Peter Costello offers tax advice to Abbott government, defends fossil fuel investments

Former treasurer Peter Costello and Future Fund chairman appears before the Finance Estimates committee at Parliament House. Photo: Andrew Meares

Former treasurer Peter Costello has offered some veiled advice to the Abbott government on how to collect more tax revenue, saying it would be easier to tighten Australia’s domestic tax laws rather than chase multinational corporations.

The chairman of the Future Fund has also defended the fund’s use of tax havens, saying the fund does not actually pay tax in Australia so it has no taxes to avoid.

The former treasurer – who made a rare appearance before senate estimates in Canberra on Thursday – said it was getting more difficult for modern governments to pinpoint the precise location of economic activity.

He said this was making it harder for governments to maintain their revenues, and that was why it was best to target domestic forms of taxation that were well-understood.

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“In the world of electronic transfer and the internet, and mobile capital, and mobile income, your best tax bases are always going to be ones that are local,” Mr Costello told senators.

“That’s why people say land taxes, consumption taxes – we know where your consumption takes place – PAYG, because we know where the income of a PAYG person is derived, they’re going to be your best taxes and the rest you’re just going to have to negotiate as best you can on your double taxation agreements,” he said.

“It’s one reason why we had to introduce a GST, because consumption is very local, you can ‘get’ that. But when you’re dealing with companies like Apple or Google or [others] all around the world, it’s very hard.”

Mr Costello, who was Treasurer of Australia from 1996 to 2007, also defended the Future Fund’s use of tax havens, and its investment in fossil fuels.

“I want to say this to the Australian people: It is not trying to avoid any tax in Australia because it’s not liable to pay any. You can’t negotiate down what you don’t have to pay,” Mr Costello said.

“I think it would be extraordinary if the government of Australia in its sovereign wealth fund said it was going to pull out of coal or gas or oil,” he said.

“These are very, very important industries to Australia. It would be a very strange thing for a country like Australia which exports gas, for its government to say we think these things are so filthy and so wrong that we won’t even touch them on the stock market.”

It comes after thousands of leaked documents published by the International Consortium of Investigative Journalists this month revealed how Australian and multinational companies – including the Future Fund – have used accounting firm PricewaterhouseCoopers to strike deals in Luxembourg to shift profits and avoid tax

Tax Commissioner Chris Jordan has called for a joint investigation into the data with Australia’s tax treaty partners.

The leak has also triggered calls for the directors of the companies – including those of the government’s sovereign wealth fund – to be brought before a Senate inquiry into tax avoidance next year.