Friday 14 November 2014

Actions speak louder than words - The AIM Network

Actions speak louder than words - The AIM Network



Actions speak louder than words














Joe Hockey has been making noise about tax avoidance.


“They’re stealing from us and our community,” he told the Nine Network on Friday, labelling tax cheats as “thieves.”


Tony Abbott told us we should judge the Coalition on their actions
rather than their words – sound advice considering their words bear no
resemblance to what they actually do – so it would be timely to consider
what they have done to address this growing problem.



While other countries are closing their tax minimisation loopholes,
the Abbott government has spent the past year opening them up.



One of Treasurer Joe Hockey’s first acts in office was to roll back Labor’s measures to tackle profit shifting and improving tax transparency – effectively handing back $1.1 billion to big global firms.


As it pushes for a G20 summit agreement this weekend to crack down on corporate tax evasion,
the Abbott government has set a timetable for action that is about one
year behind the biggest European economies including Britain, France and
Germany.



The “early adopters” in the global program will begin exchanging
information in September 2017, however, the exchange of information with
Australian authorities will not take place until September 2018.



In March this year, the ATO announced an amnesty for offshore tax cheats
For those who come forward before the end of the calendar year, there
is a guarantee of no prosecution and only four years of offshore income
is assessed with a maximum shortfall penalty of 10 per cent.



“For lots of people, their forebearers came from war-torn Europe”,
tax lawyer Mark Leibler told the ABC’s AM program.  “They wanted to keep
nest eggs overseas, not primarily in order to avoid or evade tax, but
just as a measure of security.”



So these people and their families have been avoiding tax since they arrived here after the war but let’s not worry about that.


Around $150 million worth of assets is the most declared by one
person so far. The money has come from 40 countries including
Switzerland, the UK, Hong Kong, Israel and Singapore.



Australian Tax Office deputy commissioner, Greg Williams, said new
migrants with limited knowledge of Australia’s tax system and people
that have deliberately sent money offshore are also among those coming
forward.



“You’ve got that whole gamut from old money, new money, recent migrants and people sending the money offshore,” he said.


These ‘people’ include our own government.


Australia’s Future Fund
has revealed it has invested more than $20 billion through offshore tax
shelters, including the Cayman Islands, warning of lower returns if it
does not minimise its tax bill.



The $77bn fund for federal public-servant pensions has revealed that
14.4 per cent of its assets, worth about $11bn, are invested in
subsidiaries based in the Cayman Islands (a tax haven in the Caribbean)
and a further 1.3 per cent is in its subsidiaries in the British Virgin
Islands and Jersey.



On top of this, the fund has tipped 12.6 per cent of assets, about
$9.6bn, into private market vehicles based in these tax shelters and a
small fraction is invested in a vehicle based in Luxembourg.



Answers to a Senate inquiry revealed that, at June 30, the fund held
stakes in 15 tobacco manufacturers including a $55.4 million stake in
British American Tobacco in Britain, $44.5m in Lorillard and a $44.9m
investment in Philip Morris in the US.



Individuals within the government also embrace the benefits of tax “minimisation”.


In July, it was disclosed that Malcolm Turnbull, Australia’s second-richest parliamentarian, has invested in a ”vulture fund” based in the tax haven Cayman Islands.


Mr Turnbull, who has divested himself of shares and switched his
investments to managed funds and hedge funds since being elected,
updated the register of members’ interests on June 18.



The IPA, not surprisingly, is against any moves to tighten up the laws.


“Inspired by the sensationalist headlines, the emerging policy agenda
for a clamp down on tax avoidance should be seen for what it truly is: a
ploy by indebted countries, with overgrown public sectors, to hoover up
more cash from productive people and enterprises, stifling tax
competition in the process.”



You have to give them credit for never letting morality or ethics
interfere.  They were no doubt impressed when their much-loved patron,
Rupert Murdoch, single-handedly blew an almost billion dollar hole in
our budget when the ATO chose not to appeal a court ruling condoning
Murdoch’s tax avoidance practices.



In a 1989 meeting, four News Corp Australia executives exchanged
cheques and share transfers between local and overseas subsidiaries that
moved through several currencies.



They were paper transactions; no funds actually moved. In 2000 and
2001 the loans were unwound. With the Australian dollar riding high,
News Corp’s Australian subsidiaries recorded a $2 billion loss, while
other subsidiaries in tax havens recorded a $2 billion gain.



By last July that paper “loss”, booked against News Corp’s Australian newspaper operations, had become an $882 million cash payout.


Under a legal arrangement when the company was spun off last June,
News was forced to pass all of the tax payout to Mr Murdoch’s 21st
Century Fox.



News Corp said it had retained $A81 million because it faced income
tax charges on the interest payments by the Tax Office. However it seems
unlikely to actually pay these funds: News Corp Australia carried
another $1.5 billion in tax deductions from a separate paper shuffle
that it made when News reincorporated in the US.



The Australian Taxation Office says its $882 million loss to Rupert
Murdoch’s News Corporation may just be the tip of the iceberg.



Tax Commissioner Chris Jordan and deputy Neil Olesen told a parliamentary inquiry the Tax Office has recently lost even more valuable cases against individual taxpayers.


“There are others bigger than this one,” Mr Olesen told a
parliamentary hearing in March. “There were significant amounts at stake
that we were also unsuccessful with through the courts.”



In a current case, Australian tax authorities allege multinational oil giant Chevron
used a series of loans and related party payments worth billions of
dollars to slash its tax bill by up to $258 million. The claim is now
being heard before the Federal Court of NSW.



Despite growing pressure to crack down on multinationals reaping
massive profits in Australia each year and paying little tax, the ATO
has been scaling back its technical ability to force the
“transnationals” to pay up.



After cuts of $189 million in the May budget, the ATO announced that they had to cut staff by 2,100 people by the end of October.


Community and Public Sector Union (CPSU) deputy national president
Alistair Waters said “The tax office has provided evidence to the Senate
that for every $1 spent on resources by the tax office, that collects $6 in tax revenue
Obviously if you are pulling resources out of the tax office that makes
it easier for people who might want to avoid paying their tax.”



Public servants with hundreds of years of combined technical know-how
have left the ATO’s “Internationals’ Group” in recent years, with the
process accelerated by the present massive cuts to the agency.



Private advisors
hired by “transnationals” to minimise their tax payments know too much
about internal workings of the ATO and are using their insider knowledge
to profit their clients.



Case deadlines of 90 days imposed on audit teams by ATO bosses eager
to increase the number of cases covered have allowed transnationals to
simply “wait out” the Taxation Office or to have low-ball settlements
accepted.



Swedish furniture giant IKEA paid just $7.7 million in tax in
Australia in 2013-2014, despite banking an operating profit of $92
million for its Australian activities that year.



Even the government’s domestic decisions belie their stated willingness to crack down on tax rorting.


Repealing the legislation regarding novated car leases
and FBT cost us $1.8 billion in revenue and the only people to benefit
are those who fraudulently claim business usage of their car, and the
salary-packaging industry that has sprung up to service this perk.



But what can you expect from a Prime Minister
who keeps caucus waiting for an hour – his excuse being “he had to
schedule an early morning visit to a cancer research centre in Melbourne
on Tuesday so that he could justify billing taxpayers to be in the city
for a “private function” the night before”.



Or a Treasurer
who defended “his practice of claiming a $270-a-night taxpayer-funded
travelling allowance to stay in a Canberra house majority-owned by his
wife” as did the Communications Minister who “rented a house from his
wife Lucy when in Canberra.”



In Canberra, MPs are not required to show a receipt to prove they
stayed in a hotel because the blanket $270 rate applies whether you stay
in a hotel or a house owned by yourself or another person.



Because of the rules, many MPs purchase property in Canberra to
provide a base during parliamentary sittings and use their travel
allowance to pay off their mortgage.



We also have our Prime Minister, Attorney-General, Foreign Minister
and Agriculture Minister defending their practice to claim travel and
accommodation costs to attend weddings
whilst grudgingly refunding the money only after it was exposed in the
press.  Attendance at sporting events apparently still constitutes
official business.



Tony Abbott had promised to lead an honest government that would respect taxpayers’ money and end the age of entitlement.


Joe Hockey has “vowed to give the Tax Office whatever laws it needs”
and is “determined to use all available resources to close tax
loopholes.”



Sorry boys – your actions make me doubt your sincerity.


Like this:

Thursday 6 November 2014

How Long can Hockey Survive? - The AIM Network

How Long can Hockey Survive? - The AIM Network



How Long can Hockey Survive?













hockey





For someone whose popularity was the envy of
everyone in the new Coalition government earlier this year, Joe Hockey
must be wondering what the hell happened. His pre-budget popularity
among all voters was 21 points on the positive side (51% for and 30%
against). Then came his first and possibly last budget. That budget is
best described as a fart bomb, the aroma of which just won’t go away.



From that point on Joe has suffered from a lingering case of
foot-in-mouth disease. Some of his revealing comments following on from
his earlier, ‘end of the age of entitlement’ rant, and his dancing to the ‘best day of my life’ music, on budget night, include ‘old people don’t drive cars,’ and just the other day a mind boggling, ‘we will find any way we can to take money out of universities,’ as said to Phil Coorey at the Australian Financial Review.



So, it’s pretty clear his star has hit a brick wall not just with the
electorate generally, but with LNP voters as well. The odd thing is
that Joe himself is genuinely surprised at how badly his budget has been
received. So one has to ask, did he not think that being unfair to the
disadvantaged would rebound on him? What was he thinking? Were the
unpopular budget measures his idea, or was he encouraged to go down that
path by others? Was he set up?



debtOne
thing is for sure. The Treasurer owns the budget no matter who else
contributed and Joe will own this one for years to come just like John
Howard owned the 1982 budget that preceded Malcolm Fraser’s defeat in
1983. The full impact of Joe Hockey’s budget is yet to be realised
because the economy is in much better shape than it was in 1982. That’s
the good news.



The government, however, campaigned furiously on fixing the ‘debt and
deficit disaster’ and that is the bad news. They did so not realising
the nature of the problem which was, and is, falling revenues and
excessive tax expenditures. They still don’t seem to realise it, or do
they? They still want to curb spending but in fact are doing the
opposite. Debt is steadily increasing. Perhaps that is why Tony Abbott
wants a more mature discussion about the GST. They know they have to
find some new money from somewhere.



Sooner or later the numbers will show them up as utter failures. They
have already left it too late. And someone will have to accept
responsibility for it. It almost feels like poetic justice that while
Peter Costello benefitted hugely from a barrel load of money coming in
from China and making him look so good, Joe Hockey’s barrel has shrunk
to a tea pot and he is looking so bad.



musicWhen the money flows the music plays. When it stops the music fades.


Costello was never put to the test. Hockey is being tested severely
right now and is not looking good at all. The analogy being, that when
things are good the music is playing. When things go pear-shaped, the
music begins to fade.



If the budget is ever to return to surplus, revenues must rise. That
is fundamental. The only way that can happen, short of a revival in
China, is to raise taxes and cut tax expenditures; the exact opposite of
Abbott’s mantra about lower taxes. They won’t do it. What a delicious
opportunity for Labor to exploit. If Bill Shorten and Chris Bowen can
climb out of their lethargic slumber and show the Coalition up for the
failures they are, Abbott will have to respond.



budget1The
likely response is to blame the Treasurer. That’s the way of politics.
How long has he got left? Probably one more budget and if it does
include tax increases of some description, Joe is screwed. If it
doesn’t, by 2016 the Coalition’s economic credentials will be screwed
and they will have to go.



The Coalition could have avoided all this last year by campaigning on
Labor’s leadership failures and little else, but they had to engage in
chest beating about the economy, pointing to their so called success
while Costello was Treasurer. They chose to highlight, what seemed to be
Labor’s economic failures. In reality, they shot themselves in the
foot.



They didn’t hear the music fading. In 12 to 18 months’ time the music will stop.


Like this:

Wednesday 5 November 2014

Wounded Hockey faces a nasty choice on banks –

Wounded Hockey faces a nasty choice on banks –

Wounded Hockey faces a nasty choice on banks



The Murray Inquiry is likely to hand the government an
invitation to a fight with the big banks — and Treasurer Joe Hockey is
in no state to lead it.









Treasurer Joe Hockey managed to do it again, this week: open
his mouth and stick his foot in it. And Labor are over the moon about
it, because in doing so he has served up a line that they will quote for
the rest of the life of this troubled government.



“We’ll find any way we can to take the money out of the universities,” he told The Australian Financial Review’s Phil Coorey
yesterday, if the Senate declined to approve the government’s
slash-funding-and-deregulate-fees higher education policy. Within hours,
the Labor party had turned the statement into a poster.
The line perfectly illustrates the perception Labor has been trying to
create of the government — that it is ideological, punitive and
determined to destroy core activities voters take for granted.



Hockey has previously left open the possibility of finding
savings in other areas if the Senate refused to pass all of his
budget — a clunky statement that Labor rapidly built a scare campaign on
and which left Hockey’s colleagues wondering what he was playing at.
Now he has gone further in identifying university education as a target
and expressing a determination to do whatever it takes to slash funding.



Hockey’s statements are, on a rational level, utterly
innocuous. As Treasurer, it’s his job to manage fiscal policy in
conjunction with his Finance Minister. If savings fail to materialise,
or revenue falls short, for whatever reason, the Treasurer is the key
minister charged with determining whether they need to be offset or not,
taking into account both fiscal requirements and macroeconomic policy.
Currently — despite all the rhetoric — Hockey is running a highly
stimulatory fiscal policy, and is in no hurry to curb that stimulus,
because he knows it will undermine economic growth. But he’s also aware
that the path back to surplus will be long and challenging — longer and
more challenging than it seemed from the opposition benches — and he
will need to keep finding savings and cuts just to stick to the
long-term path he’s on, let alone move more quickly.



But politics of course is anything but rational, and Hockey
has repeatedly showed a poor grasp of how his statements will look to
voters and be exploited by the opposition. For a bloke who used to be so
popular and at ease in the media, it’s a surprising but highly
problematic flaw in his political make-up.



A clever
Treasurer would frame the debate as being about making the banks more
responsible … A strong treasurer would lead such a debate. But “clever”
and “strong” are about the last things you’d call the Treasurer
currently.”

And it’s particularly problematic because David Murray looks
likely to dump in Hockey’s lap a particularly nasty policy problem
before the end of the year, when the Financial System Inquiry headed by
Murray reports. The inquiry is Hockey’s baby: he pushed hard for it in
opposition and, in doing so, incurred the wrath of the banking cartel,
and especially ANZ chief Mike Smith, who compared Hockey to the late
Venezuelan leader Hugo Chavez. And while the appointment of Murray as
the inquiry head, and the watered-down terms of reference, initially
appeared designed to nobble the inquiry, Murray has, at least so far,
exceeded expectations. The focus on the cartel’s capital buffers, and
the likelihood that Murray will recommend, in some form, an increase in
the requirements for the big banks to hold assets against lending, means
a stoush is looming between the government and the cartel.



The increase in capital requirements serves two
purposes — to strengthen the banks in the face of future financial
crises (and there will be future financial crises, because that’s
capitalism) and to resolve the “too big to fail” dilemma whereby the
likes of Mike Smith use the fact that no one seriously doubts the
government would intervene to prop up the big four, in order to fund
riskier activities in other markets and see off competition from smaller
banks locally.



But the banks are already engaged in preemptive blackmail,
warning that any increase in capital reserve requirements will curb
lending, send interest rates soaring and, in Smith’s words,
“come at a cost to the economy through lower growth, fewer jobs and
lower tax revenue”. That is, the usual Four Horsemen of the Apocalypse
stuff from an industry facing regulation or higher taxes. No mention,
naturally, of the lower economic growth that comes from having a banking
cartel at the centre of our financial and wealth management systems.



But the cartel isn’t just another industry. Even more so
than the mining industry, this is a sector accustomed to getting its way
with governments. The Coalition has already demonstrated its
willingness to go to the wall for the cartel, restoring conflicted
remuneration to the retail super sector controlled by the cartel and
AMP. Murray’s expected recommendations (note that the Australian Prudential Regulatory Authority
this morning released its new residential mortgage lending
requirements, which will need to be digested first) will leave the
government, and Hockey, in an invidious position. It will need to either
ignore its hand-picked review panel on an issue where, outside the
cartel, there is widespread agreement about the need to fix “too big to
fail”, or have a stoush with a key ally.



Neither is a good outcome for a politically wounded Hockey. A
clever Treasurer would frame the debate as being about making the
banks, currently bringing in record profits, more responsible in the
face of future threats, and less likely to call on taxpayers. A strong
treasurer would lead such a debate. But “clever” and “strong” are about
the last things you’d call the Treasurer currently. Perhaps Hockey will
spend the next few months “considering” the inquiry’s recommendations in
the hope that, between now and the middle of 2015 (Hockey being too
busy preparing MYEFO and next year’s budget to fully focus on it before
then), something will turn up. Namely, his political touch.