JobKeeper was the biggest single government spending program in Australia’s history. And, thanks to this government’s wilful negligence, it also became the biggest corporate welfare rort in Australia’s history. $20B of public money was paid to entities who rather than going backwards during the pandemic, actually had an increase in turnover.
The government has fessed up to $13.8B in JobKeeper payments that went to Australian companies who had an increase in turnover, which amounts to 29 per cent of all payments included in that analysis. But they are hiding the details of an estimated further $5.9B paid to other entities, who also got JobKeeper and then had an increase in turnover. This includes billions paid to multinationals companies such as:
global eyewear retailer Specsavers, controlled by Welsh billionaire Doug Perkins, and domiciled in the Channel Island tax haven of Guernsey;
the largest manganese miner in the world, Consolidated Minerals, controlled by Chinese billionaire Jia Tianjiang, and whose parent company is domiciled in the Channel Island tax haven of Jersey; and
Louis Vuitton, the global fashion brand synonymous with luxury and opulence, owned by French billionaire, Bernard Arnault, who became the world’s richest person earlier this year.
This is obscene. Quite literally, the Australian public purse has been used to line the pockets of the world’s richest man. The government knew this was happening and did nothing to stop it. From very early on, the warning signs were there that JobKeeper was resulting in a massive transfer of public money to private wealth. But the government refused to introduce the most basic of integrity measures that would have stopped the flow of public money to tax-dodging multinationals and their billionaire owners. And now they won’t tell us how much these multinationals and billionaires profited on the public purse.
The bill would fix this problem and recover billions of dollars that could be used to fund better public services or help with the transition to a clean energy economy. It would do this by:
establishing a mechanism to claw-back JobKeeper payments from companies with over $50 million in turnover who ended up being profitable or who paid executive bonuses by withholding GST input credits; and
establishing a public register of companies with over $50 million in turnover who received JobKeeper payments.
Unfortunately, the opposition has said that they do not support the claw-back of JobKeeper in any form. Despite regular criticism of JobKeeper payments to profitable companies, the Labor Party has ended up on the same side as the very billionaires and big corporations who made off like bandits. On JobKeeper rorts, the Labor Party are all bark and no bite. And, in being so spineless, they end up running cover for the government on an issue for which they should be relentlessly held to account. Anything less is an implied endorsement of the default position of the Morrison Government, which is that public spending programs are there to funnel money to their corporate mates who are in on the fix.
In arguing against the claw-back of JobKeeper payments to profitable companies, both the government and the opposition have used the strawman of the negative impact that it would have on small businesses. Neither have provided a credible argument why companies with a turnover of more than $50 million—which is who would be affected by this bill, and who are not by any reasonable definition small businesses—could not afford to and should not be made to pay back a public subsidy which they did not end up needing.
Irrespective, the claw-back mechanism included in this bill—the withholding of GST input credits—is inherently tied to the turnover of a company. So, in the event that there is a company with a turnover of more than $50 million, who got JobKeeper, and who ended up being profitable, but has subsequently had a decrease in turnover such that their ability to repay may be compromised—which is very unlikely—then their eligibility for GST credits will have been reduced by virtue of their turnover having reduced, hence their repayment of JobKeeper would be also be reduced. In other words, the bill will only affect those who are in the best position to repay.
More positively, since the introduction of this bill, the Senate—with the support of the Greens—has passed an amendment to a government bill for the establishment of a public register of JobKeeper recipients with a turnover threshold of $10 million. The Greens support amending this bill to that end and have circulated an amendment to this effect.
Recommendation
The bill be amended to change the turnover threshold for the publication of information about entities that received JobKeeper payments from $50 million to $10 million.
Recommendation
The bill as amended be passed.
The most basic integrity measure
JobKeeper was integral to Australia having got through the first phase of the pandemic as well as we did. When uncertainty was at its peak, the parliament provided resounding support for the establishment of a wages subsidy to with the aim of:
...supporting business and job survival, preserving the employment relationship, and providing needed income support.
Although the parliament considered many amendments to the Bills that would have improved JobKeeper and made it fairer—particularly in relation to eligible employers and employees—the Bills enabling the establishment of JobKeeper payments were introduced, read and agreed unanimously by both houses of parliament in a single day. It was Team Australia moment made possible because of the goodwill provided by non-government members and senators to the government.
This goodwill included the latitude given to the Treasurer to develop detailed rules to implement payments consistent with the intent of JobKeeper as announced by the government:
The payment will be open to eligible businesses that receive a significant financial hit caused by the coronavirus.
Nowhere in parliament on that day, 8 April 2020, did the government mention that JobKeeper might be paid to and kept by profitable companies. And, implicit in the passage of the bills, was that parliament did not endorse the payment and keeping of JobKeeper to profitable companies
It was incumbent upon the Treasurer, having been given powers to make rules suitable for the implementation of JobKeeper consistent with the government’s announcement, to ensure that any business that received JobKeeper, but that didn’t end up needing JobKeeper, would be required to return the money.
This is a standard caveat on income support payments: if you receive government support based upon a decline in income, but you don’t end up having that decline in income, then you have to pay it back. If it's good enough for JobSeeker recipients, it’s good enough for Australia’s biggest and most profitable corporations.
A claw-back mechanism—or a retest of actual turnover after three months—would not have hindered the roll out of JobKeeper to legitimate applicants. Business could still have been eligible for and received JobKeeper based on a projected decline in turnover. They would simply have had to return the payment if they didn’t end up being adversely affected.
A claw-back mechanism would only have reduced the rollout of JobKeeper to the extent that businesses, who knew from the outset that they didn’t need JobKeeper, didn’t apply for it in the first place, which is how subsidy programs are meant to work. There would have been no downside for businesses.
But the government did not introduce a claw-back mechanism. As a result,
$20 billion has gone to those that didn’t need it. That’s around $800 for every Australian citizen that, instead of being used to create a better nation or help those in need has been used to boost the profits of a select number of businesses.
The Government is defending the payment of JobKeeper to profitable companies as a form of fiscal stimulus. The Treasurer has argued that a
clawback mechanism would have:
...withdrawn support from the economy and lessened the broader macroeconomic effect of the policy.
But instead of providing support that was targeted and proportionate, JobKeeper profiteering has been arbitrary and distortionary. Those who were honourable and who stood on their two feet have been penalised. At a time when we were all being urged to ‘pull together’, the Government devised a scheme that split the nation between those who got on the gravy train, and those who didn’t.
Businesses who didn’t apply for JobKeeper, often because they assumed that they would actually have to meet the turnover test, are now furious. With the economy now teetering again following another sustained period of lockdowns, these businesses are looking at their competitors, who fared no worse than them, but because they applied for and got JobKeeper, are now in a better position and are better able to withstand the current economic downturn.
While the Government refused to clawback public money to profitable companies, they have been willing to pursue income support recipients who also received JobKeeper. At last count, Centrelink had recovered $32.8 million in JobKeeper payments made to some of the least affluent members of our society.
At the other end of the spectrum, billionaires’ have seen their wealth skyrocket since the beginning of the pandemic. A good number of them, such as the international elite listed above, and local tycoons like Gerry Harvey, Solomon Lew and Kerry Stokes, have become more filthy rich with the help of JobKeeper payments to their profitable companies.
This level of inequity, from one business to the next, between company owners who have seen their dividends rise, and workers whose wages are stagnant and security is tenuous, and between billionaires and those on income support, is what makes the JobKeeper rorts so tangible for so many people.
Early warning signs
Treasury prepared a report in June 2020 analysing data on JobKeeper recipients obtained from April 2020 Business Activity Statements filed by large companies with the ATO. The report stated that:
The underlying data also show that 15 per cent of JobKeeper recipients experienced an increase in turnover in April 2020 compared with one year previous [emphasis in original].
This turned out to be a massive underestimate, with closer to 30 per cent of the first phase of JobKeeper, from March 2020 to September 2020, going to companies whose turnover increased.
The report suggested that this April 2020 data should be read with caution:
...with just one month of actual turnover data it is premature to make any judgement about whether there are businesses being supported by JobKeeper that may not merit support.
Be that as it may, the government appears to have made no effort to respond to these early warning signs. In fact, elsewhere the report definitively suggests that the payment of JobKeeper to businesses whose turnover had not been impacted was insignificant:
...if support was to be withdrawn just from those organisations whose turnover has fully recovered to pre‑Coronavirus levels, only a relatively small fraction of businesses would be expected to be in this position.
This claim was baseless and wrong, and it demonstrates that the government wilfully ignored early evidence that a significant portion of the biggest government spending program in the nation’s history was going to businesses who didn’t need it.
This was despite the Treasury report laying out how the government could—and should—have responded to the early evidence that 20 per cent of JobKeeper was being misdirected:
An obvious change the Government could make would be to reassess eligibility in light of the more favourable circumstances of some businesses.
…
Practically, this could be done by using a fresh test of turnover decline, using measured or actual turnover change rather than projected change when businesses first applied. The virtue of a fresh test is it would ensure that the JobKeeper Payment remains well targeted.
Hiding the full story
During the course of this inquiry, Treasury and the ATO have been less than forthcoming with data about the payment of JobKeeper to entities who ended up experiencing an increase in turnover, a point made in the Chair’s report. Despite multiple requests, neither agency provided information to the committee prior to the release of the Treasury report on Monday 11 October 2021. This is despite this Treasury report stating that:
Since November 2020 de-identified JobKeeper microdata has been made available to government researchers, academics and public policy institutes.
Prior to the release of the Treasury report, this created the farcical situation of data regarding payment of JobKeeper to companies becoming available to the public through the release of analysis for parliamentarians by the Parliamentary Budget Office based on the very same data that neither the ATO or Treasury would provide directly to the committee.
Even after the release of the Treasury report, the full story is far from clear. Despite making much of the figure of $13.8B going to entities that experienced an increase in turnover, the Treasury report fails to adequately explain that this analysis does not include payments of JobKeeper made to not-for profits, new businesses and businesses that were part of consolidated groups (i.e. multinationals). And, rather than this $13.8B being a component of the total $70.3B for Phase 1 of JobKeeper, it is a component of only $47.6B of Phase 1 of JobKeeper.
Which means, from what we know for sure, 29% of the first phase of JobKeeper went to companies that had an increase in turnover. If this rate were to hold for the $22.7B of JobKeeper Phase 1 excluded from the Treasury analysis, then another $6.6B has gone to companies that experienced an increase in turnover from Phase 1 alone. This is in accord with PBO findings that the total amount of JobKeeper that went to companies who experienced an increase in turnover was $20B.
A little bit of sunlight
Since the introduction of this Bill, analysis of public reports issued by companies that received JobKeeper and increased their turnover has given this issue salience and piqued the conscience of some of corporate Australia. The ATO informed the committee that 62 businesses have repaid $203 million, and that another 13 have also approached the ATO regarding repaying JobKeeper.
However, as important as public scrutiny has been in forcing these 75 companies who didn’t need JobKeeper to voluntarily repay it, there are at least another 1,200 companies with a turnover greater than $50 million who had an increase in turnover who haven’t approached the ATO about repaying JobKeeper. And, even among those who have repaid, not all of the money has been returned. For example, Harvey Norman has repaid $6 million received by the parent company, but a further $16 million claimed by franchisees has not been repaid.
This illustrates the shortcomings of transparency alone as a mechanism to recover JobKeeper from those who didn’t need it. Nevertheless, transparency of government programs such as JobKeeper is about a broader principle of the right to know how much and which private enterprises are benefiting from public subsidies. Which is why a public register of businesses who received wage subsidies was a feature of such schemes in many other developed nations, and is why such a public register, as proposed by this Bill, should be introduced in Australia.