Graham Perrett (Moreton, Australian Labor Party) Share this | Hansard source

At last year's election Labor clearly outlined how an Albanese government would ensure that multinationals pay their fair share of tax. Australia, with its rich resources, skilled workforce, vibrant economy and legal stability, has been an attractive destination for multinational corporations for many, many decades. They come here seeking to capitalise on opportunities in our domestic market—remember, the 13th biggest economy in the world—and also our international connections.

Labor welcomes foreign investment and recognises the benefits that this investment brings. However, it is essential that we create a level playing field for all businesses operating within our nation.

The current tax system facilitates multinational companies to exploit loopholes and employ aggressive tax planning strategies to shift profits overseas, resulting in minimal tax contributions here in Australia, which can benefit society. Often the mechanism is a sub-office in a cheaper tax jurisdiction entering into an intellectual property leasing arrangement with the Australian joint venture 'partner'. This is an accounting trick for tax minimisation purposes that is not illegal but is definitely immoral and certainly unAustralian.

Corporations should not come here to shelter under our social stability while using legal loopholes to leach extra profits offshore. This practice not only deprives this great southern land of much-needed revenue but also creates an unfair advantage for these large corporations over small and medium-sized Australian enterprises that cannot engage in such dodgy legerdemain. Small businesses in my electorate of Morton are paying their fair share of tax, and we need to make sure that the multinational companies are contributing and paying their fair share as well and not extracting an extra advantage over Australian businesses.

Australians are still shouldering the $1 trillion in public debt racked up by the Abbott-Turnbull-Morrison governments that left the nation with little economic legacy—other than that interest bill. During the Abbott-Turnbull-Morrison years, Australians were losing out on funds that should have been available for vital services like Medicare, aged care, child care and mental care. Australians lost out because multinational companies used tax havens and tax avoidance schemes to avoid paying their fair share of tax in Australia. We even had PricewaterhouseCoopers, PwC, using information gained through government contracts—they were engaged by the government—to help companies exploit the loopholes that they were actually contracted to help stop, putting private greed before public good. I hope the people who decided to do that will pay and pay dearly.

That is why the Albanese government will mirror global developments on multinational tax through a responsible and measured multinational tax integrity package that will close tax loopholes and improve transparency. This government understands that businesses of all sizes make important contributions to the economy, and we want to see that continue. This legislation is simply about levelling the playing field for Australian businesses and increasing transparency in our taxation system.

Schedule 1 of the Treasury Laws Amendment (Making Multinationals Pay Their Fair Share—Integrity and Transparency) Bill relates to the disclosure of subsidiaries, as well as introducing new reporting requirements for Australian public companies, both listed and unlisted, to disclose information on the number of subsidiaries they have and their country of tax domicile. This will assist in holding companies to account, particularly those large corporations that engage in dodgy practices. It will require them to be more transparent about their corporate structures and whether they are operating with some sort of questionable tax arrangements, such as through foreign subsidiaries in low-tax jurisdictions.

Tax havens aren't just a tax dodge; they're dodgy in other ways, too. Tax havens are favoured by drug runners, extortionists, terrorists and money launderers. Firms that use tax havens are rubbing shoulders with some of the world's most unsavoury characters. Yet there are plenty of firms content to play this game. According to one estimate, one-tenth of global GDP—around $12 trillion—is currently stashed away in tax havens. When multinationals exploit tax lurks, ordinary taxpayers end up footing the bill. A firefighter can't ask to be paid using a shell company in Bermuda. The local cafe operator can't route their coffee orders through the Cayman Islands. Across Australia, employers and firms are working hard and doing the right thing and often proudly paying their fair share.

Most people don't begrudge others for their success, but they expect to compete on a level playing field. How can a small Australian technology start-up take on the global giants if it has to pay a higher rate of tax than they do? You don't have to look far to find the fingerprints of tax havens. When you cast your eye over recent registers of the foreign ownership of agricultural land in Australia, you will initially see a list of companies that you would expect. The five biggest owners of farmland in Australia are Britain, the United States, the Netherlands, Canada and China.

Surprisingly, in sixth place comes the Bahamas. An island inhabited by a few hundred thousand people with income levels that sit at about half of Australia's is the sixth-largest foreign owner of Australian farming land. It doesn't make much sense until you realise that the Bahamas has no company tax and no income tax and appears on most people's lists of tax havens. And there are other examples. We need to know who is using the Bahamas and other tax havens to dodge paying tax from profits made in Australia.

Using the information that will be collected, the government can ensure better economic analysis can be used to inform whether current taxation laws are functioning as intended—paying your fair share—and collecting the amount of revenue that the Australian people are owed. The consequences of ignoring multinational tax avoidance are clear. Somebody has to pay for schools, hospitals, national security and transport networks. When powerful interests miss their turn, everyone else—everyday Australians—ends up paying more. That means teachers and nurses and amboes and child-care workers and fruit pickers will all pay more. Like Robin Hood in reverse, multinational tax-dodging hurts those who can least afford it. Companies will be required to disclose this information when completing and releasing their annual financial report, which will help to limit compliance issues and burdens.

This is not a new concept. In fact, a number of other countries around the world have similar measures already in place. This bill would simply bring Australia into line with international approaches such as that of the United Kingdom. This section of the bill was carefully constructed with stakeholder feedback—obviously not the tax avoidance people and not totally relying on PwC—and is a huge step in the right direction towards ensuring that we increase tax transparency. It complements the ongoing work being done by the Albanese government to make multinationals pay their fair share.

Schedule 2 of the bill relates to thin capitalisation, a topic that I know gets most Australians excited. It is a new revenue-raising scheme that targets a known tax-planning arrangement by limiting multinational companies' debt deductions. This is another change that will ensure that multinational enterprises operating in Australia are paying their fair share of tax and that we are levelling the playing field for Australian businesses. Under these new limits, a multinational company's debt deductions would be limited to 30 per cent of profits using the EBITDA test, which is earnings before interest, taxes, depreciation and amortisation. This test will replace the currently used safe harbour test. However, in order to provide more flexibility for smaller entities with earning volatility, debt deductions denied under the EBITDA test where the interest expense amount exceeds the 30 per cent ratio limit will be able to be carried forward and claimed in subsequent income years. This measure will also retain the arms-length debt test as a substitute test which will be applied to an entity's third-party debt, disallowing deductions for the related party's debt. Adjusting to an earnings based approach to debt deductions will ensure that deductions are tied directly to the entity's economic activity and earnings. This is a more robust approach that ensures tax planning practices of multinationals are properly regulated.

The OECD has led global efforts to address tax integrity risks and limit multinational companies' adjustment of their debt levels and use of related party borrowings to minimise the amount of tax they pay. Most OECD countries, including the United Kingdom, the United States and most of the European Union, have already implemented similar earnings based interest-limitation rules. The proposed thin capitalisation amendments will simply bring Australia into line with our international counterparts. The Albanese government has held extensive consultation with different sectors. While some will have slight exemptions from the new rules, these sectors should be subject to the new interest limitation rules, as they can give rise to a base erosion risk.

By introducing this bill, the Albanese government are keeping our promise to make multinationals pay their fair share. We called on the Abbott, Turnbull and Morrison governments to make these changes to multinational tax laws. Instead, they chose to chase welfare recipients to pay back incorrectly calculated and illegal debts. We're all paying the price for that, including some who've lost their lives. The Labor Party have a history of calling out injustice when we see it and legislating to stop it when we get elected. Making multinationals pay their fair share is a prime example of why Labor governments really do make a difference. This bill means more money for our hospitals, our schools, our crucial infrastructure projects and our environment, and I commend the bill to the House.

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