Andrew Leigh (Fenner, Australian Labor Party, Shadow Assistant Treasurer) Share this | Hansard source

I rise to speak on the International Tax Agreements Amendment Bill 2016 and move:

That all the words after 'That' be omitted with a view to substituting the following words:

'whilst not declining to give the bill a second reading, the House calls on the Government to explain why it has failed to close tax loopholes and increase transparency in Australia.'

This bill ratifies the recently renegotiated Australia-Germany tax treaty. Its purpose is to eliminate double taxation with respect to taxes on income and capital and to update certain definitions, including the definition of 'permanent establishment'. In supporting this bill, Labor is relying on assurances provided by Treasury to the Joint Standing Committee on Treaties on 29 February 2016 that nothing in the agreement prevents either Australia or Germany from enacting domestic laws relating to tax evasion or tax avoidance.

I note that the bill comes at a cost, with the estimated cost over the forward estimates being $125 million. I note, too, Labor's disappointment that submissions to the Treasury's consultation process were not made public. But I do note that this is a bill whose passage has been recommended by the Joint Standing Committee on Treaties. The bill includes a strengthened definition of 'permanent establishment', and it is an agreement that will benefit intellectual property exporters, primarily German companies, and intellectual property importers, primarily Australian companies.

We on this side of the House appreciate any improvement that is made to the definitions in our tax laws to better catch profit shifting. But in supporting this bill we note that the government have consistently squibbed the opportunity to act on multinational tax avoidance. We have seen from this government a promise to reduce the safe harbour levels and the thin capitalisation rules in the 2016 budget. We know that they were coming close to changing those thin capitalisation rules—even briefing out to journalists that the 2016 budget would crack down on thin capitalisation—but at the last moment they pulled the measure from the budget.

One thing they forgot to do, though, was to remove the definition of 'thin capitalisation' from the budget papers. The budget papers include an orphan definition. The term 'thin capitalisation' is defined but does not actually appear in the budget. There could be no more clear sign that this government yielded to special interest pressure in backing down on closing loopholes on multinational profit shifting.

We on this side of the House have a strong package on multinational tax avoidance. We are committed to changing the way in which debt deduction rules operate by applying a worldwide gearing ratio. This is a rule which is consistent—not an arbitrary threshold—has strong economics to defend it, is good equity policy and adds to the budget bottom line.

This government has asked the tax office to do more extensive audits, but at the same time it has sacked tax office staff. There are now thousands fewer full-time, permanent tax office staff than there were at the time the coalition won office. While this government has called for greater tax transparency in the press, in parliament it has refused to support Labor legislation that would require greater tax transparency from private firms. This government talks about tax transparency, but its actions on tax transparency have been to raise the publication threshold for ATO tax data from $100 million to $200 million. That deal that it did last December with the Greens took two-thirds of private companies out of the tax transparency net.

Labor are committed to budget repair that is fair and, in the process of this, we are committed to ensuring that multinationals pay their fair share. You cannot support small businesses in this country if, at the same time, you are backing tax loopholes that are only accessible to multibillion-dollar firms. Labor have led the way on tax transparency; Labor will continue to lead the way on multinational profit shifting. While we have had the Minister for Revenue and Financial Services saying in April this year, 'There needs to be a registry of beneficial ownership in our country,' Australians are still waiting for the registry of beneficial ownership. We have now heard that Minister O'Dwyer is not committed but is 'exploring options' for a register of beneficial ownership. Again, that is a step back from the tax transparency Australians demand.

Australians look at this government and they see a government that is pretty tough when it comes to taking on the most vulnerable in Australia—people with disabilities, the young and jobless, and pensioners—but is pretty weak when it comes to taking on the big end of town. Sure, we support the modest measures in this bill, but we call for significant action by Australia on cracking down on multinational tax avoidance.

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