Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Assistant Minister for Treasury) Share this | Hansard source

I speak in support of the amendment moved by the member for Fenner. The purpose of this bill, the Treasury Laws Amendment (Income Tax Consolidation Integrity) Bill 2018, is quite complicated, and it comes about as a result of consultation that was undertaken by Treasury with interested participants from industry and tax experts that work in this area. They published a paper that looked at the advantages that multi-entry consolidated groups have over domestic Australian resident-owned head companies that consolidate to form a group for taxation purposes. They did find that there were a number of advantages that the multi-entry consolidated groups had over the domestically based companies, and this bill seeks to amend and remove some of those taxation advantages that exist in the current law.

In the Australian law, the consolidation regime applies mainly to a wholly-owned group of Australian resident entities that choose to form a consolidated group for income tax purposes. A consolidated group generally consists of an Australian resident head company and all of its wholly-owned resident subsidiaries. Specific rules allow for certain resident wholly-owned subsidiaries of a foreign holding company to consolidate by forming a multiple entry consolidated group. Of course, these measures, except for the deferred tax liability measures and the securitised assets measures, were originally announced by Labor in the 2013-14 budget. So, it's good to see that the government finally has adopted the recommendations of this working party and Labor's proposal and brought this legislation to the parliament.

I'm not going into the details of this, because it's quite a complicated piece of legislation, but I want to point out that this is an element of a policy that Labor has been pushing for some years in order to clean up the tax system, to close loopholes, particularly for foreign multinationals to avoid paying their fair share of tax in Australia, and ultimately to raise more revenue for the budget to fund education, health and infrastructure services. We've had a clear plan on integrity for tax measures for some time. When you consider that one in five of Australia's biggest companies has paid no company tax for the past three years—that's no tax from those who can most afford it—it's not a fair contribution to key areas of public spending such as hospitals, schools, universities and infrastructure.

Indeed, health is one area where most Australians can least afford the imposition of ill health and bad luck. I recently received a letter from a constituent who has been on the waiting list for a double-hip replacement for some months now. He was meant to be operated on in June last year, and when he contacted me earlier this year he hadn't heard anything from the doctor or the hospital, the Prince of Wales in Randwick, where he was supposed to have the surgery. It was only as a result of my intervention and writing a letter to the Minister for Health in New South Wales that he finally did get some action, and he is hopeful that that surgery will now take place. I raise this as an example of the fact that this government has cut funding to hospitals. It has continued the freeze on Medicare, which has forced some doctors to push up the rebate, and it is having an effect on our health system. It is having an effect on our health system in terms of elective waiting surgery times and, of course, hospital emergency departments. In the context of this government now wanting to provide a $65 billion tax cut over the next decade to the largest Australian corporations, to the big companies, when people can't get the adequate health services that they need, when schools during the summer don't have air-conditioning so the students are sitting there in sweltering heat, when infrastructure that's vital to unclog our cities isn't being developed, you can understand why Australians are frustrated that this government is offering a big tax cut to the wealthiest multinational corporations, most of the advantage of which will go overseas.

Cost of living is a huge issue for Australian families and pensioners. Over recent years, they have been facing the rising cost of electricity. The cost of insurance has gone up. The cost of child care has gone through the roof. Housing, in my area, is just ever increasing. On this notion that the housing market is coming off the boil, I urge people to come and have a look at the area that I live in. They would fail to see that that evidence is actually taking place at the moment. Pensioners can't afford to switch on air-conditioners during summer, because they can't afford their electricity bills. Cost of living is a huge issue at the moment for Australians who are struggling to make ends meet. Yet this government is proposing to cut taxes for the largest companies and corporations and give them a tax break, but at the same time it is increasing taxes for hardworking Australians by increasing the Medicare levy by 0.5 per cent.

Well, Labor's not buying it. We've said that we're opposed to this proposed company tax cut. We want to keep that money in the federal budget to properly fund health, education and infrastructure. We've said we'll consider cutting company taxes, as we have in the past, once the budget is back in surplus, which is the fiscally responsible and sensible thing for a government to do. But this government, on its ideological crusade, won't have a bar of that and is persisting with this notion, which is opposed by the majority of Australians, that it should cut company tax and that that benefit will trickle down to workers. Of course, we don't know that.

They're using the US as an example. They're saying, on the back of their lovey-dovey tour last week to the US, that Australia is going to be uncompetitive when it comes to corporate taxes and will fall behind. But, interestingly, the Congressional Budget Office in the United States recently published a paper where they looked at what they call the effective rates of company tax throughout the world, and they gave countries international rankings. An effective rate of tax is one where the whole nature of a taxation system is considered in terms of the eventual rate of tax that a corporation might pay, and it includes things like dividend imputation in Australia, the tax credit that shareholders will get for tax that's already been paid by the corporation at a company level; depreciation and the fact that certain assets can be depreciated at a faster pace in Australia than in other nations; instant asset write-offs, which are related to depreciation, of course, but provide an opportunity to write that asset off over the course of one year; and, of course, the deductions that exist in a particular nation. We all know that Australia has a very generous system of deductions for income spent in generating a profit for a business, most notably in the resources sector, where it's basically the case that companies don't begin paying any tax until they make substantial profits. They're some of the most generous deduction systems in the world.

Based on those characteristics, the Congressional Budget Office ranked the effective tax rates of nations, and they found that Australia's effective tax rate is around 11 per cent, but that of the United States is around 16 per cent. So, when you look at effective rates of tax for corporations, we're actually lower than the United States, based on this study by the Congressional Budget Office. But this government seeks to ignore those facts and will push on with a policy that is deeply unpopular in the Australian community, who would rather see people hold that money in the budget to spend on education, health and infrastructure.

We've also got a plan to tighten up some of the tax loopholes that exist and crack down on tax havens. That clear plan to tighten debt deduction loopholes used by multinational corporations will improve the budget bottom line by $4 billion over the medium term. Labor will also introduce public reporting of country-by-country reports, high-level taxation, and information about where tax was paid, and how much tax was paid, by large corporations, those with over a billion dollars in global revenue. Providing protection for whistleblowers who report those entities evading their taxation obligations to the Australian Taxation Office is also very important. Where whistleblower information results in more tax being paid, Labor have said that we'll allow them to collect a share of the tax penalty, with a reward of up to $250,000.

So you can see that Labor's got a fair-dinkum system and a fair-dinkum policy when it comes to closing some of these tax loopholes, but it relies a lot on some of the measures that have been recommended at an international level through the international organisations that Australia is a member of. It's something that has broad support and that many other nations are now adopting, and it's based on some of those BEPS measures and some of those other international movements that are associated with improving tax transparency and ensuring that there's no leakage from domestic taxation systems and that you maximise the funds and revenue raised to fund services within a budget.

As I mentioned earlier, this bill has been on the table for many, many years. It's something that Labor has supported for many years. It was in our policy that we took to the last election. It does raise close to a billion dollars over the forward estimates, and it does clear up that discrepancy that exists between foreign-based holding companies and Australian holding companies. We do congratulate the government for finally bringing this on and adopting one of the policies that were put forward by the Labor government in 2013-14. They say imitation is the greatest form of flattery; I thank the minister for imitating Labor's policy.

See this speech in context