It is no small irony that the very day the Commission of Audit report was released this week so too were the accounts for Google Australia. Once again, the tech company has paid virtually no tax.
They spun it as a 15 per cent tax rate; a bill of $7 million on a profit of $46 million. After deductions, though, the amount paid was just $466,802. Google’s real profit – mostly booked in more amenable tax jurisdictions – is many times what it declared. Its ad revenue in Australia is as high as $2 billion.
So we have multinationals paying minimal tax, massive government waste, a constellation of tax lurks for the wealthy, and taxpayer-backed banks racking up super profits. But what does the Commission of Audit do? Tells us to hit up the poor, the sick and the aged.
No wonder they were all smiling when it was released. They must have been kidding; just a ruse to agitate the dreaded champagne socialists.
Commissioner Tony Shepherd is a bit like the Moroccan rug vendor. He might be asking you for $3500 but you know you’ll get him down to $450. Price is not the point, though. It’s about the great big new rug. The rug is a dud; it’s not even hand-woven. It’s synthetic. They cut off the ”made in China” label.
It may look real. The rise in doctor co-payments for instance does capture the hypochondriac demographic. Apologies to hypochondriacs – some of our closest friends are hypochondriacs – but there are some savings to be had there. The unintended consequence is that it nails the old, the poor and the sick, too.
If this report was the real deal they would put GST on the table. It might affect the poor but at least it gets the rich, too, with all their fancy offshore tax structures. One ruse is brewing up a loan to yourself from a foreign entity and claiming tax deductions on the interest. According to a tax lawyer, there are billionaires who not only fail to pay tax but get rebates for interest deductions on loans to themselves.
A Tax Office insider reckons another lurk is paying private school fees from foreign havens. Has the taxman investigated this? We put it to the very large PR division this week but received a response to a different set of questions that were never posed in the first place.
Australian companies slotted $60 billion into related companies and trusts in tax havens in 2012. Some $36 billion in revenue came back to Australia from Switzerland alone. Meanwhile, up in Queensland, they are proposing to name and shame juvenile offenders such as the one this week convicted for flogging a couple of ciggy lighters from the shop. When will they start putting tax shysters on a public register rather than offering them yet another amnesty for dodging their obligations? Transparency would sort things out quick smart.
Yes, the government needs to take drastic measures to cut public spending – what about the millions splashed on big accounting and legal firms for advice – but hitting up the old, the sick and the weak is a dud. How does slashing the minimum wage help the economy?
A financial transaction tax should be on the table too. It would deter useless activity such as high-frequency trading, money laundering, tricky tax-driven transactions and excessive speculation. Real investment would still proceed apace.
Bait and switch
One of the greatest rackets around is structured finance. It just won’t die. One contact tells of the latest ”bait and switch” fandangle from Citibank and UBS.
Citi has been dangling the best short-term deposit rate in the market; at 3.8 per cent, veritably too good to be true. The catch is that when the Citi product matures, the client has the privilege of being invited to a presentation by some slick merchant bankers from UBS.
Thereupon he is presented with the exciting opportunity of investing in UBS Callable Goals (Kick-In Australian Share Basket). This opaque and overly engineered pup is a derivative over big four bank shares and totes a yield of 8 per cent. Strangely, the delivery asset was quoted as shares in BHP.
Anyway, the ”Kick-In” comes when the price of one of the four banks falls a lot. In that scenario the whole investment falls a lot.
That was not the case in this instance, but here we have an investor who wanted a secure government-backed term deposit being rolled into a high-risk derivative with oodles of fees.
The upfront fee is up to 2.2 per cent for the adviser. UBS makes its baksheesh, which is impossible to work out, via the obtuse structuring. What we can’t work out is what incentive Citi bankers were offered to stick their clients into UBS. Was it just that 2.2 per cent? We asked both. Both ducked for cover.
Finally, readers may recall our yarn the other day about the bloke whose Westpac adviser skewered him in Macquarie’s MQ Gateway concoction. One elderly retail customer ended up with a debt on his house. Another source rang to say he had been touched up too. He bought it because it was branded ”capital-protected”. Though a sophisticated investor, he didn’t bother reading the PDS. ”When they said it was capital-protected they must have meant Macquarie’s capital was protected,” he quipped.
Michael West established Michael West Media in 2016 to focus on journalism of high public interest, particularly the rising power of corporations over democracy. West was formerly a journalist and editor with Fairfax newspapers, a columnist for News Corp and even, once, a stockbroker.