Josh Burns (Macnamara, Australian Labor Party) Share this | Hansard source

I'm very pleased to rise to speak on the Treasury Laws Amendment (Making Multinationals Pay Their Fair Share—Integrity and Transparency) Bill 2023. This bill is an important bill, because across my electorate we have thousands of hardworking Australians going to work every single day and paying their fair share of tax—thousands of people who turn up to contribute to our nation's economy, who get up and go to their workplaces and contribute tax in the Australian system. We also have hundreds of small businesses in my electorate—businesses that make our local community what it is, businesses that give us so much character and depth as well as provide services to our local community.

The thing is, the individuals who work in my local community and right across the country, as well as the small businesses that I am so proud to represent in Macnamara and the small businesses right across the country, don't have the ability to put millions of dollars into their own tax teams, to get their own tax advice. They don't have millions of dollars to seek ways in which they can minimise their tax payments as a corporation or as an entity as a whole. They just have to pay their tax. So, this bill seeks to level the playing field. This bill seeks to say that if you're a small business or an individual paying your fair share of tax in this country then the multinational enterprises, who contribute to our society and who play an important role, should also pay their fair share of tax. This bill is about making it more transparent so that those multinational enterprises are put on a level playing field to those small businesses and to the individuals who pay their fair share of tax in this country.

The bill introduces new rules to protect the integrity of the Australian tax system and improve transparency. It will help ensure a fairer and more sustainable tax system. In recent years we have witnessed an alarming trend whereby corporations have exploited loopholes and engaged in tax planning to avoid paying their fair share of taxes. This not only erodes public trust but also puts an undue burden on the hardworking taxpayers I've been speaking about in this contribution. It undercuts the funding required for the essential public services that people all around the country rely on.

This is particularly unacceptable at a time when Australians are facing pressures around the cost of living. Inflation has been hurting Australian families and Australian workers. And while inflation is easing, thanks to the fiscal responsibility of the government as well as the hard work of the Australian people, I know that many people in my electorate are still finding the cost-of-living pressures real, are still finding day-to-day expenses extremely difficult to manage. So, it's only fair that, when small businesses that struggled through the COVID pandemic are now facing rising costs for a range of reasons due to inflation, much of which has nothing to do with the Australian economy but overseas international pressures, multinational enterprises pay their fair share of tax so that individuals who are feeling the cost-of-living pressures are not put under undue pressure to fill the gaps and to fund the programs that we all rely on and that it is a more equal and fair system, where the multinationals also pay their fair share of tax. I think it's important to be clear on this point: this bill is not an anti-business bill. On the contrary, this bill is about saying to the small businesses that don't have the capacity to fund millions of dollars worth of tax advice that they should be on a level playing field with some of the big multinationals who can afford to have teams and teams of people working to minimise their tax liabilities.

I represent an electorate where prosperity is built on successful small and medium businesses, where many people hold shares in large corporations. I want to see a strong corporate sector making profits, paying dividends to our local investors, but I also want to see those corporations paying their fair share and making sure they are taking part and carrying their fair share of the tax burden.

This is very much in the interests of the corporate sector itself. Many corporate leaders that I speak to understand this perfectly well.

This bill seeks to tackle the problem of corporate tax avoidance head-on. It is designed to restore integrity and transparency in our tax system and to hold multinational corporations accountable for their tax obligations. At its core, this legislation aims to close loopholes that have allowed some companies to shift profits to artificially low tax jurisdictions, thereby reducing tax liabilities in the countries where they actually operate and generate substantial revenue, like Australia.

Many investigations in recent years have identified methods by which multinational corporations evade their tax responsibilities. In 2014, the Australian Financial Review reported on a number of Australian companies avoiding tax by way of secret tax deals in Luxembourg, negotiated by the accounting firm PwC. The article identified hybrid debt structures, total swap returns, royalty payments and intra-group loans to reduce taxes. The ability to move profits around the world purely by paperwork, in return for what seems to be a minor fee to Luxembourg, is a recurrent feature in the subsequently leaked tax agreements. We regularly see reports about the number of corporations who pay little or no tax in Australia. There are sometimes legitimate reasons why a corporation will have no tax liability in a given year. But the broader picture shows that, in many cases, corporations have deliberately arranged their affairs so as to minimise their tax responsibility in Australia. This has to change because it's unfair. Government has a responsibility to address this harmful practice that undermines the government's ability to fund essential services. Miners, oil and gas producers and technology companies are among the multinational companies the government is targeting through the proposed legislation.

I'll step through some of the specifics of the bill and their implications. The first schedule is multinational tax transparency: the disclosure of subsidiaries and transparency and accountability. This schedule targets Australian public companies, listed and unlisted, requiring them to disclose their subsidiaries and locations. By doing so, this measure will hold large corporate groups accountable and promote transparency in their corporate structures. It will enable us to identify any opaque arrangements involving subsidiaries located in low-tax jurisdictions, helping us ensure that companies pay their fair share of taxes.

The second part is informed economic analysis. The disclosure, as I've just outlined, of subsidiary information will provide valuable data for economic analysis. This data will aid in understanding whether our tax laws are functioning as intended and collect the appropriate amount of revenue from multinational enterprises.

The third point is a really important point. This is a battle that we can't fight alone in Australia. We need to align ourselves with our international partners. The proposed disclosure requirements align with international approaches to tax transparency. The United Kingdom has had a similar measure in place for some time now. This will make our legislation consistent with global efforts to promote tax fairness. By integrating this information into annual financial reports, we aim to reduce compliance burdens for companies but we will also, at the same time, want to enhance transparency.

Schedule 2 revolves around thin capitalisation. This is about levelling the playing field. It's a revenue raising measure designed to ensure that MNEs pay their share of taxes in Australia by limiting debt deductions. We aim to create a level playing field for Australian businesses, preventing tax avoidance practices. By increasing the tax liabilities for multinational enterprises we are levelling the playing field for the small businesses and individuals who are paying their fair share of tax. We shouldn't—and I repeat—have a situation where small businesses who can't afford millions of dollars' worth of expertise to minimise their tax liabilities being disadvantaged by those companies that can. The new earnings based test is a schedule where rules will limit an entity's debt related deductions to 30 per cent of profits.

This is about making sure that businesses are unable to find these sorts of loopholes, where they just continually create deductions when they should be paying tax. This new earnings based approach ensures that deductions align with the entity's economic activity, and it will be a robust solution to address tax planning practices of multinational enterprises.

Finally, let me re-stress this point: this is about international best practice. Most OECD countries have already implemented earnings-based interest-limitations rules, including in the United Kingdom, the United States and much of the European Union. This will bring us in line with international efforts to address tax integrity risks. We need to close the loopholes so that businesses aren't looking for the lowest common denominator. We need to make sure—and we are working with our international partners, especially in the OECD—that businesses know that wherever they turn there is going to be a fair and equitable tax arrangement. Australia must do its part, and this bill contributes to that important principle.

I think it's important to note that the drafting of this bill involved extensive and meaningful consultation with key stakeholders across the economy. In August 2022 and in April 2023 we engaged with various representatives from the business community, tax experts, industry associations, advocacy groups, unions and many others to gather insights, perspectives and feedback. These consultations proved invaluable in shaping the bill's provisions and in ensuring that it strikes the right balance between tax transparency and protecting the integrity of the Australian tax system, while considering the diverse needs and concerns of all stakeholders involved. By collaborating with key stakeholders, we have built a comprehensive and well-informed piece of legislation that reflects the collective aspiration for a fairer and more sustainable tax system in Australia.

In conclusion, this bill is a necessary step towards building a fairer, more transparent and sustainable tax system. By supporting this bill, we are sending a powerful message that Australia is committed to ensuring that multinational enterprises pay their fair share and contribute to the prosperity of our nation and the wellbeing of our communities. I am proud of the hardworking people that I am privileged to represent. Each and every day, they go to work and make meaningful contributions to their businesses, their organisations and our local community. They come home at the end of the day and pay their fair share of tax. We have some incredible small- and medium-sized businesses that operate in my electorate, full of people who are smart, hardworking and, like those individuals, pay their fair share.

It is not acceptable that we have a situation in this country where large corporations who can afford to find these loopholes and who can afford to minimise their tax contributions are free to do so. We need a situation in Australia where our tax arrangements are fair and equitable across all different corporations. This bill is an important step in making Australia an international partner with our like-minded countries, in making our tax arrangements fairer and in creating more revenue to provide the essential services that our hardworking Australian businesses and community rely on. I commend this bill to the House.

Debate adjourned.

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