Daniel Mulino (Fraser, Australian Labor Party) Share this | Hansard source

I rise today to speak in favour of the amendment moved by the member for Whitlam. I very much hope that those opposite vote for that amendment, in line with the stated position that they took to the last election and in line with the stated position of the Prime Minister, the Treasurer and many others opposite who have spoken in favour of taking superannuation to 12 per cent, a much-needed reform. But I'm going to make a few observations today in relation to the parts of this bill, the Treasury Laws Amendment (2020 Measures No. 1) Bill 2020, that relate to multinational corporation taxation, and echo the sentiments of the shadow Assistant Treasurer.

In particular, what I wish to echo is that we don't oppose the content of this bill. But, as with so much that we face in this chamber, while it is a step in the right direction, it is a tiny step, a tiny shuffle, in the right direction. At the same time, it is a wholly inadequate, unambitious and uncreative response to what are very serious problems.

In this instance, we are dealing with one of the great challenges to our taxation system, yet what we face in this bill is a change to a definition. We should be debating deep, structural, long-term changes to our tax system that make it more sustainable. When one looks at this issue, one can see dozens of countries around the world simultaneously trying to deal with it. The OECD has a base erosion and profit-shifting framework—a very wide ranging, large-scale set of initiatives—that over a hundred countries have signed up to, the reason being that, on some estimates, something in the order of $240 billion off the tax base of OECD countries is currently under threat from profit shifting.

As the shadow Assistant Treasurer outlined, there are far too many major companies in this country who are paying little or no tax, and people in our community, for good reason, are outraged. They are seeing their own personal income tax rise year on year, their own capacity to pay the bills is under pressure, but in the media they see company after company paying little or no tax. I want to spend a couple of minutes running through why this is happening and why there is urgency to this issue.

A lot of this, I believe, comes down to fundamental changes in the global economy. When one goes back to international trade theory in the 19th century—for example, Ricardian tax theory or Heckscher-Ohlin—it was a world where people imagined that we had some economies focusing on advanced goods and some economies focusing on resources and inputs, and most trade was between those kinds of economies. Most trade was between countries that were focused on producing the inputs to production processes and countries that would then import back advanced manufactured goods. The vast majority of trade theory in the initial decades of economics was focused on that kind of thinking, and that was actually useful and did describe large parts of the world economy for a long period of time.

Fast-forward to the post World War II era, and one can look at someone like Paul Krugman, who won the Nobel prize for economics for very deep insights into a changing world. He found that much of the world's trade post World War II was actually shifting from what one might consider north-south trade to trade between OECD countries. There was very highly specialised trade of very similar products between countries. His trade model, which was very different from the economics of the first two centuries of the discipline, looked at hyperspecialisation in the automotive industry, for example, where there was massive trade in cars between Japan, Europe and the United States. Krugman hypothesised that this was driven by consumers' demand for a variety of goods. Another example was the fact that the French specialised, through the company Valeo, in air conditioning for passenger cars, whereas the Germans specialised in air conditioning for buses. Fast-forward yet again and I believe that the world economy is now going through as fundamental a change as that, if not more fundamental, where, instead of just specialisation between advanced economies, what we are moving to now is a world where we are seeing competition not between companies based in advanced economies but between global value chains.

What we're seeing now, for example, is that Honda is partnering with parts producers in Vietnam and BMW is partnering with parts producers in India. If one looks at the period 1988 to 1998, and what is often referred to as the I6, which is China, India, Korea, Poland, Indonesia and Thailand, what we see is that the growth in completed goods exports, so motorcycles and cars, grew, but not very much. But the growth in parts and components grew more than tenfold. Those parts and those components were often being exported to advanced economies, like Japan, the United States and Western Europe. The point is that we have moved to a different kind of global economy. We've moved to an economy where we shouldn't think of companies as being based in one country. Companies are now globally entities, and they can shift their profits from any country to any other country. We are in the middle of this transformation. The reason this is so fundamental is that this is one of the key drivers of the erosion of advanced economy tax bases. Another related change that's going on in our economies is technological change which is allowing production to occur in any country through 3D printing, or services to be provided far from where the person is with the expertise. For example, we can see all sorts of services in the health sector provided by people in other countries—Indian experts providing diagnostic services to people in Australia, the United States or Europe.

All of these technological changes are leading to greater productivity growth but they are also leading to opportunities for these multinational companies, multinational agglomerations, to shift profits. It is happening now and it is growing. This is an example of an issue which the OECD recognises is a first-order issue. Something in the order of up to $240 billion is under threat in the OECD tax base, and that is growing. And what do we have from the government? A bill that changes a definition. That is really what we are challenging here today. It is a step in the right direction, but this is not what we should be doing after seven years of this government. It's simply not good enough that this government is bringing into this policy area something so wholly inadequate.

But, as the shadow Assistant Treasurer alluded to in the procedural debate earlier, it's not just this bill; it is bill after bill after bill that we end up supporting, but as a step in the right direction that is wholly inadequate. In policy area after policy area the debates that we are engaged in in this place are so wholly inadequate that they're reflecting a government whose agenda is so lacking in ambition, so lacking in content and so lacking in creativity that it is simply not good enough for a country that is facing a whole raft of long-term challenges. This is one of them. This is a first-order issue for the federal government, because our tax base is under threat and we need a whole-of-government comprehensive strategy for dealing with this issue; not a hollow government entity that is spending its money on advertising but a long-term strategy where our tax base can be protected. But, as I said, this bill is also symptomatic of this government's overall agenda.

We don't oppose this bill, as with other bills that have gone through this place over recent sitting weeks that we haven't opposed, but it's with a degree of regret at the lost opportunity. Time after time, we're seeing bills debated where the content of the bill only constitutes a few minutes of most speakers' speeches and then the rest of their speeches are devoted to the weighty matters that we should be considering in far thicker bills, but unfortunately, because of this government's inactivity, we're not. As I said earlier, it's all the more inadequate given the fact that this is a third-term government. It's not like they haven't had time. They've had seven years now to develop a full agenda on this issue. Where is it? On issue after issue, seven long, seven inert, seven wasted years are reflected in the bills that come here and that are wholly inadequate. So, yes, we'll support this bill—it's a step in the right direction—but this is a massive issue that deserves so much more.

Finally, on the amendment, as the shadow Assistant Treasurer alluded to, the issue of moving to 12 per cent is in and of itself a first-order issue. It is critical that this parliament gets behind the increase to 12 per cent. In a society where people are living longer and longer, in a society where people are under increasing financial stresses, it is absolutely imperative that we put in place a regulatory environment where people's living standards in retirement are protected. As a number of commentators have suggested, we are probably now entering a period where interest rates are going to be at historic lows for a very long time. We are seeing central banks around the world foreshadowing historic low interest rates for years, and, of course, this is going to have an impact on returns right up and down the risk schedule. So we can't make assumptions about equity returns. We can't make assumptions about the returns of asset classes that perhaps we could have a decade or two ago. That's why it's critical that this government puts in place a long-term strategy that protects people's retirement income, given that many people who are investing now might face, in retirements that are longer than ever, very low returns in the lead-up to their retirement and during their retirement. So it is absolutely critical that, in that environment, we increase the rate of saving from 9½ to 12 per cent. This should have been done long ago, but now it is absolutely imperative.

It is critical that we not only pass this bill but that we pass the amendment to it so that we provide a signal to the sector that the promises that all the major parties took to the last election are going to be fulfilled. In conclusion, this is yet another bill that will get through this place, but it's yet another bill that reflects a missed opportunity.

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