Peter Khalil (Wills, Australian Labor Party) Share this | Hansard source

You know, Deputy Speaker Freelander, as we all do here, that most Australians pay their fair share of tax. So why should the biggest multinational companies get away with paying sometimes zero tax in Australia? Did you know that one in three medium and large corporate entities paid zero tax in the last year? That is 782 out of 2,468 large-and-medium-sized corporate entities. In the mining, energy and water sector, more than half the companies paid no income tax. Among those companies, some of them just paid $30 in tax—Chevron was an example of that. In 2021 Google earned more than $7 billion but paid only—wait for it—$85 million in tax. That might sound like a lot but that's an effective tax rate of 1.2 per cent. Facebook, the social media giant, doubled its profits but funnelled nearly $1 billion into local advertising revenue to an international subsidiary, so their total Australian tax bill was $24 million. That's an effective tax rate of 2.4 per cent. Just last year, Aristocrat made $1.229 billion and paid $327 million in tax—a bit higher, an effective tax rate of 26 per cent. But the amount of corporate tax revenue lost annually due to multinationals minimising tax ranges is an estimated $500 billion to $600 billion. It's time they pay up. It's time they pay their fair share as companies that are operating in Australia.

This is an issue I'm clearly passionate about. There's a difference between tax avoidance and tax evasion: tax evasion being illegal and tax avoidance being within the rules—finding ways to get around paying your tax is tax avoidance. Every dollar lost through those attempts and those efforts is money lost to our kids' education, it's money lost to housing, it's money lost to health care, to protecting our natural environment, to looking after older Australians in retirement, and to reducing the cost of child care. I've been speaking about the issue for many years. In this place, when we were in opposition in the last parliament, I called on the former government to take bolder action. It's no surprise they did nothing—absolutely nothing. I wrote a policy paper on this issue back in 2021, laying out some of the ambitious reform ideas of how we could tackle the problem. I was so pleased that when I worked with our then shadow ministers Andrew Leigh and Steven Jones, and the now Treasurer, Jim Chalmers, that they were working on these ideas as well. They understand the fairness question around this, and that these multinationals should pay their fair share. As an executive team, they have done a tremendous job in putting together policies around making multinationals pay their fair share of tax. As a government, as ministers in the government, they are now taking concrete action through this bill. That's a lot more than the former Treasurer Josh Frydenberg did—he did nothing. During the 2022 election campaign, the Albanese government, with all the work that was done by Minister Jones, Jim Chalmers, Andrew Leigh and others, committed to ensuring multinationals pay their fair share of tax, took that to the last election, and now they're delivering on it.

The policies supported by this government are grounded in the OECD G20 inclusive framework on base erosion and profit shifting that began back in 2013. Base erosion and profit shifting, or BEPS, is associated with multinationals exploiting those gaps and mismatches between the tax systems of different countries and jurisdictions, and it affects all countries internationally. They look for the weak spots. In developing countries there is a higher reliance on corporate income tax, which means these countries are impacted more disproportionately from BEPS. Over 135 countries and jurisdictions are working collaboratively in the OECD G20 inclusive framework on BEPS.

This includes implementing actions to tackle tax avoidance, improve the coherence of international tax rules and ensure a more transparent tax environment.

These amendments will introduce new reporting requirements for listed and unlisted companies that require them to disclose their subsidiaries and where they are located, which addresses the risks to the domestic tax base arising from the use of debt deductions as base erosion or profit sharing—the BEPS technique. These measures will help us hold companies accountable and ensure greater transparency. This is about ensuring companies—in particular, large corporate entities—become more transparent about the way they operate, their corporate structures and whether they are operating with opaque tax arrangements and flushing that out, which could be through subsidiaries based in low-tax jurisdictions, which is a classic example or technique that is used.

Without this level of transparency, we will not know whether our tax laws are doing their job and whether they are collecting the fair amount of revenue that they should be. These changes will require companies to disclose this type of information as part of an annual financial reporting, which helps us work in line with other approaches seen globally, such as that which has been adopted in the United Kingdom.

Another amendment will be introduced to strengthen Australia's thin capitalisation rules. This is a revenue raising measure that will help level the playing field for Australian businesses. It will target a known tax planning arrangement by limiting MNEs' debt reductions and ensuring they pay their fair share of tax in Australia. More specifically, the measure will limit an entity's debt related deductions to 30 per cent of profits. This new earnings based test will replace the current safe harbour test. It will allow debt deductions to be denied under the entity level test, which provides smaller entities with earnings volatility and more flexibility, and will allow an entity in a worldwide group to claim debt related deductions up to the level of the group's net interest expense. This new group ratio will replace the worldwide gearing ratio and retain an arm's-length debt test as a substitute test, which will apply only to an entity's external third-party debt, disallowing deductions for related party debt under this test.

That all sounds very complicated, but they are very specific policies that have been worked through to ensure that these multinationals pay their fair share of tax. It's about time because a lot of these companies—not all but a lot of them—are still finding ways to avoid their tax responsibilities in Australia. If you're an ordinary Australian—you're a local Australian business, you're a cafe owner or you've got a small business—you're paying your 30 cents in the dollar or whatever it might be. You can't hide your profits or your revenue if you've got a local cafe in my electorate, in Pasco Vale or Brunswick. You're not hiding your revenue in a subsidiary on Cayman Islands. No cafe owner can do that, can they? They're paying their fair share. The average punter is paying their fair share of tax out of their salaries, out of their wages.

Is it too much to ask that some of the biggest companies in the world pay their fair share of tax in Australia, a country in which they are making a profit? Is it too much to ask that that revenue comes back to the taxpayer? I don't think it is. This bill, these amendments and the work that's been done by our ministers and our government is all about making them pay their fair share. It's about fairness. Australians deserve a government that does everything that it can to make sure that these large companies are paying their fair share. Australians should be able to have confidence in their tax system and the principle that everyone—from individuals and small businesses to those large corporations, both Australian and foreign owned—are contributing and giving back to our society through their tax payments.

Evasion and avoidance are not victimless activities. That's an important point. Every dollar that is lost through tax avoidance tactics that big companies utilise leaves us worse off as a society because that's money that would otherwise be going into a whole range of policies that go to Australians' quality of life. The whole community suffers when some members, whether they be individuals or corporate entities, wrongfully or artfully dodge making their fair contribution.

The other point I'd make is that while activities such as tax avoidance might be technically legal, they undermine the rule of law. They're certainly not in the spirit of the law. The primary purpose of the tax system is that it belongs to, and should benefit, the people of Australia. An activity such as tax avoidance also undermines public trust in government, because it is our responsibility to make sure that there is a level playing field where everyone is paying their fair share regardless of their size. It's about making sure that the tax system is fair for all.

After nine years of the previous coalition government doing absolutely nothing in this space—they couldn't even match some of the OECD initiatives—it is up to us, as a Labor government, to make sure that we're doing everything we can to close these loopholes and to shut down and mitigate these tax avoidance measures that are being utilised and exploited expertly by these multinational companies. It's up to us to instil some fairness back into the system and bring back confidence and trust that as a government we're doing everything we can to level the playing field so that when your average punter, your average cafe owner, who pays their fair share of tax, is doing their taxes at the end of the year—a husband and wife, a small family business or whatever it may be—they can have confidence that the government is ensuring that the big players, the big corporates, are also paying their fair share of tax and not evading that. It's up to our Labor government. That's what we're doing with this bill: taking real action to make those multinational companies truly pay their fair share. I commend the bill to the House and thank the minister for all of his hard work on this policy area.

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