Looking for all those vacant residential dwelling being deliberately kept out of the Australian housing market

In the 2011 Census there were 2,297,460 rented private dwellings recorded. This was 29.6 per cent of the 7,760,322 private dwellings declared covering an est. 8,420,000 households.

By December 2016 the total number of private dwelling stood at 9,802,700 properties, for an est. 9,268,700 households.

Simple maths shows there was possibly around 534,000 private dwellings for which there were unlikely to be tenants and which were potentially available for sale.

Given these excess dwellings are likely to be unevenly spatially distributed, a number of metropolitan suburbs and regional urban areas would still be experiencing limited availability of housing stock for rent or sale and therefore demand may be unmet.

However, according to BIS Sharpnel; In 2017After a record breaking building boom in most capitals, Australia will have 24,039 extra homes above what are needed and will be oversupplied for the first time in more than a decade, a new report shows.

So why is it so hard to find a place to rent in large metropolitan areas and why is housing for sale so expensive?

It appears there is an artificial drought which can only be explained by the high percentage of investment properties in the housing stock mix which had reached 23 per cent by 2015, comprising one quarter of all house stock and two-thirds of apartment stock.

Domain.com.au released a ball park estimate of all vacant properties on 4 April 2017, based on Prosper Australia  research:

QUEENSLAND

An estimated 59,000 properties are standing empty in Queensland.

NEW SOUTH WALES

There are an estimated 121,000 properties vacant across New South Wales (with up to 90,000 properties standing empty in Sydney suburbs).

VICTORIA

The president of Prosper Australia, Catherine Cashmore, who has collected data on water usage to show there are 80,000 empty homes in Melbourne, said an empty home tax was an intuitively appealing policy that could pave the way for greater reforms.

SOUTH AUSTRALIA

There are an estimated 23,000 properties vacant in South Australia.

WESTERN AUSTRALIA

An estimated 21,000 vacant properties.

NORTHERN TERRITORY

There are an estimated 2,000 vacant properties in the Territory.

AUSTRALIAN CAPITAL TERRIOTORY

An estimated 5,000 vacant properties.

TASMANIA

An estimated 7,000 vacant properties.

The Sydney Morning Herald reported on 28 March 2016:

Vacant properties were among the "perverse outcomes" of tax incentives that encouraged some investors to favour capital growth over rental returns, according to the analysis by the UNSW's City Futures Research Centre.

"Leaving housing empty is both profitable and subsidised by government," researchers Bill Randolph and Laurence Troy said. "This is taxation lunacy and a national scandal."

The ANU Centre for Social Research and Methods analysed Australian Taxation Office data and found at least 4,204 “legislators” who owned investment properties of which more than 13.87 per cent appear to negatively gear their properties.

By 2017 226 of these “legislators” were federal MPs and senators who owned 525 properties between them and about 48 per cent of these parliamentarians own investment properties.

So it is not hard to see why the Turnbull Government is dragging its heels when faced with the “perverse outcomes” arising from negative gearing and capital gain tax concessions.

Or why a Coalition state government like the NSW Government would decide that the best way to address a perceived housing shortage is to give its political supporters free rein.

Sky News, 9 January 2017:

The NSW government will be able to fast-track developments under a massive shake-up of the state's planning system aimed at tackling Sydney's chronic housing shortage.

Councils will determine fewer development applications under the proposed changes but will be responsible for devising more planning strategies with local communities.

Other proposals include providing incentives for developers if they consult with neighbours and the community before lodging development applications and simplifying building regulations.

It defies belief that the NSW Coalition Government would believe that just building more private housing for investors to warehouse for financial gain is a solution to rising house prices and limited availability.

In December 2016 the average annual full-time adult wage/salary of an individual was est. $79,721 or $1,533 per week before tax and in an employment field of 12.06 million workers only 8.30 million had full-time jobs. An estimated half the workforce would probably have earned below $56,000 per annum.

Realestate.com.au calculates that it requires at least one person in a marriage/
partnership, presumably without children, to be in full-time employment - and earning more in wages each week than half the current workforce - for the couple to have any hope of saving for a deposit within a reasonable time period:

[http://www.realestate.com.au/news/how-long-does-it-take-to-save-for-that-first-home]

So if our multimillionaire prime minister, Malcolm Bligh Turnbull, and his parliamentary fellow travellers won’t act to ease housing affordability by removing taxation loopholes which allow the greedy to manipulate the housing market to their advantage, then it is up to voters to apply a cattle prod to their privileged haunches – and vote them out in 2018-19.

And if state governments won’t move to penalise investors who deliberately leave residential dwellings vacant for a trouble-free capital gain as well as a tax deduction, then voters with an eye to the future of their children and grandchildren might consider letting them know how they feel about the situation.

Ninety-six per cent of Australian federal parliamentarians own a property

ABC News, 20 April 2017:

There's no housing affordability crisis in the ranks of Federal Parliament's members and senators.

The politicians charged with tackling the thorny issue of spiralling house prices are among the nation's most aggressive property investors, an analysis by the ABC has revealed.

The 226 individuals own 524 properties between them and about half of them own investment properties.

That means many of our politicians have a very personal interest in any changes to negative gearing and the capital gains tax discount……

Ninety-six per cent of parliamentarians own a property. Only 10 out of our 224 elected officials aren't in the game.

Compare that to the rest of Australia, where home ownership is expected to dip below 50 per cent sometime this year.

Register of Members’ Interests for 45th Australian Parliament.

Although a number of investment properties are listed in the members’ register this does not necessarily mean that additional property is not owned as part of superannuation schemes (other than that operated by the Commonwealth of Australia) or included in the assets of a private corporation in which a member has a significant shareholding.

GREED Inc: rental income & negative gearing in Australia

The Guardian, 12 April 2017:

The ATO stats also show the number of landlords with an interest in six or more rental properties has grown quickly in the last three years, up 8.6%, from 17,671 to 19,198 individuals.

Landlords with an interest in five rental properties have grown even faster, up 9.8%, from 16,600 to 18,231. Those with an interest in three or four properties have also grown quickly, up 7% each.

By comparison, the largest number of landlords are those with an interest in a single rental property, at 1.5 million. Their number increased by just 2% over the last three years.

The Conversation, 13 April 2017:

The latest data from the ATO is consistent with what we’ve seen in the past. It shows that people with high-income occupations – doctors, lawyers, and others – are more likely to use negative gearing than the nurses and teachers on whom Treasurer Scott Morrison focuses when he tries to justify retaining negative gearing. It also shows that negative gearing is typically worth four to five times more for doctors and lawyers than nurses and teachers.

The Guardian, 13 April 2017:

The release of the taxation statistics for 2014-15 reveals that, while the number of people negative gearing has levelled in the past three years as interest rates have fallen, the greatest share of the benefits of negative gearing goes to above average earners – and the biggest growth is to those owning multiple properties.

With housing affordability and negative gearing the hot topic in the run up to the May budget, the annual release of the taxation statistics by the ATO on Wednesday served to reinforce how greatly negative gearing figures in people’s tax affairs.

In 2014-15, 1.27 million people recorded a rental net loss. This was down slightly from the 1.3 million in the years before and meant that 12.8% of taxpayers were negative gearing.

Again that was down from the previous year and the peak of 2012-13 when 13.4% of taxpayers were recording a rental loss…..

The reason for the drop is mostly because the main way to achieve a loss on your rental investment is through payments on the interest of the mortgage. But, as interest rates fall, that cost also falls, which means it is actually harder to record a loss.

Over the past four years, the number of people claiming a deduction for payments of interest on a rental property have increased but the total amount claimed has fallen…..

The median rent in NSW in the December Quarter of 2014 for housing ranging from 1 bedroom to 4 or more bedrooms was $420-$500 per week. With the median rent being $450-$600 in Greater Sydney, $230-$433 in the Greater Metropolitan Region and $230-$245 in the rest of NSW.

During the same quarter median rents across the NSW Northern Rivers region ranged from $180-$580 per week.

In 2014 the gross rental yield for apartments in Sydney CBD, Paddington, Darling Point, Double Bay, Kirribilli, Rose Bay, Tamarama, Bellevue Hill, Point Piper, Potts Point, and Vaucluse, i.e., the gross return on investment in a apartment if fully rented out, ranged from 2.8 per cent to 5.0 per cent according to Global Property Guide.

Want to know the average rental loss claimed for taxation purposes by landlords in your postcode? Then use this interactive map.

See that furtive chap in the dark glasses? He's a negative gearer!

Just a reminder of the cost to the rest of us of the out-of-control negative gearing of investment properties.     

The Sydney Morning Herald, 13 May 2016:

The re-analysis of the 2013-14 tax data, the latest available, shows that each negative gearer claimed an average loss of $8722 per year. Seven out of 10 had income before deductions in the top or second-top tax bracket. The average amount of tax saved by each of the 1.2 million negative gearers was $2900 per year.

Spread over the remaining 11.7 million taxpayers, the average cost was $310 each. The total, $3.646 billion, is about as much as the government spent on assistance to jobseekers and vocational training, and twice what it spent on assistance to indigenous Australians.

Haven't heard any negative gearer bragging about this around the barbeque lately.

Turnbull Government's $75 & $125 bribes appear to have earned it nothing but falling poll numbers

The announcement of a one-off payment of $75 to singles and $125 to couples who receive the aged, disabled and carers pensions to cope with a predicted rise of $78 in the average household electricity bill from June this year, along with a promised loan to the SA Government for construction of a solar thermal power plant and a feasibility study for a north-south gas pipeline, in exchange for company tax cuts for businesses with up to $50 million annual turnovers – has not produced a happy bounce in the polls for the Liberal-Nationals Coalition Government led by Malcolm Turnbull and Barnaby Joyce.

This Newspoll was conducted between Thursday 30 March and Sunday 2 April 2017.

The Australian, 3 April 2017:

Company tax rate cuts in Australia and the banks that benefit

There has been some finger pointing in mainstream and social media of late over Labor’s use of $7.4 million as the amount banks would be able to retain under the Turnbull Government’s progressive cuts to the company tax rate included in the 2016-17 Budget.

According to the Australian Tax Office on 3 January 2016:

The government announced a reduction in the small business tax rate from 28.5 per cent to 27.5 per cent for the 2016–17 income year. The turnover threshold to qualify for the lower rate will start at $10 million and progressively rise until the 27.5 per cent rate applies to all corporate tax entities subject to the general company tax rate in the 2023–24 income year.

The corporate tax rate will then be cut to 27 per cent for the 2024–25 income year and by one percentage point in each subsequent year until it reaches 25 per cent for the 2026–27 income year.

Full report: Company tax cuts What the evidence shows

ABC News reported in May 2016 that Treasury Secretary John Fraser told Senate Estimates: The cost of these measures to 2026-27 is $48.2 billion in cash terms.

In the first four years it is estimated that these tax cuts will cost the Treasury bottom line an est. $5.3 billion.

So where did the $7.4 billion for banks come from?

Australia is thought to have four big banks – the National Australia Bank (NAB), Commonwealth Bank (CBA), Australia and New Zealand Banking Group (ANZ) and Westpac (WBA) and it appears that this amount is based on projections done with regards to these banks by think tank, The Australia Institute.

The Australia Institute, media release 2016:

Big 4 banks $7.4 billion budget gift

The Coalition Government’s business tax plan would deliver $7.4B to the big 4 banks.

“Cutting company tax rates delivers a massive windfall to an already highly profitable banking sector,” Executive Director Australia Institute, Ben Oquist said.

“It makes no economic or budget sense to deliver the big 4 banks a multi-billion dollar tax break when Australia already has a revenue problem.

“If your agenda is jobs and growth, targeted industry assistance would deliver a much greater return on investment,” Oquist said.

The value of company tax provisions was derived from 2015 full year annual reports for the big four banks. That figure summed to $11,123 million. That figure was projected forward to 2026-27 to give the no change scenario.

The projection assumed bank profit and hence tax payable would increase in line with nominal GDP. The nominal GDP projections used the figures in the 2016-17 budget papers which give nominal increases of:

2.5 per cent in 2015-16,

4.25 per cent in 2016-17, and

5 per cent in 2017-18 and subsequent years.

Company tax cuts do not affect the big banks until 2024-25 when the current 30 per cent rate will fall to 27 per cent for all companies with further reductions of one per cent per annum until they reach 25 per cent in 2026-27.

The results of this are presented in the following table:

Table 1. Benefit of company tax cuts for big four banks, $million

	2024-25	2025-26	2026-27	Total
Savings on company tax	1,756	2,458	3,227	7,441

KPMG stated in Major Banks: Full Year Results 2015 that the Australian major banks reported another record earnings result in 2015 - a combined cash profit after tax of $30 billion.

By year’s end 2016 the major banks were reporting a combined cash profit after tax of $29.6 billion.

The Federal Government’s underlying cash balance for the 2016-17 financial year to 31 December 2016 was a deficit of $33,025 million and the fiscal balance was a deficit of $31,143 million. While net government debt for 2016-17 stood at an est. $326 billion.

In Major Banks: Full Year Results 2016 KPMG observed:

There is an increasing global perception that banks put shareholders’ and executives’ interests ahead of their customers and the community. This perception is more real for banks than for other corporates as they are seen to rely not only on compliance with strict regulation, but increasingly on the goodwill of the community and government to continue to operate in their current form.

We are seeing heightened scrutiny of Australian banks, including through the recent Standing Committee on Economics (the Committee) inquiry, becoming a regular feature of media and political commentary, notwithstanding eight separate inquiries since 2009. There are many reasons for this increased level of oversight, with terms such as “trust deficit” and “trust gap” often cited as the root cause.

It has been argued that the financial services industry has lost touch with the core proposition customers are seeking by forgetting its real purpose in society and becoming too inwardly focussed. These themes were repeated in testimony to the Committee.

Readers can make their own minds up as to whether banks have lived up to the historic social licence granted them by community (see bank scandals since 2009 and alleged superannuation owing in 2017) and, if they actually need any further tax relief or if that $7.4 billion would be much better in the hands of the Commonwealth Treasury.

What were they thinking?

The  Sydney Morning Herald, 15 February 2017:

What were they thinking? On Monday three members of cabinet called a press conference to pressure the Senate to cut the dole. That's right, to cut the dole. At just $13,750 per year plus an $8.80 per fortnight energy allowance, it's already so low the Business Council believes it "presents a barrier to employment and risks entrenching poverty." The Organisation for Economic Co-operation and Development, the research arm of the world's richest economies, says Australia's unemployment benefit has reached the point where it may no longer be effective in "enabling someone to look for a suitable job".

Even a Coalition-dominated inquiry found a "compelling case" for boosting it.

But the three ministers wanted to deny the energy supplement to new entrants on the spurious ground that this would merely remove "carbon tax compensation for a carbon tax that no longer exists". It wouldn't. The Newstart cost of living increase was cut 0.7 per cent when the energy supplement came in to avoid double counting. If the energy supplement went but the cut remained, new entrants to Newstart would be worse off than if the whole thing had never happened.

And they wanted to withhold Newstart from newly-unemployed Australians aged 22 to 25, paying them instead the lower $11,375 Youth Allowance. The under 25s would have to wait longer too – five weeks instead of the present one.

Rather than spend time arguing the merits of cutting a benefit already so low it can barely be lived on, Treasurer Scott Morrison, Social Services Minister Christian Porter and Education Minister Simon Birmingham delivered instead what amounted to a threat: if the Senate didn't cut the unemployment benefit, they might not fully fund the National Disability Insurance Scheme.

But not at first. In a burlesque twist, they opened the press conference spruiking the case for an unfunded massive company tax cut.

* Images found at Google Images

There would be a particularly nervous class of Australian investors right now - perhaps even Mr. Harbourside Mansion himself

The Guardian, 11 February 2017:

The founders of Mossack Fonseca, the law firm at the centre of the Panama Papers scandal, were arrested in Panama City on Thursday as the country’s attorney general launched a probe into their alleged connections with Brazil’s sprawling Lava Jato corruption scandal.

Juergen Mossack and his colleague Ramon Fonseca, a former adviser to Panama’s president Juan Carlos Varela, were taken into custody and transferred to police cells in the capital overnight for further questioning on Friday, their defence attorney Elías Solano was quoted telling reporters.

Panamanian prosecutors raided the offices of Mossack Fonseca on Thursday. In a press conference on Kenia Porcell, Panama’s attorney general, said she had information that identified Mossack Fonseca “allegedly as a criminal organisation that is dedicated to hiding money assets from suspicious origins”. 

She said the firm’s Brazilian representative had allegedly been instructed to conceal documents and to remove evidence of illegal activities related to the Lava Jato case.

“Put simply, the money comes from bribes, circulated via certain corporate entities to return bleached or washed to Panama,” said Porcell. She explained charges had been formulated against four individuals, including the Mossack Fonseca partners. 

Porcell thanked the authorities in Brazil, Ecuador, Colombia, Peru, Switzerland and the United States for their part in a collaboration which she said began over a year ago.

The Panama Papers, which consist of millions of documents belonging to Mossack Fonseca and leaked in April 2016, provoked a global scandal after showing how the rich and powerful used offshore corporations to avoid paying taxes.

Australian Financial Review, 14 June 2016:

Prime Minister Malcolm Turnbull's merchant bank Turnbull & Partners received an estimated $3 million in 1995 and 1996 from the sales of shares held through offshore companies administered by notorious Panama law firm Mossack Fonseca.

Turnbull & Partners received up to $7 million from share sales and advisory fees from Mr Turnbull's time as a director of a listed mining company, Star Mining, which had an interest in a Siberian gold deposit.

Documents obtained by The Australian Financial Review, which first revealed Mr Turnbull's link to a Mossack Fonseca company last month, show heavy selling of Star Mining shares by offshore companies in 1995 after a series of favourable decisions by Russian politicians and bureaucrats boosted the Star Mining share price.

One of the key figures who helped obtain Star's Siberian  mining leases, Ludmila Melnikoff, accuses Star director Ian MacNee, who died in 2008, of paying bribes of more than $US2 million to secure these decisions.

Australia still losing full-time employment positions and the Turnbull Government still denying reality of the job market

Media Release

20 October 2016

Shift to part-time employment continues

Monthly trend employment in Australia increased slightly in September 2016, according to figures released by the Australian Bureau of Statistics (ABS) today.

In September 2016, trend employment increased by 3,900 persons to 11,959,500 persons - a monthly growth rate of 0.03 per cent. This is down from the monthly employment growth peak of 0.28 per cent in September 2015. Trend part-time employment growth continued, with an increase of 11,800 persons, while full-time employment decreased by 7,900 persons.

”The latest Labour Force release shows further increases in part-time employment. There are now 130,000 more persons working part-time than in December 2015, while the number working full-time has decreased by 54,100 persons," said the Program Manager of ABS' Labour and Income Branch, Jacqui Jones.

The trend monthly hours worked increased by 2.2 million hours (0.1 per cent), though it is still below the high in December 2015.

The trend unemployment rate decreased slightly (by less than 0.1 percentage points) to 5.6 per cent, and the participation rate decreased 0.1 percentage points but remained steady at 64.7 per cent in rounded terms.

Trend series smooth the more volatile seasonally adjusted estimates and provide the best measure of the underlying behaviour of the labour market.

The seasonally adjusted number of persons employed decreased by 9,800 in September 2016. The seasonally adjusted unemployment rate for September 2016 decreased by 0.1 percentage points to 5.6 per cent, and the seasonally adjusted labour force participation rate decreased by 0.2 percentage points to 64.5 per cent.

More details are in the September 2016 issue of Labour Force, Australia (cat. no. 6202.0). In addition, further information, including regional labour market information, can be found in the upcoming September 2016 issue of Labour Force, Australia, Detailed - Electronic Delivery(cat. no. 6291.0.55.001), due for release on 27 October 2016. 

In August 2016 there were an est. total of 179,000 full-time and part-time job vacancies in Australia, according to the Australian Bureau of Statistics. By September 2016 this figure had dropped to est. 161,1000 job vacancies, according to the Australian Government Dept. of Employment.

In September 2016 there were est. 690,900 unemployed people in Australia. An est. 20 per cent of these people were under 25 years of age.

An est. 480,400 unemployed people were looking for full-time work (est. 39 per cent of this number were females) and on average they each spent 47.1 months doing so.

An additional est. 209,900 unemployed people were looking for part-time work and, as est. 59 per cent of this number were females one could suspect that many were only seeking part-time rather than full-time work because of competing child raising/carer obligations.

Despite these figures indicating that a high number of unemployed people are competing for jobs in a shrinking pool of employment opportunities, the Turnbull Government through the Minister for Social Services and Liberal MP for Pearce Christian “inequality is a measure of difference not a measure of comparative wellbeing”  Porter insists on demonising those applying for unemployment benefits while they search for work, as well as those women who seek to lawfully access government paid parental leave payments in additional to their employer schemes so that they may return to work at an appropriate time and, single parents receiving parenting payments.

The Turnbull Government’s new policy approach based on the June 2016 Baseline Valuation Report allegedly providing a baseline analysis of lifetime welfare costs and highlighting areas of interest is not worth the paper it was printed on – as has been pointed out elsewhere.

And the example of the stay-at-home single parent of four earning more than a similar parent working full-time is nothing but a pile of political manure, as was shown it this report in The Sydney Morning Herald on 29 October 2016:

The claim, published in The Australian on Friday and backed up by Social Services Minister Christian Porter, is that single parents with four children can get payments totalling $52,523 per year if they don't work but only $49,831 after tax if they work and receive the median full-time wage…..

Former Department of Social Security analyst David Plunkett said the calculation excluded $30,916 in family tax benefits that the parent working full-time would also receive, meaning that when "apples are compared with apples", the parent would receive $80,747 if working and $52,523 per year if not working.

The parent would be almost $30,000 per year better off working than not working, rather than than $2692 worse off as claimed.

Ben Stiller writing in The Sydney Morning Herald on 26 September 2016 gave a telling response to this blinkered federal government’s approach to jobs ‘n’ growth:

I've now spent most of my life working with people the minister has declared there is a "moral imperative" to get off welfare, many of them living lives impacted by profound disadvantages to participation in employment. All of them people who, like me, just want an opportunity to make their life better.

Unlike me, though, they are often trying to manage multiple disadvantages associated with physical health, mental health, family breakdown, lack of education, high local unemployment rates, discrimination and stigmas.

We can choose to apply moral judgment to people so easily attributed to a budget line and described as having a "lifetime of welfare dependence". After all, almost everyone reading this is a success. We made a go of things, overcame our challenges. We pay our taxes. These people are scientifically calculated to spend their lives without bothering to get a job.

Except there aren't any new low-skilled jobs for a 19-year-old single mother with a year 10 education that structure flexible working arrangements around caring responsibilities, childcare pick-ups, court appearances to renew AVOs and night-time community centre literacy/numeracy classes. Even the "welfare dependant" strive to help their children with homework.

As for the old unskilled jobs, they've all been undermined, underpaid and offshored. The new skills needed to get a job cost tens of thousands of dollars and if you happen to pick a dodgy private provider then all that debt has gone into a worthless piece of paper.

When there are no jobs, when there are no opportunities and there is no hope for improvement we have created poverty. As St Vincent de Paul Society CEO Dr John Falzon said, "Poverty is not a personal choice." In poverty there are no choices. People do what they need to do in the world in which they live in order to survive.

I've seen people line up like cattle for hours in the rain to receive a basket of tinned food or a $20 supermarket voucher (Don't worry, Minister, they were always marked "No tobacco. No alcohol"). I've seen people pretend to be someone else to try to get an extra basket because family have come from interstate on the bus and they have nothing to feed them.

Those aren't choices made by people with options and opportunities, they are attempts to survive in a system that confuses, abuses and punishes.

I would like to take this opportunity to make one thing very clear to every politician and print or television journalist who may be tempted to continue to demonise people receiving Centrelink or Dept. of Veterans’ Affairs pensions, benefits or allowances.

They are not the only people in Australia receiving in kind or cash welfare from the federal government.

By way of example*:

* Every person or business receiving a tax concession or tax refund is receiving government welfare. 

* Everyone taking advantage of low taxing components in their superannuation arrangements is receiving government welfare. 

* Every individual who received a primary and high school education received government welfare through state/federal subsidies to schools and/or tax concession to peak religious organisations running them. 

* Every student who took advantage of deferred fee payment options during their university education years received government welfare. 

* Everyone turning up at A&E at a public hospital is receiving government welfare.
* Every parent who took their children to be immunized under the national immunization scheme received government welfare.
* Everyone with or without a a concession card who reached the annual PBS Safety Net threshold and was subsequently supplied with reduced cost/free medication received government welfare.

* Every person receiving non-income tested assistance from any government health or social program is receiving government welfare.

In other words, every single person in Australia receives government welfare – sometimes for years!

* This is not an exhaustive list of examples

Using tax offsets as a principal funding device to encourage self-assessing corporations to conduct research and development. What could possibly go wrong?

Providing a tax incentive for industry to conduct, in a scientific way, experimental activities for the purpose of generating new knowledge or information in either a general or applied form. [C’wealth Income Tax Assessment Act 1997 - SECT 355.5]

What could possibly go wrong when a federal government primarily funds business research and development (R&D) by offering private corporations tax offsets for conducting such activities, while at the same time allowing them to self-assess whether they are eligible for these tax incentives and whether their research is genuine?

Well for a start, the companies involved tend to employ less science, technology, engineering and mathematics graduates to conduct their R&D.

Given that on 15 June 2016 The Australian reported that; the Productivity Commission says STEM graduates fare poorly in the job market, apart from those who have studied healthcare, mining engineering and surveying. The outlook for mathematics and computer science qualifications are only slightly below average, however there are big gaps for graduates in life sciences, chemistry and the physical sciences. Employment outcomes improve three years after graduation, but 20 per cent of people with bachelor degrees in natural and physical sciences have still not got a job. Of those who do get work, many are in an unrelated field. About a quarter of people with science degrees say their qualifications are not relevant to their employment, one has to wonder why business and industry in Australia are not availing themselves of these qualified graduates.

Then there is the fact that it appears that this government program is not always well targeted.

Another flaw in this system is that voters have no way of knowing which companies are receiving these tax incentives and how much they are receiving, or of assessing what government foregoing so much tax income annually actually achieves as outcomes for the economy.

If science actually matters to the Turnbull Government it should matter not just in universities and identified research institutes but in all its aspects – including allegedly market-driven R&D.

One has to suspect that a little more academic discipline in business research and development might lead to better outcomes.

BACKGROUND

Dept. of Industry, Innovation and Science, Review of the R&D Tax Incentive (Ferris, Finkel and Frasier) 4 April 2016:

The R&D Tax Incentive (the Incentive) is the largest component of Australian government support for innovation, with around 13,700 entities performing $19.5 billion of R&D at an estimated cost to government of $2.95 billion in 2013-14. The Government commissioned this review to:

‘identify opportunities to improve the effectiveness and integrity of the R&D Tax Incentive, including by sharpening its focus on encouraging additional R&D spending.’

Reviewing the programme against these terms of reference involves the evaluation of the programme against its objectives, weighed against the costs, to measure the net social benefit.

The objectives, as stated in the programme’s legislation, are to ‘encourage industry to conduct research and development activities that might otherwise not be conducted…to benefit the wider Australian economy’. In other words, the Incentive seeks to encourage additional R&D (additionality) that benefits others (spillovers).

Most OECD countries have incentive schemes for R&D. Australia and most other countries use tax incentives as part of their public support, but Australia, Canada and the Netherlands are unusual in having tax measures as the principal form of support for business R&D. Countries such as Finland, Germany and Sweden are examples at the other end of the spectrum, in that they do not use tax incentives at all but rather support business R&D through direct measures such as competitive grants.

Overall assessment

The review panel finds that the programme falls short of meeting its stated objectives of additionality and spillovers. There are a number of areas where improvements could be sought in order to improve the effectiveness and integrity of the programme and achieve a stronger focus on additionality.

Based on the best estimates of additionality and spillovers, the panel found that the programme could be better targeted. The areas of improvement identified in this review would be likely to generate greater benefit from the programme for the Australian economy.….

The panel notes that there is a modest amount of collaboration with publicly-funded research organisations (PFROs) within the programme, but it is not an explicit focus. The panel also notes the low employment level of Science, Technology, Engineering and Mathematics (STEM) PhD graduates in Australian industry relative to other OECD countries. This represents a lost opportunity for greater spillovers of knowledge between larger companies, PFROs and the broader marketplace…..

The panel notes that despite the level of coordination between AusIndustry and the ATO, the significant growth in the scale of the programme is placing increasing strain on the administrative and compliance model for the programme. The Government should consider options to improve administration. These could include: adopting a single application process rather than the current separation of registration and claims, introducing a single database for the entire programme, reviewing whether both AusIndustry and the ATO should continue to administer the programme jointly and closer collaboration and streamlining around review and findings. Either or both agencies may require additional resourcing to enable such improvements.

To place the programme into alignment with modern expectations and to allow public visibility of companies receiving public support for their activities, tax secrecy provisions should be adjusted to allow the publication of the names of companies claiming the Incentive and the amounts of R&D they have claimed…..

Australian and foreign-owned companies who are laughing all the way to the bank

QANTAS AIRWAYS LIMITED with an income of $14.90 billion stated it had no taxable income in in 2013-14 so paid no tax. Hmmmm…..

ENERGYAUSTRALIA HOLDINGS LTD earning 8.84 billion and EXXONMOBIL AUSTRALIA PTY LTD bringing in $9.94 billion in that same financial year also had no tax to pay.

News Corp’s APN NEWS & MEDIA (owner of most of the regional newspapers in Northern NSW ) with a taxable income of $21.29 million in 2013-14 also paid no tax.

They are among the hundreds of Australian and foreign-owned companies with incomes of over $100 million a year which the Australian Tax Office (ATO) lists as paying no tax.

ATO Corporate Tax Transparency - 2013-14 Report of Entity Tax Information

Corporate tax transparency – further contextual background

Oxfam calls on major parties to address the fact that multinational tax dodging is costing Australia billions

Medianet Release
Multinational tax dodging costs us billions Nearly $AU9 billion that could be spent on schools, hospitals and critical infrastructure in Australia and in poor countries is instead being hidden by Australian-based multinationals in tax havens, according to an Oxfam report released today. According to The Hidden Billions – How tax havens impact lives at home and abroad, and based on the latest available data, tax haven use by Australian-based multinationals cost Australia around USD $5 billion (AUD $6 billion) in lost tax revenue annually, and cost developing countries an estimated USD $2.3 billion (AUD $2.8 billion) every year. The report is being launched with an online poll that shows 90 per cent of Australians polled think the Government should do more to stop multinational corporations avoiding paying tax in Australia and in every country in which they operate. Oxfam Australia Chief Executive Dr Helen Szoke said the report showed how much the public lose out when big companies do the wrong thing and governments don't step in and stop them. "The Oxfam report, for the first time, puts dollar figures on what Australians and poor people in our region are missing out on because Australian-based multinational companies aren't paying their fair share of tax like the rest of us," Dr Szoke said. The Oxfam-commissioned poll also found: ·         60 per cent of Australians polled believe the main thing the Federal Government should do to raise revenue is crackdown on tax avoidance by multinationals; ·         90 per cent of Australians polled believe the Federal Government should legislate to prevent all multinationals operating in this country from moving their profits to tax havens to avoid paying tax here; ·         87 per cent think that those Australian companies who operate in developing countries and in Australia should publicly report their earnings and how much tax they pay everywhere. Globally, tax-dodging is rampant in developing countries, with big companies ripping USD $172 billion (AUD $209 billion) of tax revenue out of their economies in 2014, money that could have been used to fight poverty and generate equality and prosperity. Dr Szoke also said The Hidden Billions report found that use of tax havens overseas by big businesses based in Australia would cost developing countries USD $4.1 billion (AUD $5.6 billion) in desperately needed revenue for essential public services over the next five years, including many of Australia's poorest neighbours. "Over the next five years, it's estimated that Indonesia will be deprived of around USD $360 million (AUD $493 million) that could have gone towards education, and PNG stands to lose around USD $17 million (AUD $23 million) in expenditure on essential services such as hospitals, schools and sanitation," Dr Szoke said. "This is shocking, given in PNG, 60 per cent of the population don't have access to clean water. "In Ghana, funding lost due to the use of tax havens by Australian-based multinationals could pay for an estimated additional 1,400 primary school teachers, and nearly 600 nurses, a year.  In The Philippines, an estimated 1,700 new classrooms per year could be built. "It doesn't have to be this way. Australia should show that it's tackling this issue by making the tax affairs of Australian-based multinationals public – not only for their operations in Australia, but for every country in which they operate. "Our research relies on IMF data, which shows the flow of money from Australian-based multinationals.  Unfortunately, there is no way to find out which individual companies are dodging tax, as they're not required to publish their tax affairs on a country-by-country basis."  Dr Szoke said this lack of public reporting enabled big companies to hide billions of dollars they should be paying in tax. "Other countries, including the US, France and Canada, have made tax reporting public for high-risk sectors in big business, such as for mining companies and big banks; it's time Australia caught up," she said. Dr Szoke said the report showed that Australia was a major part of this global problem that affected so many lives here and overseas. "With inequality worsening around the world, making the fight against poverty even harder, companies must pay their fair share of taxes, so that the revenue can be used to improve people's lives, both here and for the world's poorest people," Dr Szoke said. Oxfam is calling on all political parties to commit to: ·         Make tax transparent at home and abroad; ·         Curb irresponsible use of tax havens; ·         Make multinational ownership information public; ·         Support developing countries with tax infrastructure, and, ·         Support global action to end tax dodging. Notes to editors: Research Now conducted the online poll of a nationally representative sample of 1009 Australians, from 25-27 May.
	© Australian Associated Press, 2016