Jennifer Westacott - Network Ten, The Project

Event: Network Ten, The Project
Speaker: Jennifer Westacott
Date: 14 February 2018
Topics: Company tax

Panel: Well, we've contacted Qantas, Transurban, EnergyAustralia, ExxonMobile, and Virgin Australia to come on today. Sadly none of them were available to join us but Jennifer Westacott, the CEO of the Business Council of Australia is here. Jennifer, we're outraged by this but you're outraged by our outrage. Tell us why?

Jennifer Westacott,: Well, what are we outraged about? This quite misleading report from the ABC. I mean I'm outraged by that report because it's wrong. Australian companies do pay tax. They paid 70 billion dollars’ worth of tax last year.

They pay one of the highest tax rates in the world. The tax commissioner today has come out and said Australia's level of compliance is one of the best in the world. Now when companies don't pay tax this is what this very misleading report fails to actually take account of. They don't pay tax when they don't make any money. Now, Qantas for example is being used.

I mean look at this airline, it was on its knees a few years ago. It's reinvested, it's bought a new airline, it's reinvested in its kind of ticketing facilities, it's paid its workers more. Paid them bonuses last year. Now it's made big losses. It's got to recover those losses and it doesn't pay tax when it makes losses and this is just basic business and its very misleading this report and very confusing to people. Of course we want companies to pay their tax.

Of course we want them to make their legal obligations and by and large overwhelmingly they do but when they don't pay tax it's because they are not making any money.

Panel: There's certainly a feeling that in the community though that the bigger the company the less likely they are to be paying tax anywhere in the world and actually it's a global problem. So, can you understand how the rest of us Australians who do pay our tax can feel a bit ripped off by this stuff?

Jennifer: Yeah, except it's not just right. The top 12 companies pay thirty percent of all company tax so the biggest companies in Australia do pay tax. BHP, which is mentioned in this ABC report, over the last ten years has paid $60 billion dollars in tax. I think people forget that when companies are making losses they're still employing people, they're still reinvesting, they're still paying wages, they're still paying payroll tax, they're still paying GST.

You know, we've got to kind of make sure that we're very accurate in these stories. Of course we should clamp down on tax avoidance. But we've got to make sure that debating the community, which I absolutely understand, is accurate and it's right.

Panel: Yeah but Qantas has made a hundred billion dollars in the last ten years. If I was on the dole five years ago and made a hundred billion last year, I'd still be expecting to pay tax this year.

Jennifer: But they made a lot of losses too. Remember that? They made one of the biggest corporate losses in Australia's history. And they have to kind of recover those losses. But in the meantime, they were still employing people, they were still investing in their company, they saved an iconic airline. You think about a few years ago, it was on its knees, Qantas.

Panel: Yeah but those wages and all those costs are tax deductible for Qantas as well so,  it just feels like double dipping.

Jennifer: But this is the thing that's wrong with this ABC report. They compare revenue with profit with the amount of tax paid.

Companies pay tax on profits. That means they pay it after they've paid their workers, their suppliers, leased their buildings, built their capital. I mean if we start saying in Australia that companies are going to pay tax on their revenue well, we'll have unemployment in double digits.

I understand why people want transparency. The Business Council, which I run is pushing companies to sign a code to show how they are organising their taxes. Qantas has signed that code. But, people have got to make sure we're accurate about this. We do not want a country where companies don't reinvest. Where they're not bringing forward these big projects. That means sometimes they make losses. That'll be like me saying to someone who wasn't working or the tax office saying, we know you didn't earn any money last year, why didn't you pay tax?

Panel: We do, it's called GST so, whether we're working or not.

Jennifer: That's true. But these companies are still paying GST. They're still paying payroll tax. They're still paying royalties. They're still paying lots and lots of taxes.

Panel: I want to hear more about how you made a hundred billion dollars a year after the being on the dole. Maybe that's a different story.

Jennifer, I think the problem is, I get what you're saying. Revenue is not what's taxed as profit. But it’s this sense that there must be some pretty clever engineering going on to take huge revenues and then turn them into losses so that they don't need to be taxed, so they can get away without paying tax.

So as an example, ExxonMobile makes twenty-five billion dollars in income, can suddenly make that disappear at tax time. Glencore Investments, $28 billion over the last 3 years, suddenly can make that disappear over tax time.

It's not the Qantas situation, it's not struggling companies. It feels like it's a system that's being gamed. And that's not say they're doing anything illegal, it's saying that the system should be changed so that that just can't happen.

Jennifer: Well, but then again some of those companies, the reason they are not paying taxes is because they've spent billions and billions and billions on these big projects. And we know in those construction phases take years.

So take a coal mine, sometimes it takes two years to actually get to the stuff and be able to get it to another country. It that time, you're still employing people, you're still spending a lot of money investing in the project. So, we've got to be very careful here. I totally agree with you. We've got to make sure companies pay their taxes, multinationals pay their taxes, that's why we are pushing this code. We've also got to remember that some of these very big resources companies are spending absolutely billions, billions, and billions on these big projects that are in construction and while they're in construction they’re not making any money.

Panel: We're hearing that case for tax cuts being put by business, this report is not saying that no companies are paying tax but it's saying that 20% aren’t. And some really really big ones.

What is the point in us giving tax cuts to big companies when they're not paying taxes anyway. Doesn't it mean that whatever benefit we're looking for, we're not going to get?

Jennifer:  Well, as I said these companies are not paying tax in certain periods because they're not making any money and that's the point to make and we want them to. When I talk to CEOs you know what they say, "I'd love to be paying tax because it means I'm making money, it means I'm making a profit". But we need a more competitive tax system. The Americans have just had a 14 point tax cut instantly. And look at what some of the companies are doing. Giving pay increases, reinvesting in America. Australia has a 30% rate. Asia is 22%. Britain is 17%.

If we're not competitive, we can't attract foreign investment here. We can't attract companies here. And Australian companies? They will take their business and do it somewhere else and that's the issue. We are very uncompetitive. We are extremely uncompetitive. We've got to be more competitive so we can grow our businesses, employ more people, pay them more.

Panel: Well, their model also includes restrictions on deductions. Should companies be restricted in some ways?

Jennifer: Well there are lots of restrictions but look ... These things have been looked at many many times in many tax reviews and people come to the same conclusion that by and large we've got this right. I mean we're always open for those compensations. But the bottom line is this, we have one of the highest tax rates in the world. One of the most uncompetitive tax rates in the world. That effects small and big businesses. And we always forget that , you know, every small business needs a big business.

Many of the small businesses in Australia rely on a big business, their biggest customers. We need a whole economy now to be able to compete in a very very different world economy than once upon a time where we weren't subject to all these global pressures. And I tell you, the US thing is a big decision. And it will have big effects as we see companies putting money there and not in Australia.

Panel: But Jennifer, if you say we've got it right then why do we need to talk about cuts?

Jennifer: We need to get the rate right, we were talking about these deductions you talked about.

Our rate is very high, very high by international standards. And that will mean that companies will put money where they can make better returns. And remember that at the end of these returns are shareholders, mum and dad investors. Companies will put money where they can make better returns. And frankly we are falling behind. And let's remember, we're talking about a 10 year tax cut. The Americans have done this instantly. 14 points instantly. We're talking about five points ...

Panel: But the jury is definitely out on the Trump tax cuts. I mean that happened two weeks ago? It'll be worth looking at again in six months or twelve months’ time. There are some people who say it's going to cost their economy a trillion dollars.

Jennifer: Well, they will have tremendous economic activity. Well, I don't think it's a wait and see because every time this has been done in Australia. When companies who got more activity, when they're more profitable, that's actually more revenue to government. A couple of years ago, when companies were more profitable, the top twelve companies were making profits, they were paying $24 billion in tax. A couple of years ago they were only paying 19. When companies are more profitable, when they're more successful, more money comes into the hands of governments.

Panel: Interesting debate Jennifer. Thank you for your time tonight.

Jennifer: You're very welcome. Thanks.

Panel: Thanks Jennifer! Thank you!