Sam Rae (Hawke, Australian Labor Party) Share this | Hansard source

The challenge of taxing multinationals is not unique to Australia. It's a global issue that requires a coordinated international response. The rise of the digital economy, the increasing mobility of capital and the complex nature of multinational enterprises have outpaced the capacity of traditional tax systems. As a result, governments around the world have found themselves grappling with how to ensure that large corporations pay their fair share of tax.

I'm very proud to say that Australia has been at the forefront of these international efforts. As part of our 2023-24 budget, we announced that Australia would join a group of first movers to implement both a global minimum tax and a domestic minimum tax of 15 per cent. Applicable to multinational enterprises with an annual global revenue of approximately $1.2 billion or more, this tax will ensure that large multinational corporations pay a minimum level of tax on income generated in each jurisdiction where they operate. By cooperating with our international partners to set a floor on corporate tax rates, the Albanese Labor government is reducing the incentive for multinationals to engage in aggressive tax planning and profit shifting. This will not only protect Australia's corporate tax base but also make our country a more attractive place to invest. In a world where capital is increasingly mobile, having a stable and predictable global tax environment is crucial for attracting long-term investment and fostering economic growth.

In addition to a global minimum tax, this legislation—the Taxation (Multinational—Global and Domestic Minimum Tax) Bill 2024 and related bills—also implements a domestic minimum tax which will give Australia additional taxing rights on the low-taxed Australian income of large multinational groups. This is a critical safeguard to ensure that Australia collects revenue from local undertaxed profits.

This is not just about protecting our revenue base; it is also about fairness. It's about ensuring that all businesses—whether large or small, domestic or multinational—contribute their fair share to the society from which they benefit. It's about creating a level playing field where businesses compete on the basis of innovation, efficiency and service, not on their ability to exploit loopholes in a tax system.

These measures form just one component of the Albanese Labor government's strong agenda on multinational tax avoidance. We understand that such a complex issue cannot be tackled with just a single piece of legislation. That's why we have already delivered four separate multinational tax reforms with a further five to come alongside the global and domestic minimum taxes.

One of the key reforms we've already delivered focuses on increasing transparency around corporate structures and tax arrangements. Multinational corporations often operate through a complex web of subsidiaries and affiliates, making it difficult for tax authorities to track where profits are being generated and where they are being taxed. To address this issue, the Albanese government has introduced a new subsidiary disclosure law, which requires public companies to disclose information on their subsidiaries and their country of tax residency. This will shine a light on how companies structure their subsidiaries specifically for tax purposes and will increase transparency on corporate structures and whether they are operating with opaque tax arrangements. This reform is a significant step in our efforts to combat tax avoidance. By requiring companies to disclose this information, we are providing tax authorities with the tools they need to identify aggressive tax-planning strategies and ensure that companies are paying their fair share of tax. At the same time, we're sending a clear message to multinationals that they must operate with transparency and accountability if they wish to do business here in Australia.

Transparency alone is not enough. We must also ensure that companies benefiting from government contracts are contributing their fair share of tax. That's why, as part of the Albanese Labor government's Buy Australian Plan, we've implemented the Fair Go Procurement Framework. This framework requires companies tendering for government contracts valued above $200,000 to disclose their country of tax residency. The Fair Go Procurement Framework is about ensuring that taxpayer dollars are spent on companies that are good corporate citizens. Companies that benefit from government contracts have a responsibility to contribute to the public purse, and this framework ensures that they are meeting that responsibility. It's a remarkably simple principle: if you want to do business with the Australian government, you must pay your fair share of tax.

As part of our broader multinational tax integrity agenda, we are also progressing legislation to create a public country-by-country reporting register. This register will require certain large multinationals to disclose their tax affairs on a country-by-country basis, providing greater transparency as to where they are paying tax and where they are generating profits. In addition to country-by-country reporting, we're also implementing a public register of beneficial ownership. This will require companies to disclose who ultimately owns or controls them, providing further transparency and making it harder for individuals to hide their wealth through complex corporate structures. This reform is a critical tool in the fight against tax evasion, money laundering and other forms of financial crime. By shining a light on who owns and controls companies, we're making it harder for individuals to hide their assets and evade their tax responsibilities. This is about ensuring that everyone, regardless of their wealth or status, pays their fair share of tax here in Australia.

One of the most common strategies used by multinationals to minimise their tax liabilities is thin capitalisation, where companies artificially inflate their interest expenses through related-party debt. This reduces their taxable income here in Australia, allowing them to shift their profits offshore. To address this, we've tightened Australia's thin-capitalisation rules, reducing the ability of multinationals to engage in this practice. These reforms will ensure that interest deductions are more closely aligned with the economic substance of the debt and that multinationals are not able to exploit the system to avoid paying their fair share of tax. Furthermore, as part of our multinational tax integrity agenda, the Albanese Labor government is introducing a new royalty penalty for significant global entities that avoid Australian royalties withholding tax. This penalty will ensure that large multinationals cannot avoid their tax obligations by understating the value of royalty payments or disguising them as some other kind of transaction.

The fight against tax avoidance requires not only strong laws but also remarkably strong enforcement. That's why the Albanese Labor government has increased funding for the ATO's Tax Avoidance Taskforce, extending its operation and increasing its resources to crack down on tax dodging by multinational enterprises, large Australian public and private groups and extremely wealthy individuals. Since its inception, the Tax Avoidance Taskforce has been instrumental in detecting and deterring tax avoidance. It has generated billions of dollars in additional revenue and has sent a strong message to those who seek to evade their tax responsibilities. By providing the ATO with the resources it needs, we're ensuring that the taskforce can continue its vital work and that those who try to cheat the system are held to account.

The economic impact of these reforms cannot be overstated. Economists estimate that close to 40 per cent of multinational profits, which is roughly equivalent to around $900 billion, has shifted to low-tax countries each and every year. This has a devastating impact on the revenue base of countries like ours, where corporate tax comprises a significant portion of our total revenue. The OECD estimates that, by making multinationals pay a minimum effective tax rate of 15 per cent, annual global revenue gains could exceed $300 billion. For Australia, the benefits of these reforms are crystal clear. By ensuring that multinationals pay their fair share of tax, we're protecting our revenue base, levelling the playing field for Australian businesses and ensuring that the benefits of economic activity in Australia are shared more broadly with the Australian people. At the same time, we're positioning Australia as a leader in global tax reform and setting a new standard for transparency, fairness and accountability in the international tax system. I commend the bill to the House.

See this speech in context