Andrew Leigh (Fenner, Australian Labor Party, Assistant Minister for Competition, Charities and Treasury) Share this | Hansard source

The government won't be supporting the member for Wentworth's amendment, as I foreshadowed in my earlier remarks. As I've said, I have a great deal of respect for the member for Wentworth, for her passion for tax reform and for her interest in better policy. This dates back to her first speech to the parliament and her remarks about the importance of a tax system that improves productivity in Australia. I regard her as a member of the highest integrity, somebody who has a keen interest in public policy and in good economic reform.

The government is not supporting this measure because, by removing the proposed debt deduction creation rules from the bill, it would remove an important integrity feature of the bill. This side of the House has a keen commitment to multinational tax integrity. That was represented in the 26 government speakers who spoke in favour of this bill. Twenty-six of my colleagues took the time to prepare and present remarks about the importance of closing multinational tax loopholes. They spoke about the importance of revenue for the communities they serve, of adequate revenue to fund health, education, community services and infrastructure. They spoke about the issue of fairness, about the importance of achieving a level playing field, and they spoke about their frustration, that multinational firms shouldn't get a tax benefit from artificial debt.

The strengthened thin capitalisation rules play an important role in ensuring deductions are directly linked to earnings and legitimate commercial activity. Engineering excessive debt deductions is one of the easiest ways of shifting profits out of Australia and into a low tax jurisdiction. If the member for Wentworth's amendment were carried, it would have the effect of allowing artificial debt deduction creation schemes to continue operating, meaning less tax revenue to fund vital services.

Australia supports the OECD's action plan on base erosion and profit shifting, and these measures are entirely consistent with that OECD work. The government has worked extensively with stakeholders. We have signalled, on the initial tabling of the bill on 22 June 2023, the importance for the government of balancing tax integrity with supporting genuine commercial activity.

As I outlined earlier, that consultation has seen 17 meetings by Treasury, 54 written submissions to the exposure draft. Those who were asked to be public, published on Treasury's website. There has been extensive consultation by the government on this measure, which we took to the last election, having announced it in April 2022. This measure is not being rushed. The consultations haven't been forgotten. We have engaged with stakeholders, with industry, with civil society and with experts.

We understand that there will be multinational firms currently using artificial devices to deduct debts in low tax jurisdictions or via low tax jurisdictions who would prefer not to pay more tax, but if we don't close this loophole then millions of dollars of revenue will be lost. The revenue cost of the member for Wentworth's amendment runs into the millions of dollars. Those millions of dollars will, effectively, have to come out of the pockets of regular Australian taxpayers, of ordinary businesses and households. All will be borne in the form of higher national debt or inferior services.

The government's commitment to multinational tax integrity is steadfast. We do this through our engagement with international partners, which are all moving in the same direction. Let's make no mistake. Right now, there are stakeholders in other countries arguing for a slowdown, but those countries are moving ahead on these important tax integrity measures. Australia should move ahead too with the global consensus on closing multinational tax loopholes.

I thank the opposition for their announcement that they will not be supporting the member for Wentworth's amendment.

Question negatived.

Bill agreed to.

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