Federal Election 2016: looking at the ICIJ Panama Papers searchable database

Some observations after an initial look at the ICIJ Panama Papers searchable database* (which includes Offshore Leaks data), with regard to listings of companies and individuals associated with Australia……

For some who are listed it appears to be a bit of a family affair, for others a lone foray into off-shore company registration.

Some associated with registered companies are investors, while others are active players in the mining, smelting, construction, manufacturing, banking, finance, risk management, insurance and marketing sectors.

There’s the odd investment manager or two, at least one specialist in fine art, some professional property directors and company secretaries, self-employed consultants and a media type.

One of Australia’s rich listers and a National Party politician (appointed not elected) also make appearances on this database.

As does a company which had as directors one multimillionaire former Labor premier of NSW and another multimillionaire who who went on to be a Liberal prime minister – for reasons unknown full details of this company have not been included in the searchable section of the ICIJ database to date.

What there doesn’t appear to be any indication of is that ordinary workers on the average wage went to Mossack Fonceca or other financial advisors to set up a companies in a low taxing jurisdiction such as Panama, the British Virgin Islands, Singapore or Hong Kong.

Off-shore registration appears to be something indulged in primarily by business and industry in this country as well as those with above average to high levels of personal wealth.

The very groups that Turnbull & Co have given company and income tax cuts in the 2016-17 Budget.

Inevitably there are 2014-15 political donors among those listed on the databases and, just as inevitably, there are some who give more to the Liberals and their Coalition partner than they do to Labor.

Before voting on 2 July 2016 readers might consider clicking on the search link at the beginning of this post and typing in a few individual and company names, to see how these might compare with the known interests of election candidates and those political donors included in documents held at the Australian Electoral Commission Annual Returns Locator Service.  

Where people spend, invest or gift their money says something about their personal and professional ethics.  

* It is not asserted by the creators of these databases that every individual or corporation identified has been involved in unlawful tax evasion or any other form of wrongdoing.

Australian Federal Election 2016: the pain that awaits under a second Abbott-Turnbull Government

If there is a second term for this Abbott-Turnbull federal government it will be one characterized by high public debt and increased borrowings.

With a taxation revenue stream that has been deliberately limited by a $4 billion dollar giveaway to people whose level of earned income already cushions them from the realities experienced by average and low income households and, a further $48.4 billion hit to the revenue bottom line so that government can cut the company tax rate of an est. 2.121 million businesses - 70 per cent of whom don't paid the full rate anyway.

To keep their ship afloat Turnbull & Co would need to implement all those punitive Abbott-era cuts that were predominately aimed at working class households.

Which means among other things, an extension of the 2013-14 indexation freeze on Medicare rebates paid to specialist doctors, GPs and allied health professionals in an attempt to force them to pass on the shortfall to patients as a co-payment. As well as the introduction on 1 July 2016 of upfront payments for x-ray, imaging and pathology services.

Eligibility for Family Tax Benefits will be tightened and government paid parental leave payment rules will be changed to exclude more mothers.

The regressive Good & Services Tax (GST) has also been broaden so that from 1 July 2016 goods purchased overseas via the Internet will attract this tax.

From September this year anyone 22 years and over applying for Newstart Allowance will receive payment at a lower rate - each fortnightly cash transfer for a single unemployed person (with no children) will be $8.80 less and for unemployed couples (with no children) it will be $15.80 less. 

This means that a single person eligible to receive Newstart who applies in September will only have an est. $259.40 per week on which to live and look for work, while couples will only receive an est. $468.50 each week. With average rents in the Sydney metropolitan area ranging between $500-$530 at the beginning of this year, rental stress is likely to increase in unemployed households.

Liberal and Nationals federal politicians are denying that they are conducting "class warfare" yet large tax cuts are going to the top 25 per cent of income earners and will eventually will be extended to businesses with annual turnovers in the billions of dollars, while the economically and socially vulnerable are told they deserve less.

Indeed spatial demographics demonstrate the Coalition's further widening of social and economic division in this country.

On 6 May 2016 The Age revealed that the biggest proportion of income earners who will benefit fully from these personal income tax cuts are in Prime Minister Turnbull's high socio-economic status electorate of Wentworth, where more than a third will have more in their pockets after tax. With the western Sydney electorate of Fowler having the nation's lowest proportion of taxpayers who qualify for the tax cut. In its suburbs of Liverpool, Cabramatta and Green Valley, just one in 20 earners have a taxable income higher than the new tax threshold.

While The Guardian on 7 May reported that, in the relatively lower socio-economic status regional electorate of Page on the NSW Far North Coast, 94.2% of taxpayers would miss out on that same cut in the tax rate because their taxable income was below $80,000 a year. Similarly, neighbouring Richmond and Cowper electorates would see 92.3% and 94.0% respectively missing out on the tax cut.

A brief look at what to expect..........

Parliamentary Budget Office, 10 March 2016:

Unlegislated measures carried forward in the budget estimates—February 2016 update. Date issued: 3 February 2016. Date revised: 12: 30pm, 10 March 2016

The Sydney Morning Herald, 2 May 2016:

The first Turnbull budget will be propped up by about $13 billion of so-called "zombie measures", which are still on the books from the first and second Abbott budgets but have not yet been passed by the Senate.

A parliamentary budget office count for the coming financial year puts the "ghost" measures at $1.7 billion. The biggest are the $600 million from planned cuts to access to Family Tax Benefits, $258 million from the outlawing of alleged double-dipping of maternity leave schemes, and $139 million from increasing co-payments and changing the safety net for the Pharmaceutical Benefits Scheme.

2016-17 Budget Papers, Statement 6: Debt Statement, Assets and Liabilities, 3 May 2016:

Net debt is expected to be $326.0 billion (18.9 per cent of GDP) in 2016‑17. Net debt is projected to peak at 19.2 per cent of GDP in 2017‑18, before declining over the medium term to a projected 9.1 per cent of GDP ($264 billion) in 2026-27.The end-of-year face value of Commonwealth Government Securities (CGS) on issue subject to the Treasurer's Direction [government borrowing] is expected to be $497 billion in 2016‑17 and is expected to increase to $581 billion in 2019-20. By the end of the medium term (2026‑27) the total face value of CGS on issue is projected to rise to $640 billion.

2016-17 Budget Papers, Statement 4: Revenue, 3 May 2016:

The 2016-17 Budget forecasts for tax receipts, excluding new policy, have been revised down since the 2015-16 MYEFO by $4.6 billion in 2016-17 and $13.5 billion over the four years to 2018-19. Excluding GST, tax receipts are forecast to be $4.6 billion lower in 2016-17 and $14.2 billion lower over the four years to 2018-19…..

the forecast for nominal GDP has been revised down by $27.5 billion over the four years to 2018-19….

In 2016-17, tax receipts as a share of GDP are expected to be 22.2 per cent, lower than the 2015-16 MYEFO estimate of 22.5 per cent.

Financial Review, 3 May 2016:

The government will spend almost $4 billion over the next four years to stop 500,000 taxpayers moving into the second-highest tax bracket…..

2016-17 Budget Papers Part 1: Revenue Measures, 3 May 2016:

The GST will be extended to low value goods imported by consumers from 1 July 2017….

The intent of this measure is that low value goods imported by consumers will face the same tax regime as goods that are sourced domestically.

Overseas suppliers that have an Australian turnover of $75,000 or more will be required to register for, collect and remit GST for low value goods supplied to consumers in Australia, using a vendor registration model.

The Guardian, 4 May 2016:

Asked about the plan to increase the threshold at which the 37% tax bracket kicks in from $80,000 to $87,000 – a tax cut of a bit over $300 a year for the top 25% of earners – the prime minister, Malcolm Turnbull, told ABC radio that even if it was not legislated when he called the federal election at the end of the week it would be implemented "administratively".

The Sydney Morning Herald, 4 May 2016:

On Tuesday the federal government announced it will increase the tobacco excise by 12.5 per cent a year for the next four years.

The plan will cause the price of a packet of 25 cigarettes to rise to about $40, up from $25 today.

ABC News, 5 May 2016:

Prime Minister Malcolm Turnbull has refused to confirm the 10-year cost of the proposal to cut tax for all firms to 25 per cent over a decade.

The Parliamentary Budget Office (PBO) has estimated the proposal, which will be phased in over time and benefit small and medium-sized businesses first, will cost $16.5 billion a year in 2026-27. However, during an interview with Sky News, Mr Turnbull would not confirm that figure, despite being asked more than a dozen times for an explanation.

The Australian, 6 May 2016:

Treasury has revealed a hit to revenue of $48.2 billion over 10 years from the Coalition’s plan to cut company taxes….

The government policy starts by cutting the company tax rate to 27.5 per cent to all companies with a turnover of up to $10 million, taking effect from July….

will be extended to bigger companies year by year, followed by several years of cutting the overall rate to 25 per cent for all companies.

The Sydney Morning Herald, 7 May 2016:

Anyone who signs up for welfare from September 20 will get less than those already on it, creating a two-tiered payments system…..

The government is removing an "energy supplement" 
Newstart Allowance payments have steadily decreased in relative terms over the past two decades to less than 40 per cent of the minimum wage……

The cut comes as national youth unemployment is nearly 13 per cent.

Centrelink, 7 May 2016:

Payment rates for Newstart Allowance…..

single, no children $527.60 [per fortnight]

[couple] $952.80 [per fortnight]

The “Your Guide To” Series: Newstart Allowance, July 2015:

[Newstart non-indexed] Rates include Energy Supplement of $8.80 (single, no children), $7.90 (each member of a couple) and $9.50 (single with children or over 60 after 9 months) per fortnight.

ABC News, 14 January 2016:

The typical Sydney unit rent was $500 a week, while a house was $530 in December 2015.

Royal Australian College of General Practitioners, May 2016:

14 May 2013 Suspension of MBS rebate indexation until 1 July 2014 to align indexation with financial year, announced in 2013-2014 Federal Budget.

13 May 2014 Indexation freeze for specialists, allied health professionals, nurse practitioners, midwives and dental surgeons MBS and DVA rebates until 30 June 2016, announced in 2014-2015 budget.

1 July 2015 Rebate indexation freeze commences…..

The Federal Government is reducing its investment in your healthcare by freezing your Medicare rebates. This means your Medicare rebates will remain the same until 1 July 2018, despite the cost of services increasing. The freeze is a co-payment by stealth and the Government has implemented this measure to reduce the amount it spends on all Medicare subsidised services, including general practice services. ….

Practices where a large proportion or all services are bulk billed will be significantly affected. The rebate freeze will have a detrimental impact on the viability of the practice. These practices may need to consider introducing or increasing out-of-pocket expenses to ensure the sustainability of the practice.

Individual GPs employed by a practice may be asked by their practice to pay a larger service fee to cover increasing practice costs.

Patients will experience a reduction in the value of their MBS patient rebate over time. 

The impacts will be magnified for GPs and practices providing patient services in lower socio-economic areas, where a majority of patients are from vulnerable groups (such as pensioners, Aboriginal and Torres Strait Islander peoples and people on very low incomes.). Many people in these areas cannot afford to meet out-of-pocket costs for care.

The Turnbull Government and multinational tax avoidance

On 2 October 2014 the Australian Senate referred the matter of corporate tax avoidance and aggressive minimisation to the Economics References Committee for inquiry and report by the first sitting day of June 2015 and, after repeated extensions, on 2 May 2016 the Senate granted the committee a further extension to report by 30 September 2016. 

The committee’s interim reports clearly indicated that the Australian taxation system was being gamed by foreign-based multinationals using aggressive tax practices such as avoidance of permanent establishment, excessive debt loading, aggressive transfer pricing, and the use of tax havens.

On 11 December 2015 the C’wealth Multinational Anti-Avoidance Law (MAAL) came into effect and, its provisions applied from 1 January 2016 to corporations with global annual incomes of AU$1 billion and over and consolidated groups with a parent entity having a global annual income of AU$1 billion and over.

MAAL was designed to counter the erosion of the Australian tax base by multinational entities using artificial or contrived arrangements to avoid a taxable presence in Australia, adding to anti-tax avoidance measures already found in the Income Tax Assessment Act 1997.

However, less than three months later on 26 April 2016, the Australian Taxation Office (ATO) discovered that some taxpayers are entering into artificial and contrived arrangements to avoid the application of the MAAL.

On 3 May 2016 the Turnbull Government released a consultation paper on its proposed Diverted Profits Tax (DPT).

The DPT will impose a 40 per cent tax rate on corporations and consolidated groups with global annual incomes in excess of AU$1 billion that reduce the tax paid on the profits generated in Australia by more than 20 per cent by diverting those profits to low tax jurisdictions. The government hopes to have this new law in place by 1 July 2017.

According to the consultation paper both the Multinational Anti-Avoidance Law and the Diverted Profits Tax are based on Britain’s diverted profits tax introduced on 1 April 2015.

One can only hope that both these laws will be more effective than the U.K. law on which they are based. Because less than eight months after that law was introduced it was found to be ineffective in stopping large multinationals from diverting profits to low tax jurisdictions. As an example, Google with its U.K. advertising revenue held in low taxing Ireland had not had to make payments under the new diverted profits tax.

There is no way that multinationals operating in Australia will not mount legal challenges if the ATO attempts to impose penalties under provisions in MAAL and DPT. 

To some extent the loser will always be federal government revenue because, successful or otherwise, the corporate millions spent in legal fees fighting the tax man are apparently tax deductible.

Australian Federal Election 2016: who else is tired of Liberal-Nationals political lies concerning negative gearing?

Human Rights Commission President Gillian Triggs recently observed that Australian politicians were generally ill-informed and uneducated.

She was speaking in reference to democracy, human rights and international law.

I am beginning to suspect her observations may apply to almost any matter that is placed before them for consideration or action.

When it comes to negative gearing, Liberal and Nationals federal politicians have obviously not read beyond those party talking points released as the federal election campaign heats up and, I suspect their ignorance is wilful. 

Readers have probably already noticed how many of them have declared investment properties and accompanying mortgages in the current Register of Members’ Interests?

So in an effort to balance the one-eyed view of negative gearing held by those with vested interests, here are some facts and observations……

What is negative gearing?

This is how the Direct Property Network (Denuo Pty Ltd) website describes negative gearing:

Negative gearing: cost of the property is greater than the income generated. e.g. total cost is $2,000 per month (includes loan, council rates, real estate management fees etc) less the incoming rent $1,500/month rent received. The difference is $500 per month or $115. 38/week, which costs the investor.

The benefit of negative gearing is the cash loss is offset against income from other sources, thus reducing your taxable income, and hence the amount of tax you have to pay (compared to the tax you'd pay without the investment).

The effects of this cash loss are buffered or absorbed by the tax system.

Because of the tax effects your loss is reduced.

Simply put: the tax man and the rental income pays for your investment property!!

And this is what the Australian Taxation Office (ATO) says about negative gearing:

A rental property is negatively geared if it is purchased with the assistance of borrowed funds and the net rental income, after deducting other expenses, is less than the interest on the borrowings.

The overall taxation result of a negatively geared property is that a net rental loss arises. In this case, you may be able to claim a deduction for the full amount of rental expenses against your rental and other income (such as salary, wages or business income) when you complete your tax return for the relevant income year. Where the other income is not sufficient to absorb the loss it is carried forward to the next tax year.

If by negatively gearing a rental property, the rental expenses you claim in your tax return would result in a tax refund, you may reduce your rate of withholding to better match your year-end tax liability.

If you believe your circumstances warrant a reduction to your rate or amount of withholding, you can apply to us for a variation using the PAYG income tax withholding variation (ITWV) application (NAT 2036).

Advice from domain.com.au on how to negatively gear your own holiday house so that the taxman pays for your weekends away and annual holidays.

Who negatively gears investment properties?

Business Insider reported on 16 February 2015 that:

The richest 40% of Australians carry 80% of the investor housing debt.

According to the Grattan Institute on 8 March 2016:

Data is not directly available on what proportion of home purchases are made by investors. Data on new home lending from The Australian Bureau of Statistics’ Lending Finance figures indicates that between one-third and half of new lending is to investors. And ABS census data shows that just under a third of existing properties are owned by investors.

But not all of them negatively gear. Some do not borrow, and others do not borrow enough to be negatively geared: that is, their rental income is greater than the expenses and loan interest. The tax stats show us that about two-thirds of all housing investors are negatively geared. This suggests that around 20% of housing buyers are negatively geared investors.

In 2015 Australians borrowed a total of $73.54 million in housing finance [ABS, 5671.0 - Lending Finance, Australia, Dec 2015].

These figures indicate that in 2015 negatively-geared investors borrowed an est. total of $14.7 million in housing finance.

It appears that many investors who negatively gear property have borrowed up to 50 to 80 per cent of the purchase price of their investment.

This is a breakdown of who these investors are thought to be, according to Grattan Institute spokespersons writing in The Conversation on 8 March 2016:

Click on images to enlarge

That graph is supported by a second based on ATO data:

Executive Director of The Australia Institute Ben Oquist stated in The Sydney Morning Herald on 16 February 2016:

"In total, these concessions [negative gearing, capital gains tax discount & superannuation tax concessions] are worth more than $37 billion, yet the young receive only $2.4 billion of their value…

"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.

The Sydney Morning Herald also reported on 13 November 2015 that:

According to Tax Office data, nearly 30 per cent of anaesthetists negatively gear their properties, compared to just 3.6 per cent of cleaners.
Surgeons (27.7 per cent), finance managers (23.4 per cent), mining engineers (22.2 per cent), and lawyers (22.1 per cent) are also far more likely to use the strategy than people in lesser-paying jobs, the data shows.

Sales assistants (3.7 per cent), hairdressers (5 per cent), nurses (9.6 per cent) and teachers (12 per cent) are much less likely than surgeons and lawyers to use negative gearing…..

Click on images to enlarge

Data shows the average tax benefit that surgeons received from negatively geared property was $4161 in 2012-13, followed by anaesthetists ($3353), lawyers ($1788), mining engineers ($1336) and finance managers ($1247).

But cleaners only received an average tax benefit of $41, while sales assistants ($42), hairdressers ($167), nurses ($254) and teachers ($327) fared little better…..

Data for the 2013-14 financial year confirms the same professional occupation mix as benefiting most from negative gearing tax concessions.

It comes as no surprise that an electorate with some of the wealthiest people in Australia - the Liberal Party electorate of Point Piper held by Malcolm Bligh Turnbull MP - is also the electorate which claims the most in average rental losses from negative gearing:

ABC News, 27 April 2016, ATO (2014) and NATSEM

According to the Brisbane Times on 1 May 2016:

New research by the Parliamentary Library has found that of the 6071 people in Mr Turnbull's postcode who submitted a tax return in 2014, 592 claimed the tax deduction to the tune of almost $18 million - or $30,278 each.

That works out at about $582 a week.

Nor does it come as a surprise to find some Turnbull Government ministers have one or more geared investment properties, such as Minister for Immigration and Border Protection Peter Dutton, who in December 2015 purchased a $2.235 million two-story beach-front house at Palm Beach QLD with money borrowed from the ANZ Bank. He and his wife appear to own four other properties - two of which are also listed as investments.

In fact an est. 1 in 3 federal politicians own rental properties and ownership by party breaks down like this:

Qld Nationals senator Barry O'Sullivan reportedly owns 41 of these properties, Nationals MP David Gillespie 18 properties, Palmer United Party MP Clive Palmer 12 properties and Country Liberal Party MP Natasha Griggs 12 properties.

So why does multi-millionaire Prime Minister Malcolm Turnbull insist that removal of the negative gearing would hurt mum and dad investors ie those with taxable income incomes at or below $80,000pa?

Well, the first point to remember is that people with genuine and 'unmassaged' taxable incomes below $80,000 per annum are more likely to be receiving negative gearing tax concessions worth less than $800 per year.

The second point is that Labor is only talking about removing the negatively gearing option from old housing stock that is not already negatively geared.

Current investment properties - no matter who they are owned by - will be exempt from proposed negative gearing changes.

Basically, removing negative gearing from old housing stock purchased after 30 June 2017 would predominately affect that section of society which seeks to aggressively avoid tax and accrue wealth by property speculation.

The simple answer to the question of why Malcolm Turnbull has taken his contrary stance is that this is a federal election year and the country is probably heading to the polls in less than six weeks - therefore both Liberal and National ministers, senators and MPs all need to keep their political donors, personal support bases and the property, banking and finance industries firmly on their side if they are to retain their seats and win the Abbott-Turnbull Government a second term in office.

I suspect that small-time investors did not genuinely factor into Turnbull’s decision to leave negative gearing arrangements well and truly alone, no matter what he argues between now and 2 July 2016.

After all, before this election year dawned negative gearing was open to debate in his own party. As the departing treasurer Joe Hockey demonstrated in Hansard on 21 October 2015 at Page 11952 when he appeared to be agreeing with an element in Labor’s draft affordable housing policy:

JOE HOCKEY: We should be wiser and more consistent on tax concessions to help pay for that. In particular, tax concessions on superannuation should be carefully pared back. In that framework, negative gearing should be skewed towards new housing so that there is an incentive to add to the housing stock rather than an incentive to speculate on existing property. 

In an effort to paper over Turnbull Government unwillingness to look taxation inequities squarely in the eye, Liberal and Nationals politicians are apparently blaming ordinary Australians and their supposedly shaky levels of confidence, if The Saturday Paper of 30 April 2016 is any indication:

Coalition sources say concerns about the impact on consumer confidence of big changes to the tax system – along with the assessment that the boost to growth was too small to justify the upheaval – were behind the decision to abandon an increase in the goods and services tax. 

Similar concerns also fed into the decision not to fiddle with negative gearing.

The online newspaper went on to say:

The Saturday Paper has been told cabinet took its decision to retain negative gearing some weeks ago and that it was a political – and not an economic – move.

The policy decision was made to form part of the government’s armoury in the lead-up to the election…..

What do ordinary people think of negative gearing?

According to The Australia Institute less than 9 per cent of the Australian population owned investment properties in 2012, so it is unsurprising to find this online poll in The Daily Examiner (Clarence Valley) on 29 April 2016:

Conclusion?

Putting it quite frankly;  protecting current negative gearing tax concessions for an estimated less than 9 per cent of the population (whose cumulative tax minimisation/avoidance is by most accounts distorting the property market) at the expense of the remaining est. 91 per cent is bad taxation policy.

Favouring this less than 9 per cent, during a federal government term which saw first Abbott then Turnbull rip into the fabric of health, education and welfare safety nets protecting over 23 million people because tax revenue is not keeping pace with government spending, is mindlessly destructive politics.

A fairer approach to taxation concessions - particularly those on self-managed superannuation funds, investments and capital gains realized - which does not encourage aggressive tax minimisation/avoidance at the expense of the common good is not the bogeyman vested interests are making out.

Dear Prime Minister, Australia doesn't need lower taxes

The Australian federal election tax debate is well underway.

The Financial Review revealed on 12 April 2016 that modelling indicated that a cut to company tax would not be in the national interest as it would lead to a sharp decrease in living standards by 2040.....

"It is national income, and not production, that provides an indicator of living standards. Overall we conclude that while a cut to company tax will boost domestic production, it will lead to a fall in real incomes in the range of $800 to $2000 per person in present value terms," Dr Dixon writes in The Australian Financial Review.

The Turnbull Government received an open letter on 13 April......

The Australia Institute, 13 April 2016:

Top economists and community leaders have signed an open letter calling on Prime Minister Malcolm Turnbull to not to cut taxes at this time - especially not on company profits.

The letter, published as a full-page newspaper advertisement, is signed by Former Reserve Bank Governor Bernie Fraser, ACTU National President Ged Kearney, Former WA Premier Carmen Lawrence, Uniting Church Australia President Stuart McMillan and Nobel prize winner Peter Doherty and a collection of economists are part of a list of 50 prominent Australians who are calling for prioritising services, not tax cuts.

The letter reads:

“Cutting programs which support needy Australians to give more tax benefits to companies is not fair. Collecting more tax, more equitably, will make Australia a better place to live and work.”

“Now is not the time to cut taxes. It would be fiscally irresponsible to lower the company tax rate in the current budget environment,” Executive Director of The Australia Institute, Ben Oquist said.

“Proponents of a cut to the company tax rate continue to promote claims of long-term, trickle-down benefits without identifying the immediate impact to revenue and in-turn essential services.

“In fact, a five-point cut in the company tax rate would deliver a projected $27 billion windfall over ten years for the four major banks alone. This simply makes no economic sense and would put Australia’s revenue base at risk. 

“Australia is a low taxing country, 6th lowest by OECD standards. We also have a clear revenue problem, which should be this priority for this budget,” Oquist said.

This was followed three days later by a breakdown of the taxation profiles of the Liberal-Nationals and Labor federal governments.....

THE 10 HIGHEST TAXING AUSTRALIAN GOVERNMENTS

2004-05  24.3% Liberal
2000-01  24.2%  Liberal
2005-06  24.2%  Liberal
2002-03  24.0%  Liberal
2003-04  24.0%  Liberal
2006-07  23.7%  Liberal
2007-08  23.7%  Liberal
1986-87  23.3%  Labor
1987-88  23.2%  Labor
2001-02  23.2%  Liberal

[Stephen Koukolas, 16 April 2016]

THE 10 LOWEST TAXING AUSTRALIAN GOVERNMENTS

1992-93  20.0%  Labor
1993-94  20.0%  Labor
2010-11  20.0%  Labor
2009-10  20.2%  Labor
1991-92  20.7%  Labor
2011-12  20.9%  Labor
1983-84  21.0%  Labor
1994-95  21.2%  Labor
2012-13  21.5%  Labor
2013-14  21.5%  Labor

And the source for these numbers are the MYEFO released by Treasurer Morrison and Finance Minister Cormann in December 2015: http://www.budget.gov.au/2015-16/content/myefo/html/index.htm [Stephen Koukolas, 16 April 2016]

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.