Votes for corporations and extra votes for property owners: why local council elections are undemocratic



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Undemocratic voting systems in local council elections are not limited to the City of Sydney.
AAP/Daniel McCullough

Ryan Goss, Australian National University

Imagine, for a minute, an undemocratic political system. Imagine a voting system in which someone has more votes than you because they own property. Or a voting system in which corporations have a vote – and maybe even more votes than regular people. A voting system in which, as a result, the power of your vote could be diluted by votes cast on behalf of corporations.

This voting system isn’t something from Britain during the Industrial Revolution, or America’s Deep South in the 1950s. Instead, as my recent paper outlines, this way of voting is a reality at local council elections in five of Australia’s six states.

It’s time for this to change.

Not just a Sydney problem

In recent years journalists have often discussed voting rights in the City of Sydney, which gets attention because of the high profile of its council and because of its unusual voting laws. Not only do property-owning corporations get two votes in the City of Sydney, but voting is compulsory for them.

But this type of undemocratic voting isn’t confined to the City of Sydney. It’s not even confined to New South Wales. In every state except Queensland voting rights at local council elections include voting rights based on owning or leasing property, votes for corporations, and various forms of plural voting (ways in which one person can have more than one vote).

In other contexts, Australia’s most senior judges have described plural voting or property-based voting rights as “conspicuously undemocratic” and “anachronistic”, and said that such systems would be unconstitutional if done at federal elections. Such a system enshrines inequality by giving some people more of a say than others.

These days our local councils perform a wide range of government functions. If we don’t accept undemocratic voting rights at state or federal elections, we shouldn’t accept them for local council elections.

Time to catch up with Queensland

Queensland reformed its law on all of this in the 1920s. Alfred Jones, a Labor member of Queensland’s upper house, put it this way when advocating the change in December 1920:

We must recognise that local government is a form of government which affects every citizen within the particular local authority area; and I believe that all governing bodies should be elected on the broad franchise of one adult one vote. Probably Australia has led the world in connection with the adoption of that principle.

Surely what Queensland recognised in 1920 can be recognised in the other states in 2017.

And so, as my paper explains, in Queensland today you get to vote at local council elections if you can vote at state and federal elections. It’s that simple.

Essentially, this means you only get to vote for the local council that runs the area you live in, you only get to vote once, and there are no special voting rights for corporations or property owners. It’s the same at council elections in the Northern Territory.

Queensland hasn’t always been the torchbearer for Australian democracy. But at least voting rights at Queensland local government elections are designed to reflect basic democratic principles.

A kaleidoscope of different laws

The other five Australian states have different ways of deciding who gets voting rights at local council elections. British and Australian history has shaped these voting systems, and the relevant laws have often evolved slowly over time.

In some states, for example, non-citizens can vote if they are resident in the area; in other states residents must be citizens to vote. In some states, voting is compulsory at local council elections; in others it is voluntary or compulsory only for some voters. The detail of the laws is complex.

Nevertheless, there are some rules common to many of the problematic laws in these five states. Being enrolled on the state or federal electoral roll in a local government area will generally entitle you to vote at council elections in that area.

Owning or occupying property in a council area will generally entitle the owner or occupier to vote in that area, especially if the owner or occupier is not also a resident. This also means that, where the owner or occupier is a corporation, the legislation will provide a process by which someone can vote on behalf of the corporation. Where someone owns or occupies multiple properties in a particular council area, or where they live in an area and also own or occupy another property in the area, the law will provide some sort of limit on the number of votes available to that person.

The complex provisions underpinning these voting rights stand in stark contrast to the simple terms of the Queensland law. But while they are complex, their result is clear. In different ways, as the paper shows, these laws allow for voting rights based on property ownership or occupation, voting rights for corporations, and allow individual people to cast multiple votes.

All of this dilutes the voting power of individuals, and runs the risk that local governments may become distracted from what is in the interests of their local community.

Local councils can’t fix this themselves

These laws are quirks of history that have no place in Australia’s 21st-century democracy. So what should be done?

Fixing the laws that govern local council elections is the responsibility of the states. From time to time, state governments and state parliaments consider the possibility of making local council voting rights more democratic.

The ConversationThe good news is that there’s an easy way to make the change: NSW, Victoria, Western Australia, South Australia and Tasmania can simply follow Queensland’s lead. It’s time for state parliaments to act.

Ryan Goss, Senior Lecturer, Australian National University

This article was originally published on The Conversation. Read the original article.

FactCheck: do 679 of Australia’s biggest corporations pay ‘not one cent’ of tax?


Fabrizio Carmignani, Griffith University

… 679 of our biggest corporations pay not one cent of tax. – Australian Council of Trade Unions (ACTU) Secretary Sally McManus, address to the National Press Club, Canberra, March 29, 2017. The Conversation

Speaking at the National Press Club in Canberra, Australian Council of Trade Unions (ACTU) Secretary Sally McManus called for an increase to Australia’s minimum wage and criticised the Fair Work Commission’s recommendation to cut Sunday and public holiday penalty rates.

McManus said that “679 of our biggest corporations pay not one cent of tax”.

Was that claim correct?

Checking the source

When asked for sources to support McManus’ statement, a spokesman for the ACTU pointed The Conversation to a media report and to the Australian Taxation Office (ATO) Report of Entity Tax Information for 2014-15, and provided this response from McManus:

According to the most recent ATO Tax Transparency Report, 679 companies with more than $100 million in income paid no tax in Australia in 2014-15.

The list includes such household names as Walt Disney, Sydney Airport, Qantas, Origin Energy and News Australia.

These companies can collectively be considered to be amongst the biggest operating in Australia – both in terms of income, and the prominent position they enjoy in the public eye.

Some of them are not Australian owned, and they may pay tax in other jurisdictions. However, they all operate in Australia, generate revenue from the spending of Australians and utilise existing infrastructure – like roads and ports – that were paid for by Australians.

So there’s something deeply unfair about a system which allows them to not pay any tax in Australia.

The ACTU also provided The Conversation with a spreadsheet listing the corporations it said had paid no tax.

Is that figure right?

The best source for information on how much tax Australia’s biggest corporations pay every financial year is the ATO. The ATO’s Report of Entity Tax Information – the same report the ACTU referred to in their response – is produced annually and shares information taken from the tax returns of:

  • Australian public and foreign-owned corporate entities with total income of A$100 million or more
  • Australian-owned resident private companies with total income of A$200 million or more
  • entities with tax payable under the petroleum resource rent tax, and
  • entities with tax payable under the minerals resource rent tax.

The report includes each company’s name, total income, taxable income, and tax payable.

For the purpose of this FactCheck, the relevant information is the tax payable by each of these companies. By looking at this data, we can see which companies didn’t pay tax in 2014-15, the most recent financial year for which this information is available.

How many companies don’t pay tax?

There are 1,904 companies included in the ATO’s 2014-15 report. Of those, 678 – or 36% of the companies listed – had no tax payable.

My count – 678 – is slightly different to McManus’s count of 679, and to the figure the ATO quoted on its pie chart here (the ATO has since corrected its report to reduce the number of nil tax payable taxpayers by one to 678).

The ACTU provided The Conversation with a spreadsheet listing the 679 companies that, in their view, paid no taxes. When I compared my count with the ACTU’s, I noted the ACTU included a company that I did not, a company named Tal Dai-Ichi Life Australia.

In the report I downloaded from the ATO website, Tal Dai-Ichi Life Australia is recorded as having total tax payable of A$56,171,148 for the 2014-15 financial year, so it shouldn’t be included in the count of companies that paid no tax.

Nevertheless, the difference is obviously minor. McManus was essentially correct.

Why do some companies pay no tax?

In general, there are two reasons why corporate companies pay no tax in Australia.

The first is that some companies are not making any profit. The concept of “total income”, which is used to identify the companies included in the ATO report, relates to revenue – not profit.

So, a company can have income (or revenue) of more than A$200 million, but that doesn’t automatically mean it has made a profit. Its losses or outgoings may outweigh its income. Only companies making a profit have to pay taxes.

Many of the companies that didn’t pay tax in 2014-15 were those in the energy/natural resources and manufacturing sectors – two sectors that were experiencing a downturn in that year and where profit margins were shrinking.

Proportion of entities with nil tax payable, by industry segment, 2013–14 and 2014–15.
ATO corporate tax transparency report for 2014-15

The second reason could be tax avoidance or profit shifting. These situations arise when companies take advantage of the international tax system to reduce the amount of tax to be paid. For instance, companies may set up complex ownership arrangements that allow them to redirect profit to countries with lower tax rates.

While not necessarily illegal, these situations are closely monitored by the ATO to ensure that Australia receives its correct share of tax under international tax rules.

Verdict

Sally McManus’ claim that “679 of our biggest corporations pay not one cent of tax” was essentially correct. According to ATO records, 678 of Australia’s biggest corporations didn’t pay tax in Australia in 2014-15.

McManus’s figure of 679 included one company that did have tax payable in that financial year. But in percentage terms, the difference between 678 and 679 is negligible.

It’s important to note that when a company doesn’t pay tax, it doesn’t necessarily imply tax avoidance or profit shifting. A company might not be paying tax because it isn’t making a profit, even if its total income (that is, revenue) amounts to more than A$100 million or A$200 million. – Fabrizio Carmignani


Review

This is a sound FactCheck.

The ATO’s annual corporate tax transparency reports can provide useful insights to inform public debate regarding how effectively our tax system is working.

As the author rightly points out, the information must be used with caution. There are legitimate reasons why a company with substantial income does not have to pay income tax. For instance, it may make a loss in that particular year, or has substantial carried forward losses from previous years.

Or, as the author has also rightly noted, tax avoidance may be the reason why a large company is not paying any income tax. – Antony Ting


Have you ever seen a “fact” worth checking? The Conversation’s FactCheck asks academic experts to test claims and see how true they are. We then ask a second academic to review an anonymous copy of the article. You can request a check at checkit@theconversation.edu.au. Please include the statement you would like us to check, the date it was made, and a link if possible.

Fabrizio Carmignani, Professor, Griffith Business School, Griffith University

This article was originally published on The Conversation. Read the original article.