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

The nation faces some significant economic challenges. One of those significant challenges is restoring fiscal balance to the way the economy grows and the way that the nation grows. We have a large and growing budget deficit. The levels of debt that this Liberal government has undertaken have increased since it came to government. Many Australians would not understand this or know this, but this government has in fact made the budget deficit worse.

Over the course of the last two years, the Liberal coalition government has doubled the budget deficit. The deficit has gone from approximately $26 billion to $52 billion. There has also been an increase in the level of debt. They are figures that most Australians would not be aware of, but they are facts. The levels of debt the government has introduced need to be paid for and they will be paid for by future generations of Australians if we do not restore some balance and an even keel to the fiscal position of the nation. We need a sensible approach to restoring sustainability and balance to the budget. That requires governments to make savings and also to look to measures to raise additional revenue to fund important social services, in particular those safety net services that many Australians rely on to be able to participate in our society.

Labor is acutely aware of this challenge. That is why, over the course of the last two years, there has been a great effort from the Labor Party—and in particular the economic team, led by Chris Bowen—to consult with Australian businesses, with Australian tax experts and with organisations that work in the field of fiscal responsibility to put together a set of policies that are responsible, that restore sustainability to the budget and are balanced and fair. These policies also promote growth within our economy, promote growth in jobs and provide additional revenue to fund programs that are vitally important—for instance, the Gonski reforms to education, which are necessary to ensure that our nation has a competitive education system, and funding programs that are providing incentives for people to take on more education, particularly at the higher education levels through university and TAFE colleges.

Labor has developed a set of policies that are balanced and fair. We have done this in a different manner to a coalition government. We have taken a different approach to those opposite. Those opposite—in the first budget and the following budget of the Abbott government—attacked pensioners, attacked the sick by attempting to introduce a co-payment for visits to the doctor and attacked students by attempting to introduce $100,000 university degrees. In many respects, those opposite attacked the most vulnerable in our community. They attacked the people who, really, we should be giving the incentives to and a leg up so that they can prosper, establish businesses and grow our economy into the future.

Not only have they attacked the most vulnerable in our community but they have also given tax breaks and tax savings to some of the most profitable and wealthy businesses and individuals in our economy. A classic example of this is removing the minerals resource rent tax, allowing the biggest mining companies in the world a tax break whilst putting a tax increase on the lowest paid women in the country—those earning less than $38,000 a year—by removing the low income superannuation contribution. That has been the philosophy of this government when it comes to looking at restoring fiscal balance to our budget. That is the point: there is no balance. It is unfair and is unbalanced.

That is why Labor undertook this process of consultation, working with experts and looking to areas within our economy where additional revenue can be raised while still promoting growth and promoting jobs. We did that through two policies. One tackles superannuation tax concessions by taxing those who have more than $1 million in their superannuation fund and are earning an income of interest based on that capital value in the superannuation fund. Anyone earning more than $75,000 per year as income off their superannuation balance—so we are not talking about reducing the actual capital balance in the superannuation fund, but about earning that income of that—will have to pay a little bit more tax. That is because the experts say that superannuation tax concessions are going to consume the budget and they are going to overwhelm, particularly, the amount of expenditure that we afford to the age pension.

We have also looked at this issue of multinational tax avoidance. We have come up with a policy that is balanced and fair. It looks to raise $7.2 billion of additional revenue by asking some of the most wealthy multinational companies—which earn super profits in Australia off their operations but pay very little tax in Australia—to pay a little bit more tax. When you have average employee Australian taxpayers paying an effective rate of tax of 21 per cent, as workers and as employees, and multinational big businesses paying less than 10 per cent effective rates of tax, then there is an imbalance in the system. The government needs to rectify that.

But the government has not done that and it has been up to Labor to develop a policy which does just that: it raises $7.2 billion worth of additional revenue to ensure that we can fund those important educational programs and other programs. Labor believes when it comes to multinational profit shifting and corporate tax avoidance that really enough is enough and the time has come for real action, particularly given the deteriorating state of the budget and the increase in the deficit that is being undertaken by the Abbott-Turnbull government.

Whilst it is difficult to accurately determine the true scale of corporate tax dodging, it has been brought to light in particular in recent years, leaving many in the community rightfully outraged. Earlier this year, we saw that the Senate inquiry into corporate tax avoidance highlighted the size of the problem when it revealed that the nine largest global pharmaceutical companies—which made $8 billion in sales in 2014 in Australia and received $3.5 billion in subsidies from Australian taxpayers through the Pharmaceutical Benefits Scheme—had paid collectively just $85 million in income taxes. That is one per cent of their revenue. Now most Australian PAYG taxpayers, workers and employees would love to pay just one per cent of their earnings as income tax but they do not; they pay a lot more. The average Australian wage earner pays a standard 21 per cent of their income in taxes, and small businesses and small corporated businesses in Australia pay 30 per cent. It is clear just how unbalanced the taxation system is and why there is a need for reform.

Other examples include: Apple, which paid just $80 million in Australian tax in 2013-14 despite earning local revenue of over $6 billion; James Hardie, which, despite average annual profits of over $200 million, operates at a net taxable loss in Australia allowing it to claim tax deductions on annual payments to the compensation fund for victims of asbestos products; and Glencore, which, depending on who you believe, either paid zero dollars or $400 million on local revenue of $15 billion.

In its submission to the tax inquiry, the Australian Tax Office reported that, of Australia's $300 billion in cross-border trade, more than $150 billion was made up of companies transferring money from their Australian operations to international jurisdictions, many of which featured very low tax rates. We believe that, when it comes to tax, Australians and Australian companies should pay their fair share. That is why in March this year Labor released the policy I mentioned earlier, which will raise $7.2 billion for measures to stop multinational profit shifting out of Australia. I contrast that to this policy and the bill that is being debated here. Under this bill here, the government cannot say how much revenue will be raised by this suite of measures. In fact, when you look at the budget papers, on the revenue side for this particular measure, there is an asterix. It is unacceptable that the government do not know how much a particular measure is going to raise. It really does highlight the fact that in many respects their hearts are not in it when it comes to restoring balance to the budget.

Our approach is multi-faceted and seeks to ensure tax deductions are based on a company's entire global operations, not just their operations here in Australia. It will stop the issue of shifting profits overseas and will stop a company claiming that the profit that they make here that they send to another division of that company in another country as a loan cannot be used for income purposes and therefore cannot be taxed. We are not just looking at what they do in Australia but at what they do internationally. We will also standardise our tax law with other countries so that companies cannot double dip. We will improve compliance with the Australian Taxation Office by: providing effective funding to ensure that the tax office has the necessary means, the staff and the personnel to crack down on these avoidance schemes; and we will start third-party reporting and data-matching early to improve compliance.

We have repeatedly called on the government to adopt a bipartisan approach to this issue. We got out early on this particular measure and said in the lead up to the last budget: here is a way you can raise $7.2 billion of additional revenue; it sits well within the OECD guidelines for base erosion and profit shifting; and it could have been adopted on multipartisan approach. We could have said that this parliament is serious about tackling this issue but, no, the government has said they will not even look at the measure. A cooperative approach would have plugged the holes through which Australia is losing millions and billions of dollars in forgone tax revenues and would have been particularly beneficial given that, as I said, the deficit is getting worse and debt is increasing under this government.

Of course Labor has worked for a number of years now to ensure large firms pay their tax bills. In 2013 Labor passed laws requiring the Australian Taxation Office to publish information about the income tax paid by companies earning more than $100 million. This law applied to around 2,000 companies. But again we have seen this particular Liberal government remove some of that scrutiny, remove some of that transparency that Labor put into the system. The government now wants to exempt about 800 of those companies to allow them to keep their tax affairs confidential. They argue that private firms should not be held to the same standards as public companies.

The government has introduced this bill despite the fact that it was uncovered, through a freedom-of-information request, that there had not been one complaint received by the Treasurer or Prime Minister's office about the law that Labor introduced to improve taxation transparency and to ensure that these companies publish their taxation records. This just proves that this is a completely ideological approach that this government is taking, which is not in the best interests of Australians, which does not restore fairness and balance to our taxation system and that is why it deserves condemnation for the approach that it is taking. Nonetheless, Labor takes a constructive approach to these issues and that is why we have offered support for the government in the passage of this bill.

The bill does introduce significant new concepts to our taxation law—the notion of a global entity. It seeks to clamp down on multinational firms using artificial arrangements to avoid paying to corporate tax in Australia, it does double the penalty for firms of involved in tax avoidance schemes and it implements some of the OECD's action plan for transfer price documentation and country-by-country reporting. However, as I said, the government still does not know how much revenue this measure will raise. When it comes to ensuring we restore balance to our taxation system, the government should be working with Labor on the proposals that we have put forward.

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