Friday, April 10, 2015

Is it a problem that some big companies pay little tax?

There is a big debate on that ongoing in Australia at the moment and it has been causing heartburn in Britain too.  The British have attempted to plug the hole by a bureaucratic monstrosity that will have a main effect of increasing accountancy costs.  But the most just system would undoubtedly be to abolish company tax altogether.  Companies disburse their revenues to suppliers, workers and shareholders.  And those people are already taxed on those receipts.  Company tax is double taxation.  Australia has a unique "franking" system that reduces the burden on shareholders but the simplest system would be to abolish the tax altogether.

Politicians rarely abolish or reduce taxes, however. You almost have to be another Ronald Reagan to do that.  John Howard did but even he replaced the "lost" tax by a new tax (the GST).  Given that reality, the challenge is to  find a better system of taxation than the present one. 

The simplest and most efficient change would be to impose a turnover tax as an alternative to a company tax.  A turnover tax of (say) 2% on all companies would yield similar revenue to what company taxes yield and would not be avoidable by profit shifting.  Multinationals would have no avenue of escape.  The turnover of a company (total revenue before disbursements earned in the country concerned) is readily ascertainable from existing company records  so would also require minimal bureaucracy to enforce.

It would also erode the temptation to divert profits into "fringe benefits" for company officers and employees.  Such diversion would have no effect on the tax bill. Even the temptation to retain profits in the hope of changed circumstance in the future would be minimized.  The revenue would be taxed whether it was retained or not. It would also require no international consensus or co-operation. 

Why it never seems to be canvassed rather mystifies me.  Perhaps the bureaucrats don't like it because it would shrink their empires.  An excerpt from the current debate below


Taxation experts have warned against unilateral action on corporate tax avoidance, telling a Senate Economics Committee Australia should be proactive and show leadership in the OECD and G20 tax processes already underway.

The inquiry, initiated by Greens leader Christine Milne, is exploring tax avoidance and aggressive minimisation by corporations registered in Australia and multinational corporations operating in Australia.

Treasurer Joe Hockey has hinted that a diverted profits or “Google tax”, similar to that introduced in the UK is being considered by the Australian government.

However Richard Vann, Challis Professor of Law at Sydney University told the committee he was somewhat cynical about such a tax, suggesting it would collect very little revenue in the UK.

“They don’t even know how they’re going to try to calculate the revenue that they’re going to collect from Google,” Professor Vann said.

Professor Vann said the government was sending a “mixed message” to the multinationals that presented the biggest tax avoidance problem to Australia, by suggesting in the tax discussion paper that we needed to cut our corporate tax rate, and at the same time highlighting the problem of tax avoidance by multinationals.

“There are no simple single-country solutions, it does require coordinated action, he said.

“I’m not saying the diverted profits tax or something like it is a bad idea, but if everyone introduced one that would be a problem. They would all be different, they wouldn’t be harmonised and then we would have breakout.”

QUT taxation Professor Kerrie Sadiq agreed, and said Australia must collaborate internationally and not act “hastily or unilaterally”.

“Personally, I believe we should strive to fix the current system, particularly the transfer pricing regime.”

Transfer pricing sees multinationals make intra-company transactions, such as billing a subsidiary company, for the purposes of avoiding tax in higher taxing jurisdictions.


Greens leader Christine Milne’s bizarre attack on The Australian

Greens leader Christine Milne hijacked a Senate Inquiry into corporate tax avoidance to launch a bizarre attack on The Australian by accusing News Corp of generating a tax benefit from the newspaper.

Milne, who initiated the inquiry into the tax affairs of overseas tech giants like Google, Apple and Microsoft, made The Australian the focus of her opening questions to News Corp Australia chief executive Julian Clarke.

“Can you tell me what are the tax benefits that you get from running The Australian at a loss?,” Milne asked.

Firmly rejecting Milne’s suggestion, Clarke pointed out The Australian is run on a for-profit basis. “If it’s a choice that I make between making a profit on a newspaper and paying tax or on the other side getting some tax benefit the preference is always to make a profit,” Clarke said.

In a spirited tribute to The Australian, Clarke paid respect to the newspaper reaching last year’s landmark 50th anniversary. “With due respect I probably don’t expect you to agree with this but I consider The Australian newspaper to be the finest national newspaper operating here in Australia,” Clarke said.

Continuing the line of enquiry, Milne engaged Clarke in an offbeat exchange. “You’re right, you and I won’t agree on that,” she said.

Clarke responded that Milne’s antipathy to The Australian put her “in a minority” to which the Greens leader returned to the issue of The Australian’s profitability.

“The issue you here is that you run The Australian at a loss and I’m asking why do you continue as a business when it’s not profitable?,” she said.

Clarke hit back with a passionate defence of The Australian’s values as a paper, which was started to challenge orthodoxy; offering a vision to the nation.

“It’s a very important part of our total business, and I make no apologies for the fact The Australian is actually a very important part of our total newspaper operation, and journalistically I think it’s very important inside Australia; very important,” he said.

“You won’t necessarily agree with the reasons we give for this but we think Australia, this nation of ours, needs a very strong national newspaper like The Australian to do exactly what it is doing.”

He added that if The Australian did not exist there would be “nobody doing what we’re doing”, drawing attention to the paper’s mission to challenge, not reassure, the political and cultural establishment.

“Well, Senator, we’ve got a difference of opinion as to why we’re doing it,” he said. “And for every time you tell me we’re trying to do this to run tax losses I’ll tell you that we’re not.”

Milne replied: “I accept that you’re doing it for an ideological purpose.”

Clarke answered: “Okay, I’m happy with that.”

At one point, Milne was cut off by other Committee members, who beseeched the Inquiry to return to its main purpose.

In his opening remarks, Clarke slammed allegations in Fairfax Media-owned papers that News Corp engaged in an aggressive tax avoidance scheme as fundamentally incorrect.

He revealed News Corp was seeking a correction from The Sydney Morning Herald, and told the Committee the company’s local operations are incurring and paying substantial tax in Australia.

Committee chairman Sam Dastyari applauded News Corp’s submission as one of the most frank and detailed disclosures after the bosses of Google, Apple and Microsoft were unable to answer basic questions on the Australian tax affairs of their companies.


Silence and violence in Leftist protest world

Miranda Devine

WHEN leftist authoritarians try to stop people from expressing views they don’t like,they don’t like, all they do is create publicity and even sympathy for causes they oppose.

Whether they violently disrupt protests against sharia law or force the closure of a pizza shop whose Christian owners don’t want to cater for a hypothetical gay wedding, the morally righteous are their own worst enemy.

If you watched the foul-mouthed violence and flag-burning of the so-called anti-racists who disrupted peaceful rallies of a hitherto obscure group of protesters named ­Reclaim Australia, you would automatically have sided with the victims of their abuse.

You may not agree with the Reclaim Australia crowd that Australia has a problem with minorities who “are trying to change Australia’s cultural identity.” You may not agree that halal certification of food in Australia should be banned, that sharia law should be ­illegal, and the burqa forbidden. You may not agree that schools should teach “pride in the Australian flag and anthem”. You may not agree with mandatory 10-year jail terms and deportation for anyone who carries out female genital mutilation. You may be optimistic, as I am, that Australia will absorb Muslim migrants just as well as it has absorbed previous groups and that Australia will be stronger for its ­hybrid vigour.

But that doesn’t mean that those who think differently shouldn’t air their views without being punched, kicked, spat on, showered with police horse dung, abused and intimidated into going home.

That’s what happened on Saturday when rallies around the country planned by ­Reclaim Australia to protest Islamic extremism were ­assailed by mobs of Socialist Party activists, unionists, anarchists, Abbott-haters and ­assorted other disgruntles.

These tolerance police claimed to be acting virtuously as enemies of racism but in ­reality they are part of a well-organised campaign of civil disruption whose ultimate goal is to destroy the capitalist ­system.

In Sydney, police did a good job of keeping most of the so-called anti-racists apart from the 200 or so Reclaim Australia supporters in the rain at Martin Place. But in Melbourne’s Federation Square the clashes between the two groups were so vicious and ­aggressive, they made headlines around the world.

Footage shows both sides pushing and shoving, but it was the so-called anti-racists, who initiated the violence.

They linked arms in Melbourne to form a barrier to stop people, including several speakers, from joining the ­Reclaim rally. They didn’t want to pose a counter view, but to stop the rally.

“We’re not interested in holding our rally somewhere else … this is dangerous to allow hate speech to occur on the streets of Melbourne,” Socialist Party candidate and union organiser Mel Gregson told reporters. “The streets of Melbourne are not the place for anti-Muslim ideas.”

What is she so afraid of? A bad idea expressed out loud is a lot better than a bad idea suppressed and forced underground where it festers and gains power.

Exposed to criticism, ideas can be held up to ridicule, countered with better ideas. If they are bad ideas, the good sense of the Australian people will reject them. That’s the whole point of free speech.

Max, who describes himself as an “average middle aged bloke” went to the Reclaim rally in Melbourne with his three-year-old in a pram, ­because he wanted to hear what the speakers had to say about Islam. His entrance to Federation Square was blocked by “vile youths spitting and abusing passersby and those wishing to attend”.

Pushed and shoved, and fearing for his child’s safety, he never made it to the rally, and vented his spleen online ­instead. “It was up to me to make my own opinion of what was to be said.”

And that is the whole point. All the pseudo anti-racists achieved was to put Reclaim Australia on the map in its very first outing. Now the name is known around the world.

Pauline Hanson, who spoke at the Brisbane rally, made her name the same way. Her fringe One Nation party gained enormous kudos and public awareness in the 1990s when violent socialist protesters attacked its supporters, bussing in rent — a hooligans to bash elderly people. Hanson became a martyr and a political force overnight. Every violent protest drew new recruits to One Nation. Disgusted by the behaviour of her opponents, the silent majority chose her side, even if they didn’t agree with her views.

Similarly, when anti-homophobia zealots tried to shut down a pizza shop in small town Indiana after its Christian owners told a reporter they would not cater for a ­hypothetical gay wedding, the backlash was immediate. The public donated $US842,000 in 48 hours to Memories Pizza owners Crystal and Kevin O’Connor, who now say God rewarded them for their stance.

This is what happens when the totalitarian left tries to ­impose its will in a democracy. It will never win because reasonable people recoil from such closed-minded bigotry.


Privatization:  Western Australia government to sell $800m property portfolio

The Insurance Commission of Western Australia, owned by the WA Government, is seeking to sell the biggest direct property portfolio ever offered in the state worth more than $800 million as part of a change in its investment portfolio asset allocation.

The direct property assets are all located in Western Australia and include three commercial office buildings in Perth and two major retail suburban shopping centres.

ICWA chief executive, Rod Whithear confirmed the move as foreshadowed on and said the commission, which administers the state's Third Party Insurance scheme, wanted to steer away from development and allocate funds into property in a more efficient way.

"If we are able to extract the right value for these assets, it will provide an opportunity for ICWA to reallocate sale proceeds into indirect property investments and other investment classes in line with our investment strategy," Mr Whithear said.

"We could hold a proportion in a wholesale fund and have someone else manage the portfolio, and that would save a lot of time and money."

Mr Whithear also said he anticipated significant interest in the retail shopping centres as investment institutions compete to acquire prime retail assets with development opportunities.

"In the current market, there is a lack of supply of properties for sale and historically low debt costs, so international and domestic buyers are actively searching for portfolio-level opportunities like this one."

PwC Real Estate Advisory and HWL Ebsworth have been appointed as the financial and legal advisory firms to assist ICWA deliver the transaction. 

Mr Whithear did not rule out a possible full trade sale or even an initial public offering, he said that was unlikely. The commission is pursuing an outcome by the end of this year.

The assets form a significant part of ICWA's total investment portfolio of about $4.4 billion held to offset insurance liabilities. They include the 30,000 square metre Forrest Centre at 219 and 221 St Georges Terrace; the 32,000sqm Westralia Square at 141 St Georges Terrace; the 10,000sqm Westralia Plaza at 167 St Georges Terrace.

The retail assets include The Shops at Ellenbrook, which includes 30,000sqm of retail as well as five hectares of development land. The second retail asset is the 15,500sqm Livingston Marketplace Shopping Centre.

JLL's WA managing director John Williams said the overall portfolio would be the largest ever offered, based on his 20 years observing the market.

State Treasurer Mike Nahan said the shift in strategy was worthwhile for the commission.

"Commercial property development is not generally a primary function of government agencies, so ICWA's decision to sell its direct property assets will allow it to focus on its core insurance functions," Mr Nahan said.

Last year South Australia's Motor Accident Commission announced that it had started consultations with real estate agencies on the future of its $600 million property portfolio following a decision that the commission's compulsory third party insurance business would be privatised.

The $3.5 billion investment fund that commission oversees has a 17.5 per cent portfolio weighting to property.


Melbourne father of surrogate baby fights to make surrogacy legal across Australia

I see absolutely no reason why surrogacy should be banned anywhere.  The ban is just some sort of kneejerk reaction and fear of the new.  It is of course an unusually intimate service but other intimate services have been legalized. Prostitution, for instance, is now legal in most jurisdictions that I know of. 

And I don't mean to be derogatory in the comparison with prostitution.  I see both services as having a element of nobility in fact.  Offering the use of one's body to serve the wishes of another is a high order of self-sacrifice.  Whether it is done for money or not does not alter the intrinsic nobility of the thing. 

And, in case someone wants to get "ad hominem" with me about the matter:  No. I have never been with a prostitute

A Melbourne man, who went through the surrogacy process in Thailand about the same time as the baby Gammy scandal, is fighting to have commercial surrogacy made legal in all Australian states and territories.

Sam Marshall and his late partner Natasha McAlpine started investigating surrogacy in Thailand, three years after she recovered from a cancer that left her unable to conceive a second child.

Mr Marshall said he and Natasha were worried when they heard about baby Gammy, but their clinic was professional and caring and the process ran smoothly.

Sadly though Natasha's cancer returned.  The day after she died, Mr Marshall received a phone call, telling him their surrogate had gone into early labour.

The 36-year-old is now raising his seven-month-old surrogate son named Thai, as well as the couple's first child Toby, on his own.

"When I think about all the stuff Tasha had to go through, all the stuff we had to go through to get Thai - we could have done it here, it's not right," Mr Marshall said.

Thailand banned foreign surrogacy following the baby Gammy scandal, where a West Australian couple was accused of abandoning a twin with Down syndrome.

Surrogacy expert Professor Jenni Millbank, from the Faculty of Law at Sydney's University of Technology, said surrogacy agencies in Thailand were shifting across the border to Cambodia.  Professor Millbank was also aware of six new surrogacy clinics which have set up in Nepal.

She said it was creating new problems.  "I guess what we are seeing is this complicating factor, of patients, donors, surrogates and doctors all crossing borders and treatment taking place in a location that is foreign to all of them," Professor Millbank said.

"So when it comes to language barriers, knowledge of the law or access to record keeping, it is more complicated and more uncertain."

Mr Marshall said they were very lucky with their clinic, but there were still plenty of "dodgy" operators.

He said the simple way to protect people was to make commercial surrogacy legal in Australia.

"We're a first world country so we'd be able to create the processes and structures and protections that would get around the ethical issue of surrogates being taken advantage of, and if you take that ethical issue away then there is no reason not to do it," he said.

Professor Millbank believed there could be heartbreaking consequences of "cross-border reproduction".

"Suppose you've got a complication from your treatment, or suppose your child a few years later wants to identify their egg donor or the surrogate, it appears that records are going to be much harder to access if at all, once you've gone to another country or if your practitioner has gone to a third country," she said.

Mr Marshall, who has also been diagnosed with slow progressing multiple sclerosis has his hands full with his baby boy and five-year-old son, but said he has so much to be thankful for.


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