. I want to do my very best for my country. Simple as that.

JOURNALIST:

This morning Ray Hadley was reading out the names of people who voted for Malcolm

Turnbull…

TREASURER:

I don't think he would have read out my name…

JOURNALIST:

There are a lot of Liberal supporters who are angry at Monday night's events. What is your

message to them about any anger over the removal of Tony Abbott and any reluctance to accept

the new Prime Minister?

TREASURER:

My message is - the worst thing you can possibly do is see a change of Government. We had six

years of Labor. It was bad in policy, bad in principle. They did some things right, but they did a

hell of a lot of damage to the country. We are collectively doing our best to improve Australia

and we will continue to do it. We will continue to do it. Now just two more, Lane you haven't

asked one. Fran, you have to put your hand up! [laughter] Lane.

JOURNALIST:

Do you want to stay in the ministry in some capacity?

TREASURER:

I’ve have had discussions with the Prime Minister about that and I will leave it to those

discussions.

JOURNALIST:

Question for the Tax Commissioner - you just said what a good job Treasurer Hockey had done

on the international stage and international tax avoidance. Do you believe he should stay in the

job?

COMMISSIONER:

I think I will leave the politics for the politicians.

TREASURER:

Mark, we will go to you.

JOURNALIST:

We heard today that Minister Dutton offered his resignation to the Prime Minister. Have you

offered yours?

TREASURER:

I’m not discussing what I discussed with the Prime Minister.

JOURNALIST:

Mr Hockey is this press conference a statement to the Prime Minister, a plea to him that you

would like to stay as Treasurer?

TREASURER:

No, not at all.

JOURNALIST:

Treasurer, do you believe that the Government's chances have actually improved? You talked

about the worst thing being a seat in Government to the Opposition. Do you believe that the

Government's chances of surviving the next election have now improved?

TREASURER:

I will leave that to the commentators.

JOURNALIST:

What's the personal impact of the last few days been to you?

TREASURER:

That’s a bit self-indulgent. I’ll leave it there and thank you all for coming.

[ENDS]