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Poor little rich companies: No money for tax. Plenty for political donations.

While the government scrambles to look for ways to increase revenue and cut spending, one group of sacred cows who seem largely unperturbed by these ongoing discussions are Australia’s largest companies. That might be because around one in three of them pays no tax at all. And for those that do pay tax, there is talk of cutting the corporate tax rate in the future.

It seems that for this particular group of Australian tax payers, life is fairly rosie. And many of these companies are quick to show their gratitude to the crafters of Australia’s tax laws. In fact, many of those companies who cry poor when it comes to bearing their fair share of Australia’s tax burden, can still find the money to line the pockets of our nations’ political parties.

The poor little rich companies who donate to political parties

As has been reported in the last few months, over a third of Australia’s largest public companies and 30% of our largest private companies paid no tax at all in the 2013/14 tax year. When looking at the lists of these poor little rich companies, I noticed that they include a couple of large corporate political donors. So I decided to take a longer look at the Australian Electoral Commission (AEC)’s database of political donors for the last three years to see if I could identify any more poor little rich companies who, despite not earning enough taxable income to have to pay tax, were also large corporate political donors.

Bingo! Despite the fact that the AEC’s list of political donations is incomplete – thanks largely to John Howard’s changes to political reporting requirements in 2006 – it didn’t take long to identify over twenty large Australian companies who fit my search criteria. Here’s just some of the larger ones:

PoorLittleRichCompanies2

Other poor little rich companies worthy of an honourable mention include Macquarie Group Limited, who paid over 1.1 million to political parties over the last three years, and yet paid only 16% tax (instead of 30%) on their income for the 2014 tax year – and Santos (an oil and gas company) who paid over $600,000 to political parties and paid just under 15% tax during the same periods.

If all these companies have been able to establish for the ATO that they should pay little or no tax in the 2014 tax year, how is it that they can justify donating substantial sums to one or more of our political parties over the last three years?

Why do companies donate to political parties?

The answer to this is not going to shock you. The reason companies donate to political parties is not altruism or to be good corporate citizens – it’s purely and simply to gain financial advantage.

In fact, ‘profit maximisation’ is the only legal reason a public company can donate to a political party in Australia, and they aren’t afraid to admit it. In a High Court case heard in late 2015 that centered around reforms to NSW political donations, a key part of property developer Jeff McCloy’s legal case as to why property developers should be able to donate to political parties was that it enabled them to:

.…gain access to politicians, acquire influence and advance the interests of businesses.
(MsCloy v NSW, 2015)

Clive Palmer: a new breed of corporate political donor

There has arguably never been a more blatant example of a company using political donations to buy its way into achieving its corporate goals than mining magnate Clive Palmer and his Palmer United Party (PUP). Palmer’s mining companies donated millions of dollars to ensure that he – and other representatives of PUP – were elected in the 2013 Federal Election following an extensive advertising blitz.

On Palmer’s website for the 2013 election, he had only five policies – three broad policies about things like security, and two very specific policies:

  • “Abolish the carbon tax” – a tax which had hit his companies hard; and
  • “Create mining wealth” – Palmer really couldn’t have been more specific about wanting to use his political clout to advance his companies.

We all know the outcome of the 2013 election – Palmer was voted into the House of Representatives and three of the PUP party candidates were voted into the Senate. And whilst Palmer himself has little influence in the House of Representatives, his three Senators held the balance of power in the Senate – at least initially. On taking office, one of their first priorities in the Senate was to use their power to pass legislation abolishing the carbon tax and the mining tax.

‘Check’ and ‘check’ to PUP’s two specific political goals – a win for Palmer’s companies and other mining and resource companies. But as I wrote last year abolishing the mining and carbon taxes was a major loss for the Australian public who:

  • lost two major sources of revenue,
  • saw few if any new jobs created as a result of the taxes being cut, and
  • had a successful carbon reduction program replaced with one that actually increased carbon emissions and cost a lot more money.

Palmer came under criticism for the extensive money he took out of his mining companies for his election campaign when his Queensland Nickel plant went into receivership in 2015. At that time, the $15 million dollar donation Queensland Nickel had made to the PUP campaign in 2013 came into question. According to Palmer, that $15 million political donation could not have been better spent:

That [donation] saved the refinery $24 million a year.
(Clive Palmer, January 2016)

Palmer has arguably taken corporate influence in politics to a new level by funding his own political party and literally buying votes in parliament through his campaign’s successful advertising spend. (Of course that backfired on him when two of his Senators quit the party, but by that stage he had already achieved two of his goals.) And while Palmer is arguably unlikely to continue in parliament for any length of time – most likely because he won’t be voted in again – if his key aims were abolishing the carbon and mining taxes, he doesn’t really need to.

You have to wonder whether Palmer’s foray into politics is a strategy that other companies or even industry bodies may replicate. And while they may not end up as lucky as Palmer was to hold the balance of power in one of our houses of parliament, they may still have significant influence.

Which bring us back to…

The Politicians’ Precious: Large political donations

AbbottGollum

Image from abbotfail.com

There’s no doubt that having money to invest in advertising is important to a political party being elected. And it’s for this reason that political parties value corporate donors. An analysis of political donation by type on the Green party’s Democracyforsale website shows that around 75% of donations to political parties (where the source can be identified) come from companies. When you factor in money that companies give to politicians through tickets to fund-raising events and forums – which doesn’t have to be declared to the AEC – the percentage of support that political parties receive from companies may be even higher.

And those donations, as noted above, often come with access to politicians and therefore potentially the ability to influence the political process.

Many politicians – like our own Prime Minister Malcolm Turnbull – profess to believe in reforming political donations until they are in charge of the political donations honeypot. Then, like Gollum holding onto his precious ring, they don’t want to give up the precious corporate donors that they believe help them to stay in power – and they become very quiet on the matter. Suddenly the problem of corporate donations doesn’t seem quite so pressing to them…

But it is. Dealing with the influence of large political donations has been urgent for a while.

If you do a search on political donations, you’ll see article after article highlighting the pitfalls of large donations to political parties – whether from corporates or individuals. You’ll find academics, businessmen, justices, even politicians who have been calling for reform on this front for decades. There was even a parliamentary inquiry in 2011 into political donations which recommended changes – particularly to disclosure requirements. But still nothing has happened.

Here’s just some of the voices who have called for reform:

The Old Malcolm Turnbull (circa 2005)

no political donations should be allowed unless they are: from citizens and/or persons on the electoral roll (ie, no companies, unions, associations etc); subject to a cap; and donors should certify that the donation is either their own or their spouse’s money and has not been given to them by a third party

High Court Justices

“guaranteeing the ability of a few to make large political donations in order to secure access to those in power would seem to be antithetical to the great underlying principle [of the equitable distribution of power in a democracy]”
(McCloy v New South Wales: French CJ, Kiefel, Bell, Keane JJ, 2015)

The ANU’s Democratic Audit of Australia

There is inadequate transparency of funding. Moreover, there is a grave risk of corruption as undue influence due to corporate contributions and the sale of political access” (Sally Young and Joo-Cheong Tam, 2006)

Chairman of the Australian Shareholder’s Association

It’s almost a form of bribery. No company’s going to give something unless they expect to get some benefit from it…Whether the expectation is real or simply perceived, it is not in the interest of democracy.” (John Curry, 2004)

John Hewson (former leader of the LNP):

the only way to guarantee transparency would be to ban all donations by entities and to shift to the public funding of political parties.

For now, the poor little rich companies keep on giving….

Clearly there is a no shortage of calls for the reform of political donations, and equally clearly, the reform of political donation laws is no simple matter – but that doesn’t mean it can’t be done. In Canada, corporations and unions are banned from making donations to political parties and individual donations are capped at $1500 per annum. Some say this is extreme – I say it sounds reasonable. At the very least, it would stop our poor little rich companies from having to keep on giving. And you never know – it might even result in laws which require them to actually pay tax instead.

This article was first published on ProgressiveConversation.

 

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  1. townsvilleblog

    http://www.afr.com/news/policy/tax-office-to-name-579-companies-that-paid-no-tax-20151216-glp3vc this link backs up this article, the Turdbull government has been silent on the issue for months, this is not a case of auditing, there needs to be a change in the corporate taxation laws that either reduces the huge amount of tax deductions that these corporates can claim or a floor needs to be put under the amount of tax contribution, in other words a default situation if their deductions take them below paying 20% tax, then they automatically pay the 20% and also on workers wages the taxation bands net to be set to float with inflation so workers who earn more do not automatically move into a higher tax bracket. In my humble opinion.

  2. billshaw2013

    Despite it would be imposing more beaurocracy and red tape perhaps corporations who don’t pay tax should be banned from making political donations. They need to earn the right to influence our politicians.

  3. townsvilleblog

    billshaw2013, Sorry Bill, but that’s the ‘wrong’ way to look at things. The correct way is to force these corporate bludgers to pay their ‘fair share’ as everyone else who earns an income must. You are probably going to say they might leave Australia. Correct they may, however there will be other companies who will take their place and comply with Australian corporate taxation laws, if the LNP were to be on the side of the workforce, if they are not on the side of the Australia workforce, why should working people vote for them?

  4. Backyard Bob

    Shaun,

    The problem isn’t that companies aren’t complying with Australian taxation laws, the problem is that they do! Government needs to fix the myriad legal loopholes by which they manage this. To their credit, Labor seems to have been pitching to its grassroots in recent weeks. I reckon they could pitch a little more in this direction.

    Excellent article, btw.

  5. Jaquix

    Bribes, known in Australia as “political donations”, are also tax deductible to the “donor”. Therefore all taxpayers are actually “donating” too, straight to the political party receiving the “original donation”. Malcolm Turnbulk’s words of 2005 should be repeated on the front pages of newspapers, along with this excellent article. Instead of a segment-specific ABCC we urgently need a body to oversee all forms of bribery and corruption of process by politicians, political parties and companies, unions etc. Australia is going to the dogs without it.

  6. Michael

    We live in parallel universes:
    1. at the ballot box, citizens have 1 vote = 1 value for one day only every 3/4 years
    2. rest of the time = 1 representative x votes = makes laws to facilitate:
    3. it is easier for 1 x business owner/CEO/legal entity (a human construct for combining capital) x money x agility x innovation x commercial in confidence x privacy x legal, all to influence 1 or (1+1)^n politician/s(ie party/network)^votes to modify laws more favourable to them and their individual objectives at our expense or competitors.

    We, the “1 vote = 1 value” (a human construct) are mere crops for harvesting – how could we have let that happen??

    Ask a business owner anytime how s/he is doing – “Oh, it’s tough” with a litany of reasons (penalty rates, red tape, etc, etc) always someone else’s fault and funnily enough not one self criticism or responsibility.

    All fertile ground for corruption of process for skewed advantage – enjoy.

  7. Douglas Pye

    The ‘right’ / ‘obligation’ to pay tax has ever been politically contentious, for all Aus taxpayers – business & private. If I recall correctly, Garfield Barwick late last century ‘famously’ declared it was …. ” every Australian’s right to pay as little tax as was legally possible ” ….. which opened the door even wider to the tax avoidance industry! …. so lawyers & accountants could thrive – along with their clientele !

    Legislation along the way has made it possible for ‘individuals’ … tradies … widely varied ‘subcontractors’ … employees (car perks) …etc. to fudge the system for a smallish gain. Accordingly, a significant proportion of eligible Aus. tax payers ‘play the game’ as far as possible.

    In a fashion, cheating on tax is a national sport ….. bringing the ‘complicity’ factor into play!… psychology anyone ?? !

    Earlier today, I read the comments section of a Facebook post under the banner of ‘The Australian’ political reporting … an eyeopener!

    Of course, the comments were (99.9%) of LNP (right) persuasion,and generally debased past ALP performance (financial management), yet there was only an occasional Trade Union corruption comment …. so the ‘corruption’ topic was off the list!! …

    Could it be that ‘corruption’ and ‘right’ might be merged (blurred) here?? ! …..

  8. Kaye Lee

    Former Liberal Party Treasurer and fund raiser Michael Yabsley: “The only donations that should be allowed should be from real people, Australian citizens. And those donations should be capped by legislation at a modest amount … maybe $500.”

    TONY FITZGERALD, FORMER ROYAL COMMISSIONER: Access can now be purchased, patronage is dispensed, mates and supporters are appointed and retired politicians exploit their connections to obtain success fees for deals between business and government.

    STEVEN GREENWOOD, PROPERTY COUNCIL OF AUSTRALIA: Well it’s become accepted practice, I suppose, for all industry groups. Whether it be the property industry or the medical industry – or whatever. The accepted practice now is for business, to get access to government, is to pay access in certain ways and forms.

    DAVID GOODWIN, QLD CHAMBER OF COMMERCE: A coercive donation is when you get a phone call and get told, “It would really be appropriate for you to bring a $10,000 table to this function,” and I guess you kind of know you don’t have a choice. That’s when business has got a problem.

    PETER MCCUTHEON: Another issue has been so-called success fees, paid to former ministers advising private companies. After winning the tender for Brisbane’s airport link project, the Thiess-led consortium reportedly paid former Queensland treasurer Terry Mackenroth and former federal Labor MP Con Sciacca half a million dollars for their strategic advice.

    TONY FITZGERALD: Neither side of politics is interested in these issues except for short-term political advantage

    TED MACK: We are now effectively the second best democracy money can buy.

  9. Michael

    How many digits in a Swiss bank account, again?

    The only trouble is that now at least two people know.

    Can’t wait for the day when insiders become whistleblowers and politicians heed the people’s demands – what a world it could be..

  10. Carol Taylor

    Thank you Kate M for this article and the excellent research. Morrison is going to have one hell of a job trying to ‘sell’ his business tax cuts and the ridiculous and much discredited trickle down theory, once it is realised that a lot of big business do not pay their fair share of tax in the first place.

  11. Terry2

    if there are some in our society – and evidently there are – who are prepared to believe that cuts to company taxes will increase wages as a result of the ‘trickle-down’ effect then there are those equally as gullible to believe that company tax cuts will encourage companies to pay tax.

    I’ve firmly believe that we must treat company tax as a fixed operating expense like rent, salaries & wages etc. only then can we start talking about reducing the rate.

  12. Zathras

    I’ve always wondered why the matter of the Exclusive Brethrens donations to the Libs that was raised in Hansard years ago was never followed up.

    Their cut of the public purse handout to private schools increased from $10million to $40million and they set up some sort of shelf company in Tasmania that donated money to the Liberal Party.

    Laundering taxpayer money via shelf companies is not a good look and is another reason for public funding of political parties.

  13. Matters Not

    Shorten et al promise to make life less rosy for tax avoiders, broadly defined. It’s a promise repeated often, suggesting it resonates well with the public But as Abbott now knows, broken promises have a significant political downside.

    Tax avoidance on a massive scale isn’t peculiar to Australia but found in many other supposedly sovereign nations. It’s a problem without an obvious solution, particularly when many of these sovereign nations (sometimes our so called friends ? and trading partners) aid and abet same. Who would have thought one of BHP and Rio best export markets was Singapore? Not that any ‘product’ actually arrives in Singapore. It’s just a ‘book entry’ to ensure the ‘profit’ is made in Singapore and not in Australia. And Singapore ensures a very, very low tax rate to attract these large companies dealing in Australian minerals.

    Pursuing the legislative avenue (closing loopholes etc) must on Shorten’s agenda. But that track while ‘necessary’ may prove to be ‘insufficient’. At least, that the experience to date. Companies will always try to minimise their taxes as they attempt to maximise their profits. Indeed Directors have a fiduciary duty to do exactly that.

    Nevertheless, at the same time we as consumers have the direct power to effect a company’s a bottom line by choosing to buy (or not) a company’s product. Take Energy Australia and the evidence provided in the table above. Imagine if Australians in their millions decided to switch their energy supplier. To boycott Energy Australia wherever and whenever possible. What about the Westfield Group (which no longer exist under that name in Australia – now Scentre Group, which owns and operates the Australian and New Zealand Westfield shopping centre portfolio)? But there are plenty of examples where consumers could (or at least threaten) to exert economic pressure.

    Of course these companies are not stupid. They always hedge their bets. They donate to all sides. Why ‘buy’ one party when for a bit more you can buy the ‘lot’. Nevertheless it’s an avenue that ought to be pursued. Naming and shaming. Affecting and effecting the bottom line needs to be explored. But we need real up to date information on who is doing what, when, how and why? Maybe Shorten and Bowen have a few more promises to make? To tell us ‘how’ they will deliver these promises. ?

  14. Michael Taylor

    Thanks ByB, I appreciate that. I’m sure Kate does too.

  15. Florence nee Fedup

    I believe there is a strong perception in the community that business and wealthy don’t pay tax.

    It is stronger than the one Gillard government were poor economic managers,

    Once the perception is there, won’t go away. Voters won’t listen,

    Worse for this government, the perception contains much truth,

  16. diannaart

    Excellent analysis and writing Kate.

    I do not understand why Turnbull is still considered most likely winner of the 2016 game, when he is (as Tony loves to point out himself) running with the same 2014 agenda (being the same agenda that was not mentioned prior to the 2013 election).

    Pursuing tax cuts for the big end of town while slashing the reason we have governments (education, health, transport etc) is a very big sell. No wonder Tones hasn’t given up.

    PS

    @Michael Taylor

    Who is ByB?

  17. regalcrime

    wait, what? I pay GST to Energy Australia and they pay no tax? huh? oh boy gonna ring them tomorrow to ask a few questions.

    I sniff a very big refund.

  18. Kate M

    Great/interesting comments/ideas from all.

    Love the extra quotes Kaye. That’s the thing – there are sooooo many people who think it should change, and yet little happens.

    Regalcrime – my article is about income tax (although I did not make that clear – apologies for the confusion!!) GST is different. Companies effectively act as collection agents for the government on that for tax that we pay on what we buy – at least in theory. It’s not really a company tax, even though they collect it. Companies add GST to the relevant good/service they are providing, collect it from us, and then pass it straight onto the government. Of course, like all taxes, it not always that simple – but GST we pay is never really classed as income – it’s just passing through.

  19. wam

    We could give the companies a tax cut to 15% as long as there were no deductions?

  20. Continuous

    The disturbing part of the chart for me is – how cheap it is for these companies to corrupt policy in Australia.

  21. David Ho

    If the public were to fund parties it could be through a scratch lottery method. A prize of, say, $50.000 is offered and each party has a scratchie of their own and a ticket buyer is limited on each purchase. Throughout a term a perception of performance and what a party promises might be reflected by the numbers of ticket purchased. This method ensures no one really expects audience or special favours.

  22. Michael

    Continuous – I have always wondered what the the return on investment is on political donations – $50K gets you a $1M through rule changes?? – or do they auction it (silent, “commercial in confidence”, of course)??? – ahhhh, transparency ………….

    The one systemic process I coined is “developer poker” – get 4 people together with $50K each – half for legal and half for architect – take option on land with permission for 3 units – apply for 7 to Council (which has a vested interest due to more rate income) – get knocked back due to resident objections (let them have their say) – go appeal to Land & Environment Court – site visit in the am listen to residents – adjourn for lunch – discussion – present full plans for 5 in pm – decision made as “compromise” – start earthworks, wait a while – put in S96 amendment for an additional unit – outcome? = 6 units and the project is not yet finished?? – everybody except original owner and residents are “happy” – next please.

    What a great job we are doing – now where is that $50K?

  23. townsvilleblog

    Matters Not – There is an obvious solution, and that is to legislate away all those loopholes and also to legislate a floor to the taxation system for business of 20% of their gross income, hardly an impossibility to achieve.

  24. regalcrime

    Kate M – Thank you for the explanation. I asked anyway.

    “Is it true that Energy Australia doesn’t pay tax to the government?”

    “No, we pay GST” (sic)

    I’ll leave economics to you guys in future heh.

  25. Lee

    “Despite it would be imposing more beaurocracy and red tape perhaps corporations who don’t pay tax should be banned from making political donations. They need to earn the right to influence our politicians.”

    Even if a corporation does pay tax, why should it influence our politicians more than individuals? These corporations can obviously afford to donate more than individuals. I’d like to see corporate donations banned. Political parties cannot serve two masters. They’re making promises to big corporations before an election which are being kept hidden from the voters. How many farmers would have voted for the LNP if they had known that the NSW government had promised the miners to put a stop to the protests?

  26. Lee

    “You are probably going to say they might leave Australia. Correct they may, however there will be other companies who will take their place and comply with Australian corporate taxation laws”

    I’d like to know how many of them are currently outsourcing at least some of their work to overseas and importing workers, including the dollar value and number of Australian jobs this is affecting.

  27. regalcrime

    Lee;

    yes, so why was “no” the answer from EA?

    shrug, I thought their answer was comedic, in a tragedy kinda way.

    ty for the article link btw, but I no longer have interest. Unlike EA who have accounting specialis…ugh nvm.

  28. Lee

    regalcrime, you didn’t specify which tax in your question, so EA’s answer is correct. GST is also a form of tax, that all the income tax dodgers pay along with everyone else.

  29. Sir Bill International

    In addition there are foundations like the FEF ( Free Enterprise Foundation ) through which Liberal party donors can remain anonymous.

  30. townsvilleblog

    Perhaps now with a minority Labor government in Canberra we may see these corporations pay their fair share of tax, finally.

  31. Neil of Sydney

    Perhaps now with a minority Labor government in Canberra we may see these corporations pay their fair share of tax, finally.

    I suspect they are otherwise the ATO would be on to them for tax avoidance. Trouble is we do not make anything here anymore. most things are fully imported so you can only tax on the mark up.

    It really annoys me when people say Apple computers do not pay their fair share of tax.. An Apple computer is fully imported.

    What we have to do is to get companies to start making things in Australia again if we want them to pay more tax.

  32. Möbius Ecko

    Yes townsvilleblog, hopefully the hundreds of ATO positions who were investigating tax avoidance will be restored. Those ATO cuts were in direct response to big business tax avoiders lobbying the Liberals, who rolled over panting with tails wagging as they always do for their masters.

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