The use of strategies to avoid or aggressively minimise tax by for-profit aged care organisations and the impact their financial practices have on service quality and government’s value for money are the subject of a new inquiry.
The Senate Economics Reference Committee inquiry into the financial and tax practices of for-profit aged care providers will also assess whether accountability measures for taxpayer money are adequate and if the current practices meet public expectations, according to the terms of reference.
The inquiry was proposed by Australian Labor Party Senator Jenny McAllister and agreed to by the Senate last Thursday.
Ms McAllister said she called for the inquiry in response to the recent report on for-profit aged care providers by The Tax Justice Network – Australia that “suggests very complex arrangements are being used to hide profits and minimise tax”.
“It is important that the Senate examine these issues, given the aged care sector is primarily publicly funded and services very vulnerable members of our community,” Senator McAllister told Australian Ageing Agenda.
The report, Tax Avoidance by For-Profit Aged Care Companies: Profit Shifting on Public Funds, was commissioned by the Australian Nurses and Midwifery Federation, which subsequently launched a petition calling for greater transparency in the funding of the for-profit aged care sector after publishing the findings on 1 May.
The report found that in 2015-16 the six largest for-profit aged care providers including BUPA, Opal Aged Care, Regis Healthcare, Estia Health, Japara and Allity received over $2.17 billion in government subsidies, made after-tax profits of $210 million and paid around $154 million in tax.
Opal and Allity paid no tax in the year 2014-2015 and Allity also paid no tax the following year, according to the report.
Author of the report and spokesperson for the Tax Justice Network – Australia Jason Ward said: “Our research concludes that many for-profit aged care providers are utilising a variety of loopholes, corporate structures and discretionary trusts to minimise their taxable income, whilst making substantial profits from government subsidies.”
Mr Ward, who has spent the last several years mostly-focused on the practices of large resource companies including Chevron and Exxon, said he was surprised to see similar strategies used by aged care organisations.
“When you get a company that is supposed to be providing a public service and getting public monies to do that, it is surprising that they would engage in the same type of aggressive tax avoidance practices,” Mr Ward told AAA.
The Senate should be commended for establishing the inquiry, said Mr Ward, an adjunct senior researcher at the University of Tasmania’s Institute for the Study of Social Change.
“The efforts by these companies to maximum shareholder returns at the expense of care is detrimental to the reputation of the broader aged care sector. The Senate inquiry should shed light on the darker side of the sector and lead to positive reforms,” Mr Ward said.
The report recommends that any company receiving more than $10 million in Commonwealth funding in any year be required to file a complete audited annual financial statement with the Australian Securities and Investments Commission, and not be eligible for reduced disclosure requirements.
It also recommends that public and private companies be required to fully disclose all transactions between trusts and related entities.
“Responsible aged care providers should support the call for increased transparency and public accountability. Our elderly deserve high quality aged care and taxpayers need to be sure that is what they are funding,” Mr Ward said.
Two of the providers named in the report – Bupa and Opal Aged Care – told media outlets they complied with Australian tax law and disclosure requirements.
Lee Hill, interim CEO of the Aged Care Guild, which represents eight of the largest for-profit providers, said the inquiry was a welcome opportunity for a public review of financial issues in aged care.
“We will make every effort to ensure that the Senate inquiry and through that process the Australian public is fully informed,” Mr Hill told AAA.
“This process is vital to the resolution of issues that we all face in meeting the growing aged care needs in our community,” Mr Hill said.
The inquiry is scheduled to report back on 14 August 2018.
Information about the inquiry and the full terms of reference are available here. Public submissions close on 8 June 2018.
The Tax Justice Network – Australia report is available here.
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