Global corruption of democracy in the 21st Century

The Guardian UK, 11 April 2016:

Because at root, the Panama Papers are not about tax. They’re not even about money. What the Panama Papers really depict is the corruption of our democracy.

Following on from LuxLeaks, the Panama Papers confirm that the super-rich have effectively exited the economic system the rest of us have to live in. Thirty years of runaway incomes for those at the top, and the full armoury of expensive financial sophistication, mean they no longer play by the same rules the rest of us have to follow. Tax havens are simply one reflection of that reality. Discussion of offshore centres can get bogged down in technicalities, but the best definition I’ve found comes from expert Nicholas Shaxson who sums them up as: “You take your money elsewhere, to another country, in order to escape the rules and laws of the society in which you operate.” In so doing, you rob your own society of cash for hospitals, schools, roads…

“Those who exited our societies are now also exercising their voice to set the rules by which the rest of us live”

But those who exited our societies are now also exercising their voice to set the rules by which the rest of us live. The 1% are buying political influence as never before. Think of the billionaire Koch brothers, whose fortunes will shape this year’s US presidential elections. In Britain, remember the hedge fund and private equity barons, who in 2010 contributed half of all the Conservative party’s election funds – and so effectively bought the Tories their first taste of government in 18 years.

To flesh out the corrosion of democracy that is happening, you need to go to a Berlin-born economist called Albert Hirschman, a giant in modern economic thinking. Hirschman died in 2012 at the age of 97, but it’s his concepts that really set in context what’s so disturbing about the Panama Papers.

Hirschman argued that citizens could protest against a system in one of two ways: voice or exit. Fed up with your local school? Then you can exercise your voice and take it up with the headteacher. Alternatively, you can exit and take your child to a private school.

In Britain and in America, the super-rich have broken Hirschman’s law – they are at one and the same time exercising economic exit and political voice. They can have their tax-free cake and eat it……

Political Cartoon of the Week

Cathy Wilcox

May is likely to be an interesting month in 2016

All around the world directors, shareholders, beneficial owners, mob bosses, drug lords, gun runners and owners of stolen art hiding within shell companies in low tax jurisdictions will be marking their calendars…..

AFR Weekend, 8 April 2016:

The ICIJ, which has said it will not provide data to regulators, plans to release the names of more than 200,000 Mossack Fonseca companies, trusts and foundations in May, including names of directors, shareholders and beneficial owners.

Tax authorities can use this data to seek further documents under tax treaties with many jurisdictions....

A topical tee shirt

Found on Twitter this week.....

This post is dedicated to Malcolm Bligh Turnbull's investment portfolio.

Australian Federal Election 2016: nowhere to run to, nowhere to hide

It is not just individual taxpayers who should be worried about being caught out using Panama-based firm Mossack Fonseca & Co to allegedly hide unexplained wealth or avoid/evade tax on income earned in this country.

The Turnbull Government should also be worried because this story is likely to run right through the federal election campaign this year and, it is not outside the realms of possibility that names will surface which include known Liberal Party political donors.

It is already a problem for the Prime Minister and Cabinet because along with many other federal government departments/agencies, the Australian Dept. of Defence and Department of Immigration and Border Protection have previous and current contracts with Wilson Security Pty Ltd, a client of Mossack Fonseca.

Neither Defence nor Immigration appear to have conducted genuine due diligence on this company during tender processes, as evidence by their response here and here.

On 4 April 2016 ABC News reported:

Leaked documents have revealed that two brothers embroiled in a massive Hong Kong corruption scandal were ultimately in control of an Australian security company that earned roughly half a billion dollars in lucrative government contracts.

The two billionaire brothers, Thomas and Raymond Kwok, were charged with bribing a Hong Kong government official in July 2012 in a case that shook the Hong Kong establishment.

Soon after their arrest, the leaked documents, obtained by the ABC's Four Corners, show the brothers covertly remained directors of the offshore company that ultimately controls Wilson's operations in Australia — Wilson Offshore Group Holdings (BVI) Limited…..

In December 2014, Thomas Kwok was convicted of the bribery offences and sentenced to five years in prison.

His brother Raymond Kwok was acquitted of all charges.

According to Jason Sharman, professor at the Centre of Governance and Public Policy at Griffith University, the "common sense" definition is that the company listed as the ultimate holding company is "not only the legal owner but the entity in control," he said.

"You would expect that if you've got a company at the top of the chain that is in control of a lot of assets, people would really want to know who they are working for, who they are owned by and who they are being directed by," said Professor Sharman…..

Since the arrest of the Kwok brothers in July 2012, Wilson Security secured a sub-contract to provide garrison services for Australia's offshore detention centres on Nauru and Manus Island as well as various other contracts with Defence, The Australian Tax Office and the Department of Prime Minister and Cabinet.

The Kwok brothers maintained effective control as directors via a covert manoeuvre facilitated by Mossack Fonseca.

Two weeks after the brothers were charged, both Thomas and Raymond Kwok removed themselves as directors from Wilson Offshore Group Holdings (BVI) Limited but replaced themselves with two mysterious new directors that were companies, Winsome Sky and Harmony Core.

The leaked files show the directors of those mystery companies were in fact the Kwok brothers themselves.

Thomas Kwok signed on as the director of Winsome Sky on July 30, 2012, and on the same day Raymond signed on as the director of Harmony Core……

Wilson Offshore Group Holdings (BVI) Limited was originally registered in 1991 under a different name, Covert Investments.

Thomas and Raymond Kwok, as well as their older brother Walter, were early directors of Covert Investments before it changed its name to Wilson Offshore Group Holdings (BVI) Limited in 2004.

BACKGROUND

The company founded by Jürgen Mossack and Ramón Fonseca says of itself:

Established in 1977, the Mossack Fonseca Group is a leading global company which provides comprehensive legal and trust services.

With over 500 staff members across every continent, the Mossack Fonseca Group provides excellent services based on more than 35 years of experience. As part of its added value, the Group offers personal advice and a world-class online experience through a virtual Client Portal which is available 24 hours a day. Our web-based Client Information Portal application allows clients to reserve companies online, verify the status of companies, and pay invoices, in addition to other transactions.

Our service and research-oriented professionals specialize in trust services, wealth management, international business structures, and commercial law, among other areas.

Our product and service portfolio is constantly updated and renewed, enabling the Group to find the appropriate solution for your business. We offer research, advice and services for the following jurisdictions: Belize, The Netherlands, Costa Rica, United Kingdom, Malta, Hong Kong, Cyprus, British Virgin Islands, Bahamas, Panama, British Anguilla, Seychelles, Samoa, Nevada, and Wyoming (USA).

Our law firm has specialized attorneys experienced in all areas of law such as shipping, immigration, contracts and intellectual property, as well as commercial law in general. We also assist clients in physically relocating to Panama and supporting them with regard to all of the steps required, from handling immigration matters and buying or renting property to establishing their business in Panama.

Australian Taxation Office media release 4 April 2016:

ATO statement regarding release of taxpayer data

Recently, the ATO received data in relation to a Panamanian law firm containing names of a significant number of Australian residents. Currently we have identified over 800 individual taxpayers and we have now linked over 120 of them to an associate offshore service provider located in Hong Kong.

These cases relate to the release of data by transparency or media organisations in Australia and overseas. ATO intelligence on tax evasion comes from a variety of sources, including from concerned citizens, advisers, partner agencies and international bodies. For example the ATO has raised tax liabilities of around $400 million from data supplied by confidential informants.

Deputy Commissioner Michael Cranston said that since the completion of the offshore disclosure initiative 'Project DO IT', the ATO has ramped up its compliance work to deal with those taxpayers who have failed to disclose offshore income and assets. Sharing information and coordinating action closely with other tax administrations is a large part of this work.

"We promised the community that following Project DO IT we would continue to build our intelligence base, undertake audits, apply significant penalties and refer the worst cases for criminal investigation" Mr Cranston said.

"We have been analysing the latest data against information these taxpayers had reported to the ATO and against the information we already have. We are also working closely with the AFP, Australian Crime Commission and AUSTRAC to further cross-check the data and strengthen our intelligence. Some cases may be referred to the Serious Financial Crime Taskforce.

This Taskforce builds on the success of Project Wickenby where we raised $2.29billion in tax liabilities and there were 46 criminal convictions.

"The information we have includes some taxpayers who we have previously investigated, as well as a small number who disclosed their arrangements with us under the Project DO IT initiative. It also includes a large number of taxpayers who haven't previously come forward, including high wealth individuals, and we are already taking action on those cases" Mr Cranston said.

"Through data analysis we have been able to identify patterns such as clusters of individual taxpayer and advisers for further investigation."

"The message is clear - taxpayers can't rely on these secret arrangements being kept secret and we will act on any information that is provided to us" Mr Cranston said.

The Sydney Morning Herald, 4 April 2016:

More than 11.5 million documents have been leaked from Mossack Fonseca's files, revealing the secrets of hundreds of thousands of clients – including several thousand Australians – covering a period over almost 40 years, from 1977 until as recently as last December.

The release of the documents on Monday follows a 12-month investigation by media groups including The Australian Financial Review, led by the International Consortium of Investigative Journalists (ICIJ) in Washington…..

The files show how Mossack Fonseca thwarted Australian regulators and police inquiries, continued to act for individuals accused of fraud and embezzlement, and lobbied actively to prevent Australia from signing agreements that would allow the exchange of tax information with Samoa, a key tax avoidance jurisdiction.

While most investors and corporations who use tax havens have legitimate reasons to use these structures, the leaked records also show some companies domiciled in tax havens were being used for suspected money laundering, arms and drug deals, and tax avoidance.

"Some cases may be referred to the Serious Financial Crime Taskforce," ATO deputy commissioner Michael Cranston told the Financial Review, confirming the Australian link with Mossack Fonseca.

The data includes high wealth individuals "and we are already taking action on those cases", Mr Cranston said.

"ATO intelligence on tax evasion comes from a variety of sources, including from concerned citizens, advisers, partner agencies and international bodies…..

Mr Cranston said some of the Australians under scrutiny had previously been investigated by the Tax Office but the probe included a "large number of taxpayers who haven't previously come forward".

The ATO investigation is based on a smaller set of files detailing Mossack Fonseca's Luxembourg operations, which were sold to the German government by a former employee, triggering scores of raids by tax investigators who targeted Commerzbank​ clients in Germany in February last year.

German newspaper Süddeutsche Zeitung​, working with the ICIJ, subsequently obtained much more extensive files, with a total 2.6 terabytes of data for Mossack Fonseca's entire global operations, from an anonymous informant. No payment was made……

The Panamanian firm is one of the top five global groups providing corporate registry services in 21 low-tax jurisdictions around the world for more than 214,000 companies, trusts and foundations, providing an essential services for legitimate companies and investors, including BHP Billiton.

But the files show that the firm also protects its less reputable clients, keeping Swiss advisory firm Strachans on its books despite a decade of Project Wickenby investigations initially focused on Strachans that led to 46 criminal convictions, including a jail term for a Strachans partner, Philip de Figueiredo.

Another Wickenby target, Rockhampton-born lawyer Peter Borgas, based in Switzerland, remained a valued Mossack client even after he was arrested in Sydney in 2013 (the charge was dropped five months later).

Last December, Mossack decided it would not act on its probity concerns for a firm controlled by Tan Yixin, a Chinese executive jailed for 3½ years for bribes and leaking secrets to Australia's Rio Tinto, because "the client will destroy us with their comments" in the high-growth Chinese market.

When the Australian Federal Police wrote to Mossack Fonseca's British Virgin Islands office in July 2012 to enforce an Australian court order to sell a Perth apartment on which a BVI company, Anchorville Holdings Ltd, allegedly held a mortgage, Mossack replied that Anchorville had been struck off in 2007 and asked the AFP to stop sending letters.

Perth entrepreneur Roger Bryer had lived for a decade in the spectacular Perth penthouse, which was tied up in lengthy criminal trials over a $US15 million ($19.5 million) embezzlement case involving Commerzbank. Most of the proceeds had been transferred to Australian accounts controlled by Mr Bryer, to invest. Mr Bryer told police he had no knowledge the money was stolen. It was not suggested that he had acted improperly.

In 2012, the DPP applied to sell the penthouse as part of the proceeds of crime, but Anchorville had been set up as mortgagee on it.

Rebuffed by Mossack Fonseca, the AFP obtained a BVI search warrant in November 2012. A Mossack executive produced old documentation showing Anchorville was owned by yet another nominee company.

Meanwhile, Mossack had contacted the original registered owner of Anchorville and offered to reinstate the company, for $5487. As part of that reinstatement, new documents were registered in 2013 that showed that Bryer had owned Anchorville since 2001.

Mr Bryer told the Financial Review on Sunday that he had made it clear to the AFP that he controlled Anchorville and the matter had been completely resolved in a confidential settlement with the AFP and DPP on February 6, 2013.

While Anchorville was set up as a mortgagee company, its mortgage on the penthouse was not valid.

"I have very grave doubts as to whether they were acting legitimately," Mr Bryer said of Mossack Fonseca. "None of it was credible for that company."…..

In 2008, Sydney developer George Ghossayn​, who at the time was a regular in the appointment diary of Labor powerbroker Eddie Obeid​ before later switching his support to the Liberal Party, was setting up an offshore partnership with fellow developer Fouad Deiri​, in a BVI company, Fitall Development Limited.

In September 2013, convicted cocaine dealer-turned-Queensland property developer Joseph Frangieh​ took control of a Seychelles company, Silver Tiger Enterprises Limited.

In late 2011, sports promoter Dominic Galati​ was publicly challenging to replace Frank Lowy as chairman of Football Federation Australia, "because I believe that someone has to be a voice out there for the people that are passionate about this game".

Behind the scenes, Galati was involved in setting up half a dozen companies in Samoa, which were transferred to a new Hong Kong company, Global Wealth Group, controlled by Galati, William Aloisi, John McGeary and Roy Bijkerk.

William Aloisi's website describes him as an investment banker. Mr McGeary is a greyhound trainer, while Bijkerk is a convicted cocaine importer who has built a property empire through Guardian Care Properties.

A remarkable 269 shareholdings of companies in the British Virgin Islands, Samoa, the Seychelles and Panama, almost all of them holding bearer shares, are linked to just four addresses on the Gold Coast associated with family members of Ian Taylor, a New Zealand businessman who, with his father Geoffrey Taylor, has set up shell companies that have since been linked to arms deals, Mexican drug lords and Russia's largest tax fraud.

There has been no suggestion of illegality by the Taylors.

Ian Taylor has previously told Fairfax that "only a small handful" of their companies were misused.

"Clients of certain nationalities are discriminated against only due to their citizenship.

Read the full article here.

The Australian, 4 April 2016:

More than 1000 Australian links to companies have been found in a data leak of millions of documents from a Panama law firm…..

The passports of hundreds of Australian citizens connected to companies as directors, shareholders and beneficial owners, are included according to the ABC.

Australian Federal Election 2016: company tax is a vexing question

In 2014 Treasury made a case for a flow-on to the Australian economy from a 1 per cent tax cut “in the long run” and the Abbott Government reduced company tax for small business by 1.5%, effective 1 July 2015.

This meant that in 2015-2016 the following applied:

(a)  a sole trader in Australia pays the same rate of tax as an individual taxpayer with the same tax-free threshold of $18,200 as the individual. Tax rate brackets range from 19 cents in the dollar if taxable income is between $18,201-$37,000 up to 45 cents in the dollar if taxable income is $180,001 and over; and

(b) a small business with an annual aggregate turnover of less than $2 million pays company tax of 28.5% and businesses with a higher turnover pay 30% company tax. The tax rate for companies is less than the highest rate for individuals.

In December 2014 (updated March 2016) the Australian Tax Office (ATO) created its first corporate tax transparency report for the financial year 2013-14 and the companies listed in this report represented 63% of the approximately 1.1 million companies operating in Australia who reported a taxable income in that tax year. The ATO data tables can be found here.

In 2013-14 company tax was an est. 28% of total income tax revenue received by the federal government and, according to the ATO companies paid total net tax of $67.3 billion.

On 22 March 2016 the ATO released taxation details of 321 private resident companies with listed revenue of $200 million or more in that same financial year.

Of these 30.52% paid no tax and another 31% paid less than the full company tax rate.

Using ATO data the Australian Financial Review published a table of 1,860 companies - with total annual incomes between $100 million and over (public/foreign-owned entities) and $200 million and over (private entities) - which showed that when tax was actually paid the taxation rates for these businesses in practice ranged from as low as 1%-2.5% up to 30%, with only an est. 30 per cent of all these companies paying the full company tax rate.

Yet with an est. 70% of these 1,860 companies not being liable for the full company tax rate and net company tax collected falling to $66.9 billion in 2014-15, the Coalition Government still appears to be hinting that it will consider reducing the company tax rate for a second time.

The Sydney Morning Herald also reporting on 21 March that: Big business wants the rate paid by larger corporations cut to 28.5 per cent to match the rate paid by small companies, and phased down to 25 per cent by 2020 and 22 per cent by 2025. This call by the Business Council of Australia (see paper precis) appears to be backed by some in the small business sector.

Are Turnbull & Co really thinking of giving in to a greedy cash clawback by big business, some of whom are generous political donors?

The prime minister refuses to be drawn before the 3 May 2016 budget papers are released.

Australian Federal Election 2016: these tired old tricks no longer work, Tones

This was the Member for Warringah, Tony Abbott, in the Australian Financial Times on 9 March 2016:

On Friday, Tony Abbott said one of Labor's "five new taxes" included a housing tax (negative gearing), a wealth tax (capital gains), a seniors tax (superannuation), a workers tax (smokers), and the carbon tax.

"Five new taxes is what Bill Shorten has in store should Labor win the next election”…..

There it is, another three-word slogan – “five new taxes”.

So where are these five new taxes?

Negative gearing is a tax concession not a tax charge and Labor does not intend to eliminate this concession for all existing negatively geared investments or future new housing stock – the concession will be removed only on any future investment purchases of old housing stock after 30 June 2017.

Capital gains tax already exists so it is not new. The existing discount subsidy on this tax will be halved under a Labor Government on 1 July 2017. However, all investments made before this date will not be affected by this change and will be fully grandfathered and this policy change will also not affect investments made by superannuation funds. The CGT discount will not change for small business assets. This will ensure that no small businesses are worse off under these changes.

Superannuation is already taxed at certain points of accumulation. Labor is proposing to make this tax fairer by discouraging its use for estate planning/tax avoidance by people with very large incomes by realigning super tax concessions i.e. lowering the High Income Superannuation Contribution (HISC) threshold to $250,000. Around 110,000 people will be affected by the new arrangements.  It will  also reduce the tax-free concession available to people with annual superannuation incomes from earnings of more than $75,000. From 1 July 2017, future earnings on assets supporting income streams will be tax‑free up to $75,000 a year for each individual. Earnings above the $75,000 threshold will attract the same concessional rate of 15 per cent that applies to earnings in the accumulation phase. This measure will affect approximately 60,000 superannuation account holders with superannuation balances in excess of $1.5 million......To ensure that similar concessions are reduced for defined benefit superannuation schemes, Labor will also remove the 10% tax offset for defined benefit income above $75,000, estimated to effect approximately 9,500 account holders.

Tobacco taxation already exists so it also is not new, but the tax percentage will change if Labor wins government. Resulting in a price increase on a packet of cigarettes of an est. $10 spread over four years.

Carbon tax does not exist currently – in fact the previous Labor government's carbon levy was scheduled to end in 2014-15 as it moved towards the then legislated change to a market-driven carbon pricing mechanism. In 2014 a newly elected Abbott Government abolished this national emissions trading scheme. To date Labor has not announced details of its new climate change policy except to point out that it intends to implement an emissions trading scheme which will not be a tax.

Five new taxes planned under Labor? Er..... more like no new taxes in these five instances identified by Tony Abbott in full election campaign-mode.

Master Builders Association rather predictably bites back at Labor's negative gearing policy

 Labor's policy.....

ABC News, 13 February 2016:

Federal Opposition Leader Bill Shorten has unveiled plans to change negative gearing rules for property purchases, in a move touted to "put the great Australian dream back within reach for the middle and working class".

Key points:

* Labor government would restrict negative gearing to "newly constructed homes"

* Capital gains tax discount reduced from 50 per cent to 25 per cent

* Both measures would come into force from July 2017

* All existing investments under the scheme would be fully "grandfathered" and protected against changes

With just months to go until a federal election is called, Mr Shorten used his speech to the NSW ALP conference to rally the party faithful for the battle ahead.

He said if Labor wins the election, from July next year negative gearing would only be available on newly-constructed homes.

The changes under a Shorten government would not affect the tax arrangements for investment properties purchased before July 2017.

Under costings released from the Parliamentary Budget Office, the measures could save the budget $32.1 billion over 10 years once they come into force.

Builders' snark.....

Medianet Release 13 February 2016:

“Labor’s policy announcement on negative gearing has squarely driven a marker not only in the housing debate but also in the broader debate about tax reform and the values we hold as a community,” Wilhelm Harnisch, CEO of Master Builders Australia said.

“Master Builders Australia is committed to tackling the underlying challenges that impact on housing affordability so that home ownership and the housing rental markets remain a cornerstone of Australia’s way of life. The ALP’S new policy position will be controversial by moving away from a long held bipartisan approach since the 1990s after the failed negative gearing policy experiment,” he said. 

“The quarantining of negative gearing to newly constructed residential buildings has certain attractions for the residential building sector but has a sting in the tail by reducing the Capital Gains Tax discount from 50% to 25%,” Wilhelm Harnisch said.

“Our concern is that Labor’s policy is a populist response to those who demonise housing and negative gearing as primary cause of our fiscal and social problems. Investing in new private rental housing is not evil,” he said.

“The private rental market is a critical supplement to the public and social housing rental sectors.

The private rental market also provides a valuable role in supplementing the retirement income strategy for mum and dads on low and middle incomes. Housing is an asset class just as shares and just as shares, interest deductibility in investment housing should remain as a tax feature,” he said.

“The ALP policy leaves important questions unanswered including how to overcome structural impediments to increasing housing supply which is the only effective way to truly tackle housing affordability for both homeowners and renters ” Wilhelm Harnisch said.

“Master Builders has called for the Federal Government to work with State and Territory Governments to use federal national competition policy payments for individually targeted and permanent structural reforms that can remove the current unnecessary blockages that inflate the cost of housing,” he said.

“Master Builders will continue its positive engagement with the ALP on this important area of public policy,” Wilhelm Harnisch said.

“But what we are looking for from both major parties in the lead up to the Federal Election are policies that add to economic growth, create jobs and enhances the positive role that housing can play and that will at the same time improve the ability of mums and dads make their contribution by providing rental housing and at the same time look after their own retirement strategies,” Wilhelm Harnisch said. 

Who negatively gears investment properties.....

The Sydney Morning Herald, 15 February 2015:

Exclusive analysis of the costs and take-up of negative gearing, the 50 per cent capital gains tax discount, and superannuation tax concessions, shows the combined revenue loss - or tax expenditure - will amount to some $50 billion annually within three years, although under 7 per cent of that benefit will flow to the under 30s.

The data-crunching has been undertaken by the National Centre for Social and Economic Modelling using its own database of Australian households as well as the latest information released by the Australian Tax Office.

It was commissioned by the progressive think tank, The Australia Institute.

Executive Director Ben Oquist said the findings showed conclusively that keeping the current concession regime in place is neither in the national interest nor fair.

"In total, these concessions are worth more than $37 billion, yet the young receive only $2.4 billion of their value," he said.

"The capital gains tax discount and negative gearing are particularly unfair for the young, with the under 30s taking approximately 1 per cent of the benefit of tax breaks worth $7.7 billion a year and climbing.

The NATSEM research also shows that 73 per cent of the benefits of the capital gains tax discount, flows to the top 10 per cent of income earners.

All up, it says the under 30s share of the three concessions combined is just 6.4 per cent, whereas those over 50 years of age receive 53 per cent of the benefits. That works out to $2.4 billion versus $19 billion for those over 50 - many of whom are already well-off......

ABC The Drum, 24 September 2014:

When I crunched the numbers, over 60,000 people with investment properties whose taxable income was $80,000 or less had total incomes above that $80,000 threshold ...

The very reason that many housing investors fall below the $80,000 threshold is because they have used negative gearing to slash their tax bill...

Graphs found at  

http://www.abc.net.au/news/2014-09-24/janda-the-myth-of-mum-and-dad-negative-gearers/5766724

As Malcolm Turnbull faces his first national budget as prime minister the right-wing nutters start to crawl out of the woodwork

First cab off the rank is the Australian Chamber of Commerce and Industry with a Let’s Make Aged Pensions Repayable Loans! statement on 14 February 2016:

The Federal Government must use May’s Budget to demonstrate it remains committed to reducing government spending as a share of the economy or else we risk consigning future generations to the painful readjustments that have taken place in southern Europe, the Australian Chamber of Commerce and Industry said today.

The Australian Chamber has released its Pre-Budget Submission, which outlines a series of reforms that can curb runaway spending in areas including the age pension, family tax benefits and childcare.

Kate Carnell AO, CEO of the Australian Chamber, said: “Unless public spending is brought under control, the Australian economy will gradually be crippled by increasing taxes and growing public debt, both of which are unsustainable.

“Given welfare and social services will account for 60 per cent of total government sector spending this year, they provide numerous changes worth considering.

“Changes to the Age Pension could foster innovative financing solutions that guarantee that pensioners can remain in their homes and still save billions of dollars from spending.

“The Government should consider transforming pension payments to owner-occupiers into a loan that is recoverable against their property when it is sold, potentially with a residual value that would allow pensioners to access equity for other purposes, such as aged care. While retirees should be able to maintain a minimum residual value, at present very little of the equity in owner-occupied housing is being drawn down for other purposes.

“In addition, abolishing Family Tax Benefit Part B could save $13.9 billion over four years and means testing the Child Care Rebate could save $250 million per year.

“Public spending growth cannot exceed economic growth indefinitely. If spending continues to grow faster than the economy, we will need to continuously raise the tax burden. If Australia waits until the system breaks we will consign the next generation to readjustments like those implemented recently in Greece and Spain……

Australian Chamber Pre-Budget Submission 2016-17

Next problem for Australian Prime Minister Turnbull - his pick as Treasurer

There is such a lack of talent on the government benches in Canberra that Malcolm Turnbull would have had few ministers to choose from, even if he didn’t owe Scott Morrison the treasury portfolio as exchange for his ‘support’ in the leadership challenge which saw Turnbull gain the prime ministership.

Even after three changes of portfolio, Morrison continues implementing his far-right Christian ideology which delights in screwing over the poor and vulnerable while rewarding god’s chosen - the rich.

As this report in The Sydney Morning Herald on 12 February 2016 indicates:

The most shocking thing in the Treasury analysis delivered to Scott Morrison on January 25 isn't the finding that a cut in income tax funded by a lift in the goods and services tax wouldn't boost the economy at all.

It's what Morrison asked the Treasury to model.

He asked it to model a lift in GST from 10 to 15 per cent and then the handing back of every possible cent in income tax cuts. Because boosting the GST automatically results in extra spending on benefits such as Newstart, family allowances and pensions as prices climb it isn't possible to give all of it back.

But it is possible to hand back $30 billion of the $35 billion as tax cuts, and that's what Morrison asked the Treasury to model in the first instance, not legislated increases in benefits of the kind delivered by his predecessor Peter Costello when introducing the GST.

The impact is horrific.

High earning households do very well. In the top fifth, 81 per cent are better off. In the fifth below that, 80 per cent are better off.

In the bottom fifth, only 9 per cent are better off. Put another way, the change makes 91 per cent of the lowest-earning households worse off.

It makes 79 per cent of the next lowest earning households worse off, and 60 per cent of middle earning households better off.

Morrison had asked the Treasury to model a change that enriched middle and high earners at the expense of the least-well off.

And the results tell us something about the nature of the change. It appears to have been one that cut tax rates or adjusted thresholds at the top more than the bottom. All of the Prime Minister's talk about how any change must be fair appears to not have sunk in.

At his request Treasury and its consultants Econtech and KPMG also did sensitivity analysis. What would happen if, say, $6 billion of the tax cuts were diverted to low earners in extra benefits? They found that the more the tax cuts were diverted to benefits, the worse the economic payoff. Econtech found the payoff turned negative. KPMG found it was positive but got weaker the more low earners were compensated.

Morrison will make much of the finding in a later Treasury brief that doing nothing and allowing bracket creep to push people into ever higher tax brackets is set to take 0.35 per cent from GDP over four years. But tax cuts funded by a hike in the GST wouldn't have halted bracket creep, they would have postponed it. And during the time they postponed it, the projected budget deficit would have swelled……

Will the Turnbull Government finally eliminate those overgenerous superannuation tax concessions for the wealthy?

Is talk of make superannuation policy fairer just part of the political spin in the lead-up to this year's federal election spin or will the Turnbull Government genuinely commitment to removing overgenerous superannuation tax concessions for the wealthy?

In 2015 Australian Treasurer Scott Morrision put superannuation tax concessions for the high-income earners on the table - signalling the possibility of cuts to tax concessions for this group.

By January 2016 Morrison was holding to this position with qualifications.

Public expectation began to build that the Turnbull Government would at last address those tax loopholes in the national superannuation scheme which allows high-income earners to use super as a form of tax avoidance or as estate planning, but leaves ordinary workers paying higher levels of tax on their own super.

An article in The Australian on 3 February 2016 contained this information on government policy relating to tax breaks for the wealthy and the current public mood:

More than 60 per cent of voters support increasing the tax on superannuation contributions for high-income earners in a Newspoll that will buttress plans by the Turnbull government to strip back the generosity of tax breaks on compulsory savings…..

Treasury estimated last week that the tax breaks on superannuation contributions would cost the government $16.2bn in tax revenue this year, or almost half the projected budget deficit. The concessional treatment of superannuation earnings costs the budget a further $13.6bn…..

Treasury has been pressing for a tightening of superannuation tax concessions since 2008. It estimated that in 2012-13, people on the top tax bracket were gaining concessions on contributions worth an average of $4900 a year while people on the bottom two tax rates got concessions of $320.

The response from the Turnbull Government was expected to fall in with the public mood and further announcements were anticipated.

Unfortunately, by 5 February an unnamed source in Canberra had let it be known that the government also has the Super Guarantee in its sights and intends to permanently halt increases in the amount of compulsory superannuation contributions paid by an employer into a worker's superannuation account.

If this comes to pass then an est. 11.5 million workers (based on 2015 figures) currently below retirement age will have less money to live on in their eventual retirement years and their employers with potentially more money in their own personal retirement kitty.

Broken down by gender that's an est. 6.1 million men and 5.3 million women (including in excess of est. 90,000 couples) with less retirement savings in their pockets to meet their living expenses when their working life ends. 

Prime Minister Turnbull has since denied there will changes to the Super Guarantee - or did he?

Mr Turnbull tried to distance himself from the proposal saying “the Government has got no plans to change the rise in compulsory super.”

However he did not deny the move was up for discussion, saying: “What is happening at the moment is that we’re having a very lively debate about tax and economic reform and so all sorts of proposals are swirling around.”

Somehow I'm not feeling confident this denial will last because I'm not sure that this particular federal government understands the real meaning of 'a fair go for all'.

Are we in the first years of a global tax war?

Tax evasion and avoidance has been called a trillion dollar evil and right now in Australia the corporate fight-back has begun as big business and wealthy individuals decide that they want to hold on to every single dollar of their share of this trillion.

Expect a national public relations campaign explaining why business and industry pay their fair share of Australian taxes if the Tax Advisory Panel (and the industry sectors it represents) gets its wish.

I suspect that they are all watching what is going down in Europe with a great deal of interest……..

Financial Times UK, 27 January 2016:

The uproar about Google paying £130m in back taxes and raising the amount it pays in the UK by just £10m a year is merely a little local difficulty compared with what comes next.

Apple could soon be instructed to pay billions, triggering a showdown between Europe and the US and a potential breakdown of the international tax system. This sounds apocalyptic but it is a decent bet.

If you doubt it, consider the following. From irate taxpayers and infuriated politicians to defiant bosses of multinationals, many are at the ends of their tethers about corporate tax.

Countries in the Organisation for Economic Co-operation and Development have spent two years trying to fix the system; one of the first results, Google’s UK deal, has gone down terribly.

Apple disclosed on Tuesday that its minimally taxed pot of overseas cash has grown to $200bn.

Tim Cook, chief executive, flew to Brussels last week to protest at the likelihood of being told by the European Commission to pay a chunk to Ireland, where it has operated since 1980.

American politicians are angry at what some call “a direct threat to the interests of the US”.

The question on which the future of global tax harmony rests is not whether Google should pay more in the UK and less in Ireland.

It is whether US multinationals pay much tax anywhere on overseas earnings, and whether they ever will.

For now, billions in profits are booked in Bermuda and offshore entities, annoying everyone.

The centre is not holding for Alphabet, Google’s parent group, as France and Italy reinterpret their laws to make it pay more tax before local profits escape to Ireland and then, via the Netherlands, to Bermuda.

It will surely fracture over EU cases against Apple and Amazon since the US lives in hope that one day, over the rainbow, their cash will come home to be taxed.

We face a historic moment.

The tax system formed under the League of Nations in 1928 relies on the idea that companies should be taxed largely where profits are created, not where they sell their products and services.

It could soon fall apart and what happens then is anyone’s guess, although it will not be pretty and will probably resemble a global tax war.

Read the rest of the article here.

The Guardian, 28 January 2016 

The UK government’s controversial tax deal with Google could fall foul of European competition rules and will be investigated if a complaint is made, the European commissioner responsible for the rules has warned.

Margrethe Vestager said that so-called sweetheart deals between member states and companies were unfair and could amount to illegal state aid.

The SNP has already written to Vestager calling for a European commission investigation into Google’s tax settlement

Asked on BBC Radio 4’s Today programme about the government’s £130m deal with Google on back taxes, she said: “That’s way too early to say because I don’t know the details of the deal.”

Asked whether she would investigate, Vestager said: “If we find that there is something to be concerned about, if someone writes to us and says: ‘Maybe this is not as it should be’, then we will take a look.”

She added: “We should be in a union where everyone has a fair chance of making it. If you are in a small innovative company … the bigger ones shouldn’t close the market and disable your opportunity to find customers.” 

Vestager’s remarks will add to the mounting pressure on David Cameron, whose government has been accused of being too close to Google……

The Sydney Morning Herald, 16 October 2015:

We are entering a new world of tax revenue wars, and no one can say who will emerge as the victor. 

All we know is that there will be tension over the next five years as governments seek to implement the global plan to end to tax havens from Luxembourg to Bermuda.

The Organisation for Economic Co-operation and Development plan - known as Base Erosion and Profit Shifting (BEPS) – will put an end to non-taxation.

From the OECD's perspective, in a world where there's no longer zero tax, everyone's a winner. In practice, there's likely to be winners and losers.

Tensions will arise because there's still no clear guidance on where or how much profit should be taxed.

BEPS action item 1 (there's 15 parts) said it was impossible to ring-fence the digital economy. It stopped short of recommending whether profits should be taxed where the customer is and value is created (source), or the country where the product originated (residence)…..

The OECD estimates that there could be up to $US240 billion ($325 billion) in revenue being lost due tax avoidance. But that's likely to be tied in with bigger problems such as money laundering.

How many companies with annual turnovers in excess of $250 million pay tax in Australia?

[Australian Tax Office, Corporate tax transparency report for the 2013-14 income year]