Andrew Giles (Scullin, Australian Labor Party) Share this | Hansard source

I rise to make a contribution on the Tax Laws Amendment (Implementation of the FATCA Agreement) Bill 2014. As previous speakers have noted, this bill in effect requires Australian financial institutions to collect information about their customers who are likely to be taxpayers in the United States of America and to provide that information to the Australian Tax Office which will, in turn, provide that information to the US Internal Revenue Service. This of course gives effect to the Australian government's commitments as set out in the Agreement between the Government of Australia and the Government of the United States of America to Improve International Tax Compliance and to Implement FATCA—the Foreign Account Tax Compliance Act—which was signed in Canberra in April 2014, as the member for Deakin noted a moment ago.

FATCA has been described by TheEconomist as 'by far the biggest catalyst' of a movement towards global tax-transparency or, indeed, tax fairness. I note that the UK has also, in the aftermath of FATCA, taken what may be regarded as similar steps to the US, and that the OECD is progressing the implementation of a single global standard for the exchange of relevant information. This year's G20 finance meeting in Sydney endorsed common standards for sharing account information across borders, with automatic exchange taking effect by the end of next year. This is an important development—although, as is the case with the bill before us, there is obviously considerably more work to be done.

I note in that regard—and I think the member for Deakin also touched on this—the very important work that the former Treasurer and Deputy Prime Minister, the member for Lilley, did in the lead-up to this bill, by commencing the formal discussions between Australia and the US following a meeting between the Treasurer and US Treasury Secretary Tim Geithner in November 2012. I also note the important work that former Assistant Treasurer David Bradbury did in the area of cracking down on corporate profit-shifting and tax minimisation schemes. I congratulate him on his recent elevation at the OECD. It is well deserved and I wish him very well, though I think it is appropriate that I also say that he is very much missed in his former role in this place in the government of Australia.

The FATCA is an American law, developed to reduce offshore tax evasion and regain federal tax revenues from American account holders at foreign—that is, non-American—financial institutions internationally. It obviously, in that regard, has implications for Australia and Australia's financial institutions. The impetus for the act in America was a 2009 court case in which Swiss Bank UBS was found to have assisted American nationals to evade paying American taxes. As a result, UBS agreed to pay the US government US$780 million in fines, in restitution, and also to provide the names of suspected tax cheats. There has obviously also been some significant subsequent litigation in this area. According to the US Department of Justice, the use of offshore bank accounts to avoid paying American taxes costs the US Treasury, in total, at least US$100 billion annually. This is of course a cost to American society of the same magnitude.

The wide-reaching FATCA was passed in the 111th Congress as part of the 2010 Hiring Incentives to Restore Employment Act, the HIRE Act, becoming law in March 2010, and requires individuals to report their financial accounts held outside of the United States; and foreign—again, that is, non-United States—financial institutions to report to the IRS about their American clients. To enforce the FATCA, it has become necessary for the US government to sign agreements with foreign governments such as Australia's, allowing the trade of individuals' financial data.

Labor welcomes any sensible steps to assist tax authorities, whether in Australia or overseas, to ensure compliance with tax regulations. The Treasurer has acknowledged that some multinationals are not even paying their fair share of tax anywhere and called for a global response. I welcome this, too. But there is more to be done—much more.

This government has demonstrated a significant gap between its rhetoric and its actions when it comes to ensuring that multinationals pay their fair share of tax within Australia. By not proceeding with similarly sensible measures, as are implemented in this legislation, the Australian people have foregone over a billion dollars in revenue. This is resulting in cuts to essential services. And, as the member for Fraser has noted, every dollar avoided by multinational companies must, in effect, be paid for by Australian taxpayers and businesses, or, of course, by cutting services—essential services maintaining the fabric of our society. We have seen with this budget which side this government is on. It asks those with the least to do the most, time after time after time, as we heard in the matter of public importance discussion only a few minutes ago.

Ultimately, I think it is important to acknowledge that cracking down on multinational profit-shifting is not just about making sure that firms pay their fair share of tax, important as that is. Critically, it is also about making sure that the burden of tax is fairly shared across businesses.

I am reminded of the comment of the Justice of the Supreme Court of the United States, Oliver Wendell Holmes Jr: 'Taxes are what we pay for a civilized society.' That was as prescient of the debate in Australia at the moment, as we argue in this place and outside it about what makes a civilised society. I note the context for that remark. It was made in a dissenting judgement in a 1927 case involving a Spanish tobacco company seeking to minimise its tax arrangements on insurance in the Philippines, then subject to the law of the United States. Even by today's standards—the standards that FATCA is engaged in working through—it was a very complicated case. But his honour saw through the complex taxation arrangements then, and we must do our best to do likewise now. To quote him more fully: 'It is true … that every exaction of money for an act is a discouragement to the extent of the payment required, but that which, in its immediacy, is a discouragement may be part of an encouragement when seen in its organic connection with the whole.' This notion of an 'organic connection with the whole' is one that deserves some greater consideration.

I believe that this principle is at the very heart of taxation. Taxation should never be seen in isolation, as those opposite and their right-wing cheerleaders insist it should be. It is true, of course, that our roads, schools, hospitals and all of our services are, in large part, funded from tax revenue, but this is part of a broader purpose—that purpose being, of course, to build a society where people are not left behind or excluded because of the material circumstances in which they entered this life.

This is why the coalition's budget has been so devastating, because its basic message is: if you are not born into comfort then you will not get to fully participate in society. And this is why we, on this side, describe the budget as cruel. To say to someone that, no matter how hard you work or how smart you are or how well you apply yourself, you do not stand a chance to get ahead in life because your parents' wealth does not allow for it—this is cruelty. Interestingly, that seemed to be acknowledged to some extent by the former Prime Minister, John Howard, in his contribution at the National Press Club today.

Countries that have progressive taxation systems tend to have the least inequality and, in turn, tend to be more collectively prosperous and productive. One only needs to look at the Scandinavian examples as proof of this—evidence, as opposed to neoliberal theory. Can those opposite point to examples of prosperous, productive and equal societies that operate under these sorts of neoliberal regimes? I doubt it, and I again reflect on the contribution of John Howard, a former conservative Prime Minister, in his remarks on the state of the US society.

I am pleased that the US has passed laws to crack down on tax evasion and that Australia is assisting with collection. But it is somewhat ironic that the US is where those opposite look to as a model for Australia. Whether it is for universities, health care or gated communities more generally. The US system is in too many respects based on concepts of user-pays exclusivity. It applies a moral lens to those who, for instance, cannot afford to take on massive amounts of debt, who cannot find work or who until recently could not afford health care. It divides their community into haves and have-nots, deserving and undeserving. This has never been the Australian way, and it cannot be so in the future.

I applaud the US administration for getting the high-roller tax evaders to pay their fair share wherever they may be. I note that these measures are permanent, not temporary like this government's deficit tax on high earners. Our government could learn from the US government to treat foreign companies and people the same as it treats Australian companies and people. What is this government doing to tackle Australians seeking to evade taxes here and abroad?

I return once more to Holmes' decision:

The result of upholding the government's action is just. When it taxes domestic insurance it reasonably may endeavor not to let the foreign insurance escape. If it does not discriminate against the latter it naturally does not want to discriminate against its own.

Indeed, getting foreign or domestic companies or wealthy individuals to contribute to the running of a society and system of government from which they derive a profit or protection from is entirely just.

And so the principles of this legislation are supported by Labor. But again, it is only part of what is needed to be done. The government wants to repeal Labor's tax transparency reforms. These reforms would have ensured the public could see how much tax Australia's largest companies are paying. They are supporting transparency for US citizens vis-a-vis their tax obligations, but not for large businesses here. If the government is serious about making sure companies pay their fair share of tax, why are they trying to let these same companies hide how much tax they are paying?

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