The investment bank has made its first appearance before a parliamentary inquiry where its top executives were grilled over “aggressive tax practices” and investments in offshore havens like the Cayman Islands.
The parliamentary committee’s deputy chair Dr Andrew Leigh noted that Macquarie Bank had been named among other major financial institutions in the “CumEx-Files”, a tax fraud scheme discovered in 2017 by a network of European investigative journalists. The “cum-ex” deals reportedly triggered multiple tax refunds on dividend payments.
“The size of the scandal is massive,” Mr Leigh said. “Something in the order of $60 billion overall. What has Macquarie learned about the risks of aggressive tax planning coming out of that case?”
Macquarie’s deputy managing director Greg Ward, who also heads up the group’s retail bank, said the bank never wants to be in dispute with any tax authority in any jurisdiction.
“To try and ensure we don’t end up in that predicament we not only ask ourselves ‘could we’ but ‘should we’ do something. Whenever we enter into any transactions that have a tax element, we have an internal tax team who give us advice and we seek external council or legal opinion. Here we had that, we had external opinion that what was being done was not against the law and was being done by dozens of financial institutions across the world,” he said.
“That doesn’t make it right,” Dr Leigh said.
“It doesn’t make it right,” Mr Ward agreed. “That’s why there was a careful consideration that not only does it meet the law but should we be doing this. The conclusion at the time was that it was ok. It was disclosed to the revenue department of the relevant jurisdiction that had to approve the credit. If they weren’t satisfied, the approval of that credit wouldn’t have been given.”
Mr Ward said that Macquarie isn’t typically involved in “aggressive tax practices”.
“This caught us by surprise. We wouldn’t have anticipated this outcome. We don’t expect this to be part of our business,” he said.
The Labor MP then asked whether the investment bank has “significant dealings” with tax haven jurisdictions like the Bahamas and the Cayman Islands. Macquarie’s chief financial officer Alex Harvey replied that, generally speaking, it is bank policy not to be involved in transactions where there are aggressive tax practices.
“We are very mindful of tax regulation around the world and in all jurisdictions, we seek advice,” he said. “I wouldn’t say we spend a lot of time investing in tax havens. Most of our activity is in US or UK. Tax havens are not really part of our business. Structuring transactions to minimise tax is not something we engage in.”
Mr Harvey noted that approximately 70 per cent of Macquarie’s revenue is generated from overseas markets, with 30 per cent coming from Australia. In the last financial year, the group paid a tax rate of approximately 21 per cent of its total earnings.