Tony Abbott puts US on notice over tax evasion
Prime Minister Tony Abbott has given the US notice that he is serious about leading global efforts through the Group of 20 to stop tax evasion through profit shifting by multinationals, which would include some of America’s biggest companies.
Mr Abbott said international tax rules should be structured to capture income where it is generated – an indirect swipe at Apple, Google and other big companies that license intellectual property to their own subsidiaries to enable them to shift profits to countries with lower taxes.
“We need global tax rules to ensure that businesses pay tax in the countries where they earn revenue,” Mr Abbott told a lunch of Australian and American business executives in Manhattan on Wednesday (AEST). “And we need financial system and energy system governance that better reflects the changing balance of economic power.”
While the US wants to make climate change an important part of the G20 agenda, Mr Abbott, who will host the leaders summit in Brisbane in November, is more focused on economic growth. Earlier, in the Canadian capital of Ottawa, Mr Abbott set the scene for a testy visit to Washington on Thursday by declaring Barack Obama a climate change policy ally with the claim that his plans to curb power station emissions were similar to the Coalition’s Direct Action policy.
Mr Abbott said he believed climate change was a problem, “but it’s not the only or even the most important problem that the world faces.”
At a joint press conference with Canadian Prime Minister Stephen Harper, a fellow conservative who congratulated Mr Abbott on his plans “to eliminate the jobs-killing carbon tax”, Mr Harper said no country would ever proceed with a policy that destroys job s and growth. “No matter what they say, no country is going to take actions that are going to deliberately destroy jobs and growth in their country. We are just a little more frank about that, but that is the approach that every country’s taking,” he said.
Mr Abbott, who has a meeting planned with the President at the White House, said he in no way felt pressure from Mr Obama’s aim to reduce emissions from US power stations by 30 per cent from 2005 levels by 2030. The plan is opposed by Republicans and the energy sector and faces legal and political challenges.
Under the plan, each US state is given a target to cut emissions from its power stations and to decide how to best do this – be it by embracing clean energy, improving efficiency or reducing power use, perhaps through a market mechanism. It has been hailed in Europe and Australia as the jolt needed to restart stalled global climate talks, but Mr Abbott said such a regulatory approach was similar to his Direct Action policy, an opt-in scheme in which polluters would be paid by the government to reduce emissions of greenhouse gases.
“I am encouraged that President Obama is takingas what I regard. . . direct action measures to reduce emissions,’’ he said. “It is very similar to the actions my government proposes to take in Australia.”
The comments are potentially inflammatory, given Mr Obama has long advocated a market mechanism like an emissions trading scheme. He dropped his last push for such a mechanism in 2010 when the Republicans took control of the House of Representatives.
Josh Meltzer, a fellow at the Brookings Institution and former diplomat at the Australian Embassy in Washington, said Mr Obama’s regulatory approach might be characterised as direct action, but his policy was different to Mr Abbott’s. “The Obama approach is a firm cap on emissions from the electricity sector and no government fund paying for these reductions,” he said.
“So the cost will be borne ultimately by the power sector and should flow through to higher prices for electricity. “Whereas in Australia, the whole premise is there is not going to be a cost to industry to reduce emissions because the government will pay you to do it.” Mr Abbott used his speech in New York on Wednesday to take post-budget sales pitch to the United States.
His aim was to show his government was bringing the budget back to surplus and, as the head of this year’s G20 leaders’ summit, was prepared to lead by example, despite a political cost. He defended his government’s decision to block the sale of GrainCorp to the US company Archer Daniels Midlands, saying it should not be construed as Australia being anti-investment. “More than 100 major foreign investment proposals have been approved,’’’ he said. “There’s been one rejection – just one – because you don’t normally replace a locally-owned monopoly with an overseas-owned one.’’
Mr Abbott, as he did when he was in Canada, highlighted the most unpopular elements of the budget as its key strengths. But in New York, he added that the philosophy of the budget was consistent with that of a great, former US president.
“In the words attributed to (Abraham) Lincoln, government should do for people what they cannot do for themselves, and no more,’’ he said. “Since September last year, the new Australian government has practised what we’ve preached.’’ He mentioned the $7 Medicare co-payment, ending industry subsidies, the deregulation of university fees, the welfare cuts and the cuts to schools and hospitals funding.
“Instead of a 2 per cent-of-GDP-deficit in 2017-18, the final budget result is close to balance; and gross debt, a decade hence, is reduced by almost $300 billion, or over 15 per cent of GDP.’’ “We’ve done this because it’s better to be tough in your first budget than in your last. “There’s been a political cost, of course; but we have refused to put short-term popularity ahead of long-term respect.”
In words similar to those of Julia Gillard when she visited as prime minister, Mr Abbott emphasised that Australia did not regard the US as a washed-up economic power, words that are important diplomatically. “Some people say that America is a spent force. They’re wrong,’’ he said.
Mr Abbott visited Ground Zero, rang the opening bell at the NYSE and met UN Secretary-General Ban Ki-moon.