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

The Albanese Labor government is committed to ensuring that big multinational corporations that make a profit in Australia pay tax in Australia. This was an election commitment, and I'm happy to speak in support of this necessary reform, the Taxation (Multinational—Global and Domestic Minimum Tax) Bill 2024. It builds on the substantial reforms already implemented by Labor regarding the taxation of large multinational corporations.

Our foundational belief is that tax transparency is a vital part of the social contract that multinationals have with the communities in which they operate and that they profit from. This means insight into decision-making around tax strategies and management of tax obligations, this means shining a light into the dark places of the tax dealings of large multinationals and this means giving the Australian public more information and understanding about how much tax these companies pay in comparison to their profits.

Labor is committed to achieving this transparency through a raft of reforms. We moved to require that both listed and unlisted companies disclose information on their subsidiaries and their country of tax domicile. Again, this will provide a new and welcome level of transparency on how multinationals are structuring their businesses for tax purposes. It will also indicate whether they are operating with opaque tax arrangements. This information will be required in annual financial reports commencing on or after 1 July 2023.

Further transparency is guaranteed with the Buy Australian Plan, under the Fair Go Procurement Framework. Companies tendering in government procurement processes for contracts worth over $200,000 will have to list the jurisdictions where they pay tax. In other words, to win a government contract, these companies need to make it clear that they're paying their fair share of tax. They must be good global citizens. In the October 2023 budget, we directed $200 million a year, for four years, to boost the ATO's Tax Avoidance Taskforce, which is cracking down on tax dodging by multinational corporations as well as domestic entities.

The thin capitalisation rules have curbed the practice of abuse of debt deduction rules. If left unchecked, this can eat away at our tax base and leave Australian individuals and small businesses paying more. The former government did not see this as a problem during their wasted decade in office, but Labor does. One of our election promises was to implement an interest limitation measure. The Labor government has toughened the rules around debt deductions to ensure tax fairness, limiting the ability for taxpayers to create artificial interest-bearing debt in Australia in order to maximise interest related deductions that reduce their tax bill.

This bill focuses on the reality that the taxation of multinational corporations, and the lack of transparency around it, has long been recognised as a global problem. The international corporate tax system is in dire need of reform, a fact recognised by the OECD and G20 nations. Many of the international conventions for corporate income taxation are now outdated. They do not account for digitalisation and globalisation. As the Treasury said:

By using digital technologies, large multinationals increasingly have the ability to operate at 'scale without mass' in countries where they earn significant revenues without needing a traditional physical presence.

These countries are then constrained from collecting corporate tax because traditionally such tax is collected in the country where the employees and assets are based. Additionally, multinationals have been able to move profits around from higher taxing countries to low- or even no-tax jurisdictions. This new business environment has led to threats to the stability of the international tax system. Some countries have introduced a digital service tax, prompting the United States to threaten retaliatory trade action. Other countries have decreased their corporate income tax rates to ensure that multinational companies keep investing in them.

This negatively affects other countries and their ability to tax multinationals, and it also affects domestic businesses. To deal with this, in 2021, 136 nations—90 per cent of global GDP—agreed on what is called the Two-Pillar Solution. This focuses on the allocation of taxing rights to market jurisdictions and the imposition of the global minimum tax rate of 15 per cent. This was subsequently endorsed by G20 leaders. Pillar One focuses on the 'scale without mass' problem and seeks to avoid a situation of escalating trade tariffs due to digital service taxes. Pillar Two is the subject of this bill, a global minimum tax on large multinational corporations. It's not easy to reform the international taxation system, but it's critical that Australia does so. We're doing so with this bill.

Labor is taking a leadership role in instigating this multilateral change to ensure that big corporations pay their fair share. This reform means that these companies will have to pay a minimum level of tax in every jurisdiction where they operate—a big pat on the back for Australia for taking the lead on this. The global minimum tax and domestic minimum tax of 15 per cent will apply to multinational corporations with an annual global revenue of approximately A$1.2 billion.

There are substantial benefits to these reforms—firstly, the tax rate differential between Australia and low-tax countries will be reduced. This will decrease the incentive for corporations to shift profits overseas. Ultimately it will make Australia an investment target and boost our economic growth. Australian businesses will benefit as well, because the reforms will level the playing field when it comes to competing with large multinational corporations. They will adhere to the Global Anti-Base Erosion Rules that were agreed by the OECD Inclusive Framework. This framework encompasses 145 jurisdictions.

A minimum corporate tax rate enables Australia to apply a top-up tax on large multinationals operating in Australia where their income is taxed overseas at a lower rate, and the domestic minimum tax rate enables additional taxing right on the low-taxed Australian income of these companies. The domestic minimum tax is vital to ensure that Australia collects the revenue from these countries rather than other jurisdictions. There are over 50 jurisdictions in the process of implementing the two-pillar solution, so it's crucial that the domestic minimum tax protects Australian interests.

In keeping with the global nature of these reforms, this legislation will be reviewed by the OECD to ensure that it is working as intended and to indicate to other jurisdictions that it is recognised. Other jurisdictions working to implement these reforms are the United Kingdom, Canada, Japan, South Korea and the European Union. These countries all recognise that it is time to address the global divide between sophisticated financial centres and less-developed but resource-rich countries.

There is more to come with this government when it comes to holding multinational corporations accountable. We have introduced a bill to implement a public country-by-country reporting register—a world-leading set of disclosure requirements. We have set the application date of country-by-country reporting to 1 July this year to align it with the European Union's implementation of a similar register. Importantly, it strengthens the global momentum towards transparency and fairer tax arrangements.

This is complemented by our progress towards our election commitment to develop a public register of beneficial ownership. This will provide information on who owns, controls or receives profits from a company operating in Australia. This register will assist regulators and law enforcement agencies with their work on tax evasion, money-laundering and complex financial crime. It is complicated, arduous work, but it will result in fairness for Australia.

This bill, which is receiving broad support, is not the end of the Albanese Labor government's action to make multinational corporations accountable. In May the Treasurer announced moves to ensure a stronger, more streamlined and more transparent approach to foreign investment. Another aspect is strengthening the foreign resident capital gains tax regime to make sure foreign residents pay their fair share of tax too. The May budget also announced a new royalty penalty. This will mean that companies with an annual revenue of $1 billion will attract a penalty if they avoid Australian royalty withholding tax.

All these measures will have a positive effect on the bottom line and they will increase public confidence that the large multinational corporations that operate in Australia are paying what they should be—their fair share. I'm a bit disappointed that the Leader of the Greens spent his entire speech, after saying he would support the legislation, talking about the Labor Party and the Liberal Party. He didn't actually do the hard work of going into the legislation and seeing what it would do. He just had a litany of whingeing rather than looking at this hard, complicated international legislation and how it will have impacts on Australia's businesses and multinational businesses. It was very disappointing that the jeremiad of whingeing from the Greens continues, mainly targeted at Labor people and Labor seats. I obviously call on the opposition to support these reforms and be in step with the global push towards fairer corporate taxation regulation. Much of the work was actually started under the former government—I will acknowledge that. I commend this bill to the House.

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