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

We often hear from businesses that they feel they're being overregulated and that there's too much red tape in the Australian system and the Australian economy. But this particular bill, the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2019, is one of the reasons that regulation is needed—that is, that big businesses often use accounting tricks and restructures to avoid paying their fair share of tax in Australia. As soon as a government regulates, you can bet your life that a big business will use accountants, lawyers and financial advisers to find a way around that and minimise their tax into the future.

Australian companies are no different. Because they make large profits, and their profits have been increasing in recent years—at a much faster rate, I might add, than the average Australian workers' wages—they're always a step ahead of government. This bill represents the Australian government catching up in some respects, although it doesn't go far enough—and I'll deal with that in a moment—because this is a half-hearted approach to tackling the issue of corporations using accounting tricks to avoid paying their fair share of tax. The measures in this bill seek to tighten the thin capitalisation rules to ensure offshore sellers of hotel accommodation in Australia calculate GST in the same way as local sellers and to remove the luxury car tax on reimported cars refurbished overseas.

Labor supports these measures. Thin capitalisation rules are a way for companies to deduct for debt financing expenses to an extent that the entity's debt exceeds a prescribed level where the level of adjusted average debt exceeds a maximum allowable debt in an income year. Debt financing expenses are costs associated with taking on debt such as the fees and commissions paid to investment banks, to law firms and to auditors. An entity is generally required to comply with accounting standards in calculating the value of assets and liabilities in Australia, and the thin capitalisation rule allows an entity to recognise certain assets and revalue assets in a different way in certain circumstances.

Recently, there has been a significant increase in the use of asset revaluation by companies to generate additional debt capacity and claim greater deductions. That's one of the accounting tricks that I mentioned earlier. This represents the government catching up. Some of these companies have been exploiting a loophole that exists in our tax laws to claim a greater level of debt and use that as a deduction to reduce their amount of tax liability. This bill will amend the Income Tax Assessment Act to tighten the thin capitalisation rules and require a company to use the value of the asset liabilities, including debt capital and equity capital, that are used in its financial statements, and it will remove the ability for an entity to revalue its assets specifically for thin capitalisation purposes. Labor supports this reform, although we believe it doesn't go far enough. We believe that the best way to clean up the budget and make sure that multinationals pay their fair share of tax would have been to adopt some of the policies that Labor took to the last election, where we were proposing to close down many of those tax loopholes that have existed in our tax laws for companies for many, many years.

Teachers, nurses, tradies and others that work in our economy pay their fair share of tax. They don't have the luxury of being able to fund solicitors, financial advisors and accountants to find loopholes in the tax legislation to minimise their tax, and it's time that multinationals did the same thing as well, particularly when we're facing a budget with finite resources and increasing expenditure associated with an ageing population and the additional impost of funding health and aged care services as that population ages. But also we are dealing with the effects of climate change and other issues that are a drag on the Australian economy and they will require additional dollars within the budget. It's not fair that the burden of funding those programs relies to a greater extent on low to middle income workers rather than large corporations and multinationals. Closing down tax loopholes can mean more taxpayer dollars stay in Australia to fund critical services such as hospitals and schools, and productivity enhancing investments. While this bill is a start, which is why Labor is supporting it, more needs to be done.

It's fair to say that the Liberals are half-hearted when it comes to making sure multinational corporations pay their fair share of tax and disclose the amount of tax that they pay. We should never forget that it was this government that teamed up with the Greens. They don't like this; they don't like the fact that members of the Liberal and National Party got into bed with the Greens in the Senate to water down the tax disclosure laws that Labor put in place when we were previously in government. These are the laws that require the big Australian companies to disclose on an annual basis the amount of tax that they're actually paying. Those companies didn't want to do that. No, they didn't want to do that at all. I recall some of the ridiculous reasons put forward by members opposite for why those companies shouldn't have to do that. I can remember the previous member for Reid saying that families would be threatened by these laws. When it came to an inquiry and the Liberal Party were asked to produce evidence of this, that evidence was not there.

So it should never be forgotten that those opposite teamed up with the Greens to water down Australia's tax transparency laws so that the amount of tax that big corporations are paying in Australia would not be known by the Australian public. That is their record. That is their approach to tax reform: 'Give Australians as little information as possible because we don't want them knowing the truth about how much tax large corporations in Australia are really paying, because we know that Australian workers would be outraged by the fact that many of these large corporations can use tricky accounting procedures to increase their deductions and reduce the amount of taxable income they have—some with billion dollar turnovers paying no tax at all in Australia.' And those opposite think that's all right. When it comes to clamping down on that sort of behaviour, this is a pretty half-hearted attempt.

Net debt in Australia has doubled and economic growth is at its slowest in 10 years, since the global financial crisis. Yet the Liberals and Nationals have shown no stomach at all to stop multinationals avoiding their tax obligations. During the last election campaign, they were silent on multinational corporations and tax havens and refused to close down tax loopholes, meaning that working Australians have been footing the bill for those unfair tax loopholes. Who could forget the Liberals' signature policy when it came to multinationals: the $80 billion tax cut for multinationals and big banks that flowed overwhelmingly to companies offshore in the form of executive bonuses, share buybacks and inflated dividends.

The Liberals point to revenues raised by the Tax Avoidance Taskforce but never admit that most of those revenues are based on Labor's transfer pricing laws that were opposed by those opposite in 2013. It was Labor laws that the Liberals and The Nationals opposed that underpinned the tax office's $300 million win against Chevron. It was Labor laws that the Liberals and the National Party opposed that delivered the tax office's $529 million settlement with BHP. Only Labor has been serious about cracking down on multinational tax loopholes and making multinational corporations pay their fair share of tax.

During the election campaign we announced further laws to clamp down on tax avoidance. It was a crackdown that would have made it fairer and would have meant that companies that do the right thing would have been helping to fund better healthcare services and better education services. We went to the election with 19 measures to crack down on multinational tax loopholes and tax havens. They were measures such as tightening debt deductions, reporting of country-by-country reports, increased capacity for the ATO, public reporting of AUSTRAC data, closing loopholes of certain trusts that make payments to nonresidents to artificially get a tax rate below the 30 per cent company tax rate and, of course, the whistleblower protections that we put in place.

The Liberals need to do more than just claim credit for Labor's previous reforms. If they were serious about dealing with multinational tax avoidance, they'd take real action and seriously look at some of those proposals that Labor was proposing before the last election. The government need to do more to tackle multinational corporations and ensure that they pay their fair share of tax. Every dollar that this parliament and this government let slip overseas is another dollar that Australian workers and taxpayers have to fork out to fund critical services and investments—and that's not fair. That is not fair to the people who are building the Australian economy and working hard every day. We shouldn't allow corporations that have the funds to use tricky accounting procedures to avoid paying their fair share of tax.

This bill does go some way to closing some of these tax loopholes, but it is a half-hearted attempt. The government should get serious and adopt Labor's reforms that we took to the last election if they are going to be serious about closing tax loopholes for multinational corporations.

Debate adjourned.

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