Wednesday, May 20, 2015

Taxman cometh for digital disrupter Uber

Online services such as Uber will be chased for GST and other taxes as the Australian Tax Office moves to crack down on new players in the digital economy.

With a broad digital brush, the taxman is targeting two new and increasingly popular operators — taxi service Uber and online accommodation finder Airbnb. 

The ATO said they were no different from traditional bricks and mortar businesses and warned digital competitors they also needed to pay tax and collect the 10 per cent GST from their customers.

Listen to my interviews with ATO deputy commissioner James O'Halloran and Uber director of public policy Brad Kitschke

"The existing law applies equally whether the buyer or seller come together at a bricks and mortar business or via a mobile phone app or a website," Deputy Tax Commissioner James O'Halloran told AM.

Using the example of Uber, Mr O'Halloran said drivers must register for GST, charge GST on full fares, lodge business activity statements and report all income in their tax returns.

"We understand that people don't often consider the tax consequences of new and emerging business models," Mr O'Halloran said.

"Our first step is to assist taxpayers involved in the sharing economy to meet their tax obligations." 

In releasing today's advice, the ATO used the term "collaborative consumption activities" to describe digital players like Uber, Airbnb, certain parking services and any business offering to provide goods and services to a consumer.

The ATO said it recognised that some taxpayers might need to take "corrective actions" and gave a deadline of August 1 for targeted businesses to apply for an ABN (Australian Business Number) and to register for the GST.

Uber said it had been consulting with the Tax Office over the past six months and was disappointed the ATO had "taken it upon itself to dictate government policy for the sharing economy".

"Today's decision by the ATO is not a tax on Uber but rather impacts the over 9,000 ordinary Australians who drive on the uberX platform," the company said in a statement.

"These are 9,000 individuals who will now be caught up in red tape before they even accept their first ride and will then be hit with a tax on their very first dollar earned.

"[This is] unlike truck drivers, painters, online sellers, gardeners, other sharing economy participants and every other small business who do not have to collect GST until their business reaches $75,000 per annum in turnover.

"The typical uberX partner in Australia works for around 20 hours a week and takes home around $30,000 per annum, well under the Government's threshold for GST."

Uber's director of public policy Brad Kitschke told AM that the ATO's ruling was a narrow interpretation of the law and failed to take into account the "modernisation of point­ to­ point transport".

"We certainly don't think that Uber partners shouldn't be captured by the taxation system," he explained.

"Our main point is that Uber partners, like the hundreds of thousands of other small and micro businesses, should be subject to exactly the same rules and should be allowed the threshold."

However, the Taxi Council of New South Wales responded that all its members have had to register for, collect and pay GST since the tax was introduced in 2000.

"It continues to amaze me that Uber believe that they're above the law," responded the council's chief executive Roy Wakelin­King. 

"Uber should accept the umpire's decision and comply, that's what everyone would likely expect. "It's fair, it's equitable, it's what everyone else has to do, so why should Uber be treated differently?"

Monday, May 18, 2015

Former ACCC boss warns iron ore inquiry risks "political theatre" for "vested interests"

The former chairman of the Australian Competition & Consumer Commission says a parliamentary inquiry into iron ore industry could damage Australia's global reputation as a place to invest.

Graeme Samuel, who led the ACCC between 2003 and 2011, believes politicians need to stay away from what could be "political theatre" and leave it to regulators like the ACCC to do a proper investigation.

Mr Samuel is also worried about external perceptions that the Federal Government could be swayed by vested interests such as those being promoted by the Fortescue Metals chairman Andrew Forrest.

"Competition regulators are best served to be able to investigate allegations of market manipulation which is what's been suggested here and they're the ones that should be dealing with it - not parliaments or politicians," Mr Samuel told AM.

"I think the problem with politicians getting involved is that we get into a political theatre with parliamentary inquiries and we tend to get a confusion then between what is in the public interest and what is in a political interest or serving political purposes.

"That's why you have independent competition regulators like the ACCC, like the European Commission, like the US Department of Justice and other major agencies throughout the world."

Mr Samuel was speaking after the Prime Minister Tony Abbott declared he would support an inquiry into the iron ore industry after an intense campaign led my Mr Forrest.

But Mr Samuel says a parliamentary inquiry has the potential to raise questions about Australian business and how international investors might view government regulation fuelled by vested interests.

"Since the 1990s and the Hilmer competition policy reforms, Australia has been able to properly claim itself as being the leader in free markets, the leader in developing free markets in this country and in resisting the pleadings of vested interests to interfere in free markets," Mr Samuel said.

"What we seem to have here is particular vested interest that want government, who want parliament to intervene in what seems to be a free market.

"Fortunately we had successive treasurers in Paul Keating and Peter Costello who saw through these manipulations and said no, the public interest has to prevail.

"And, let's face it, it's served us so well for various international economic crises, including most recently, the global financial crisis."

The ACCC recently cleared Andrew Forrest of suggesting cartel activity in March when he declared that Fortescue should work with BHP Billiton and Rio Tinto to put a cap on iron ore production to keep prices low.

The current ACCC chairman Rod Sims said Mr Forrest's were "off the cuff" and did not constitute cartel behaviour.

But Graeme Samuel says that decision strengthens the role of regulators like the ACCC to investigate concerns about market manipulation in the iron ore industry.

"It's not for me to question how the ACCC or what it did in relation to its investigations. But you do have the chairman of the ACCC, Rod Sims, coming out publicly and saying that on the analysis of the ACCC there was not evidence of predatory pricing or of collusive behaviour.

"If there are still concerns the ACCC has all the powers under its act to subpoena witnesses, to subpoena documentation and to be able to conduct a thorough independent investigation".

Tuesday, May 12, 2015

Joe Hockey's multinational tax war - symbolism over substance that weakens tougher global action?

Joe Hockey's crackdown on corporate tax avoiders might be a world first but it pre-empts what might have been a broader agreement between G20 and OECD member nations.

Mr Hockey has declared war on thirty multinationals who pay little or no tax in Australia while threatening fines of 100 percent of the tax owed plus interest.

But by going it alone has the Treasurer put pre-Budget symbolism ahead unified action that stood to make a greater global impact on tax dodgers?

Listen to my analysis from this morning's edition of AM on the ABC.

Mr Hockey's tough talk ramped up last year when Australia was on the world stage in its presidency of the G20 where finding ways to target the likes Google, Apple, News Corp and Microsoft was high on the agenda.

As with most things G20 related, the pressure to turn worthy yet non-binding commitments into real action remains immense.

But throughout the G20 deliberations, the myriad of laws and loopholes that vary across nations meant a global approach seemed to be the only practical solution given the legal firepower of multinationals.

The OECD, which is known to be months away from finalising recommendations for a multi lateral approach, will almost certainly be angered by Mr Hockey's action which is coloured by the pre-Budget timing.

Michael Croker, head of tax at the Institute of Chartered Accountants, says Mr Hockey might have been better waiting for a more coordinated global approach.

"That's the key concern from tax practitioners as the OECD is not far off finishing its work. It's expected to wind up its final recommendations in November this year and present those to the G20 ministers at their meetings in Turkey," Mr Croker told AM.

"So it's probably not going to go down well from the OECD perspective, and it will perhaps raise some concerns that maybe Mr Hockey lacks confidence in the outcomes from the OECD process."

Mr Croker thinks the pre-Budget timing is potentially problematic for Mr Hockey who risks being accused of symbolism over substance.

"I'm sure that will be levelled at the Treasurer. But I think there's a sense that the public is of a mind something should be done," Mr Croker said.

"Mr Hockey could say 'well I've acted early and if the OECD comes out with better approaches, then I'll embrace the OECD approach when I see their final recommendation."

The crackdown on multinational tax dodgers means the Tax Office will have greater clout to do its job which in turn will help coffers depleted by the falling iron ore price.

But Michael Croker says the government and the ATO will need to act quickly to send clear messages to foreign companies about the tougher penalties for tax avoidance.

"The ATO needs to be on the ball here because these big companies are making big investments and expect very quick turnaround," Mr Croker said.

"The ATO will effectively will carry the load of determining what's a good inbound structure and what's a bad inbound structure, in terms of these new anti-avoidance provisions. "

Friday, May 8, 2015

Transition out of mining boom taking longer than expected, Reserve Bank warns

It has been a recurring theme of Reserve Bank commentary and official statements over the past two years.

But today, the signals about the economy's transition away from the mining investment boom took on a graver and perhaps more frustrated tone.

The RBA is now warning that the successful move out of the fast fading mining investment boom is taking much longer than expected in the previous February statement.

Underscoring the challenges, the central bank's quarterly statement on monetary policy says a "significant" pickup in non-mining investment appears unlikely over the next year or so.

The sluggish switch away from resource investment is being cited by the RBA as a key reason that kept economic growth at below trend pace in the first three months of this year.

The RBA has slightly downgraded its economic growth prospects to 2 percent in June from a forecast peak of 2.25 percent made in February.

The RBA also cautions that business is not stepping up to fill the gap left from the tapering off of the mining boom.

"Business investment remains a significant source of uncertainty," the RBA says.

"There are also significant risks to the forecasts for non mining investment" and that the latest capital expenditure survey "implies a weaker profile for non-mining business investment over the next year than currently forecast".

In addition to being frustrated about the high Australian dollar despite recent rate cuts, the RBA is also more pessimistic about the direction of the labour market.

The RBA now believes the jobless rate will peak at 6.5 percent in mid-2016 and remain elevated for some time.

The challenges are immense given an uncertain global outlook with the slowdown in China cited as a potential risk as its property market a source of weakness.

The resulting lower demand for steel and other construction products could further impact demand for Australian iron ore and put more pressure on Joe Hockey's budget.

Thursday, April 30, 2015

US economy stalls making rate rise later rather than sooner

It's now six years since the United States began a slow recovery from its worst economic crisis since the Great Depression.

But while the economic comeback has been steady since then, growth appears to have stalled in the first three months of this year.

According to the US Commerce Department, the US economy grew at an annual rate of 0.2 percent which is much lower than expected and the weakest performance in a year.

So rather than steaming back to the days before the Lehman Brothers collapse, the pace of growth appears to hesitant and slow.

Optimistic observers have cited a number of one-off factors that have worked to make the quarter appear more sluggish than it is.

Blizzard like conditions at the start of the year meant consumers were at home not spending; the lower oil price trimmed expansion from big oil companies and a union dispute at ports on the US west coast meant exports slowed because ships were blockaded.

And the outcome appears to contradict other good economic data with the US jobless rate now down the 5.5 percent.

While that looks good on the surface, it adds to the debate about a "jobless recovery" in the US - more part time or casual positions and workers in lower paying roles than before the Wall Street collapse.

"We are creating jobs at a pretty rapid pace - 200,000 per month in most months but these are for the most part not very good jobs," Harvard University economist Benjamin Friedman told the BBC earlier today.

"I think our economy here has a long-term structural problem of not being able to provide good, decent jobs with strong upward trajectory of the kind that middle class Americans have come to know for many generations.

"I think that's going to be a problem and I think it's going to be a problem for more than the remainder of this year."

The outlook for weaker growth now appears likely to make the US Federal Reserve more hesitant about raising interest rates from their near zero level later this year.

The Fed today downgraded its outlook for employment while still sending the message that a possible rate rise was a "meeting by meeting" proposition.

Westpac senior economist Elliot Clarke says the slow growth gives the Fed cause to "wait and see" and to be patient about how future data evolves.

"There was further reason to believe that its quite a weak number and momentum might not build as the Fed is expecting which will be a concern for them," Mr Clarke told The World Today.

"The US economy really depends on what's happening with the consumer. They really need to see the consumer fire to see growth accelerate and to give them justification to act on rates."

The surprisingly sluggish growth in the US sent a warning to global investors and played a role in heavy falls across Europe where markets in Frankfurt and Paris fell around three percent.

Until now, the strength of the US economic recovery has been a bright spot in a world of otherwise anaemic or flat growth.

So today's outcome sends a message that the US remains a wildcard in a world where slow or no growth is regarded as the "new normal".