Kylea Tink (North Sydney, Independent) Share this | Hansard source

In the explanatory memorandum that accompanies this bill, the minister says, 'Transparency is a key factor underpinning the integrity of the tax system.' On this observation, I could not agree more. However, the reality of this legislation is that it barely touches the tip of the iceberg when it comes to bringing that transparency to be, and we remain left waiting to see real, substantive improvements in the ways in which multinational companies are being held to account for their income and expenses in our market.

The measures contained in the bill, as currently drafted, do two things: (1) they require public companies to disclose information on the number of subsidiaries and their country of tax domicile; (2) they strengthen the thin capitalisation rules to limit multinational debt deductions in Australia. While I'm supportive of both of these measures—after all, they are important, long overdue elements of increasing tax transparency and integrity—alone, they do not go anywhere near far enough.

Indulge me on a short, potted history of these reforms. In the lead-up to the 2022 federal election, the Labor Party announced a multinational tax integrity package to address tax-avoidance practices of multinational enterprises and improve transparency through better public reporting of tax information. The election commitment included public reporting of tax information on a country-by-country basis, requiring large multinationals to publicly disclose how much tax they pay and how many workers they employ in each jurisdiction in which the enterprise operates.

In the recent budget, the government reiterated its intention to implement public country-by-country reporting—a commitment they then repeated when the exposure draft of this legislation was released earlier this year. And, yet, the bill we have before us today does not contain measures to implement public country-by-country reporting. It appears now that the implementation of that policy has been pushed back at least a year.

What we have before us, in this bill, is what I sincerely hope is the tasting plate or the entree, rather than the total meal. If this is as far as this government is prepared to go, as Australians seeking reform, we are going to be left wanting much, much more.

So what is country-by-country reporting and why is it so urgently needed? Public country-by-country reporting is an accounting practice that requires companies to publish how much profit and cost they incur in each of the countries they operate in, instead of publishing all of the profits and costs they incur around the world as a grouped sum amount. The introduction of country-by-country reporting here in our economy would require large multinationals operating in Australia to report key information about basic finances, such as earnings, profits, losses, the number of staff and taxes paid or not paid, for every country where they operate. By requiring companies to detail how much profit they're making in each country they operate in, we increase transparency. This is important because, where there is transparency, it makes it possible to spot companies shifting profits out of countries where they do business and into tax havens so they can pay less tax than they should. Country-by-country reporting doesn't just expose profit shifting; it actually deters it, too.

Since 2014, a huge number of documents, including those from the Panama Papers and the Paradise Papers scandals, have been leaked by the International Consortium of Investigative Journalists, unveiling how tax evasion and avoidance have become standard business practice right across the globe. The Tax Justice Network estimates that at least one in every four tax dollars lost by the world to multinational corporations using tax havens can be prevented by requiring multinational corporations to publish their country-by-country reporting data. If available, country-by-country reporting data would give us a clear line of sight not only of the scale of a company's activities in our market but also of the company's profits declared and tax paid in each jurisdiction where they operate. Making the data transparent allows public scrutiny of profit shifting and has been shown to raise the effective tax rates paid, even without additional policy changes.

In this context, then, none of us should be surprised that the OECD has called for this level of reporting to be adopted internationally. Why wouldn't we heed those calls here in Australia when you consider that the annual tax transparency report released earlier this year by the Australian Taxation Office revealed that over 30 per cent of the nearly 2½ thousand large and medium corporate entities operating here in Australia paid no tax at all here in the last financial year? They paid no tax at all. An industry breakdown showed that half of the mining, energy and water companies, like Adani Mining, ExxonMobil Australia and Santos, paid no income tax in the financial year of 2020-21. Shockingly, despite having a total income of $9.1 billion and a taxable income of $113 million, Chevron paid just $30 in income tax in Australia, according to the report.

When you bring that right back to what it means daily in economies right around the world, it can be argued that this sort of behaviour—tax evasion and avoidance—is fuelling poverty and denying nations, including our own, their capacity to achieve their ultimate goals. There are 11 more billionaires in Australia now than before the COVID-19 crisis. With extreme wealth and extreme poverty on the rise, our government needs to identify and collect tax where it is fairly due. The United Nations Principles for Responsible Investment, representing investors with $89 trillion worth of assets under management, states that tax avoidance is the key driver of inequality, which is associated with poor long-term business and social performance. By increasing transparency over what profits are made and what taxes are paid by global corporations in every country in which they operate, we could hold big corporations to account and ensure they pay their fair share of tax to lift people out of poverty.

According to recent academic research, Australia lost an estimated 14 per cent of its corporate income tax to multinational companies' use of tax havens in 2019. That represents a loss of over US$9 billion. If country-by-country reporting could help us recapture this lost revenue, our government would have more than enough money to do any one of a number of things that it is seeking to do, including meeting the needs of our childcare educators, teachers, nurses and aged-care workers or working with communities right across Australia to electrify everything.

Importantly, by ensuring that those who should pay do just that, we could shift the burden away from individual taxpayers, who in this year's budget alone accounted for 48 per cent of our total revenue. This overreliance on personal income tax is unsustainable, especially as the number of workers per retiree is rapidly decreasing. In this context, I call on the government to lead us through a process of comprehensive tax reform to reduce reliance on personal active income and review opportunities that are fairer to future generations by looking at how significant passive income is taxed.

Corporate tax transparency is just one reform. Globally, companies and governments will be under increasing pressure to respond to demands for transparency. Large financial sector firms in the European Union have been required to disclose public country-by-country information for nearly a decade. Recently investors advanced shareholder resolutions calling on Amazon, Microsoft and Cisco to begin publishing tax and operational data on a country-by-country basis, garnering the support of independent shareholders collectively and representing hundreds of billions of dollars.

To address briefly what I suspect may be some of the objections of some multinational enterprises to country-by-country reporting, I'd like to note that the potentially in-scope companies here in Australia have in many instances been reporting similar data, albeit confidentially, to the tax authorities in the OECD, and many are preparing to comply with the EU public country-by-country reporting directive. I'm convinced, therefore, that these experiences to date in other jurisdictions demonstrate that country-by-country reporting can be done without revealing commercially sensitive information and without a negative impact on competition. It's hard to see the detrimental effect of increased transparency, and in fact country-by-country reporting would level the playing field for companies operating in Australia.

It seems completely counterintuitive, but the reality is that here in Australia multinational companies that are domiciled elsewhere are not held to the same level of account as Australian companies. In this way, incredibly ironically, we are stacking the cards against Australian listed companies, who pay the corporate tax rate of 30 per cent while their direct competitors operating in Australia but domiciled elsewhere are not. Public country-by-country reporting would create a fairer and more competitive environment for Australian businesses by removing a competitive disadvantage for local businesses who are doing the right thing while also closing a loophole for foreign companies. Ultimately, most businesses that don't create complex corporate structures to shift profits to tax havens and avoid domestic obligations are losing out. These are the good guys. The good guys are being left high and dry whilst they're doing the right thing. The revenue base of Australian taxpayers is deliberately and systematically gamed.

I call on the government, then, to stand bravely by its pre-election promises and its legislated budget measures and introduce public country-by-country reporting. To do anything less than that would be to fail to live up to the expectations of those who have sent this government to lead in this time. It is time to deliver true corporate tax transparency so that community trust in the tax system can be restored. Thank you.

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