Jim Chalmers (Rankin, Australian Labor Party, Shadow Parliamentary Secretary to the Leader of the Opposition) Share this | Hansard source

It is my honour and privilege to follow the member for Charlton and the member for Lilley in speaking on the Tax and Superannuation Laws Amendment (Better Targeting the Income Tax Transparency Laws) Bill 2015. I think it says it all about this government in this bill. We have a really neat encapsulation of what this government is on about when you consider this bill. It is out there cracking down on the weakest people in our society, in our community and in the labour market at the same time as it wants to make it open slather for the wealthiest people.

It also says something about the government that they say one thing about corporate tax avoidance at the same time as their actions head in exactly the opposite direction. That is not the first time that has happened in the life of this government. They puff themselves up at the G20 and they say they are going to crack down on tax avoidance at the same time as, in their first mid-year budget update, they reopen $1.1 billion in tax loopholes for some of the biggest companies that operate in Australia. They ask the Commissioner of Taxation to 'double his efforts' on tax avoidance at the same time as they sack 4,700 people from the ATO, including about 1,000 auditors. To cap things off, the Treasurer said, 'Supporting greater tax transparency and information exchange is our best weapon to crack down on tax avoidance,' and today they seek to repeal some key elements of Labor's tax transparency laws. This bill is part of the Liberal Party's campaign to make tax evasion easier for the wealthiest people in our country, at the expense of fairness for everybody else in the tax system.

One fundamental principle of Australia's egalitarian society, as the member for Charlton and the member for Lilley mentioned, is that we should all pay our fair share of tax. This includes all workers and regular taxpayers, but it should also extend to include our businesses and our corporations. Companies should pay their fair share to fund the services, the infrastructure and the legal privileges that they benefit from and that our First World, first-rate economy, in a society like ours, has a right to expect. There are two other important benefits, of course of corporate tax. Firstly, it holds the tax system together; without it, people are more likely to stash their personal income in corporate structures to escape tax. Secondly, it helps to curb inequality, to make sure that the wealthiest in our society pay tax on their income.

Corporate income tax in Australia is at 30 per cent. That is about the middle of the field when it comes to the OECD, but it is below our major competitors, including the US and Japan. Over 850,000 Australian companies lodged a tax return in 2012-13. They paid $67 billion in company tax. This represents about 19 per cent of the total federal tax receipts. So it should go without saying that corporate income tax is an important part of government revenue and an important part of maintaining fairness in the tax system.

Just as in the personal income tax system, corporations are entitled to various legitimate deductions relating to business operations, including things like costs incurred in supplying goods and services, interest payments on borrowed money, depreciation of capital goods, and research and development expenses. That is all fine. There are a whole lot of legitimate deductions to tax expenses, recognising the costs of doing business in Australia and the benefits to the wider economy of businesses operating here.

Unfortunately it is the case, and it has been proven to be the case, that some companies engage in 'aggressive tax minimisation', or even avoidance, to lower or abolish their tax bill. This is often done using less legitimate or questionable deductions against their tax liability, many of which lie in a legal grey area in Australia's tax system. The Senate Economics References Committee inquiry into corporate tax avoidance, led by my friend Senator Dastyari, has uncovered several very questionable corporate tax minimisation cases involving prominent companies operating in Australia. These examples are now well documented. I do not intend to go through all of them, but they show that clearly the current tax system in Australia makes it possible for some of the highest-earning businesses in the country to pay very little tax here, and it is not just a few isolated examples either.

Across the ASX 200, the Tax Justice Network found that the effective tax rate on corporate income was just 23 per cent, compared to the headline rate of 30 per cent. They also found that over the last five years the proportion of income tax from business shrank from 23 per cent to 19 per cent, while the proportion from individuals rose from 37 per cent to 39 per cent. So you can see a shift in the tax base in this country. In other words, the Australian corporate tax base is at risk. It is shrinking while the personal income tax base is growing, and at the same time as the corporate tax base is at risk so too is the Australian people's faith in the fairness of our tax system.

Another important consideration, particularly in our region, is the impact of systematic corporate tax avoidance on other nations. International competition can lead to a race to the bottom on corporate tax, an increase in tax loopholes for international income, and a corresponding decrease in fairness. The IMF has estimated in a paper entitled 'Spillovers in international corporate taxation' that revenue lost in this way from non-OECD countries—so, broadly, the developing world—is about 12 percent of their total corporate income tax revenue. The impact of this on revenue is not a zero-sum game. Some countries gain, but the aggregate effect is a loss, with devastating consequences for our brothers and sisters in developing countries. They are shouldering much of the burden, while a few advanced economies—but certainly not Australia—gouge the gains.

For all these reasons, the political appetite for action on corporate tax avoidance has increased over the past few years, and this is a welcome development. The think tank Per Capita had a 2015 tax survey that found that two-thirds of people in Australia think the best way to raise new taxes for public spending is to crack down on corporate tax avoidance. More than 80 per cent of people believe that corporate tax avoidance affects the fairness of our taxation system. So this is a real issue of concern for most Australians, and it should be a priority issue for this parliament as well.

The Assistant Treasurer in the last Labor government, the great man David Bradbury, is now working at the OECD on some of these matters. With the member for Lilley and the current shadow Treasurer, he did some terrific work in this area—some very courageous work, very intelligent work, characteristically for him. He made such a great contribution in this place. With his urging, and in conjunction with other colleagues, we delivered a whole raft of initiatives in this space. We delivered the Tax Laws Amendment (Countering Tax Avoidance and Multinational Profit Shifting) Bill 2013, which closed loopholes in our transfer-pricing rules. The Abbott coalition, of course, voted against that bill. We amended the Taxation Administration Act 1953 to require the ATO, from 1 July 2015, to publish information about the income and tax paid of companies earning over $100 million. The Abbott coalition voted against that change as well. We passed the Tax Laws Amendment (Cross-Border Transfer Pricing) Bill (No. 1) 2012, which cracked down on companies overvaluing assets in international transactions to distort the tax paid. The Abbott coalition voted against that bill as well. The list goes on of the initiatives that we have taken in this space—28 bilateral information-sharing agreements, and other initiatives that netted something like $730 million in additional tax that would have otherwise been avoided between 2012 and 2014. We invested in the tax office to set up a specific audit program to look at the use of offshore marketing hubs. That has already paid dividends. That $109 million invested netted something like $250 million in extra tax that would have otherwise been avoided. I pay tribute to the Commissioner of Taxation, Chris Jordan, and the work that the ATO can do when we invest in them, give them a job to do and properly resource them for that job.

We have made it clear throughout that we believe big companies should pay their fair share of tax. We have a good track record on all these issues. Since coming to government, the Liberals have taken Australia backwards on corporate tax avoidance. They reopened that $1.1 billion loophole that I mentioned earlier. They cut funding to the tax office and they made very weak changes to the general antiavoidance rules in the last budget. Their amendments were so pathetic that the Treasury could not even cost their impact on the system, so vague were they in that most recent initiative.

The bill we are discussing now is of a piece with other actions of the government—another backward step, reducing corporate tax avoidance. It removes Labor legislation which requires the tax office to publish information about the income and tax paid of companies earning over $100 million a year. The laws currently apply to about 2,000 of Australia's biggest firms, but the government wants to carve out private firms, which make up almost half the companies affected, so it is a really serious attack on the integrity of the original bill and its purpose. The result will be less transparency for Australian taxpayers. The Australian public deserve to know just how much tax our biggest companies operating in Australia actually pay. The overwhelming number of companies who are doing the right thing in this country and creating jobs in our communities right around Australia have nothing to fear from more transparency and more accountability. Other countries are going down this path. Some already have good laws in place; others are writing those laws and designing those laws now.

We had, of course, as the member for Charlton said, all kinds of excuse making from the Assistant Treasurer about the 'politics of envy' and how people would be kidnapped and all this sort of rubbish, which has been subsequently shown as a complete con, a complete smokescreen, to get in the way of the very sensible, very reasonable initiative encapsulated in the Labor bill and being walked back in this legislation that we are discussing today.

If Australian companies are doing the wrong thing and not paying their fair share of tax, it is a very simple proposition from our side. The Australian people deserve to know if and when they are being cheated. Greater tax transparency is one of the fundamental components of the OECD's response to base erosion and profit-shifting, which Australia has signed up to. Greater transparency can help reassure Australians when the tax system is working and can help identify areas where the tax system is not meeting public expectations. What we know from their position on this bill, and overall, is that those opposite are not interested in a fairer, more effective tax system; they are more interested in helping the biggest companies keep secret how little tax they often pay.

In contrast, Labor has a clear policy in response to corporate tax avoidance. First of all, we are opposing this legislation which makes the tax system less transparent and less fair. But we have also released some very detailed plans, worked up in consultation with experts—tax accountants, academics and others. I commend the member for Watson and the member for Fraser for the work they have done. There are four key components in the policy that we have announced, well in advance of an election: a worldwide gearing ratio based on the company's entire global operations; hybrid mismatching, which is standardising our law with other countries so companies cannot double-dip; increased ATO compliance, providing effective funding to the ATO to have the resources to improve compliance; and third-party data matching, which starts the third-party reporting and data matching early to improve compliance among our companies.

We believe that this strategy would earn the budget more than $500 million a year in the budget and raise at least $1.9 billion in its first three years of operation. In addition to the fiscal benefits that the nation would get from ensuring that people are paying their fair share, it would improve the overall fairness of Australia's tax system. It would help people to have the confidence that we want them to have that the tax system treats them in a fair way—so that we are funding the services and the infrastructure that the country needs if it is to grow in a sustainable way.

Labor believes that we need to do more to counter corporate tax avoidance, not less, and that is why I follow the member for Charlton and the member for Lilley in speaking against the passage of this bill.

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