SUBJECT/S: Harper Review; Multinational taxation




CALLUM DENNESS: Joining me on Skype from Perth is Labor’s Shadow Assistant Minister for Communications, Michelle Rowland. Good morning.


DENNESS: Now the Harper Review was released. It contains 56 recommendations, fairly sweeping. Can I ask you for your initial impressions?

ROWLAND: Labor’s very supportive of having consumers at the centre of competition law and that I think should remain paramount when we look at competition policy in Australia - from Paul Keating’s initial opening up of many sectors to competition to the substantive reforms that we even had in the renaming of the Act to take into account consumers.  We’ve expressed broad support for many of the recommendations that were contained in the draft report. I think it’s particularly interesting, and I note there has been some commentary on the report recommendations for specific reforms, in areas like the taxi industry. This is one which Labor itself has been prosecuting for some time now, led by Andrew Leigh, and that is the sharing economy will end up changing the way that we do business, how and why we regulate this sector, and also the benefits that ultimately flow to consumers. So it’s a substantive body of work, 500 pages long. Labor will be looking at it very closely. We have broad support for many of the principles that are in it, including strengthening the competitive neutrality principles just as one example. But it remains to be seen how the government is going to respond to some of those recommendations contained therein.

DENNESS: Let’s burrow down into some of the specifics here. You mentioned Uber and you’re right there has been a discussion at state levels and the federal level about how you regulate this new industry because it’s really an industry that’s leapt ahead of regulations here. There are specific recommendations made in this report to wind back some of the restrictions on taxi operators, obviously very controversial. Is that a move specifically that Labor could support?

ROWLAND: We’ll have a look very closely at this recommendation and what it could end up meaning. Bear in mind this is also open to consultation on the draft report before the final government response is produced as well. But I think there should be two overriding principles. The first is that we need to ensure that consumers have choice, and we need to recognise that in this digital age new markets have emerged that we didn’t even contemplate even ten years ago. Even a market for apps, let alone a market for an app which would enable the sharing economy, or an app that would enable the sharing economy in transport but also in things like Air BnB, so even the hospitality sector. The second is that we need to ensure that we have in place other regulations which are there for a purpose, for the protection of rights, health and safety and also consumer protections that are already there. We need to make sure they are not compromised by any changes that may happen in this sector. But we need to acknowledge that in many of these areas the economy has moved on as a result of digitisation, and we need to respond accordingly.

DENNESS: Changing some of these areas will be quite tough. Already the Taxi Council has come out and really leapt on these recommendations opposing them, so too the Pharmacy Society they’re opposed to winding back the restriction on pharmacies. These are kind of tough fights to have, are you confident that a) there’s bipartisan support and b) that the Government can enact some of these recommendations?

ROWLAND: It’s a vexed area. I don’t think there’s an easy answer to that. There are interests here that have been long held. There are interests here that have many legitimate arguments I believe, on both sides. But I think ultimately the role of competition is not to protect individual firms, but to promote competition, which is the absence of market power. Now we do obviously have market power in some sectors. The role of competition law is to ensure that they are tempered and that we don’t have a chilling effect on new entry. I think that needs to be a focus of competition law going forward. It needs to be forward-looking for dynamic industries, to ensure that consumers are protected today but also in the future have opportunities. That’s a very difficult balancing act and I have no doubt that the implementation of some of these areas, and even the structure in which some of these reforms will be discussed, will be highly contentious.

DENNESS: You’re in Perth in Western Australia, a state that had regulated shopping hours. One of the recommendations is to deregulate those. In Western Australia that’s been frustrated by the union movement. Do you think that Labor can bring the union movement on board with some of these recommendations?

ROWLAND: What you’ve got to remember is that we have in place some of these restrictions on trading hours for purposes as well. You need to remember that businesses need to be able to operate to a level where they have people wanting to work for them, for example, we need to ensure that people have adequate downtime as well. But I think overall the issue of shopping hours is not a simple one. It’s not a simple one of saying we’ll throw open our doors. The number of times I’ve spoken to retailers in shopping malls, for example, who have really been frustrated by extended shopping hours because they don’t want to necessarily keep their doors open but they’re forced to by retailers or otherwise compelled to because they will be the only ones not opening their doors. I came from a retail background myself. I spent 8 years as a checkout operator in a supermarket and when I first started out we only had Thursday nights and a bit of Saturdays for trading. Then Friday nights came in and then Sunday trading. The other side of the coin is that we already have 24 hour trading through other means again in the digitalised economy. So it’s not an easy answer, I don’t think it’s just a matter of looking at the union movement, not just a matter of looking at workers and also businesses themselves, but also how all this interacts. We have a 24/7 economy which is online.

DENNESS: Isn’t it simple though, isn’t it just a matter of saying that retailers can open when they want to open and tap into that consumer demand? Remembering of course that a lot of people are flocking to online for the very reason that they can purchase goods and services whenever they want.

ROWLAND: That’s a valid point, but again I think you need to make sure that you’re not forcing retailers even inadvertently forcing them to stay open if it’s not their desire to do so. I do think we need to ensure we have a proper response to the digitalised economy. We need to ensure that workers’ rights are protected. It is not, I think, a simple balancing act, but I think the Harper Review gives it much food for thought about how we should go forward in this area and we’ll be looking at it very closely. It will be interesting to see the comments made in this area by the small business sector as well.

DENNESS: Okay let’s move on now and a new report shows that Australia’s top 900 companies claim tax deductions worth $25 billion for an effective average tax rate of 19.3 per cent. What does that say about Australia’s tax system?

ROWLAND: I think overall if someone was looking at those like a typical pay-as-you-go earner would be saying people need to pay their fair share of tax, and that includes multinational corporations. Labor’s compiled and costed a plan for addressing part of this multinational price shifting. We see that the government is trying to now get on board with that. I think all Australians would agree that multinational corporations, every corporation in fact, needs to pay its fair share of tax.

DENNESS: There’s no suggestion that deductions claimed here weren’t legitimate. These are Australian companies making use of deductions that are available. Does it say our corporate tax rate is too high or that there are too many exemptions available? There’s no point having 30 per cent corporate tax rate if people only pay below 20 per cent.

ROWLAND: I think it’s difficult to lump all of these situations into one summary but I think you can say overall, any business person, any accountant, any tax agent will tell you, unless you are legitimately minimising your tax then you’re probably not doing your job. I think that’s what it comes down to: people legitimately minimising their tax, tax breaks are available for certain sectors and certain people on higher incomes as well obviously, compared to people who are subjected to pay-as-you-go system and don’t have the same opportunities. I think people who do look at this want to see people in firms pay their fair share ultimately.

DENNESS: Just finally, you mentioned in one of your previous answers that the Government is making noises now about pursuing multinational tax evasion following the UK’s example. Labor, I imagine, will support these moves?

ROWLAND: We welcome these moves but it’s disappointing that after all the huff and puff at the G20 and Australia is supposedly taking a leading role. We’ve been sitting back for quite some time now, we should get on with that task. Labor has a plan on the table which seemed to be dismissed outright by the Government and now it’s looking at its own scheme. I think they should get on board.

DENNESS: Michelle Rowland, thanks for your time.

ROWLAND: My pleasure.