Cassandra Fernando (Holt, Australian Labor Party) Share this | Hansard source

I rise today to speak on yet another crucial focus of the Albanese Labor government: multinational tax avoidance. It is prevalent in the global economy and has been ingrained in big business culture for far too long.

This bill delivers on another of our election promises to the Australian people.

Our nation's economic integrity and fairness have been sidelined for too long, and we must take a stand to ensure that everyone, without exception, pays their fair share. My constituents pay their fair share of tax, and I'm sure all of us in this place pay our fair share of tax. But for too long now those in the big-business and multinational world have used dodgy strategies to get around their tax obligations. The Treasury Laws Amendment (Making Multinationals Pay Their Fair Share—Integrity and Transparency) Bill 2023 is a crucial step forward in closing the loopholes that have allowed some multinational corporations to avoid their tax responsibilities. It is time to level the playing field and create an equitable tax system that benefits all Australians, not just the privileged few.

For far too long multinational companies have engaged in complex financial manoeuvres, exploiting gaps and discrepancies in tax laws across jurisdictions. They have shuffled profits to low-tax havens, all while enjoying the benefits of operating within our secure and prosperous country. What has this meant for us? It represents a significant loss of revenue for our nation, reducing the resources available for vital public services like education, health care and infrastructure.

Schedule 1 of this bill targets both listed and unlisted Australian public companies. It will require them to disclose any subsidiaries they have and where they are located. This will go a long way in keeping these companies to account, by forcing them to be more transparent about their corporate structures and their tax arrangements. I suspect the Australian people would not be pleased to learn of companies that abuse loopholes and have subsidiaries sprawled across low-tax areas of the world. I would anticipate that many Australians would vote with their wallets and support the businesses that support them and their country.

Another positive flow-on from this change is that it will allow for better economic analysis and help the government of the day to determine whether our tax laws are working as intended. If the data shows our laws are lacking, changes can be made. This information will be disclosed as part of the company's annual financial report, which also helps to reduce compliance burdens. This is not a radical proposal. It is in line with other Western countries such as the United Kingdom, which already has these types of measures in place. It is estimated that $500 billion to $600 billion in corporate tax revenue is lost every year as these profits are expertly shuffled into low-tax regions across the world.

In Australia, company tax accounts for roughly 19 per cent of Australia's revenue, and our changes in schedule 2 of this bill are estimated to result in a gain to receipts of $720 million over the four years from 2023-24. This will be achieved through several measures, including limiting debt related deductions to 30 per cent of profits. An earnings based approach to debt deductions ensures that any deductions are directly tied to a company's earnings. This will assist in addressing the tax planning activities of multinationals. As debt is tax deductible, it has become a strategy for some multinationals to adjust debt levels and utilise borrowings to minimise the amount of tax they pay.

This has become such an internationally prevalent issue that it has resulted in an almost international effort to combat this practice, which has been led by the OECD. Several OECD countries, particularly the United Kingdom, as I have already mentioned; the United States; and the majority of the European Union have already implemented these earnings based interest limitation rules. Importantly, the new third-party debt test provides additional flexibility to deduct genuine third-party debt, which is consistent with common debt financing arrangements used across the world, all the while balancing the overall tax integrity purpose of this measure.

These changes are simple, commonsense propositions. It should not be the case in this country that someone on the minimum wage is paying more in tax than some of the top companies in the world. We cannot stand by and allow these corporate giants to manipulate the system, leaving everyday Australians to bear the burden of funding our nation's future. This bill signals to the Australian people that the Labor Party and the Albanese government will not stand by and let this continue. The time has come to hold these multinationals accountable, to require transparency and to close the tax loopholes that have been abused for far too long.

The core principle behind this bill is integrity. It aims to tackle the complex web of tax avoidance strategies and improve the transparency of multinational corporations' financial activities. By requiring these companies to disclose proper tax information to the Australian Taxation Office we can gain a clearer picture of their operations and ensure that they are paying their fair share. I understand the concerns raised by some who argue that these measures may discourage foreign investment or burden corporations with excessive regulation. All the changes contained within this bill were subject to extensive consultation in both August 2022 and April 2023, with civil society and industry stakeholders providing feedback that the measures in this bill are required.

Let us be clear. This bill does not seek to restrain business growth or innovation. Instead, it's about creating a level playing field for all businesses—large and small, domestic and international. We all know that local families and small businesses do the right thing, and so should big businesses. It's just that simple. By ensuring that everyone pays their fair share we can promote healthy competition, foster innovation and strengthen our economy in the long run. This legislation sends a powerful message to the global community that Australia is serious about tackling multinational tax avoidance. By helping to lead the charge alongside countries with similar laws, like others in the OECD, in enforcing fair taxation practices, we position ourselves as a nation of integrity, setting an example for other countries to follow.

This bill is not a magic fix for all multinational tax avoidance. Neither is it the only step needed to fully address the complexities of multinational tax avoidance fully. But it is a crucial and tangible step in the right direction. As the representative of a working class electorate I remain committed to working to strengthen our tax system to make it more transparent and ensure that it serves the interests of all Australians. I would hope that this government can count on all members in this place to support this bill and signal to the international community that all parties take tax avoidance seriously. I cannot think of anything more hypocritical than for those opposite, if on one hand they are saying they will repeal the increased welfare payments from the May budget, claiming that we cannot afford it, to then not support ensuring that multinationals and others are paying their fair share of tax. Do they think only everyday Australians need to pay tax? I would not want to be a coalition MP, having to go home and justify that to my constituents.

Regardless of what others say, I am proud to belong to a government that is united in creating a fairer, more equitable tax system that benefits every Australian. Let us remember the core values that underpin this legislation: integrity, fairness and transparency. To put it simply, the amendments contained within this bill, particularly the changes in schedule 2 that reform Australia's thin-capitalisation rules, will ensure that multinationals will pay an appropriate amount of tax in this country.

The timing of Australia's anti-avoidance legislation will assist in deterring multinationals from avoiding income tax, thus ensuring the appropriate amount of tax is paid and reinvested into services the Australian people need. By passing the Treasury laws amendment bill, we will take significant strides towards securing a better future for our great nation—where every individual and every company contributes their fair share to build a stronger and more prosperous Australia for all. Labor will always support legislation, like this, for a fairer and more just Australia. I thank the House.

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