Fortescue Metals Group founder and billionaire Andrew “Twiggy” Forrest and his wife Nicola made the single biggest philanthropic donation by a living person in Australian history on Monday: $400m, to be distributed to several causes of the Forrests’ choosing.
For that, they are to be congratulated.
But perhaps Andrew Forrest’s companies could have just paid more tax.
Philanthropy from wealthy individuals is many things: generous, inspiring, and selfless. But it is also inherently undemocratic. It vests massive power in the hands of the giver to determine how much money is available and what causes merit support.
This is not to say philanthropy has no role to play in a democracy. It does. But democracies cannot allow wealthy individuals and successful organisations to use philanthropy as a substitute for paying tax. That’s no longer democracy: it is oligarchy.
Forrest and Fortescue Metals Group have demonstrated an aversion to paying tax. FMG officials told a Senate hearing in 2011 that the company had never paid company tax (but had paid $450m to $500m per year in mining royalties).
In 2013, Forrest and FMG challenged the mining tax in the high court. They lost.
In 2014-15, FMG generated $9.1bn in sales on a taxable income of $208m, and paid just $13.2m in tax.
As the AFR pointed out at the time, FMG paid less tax in 2015 than the Warrnambool Cheese & Butter Factory. (The ATO said that the data are not an indicator of a company’s compliance with tax obligations.)
In 2015, Forrest claimed that FMG was playing on an unlevel field and paid more income tax than its competitors. Again, the AFR: “Forrest tax claims don’t add up.” In 2015-16, FMG paid $412m in company tax and $620m in royalties.
The Forrests’ announcement on Monday came with much fanfare and media coverage. It was star-studded, with Russell Crowe and Jack Thompson adding celebrity to the occasion. It featured cancer researchers and survivors of modern slavery and early childhood specialists. The causes were noble and the movie stars were useful in attracting attention to the projects receiving funding.
But it was alarming to witness our democratically elected prime minister and leader of the opposition on hand to applaud Australia’s new oligarch.
The prime minister did more than just applaud. He actually made the announcements: $75m for early childhood development, $50m for regional communities, $75m for higher education, $75m for cancer research, and so on.
It was jarring to hear the prime minister list the projects that the Forrests had decided to support, particularly when several of those projects sit squarely within current parliamentary debates about the federal budget and government funding.
The prime minister went out of his way to make the point that the Forrest donation was not being given because it was required by law, but rather that it was given in love.
That’s a galling statement in the context of the live debates about corporate tax minimisation, company tax cuts and education funding.
Love is fine, prime minister, but the law is important. Paying tax is a key part of democracy. A fair and robust tax system underpins the universality of services like education and health, ensuring Australia remains the nation of the “fair go” for all our citizens.
The leader of the opposition, Bill Shorten, was the last to speak at the Forrest fanfare. I wondered what the head of the Australian Labor Party would say, especially given that his colleague and former Labor treasurer Wayne Swan once accused Forrest of being a “vested interest”, part of the 0.1% seeking to “poison Australia” for his own benefit.
Shorten chose the high road, acknowledging the generosity of the gift and pivoting to the issues that Forrest had highlighted, like modern slavery. He made the point that philanthropy like Forrest’s had a useful role to play in drawing the public’s attention to an issue. Shorten took up the cause, saying modern slavery was an area where the parliament could and should do more to stamp it out.
It is a good observation. A philanthropic gift, or use of a public profile, can be put to extremely good use. At times, it can genuinely lead the public and governments to necessary action against injustice, inequality, or disadvantage. Forrest has done this over and over on issues like slavery, or Indigenous unemployment.
The media commentary hailed the Forrest announcement as a potential game-changer in Australia, perhaps prompting a culture more like the USA where major philanthropic gifts are more commonplace.
You know what else is more commonplace in the USA? Tax minimisation and avoidance. A president who won’t release his tax returns. Citizens without any health insurance. Unemployed people with no access to income support. Homelessness. A public-school system in which the quality of education is determined by the wealth of the local community. A university system that sinks graduates into debt for decades.
Thanks, but I prefer to live in a nation with a progressive, robust and fair tax system that supports universal access to services and opportunities.
That tax system can include deductibility for charitable donations by individual citizens. Government cannot do everything, and if individuals want to support the MS Society or the Stillbirth Foundation or The Smith Family, that’s fine. But a democracy cannot allow the tax system to be unfair, even in the name of philanthropy.
- This article was amended on 1 June 2017 to include the increase in tax paid by Fortescue in 2015-16.
- Andrew Forrest made the following statement in response to the column: “Kristina Keneally ignored the fact that my company, Fortescue Metals Group, made losses in its pioneering days, which impacts on tax liabilities. With thousands of employees, Fortescue has since paid a collective $6.4bn in federal and state tax contributions (this includes $5.3bn in direct taxes, while our employees collectively paid a further $1.1bn – none of which would have occurred if, together, we hadn’t taken the risks to get the company off the ground). We believe Ms Keneally’s description of philanthropy as being ‘undemocratic’ reveals a deep and sad ideological bias against philanthropic generosity. Nicola and I are proud we can gift what remains of our already taxed share – to defeat cancer, ensure all babies and young children can thrive, defeat modern slavery and the Indigenous disparity, strengthen regional communities and break through research. We don’t expect everyone to support our endeavours but we will call out those who we believe are making incorrect assertions about our motives.”
