Submission to the House of Representatives Standing Committee on Tax and Revenue Inquiry into the External Scrutiny of the Australian Taxation Office

With Sinclair Davidson

Introduction: The parliament should unequivocally reject any reduction in the level of scrutiny applied to the Australian Taxation Office (ATO).

The ATO lists five separate bodies which it considers as external scrutineers: the Australian National Audit Office, the Commonwealth Ombudsman, the Inspector-General of Taxation, Office of the Australian Information Commissioner, and the Productivity Commission. However, with the transfer of responsibility for individual complaints about taxation from the Commonwealth Ombudsman to the Inspector-General of Taxation, four of these five oversight agencies have oversight of the ATO only insofar as the ATO is a statutory agency, rather than unique oversight of the ATO.

This system of a single dedicated inspector of the Commonwealth revenue collecting agency is the bare minimum one would require for a liberal democratic tax system. There is a strong case for increased monitoring and scrutiny of the ATO. We believe that this inquiry has been established under a dangerous assumption that the most important independent statutory authority in the Australian government should be freed from the current level of external monitoring. However, the inquiry presents parliament with an opportunity to tighten that monitoring. From both a liberal perspective and a democratic perspective, the ATO needs more scrutiny.

Available in PDF here.

The end of history … in Australian universities

With Stephanie Forrest and Hannah Pandel

Executive Summary: Undergraduate history degrees in Australia fail to teach fundamental aspects of Australia’s history and how Australian liberal democracy came to be. Instead, they offer a range of disconnected subjects on narrow themes and issues—focusing on imperialism, popular culture, film studies, and ethnic/race history.

This report contains the results of a systematic review of the 739 history subjects offered across 34 Australian tertiary institutions in 2014, including 34 history programs and 10 separate ancient history programs.

Only 15 subjects out of 739 subjects surveyed covered British history, and of these, 6 were principally concerned with twentieth century British history—that is, the history of Britain after the colonisation of Australia.

Only 10 of the 34 universities surveyed offered subjects on the history of Britain as part of their history programs, even though Australian society is founded on British institutions. By contrast, 13 offered film studies subjects as part of their history programs More universities offered subjects on the history of popular culture (8) than offered subjects on intellectual history (6).

The report also ranks universities depending on how closely they adhere to the Oxbridge model of historical comprehensiveness. Only the University of Sydney, Macquarie University and Monash University come close to the Oxbridge model. Some very small and new institutions — such as Campion College — rank as well on this measure as large and well-established universities like the University of Melbourne.

There is also a tendency for many smaller universities to offer subjects exclusively on Australian and twentieth century history, thus promoting a narrow and short-sighted view of history. Undergraduate history informs the next generation of historians, the next generation of history teachers, and their future students. This report raises concerns that a new generation of Australians will have a narrow and fragmented grasp of our heritage, and lack an understanding of the institutions that have made Australia free and prosperous.

Available in PDF here.

Submission to Treasury consultation into exposure draft of Tax Laws Amendment (Tax Integrity Multinational Anti-avoidance Law) Bill 2015

With Sinclair Davidson

Introduction: The Tax Laws Amendment (Tax Integrity Multinational Anti-avoidance Law) Bill 2015 exposure draft represents an important and concerning watershed in the practice of Australian corporate tax governance.

The draft bill would base the assessment of Australian tax liabilities on an assessment of tax rules in other countries. It undermines global tax agreements to which Australia is a part that have developed to prevent double taxation, risking the phenomenon that those agreements were designed to avoid. It offers a disincentive for the world’s biggest firms from establishing operations in Australia. It mischaracterises readily understandable business decisions as tax avoidance and penalises firms for normal corporate structural practices.

The scope of this legislation amounts to a substantial, yet entirely unpredictable, increase in corporate tax, and an attendant increase in the regulatory burden faced by large firms operating in Australia. We dispute the claim that this is a “tax integrity” measure. It is very much a tax increase.

Available in PDF here.

Submission to the Senate Standing Committees on Legal and Constitutional Affairs inquiry into the Copyright Amendment (Online Infringement) Bill 2015

Executive Summary: The Copyright Amendment (Online Infringement) Bill 2005 is an internet censorship bill. It creates a new and potentially dangerous power for courts to censor websites. This power is not proportional to the harm it is intended to ameliorate.

The bill enables copyright holders to apply for court orders against internet service providers to block access to websites whose “primary purpose” is to facilitate the infringement of copyright. This amounts to a form of judicial censorship of the internet in the private interests of copyright holders. It is inappropriate in a free society.

In a submission to the September 2014 Discussion Paper into Online Copyright Infringement, the IPA argued that proposed copyright reforms will “do nothing to tackle the underlying dynamics” that have enabled a shift in social attitudes as to the desirability of copyright enforcement. This submission is substantially drawn from the arguments made in that previous submission. The previous submission, which outlines many of the arguments below in greater detail, is attached.

Copyright is not an unlimited right. Copyright enforcement needs to be carefully counterweighed against the rights that such enforcement might limit. Intellectual property enforcement is not a sufficient justification for the abrogation of a more central right: the right to freedom of expression. The Australian government does not censor websites that can encourage much more serious harm than copyright infringement. Internet censorship for the purposes of copyright enforcement constitutes a serious and disproportionate overreach of government power and a consequent threat to freedom of speech.

Available in PDF here.

Submission to the Acting Independent National Security Legislation Monitor Inquiry into section 35P of the ASIO Act

With Simon Breheny

Introduction: This submission has been drafted in response to an invitation to the Institute of Public Affairs to make a submission to the Acting Independent National Security Legislation Monitor’s Inquiry into section 35P of the ASIO Act.

Our submission recommends the repeal of section 35P. We contend that there are three key problems with section 35P:

  • Individuals can engage in illegal conduct without being aware they are breaking the law
  • Restrictions on disclosure about special intelligence operations last forever
  • Any exemption will provide only limited protection for journalists but journalism is an ambiguous term, and the exemption will not protect freedom of speech

Available in PDF here.

A Submission to the Senate Inquiry into Corporate Tax Avoidance

With Sinclair Davidson

Introduction: In October 2014 the Australian Senate agreed to an inquiry into corporate tax avoidance. This comes after a wave of media comment about apparent tax “minimisation” strategies practiced by large multinational firms, particularly firms operating in the technology space.

The debate over company tax avoidance at home and abroad is a highly politically charged one, but the evidence suggests it offers far more heat than light.

The debate has exposed that the mechanics of Australia’s company tax is poorly understood. Even basic aspects of the company tax – such as the distinction between accounting profit and taxable profit – have been misinterpreted and those misinterpretations repeated.

Such misunderstandings and confusions multiply when the debate turns to the interrelation between company tax in different countries and the international corporate tax regime. Further complications are the growing significance of intellectual property and “border-less” commerce in the digital age. This makes the existence of confusion about the company tax burden understandable. But that confusion is no basis on which to alter the structure of the tax system, nor impose new regulatory controls or privacy-limiting information sharing policies, which could undermine the value of Australia as a business friendly economy.

Furthermore, the overarching public policy goal for Parliament must be the ultimate health of the economy, and the prosperity of the Australian people. We value multinational activity in Australia not because they provide revenue for the government budget, but because they create economic activity: provide jobs, services, and enhance our wellbeing.

Parliament must avoid introducing policy settings which purport to protect the stability of public revenue but at the same time cool the investment climate and push multinational economic activity outside of Australia.

The debate over corporate tax avoidance resembles another controversial and complex tax debate in recent years – that surrounding the mining tax. As we argued in The Australian in in January 2015:

The government should tread carefully. This obsession with multinationals and corporate tax looks like the Rudd government’s mining tax debacle. In 2010, Wayne Swan said foreign-owned mining companies were paying only 13 per cent tax in Australia. Tax office data told a different story but the government ploughed ahead. As we learned, populism made for poor policy …

There’s another reason for [the government] to be careful. When all the dust had settled from Swan’s tax crusade, the mining tax raised almost no money anyway.

Available in PDF here.

Submission to Parliamentary Joint Committee on Intelligence and Security Inquiry into the Telecommunications (Interception and Access) Amendment (Data Retention) Bill 2014

Introduction: Recent terrorist attacks have emphasised the need for counter-terrorism and law enforcement policy to be flexible, robust, and up-to-date. The rise of Islamic State is a significant threat, materially changing the foreign fighter problem. Many of the government’s recent anti-terror law changes have been welcome and necessary. As I argued in December 2014, the “knee-jerk reaction against any and all national security changes is not merely wrong, it’s dangerous. There is no more basic responsibility of government than security.”

However, The Telecommunications (Interception and Access) Amendment (Data Retention) Bill 2014 (“data retention bill”) will mandate the creation of large databases of information about the activities of all Australian internet users, not just those suspected of criminal activity.

The information contained in these databases will be sufficient to reconstruct extremely deep profiles of the activities of internet users. The information within the databases will be potentially available in any court proceeding, including, for instance, as the result of a subpoena in civil litigation. The government has made a decision not to limit access to this information to national security purposes. The creation of these databases manifests substantial new privacy risks to Australians, both from lawful and unlawful access.

The government has not demonstrated that the risks and consequences of mandatory data retention outweigh the benefits to law enforcement, nor has it demonstrated that the existing legal framework – which was substantially revised in 2012 – is insufficient to tackle the security challenges which the government has identified.

Available in PDF here.

The sharing economy: How over-regulation could destroy an economic revolution

With Darcy Allen

Executive Summary: The sharing economy describes a rise of new business models (‘platforms’) that uproot traditional markets, break down industry categories, and maximise the use of scarce resources. The best known services are the ridesharing system Uber and the accommodation service Airbnb. However, the sharing economy extends much further into finance, home tools, investment, and everyday tasks.

The ‘sharing economy’ emerged from dramatically falling transaction costs that had prevented certain markets from developing. The sharing economy coordinates exchanges between individuals in much the same way as a traditional market, but does so in a flexible, self-governing, and potentially revolutionary way.

These burgeoning benefits are profound: more sustainable use of idle and underutilised resources; flexible employment options for contractors; bottom-up self-regulating mechanisms; lower overheads leading to lower prices for consumers; and more closely tailored and customised products for users.

These sharing economy platforms are only in their embryonic stage of development. The benefits to the Australian economy as the market becomes more efficient are likely to expand. This expansion will only occur if Australia’s entrepreneurs are left to experiment and innovate.

The real threat to the sharing economy is government regulation driven by the incumbent industries that are challenged. The danger of excessive legislation and regulation will absorb the gains yielded by technology improvements, preventing mutually beneficial trade and stifling economic growth.

This paper recommends new approaches to regulatory design that would encourage the growth of the sharing economy:

  • regulators should encourage bottom-up, organic, self-regulating institutions prior to introducing top-down government control;
  • occupational licensing needs to be reduced to allow private certification schemes and reputation mechanisms to evolve;
  • industry specific regulatory frameworks need to be avoided;
  • regulations making it harder for start-ups to compete for labour need to be reduced; and
  • the status of individual contractors needs to remain separate from highly restrictive employment law

Available in PDF here.

Submission to Australian government Online Copyright Infringement Discussion Paper

The law governing copyright infringement in Australia is characterised by uncertainty and complexity. Technological change has exacerbated these problems, enabling large scale copyright infringement, which in turn has exposed a lack of social agreement on the desirability of copyright protection.

This submission argues that the Commonwealth government’s proposed reforms to copyright law do nothing to tackle the underlying dynamics that have led to these developments. Instead, they seek to tip the balance in favour of copyright holders. The proposed reforms:

  • Will do little to prevent copyright infringement;
  • Have an unacceptable impact on freedom of speech;
  • Increase, rather than decrease, the underlying uncertainties of copyright law in Australia, particularly while Australia lacks a ‘fair use’ exception;
  • Give the government the power to create new copyright frameworks by regulation; and
  • Constitute an attempt to shift the costs of copyright protection from copyright holders to internet service providers.
  • Furthermore, while the proposal to extend the safe harbour provisions in the Copyright Act is welcome, it helps illustrate the underlying uncertainties of Australia’s copyright regime.

This submission first outlines the principles by which copyright law reform must be judged.

Copyright is not an unlimited right – it is granted by the government in order to provide incentives for the production of creative work. As such, copyright law has to strike a balance between the interests of monopoly rights-holders and other users of creative works. The political bargain sustaining copyright is inherently unstable, and the instability is further exacerbated by unpredictable technological change.

In Australia, the imbalance of copyright is represented most obviously by the lack of a fair use exception for copyright infringement. This creates a great deal of uncertainty in its own right, but in the context of the government’s proposed reforms, weighing the copyright balance further in favour of copyright holders without introducing a fair use exception will substantially increase that uncertainty.

The submission concludes by outlining specific problems with the government’s proposals.

Available in PDF here.

A social problem, not a technological problem: Bullying, cyberbullying and public policy

With Simon Breheny

Introduction: Bullying among children is a significant and serious issue. In recent years, thephenomenon described as “cyberbullying” has received a large amount of social, political, and academic attention.

The Commonwealth government has announced that it is seeking legislative change to deal with cyberbullying. The government plans to institute a Children’s e-Safety Commissioner with power to takedown harmful content directed at children from the social media sites.

The Children’s e-Safety Commissioner is a serious threat to freedom of speech.

The purpose of this paper is to outline the scope of the cyberbullying problem, the conceptual framework within it must be understood, and develop principles by which policymakers can address the cyberbullying problem. Without understanding the cyberbullying phenomenon it is impossible to devise effective policy that will not have unintended consequences and threaten basic liberties like freedom of speech. Unfortunately it is not clear that the government has clearly understood the causes, consequences, and characteristics of cyberbullying.

This paper argues that cyberbullying is a subset of bullying. It is bullying by electronic means. It is not a problem of a different kind from bullying in an offline environment. Cyberbullying is a social problem, not a technological one.

Available in PDF here.