Interview with Carson Scott
Subjects: Employee share schemes; Australia in the Asian Century; the Prime Minister’s visit to Arnhem land
SCOTT: The Prime Minister moving on, even though he’s up north on his touted mission to address the disparities in Indigenous communities versus the rest of the country, he’s also been making moves inside corporate Australia’s share schemes, are the burden on employees in this space? Let’s understand this developing story with Alex Malley, CEO of CPA Australia. Alex, what is, as opposed the background to all of this? Put it into context.
MALLEY: Well, back in 2009 the Labor Government changed the rules around shares that may be given in lieu of salary in a start-up small business scenario and so as a result of that, this was a disincentive for people who might be willing to take equity as opposed to salary because it was going to be taxable in their hands even if they hadn’t earned an income. So the government is now talking about the UK model which is all about saying you receive the equity, you take the chance, it’s only taxable at the appropriate time when you crystallise that value.
SCOTT: Or they vest.
MALLEY: Correct. And in Australia that could be as a capital gain where you’ll get a benefit as well of potentially a 50 per cent saving. It’s a big difference.
SCOTT: Wow. Can the government afford to be doing that, right here and now?
MALLEY: Well, look I think it’s part of a bigger game which is called a tax review. But if they’re willing to put this up and get it through then no one is going to argue with the fact that that might incentivise. I think the story behind this really Carson, is about incentivising innovation and Australia talks about it a lot but most of the great Australian innovators have American accents and so what we’ve got to do is find ways to bring them home or keep them home and this is one good step, but it’s only a small step, in a big scheme of things.
SCOTT: And that is the issue is it not, that it’s been kind of now talked about but it’s not being talked about in the context of it, as you say, a root and branch tax review? Do you worry that this is kind of piecemeal reform yet again at the expense of taking a long, cold hard look at the bigger picture problem?
MALLEY: Yes, I do worry about it. I think all Australian business worries about it and I think the community should worry about it more than they do because they see tax as an issue for business. It’s actually an issue for community and so they have promised they’re going to do a tax review next term. I say and do anything to try and bring it forward but we need more voices on this debate.
SCOTT: Is it fair to say, just to go back in time as a refresh on the last big tax review where there was a gathering in the Great Hall of the People as we might call it here in Canberra, our equivalent to what they have in Beijing right, and yet there the rug was pulled from under business leaders’ feet by the Treasurer who took a final communique off to one side and kind of ruled lines through key points and made it his own. This was the world’s best Treasurer basically killing off grand tax reform.
MALLEY: I suspect you will remind everyone of that until the day he moves into the next life but it’s funny you say that because the Henry Tax Review, I remember coming in to a Sky interview immediately after the Treasurer, but get this, on a Sunday at midday. So here they have what is a profoundly solid and thought provoking piece of work and then immediately it was published, it was talked about on a Sunday in the hope that everyone would forget about it and so we haven’t forgotten about it, we keep raising the issue that 125 taxes, 90 per cent of the revenue that comes in only comes from 10 of those 125 taxes.
SCOTT: Another concern, and it’s sort of related, because it speaks to and CPA’s got a live interest in this, the whole Asian Century. Now Ken Henry the same Treasury official, top dog that we were just referring to there, was then subsequently given the job almost as a consolation prize of an Asian Century White Paper. Has anyone actually stopped to remember that that’s actually been quietly shelved?
SCOTT: That’s kind of fallen off the wagon.
MALLEY: We talked about that and we have talked about that slipping off the website but again that paper’s got some very good content in it and I was asked just yesterday at a major business forum, whether I thought Australian business really understood what the Australasian Century means and whether they’re taking advantage of it. And I said then, and I’ll say it now, that I think we’re in the infancy of that. We happen to, by virtue of our predecessors having been in Asia for 60 years, know that that is a complex and long term process and we have to better understand what that looks like if we’re going to be a driving force, not just relying on Asian investment in Australia, but how we can also build futures for our kids and enter those integrated markets.
SCOTT: Is it that hard though to grasp the reality, you talked before about the innovation being basically the domain of those with US accents to paraphrase. Here we have Alibaba on our shores about to become the biggest ever IPO and it speaks volumes, does it not, that we’re on the doorstep but we’ve got no kind of ability to profit from that, even indirectly, it’s so ironic.
MALLEY: In reality, where Australia is succeeding in the Australasian Century really is that people see us a solid investment platform, as a safe legal ownership place to do business. It’s that that’s propping up our economy. Let’s not kid ourselves that it’s some incredible entrepreneurship on the part of Australian business. This is on the basis that we’re an attractive investment target and we need to be more than that if we’re going to control our own destiny and move forward.
SCOTT: Let’s talk about the destiny of the Indigenous population, the Wall Street Journal emotively today talking about our Prime Minister running office from inside a tent this week, so that grabs a headline but from a concrete…
MALLEY: The things you do to grab a headline.
SCOTT: The things you do to grab a headline! Well it seems as if the talk of dedicated Indigenous seats in parliament is back under discussion. How is this likely?
MALLEY: Well, whether it’s back under discussion or a Jacqui Lambie idea is another matter but I guess I put the spotlight right on Warren Mundine on this. Warren Mundine you’ve got to say from a leadership point of view, has been willing to change teams to achieve the goals for the Indigenous community that he set out to do all of those years ago and there’s a lot to respect about that. He’s called this out and said this isn’t on, suggesting in the midst of trying to bring the Indigenous people into the Constitution, throughout this thing about give them some seats and that will make it all work, he’s talked about the fact that the definition of Aboriginality gets somewhat confused, that he’s getting feedback from Australian business saying there are groups calling themselves Indigenous companies when they’re not. So he’s saying stop distracting the big game, the big game is recognition in the Constitution and economic parity.
SCOTT: How does that figure with what has happened in New Zealand? They’ve managed to find a definition even though you could argue that the Maori people are, if you really go far enough back, it’s not possible to really lay claim to having a direct link anymore. But such as the situation is, there are parallels and still there’s a Maori party, there are Maori seats and everyone seems to coexist.
MALLEY: Well they seem to coexist, whether that’s actually a workable model, they coexist in the most horrendous circumstances, I think what Mundine’s striving for is economic parity and economic respect where there’s a contribution to getting that outcome on both sides. I think it’s a sensible move, personally I think he’s a future Prime Minister if he chose to be and he’s got this capacity of bringing both sides of the decisions into a room and work with it. I think Mundine is one to watch.
SCOTT: And so as you reflect from that position he’s taken to what the Prime Minister is doing this week and take a step back, he will return to Canberra, what will change?
MALLEY: Well I guess that, who knows but except to say that Abbott’s making the effort, he’s making the physical effort as well as the mental effort to get involved in the conversation and I think Warren Mundine’s looking at the edge of the risk of that and managing the edge of the risk of that which is fair in the way they’re working together.
SCOTT: Thank you for your insight. Thank you so much.
MALLEY: Thank you.
SCOTT: Have a great week and we’ll talk to you soon. Alex Malley there, CEO of CPA Australia.