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COMMENT

Two waves sink Malcolm Turnbull’s rhetoric

Richard Denniss

This week two enormous lies crashed into the shores of Australian public debate. Thanks to the Australian Tax Office we now know that rather than funding our schools and hospitals, a third of our biggest companies pay absolutely no corporate profit tax whatsoever. And now, thanks to the Queensland Land Court decision to recommend the approval of the enormous Adani coal mine, we know that suggestions that Australia is planning to be competitive in a low-carbon world amount to nothing more than a cruel hoax.

Intriguingly, Adani, the Indian-owned energy conglomerate, is at the centre of both big lies. However, before we examine the Adani double whammy, we must first explore the issue of who knew what and when about the fact that more than one third of Australia's 1500 biggest companies paid no tax in 2013-14.

The Queensland Land Court has approved the Carmichael Coal mine project.
The Queensland Land Court has approved the Carmichael Coal mine project. 

For years, Australians have been berated by big business, and their boosters in parliament, about the punitive and stifling impact of the 30 per cent corporate tax rate. For years, we have been subject to a flood of econo-babble about the need to "incentivise investment" by cutting the "uncompetitive" corporate tax rate. And, for years, we have been lied to. Either that or the people making such claims were entirely, and wilfully, ignorant of the facts.

Let's be clear: while the fact that one third of our biggest companies paid zero tax in 2013-14 is obviously news to voters, it isn't news to the company executives involved – nor to the ATO. In turn, either both Joe Hockey and Scott Morrison knew that Adani, Peabody and Whitehaven were paying no tax, or the Treasurers didn't care enough to ask.

As the Business Council of Australia repeatedly spoke out on the need to cut the corporate tax rate to "boost economic growth", not one of their members sought to correct the record. When successive treasurers told us the taxes the mining companies paid during the mining boom were what kept the budget strong, not one representative of those mining companies sought to correct the record. Yet we as voters are told we need to have a "mature debate" about the budget and the economy. Yeah, right.

If facts play any role in Australian political debate, the release of tax data on Thursday will be a watershed moment. For a decade voters have been told the unpopular mines that destroyed communities, farmland and the natural environment were essential due to the jobs they created and the taxes they paid. Indeed, Barnaby Joyce once said "without coal mines we go broke and we go broke very, very quickly".

We now know that is simply untrue.

Which brings me to this week's Queensland Land Court decision to approve the largest export coal mine ever built, which occurred just days after world leaders agreed in Paris to rapidly reduce greenhouse gas emissions.

Ironically, one of the reasons the court recommended approval of the Carmichael mine was its view that "it is apparent that [Adani] must pay tax on income earned or deemed to be earned in Australia". The judge accepted the "prima facie evidence of the corporate tax payable" and rejected opponents' claims that Adani would pay far less. The ATO data shows Adani paid zero tax on revenues of $268 million in 2013-14. Whoops.

If it can secure the taxpayer subsidies it needs to press ahead, Adani's Carmichael mine in far north Queensland will extract more than 2 billion tonnes of coal from a hole measuring 40km long and 10km wide. You will be able to see it from space. People sometimes talk about how "geoengineering" might be required to avoid dangerous climate change; few realise we are actually undertaking geoengineering to cause it.

In seeking political and public support for its mine, and for the taxpayer-funded rail line and port its mine will need, Adani has spent years talking about all of the jobs and tax revenues its environmental destruction would create. Thursday's ATO data, combined with Tuesday's land court judgment, provides clear evidence that some "good corporate citizens" systematically mislead the public and, worse, that our political class instinctively sides with them.

When Adani first sought approval for the Carmichael mine it did what successful mine developers often do and paid some economic consultants to make exaggerated claims about the number of jobs the mine would create. Safe in the knowledge that state planning and development agencies would automatically accept whatever economic claims mine proponents could generate, Adani's consultants used the widely discredited "input-output multiplier" model to claim the mine would "create" 10,000 jobs. Indeed, Adani took out TV ads during the 2015 Queensland state election using that figure.

However, like the many companies arguing that the corporate tax rate was too high while paying no tax, Adani knew that its project wouldn't really create 10,000 jobs. How do I know they knew? Easy: at the same time those ads were running during the Queensland election campaign, I was reading the "revised" economic modelling provided by the new economic consultants that Adani intended to rely on in court. The "revised estimate" of job creation was 85 per cent smaller.

As I sat on the beach reading those economic modelling results, I was unable to comment on the fundamental contradiction between what Adani was telling Queensland voters and what they were intending to rely on under oath. The documents were not yet public, so I could say nothing. The Queensland bureaucracy must have known the 10,000 jobs claim was rubbish and, in turn, the former Queensland government should have known. But no one rebuked them. Remarkably, the current federal government continues to use the 10,000 jobs figure that even Adani has now abandoned (at least when it is under oath).

According to the Queensland Land Court, the construction of the world's largest export coal mine will create 1400 jobs, a whopping 0.06 per cent of the state's employment. And according to the Australian Tax Office, Adani, along many other resource companies operating in Australia paid not a cent in tax in 2013-14.

So why is it again that we have to build so many of the mines that communities don't want and the natural environment can't cope with? Why is it again that we plan to double our coal exports at precisely the time the world says it wants to move rapidly away from coal? Yep, you guessed it: we have to mine more coal to help poor people around the world. Or, at least, so says the government that slashed the foreign aid budget by a third. After the economic claims have been destroyed, we now have to pretend we're mining out of moral obligation.

It is not clear why the Australian government is so determined to increase the GST we all pay in order to cut the corporate tax rate that so few companies actually pay. And it is not clear why state and federal governments are so keen to exaggerate the significance of the 0.35 per cent of the workforce engaged in coal mining.

What is clear is that the release of the ATO data detailing who does – and doesn't – pay corporate tax in Australia just killed the case for a cut in the company tax rate stone dead. It's a pity the ABS data on which industries do, and don't, employ a lot of Australians hasn't had the same impact on the enormous subsidies for the mining industry.

Richard Denniss is chief economist of the Australia Institute.

Twitter: @RDNS_TAI