Stephen Jones (Throsby, Australian Labor Party) Share this | Hansard source

The role of government is to provide security and services that are needed by the citizens of the country. It is the responsibility of citizens, including corporate citizens, to make a contribution to the provision of those services. Over the last several decades we have seen an increase in demand for local, state and federal governments to provide more services and new areas of services such as the National Disability Insurance Scheme, which every speaker on the legislation in this House has stood up and said they applaud. They said that this Labor government initiative is an important initiative, but they have all expressed concerns about the capacity of successive governments to foot the bill for this to provide education, research and development, and infrastructure and also meet the increasing costs of traditional services in the area of health. Indeed, we have had a raging debate on the funding of health services in this country. It is known that the system we have had in place until recently is unsustainable because the significant increase in health funding costs will far outweigh—in fact, they will swamp—the capacity of any state or territory government to meet those costs under pre-existing arrangements.

So, what we know is that we have to get the revenue side of things right. If the public's demand for the provision of these services remains unabated, we need to get the revenue side of things right. We also need to ensure that we do it in a way that creates the right environment for businesses to invest. And I note that the member for North Sydney, the man who wants to be Treasurer of this country, in his devastating contribution to this debate, dragged out the old chestnut of sovereign risk. What he should have done before raising issues of concern about sovereign risk is pick up a copy of the 2013 World Bank report. These are the sorts of reports one should be looking at in relation to business confidence about investing in this country—the reports of authoritative institutions, such as the 2013 World Bank report on the best countries to do business in. You will note, Mr Deputy Speaker Cheeseman, because I know you are on top of this issue, that the World Bank, in its 2013 report, rated Australia as in the top 10 countries to do business in, out of 185 countries. So, when they wheel out this nonsense week after week about sovereign risk, the only ones who are listening are the Liberal Party cheer squad—certainly not the authoritative reporters on this matter such as the World Bank.

These bills are aimed at ensuring that we close down tax loopholes, and there are two schedules aimed at doing that. It is not surprising—and I make no criticism whatsoever—that there are those organisations who see this as a threat to their tax avoidance mechanisms and regimes. It is quite natural that if an organisation or an individual has profited by minimising their tax through tax avoidance schemes they are going to make a bit of noise when the government and the parliament see it fit to try to close down some of these avoidance mechanisms. That is normal. They will make some noise, they will make some complaints—there is nothing abnormal about that. But it is abnormal to have the man who would be Treasurer of this country, the man dealing with his own fiscal problems at the moment—a $70 billion black hole in his budget costings—get up in this parliament, not five minutes ago, to defend those rules. That is abnormal. You would think that a man who has some fiscal problems of his own would want to look at each and every measure he could to try to close some of these tax loopholes.

Schedule 1 of the bill is aimed at closing those tax loopholes that have been addressed by the minister. Schedule 2, which I would like to address in some detail, goes to transfer pricing. But before I do that I want to address some of the points that the member for North Sydney raised in his devastating address. The crux of his contribution to this debate is that there has not been any consultation and somehow this legislation would have been improved by a public hearing. I want to address both of these issues. First, on the issue of consultation, particularly as it goes to schedule 2 of this bill, there has been extensive consultation on those matters. A discussion paper was released in November 2011. That is nearly 18 months ago. There was a series of large stakeholder meetings to discuss the principles that would form the basis of the legislative framework throughout 2012. There was a month of public consultation after that around draft provisions in November 2012. In December 2012 there was an additional large stakeholder meeting to discuss the details of the draft. The bill has benefited significantly from this consultation process.

I sit on the House Standing Committee on Economics, which this bill was referred to for a public inquiry. We set down a date for a public inquiry, 4 March. All the government members were able to make themselves available to hear evidence from concerned members of the public on 4 March. But where was the member for Moncrieff? Where was the member for Higgins? Where was the member for Wright? They were not available. In a devastating criticism, the shadow Treasurer said the government should have had a public inquiry into this bill and that government members of the economics committee should have made themselves available. He should have picked up the phone and talked to the member for Moncrieff, the member for Higgins and the member for Wright. I presume he has their phone numbers. If there is any blame in this, it should be directed to his own members of the economics committee. We were ready, willing and available to hear evidence in a public inquiry but it was his own side that closed it down. They made themselves unavailable.

This contribution from the member for North Sydney was nothing more than a ginormous bubble of fluff. We hear a lot of contributions like this from the member for North Sydney. He should be directing his devastating critique of this bill to members of his own back bench, because if there was not a public inquiry then the blame lies fairly and squarely on the coalition members of the economics committee; that is where the blame lies.

In his 30-minute tirade we heard nothing from the member for North Sydney on the issue of transfer pricing. This is a very important part of this bill. What is transfer pricing? Transfer pricing is where a transnational corporation has operations in one country, in this case Australia, and operations in another country, and they use their global network as a means of minimising tax by transferring costs and profits from one part of their operation, which may have a tax impost on them, to another part of their operation in another country purely for the purpose of avoiding a tax. It became quite famous over the last 12 months.

There was a lot of public debate about transfer pricing when that global IT company that is familiar to all of us in this place, Google—a company that set itself up with the motto 'do no evil'—was exposed as having engaged in extensive transfer-pricing operations to avoid taxation, including avoiding taxation in this country. They quite rightly were rounded on by leaders right around the world saying that a company that is dedicated to 'doing no evil' really wanted to look at some of its corporate practices.

This bill is addressed at cracking down on transfer pricing. Transfer pricing has sometimes been described as something which is just part and parcel of doing business if you are a transnational corporation. Indeed, the global CEO of Google, Mr Eric Schmidt, said on 13 December, 'Transfer pricing is just a part of capitalism.' I reject that and I call on all members in this place to reject that. It may in some countries be legal but it is certainly not moral. It is not a practice that is without victims. In this country, the victims are the taxpayers who are at threat of having to bear a greater burden of the tax take because companies like Google and other large transnational organisations are avoiding tax in this space, avoiding their responsibility to make contributions towards infrastructure and vital services that are needed in any advanced democratic country such as ours. Through their tax avoidance processes they are effectively shifting the burden of taxation onto other taxpayers. In this respect, I would say states and territories are also victims of this—because if there is less money available through corporate taxation arrangements from these transnational corporations then there is less money available for the Commonwealth to disburse to the states and other entities for the provision of health and education services.

But it is not just taxpayers who bear the burden of this and lose out from transfer pricing; it is also some of our domestic companies who are penalised. If they are not a part of a transnational corporation, there is not a level playing field. They are penalised because they do not have access to transfer pricing loopholes. That means they are paying a proper rate of tax while somebody down the road, a transnational corporation, is cheating. They are getting an unfair advantage in a similar market, so you do not have a level playing field. Costs are imposed, but not borne, by the domestic competitors. So they have an interest. There are many, many Australian companies who are going to welcome this legislation because it will go a long way to addressing some of the loopholes that are available to transnational corporations to transfer costs out of this jurisdiction so the domestic companies are bearing a disproportionate burden of the tax take.

It may not be of interest to everybody in this place, but I know that a lot of people also share the concern, not just as citizens of Australia but as global citizens, that transfer pricing arrangements are also used as a way of denuding treasury coffers, typically those of developing nations, of the vital revenue that is needed to ensure that they can build the health systems, education systems, transport systems and all those robust institutions that are needed for a thriving democracy and a thriving economy in developing countries. Where transnational corporations use these sorts of loopholes to avoid those taxes they are harming everybody. This is not a victimless crime. This is something that affects everybody.

So, instead of hearing long-winded, misguided and, in some cases, downright untrue contributions from the shadow Treasurer, these are the sorts of things we would expect members of the opposition to be focusing their attention on. How can we ensure that we have a level playing field for countries paying tax in this country to ensure that we are not disproportionately levying a tax burden upon wage and salary earners and other taxpayers to the advantage of transnational corporations and to the disadvantage of domestic taxpayers who do not have these sorts of loopholes available to them? These are the sorts of things we should be talking about.

If the member for North Sydney is truly aggrieved about the fact that the economics committee did not hold a public inquiry then he should be hauling the member for Higgins, the member for Wright and the member for Moncrieff into his office right now and saying: 'Where were you? I have just come into the House and embarrassed myself by saying there should've been an economics committee public inquiry into this. I have made a complete and utter goose of myself in the parliament by calling for a public inquiry. I've now discovered that the government members of the economics committee were ready, willing and able to have that inquiry and the only reason that it did not occur is that my own backbenchers were not available, were not doing their job, and would not turn up.' They have severely embarrassed the shadow Treasurer—and they are probably delivering their apology to him right now. I would also call on the shadow Treasurer to come to the House and issue an apology to all members on this side of the House for misleading us.

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