Reference Number: Quirk Level 10, 111 Pacific Highway North Sydney NSW 2060 30 October 2015 Locked Bag 917 North Sydney NSW 2059 Telephone: +61 2 9464 1000 Facsimile: +61 2 9464 1111 Dr Kathleen Dermody, Committee Secretary Senate Economics References Committee PO Box 6100 Parliament House Canberra ACT 2600 PDF by email: to [email protected] Dear Dr Dermody Inquiry into corporate tax avoidance and minimisation This company' s name was changed from "Transfield Services Limited" to "Broadspectrum Limited" by the shareholders at our AGM on Wednesday 28 October 2015. Our response to your request for a submission to the Senate Inquiry into Corporate Tax Avoidance and Minimisation is attached. (For convenience, below we refer to ourselves as "Transfield".) The content of the submission speaks for itself. At the same time, we highlight the following points for the committee: • Transfield takes its obligations as a taxpayer and a responsible corporate citizen very seriously. Our objective in our tax affairs and dealings revolves around the principles of transparency, simplicity and doing what is right. • Transfield's current effective tax rate is 27 .5%. This is based on the Group's total profit and reported income tax expense for FY15. • While effective tax rates can move materially from time to time, we also observe that over the last 12 years the company has paid an average of 36% of Group profits in actual cash payments to the ATO . This payment of corporate income tax in cash is a useful statistic for the information of the committee. • Transfield stresses that it does not employ any tax structuring for the purposes of revenue or profit shifting that would serve to reduce tax payable in Australia. • Indeed, Transfield charges its foreign operations for management time and administrative costs, in keeping with OECD guidelines. This in fact increases Australian taxable income. • Although the company is returning to profitability, it should also be noted that a decline in corporate income tax remittances in recent years is a function of the Group incurring significant operating losses. It goes without saying that taxes are paid on profits. Bro adspectrum Limited I ABN 69 000 484 417 Page I 1 •· '>'~··-J ~~i • j;.'Jl!l• . ~··~,.;f··• · ~·-1:.,tj.~... •~BROADSPECTRUM Transfield stands ready to assist the Committee, if required, in its important work. Yours sincerely Ben Quirk Group General Counsel For Broadspectrum Limited Broadspectrum Limited I ABN 69 000 484 417 Page I 2 Broadspectrum Limited ("Transfield") Submission to Senate Economics References Committee Inquiry into Corporate Tax Avoidance and Minimisation Broadspectrum Limited (previously named "Transfield Services Limited") ("Transfield" or "the company") has been invited to make a submission to the Senate Economics References Committee inquiry into corporate tax avoidance and minimisation. Transfield welcomes this opportunity and wishes to emphasise that it takes its obligations as a taxpayer and a corporate citizen very seriously. Transfield accepts that tax evasion is a criminal act. Transfield does not engage in tax avoidance. The company is taxable in the jurisdictions where its business operates and its revenue is earned and does not contrive to shift revenue or profits artificially by the use of entities established in tax havens for the purpose of tax avoidance. Transfield manages its tax liabilities transparently and within clear commercial and legal boundaries. Executive Summary l. The company is an Australian resident ASX listed company that has operations both in Australia and internationally. It operates through a number of subsidiary corporate entities and joint ventures resident in both Australia and foreign jurisdictions. 2. Transfield is a significant employer. The company employs more than 25,000 people globally. Approximately 19,000 of these employees live and work in Australia. The services provided by Transfield are tangible and significant to our clients. In many cases the company's staff are integrated into clients' operations. 3. As it derives its income from services performed both in Australia and overseas, Transfield must, and does, comply with applicable taxation laws in all the jurisdictions in which it operates. As a general principle of taxation law internationally, it must be understood that the first taxing jurisdiction is where the revenue from operations is earned. Due to the nature of the business being the provision of services by real people this means that the primary taxing point will be the location where those services are performed. 4. The company charges its overseas operations for the support provided by the Australian group in accordance with Australia's transfer pricing rules. This increases taxable income within Australia. 5. Transfield has no entities in recognised tax haven jurisdictions established for non-operational purposes. Transfield has not sought to deliberately lower its effective tax rate by establishing such entities in known tax havens. 6. Transfield has strong corporate governance in place, part of which is a strong tax governance framework. 7. Transfield has an open and co-operative relationship with the Australian Taxation Office. 1 8. Transfield's effective tax rate for the year ended 30 June 2015 was 27.5% and over the last 12 years the average Australian income tax paid in cash as a percentage of total group profit is 36.1%. 9. Transfield has paid more than $520M of income and state taxes since 2004 to Australian federal and state tax revenue authorities. It has also paid its foreign income and state taxes in accordance with t he tax laws in t he countries Transfield operates in. Transfield's Business and Operations Transfield is a publicly listed ASX 200 company that provides property, facilities and asset management services, infrastructure ma intenance, and commercial and industrial maintenance services across numerous sectors: in particular the Utilities, Telco, Transport, Defence, Property, Socia l, Oil & Gas, Resources and Industrial sectors. Transfield has an extensive geographic presence, and operates and provides services in countries including Australia, New Zealand, the United States, Canada, Chile, Nauru, Papua New Guinea, and the Philippines. It operates through a number of corporate entities and joint ventures resident in both Australia and foreign jurisdictions. The demand for our services is driven by the ongoing trend towards outsourcing non-core activities in the private and public sectors. By outsourcing non-core activities to us, our clients are able to focus on their core businesses by realising productivity, efficiency and financia l benefits. Transfield has more than 25,000 employees around the world, serving the needs of our clients wherever they operate. History of Transfield Transfield was founded in 1956 by Dr Franco Belgiorno-Nettis. It was incorporated in 1964 under the name Australian Cranes and Transport Limited and changed its name to Transfield Infrastructure (Holdings) Pty Limited in 1993. The company took the name Transfield Services Lim ited in March 2001 and listed on the ASX in May that year. Since 2002, the company has significantly expanded its operations through acquisitions both within Australia and overseas. The growth through acquisition has led both to an increase in the domestic and global reach of Transfield as well as number of domestic and foreign companies that are now part of the group. At the Annua l General Meeting on 28 October 2015, the company's shareholders resolved to change its name from "Transfield Services Limited" to "Broadspectrum Limited" (similar to the name of some of its subsidiaries) and this was registered at ASIC on 29 October 2015. 2 Significant Acquisitions and Expansion: 1. Australia A group of companies (including "Broadspectrum Australia Pty limited") was acquired in March 2005 and this group specialises in multi-disciplinary electrical, commissioning, mechanical and instrumentation services for the construction, mining, and energy markets. At the time of acquisition, they had a presence in South East Asia. APP Corporation and related entities was acquired in April 2006 and provides a wide range of consulting, advisory and specialist technical services to the property and infrastructure industries across project management, urban planning, real estate and independent assurance. ICD was acquired by Transfield in November 2009 and delivers engineering and design of maintenance and brownfield projects to the hydrocarbons, processing and related industries. In 2010, Transfield entered into an agreement to acquire the Easternwell group of companies, a leading Australian services provider to the mining, oil & gas and infrastructure sectors. In 2012 and 2014, Transfield was awarded government contracts to provide facilities management/ garrison services, logistics services, security services, and welfare support services to the Australian Department of Immigration and Border Protection at the offshore processing centres operated by the respective host governments in the Republic of Nauru and Manus Province (PNG). Transfield is currently negotiating the renewal of its contract with the Department of Immigration and Border Protection. Transfield's growth in Australia is also the result of its participation in a number of joint ventures in the various fields in which it operates. 2. New Zealand In 2004, Transfield doubled the size of its operations in New Zealand through the acquisition of Serco Group's New Zealand subsidiary (Serco