Apply corporate taxes to unions, employer groups

The Australian, September 11, 2017, Grace Collier

In this year’s budget, the federal government endorsed a “tax transparency code”. This accomplished nothing other than to make life easier for the enemies of free enterprise.

The TTC applies to all businesses with an aggregated Australian turnover of $100 million or more. Companies in this category are asked to file a report and make public information that once was only ever provided to the Australian Taxation Office. Companies are asked to report and upload on to the internet for everyone to see, their profit, tax expense, income tax paid or income tax payable.

This information, on how much profit a business has made and how much tax it paid, is of no use to anyone other than those wishing to harm the business concerned. Competitors find it useful and so do internet activists who have taken a moral bent against the goods or services a business provides.

In particular, trade unions find the TTC a godsend. It is a fantastic tool for them to employ when attempting to infiltrate a business that isn’t unionised or to use against a unionised business during enterprise bargaining.

Employers trying to stave off union infiltration will find union flyers distributed at their gates containing financial data presented in a way that causes maximum harm to their reputation. If a profit has been made, the flyer will advertise the profit and demand the employer adopt a union enterprise agreement. It is not uncommon for unions to include on these flyers personal information about the business owner, for example the cost of a family home, car or boat.

If little or no business profit has been made, and therefore little or no tax has been paid, the flyers will cast the employer as a dishonest tax dodger and accuse it of not contributing to the community.

Either way, the TTC ensures employers can’t win. Their enemies are at a fabulous advantage and business owners have the Coalition government to thank for this scenario.

While unions love to complain at work sites and through the media about how much tax businesses pay and how much profit is made, they are silent about their own dodgy income streams, vast profits and minuscule tax liabilities. You see, unions are income-tax exempt.

Unions say they don’t make profits but this is not true. Unions make money. Where union income is greater than their expenses, they have surpluses, and some of those surpluses are quite large. Union surpluses are not refunded to members each year but remain in the union bank account and the money is used in the way those running the union want to use it.

Granted, union profits are not distributed to individuals as profit share, but money does not have to land in one’s personal bank account for one to benefit. Often, having control of funds is better than ownership. Some union officials control vast sums and have freedom to use those funds in ways that further their individual aspirations or smite their enemies.

Further, a union can own and operate any business at all and pay no income tax on the profit made. For example, a union could own and operate a chain of coffee shops and all the profit from those coffee shops would be income-tax exempt.

This week we learned just how much money flows through union coffers despite the low levels of union membership in the community. Based on data released by the government and reported on by our Simon Benson, our largest unions are richer than they have ever been, with an estimated income of $900m a year. Just seven unions have combined assets of $340m and $587m in total annual income.

This money does not all come from the membership dues of unionist workers. It comes from union-owned businesses, superannuation funds and workers’ entitlement trusts, and it is all income-tax exempt. This income is made possible by enterprise bargaining as many agreements compel employers to put money into union investment vehicles, and unions (and often employer groups too) skim these funds each year to take some money for themselves, without telling their members about it.

These arrangements can only be described as a racket. But it is a racket that some employer groups have helped create because they too pay no income tax.

Of course, when no tax is paid on income earned, it is rather easy to amass wealth. Our unions now have combined assets of more than $1.5 billion.

There is nothing wrong with a union having riches or being successful provided this success results from legitimate union activity, carried out genuinely in the interests of their members, with appropriate safeguards, full transparency, no abuse of the funds and no conflicts of interest.

The Coalition must remedy this scenario as a matter of urgency. It must clean up the income scams, then apply corporate taxes to both the unions and the employer groups.