Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Parliamentary Secretary for Foreign Affairs) Share this | Hansard source

I support the reforms contained within the Tax and Superannuation Laws Amendment (2014 Measures No. 4) Bill 2014 relating to the tightening of debt limits in the thin capitalisation rules to ensure that multinationals do not allocate a disproportionate amount of debt to their Australian operations. But in terms of the cognate bill—the No. 5 bill—we in the Labor Party are opposed to the abolition of the seafarer offset—for reasons I will outline in a moment—but also the research and development tax incentive change and the decoupling of the link with the reduction in the company tax rate.

The government has shown a significant gap between its rhetoric and its actions when it comes to ensuring that multinationals pay their fair share of tax within Australia. I had to laugh when I read in the papers that at the first meeting of the G20 some months ago Australia's focus was going to be on ensuring that multinationals were not corporate profit shifting—that companies that are based in Australia and other nations throughout the world should pay their tax in the source country where the income is derived. I laughed because of course when Labor was in government, going back to 2012, Labor sought to introduce a number of reforms that would have added revenue to the Australian budget to the tune of $1.1 billion and were aimed at cracking down on this exact issue of multinational corporate profit shifting. The Tax Laws Amendment (Countering Tax Avoidance and Multinational Profit Shifting) Bill 2013, introduced by the then Assistant Treasurer, David Bradbury, went to that precise issue. It contained amendments to the general anti-avoidance rule, known as part IVA, and the transfer pricing regime. The reforms were two key weapons in the fight against base erosion and profit shifting, and they would have helped protect the integrity of Australia's income tax system and made sure that large-tax payers—multinational corporations—paid their fair share of tax right here in Australia, where they derived those profits, rather than shifting some of that profit to other nations where there were tax havens.

One would have expected that the opposition at the time would have supported a positive reform like that—one that adds $1 billion to the bottom line in Australia. But my staff and I had a good chuckle when we had a look at the result of the division on the Tax Laws Amendment (Countering Tax Avoidance and Multinational Profit Shifting) Bill 2013 in the House of Representatives. We were rather surprised to find out that those who now occupy the government benches at the time voted against this particular reform, for no apparent reason other than it was the ethos of the then opposition to simply vote against everything the Labor government put before the House. As a result, the bottom line in the Australian budget has suffered to the tune of $1.1 billion in forgone revenue, which is now being made up by cuts to other services, to education, to health, and to the ABC and SBS, and in changes to the pension. So Australia is paying in other ways for the significant gap between the rhetoric and the actions of this government.

Every dollar that is avoided by multinational companies must be paid for by Australian taxpayers and businesses, or by cutting services. With this budget we have seen which side the government is on. It is on the side of the big companies. When you look at some of their budget outcomes you can see that they are certainly not on the side of the battlers.

Labor supports sensible savings measures that do not unfairly impact on those who can afford it the least. Labor will be supporting the abolition of the mature age worker tax offset. Labor has a strong record of increasing workforce participation for older Australians. While in government, Labor introduced a number of measures, including the Productivity Ageing Package, which provided additional training and financial incentives for employers hiring older Australians. It was actually the previous Labor government, in its 2012-13 budget, that began the process of the phase-out of the mature age worker tax offset, limiting it to taxpayers born before 1 July 1957. That measure had an estimated $255 million gain in revenue over the forward estimates period. This is a reform that Labor is happy to support, given that we began the process when we were in government. Also, we are committed to measures that support older Australians who wish to work.

But wage subsidies, which this government is offering in the form of a $10,000 payment, are not enough. Labor knows that a comprehensive mature age employment agenda needs a comprehensive suite of measures. That is why we established the seniors work bonus, increased the superannuation guarantee, established an age discrimination commissioner, reformed the age pension to make it strong and sustainable, and set up the advisory panel on positive ageing.

I respect of the research and development tax incentive and reducing the rates of the refundable and non-refundable tax offsets, Labor has a strong history of supporting research and development in Australia. This stands in contrast to the government's attacks on science and research with their cuts to the CSIRO and to university funding associated with research. And, quite simply, this government does not even have a science minister, which clearly demonstrates their lack of support for research and development and an emphasis on scientific research in this country. In respect of the changes to the offset, Labor has some concerns in that the level of the R&D tax incentive is determined by the R&D rate and the company tax rate, together. As company tax is being reduced to 28.5 per cent, maintaining the current R&D rate would effectively increase the subsidy. Companies will already receive a benefit from the reduction in company tax, so this reduction should not reduce overall R&D expenditure, as the size of the subsidy is maintained.

But there is a potential timing issue with the R&D tax incentive reduction occurring one year earlier than the cut in the company tax rate. When Labor in government changed the R&D tax incentive arrangement from a tax credit to a tax offset, one of the reasons we did that was to increase the certainty by uncoupling the level of R&D support from the corporate tax rate. This proposed change undermines that uncoupling and raises an expectation that every time there is a change in the corporate tax rate we would see the incentive adjusted accordingly. Labor has concerns with the manner in which this particular element of the reform has been introduced.

The No. 5 bill also seeks to abolish the seafarers tax offset. The objective of this offset is to stimulate opportunities for Australian seafarers to be employed or engaged on overseas voyages and to acquire maritime skills. Even before this offset is two years old—it has only been in existence for close to two years—the government is moving for its abolition. We believe it must be given an opportunity to work, because Australia needs to maintain and expand its maritime skills base. Labor will oppose this measure on that basis. The tax incentive was one of several that arose from a lengthy industry consultation that led to Labor's shipping reform package. This package commenced in July 2012 and has been operational for just two years. After 100 years of interactive change, this major reform should be allowed to work. The current government should promote the reforms, which, of course, it is not doing. Australia is an island nation. One-tenth of the world's trade goes to or from Australia, and Australia has the fourth largest shipping task in the world. So we need to be supporting jobs for Australian seafarers and maritime workers. That is exactly what this particular tax offset did.

We know that the coalition is soon going to try walking away from supporting Australian coastal shipping, opening up the coast to an increasing number of foreign vessels and to Third World wages. It is bad for safety, it is bad for our sensitive maritime environment, it deprives us of the skills needed to maintain security in our ports and harbours and it makes related activities, like shipbuilding and ship maintenance, less viable, and weakens our long-term naval capacity.

The Australian Shipowners Association, the industry body for this sector, strongly opposes the abolition of the seafarer tax offset. They say that the offset was a key element of the 2012 reforms, that it helped to reduce operating costs on Australian vessels, that it increased the competitiveness of Australian shipping and that it provided significant opportunities for employment of Australians in international trade. The impact of the abolition on future opportunities will be severe. It again demonstrates this government's lack of commitment to building a sustainable and strong domestic shipping capacity in Australia. On that basis, as I mentioned earlier, Labor will be opposing this element of the No. 5 bill.

Labor is committed to finding savings within the budget. We demonstrated that during our period in government. We have demonstrated that in putting before this parliament specific reforms aimed at improving the bottom line of the budget. One area of reform we put forward was in the area of corporate profit shifting—something, again, that was opposed by the current government when in opposition. We are pleased to see some of the reforms that Labor commenced in government forming part of this bill, but we do not support the changes to research and development and the changes to the seafarer offset.

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