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| Cathy Wilcox |
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| David Pope |
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| Fiona Katauskas |
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| Cathy Wilcox |
Saturday, 23 July 2022
Friday, 22 July 2022
The Australian multi-agency Tax Avoidance Taskforce is earning its keep in 2022
Simply put, the Australian multi-agency Tax Avoidance Taskforce has the role of ensuring multinationals and large businesses pay the right tax.
It can sometimes take decades to induce multinationals and foreign-owned businesses to admit additional tax liability and legal battles have been known to go all the way to the High Court – repeatedly in the case of at least one corporation.
However there are now runs on the board.
In November 2018 ATO persistence saw the nominally Australian-based multinational BHP Group Ltd settle their longstanding transfer pricing dispute over the amount of Australian tax payable as a result of BHP’s Australian commodities sales through its Singapore marketing business. The agreed amount was calculated as approx. AU$529 million in additional taxes for the income years 2003 to 2018.
In December 2019 the ATO announced that it had managed to retrieve an extra $481.5 million in taxes from Google Australia after an audit investigated its tax practices between 2008 and 2018 and, that it joined the likes of Microsoft, Apple and Facebook who have all publicly stated that they have settled their tax affairs with the ATO and we welcome their transparency. This result brings the increased collections made against taxpayers in the ecommerce industry to around $1.25 billion cash.
Apple Australia reportedly owed $28.5 million in back taxes when it received the ATO bill in 2012.
While Microsoft in Australia is said to have paid AU$39 million during the 2017 financial year to settle its outstanding tax bill.
U.S. multinational Facebook Inc. was obliged to meet a bill of AU$31.3 million in additional taxes reaching as far back as 2009 according to one media report.
In October 2021 U.S. based ResMed Inc. annnounced it had settled its tax dispute with the ATO for the equivalent of US$381.7 million and locked in future tax certainty.
Then came this announcement concerning a mining corporation which asserts that half its assets are situated in Australia…...
Australian Taxation Office (ATO), media release, 20 July 2022:
The Australian Taxation Office (ATO) can confirm a settlement has been reached with Rio Tinto Ltd (Rio). The settlement brings an end to all tax disputes including long standing disputes in relation to Rio’s Singapore marketing hub. The settlement brings Rio’s total payment in relation to the disputes to almost $1 billion.
Deputy Commissioner Rebecca Saint said that the settlement represented one of the largest settlements in Australia’s tax history.
“This settlement is a very good outcome for the Australian tax system,” Ms Saint said.
“Even prior to this settlement, Rio has been one of Australia’s largest payers of income tax for many years, with a strong track record of engaging with the ATO in relation to its tax affairs, albeit with some areas of dispute.
“Rio have announced that the settlement agreed to has secured approximately $1 billion for the Australian community for past years, over and above their tax returns originally filed. Perhaps more importantly, the settlement locks in future tax outcomes, providing certainty going forward.
“This means that additional profits from the sale of Rio’s Australian owned commodities will be taxed in Australia in the years to come.
“The resolution of these matters means that ordinary Australians can have confidence that even the biggest companies are held to account to pay their tax due,” Ms Saint said.
“This result was delivered through the expertise of the ATO’s Tax Avoidance Taskforce. Many ATO staff have worked for the best part of a decade on these audits to deliver an outcome for the Australian community that strengthens the tax system.”
The compliance programs funded by the Tax Avoidance Taskforce, together with robust tax laws provide an important foundation for the ATO to be able to scrutinise activities to address multinational tax avoidance, often involving investigations over many years.
“This settlement reinforces the importance of Australia’s world leading anti-transfer mispricing rules and a tax administrator properly resourced with the capabilities to deal with this type of dispute. The complexity of properly understanding the global affairs of multinationals, and the true drivers of profitability, can take years of rigorous investigation. This is the case even when the multinational is fully engaged, shares information and is motivated to resolve the issue, such as with this settlement.”
The broader impact of the Taskforce in the market has been to reduce the proliferation of profit shifting and transfer mispricing. ATO intervention has resulted in taxpayers shifting their tax position and increasing their revenues being taxable in Australia.
The Tax Avoidance Taskforce has a focus on the energy and resources sector, including commodity exports and marketing hub arrangements.
“The Rio settlement follows the announcement by BHP in November 2018 that they had settled their marketing hub dispute with the ATO. These announcements provide confidence that Australia’s largest iron ore exporters are meeting their income tax obligations and that profit is being retained in Australia,” Ms Saint said.
As of 30 April 2022, the Tax Avoidance Taskforce has helped the ATO raise $26.3 billion in tax liabilities and collect $14.9 billion in cash.
“Australia has one of the best tax performance rates in the world overall, but in particular in the large market. The success of the Tax Avoidance Taskforce has helped us ensure that compliance rates in the large market have reached 92% of tax paid voluntarily, and 96% after compliance activities.” Ms Saint said.
Background
Details of the settlement are covered by confidentiality provisions and the tax secrecy requirements of the taxation law. However, all our large corporate settlements are reviewed by former Federal Court judges to ensure a fair and reasonable outcome for the Australian community.
ATO settlement practices are subject to significant external scrutiny, with the Australian National Audit Office (ANAO) finding that our practices are effective. The ANAO also indicated we have more transparency over large market settlements than any other jurisdiction.
The efforts of the Taskforce have seen several significant taxpayers publicly state that they have settled their affairs with the ATO, promoting unprecedented transparency. This includes the likes of Google, BHP, Apple, ResMed, and Microsoft.
Thursday, 21 July 2022
Gaining ground on heavy rain and flood damage to roads around the Clarence Valley
The Live Traffic NSW map of north-east New South Wales still resembles a measles outbreak, as all seven local councils work their way through damage to the regional roads network predominately caused by heavy rain and flood events over the last six months.
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| IMAGE: Snapshot of Live Traffic NSW mapping, 20 July 2022 |
Since May 2022 Clarence Valley Council has been publishing its maintenance schedule and this June-July it has been beavering through a long 'to do' list.
Wednesday, 20 July 2022
State of Play in New South Wales on Monday, 18 July 2022 in Year 3 of the COVID-19 pandemic
New South Wales
According to the latest published data at time of posting, as at 4pm on Monday 18 July 2022 there were 141,747 active COVID-19 cases across the state, with 13,544 of these being newly confirmed cases in the previous 24 hours and of whom 441 lived in the 7 local local government areas of Northern NSW.
A total of 26 people died from COVID-19 disease across the state in that same 24 hour reporting period.
Total COVID-19 deaths since the start of the pandemic within NSW now stands at est. 3,853 men & women.
2,205 confirmed cases of COVID-19 were currently hospitalised, with 60 in intensive care of which 13 required ventilation.
As at 11 July 2022 an est. 47,895 people were being self-managed or cared for by household members. It is possibly that on 18 July that number was significantly higher.
On the same day NSW Health listed 2,507 health care workers as being in COVID-19 isolation.
Additionally, in the first 17 days of July 8,776 people in NSW had been diagnosed with Influenza.
On 13 July 2022 in 10 of the 15 local health districts across NSW an est. 20% of hospitalisation capacity was being used by COVID-19 patients and the public health system stress alert indicator was:
Australia-wide
As at 18 July 2022 there were est. 341,204 active COVID-19 cases across the country, with 39,046 being newly confirmed cases in the previous 24 hours.
An est. 30 people died from COVID-19 disease across the country in that same 24 hour reporting period, with another est. 75 deaths recorded up to 4.30pm the next day, 19 July 2022.
Total deaths from COVID-19 since 25 January 2020 now stand at 10,719 men and women, with the majority being 70 years of age and older at time of death.
5,001 confirmed cases of COVID-19 were currently hospitalised across the country, with 155 patients in intensive care of which an unknown number required ventilation.
Additionally, in the fortnight up to 3 July 2022 a total of 187,431 people across the Australia had been diagnosed with Influenza.
SOURCES
NSW:
https://www.health.nsw.gov.au/Infectious/covid-19/Pages/default.aspx
Australia:
https://www.health.gov.au/health-alerts/covid-19/case-numbers-and-statistics
"In the earnings reports, companies have bragged about how they have managed to be ahead of the inflation curve, how they have managed to jack up prices more than their costs and as a result have delivered these record profits"
“Australia isn’t experiencing a wage-price spiral, it’s at the beginning of a price-profit spiral,” said Australia Institute chief economist, Dr Richard Denniss.
“The national accounts show it is rising profits, not rising costs, that are driving Australia’s inflation. While workers are being asked to make sacrifices in the name of controlling inflation, the data makes clear that it is the corporate sector that needs to tighten its belt.”
The report points out that wage growth was at record low levels, while the profit share was at a near-record share of GDP.”
[The Guardian, 18 July 2022]
Corporations are causing inflation by passing on price increases. They are doing this to protect and grow their profits, the same reason why they are refusing decent wage rises https://t.co/1imWMHBBEA
— Sally McManus (@sallymcmanus) July 17, 2022
The Australia Institute, Are wages or profits driving Australia’s inflation? An analysis of the National Accounts, July 2022, excerpts:
Introduction
In recent months the role of wages in driving inflation has been frequently discussed, with many commentators expressing concern that Australia risks a ‘wage price spiral’.
For example:
“Aggressive wages growth will only spur further inflation growth.”
— Andrew Mackellar, CEO of the Australian Chamber of Commerce and Industry
“We are now at risk of a wages and inflation and interest rates death spiral.”
— Innes Willox, CEO of Australian Industry Group
“In the current circumstances, there is a clear risk that a high increase in wages without improved workplace productivity would fuel inflation and increase the likelihood of a steeper rise in interest rates to the detriment of growth and job creation.”
— Innes Willox, CEO of Australian Industry Group
The fear that wage growth has, or could, play a significant role in Australia’s inflation typically ignores the fact that, as shown in Figure 1, real wage growth is at historically low levels and has been for some time.
While wage growth clearly has not been the driving force of recent increases in Australian inflation, or indeed inflation around the world, the continuing impact of COVID 19 and the sharp increase in global energy prices associated with Russia’s invasion of the Ukraine clearly have.
What causes inflation?
Inflation refers to an overall increase in the level of prices in an economy. According to the International Monetary Fund:
Inflation is the rate of increase in prices over a given period of time. Inflation is typically a broad measure, such as the overall increase in prices or the increase in the cost of living in a country.
While much is made of the link between increases in the costs of inputs (such as the price of oil) and increases in prices (such as the price of petrol) in fact many firms have a high degree of discretion about how much, if any, of an increase in costs they will pass on in the form of higher prices.
In short, if firms choose to absorb all of an increase in cost rather than increase prices the cost increases will lead to a reduction in profit not an increase in prices. Similarly, if firms pass on price increases that are more than enough to cover an increase in their production costs then profits will rise. In turn, macroeconomic data on economy-wide changes in prices and the share of GDP flowing to workers and profits can shed light on both the underlying sources of inflation and the distributional consequences of firms’ responses to rising production costs.
While spokespeople for large companies often suggest they have ‘no choice’ but to increase their prices when their costs increase not only do they have the choice to accept lower profits, a closer examination of their language makes clear that they face a range of choices.
For example, in attempting to explain how he had ‘no choice’ but to increase prices in his stores in early 2002, Gerry Harvey, the Executive Chairman of the retail chain Harvey Norman, actually made clear the range of choices he did face:
If a guy down the road drops the price, we drop the price,
If we drop the price, they drop the price.
But if it’s costing you all 10 per cent more than it was yesterday, they’re all going to put up their prices (because) they’ve got no choice.
Mr Harvey makes clear that his company is willing and able to choose to lower prices to match his competitors pricing, even in the absence of a change in cost. He also makes clear that he expects other firms not to absorb any increase in costs and that his firm and his competitors are all likely to increase their prices if costs increase by 10 percent, but it is not clear by how much his firm, or others, would chooses to increase their prices by.
Intriguingly, he ends this explanation by saying firms have no choice, even though all firms have different costs structures and his opening statement is that he would lower his price to match a cheaper offer by a competitor.
As all firms have slightly different cost structures, contract terms for inputs, bottoming costs and exposures to market rents it is inconceivable that all firms in any industry would experience identical changes in price and, in turn, the choices firms make about their price setting in response to changes in cost reflect both their current rates of profit and their willingness to gain or lose market share…..
In short, while in the long run firms must set prices sufficient to cover their costs of production, there is no direct link between costs of production and prices beyond the desire of firms to maintain, or increase, their profits. While firms in new industries seeking rapid growth often deliberately set their prices below their costs in, companies like Santos are currently enjoying a significant increase in price that is entirely unrelated to their cost of production.
Given that profits currently account for a record share of GDP there is simply no truth behind the assertion that the Australian corporate sector has ‘no choice’ but to pass on cost increases in full in the form of higher prices. Indeed, the rising profit share of GDP suggests that Australian firms have, for some time, been choosing to increase their prices faster than their costs have been rising. By definition this causes higher inflation…..
The European Central Bank’s analysis of the role of profits in driving inflation
In a recent speech, Isabel Schnabel, a member of the board of the European Central Bank, said “profits have recently been a key contributor to total domestic inflation” ……
Ms Schnabel went on to state that:
many firms have been able to expand their unit profits in an environment of global excess demand despite rising energy prices… The resilience of profits is particularly evident in those sectors most heavily exposed to global conditions, such as the industry and agricultural sector.
And:
To put it more provocatively, many euro area firms, though by no means all, have gained from the recent surge in inflation. The fortunes of businesses and households have diverged outside of the euro area, too, with corporate profits in many advanced economies surging over the past few quarters.
Poorer households are often hit particularly hard – not only do they suffer from historically high inflation reducing their real incomes, they also do not benefit from higher profits through stock holdings or other types of participation.…..
Australian results
The methodology used by the ECB to decompose recent shifts in price levels and attribute them to shifts in wages, profits and taxes can be applied to Australian data to show the contribution of each to inflation.
The Australia Institute applied the ECB method to annual data for the financial years 2005 to 2021 and quarterly data for June 2021 to March 2022 (the most recent quarter for which data is available). Annual data was used where possible to minimise the volatility in the underlying data caused by COVID-19 support payments affecting tax and subsidies.
The Australian data provides even more stark results than the ECB’s. Figure 5 shows that unit labour costs played almost no role in inflation (as measured by the GDP deflator) over the period 2013 to 2021 and had typically contributed less than half of the GDP deflator prior to 2013.
For the three quarters of data available for 2021–22, encompassing the current uptick in the CPI, labour costs have played an insignificant role, accounting for only 0.6 percentage points of the 4.1 percentage point increase in the GDP deflator (15 percent of the total).
Meanwhile profits have accounted for 2.5 percentage points of the increase in the GDP deflator (about 60 percent of the total).…..
Read the full 15 page report here.
Billionaire business owners and industry lobbyists have other ways of saying our profits are more important than people without ever mentioning the word. Here is a recent example.
ABC News, 17 July 2022:
Head of the Victorian Chamber of Commerce and Industry, Paul Guerra, welcomed the announcement but said the government must ensure it keeps the balance between supporting people in need and running the economy into debt.
"The federal government has told us the pandemic is not over," Mr Guerra said.
"The current wave seems to be stronger than we might have all first thought so we think it's a good thing that support is being provided there for those who are in need.
"That said, we'd like to make sure they come off as soon as the current risk is over so we can accelerate our way as we recover out of COVID."
BACKGROUND
Across the board record profit taking is not just an Australian phenomenon….
Political economist Assistant Professor Isabella M. Weber speaking on U.S. NPR radio program "All Things Considered", 13 February 2022:
Companies always want to maximize profits, right? In the current context, they suddenly cannot deliver as much anymore as they used to. And this creates an opening where they can say, well, we are facing increasing costs. We are facing all these issues. So we can explain to our customers that we are raising our prices. No one knows how much exactly these prices should be increased. And everybody has some sort of an understanding that, oh, yeah, there are issues, so, yes, of course companies are increasing prices in ways in which they could not justify in normal times.
But this does not mean that the actual amount of price increase is justified by the increase in costs. And as a matter of fact, what we have seen is that profits are skyrocketing, which means that companies have increased prices by more than cost. In the earnings reports, companies have bragged about how they have managed to be ahead of the inflation curve, how they have managed to jack up prices more than their costs and as a result have delivered these record profits. [my yellow highlighting]
Tuesday, 19 July 2022
#Morriscum in Seoul looking for relevance and in Perth looking for approval in July 2022
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The Echidna Newsletter, 15 July 2022, excerpt:
Morrison? He told us he'd go back to being a quiet Australian in the Shire and for a few weeks he did exactly that. But he's re-emerged, with less hair but the same amount of self-belief. The Murdoch press loathed by Rudd was handed a speech Morrison was to give at the Asian Leadership Conference in Seoul. In it, he makes a spirited defence of his government's COVID response, spinning the shopworn line that its decisions saved 40,000 lives - never mind the more than 8200 Covid deaths this year. He also has a good old moan about copping criticism because of apparent disagreements within national cabinet. The speech seems to be a hamfisted attempt to rewrite the history we all know. The vaccine strollout - "It's not a race"; the pressure on states to reopen their borders; the ill-conceived photo opps; the interference in preselections; the leaks; the lies - "I don't think, I know"; the foreign relations disaster in the Pacific ... the list could go on and on.
Morrison comes across not so much as angry ghost as a sulky one. He blamed voter confusion over federal-state relations for his electoral downfall. Not my fault is an easy evolution from not my job.
Former PMs can contribute meaningfully to the political discourse. Malcolm Fraser did so with his stance against apartheid and championing of multiculturalism. Keating's occasional forays into the public conversation are often thought-provoking and amusing, if a little angry. But from the revolving door of prime ministers from the last decade, only Julia Gillard manages good grace and the kind of self-deprecation Australians admire…..
With his Seoul speech, Morrison is following the well worn path to the speakers circuit. How long he'll last is debatable. Given the self-pitying tone of his first outing, it's not likely to be long.
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| IMAGE: Twitter |
Financial Review, 14 July 2022:
In late June, Scott Morrison hired out an entire cinema so about 50 of his former office staffers could enjoy a private viewing of Top Gun: Maverick, confirming the former prime minister’s predilection for fantasy.
The love affair with escapist fiction has evidently continued, going by ScoMo’s speech to the Asian Leadership Conference in Seoul on Thursday, which defended his government’s response to the COVID-19 pandemic.
Much of the (now martyred) messiah from the Shire’s address lamented the supremacy the state premiers wielded over the federal government during the crisis. What’s the point of being the most powerful man in Australia when you’ve got to blame someone else for the 7 per cent swing against you in the seat of Cook?
“As the pandemic evolved it became more difficult to keep uniformity in the various restrictions employed by each state ... When we inevitably disagreed, this caused great frustration amongst the public,” he surmised.
Which public was this? Surely, we’d have to discount the sandgropers, who awarded Mark McGowan a personal approval rating of 88 per cent in early 2021, a figure that would make Vladimir Putin blush.
…...Annastacia Palaszczuk garnered support in the high-60s, and Gladys Berejiklian and Steven Marshall both enjoyed approval numbers in the 70s.
ScoMo’s historic revisionism continued, however, proselytising that: “[I]n a crisis this was no time to engage in a political debate about our federation, nor as the national leader to pick fights with provincial leaders.”
Shifting the blame
It’s evidently easy to forget the more than $1 million the feds spent intervening in three separate High Court cases challenging state border closures, including the $41,000 that went to supporting Clive Palmer’s WA border closure challenge, from which the government ultimately withdrew only after public disapproval, but which undoubtedly contributed to the Coalition’s drubbing in the state two months ago.
The former PM’s reckoning that “[f]rustration with the national cabinet was actually frustration with our constitution and the federation” is another gem of Morrison’s preoccupation with blame shifting, given national cabinet was entirely an entity of his government’s own creation. No one forced him to scrap COAG, and no one forced him to allow the states such a seat at the table.
A bit of a bulldozer? The bloke couldn’t even railroad a few premiers if they were strapped to the tracks......
https://www.youtube.com/watch?v=4tDUbQoViK8
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