Matt Burnell (Spence, Australian Labor Party) Share this | Hansard source

I rise here today to speak in favour of the Treasury Laws Amendment (Making Multinationals Pay Their Fair Share—Integrity and Transparency) Bill 2023. Beyond the introduction of this bill to the House, I am also glad to see that it was the Assistant Minister for Competition, Charities and Treasury that was responsible for doing so. I know, and for that matter anyone who knows him well or even has vague knowledge about him knows, that the assistant minister is extremely passionate about this issue and is determined to see some real progress occur in this space. Which is not to say that many of us on this side of the chamber don't share that same position; we definitely do—though the assistant minister's passion in areas such as this makes him quite an advocate for the devil in the detail.

Seeing real action on corporate tax avoidance, in particular by large multinationals, has been a long time coming. The world is a vastly different place than it was in 1915, when Australia first introduced company tax, something that helped us to fund the financial burden we faced as a result of World War I. Back then, international travel to and from Australia was done by boat, with journeys taking weeks out at sea. But today corporate profits can travel out of Australia to countries as far off as Bermuda, the Cayman Islands and the British Virgin Islands in the time it takes for signatures to appear on a number of documents in a lawyer's office. And to think there was a time when we thought the Concorde was lightning fast!

I know there is a great deal of enthusiasm by members on the crossbench to get multinationals to pay their fair share of tax, and I'm sure there are some in opposition who want to see progress in this space, too—although I'm sure their support is somewhat less enthusiastic compared with other parts of the chamber. I would have thought they would be cheering from the sidelines on this one, because, after all, it is an established fact that the Liberal and National parties have had the two highest-taxing governments of the past 30 years. Perhaps it's the source of those taxes that matter the most to those opposite—and on that note we couldn't agree with them more. We want to see more multinationals paying their fair share of tax in Australia, after all. Just think, with the extra revenue generated by measures in this bill, those opposite could have built some eye-wateringly large car parks in Liberal and targeted marginal seats! They just lacked ambition. We are ambitious for them.

After all, those opposite stand on the shoulders of giants—giants such as Joe Hockey, a former treasurer who spoke of Australia being a nation of 'lifters and leaners' within our economy. Where multinationals that generate billions in annual revenues in Australia somehow end up paying zero or next to zero tax, you can only conclude that they are leaning on Australia, leaning on hardworking Australians who pay their taxes, with a few deductions here and there, but essentially contribute more income tax than a company that has taken in billions that year in revenue that was earned right here. Australia is meant to be the nation of a fair go, and that is most definitely not the best example of this being the case. I am at least somewhat hopeful that the present-day member for North Sydney sees things differently than her predecessors did.

Given some of the global events that have transpired over the past few years especially, very few things truly startle us. But there is a distinction between 'shocked' and 'surprised'. For example, when I hear that in the 2021 financial year Chevron paid $30 in income tax in Australia—$30!—on the back of revenue to the tune of $9.1 billion and a taxable income of $413 million, am I shocked? You bet I am. Am I surprised? Absolutely not. I am by no means approaching this from a background in corporate law or as a tax practitioner, but on the numbers alone we can all share in the perspective that something is clearly not right. There are many examples of companies operating in Australia that have paid very little income tax in Australia on the back of substantial revenue made in Australia. The list is a long one. Some have paid zero, or effectively zero, for several years now. Thankfully that data is now published through the Australian Taxation Office, through taxation transparency measures. If you want to uncover the names of some of the worst offenders, I'd encourage you to google it, and Chevron has definitely been one of them.

The brazen nature of corporate tax minimisation and avoidance is quite staggering, frankly. The effects can be felt by all of us. With the $30 paid by Chevron in tax in the 2021 financial year, instead of being able to contribute to paying for doctors or nurses at our hospitals or to vital public infrastructure, we can instead award one lucky taxpayer a few family-size pizzas and maybe even a garlic bread, with Chevron's generous contribution—a significantly more modest meal than the 'double Irish Dutch sandwich' that many global corporate hermits have chowed down to on from time to time. Some may say that some suspected companies haven't utilised that or similar methods, or that they don't utilise strategies like that anymore. Maybe it was a 'sometimes' food, or maybe tax transparency laws across the globe have shamed them into ceasing the practice.

Outside of the minds of the most hard-core free marketeers and libertarians among us, some of those practices utilised by many giants multinationals shock the conscience of those with the ability to understand what they entail. In the broader sense, multinational enterprises hoodwinking our tax system and taxpayers, in general, to the fact that they could pay more tax but will spend millions on lawyers and accountants to avoid paying millions and billions in tax is something the Australian people do not want to see continue, this flagrant disregard for our country.

The passage of this bill through the House is yet another example of the Albanese Labor government following through on an election commitment. Who knew that big multinational companies paying an equitable level of tax, or at least more than they had to, in a given financial year, would be a vote winner? But the problem of complicated tax strategies for large multinational enterprises is not a uniquely Australian problem. It is faced by many countries in the developed world, particularly within the OECD, the Organisation for Economic Co-operation and Development. The OECD has been investigating corporate tax avoidance for several years, given that its member nations comprise over 60 per cent of the world's GDP and three-quarters of global trade. A cooperative approach by member nations on a domestic level can go a long way to curbing the ability of multinational companies to employ many commonly utilised strategies of corporate tax minimisation and tax avoidance that exist today.

This bill is split into two schedules. They neatly bifurcate the means employed to achieve the outcome of getting multinational enterprises to pay their fair share of tax in Australia. Broadly speaking, schedule 1 is focused on the disclosure of subsidiary entities, while schedule 2 is geared toward amending Australia's thin capitalisation rules. It is my hope to get stuck into explaining the nature of each schedule and why these reforms are sorely needed in Australia—and, for that matter, abroad—although, given the complex and voluminous subject matter, this may become a difficult task within the time constraints imposed on us. I'd better get a move on.

Schedule 1 lays the groundwork to impose greater financial reporting obligations for Australian public companies, listed or unlisted, to affirmatively disclose relevant corporate entities in their annual financial reports. If it's passed, the requirement would be for this to commence from this current financial year. This is the first step to addressing the problem. It should not take the release of another 'Panama Papers', 'Pandora Papers', 'Paradise Papers' or a leak from the inside to let governments, both our own and other nations', taxpayers and investors to get insight of a multinational's corporate structure.

Tax transparency is important. It shouldn't take leaks from insiders or corporate whistleblowers to uncover the full story behind how much tax a company pays and the layers upon layers of related corporate entities it has around it in order to shift profits, debt, IP or other intangibles around to avoid paying tax in one or multiple jurisdictions or to muddy the waters, to make investigating their tax affairs manifestly difficult, to downright impossible, to decipher the labyrinthine maze of financial documents that are publicly disclosed. This will provide a great deal of guidance to many about the true nature of how assets, revenue and liabilities move around between branches that, essentially, grow from the same trunk.

Having information like this being the norm can give the public better insights as to how good a corporate citizen and enterprise is within their country. This is useful for governments, investors, institutions, all the way down to individuals who are not particularly sophisticated themselves. Investors across the spectrum have the right to make decisions on ethical choices that a company makes, such as this. It is also a viable tool for the consumer, when there's enough viable market competition, to make a valid judgement call on whether to shop with a competitor, instead of with a corporation that specifically goes out of its way to avoid paying tax in Australia, especially when it is one that has made a concerted effort to do so financial year after financial year.

It isn't fair to Australian companies that do the right thing, especially when they try to compete with global giants that duck and weave around paying tax in Australia. Having a more digestible means of following the money is the right thing to do, no matter who is attempting to read this level of detail about a company, subsidiary companies or trusts that a company may be the trustee of.

The schedule accomplishes these aims through amendments to the Corporations Act to, as I alluded to earlier, create requirements for the disclosure of information by Australian public companies concerning subsidiaries in the form of a statesmen that is disclosed in a manner similar to others at the end of the financial year. This statement would include the names of relevant entities; the type of entity, meaning whether it's a body corporate, partnership or trust; their tax residency status; and, in the case of a body corporate, the percentage of ownership by the company releasing the statement.

Schedule 2 of the bill, on the other hand, concerns thin capitalisation. In an ordinary sense, capitalisation refers to the levels of debt to equity or gearing of a business. However, in thin capitalisation—schedule 2 of the bill affects this practice—a highly leveraged business utilises this to, in large part, minimise their profits by way of debt which is owed to often closely associated corporate entities to the business through interest payments on the debt that's parked on their balance sheet. The multitude of amendments further bolster the current rules that are in place within division 820 of the Income Tax Assessment Act. If they were working as desired, we would not be here right now. It is common practice among jurisdictions across the globe, but Australia, along with many others, are moving to place limitations on this practice. The bill's explanatory memorandum approximates that 2½ thousand taxpayers have potential to fall under the scope of the changes set out in schedule 2. Quite notably, the changes alter the approach for calculating the permissible limits from being a 1.5-to-one debt-to-equity ratio to instead cap interest deduction in the given financial year to 30 per cent EBITDA, meanings the earnings before interest, tax, depreciation and amortisation.

The rule changes do allow for a degree of flexibility and choice for entities, given the ultimate goal is to deter and prevent cynical arrangements that appear to have little commercial justification other than tax minimisation. The process, largely aided by consultations on this legislation, aims to reduce the potential for unintended consequences that may occur if the applicable rules were rigid and agnostic to the type of commercial activities a business is involved in, as an example. This is evidenced by the exclusion of related party debt from consideration which was aimed particularly at not adversely affecting the legitimate incurring of debt which aids property and infrastructure investment. I would actively encourage all members to pick up a copy of the explanatory memorandum for a more thorough explanation of the voluminous provisions contained not just in schedule 2 but across the bill in its entirety.

On a concluding note, I would observe the contribution made by the member of Hume, the shadowy Treasurer, in this place yesterday evening. The member for Hume came into this place parroting tired old lines that are quite easily refuted. You can always count on the member for Hume to supply his own hot take on economics or financial reports. He talks about productivity falling by 4.6 per cent, and he did so again reflexively during the debate on this bill last night, yet he continues to ignore that the weakest quarter was almost solely presided over by the Morrison government. You can call him naive for not knowing these things—or worse, if he was aware of this inconvenient truth. I will let us all reflect silently on which side of the coin the truth might land on. If he doesn't like where an argument is going, he will find some statistics to misdirect the room like someone playing economic three-card monte at a street corner. If doesn't like the numbers, he will thump his chest and argue louder as if to shield the audience from hearing the words he is using. If the argument isn't on his side and the numbers aren't on his side, as the City of Sydney is all too aware, there is always PDF editor. One can always count on the member for Hume to make you wonder what he can count on, what is party room can count on him for and, lastly, whether he can count at all.

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