Zali Steggall (Warringah, Independent) Share this | Hansard source

The opportunity cost of multinational tax avoidance in Australia is an issue that reaches into the lives of every Australian. This bill and the Tax Avoidance Taskforce demonstrates that multinational tax avoidance in Australia is an issue that is on the government's radar—or that it is aware of it—but so far hasn't seen much action.

The importance of combating tax avoidance cannot be understated. The 2016 revelation of the Panama papers was a shock to the system for those around the world engaging in shady tax avoidance practices. The 11.5 million leaked documents galvanised governmental action around the world. Australia's response, such as a tax avoidance task force, was broadly successful in achieving its stated aims. This bill builds on the task force aims. The bill schedules that there are obvious benefits to redefining the nature of a significant global entity at schedule 1. We can pass this bill and the wording of an amendment will change, but dishonest actors will continue to shelter Australian money in offshore tax havens, and multinational corporations will continue paying little to no tax. The central revelation of the Panama Papers was the scale of the problem we face. Tax havens and avoidance have become a feature of the global economy. We can do more than tweak definitions.

A key avoidance technique particularly impacting Australia is transfer mispricing. Two companies which are owned by the same multinational group transfer goods and entities between each other at a predetermined price. It's estimated that roughly a third of international trade occurs in this way. Wealth crosses national borders at a substantially reduced tax rate. The transferred wealth often becomes sheltered in offshore tax havens. Estimates from 2018 advise that the figure housed in tax havens is US$8.7 trillion, starving developed and developing countries alike of between US$500 billion to US$600 billion in valuable public spending each year. This has implications. The money's not being invested or capitalised on in any way; it's simply sitting there, benefitting nothing and, more importantly, no-one.

I asked the question: What is the true cost of tax avoidance? What are the costs to the citizens of Warringah? What are the costs to the citizens and governments of Australia? And what are the costs to the world at large? The costs are many. Every year small businesses in Warringah pay their fair share in tax. From the Salty Rooster on Queenscliff Beach to Janos Kiss Hair in Cremorne, much loved Mosman businesses, back with a new lease of life, these honest businesses are asked to contribute roughly 27.5 per cent in tax, whilst a major telecommunication company involved in the Panama Papers paid zero per cent. Every year the Australian government loses federal revenue from tax-avoiding corporate groups. The tax gap, the amount estimated which the ATO would receive if large corporate entities were legally compliant, is worth $109 billion. One-third of these companies fail to pay a cent. Every year the capacity for developing nations to invest in their people is undermined by tax-avoidant behaviour, and these governments tend to rely more on corporate tax revenue.

What are the solutions? The international tax system was put together under the League of Nations a century ago. It's time for change. I'm encouraged to see the OECD's proposals for resolving the challenges of an increasingly digitised and globalised economy, but under their proposed framework multinational enterprises would pay a minimum level of tax whilst simultaneously providing no incentive for corporations to profit shift away from low-tax jurisdictions. Multilateral cooperation will be vital in solving this issue and returning wealth that was produced in Australia back to Australians. I call on the Australian government to advance this international debate.

See this speech in context