by Alan Thornhill
Joe Hockey is talking of progress on two of the biggest problems he faces, profit shifting and squabbling States.
The Treasurer, who is in Washington, told the ABC Insiders program today that he had raised the issue of profit shifting from the floor of a G20 meeting there.
He had told the G20 that Australia had joined – “..with other countries in expressing a concern, a deep concern about profit-shifting by multinationals.
“Whilst we recognise that the OECD is undertaking work which Australia initiated and promoted last year, we obviously want to go further and faster,” he added.
“So, the (British) Chancellor of the Exchequer, George Osborne – and myself – have announced that Australia and the United Kingdom will work together to drive the global agenda.”
Mr Hockey said this would involve:” ..going after multinationals that are shifting profits away from the countries where they earn the income.
” We are going to work with them on their diverted profits tax, which is already implemented,” he added.
“But we are going to send officials over to the United Kingdom as soon as their election is complete and we are going to (move) together.”
Australia and Britain would then lead the world in this area.
That would also ensure that Australia’s work with the OECD would lead to the very best practices.
“That will absolutely ensure that companies earning profits pay tax in the jurisdictions where they earn the profits,” Mr Hockey said.
Premiers, attending a Council of Australian Government meeting in Canberra last week, broke up without reaching agreement on a new formula to distribute GST revenue.
The West Australian Premier, Colin Barnett, was very unhappy about that, accusing other premiers of ganging up on him.
But Mr Hockey said today: “well, it’s something that’s going to be considered in the context of the Federation White Paper.
“And it’s something that I’ve discussed with the State Treasurers.
” Clearly it is unfair to have one State receiving less than one third of the GST paid by its citizens.”
But he added: “If we’re going to support Western Australia, then Western Australia also needs to undertake some of the economic reform that other States have undertaken, which over time will help to further strengthen their economy.
” But I also want to point out that Western Australia has done a lot of heavy
lifting for the Australian economy more generally over the last few years.
“And as a Federation and as a nation, we have an obligation to take that into account now.”
by Alan Thornhill
Poverty levels are rising in Australia, according to a new report.
Cassandra Goldie, Chief Executive Officer of the peak welfare group, the Australian Council of Social Service, says that’s unacceptable in a wealthy country like ours, after 20 years of economic growth.
The report, called Poverty in Australia 2014, was prepared by ACOSS.
It found that 2.55 million Australians – including 603,000 children – now live in poverty.
The report was the third in a series on poverty, that ACOSS began producing in 2007.
It uses two standards to identify and measure poverty.
The more severe concludes that people are in poverty if they are living on less than half the median income in Australia.
The median level, for the broad community, is the mid-point in Australian incomes.
That is the point at which half of the community gets more and half gets less.
This definition puts the poverty line for a single adult at $400 per week.
For a couple with 2 children it was $841 per week.
The less severe standard was set at 60 per cent of median incomes.
The latest ACOSS report estimates that the risk of poverty increased from 13 per cent in 2010 to 13.9 per cent in 2012.
It notes that we don’t do so well on international comparisons, either.
The OECD, which is often called “the rich nations’ club, found that poverty levels in Australia are about one third higher than the average for all of its members.
So who, exactly, are we talking about?
The ACOSS report produces no surprises, there.
It tells the story of poverty in Australia in 2011-12.
It noted that while median incomes continued to increase, a substantial proportion of the population was locked out of paid employment.
Youth unemployment was particularly high.
And it said that it remained difficult for people who were more disadvantaged in the labour market, to gain a foothold in the employment market.
These included Aboriginal and Torres Strait Islanders, people with a disability and the long term unemployed.
ACOSS said that – importantly – its report includes stories and written text from those who experience poverty as part of their day to day lives.
That’s because “ultimately poverty is about the real experiences of those who are in it,” ACOSS added.
It concluded “In 2012, one in seven people, including one in six children, lived below the most austere poverty line widely used in international research.”
That is 50 per cent of median income.
by Alan Thornhill
It’s not often that a parliamentary committee’s inquiry takes fire.
But something very like that is happening with the inquiry the Senate Economics Committee is holding into the complex tax structures many wealthy companies are using, to cut their tax bills.
As The Sydney Morning Herald writer, Michael West, points out:” Tax avoidance relies on secrecy.
“The chicanery of some of the world’s biggest tax dodgers is all over the airwaves this week.
“Surely they now realise that there is a reputational cost for their aggressive tax practices.”
In that sense, the inquiry might already be said to be more successful than the Treasurer, Joe Hockey’s attempt, to launch a national “conversation” on tax, with a paper he issued last month.
That now seems feeble by comparison.
There’s a reason for that.
A rare exposure of the amounts involved, in this aggressive corporate behaviour, is catching the public’s imagination, this time.
Even the OECD has chipped in.
Its head of tax, Pascal Saint Amans, told the Senate inquiry, on its second sitting day in Canberra yesterday, that the amount of profits multinationals are channelling through Singapore, would be “significantly reduced” under a global plan his organisation is proposing, to fight profit shifting.
Singapore’s corporate tax rate, like those of most of our Asian neighbours, is well below Australia’s rate of 30 per cent.
Mr Hockey has said, bluntly, that he believes profits made in Australia should be taxed in this country.
The Australian Tax Office tries hard to enforce laws, broadly based on that view.
But the 4,400 job cuts it has sustained, since the Abbott government took office, isn’t making that job any easier.
The Community and Public Service Union, which also appeared before the inquiry yesterday, was adamant about that.
A CPSU member, Cathy Pugh, who worked in the ATO’s international branch in Sydney, said many of her colleagues – officers with “broad and in depth experience” – had been victims of those cuts.
So the ability of the Tax Office to police profit shifting had been hurt.
Treasury officials have also had a lot to say about company tax recently.
One even spoke openly of scrapping company tax altogether.
He argued that Australia’s 30 per cent rate is making us “uncompetitive” in our neighbourhood, when it comes to attracting much needed foreign investment and added that it is an “expensive” tax to collect, anyway.
However deputy Treasury secretary Rob Heferen, who also appeared before the inquiry yesterday, conceded: “This is a huge issue for us.”
He said corporate profit-shifting probably matters more to Australia than almost any other country.
“That’s because Australia has a high dependence on corporate tax, and why it has been a key driver of pursuing the OECD work on so-called base erosion and profit-shifting through the G20.”
So the committee continued to inspire debate on tax policy yesterday, even though that was just the second day of its inquiry.
Australia’s big miners, BHP Billiton, Fortescue and Rio Tinto, will get their chance to explain their tax strategies, on the third – and final – day of the committee’s hearings, in Melbourne today.
With their once lush finances now pushed into the pits, by catastrophic falls in their prices, its a fair bet that they will be looking for a little sympathy from our politicians.”
They are unlikely to get it.
The money Joe Hockey has lost, through profit shifting, would have helped a lot, in his struggle to cut the Federal deficit.
Labor, as always, is also looking for ways of raising more revenue.
And as for the Greens, well.
This entire inquiry was their idea, wasn’t it?
by Alan Thornhill
The troubles many Australians have had with their financial advisers suggest that checking out the one you might use might well be a good idea.
That will be possible, from today, as the financial watchdog, the Australian Securities and Investments Commission, has now published a register of financial advisers, on its MoneySmart website.
It already has some 19,000 advisers listed there.
Even though this is just the first stage of its operation.
Bank – and other – financial advisers have been sharply criticised over recent months, mostly for offering advice that suited their own financial needs, better than those of their clients.
That controversy is still unresolved.
But efforts to improve the situation are progressing.
ASIC’s announcement today is part of that.
It said:”ASIC has today launched the first stage of the new Financial Advisers Register.
“It is now available to search on ASIC’s MoneySmart website, moneysmart.gov.au.
“The new register, which contains more than 19,000 appointments, meets the Government’s commitment to provide an industry-wide public register of financial advisers by the end of March 2015.”
But that’s not all.
ASIC also said it has updated the information for consumers on its MoneySmart website about choosing financial adviser including what questions to ask.
“The register contains details of persons employed or authorised – directly or indirectly – by Australian Financial Services licensees to provide personal financial advice to retail clients on investments, superannuation and life insurance.”
ASIC Deputy Chairman, Peter Kell said:”The new register enables consumers to find out information about their adviser before they receive financial advice.
“It also gives employers greater ability to assess new financial advisers and will improve ASIC’s ability to identify and monitor financial advisers.
“ASIC encourages consumers to visit ASIC’s MoneySmart website to check out a financial adviser they are thinking of dealing with, and do some homework before they proceed.
“This way, consumers can give themselves the best chance of getting financial advice that meets their needs.”
And it added:”ASIC will now focus its efforts on the second stage of the register which will capture financial adviser qualification, training and professional membership details to be completed and on the register by end May 2015.”
It also said that there is a small number of advisors who are not yet on the register.
While late appointments will continue to be accepted, advisers who are not on the register may potentially lose clients.”
ASIC also has some tips MoneySmart tips for those choosing a financial adviser.
• Work out what you want financial advice about; what are your financial needs and objectives?
• Search ASIC’s Financial Advisers Register to check out the current employment status and history of a financial adviser.
• Ask about a financial adviser’s experience and qualifications to help you achieve your financial goals.
• Check whether a financial adviser can provide advice about the financial products you currently own.
• Understand how your financial adviser will be paid before you engage them; every dollar in fees is a dollar less to invest.
• Get informed about your finances, and the financial advice process, to give yourself the best chance of reaching your financial goals.
by Alan Thornhill
Cutting expensive superannuation tax concessions for wealthy Australians could raise $10.6 billion for the government over four years, according to the Greens.
They said this had been confirmed by an independent costing carried out by the Parliamentary Budget Office.
The Federal Treasurer, Joe Hockey, says all options are on the table in the government’s present review of Australia’s tax systems.
In a statement today, the Greens Leader, Christine Milne, said:” “government advisers have suggested it in the tax white paper.
“Labor says they’ll support it and the Greens have got a costed policy that’s ready to go.
“This would remove a tax haven and reduce the wealth gap between rich and poor.”
That would be “a really great thing for Australians,” Senator Milne said.
“If the government is serious about raising revenue, not just making cruel cuts to those who can least afford it, then making superannuation more equitable is good in and of itself, and for the budget bottom line,” she added.
“Existing superannuation tax breaks are heavily skewed in favour of high income earners.
“The system allows super accounts to be used as a tax haven by the rich, and fails to serve those who really need to save for their retirements,” Senator Milne said.
“Progressive tax on super would see those earning under the tax-free threshold pay no tax on their super contributions, instead of flat 15 per cent that currently applies to all super contributions.
“Those earning up to $100,000 would pay no more than they currently do, and those earning over $150,000 would pay 30 per cent tax on their super contributions.
by Alan Thornhill
A third straight loss – in State elections – probably would have been fatal for Tony Abbott, as Prime Minister.
The NSW Labor leader, Luke Foley, may well have been right about that.
This time, though, Mr Abbott stayed silent in the background, as Mike Baird campaigned to continue as Premier of Australia’s most heavily populated State.
And, despite Liberal losses in Victoria and Queensland, it worked.
Predictably senior Liberal ministers, like Julie Bishop and Scott Morrison are delighted.
The Foreign Minister said the Baird government should be congratulated, because it had been willing to embrace reform.
“That’s what our Intergenerational report is all about, showing how Australia was on the wrong path under Labor,” she said.
“But we can get it on the right path with some reforms,” Ms Bishop declared.
The Social Services Minister, Scott Morrison, said:” we’re thrilled for Mike Baird, because our budget task does get easier, I think, because Mike Baird has been re-elected.
“… he has an infrastructure program which will help continue to drive the national not just the NSW economy,” he said.
But there were less welcome lessons, for the Liberals, in the NSW result, too.
Mr Baird won the election, despite an estimated 9 per cent swing against his government.
He was, undoubtedly, assisted by both his personal popularity and apparent moderation.
These are advantages our pugnacious Prime Minister does not have.
A close look at the seats the Baird government lost in the NSW election is also instructive.
Some suburban Sydney Liberals, who lost their seats, had been caught up in last year’s corruption hearings.
And the Greens won two – apparently safe National party seats – on the State’s North coast after fierce protests over fracking for coal seam gas.
They will have four seats, in the new State parliament, three more than they had previously.
The Federal Coalition has another big challenge ahead of it, too.
It has promised that its upcoming May budget will be fair, responsible – and good for both families and small business – as well as “dull.”
But it has big responsibilities, in that area, too.
Austerity won’t do the job.
At least, not alone.
So we can expect a lot more talk about tax, in the weeks ahead.
The reports of a bank account tax, that we have already seen, are just the start of it.
by Alan Thornhill
The Reserve Bank Governor, Glenn Stevens, says the fall in the value of the $A is helping Australia adjust to the end of the mining boom.
Addressing the American Chamber of Commerce in Melbourne today, Mr Stevens said:”the decline in the exchange rate is assisting the transition.”
However he added: “…we have always said we cannot hope to fine-tune this transition, however much we may wish otherwise.”
Mr Stevens then reflected on the sharp falls Australia has seen, over recent times, in the price of the commodities it exports.
His outlook was optimistic.
“…if we come through this terms of trade event with neither a major outbreak of inflation in the upswing nor a major crash in the downswing, even if we have a period of sub-average growth in the process, we will have done far, far better than in any previous event of this kind, let alone one of this magnitude.
“I still think that is the most likely outcome,” Mr Stevens said.
But he urged realism.
“Even so, the lower terms of trade mean that, all other things equal, the path of future incomes is not as high as it might have looked a few years ago.
“Even allowing for the fact that we all knew, intellectually, that at least part of the boom was not permanent, there is a human tendency to project what we see now -good or bad – into the future.
“Eventually reality intrudes and we have to re-evaluate.
“That has happened countless times before and will again, no doubt.
“It means that attention needs to be given to the things that help our economy work to deliver what we need even with a lower terms of trade.”
by Alan Thornhill
Australia’s superannuation funds are urging the Federal government to be cautious in assessing a plan to allow first home buyers early access to their super.
The Treasurer, Joe Hockey, said the government is prepared “to look at a wide range of proposals” after the Real Estate Institute suggested this idea, in a pre-budget submission.
However Pauline Vamos, who heads the Association of Superannuation Funds of Australia, says it won’t work.
She admits while job training – another area suggested for early access to super – and the ability to purchase a first home – are important.
But Ms Vamos warned that these objectives should not be pursued at the expense of dignity in retirement.
“The current compulsory rate of the Superannuation Guarantee at 9.5 per cent – is barely enough to allow most people to build enough retirement savings to fund a comfortable retirement,” Ms Vamos said.
“Raiding the nest egg early to pay for a home deposit or other purposes is likely to dramatically reduce people’s final benefits,” she added.
“We know the earlier you start saving for your retirement, the more you benefit from returns and compound interest.
And she gave an example.
If a 30-year-old person takes out $25,000 to put towards a home deposit, by age 67, they will have $54,000 less in their superannuation account, or a total balance of $364,000.
“This means they will fall substantially short of the retirement savings they need to live with comfort and dignity in retirement,” Ms Vamos said.
“Increased flexibility will only really work if contribution rates are significantly higher,” she added.
Ms Vamos said the plan also raises significant equity issues.
“If people take money out of their super, it’s likely at some point they will replace it through salary sacrifice, make additional contributions and receive a substantial tax concession for this.
“This ‘double-dip’ into the tax concession pot is likely to be highly skewed towards high-income earners, who are more likely to have the additional income available to do this.”
Ms Vamos warned, too, says using super to fund housing deposits could actually lead to worse outcomes when it comes to housing affordability, by driving up house prices.
Weathercoast by Alan Thornhill
A novel on the murder of seven young Anglican Christian Brothers in the Solomon Islands.
Available now on the iTunes store.
Alan Thornhill is a parliamentary press gallery journalist.
Private Briefing is updated daily with Australian personal finance news, analysis, and commentary.
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