James Stevens (Sturt, Liberal Party) Share this | Hansard source

I rise to contribute to the debate on the Treasury Laws Amendment (Making Multinationals Pay Their Fair Share—Integrity and Transparency) Bill 2023, and in particular in support of the amendment from the shadow Treasurer. We in the coalition have a very unambiguous position on taxation and the principles of taxation, which is that we want taxation to be as low as possible and also as fair as possible—that is, the lowest tax burden on everyone in our society but sharing that tax burden fairly and equitably. In principle, we always welcome the opportunity to support measures that are ensuring that the principles of our taxation system are not in any way being abused or sought to be exploited, or pursuing loopholes or structures in which the spirit of the fair taxation on economic activity that happens in our nation and that was derived from our nation is being avoided in any way. So this is a bill that continues along a path that, when we were in government, we were already well along on. Many people contributing in this debate have referenced the frameworks of the OECD, and the OECD has been a helpful body to bring together relevant nations that have these same challenges to talk about some principles in policy around taxation legislation that, if we have a degree of uniformity, will prevent some of the practices that we don't believe are fair and equitable. Most definitely, not enough tax is being paid in this country by some multinational companies because they're structuring their affairs in a way that exploit loopholes that are outside the principles of the fair taxation system and the principles of tax that we expect to be appropriately levied on corporations.

I'm obviously very wary—it's a principle of the coalition—around the topic of sovereign risk and the concept of changing policy positions or legislation where an investor might be able to say, 'I invested on certain terms and in a certain environment that I expected there to be consistency around. The fact that you've changed the goalposts on me is unfair and will mean that a lot of people will reconsider making investment decisions in your economy.' We on this side are always very wary of that. But this is an area that, in no way, comes into that principle of policy.

This is an area where we are identifying that the principles of our existing legislation, our existing taxation regime, are being exploited or enacted outside the principle that any investor should have properly understood was the purpose and intent of the Australian taxation system when they undertook investments in our economy. If they undertook investments in our economy that were contingent on acting outside the spirit of our taxation system—where perhaps they made investments and had a business structure and plan in mind that involved them knowing what the principle of our taxation system was but seeking to get around paying their fair share of tax in our economy—then I've got absolutely no sympathy for that type of investor, and I'm sure no-one in this parliament would.

The economic activity that occurs in our nation needs to be properly shared between a fair rate of return from an investor who takes the risk of investing in the economy and a business proposition. Equally, when they succeed in our economy, they, like any other member of our society, need to pay a fair and reasonable amount of taxation to the government. This is to support and provide the society that we expect to have as a dividend of the economy that we've got, a strong economy that we want to have, and a growing economy into the future.

Those are the principles with which we approach our decision-making in supporting legislation in this area. It's human nature for people, particularly for investors, to seek to maximise return on the capital that they employ. At times, they can be quite ingenious in identifying ways in which they structure their operations. In our view, they might be outside the spirit of our taxation system. Nonetheless, under existing provisions, they've found ways to structure their balance sheets, structure the way in which they realise elements of economic activity, within their operations in our country and not in our country. Clearly, they would not be illegal, lest they be open for direct prosecution, but they are outside the spirit.

When we see examples of corporate structures, corporate accounting and balance sheet manoeuvrings that are not capturing a fair return on economic activity, within our economy, through the fair established principles of our taxation system, then we've got to take action. We know the history of issues around things like transfer pricing, particularly in the mining and minerals sector.

This bill deals with issues around structuring balance sheets and leveraging assets, in this country, with certain debts that are not fair and reasonable, to achieve the dramatic reduction in realised income and realised profit that should be fairly taxed within our economy. We're addressing that in this bill. Equally, it's the principle of having a coordinated approach to this with similar economies. We want to always be about a low-taxing environment and take every opportunity to have the lowest tax burden on the people of this country that we possibly can. That includes the investors of this country.

We also recognise the zero-sum game of having a situation where countries are finding ways to make changes to the principles of their tax system, in certain elements of the tax system, not in the broad concept of low taxation. They're looking for ways to have particular tax treatments that would attract faux economic activity into their economies.

In that case, a particular tax treatment of a particular type of activity is lower in that jurisdiction and has a commensurate cost to another economy currently receiving that economic activity and the taxation of that economic activity. If we don't work together and cooperate on these matters through a framework like the OECD, we will have different types of tax treatments being used in tactical faux business and faux economic attraction principles rather than the general principle we all want—economic activity genuinely happening in our economy being up to us to determine tax treatment. Investors will then make decisions based on us ensuring that we have, generally speaking, the fairest and most equitable tax treatment on those investments that will still allow those investments to return a fair profit on that capital employed but also, given they're undertaking that activity within the economy, be big good corporate citizens that are contributing to the cost of running our society.

The shadow Treasurer's amendment here is very important. Beyond some of the schedules within this bill, it also makes very important points in taxation more broadly and where the government is heading in taxation. One thing that I don't think has had enough attention and needs it is the fact that, in this highly inflationary environment, income tax, in particular, but also the general issue of bracket creep, is really punishing Australian families and Australian income earners.

Inflation peaked at seven per cent more recently; it's still at six per cent. Some people are celebrating that. It's devastating and heartbreaking that, at the moment, our economy is seeing the value of the dollar deteriorate to the tune of six per cent in a 12-month period. That is the destruction of wealth and the destruction of savings for people that are provisioning for their retirements, for their futures et cetera. It also means that, because our income tax brackets are not index linked and as inflation runs hot, we're seeing an increase in the income tax take by default of inflation increasing everything in the economy and bringing the relative rates at which higher income tax is levelled down in real terms.

While in government we undertook a very significant reform now known as stages 1, 2 and 3 income tax cuts. Those were all about addressing bracket creep and inflation eating away at Australian workers' take-home pay. At times, there has been speculation around whether or not the legislated stage 3 of those income tax cuts will be honoured by the new government, who did say very clearly and repeatedly before the election that they wouldn't touch them. At this stage, that hasn't happened. Regrettably, an important point regarding stage 3 is that they are not the tax cuts that they were when they were passed, because we were not anticipating inflation to run at the levels that they have under this new government. So the magnitude of the changes to the stage 3 tax cuts are dramatically different, because inflation was not modelled by Treasury to hit seven per cent at the end of 2022, early 2023, and to now still run at six per cent.

We now have the RBA saying that their policy settings don't model inflation getting back to between their target range of two to three per cent for another two years. So every day, week, month that goes on that we're not within that target bracket, where inflation is running hotter than our target is around monetary and price stability in our economy, people's wealth and savings are being destroyed by the magnitude of that gap. And, of course, the expected benefit of changes to the tax scales are not what they were envisaged in the lower inflation environment, which was what was being projected when that decision was made.

We now have, as the shadow Treasurer pointed out, a circumstance where our tax-to-GDP ratio is going up. There are issues, which are just so perverse, like bracket creep and the dividend that the government will get from higher inflation because of that bracket creep. They're taking more money out of the pockets of Australians in real terms, and the growth of that tax-to-GDP ratio, which this amendment makes very clear, is projected to increase to levels that are putting a greater burden of tax on the people of this country.

So we debate this bill, which is about making sure that everyone pays their fair share of tax. In particular, this is targeted at multinationals and the structure of balance sheets and the like and about ensuring that proper capture of economic activity in this country is taxed at an appropriate rate. But we also make the point through the debate on this amendment that this government are increasing taxes. In some cases, it's by stealth, and, in some cases, it's vindictive, like the changes to the superannuation tax. 'You've been successful and you've got a lot of money, so we might just take some of it from you. We'll never tell you anything about it before an election because that might cost us votes. We'll wait until we've been elected and then undertake these dramatic increases in taxation on certain cohorts of Australians that we don't like.' That's the position of the government, so we oppose that.

This amendment highlights our position there and the general challenges around bracket creep and the increase in taxation from a percentage-of-GDP point of view, and that is, as I've canvassed, particularly aggravated by inflation running as hot as it is. Nonetheless, the principles that this bill is seeking to achieve are important. They are a continuation of the work that we undertook in government. We commend the OECD framework that sees governments working together on these issues, because we certainly believe that, as much as we want taxation to be as low as we can get it, everyone should pay their fair share of tax. Where multinationals are obtaining significant economic benefit from investing in our economy, they should pay their fair share of tax to pay for our society.

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