Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

It is rare for us to oppose a bill such as this, the Tax Laws Amendment (Countering Tax Avoidance and Multinational Profit Shifting) Bill 2013, because it is meant to be a matter that goes to the integrity of the tax system. However, if we were to be in a position where we could witness the dying days of the Whitlam government prior to its dismissal, but without the dismissal, then we would be witnessing it now because this government is lurching from announcement to announcement, completely disregarding process along the way. It is a real test for the Independents as to whether they are going to agree to a process where Australians face a more aggressive and empowered Taxation Office without having any public hearing into the Taxation Office or holding any public servant to account for the additional powers that are going to be given to them by this parliament. I find it extraordinary. I do not know what the government's motivation is—I seriously do not.

The House Standing Committee on Economics was not afforded the opportunity to have a public hearing into this legislation. The government used its own numbers on the committee, including the vote of the now independent member for Dobell, Mr Craig Thomson, to prevent a feasible hearing date from being set. I thought, when the deal was done between the Independents and the Labor Party, that we were going to have this grand era of transparency and accountability, that the sunshine was going to come in, so that everyone could see what was happening in the bowels of this chamber and in the bowels of this parliament. Yet the government—I suppose the Independents will vote with this; I would hope they do not, but I suppose they will—will try to roll this massive additional power for the tax office through the parliament without any scrutiny, treating the House of Representatives with utter contempt.

If the government and the Independents choose to do that, so be it. But, if there is a change of government, let's not have them come whingeing to us about the treatment they may get in the future or have them lecture us about how the parliament was treated in the past. I do not want to hear them whinge about it—because this will be one of the signature examples used. I am not really interested in the denial of democracy by the Labor Party, because it is a consistent theme, but denying a parliamentary committee from simply having a hearing on what was previously a noncontroversial bill makes it a controversial bill.

So the coalition are going to oppose this bill and we call on the Independents to join with us in opposing this bill until such time as this House has the opportunity to see whether there is justification for the Australian Taxation Office to have a massive increase in its powers and to see how the Australian Taxation Office justifies claiming that, with these additional powers, it will achieve a billion dollars of extra revenue. A billion dollars of extra revenue: that is what they are claiming. 'No problem. Give us these extra enormous powers and don't worry; we'll claim an extra billion dollars of revenue.'

With all the integrity measures over previous years, where did that revenue come from? You ask for a tightening up of this law, you ask for new prosecutorial powers, you ask for all this additional influence, so prove to us—whether it was under the Liberal Party or under Labor—that with the additional powers you actually did improve the integrity of the system and increase revenue.

Schedule 1 to the bill seeks to amend the general anti-avoidance provisions in the 1936 Income Tax Act—provisions that are commonly referred to as part IVA. Former Treasurer John Howard was responsible for inserting part IVA into the tax act. Part IVA applied to schemes that were entered into after 27 May 1981. When introducing part IVA, John Howard said:

The proposed provisions seek to give effect to a policy that such measures ought to strike down blatant, artificial or contrived arrangements, but not cast unnecessary inhibitions on normal commercial transactions by which taxpayers legitimately take advantage of opportunities available for the arrangement of their affairs.

In 2000, when introducing the GST, the coalition included division 165 in the legislation, a general anti-avoidance rule. Division 165 resembles part IVA in many aspects, although of course it is dealing with a transaction based tax, rather than a tax on a profit or income earned over a period.

We have consistently demonstrated that we are firmly opposed to tax avoidance behaviour. We firmly support the need for a strong set of provisions that deter abusive tax arrangements. The legislature—

Mr Bradbury interjecting—

If the Assistant Treasurer wants to intervene again, he can get up here and explain how his good mate Eddie Obeid got away with shuffling money between trusts. Is that what you want to do, keep interrupting me, Sunshine? We know how close you were to Eddie Obeid.

Darren Cheeseman (Corangamite, Australian Labor Party) Share this | Link to this | Hansard source

Order! If the member for North Sydney has imputations of the nature that he has just made that he wishes to make, there is an appropriate avenue available to him under the standing orders. He should use that.

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

It is okay, mate. If you give me a lecture across the table on integrity, I will give you a lecture about your relationship with Eddie Obeid. We must not countenance a change—

David Bradbury (Lindsay, Australian Labor Party, Assistant Treasurer ) Share this | Link to this | Hansard source

I rise on a point of order on relevance.

Darren Cheeseman (Corangamite, Australian Labor Party) Share this | Link to this | Hansard source

The matter being raised is of no relevance to the debate. I draw your attention to the fact that the bill that we have before us relates to countering tax avoidance and multinational profit shifting. The member should direct his attention and his comments to that.

Mrs Bronwyn Bishop (Mackellar, Liberal Party, Shadow Minister for Seniors) Share this | Link to this | Hansard source

On that point of order, there was no real point of order raised by the minister across the table. The fact of the matter is that this bill is about tax avoidance and Mr Obeid is involved in some of those issues. It is very relevant.

Darren Cheeseman (Corangamite, Australian Labor Party) Share this | Link to this | Hansard source

I believe that these matters are before relevant tribunals. I will get advice from the clerk as to whether these matters ought to be left before those tribunals as opposed to being raised in this chamber. I have sought advice from the clerk. It is my intention to ask all members participating in this debate to remain relevant to the particular bill before us. If we could have cooperation on that, that would be appreciated.

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

I would ask you, Deputy Speaker, to support me in that regard. We are focused on the concerns expressed by a number of individuals and corporations about whether the ATO is properly using its powers in relation to deterring abusive tax arrangements. In the Australian Financial Review this year, an article said that draft change to part IVA, on which the amendments in this bill are closely based, would 'determine whether a company is guilty of avoiding tax by looking at how else it could have done a deal if tax implications were not considered'. There is an extraordinarily large disconnect between the way in which business is properly conducted and the way in which the government, the Treasury and the Australian Taxation Office would require business to be conducted.

To taxpayers, profit after tax is a crucial metric. Suggesting otherwise introduces a sense of artificiality, even unreality. This point was made by the Corporate Tax Association, which said:

The reality is that business and individuals operate in an after-tax world, and from a practical and corporate governance perspective, it would be highly problematical to ask board members to put their minds to what the company would have done in the highly artificial world where tax is assumed not to matter.

Similarly, the Law Council of Australia observed 'Ordinary taxpayers, small business and large corporations will be required to assess their tax obligations by reference to the tax which would have been paid if they had done something that in reality they never would have done.' This bill is going to overlay complexity and compliance costs onto normal commercial transactions, whether business transactions, new investments or corporate restructures.

We really must start this debate by asking whether these amendments are required at all. Submissions to the Economics Committee from pre-eminent professional and industry groups whose members have deep expertise in taxation law argue that these amendments are just not necessary. For example, the Corporate Tax Association states:

… we have consistently maintained that the proposed changes represent an over-reaction to the Taxation Office losing a number of court decisions that have quite limited application.

CPA Australia made a related submission:

… we believe that the proposed amendments to Part IVA contained in Schedule 1 of the Bill are confusing and deficient and do not result in an anti-avoidance regime which is comprehensible to tax practitioners let alone the broader community.

From the Tax Institute:

The Courts have applied the current rules appropriately to find that a tax benefit exists in only those cases where the taxpayer's actions have resulted in a loss to revenue. Recent cases have not resulted in the effectiveness of Part IVA being compromised and as such the amendments in the Bill are an unnecessary overreaction.

I repeat: an unnecessary overreaction. More red tape for business—when is it ever going to stop? More compliance costs for business—when is it ever going to stop? I only wish the Labor Party would have the same tough structure for itself that it is trying to apply to people who work hard and earn a buck—the same corporate government procedure in itself and within the Labor Party, particularly New South Wales and particularly the New South Wales Right. I wish they would do that instead of just applying to everyone else a higher standard than they are prepared to apply to themselves.

Stephen Jones (Throsby, Australian Labor Party) Share this | Link to this | Hansard source

Whilst the member for North Sydney is making some devastating points, which I would probably agree with in another forum, I fail to see how they are relevant to the legislation before the chair. I would be quite happy to join with the member for North Sydney in this discussion somewhere else, but not on this legislation before this parliament at this point in time.

Darren Cheeseman (Corangamite, Australian Labor Party) Share this | Link to this | Hansard source

Order! I would ask the member for North Sydney to remain relevant to the bill.

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

I do wonder how Treasury determined that schedule 1 to this bill 'is expected to prevent the loss of over $1 billion a year'. It is a nice round number: a billion dollars. It has a whiff of convenience to it, don't you think? We were of course denied an opportunity to ask Treasury officials for an explanation. The government controlled committee did not hold a hearing. The Treasury later put in an undated submission just before the bill came into this place. So it looks as though a government that does not want to be held to public hearings in relation to one of its bills has something to hide. They are doing it on the media, they are doing it on so many things, just like in the dying days of the Whitlam government. It is just a repeat. Everything has a political agenda.

I welcome integrity measures, especially when it comes to taxation. The fact that they do not want to have hearings suggests to me that there is another agenda. The coalition will vigorously pursue these matters in the Senate committee inquiry into the bill. So we are going to try in the Senate, and if the Greens are true to their word they will support a full inquiry in the Senate.

Building up the jurisprudence around fundamental parts of a taxation system can take many years. It was 13 years before the High Court delivered its first judgement on part IVA, in the Peabody case. If the amendments to be made by schedule 1 are passed then there will be a period, probably extending over a number of years, before there is a settled judicial view as to their correct application. Uncertainty is the enemy of investor confidence, of business confidence and of consumer confidence.

Even for the experts these amendments are not easy to interpret, and their application is not predictable. Last year the Inspector General of Taxation reviewed the ATO's management of litigation and found that the ATO's success rate before the courts was 56 per cent in 2009-10, 47 per cent the year after and 45 per cent to May the year after that.

The Joint Committee of Public Accounts and Audit also had questions for the ATO regarding their litigation success rate—that is, the actual litigation. I do not think that includes all the assessments the ATO issues and then intimidates people into settling. The commissioner acknowledged—the previous commissioner, I would imagine—to the JCPAA that the ATO success rate was still very positive in terms of numbers. But he had concerns about the court's approach to the general anti-avoidance provisions. So it was all the fault of the courts.

The inspector general went on to note that some industry stakeholders held the view that the reason for the ATO's losses on general anti-avoidance-rule cases may be due to the ATO's poor case selection of matters they considered appropriate to litigate. Stakeholders also informed the inspector general that they had concerns about whether officers internal to the organisation could objectively review the facts and evidence in a case to determine, independently of the compliance section, whether the matter should be settled, defended or appealed.

This is a matter that I have raised on previous occasions, and I sense that a lack of objectivity in decision making inside the ATO is starting to have a significant impact on tax policy. The poor decisions about which cases to litigate, which have led to losses in court, are now driving the government's legislative agenda. And unfortunately there will be a cost imposed on a large number of taxpayers who must comply with a new general anti-avoidance rule.

I cannot fathom how the Treasurer can possibly justify the statement in the explanatory memorandum to this bill that the compliance-cost impact of the amendment will be low. Where do they get this from? The Law Council do not agree. They see the schedule as thrusting additional costs onto taxpayers—red tape:

The consequence of legislating this Bill will be to create significant difficulties, for ordinary taxpayers, small businesses and large corporations (both Australian and foreign) in understanding their tax obligations.

Who says it is low? On what basis do they say that the regulatory impact is low? Who writes this? And where is their accountability? How much have they consulted with businesses big and small, who are drowning under red tape? Yet the suggestion is that the regulatory impact is low.

Justice Pagone of the Supreme Court of Victoria, an author of a leading work about part IVA, has explained how onerous a new approach to the general anti-avoidance rule would be for taxpayers, since the onus of proof rests on them:

The question about what needs to be established arises in the context of the legal burden of proof falling upon the taxpayer to disprove what would have happened or might reasonably have been expected if the scheme had not been entered into or carried out. …

The ability of the Commissioner to rely upon something which did not happen, would not have happened, but which nonetheless might reasonably be expected to happen, may be difficult for taxpayers to disprove.

Do you reckon? Does the Assistant Treasurer understand this legislation? Can he get his mind around it? This is saying that business needs to start to model every alternative use, every alternative tax scenario, before it actually goes down this path—don't just get on with the job of doing your business but consider this impact on your business if you went down a different path, and prepare yourself. And the advice is that the regulatory impact is low.

Finally, the amendments' proposed starting date of 16 November 2012 must be changed. Where did they get 16 November from? This bill is different from the draft version that was released on 16 November last year. The changes made by the bill should not begin before royal assent. This is typical of Labor. They want to regulate yesterday; they introduce the bill now. And they say, 'All this is applying.' What is applying? 'Oh, well, the bill.' What bill? We haven't got a bill. It is like media; the process is no different. You guys are a shambles. But the problem is that the taxpayers are paying the price. This is not the way to govern a country; it is just not. How could anyone plan anything on a bill that has not been passed, has not even been debated and yet is meant to apply from 16 November last year?

I do not know what is going on here. If there is a change of government in September, the mountain of hard work will just get higher and higher to try and get back some certainty, stability and predictability into government. For crying out loud! I have never seen anything like it. I said that this is like the dying days of the Whitlam government. If Gough Whitlam had not been sacked, this is what it would have looked like—exactly this: a shemozzle appealing to every union official; a shemozzle all about protecting the leader. There is no good policy here. It is bad policy. What is more, it is incompetent and malicious.

Schedule 2 of this bill inserts new subdivisions into the Income Tax Assessment Act as well as the Tax Administration Act that the government says will modernise transfer pricing rules. Our transfer pricing rules have been rarely amended and they have largely stood the test of time. Last year, the government sought to make retrospective changes to the transfer pricing law that took effect from 1 July 2004. Typical. The bill sought to retrospectively amend legislation to include transfer pricing articles within Australian tax treaties. It also sought to clarify the interaction between transfer pricing and thin capitalisation rules, which had previously only been dealt with through administrative arrangements.

The coalition opposes retrospective tax changes as a matter of principle. That is why we oppose the bill. How can anyone get on with the job of living their daily life, complying with the law as it stands, when along will come Labor in the future to introduce laws that say they broke the law today? That is why the Liberal Party is, in principle, always going to oppose retrospective changes. We understand that retrospective legislation can change the substance of transactions struck between taxpayers who have made every effort to comply with the prevailing law at the time of the agreement. It can expose taxpayers to penalties in circumstances in which taxpayers could not possibly have taken steps at the earlier time to mitigate the potential for penalties to be imposed. It may change a taxpayer's tax profile, which in turn can materially impact the financial viability of investment decisions and, of course, the pricing of those decisions.

Most importantly, the retrospective application of the change will heighten Australia's level of perceived sovereign risk. 'We have trashed everything else so let's give sovereign risk a go,' says Labor. At the time, the government refused to answer questions around the quantity of revenue at stake. It was only after questioning at Senate budget estimates last year and a subsequent response to a question on notice that the ATO advised that there was $1.9 billion of primary tax in dispute in relation to transfer pricing issues for audits current at the time.

We find ourselves in a very similar position today. We have a bill before the House dealing with significant changes to important legislation that has not been given due process in this parliament and has not been given proper scrutiny. But Labor wants to ram it through. It does not have any regard or respect for taxpayers. That is why we are going to pursue it in the Senate.

The bill before the House seeks to replace the existing transfer pricing rules in division 13 by inserting these into three subdivisions in the Income Tax Act 1997—companies, branches of companies, and trusts and partnerships. It also inserts a subdivision into the Tax Administration Act in relation to record keeping and penalties that may be applied by the commissioner. The amendments within this schedule align with the internationally consistent transfer pricing approaches as set out by the OECD. These amendments apply to both tax treaty and non tax treaty cases. These amendments also contain specific rules relating to transfer pricing documentation.

These new rules are self-executing—that is, taxpayers will now apply the new transfer pricing laws on a self-assessment basis. The commissioner may challenge a taxpayer's calculated tax result, to which the taxpayer may then respond. To the extent that taxpayers may apply these complex rules when they did not previously, an increase in compliance costs is likely.

The complex and costly compliance rules impose a much greater requirement to keep contemporaneous documentation on small and medium business impacted by the de minimis thresholds that apply to the bill—more red tape. The de minimis threshold at which entities need to apply these complex and costly compliance rules at face value appear to be too low relative to the revenue risk. My colleague the member for Dunkley has raised this issue as well. I am not sure if he is speaking on this bill.

Bruce Billson (Dunkley, Liberal Party, Shadow Minister for Small Business, Competition Policy and Consumer Affairs) Share this | Link to this | Hansard source

I am.

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

There is no-one in the Labor Party who has ever worked in a small business, is there?

Bruce Billson (Dunkley, Liberal Party, Shadow Minister for Small Business, Competition Policy and Consumer Affairs) Share this | Link to this | Hansard source

No-one.

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

And they have had quite a few small business ministers in the last five years.

Bruce Billson (Dunkley, Liberal Party, Shadow Minister for Small Business, Competition Policy and Consumer Affairs) Share this | Link to this | Hansard source

Five.

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

Five small business ministers in five years.

Bruce Billson (Dunkley, Liberal Party, Shadow Minister for Small Business, Competition Policy and Consumer Affairs) Share this | Link to this | Hansard source

Four in the last 15 months.

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

Labor has had four small business ministers in the last 15 months.

Stephen Jones (Throsby, Australian Labor Party) Share this | Link to this | Hansard source

I rise on a point of order. While like any member here I enjoy banter between the member for North Sydney and the member for Dunkley, I would ask you to direct the speaker to make his contributions through the chair.

Darren Cheeseman (Corangamite, Australian Labor Party) Share this | Link to this | Hansard source

I ask that the minister direct his comments through the chair and ask him to remain relevant.

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

I am directing my comments through the chair and I am directly relevant. That is why I just talked about the red tape impact on small business. I cannot see how that is not relevant, Mr Deputy Speaker. I am mindful of the fact that the government has made such a mess of this bill and maybe one of the reasons is that it has had five small business ministers in five years and four small business ministers in the last 15 months. That might be related to the fact that hardly anyone in the parliamentary Labor Party has ever worked in small business—hardly anyone. Has anyone in the Labor Party worked in small business? I cannot hear a word. No. They would not know what the red tape burden is. I can tell you what the red tape burden is: it costs money; it costs jobs. Many submissions to the House economics committee inquiry argued that the de minimis threshold should be raised and that doing so would not put revenue at risk. It would result in large savings in compliance cost and reduce complexity, especially for small- to medium-sized enterprises.

We are just asking why the government is so committed to this bill. Why is it so rushed? We are concerned that the design and drafting of this schedule may have been rushed. It requires further testing. That is consistent with the submissions from the Corporate Tax Association, PricewaterhouseCoopers, KPMG and the Tax Institute. For example, on page 7 of its submission to the committee, the Tax Institute said: 'We are concerned that the bill as currently drafted would not yield many of the lauded simplicity and certainty benefits and will increase the compliance burden, especially and disproportionately on small to medium enterprises.' Is anyone listening? These are submissions that are saying that this will mean more red tape for small- and medium-sized business and that you have got it wrong.

We find it difficult to fathom how the financial impact of this schedule is estimated at zero extra tax dollars per year whereas the financial impact of schedule 1, relating to general anti-avoidance provisions, is expected to prevent the loss of over a billion dollars per year. Where does that number come from? It has been plucked out of the air. We have an impressive record in relation to tax simplification. We have an impressive record in relation to tax reduction. But it is the Labor Party that is introducing bills while refusing to facilitate proper scrutiny, and they just keep getting it wrong: exhibit A, the mining tax; exhibit B, the carbon tax; exhibit C, the 27 new or increased taxes Labor has introduced. We will oppose this bill because it is bad legislation and the format in the House is a disaster.

Stephen Jones (Throsby, Australian Labor Party) Share this | Link to this | Hansard source

The role of government is to provide security and services that are needed by the citizens of the country. It is the responsibility of citizens, including corporate citizens, to make a contribution to the provision of those services. Over the last several decades we have seen an increase in demand for local, state and federal governments to provide more services and new areas of services such as the National Disability Insurance Scheme, which every speaker on the legislation in this House has stood up and said they applaud. They said that this Labor government initiative is an important initiative, but they have all expressed concerns about the capacity of successive governments to foot the bill for this to provide education, research and development, and infrastructure and also meet the increasing costs of traditional services in the area of health. Indeed, we have had a raging debate on the funding of health services in this country. It is known that the system we have had in place until recently is unsustainable because the significant increase in health funding costs will far outweigh—in fact, they will swamp—the capacity of any state or territory government to meet those costs under pre-existing arrangements.

So, what we know is that we have to get the revenue side of things right. If the public's demand for the provision of these services remains unabated, we need to get the revenue side of things right. We also need to ensure that we do it in a way that creates the right environment for businesses to invest. And I note that the member for North Sydney, the man who wants to be Treasurer of this country, in his devastating contribution to this debate, dragged out the old chestnut of sovereign risk. What he should have done before raising issues of concern about sovereign risk is pick up a copy of the 2013 World Bank report. These are the sorts of reports one should be looking at in relation to business confidence about investing in this country—the reports of authoritative institutions, such as the 2013 World Bank report on the best countries to do business in. You will note, Mr Deputy Speaker Cheeseman, because I know you are on top of this issue, that the World Bank, in its 2013 report, rated Australia as in the top 10 countries to do business in, out of 185 countries. So, when they wheel out this nonsense week after week about sovereign risk, the only ones who are listening are the Liberal Party cheer squad—certainly not the authoritative reporters on this matter such as the World Bank.

These bills are aimed at ensuring that we close down tax loopholes, and there are two schedules aimed at doing that. It is not surprising—and I make no criticism whatsoever—that there are those organisations who see this as a threat to their tax avoidance mechanisms and regimes. It is quite natural that if an organisation or an individual has profited by minimising their tax through tax avoidance schemes they are going to make a bit of noise when the government and the parliament see it fit to try to close down some of these avoidance mechanisms. That is normal. They will make some noise, they will make some complaints—there is nothing abnormal about that. But it is abnormal to have the man who would be Treasurer of this country, the man dealing with his own fiscal problems at the moment—a $70 billion black hole in his budget costings—get up in this parliament, not five minutes ago, to defend those rules. That is abnormal. You would think that a man who has some fiscal problems of his own would want to look at each and every measure he could to try to close some of these tax loopholes.

Schedule 1 of the bill is aimed at closing those tax loopholes that have been addressed by the minister. Schedule 2, which I would like to address in some detail, goes to transfer pricing. But before I do that I want to address some of the points that the member for North Sydney raised in his devastating address. The crux of his contribution to this debate is that there has not been any consultation and somehow this legislation would have been improved by a public hearing. I want to address both of these issues. First, on the issue of consultation, particularly as it goes to schedule 2 of this bill, there has been extensive consultation on those matters. A discussion paper was released in November 2011. That is nearly 18 months ago. There was a series of large stakeholder meetings to discuss the principles that would form the basis of the legislative framework throughout 2012. There was a month of public consultation after that around draft provisions in November 2012. In December 2012 there was an additional large stakeholder meeting to discuss the details of the draft. The bill has benefited significantly from this consultation process.

I sit on the House Standing Committee on Economics, which this bill was referred to for a public inquiry. We set down a date for a public inquiry, 4 March. All the government members were able to make themselves available to hear evidence from concerned members of the public on 4 March. But where was the member for Moncrieff? Where was the member for Higgins? Where was the member for Wright? They were not available. In a devastating criticism, the shadow Treasurer said the government should have had a public inquiry into this bill and that government members of the economics committee should have made themselves available. He should have picked up the phone and talked to the member for Moncrieff, the member for Higgins and the member for Wright. I presume he has their phone numbers. If there is any blame in this, it should be directed to his own members of the economics committee. We were ready, willing and available to hear evidence in a public inquiry but it was his own side that closed it down. They made themselves unavailable.

This contribution from the member for North Sydney was nothing more than a ginormous bubble of fluff. We hear a lot of contributions like this from the member for North Sydney. He should be directing his devastating critique of this bill to members of his own back bench, because if there was not a public inquiry then the blame lies fairly and squarely on the coalition members of the economics committee; that is where the blame lies.

In his 30-minute tirade we heard nothing from the member for North Sydney on the issue of transfer pricing. This is a very important part of this bill. What is transfer pricing? Transfer pricing is where a transnational corporation has operations in one country, in this case Australia, and operations in another country, and they use their global network as a means of minimising tax by transferring costs and profits from one part of their operation, which may have a tax impost on them, to another part of their operation in another country purely for the purpose of avoiding a tax. It became quite famous over the last 12 months.

There was a lot of public debate about transfer pricing when that global IT company that is familiar to all of us in this place, Google—a company that set itself up with the motto 'do no evil'—was exposed as having engaged in extensive transfer-pricing operations to avoid taxation, including avoiding taxation in this country. They quite rightly were rounded on by leaders right around the world saying that a company that is dedicated to 'doing no evil' really wanted to look at some of its corporate practices.

This bill is addressed at cracking down on transfer pricing. Transfer pricing has sometimes been described as something which is just part and parcel of doing business if you are a transnational corporation. Indeed, the global CEO of Google, Mr Eric Schmidt, said on 13 December, 'Transfer pricing is just a part of capitalism.' I reject that and I call on all members in this place to reject that. It may in some countries be legal but it is certainly not moral. It is not a practice that is without victims. In this country, the victims are the taxpayers who are at threat of having to bear a greater burden of the tax take because companies like Google and other large transnational organisations are avoiding tax in this space, avoiding their responsibility to make contributions towards infrastructure and vital services that are needed in any advanced democratic country such as ours. Through their tax avoidance processes they are effectively shifting the burden of taxation onto other taxpayers. In this respect, I would say states and territories are also victims of this—because if there is less money available through corporate taxation arrangements from these transnational corporations then there is less money available for the Commonwealth to disburse to the states and other entities for the provision of health and education services.

But it is not just taxpayers who bear the burden of this and lose out from transfer pricing; it is also some of our domestic companies who are penalised. If they are not a part of a transnational corporation, there is not a level playing field. They are penalised because they do not have access to transfer pricing loopholes. That means they are paying a proper rate of tax while somebody down the road, a transnational corporation, is cheating. They are getting an unfair advantage in a similar market, so you do not have a level playing field. Costs are imposed, but not borne, by the domestic competitors. So they have an interest. There are many, many Australian companies who are going to welcome this legislation because it will go a long way to addressing some of the loopholes that are available to transnational corporations to transfer costs out of this jurisdiction so the domestic companies are bearing a disproportionate burden of the tax take.

It may not be of interest to everybody in this place, but I know that a lot of people also share the concern, not just as citizens of Australia but as global citizens, that transfer pricing arrangements are also used as a way of denuding treasury coffers, typically those of developing nations, of the vital revenue that is needed to ensure that they can build the health systems, education systems, transport systems and all those robust institutions that are needed for a thriving democracy and a thriving economy in developing countries. Where transnational corporations use these sorts of loopholes to avoid those taxes they are harming everybody. This is not a victimless crime. This is something that affects everybody.

So, instead of hearing long-winded, misguided and, in some cases, downright untrue contributions from the shadow Treasurer, these are the sorts of things we would expect members of the opposition to be focusing their attention on. How can we ensure that we have a level playing field for countries paying tax in this country to ensure that we are not disproportionately levying a tax burden upon wage and salary earners and other taxpayers to the advantage of transnational corporations and to the disadvantage of domestic taxpayers who do not have these sorts of loopholes available to them? These are the sorts of things we should be talking about.

If the member for North Sydney is truly aggrieved about the fact that the economics committee did not hold a public inquiry then he should be hauling the member for Higgins, the member for Wright and the member for Moncrieff into his office right now and saying: 'Where were you? I have just come into the House and embarrassed myself by saying there should've been an economics committee public inquiry into this. I have made a complete and utter goose of myself in the parliament by calling for a public inquiry. I've now discovered that the government members of the economics committee were ready, willing and able to have that inquiry and the only reason that it did not occur is that my own backbenchers were not available, were not doing their job, and would not turn up.' They have severely embarrassed the shadow Treasurer—and they are probably delivering their apology to him right now. I would also call on the shadow Treasurer to come to the House and issue an apology to all members on this side of the House for misleading us.

Bruce Billson (Dunkley, Liberal Party, Shadow Minister for Small Business, Competition Policy and Consumer Affairs) Share this | Link to this | Hansard source

Well, there you have it; there was the defence of this extraordinarily poorly handled legislative process. The member for Throsby has come up with 'the diary defence': the fact that the government has proven itself to be unwilling or incapable of engaging with the many organisations that have made considered and thoughtful submissions on this bill and the fact that it chose one date that did not happen to work for some of the committee members. That's it—the diary defence. It is Labor's only defence to an appalling abuse of parliamentary process, to an uncosted and untested impact on the enterprising Australians who create wealth and opportunity. All we get from the member for Throsby is the diary defence: 'Oh, we would like to have had this conversation, but we chose a date and some people couldn't make it so we abandoned the hearing.' What utter nonsense.

This kind of shambolic, dysfunctional poor excuse for governance that we see under this pathetic Labor government has just been demonstrated writ large here. Here we have substantial changes to tax laws that will impact not just, as the member for Throsby would have you believe, on the evil big end of town involved in all sorts of rorts and the like. This impacts much wider than that. It impacts on SMEs across the country. It is a range of provisions that have not been tested for their justification in terms of the problem they seek to solve, nor for their construct in terms of whether they are effective at all, nor for their calibration. The question is whether this is nothing more than a last-minute election grab for power by a government desperate to look like it is doing something at a time that it presides over the most appalling deterioration in the Commonwealth's finances. It is hard to draw any other conclusion.

I listened carefully and courteously to the member for Throsby. His attack on the very valid points and criticisms and measured remarks of the shadow Treasurer was to say that somehow the coalition is defending rorts. Is everything so base politic to you guys? Does it not matter to you that the public policy formation process should be more inclusive and should value the input of those who live and work with this every day? Or do you just want the headline of the title of this bill? I think that is really what this is about. I do not think government members have turned their mind to any of the actual content of this legislation. No, they are just happy that they have a piece of legislation before the parliament talking about countering tax avoidance and multinational profit shifting and they have not bothered to apprise themselves as to what the actual mechanisms are, or their consequences for enterprises in this country. When will you guys get tired of your constant assault on small business? It is quite remarkable.

I hear a government member interjecting that it is all about multinationals, but perhaps if he could quote himself he might have then recognised the merit of the argument. The submissions provided by tax authorities, by accounting firms and by business advisers one after another pointed to the deficiencies in these provisions as they have been drafted. The fact is that the government has refused to allow an engaging hearing process. The word 'hearing' has as much meaning as question time: you do not get any answers and you do not even get a hearing to be heard and have your concerns addressed and have the arguments weighed against what is being asserted in the documents foisted on this parliament. No, under this Gillard Labor government we do not have that.

It is the same with the government's media reforms. They just jam it through and any tactic will do. And we see this again with this legislation. There have been no opportunities for people who have taken the time to work through this process and engage themselves in this formulation of widely reaching laws. For a start, they just deserve basic courtesies. The Australian business community gets enough of it when the tax office is telling it how it should run its business. It is not that they have done something wrong. It is just a little inconvenient that you are an independent contractor. We insist that you are an employee, because that is easier for us, and we will refuse to give you an ABN because we reckon you are not really an independent contractor. Yet the law is clear. They should apply the law—a novel idea—but no, they have to go the jihad on SMEs.

Here is another example of it. The tax office has not had a great record on some of its cases on anti-avoidance measures. The shadow Treasurer outlined that there is a one-in-two diminishing rate of success. The member for Fraser, having a learned mind, would turn his thinking to just why that success rate is the way it is. Would he immediately think the law is not up to the task or might he actually look at the cases? Might he actually feel that the interpretations being imposed by the tax office are inconsistent with the way the law is drafted? Maybe there was not any anti-avoidance at all. They could have looked at those internal case selections and had some external people look at them, to reality check the cases that they have pursued, rather than self-support each other's assessment within the ATO. If you got a dispassionate assessment of it, then you might get a different outcome. But they say, 'No, we're in and we're going to change the law. Let's change the law.'

This change of the law actually contemplates posing a retrospective tax question: what if this transaction had been done another way? If the tax office want to get into that business, they should go into business and make those judgments. But, in the meantime, they should apply the law—I know that is a novel idea! We have seen how this works in other examples. We saw how this worked under the sober and thoughtful warning of the Inspector-General of Taxation. The member for Fraser might recall that the Inspector-General of Taxation himself was concerned about the way the tax office went about its business.

There was the example of some whistleblowing from a former ATO staff member about formal targets to punch through objections to audit decisions and wave other ones through irrespective of their merits. It was widely reported, but what was of more concern was that late last year the Inspector-General of Taxation's report found that more than 5,800 small businesses had been targeted by the ATO. They were forced into simply paying default tax assessments because they could not afford to fight or correct the ATO's false assertions. There was the institution designed to be fair and consistent in applying the law going after these little guys because they could not push back.

We saw a more of it in MYEFO. Do you know what was extraordinary in MYEFO, Mr Deputy Speaker? I looked through that document to see whether the government would maybe finally get the idea that, after reducing the number of people employed in small business by a quarter of a million over the last five years—despite population growth and your Treasurer saying there has been trend economic growth—there has been a substantial contraction in SMEs. I am hearing all these stories that the information you give only has to be slightly off and the ATO will go after you and how they were so active in insolvencies that they ran out of administrative filing fees and that is why insolvency rates were at record highs.

I looked in MYEFO to see whether there was a little bit of encouragement or support for small businesses. Do you know that the only small-business positive comment in that document was about what the Chinese government was doing to support Chinese small businesses? In MYEFO, the government was comforting itself that the slowdown in the economy in China would not be as great as some had predicted because the Chinese government was doing things to support small business. That was the only positive comment. Do you know what the other mention of small business was in MYEFO? It was the announcement of another $380 million to continue this jihad on small business, knowing that small businesses have no capacity to fight back. The tax office is after you, there is a behemoth in the room and the small businesses—as found by the Inspector-General of Taxation—too often have to pay go-away money.

We see this here in these measures. In schedule 1, under the anti-avoidance provisions, it is quite remarkable because there is a nice round $1 billion dropped on the table. That is what the effect is going to be: a nice, sweet $1 billion. There has been concern raised by any number of eminent organisations, including Certified Practising Accountants Australia, who do terrific analytical, evidence based work on these concerns, the Tax Institute, the Corporate Tax Association of Australia and the Institute of Chartered Accountants in Australia. All of these organisations have said there are some problems with the way in which these provisions operate, because they assume some alternative theory about commercial transactions that are then imputed into the tax thinking and therefore might produce a different outcome.

That is not to say that someone has been behaving motivated by tax mischief or tax opportunity. This is actually: 'Maybe, we could reconstruct this process and see if the transaction could be executed in another way.' That might spit out a different tax outcome. There might be a perfectly legitimate business justification about why the transaction went the way it did. But does that then leave people open to further action of a retrospective nature under these expanded general anti-avoidance provisions? There are has been no effort to calibrate how they deal with anti-avoidance, but they look all the world like they are just dealing with a poor success rate on litigation.

When these bodies seek to get guidance on that and to interact, as happens in a hearing, on the calibration and justification, they get nowhere. There is no opportunity to do that. It was interesting, wasn't it, that even in that truncated, poor excuse for a committee hearing exercise—which has brought great shame onto this parliament—the Treasury's submission was a belated attachment. It was an afterthought. They tried to get behind the policy justification, which should come out of Treasury, to see how the particular instruments are being advocated and crafted in the interests of the tax office's conduct. There is no chance to have that conversation at all. That is what is the great shame about this process.

You then move onto schedule 2, which was quite interesting. You heard the member for Throsby talking about the evils of transfer pricing and what that can do to the tax take in Australia. Do you know that, in the explanatory memorandum, schedule 2 does not raise a dime? Do you not find it the slightest bit interesting that we have got a nice, round $1 billion figure for anti-avoidance but, when it comes to this horrendous evil and the reaching over to the OECD for their work—and it is all sweet—it does not raise a dime, according to the explanatory memorandum? Doesn't that make an interesting conversation?

So powerful are these provisions that they are getting jammed through the parliament because our tax base is at risk. We hear these erudite presentations from government members about transfer pricing—it is eroding tax bases and impeding developing countries for having doctors—and how it is fantastic, but when you look at the detail it does not raise a dime. So what is it?

Andrew Leigh (Fraser, Australian Labor Party) Share this | Link to this | Hansard source

It's protecting revenue.

Bruce Billson (Dunkley, Liberal Party, Shadow Minister for Small Business, Competition Policy and Consumer Affairs) Share this | Link to this | Hansard source

The interjection is that it is protecting revenue. It does not raise a dime, yet so urgent is this potent and powerful measure that the parliament is not afforded the courtesy of a hearing about it. You just have to jam it through. When you look at its impact on small business, submission after submission points to an overriding concern about this legislation creating extraordinary additional compliance costs for taxpayers and also uncertainty about what taxpayers need to do and what they need to do differently to ensure that they are complying with these revised transfer pricing tests.

The government comes in here and talks about the evil of these behemoth multinationals, ignoring the fact that there is no safe harbour for small business. There is no carve-out; there is none of the wisdom reflected in the United Kingdom law. I quote from the ICAA's excellent submission, where they say:

In our view, in a proper balancing of compliance costs against revenue risks, it is essential that some taxpayers are completely carved out of the transfer pricing rules. This is on the basis that below a certain point it is just not cost effective or practical to impose transfer pricing guidelines. The UK has recognised this in its transfer pricing rules which provide that SMEs are exempt from the transfer pricing rules. An SME under this definition is one that has less than 250 employees and either:

We note that this approach of completely carving SME taxpayers out of the transfer pricing rules need not however, prevent the ATO from still being able to gather information—

and use its extraordinary toolkit that is available now—

to address any concerns it has around related party dealings by SMEs.

They make the following point:

… the Institute believes that penalties should not be imposed for any adjustment made under Subdivisions 815-B to 815-E on a SME taxpayer that has made reasonable efforts to comply with the legislation—

should be taken into account. Where has that wise counsel gone? The de minimis thresholds of $10,000 and $20,000 proposed here are far too low to achieve their intended purpose. To go after those behemoths that the government likes to say this is about, why are those thresholds so low? The proposition is to raise the threshold to $5 million to have their intended effect, but then we think, 'This is not supposed to raise a dime.' It is a saviour of budgets. It is the headline the government is after. It is an appalling abuse of parliamentary process and it is just further evidence of this dysfunctional, divided and hopeless government. (Time expired)

Andrew Leigh (Fraser, Australian Labor Party) Share this | Link to this | Hansard source

A strong tax system is fundamental to driving innovation, entrepreneurship and economic growth, because it is only through a strong tax system that we are able to provide the infrastructure that business needs to thrive; it is only through a strong tax system that we are able to fund high-quality education and the research and development we know business depends on. So making sure that we have a strong tax system with good anti-avoidance provisions is a pro-business measure. Those who oppose it—those who say that we ought to have a tax system with loopholes in it—are not pro-business; they are pro-loopholes. They are standing up for those who believe that there ought to be loopholes that those with cunning lawyers can use to avoid paying tax.

This bill puts in place measures that will counter tax avoidance and multinational profit-shifting. It will, as the speaker before me reluctantly acknowledged, protect significant amounts of revenue. Over $1 billion of revenue will be protected by these measures. That is what these measures are about. They are about ensuring that our tax system follows the values that Australians hold dear: the values of equality and fairness; the value of opportunity; the values that say that, just because you can hire the best lawyer in town, you should not be able to get an unfair advantage with our tax code. That is all this bill is about.

If you listen to those opposite, you might think that this bill has been cooked up in a Treasury dungeon somewhere and thrust upon the parliament, but nothing could be further from the truth. Treasury went through a normal public consultation process, as they do with tax reform bills of all types. But beyond that, in the case of this bill, the Assistant Treasurer set up an expert roundtable and Treasury used that expert roundtable extensively. So the views of those affected by these changes have been thoroughly canvassed.

As the member for Throsby acknowledged, there was a willingness on this side of the House to hold a parliamentary inquiry to look into this bill, but when the availability of members was canvassed it was found that, while government members were available in abundance—I cleared the day in my diary—opposition members were nowhere to be seen. So, when the member for Dunkley talks about courtesy, fundamentally the courtesy is of those in the opposition to be willing to attend an inquiry. When we found that there was not a single member of the opposition willing to turn up to this inquiry, we took the view that fundamentally the opposition were not particularly interested in holding a parliamentary inquiry. Had the members for Higgins, Wright and Moncrieff been willing to attend that inquiry, it might well have gone ahead. Had even one of them been willing to attend that inquiry, it might well have gone ahead. But all of them had more pressing concerns. You would not have known that by listening to the member for North Sydney; you would not have known that from listening to the member for Dunkley. For them, this is just a big story about a government conspiracy. But, when it actually comes to making time to hold a parliamentary inquiry, opposition members were unable to do so. Now they have the temerity to turn up in the parliament and attack the government for failing to hold that inquiry. That is just not good enough. If you cannot make yourself available for a parliamentary inquiry, you forego the right to come into this parliament and claim that that inquiry should have gone ahead.

Let me go to some of the measures before speaking about the context in which they are being implemented. These amendments will maintain the effectiveness of the general anti-avoidance rule to counter tax avoidance. The role of part IVA is exposing the substance or reality of what taxpayers have done to the ordinary operation of the tax law. Taxpayers should not be able to avoid the tax consequences of what they have actually done by arguing that they would have done something completely different or nothing at all. They should not, in colloquial language, be able to have their cake and eat it too. In putting together this bill, with consultation with the public and the expert panel, we received legal advice from senior counsel with expertise in part IVA. So this is a balanced response to address problems without interfering with ordinary commercial activities. That is schedule 1.

Schedule 2 deals with multinational profit shifting. It is about bringing Australia's transfer pricing regime into line with OECD best practice. It is one of the reasons we have the OECD. It is not just a rich nation's club headquartered in Paris; it is aimed at sharing best practice, particularly in the area of taxes but also in areas like education and health. Here, we have looked to best practice across OECD countries and we have put in place these reforms to make sure that we do not have the tax base eroded and we do not have profits shifted. In doing that, we will protect a significant amount of revenue.

These powers directly reflect the OECD guidelines. There is not a broad new power. They have what is known as a reconstruction power, an essential feature of a modern transfer pricing regime. The notion behind a 'reconstruction power' is that it helps you tackle an artificial structure, not just an artificial price in an isolated transaction. It is no surprise that there are some who are at the moment using these loopholes and benefiting from the avoidance measures and multinational profit shifting, but they will not be able to do so under this bill. Those of us on this side of the House believe that it is fundamental to a fair go and fundamental to equal treatment of firms that they not be allowed to erode the revenue base in the process. If we are to fund the services that the social sector demands and that I know from my conversations with businesspeople that they are keen to see then we need a strong revenue base. Less tax from one company just means more taxes that have to be paid by other companies and other individuals across the economy.

We know there is a strong demand for infrastructure spending. That is why this government has doubled the road budget and quadrupled the rail budget and spent more on urban public transport than all other governments since Federation combined. But we know there are still calls from business to spend more on infrastructure. Routinely, when business groups survey their members, infrastructure spending stands out as a key priority. Why wouldn't it? We had a period under the Howard government when the pause button was pressed on infrastructure spending and infrastructure decisions were made not based on the national interest but based on sectional political interests. One of my academic papers looked at the Roads to Recovery program. There you could see, even taking into account the population density of an electorate, that coalition electorates were receiving significantly more Roads to Recovery funding than were Labor electorates. That was because, under the coalition, infrastructure spending was too low and was not targeted to the areas most in need and not driven by cost-benefit analyses. That is not true under this government. But in order to maintain strong infrastructure spending we need a strong tax system to back it up.

A lot has been said in this debate about the general issue of tax reform under this government, so let me address directly some of the statements that the shadow Treasurer and the member for Dunkley have made about tax reform under this government. We have a proud record of tax reform. As economists and environmentalists alike have urged, we have put a price on carbon pollution, the most efficient way of addressing dangerous climate change. We have moved from a royalties regime to a profits based mining tax which will make sure that when the world price goes up through luck rather than ingenuity the tax share goes up commensurately. We have put in place an instant asset write-off. We have tripled the tax-free threshold. Those opposite will sometimes ask, 'We had a low-income tax offset there; what do you mean you have tripled the tax-free threshold?' Let me be very clear: what I mean by that is that we have taken one million Australians out of the tax-filing system.

The member for Dunkley likes to talk about reducing red tape. One of the big forms of red tape for low-income Australians is filing an annual tax return. If those opposite were to get into power, they would put the responsibility for filing a tax return back onto a million Australians for no additional revenue and no additional benefit to those individuals. We know from surveys that they take a day a year to file a tax return. So that would be an extra day a year gone for a million Australians were the coalition to come to office.

Bruce Billson (Dunkley, Liberal Party, Shadow Minister for Small Business, Competition Policy and Consumer Affairs) Share this | Link to this | Hansard source

Mr Deputy Speaker, I rise on a point of order. I am enjoying the member for Fraser's contribution, but there are about 4½ minutes left for him to actually deal with the bill before the House. I encourage—

Steve Georganas (Hindmarsh, Australian Labor Party) Share this | Link to this | Hansard source

The member will resume his seat. The member for Fraser will continue.

Andrew Leigh (Fraser, Australian Labor Party) Share this | Link to this | Hansard source

I am addressing directly some of the statements made by the member for North Sydney and the member for Dunkley on the issue of tax reform and the suggestions that have been made that this reform to counter tax avoidance and multinational profit shifting has somehow come out of the blue. It is important to understand the context of tax avoidance and multinational profit-shifting laws. Their broad context is a Labor legacy of tax reform.

We have been committed to good tax reform, guided by the experts. We, for example, followed through with fuel tax reforms that were brought into parliament by Peter Costello in 2003, supported by the opposition right up until the last minute, when they realised they could get some political mileage from backflipping on a Peter Costello reform—extraordinary stuff!

The reason we are committed to this bill to counter tax avoidance and multinational profit shifting is that we realise revenue must be raised as fairly as possible and must be spent as fairly as possible. That is why we have means tested the baby bonus, the private health insurance rebate and family tax payment part B. When the member for North Sydney went to London he talked about 'the age of entitlement'. When he came back to Australia he said that reducing the baby bonus for second and subsequent children was like China's one-child policy.

We need a bill to counter tax avoidance and multinational profit shifting because a strong tax system is essential to a fair society. We have to protect that revenue because if we do not then that means increasing taxes in other places. That is fundamentally the problem that the coalition has in so many of these areas. They are constantly saying that there are taxes they are going to reduce, that there are revenue measures they are going to oppose. The effect is that they now have a $70 billion hole in their costings—not my figure, a figure of the member for Goldstein, subsequently backed in a few days later by the member for North Sydney, who said, 'well, $50 billion, $60 billion, $70 billion', as though there really was not much difference. What is a spare $20 billion between friends? Let me be clear as to the implications.

Luke Simpkins (Cowan, Liberal Party) Share this | Link to this | Hansard source

Where's your surplus?

Andrew Leigh (Fraser, Australian Labor Party) Share this | Link to this | Hansard source

I did look over because I thought briefly that the interjection might be the member for Wright turning up to this debate to explain where he was when we had the parliamentary hearing that was scheduled. But let me continue.

The bill before the House ensures that we protect revenue, because if we do not protect revenue then we get into the problem the coalition find themselves in. The problem the coalition find themselves in is a massive costings gap. That is because, if you are a special interest, the coalition welcomes you with open arms, but, if you are a struggling Australian family, the coalition puts up their hand. They want to cut the schoolkids bonus, which is $410 for primary school children and $820 for secondary school children. They want to take that away. They want to increase taxes on low-income Australians by bringing down the tripling of the tax-free threshold. They want to cut pensions, because they have to do that once they have gotten rid of the carbon price, that most efficient way of dealing with dangerous climate change.

This bill is part of a set of Labor reforms concentrating on making sure our tax system is as fair as possible. On this side of the House we will not be driven by special interest. We will be driven by the Australian national interest. We will be focused, like a laser beam, on the interests of Australians and on making sure our tax system is fair and equitable. (Time expired)

Ed Husic (Chifley, Australian Labor Party) Share this | Link to this | Hansard source

I actually think my colleagues the member for Fraser and the member for Throsby are being too hard, because they need to appreciate that those opposite do have consistency. When it comes to issues of revenue and whether or not the taxation base of this country is being eroded, you have to know that they will not do anything about it. It has been there for decades. They had their little game where they were trying to track down the BLF. Malcolm Fraser and then Treasurer John Howard were in there, boots and all, after the BLF. That uncovered all these bottom-of-the-harbour taxation schemes.

Luke Simpkins (Cowan, Liberal Party) Share this | Link to this | Hansard source

Mr Deputy Speaker, I rise on a point of order. I do not think we are here to talk about the Labor Party’s preselectors; I think we are here to talk about the bill.

Steve Georganas (Hindmarsh, Australian Labor Party) Share this | Link to this | Hansard source

Order! The member will resume his seat. The member for Chifley.

Ed Husic (Chifley, Australian Labor Party) Share this | Link to this | Hansard source

Nice try, sunshine.

Steve Georganas (Hindmarsh, Australian Labor Party) Share this | Link to this | Hansard source

And the member for Chifley will make his remarks through the chair and refer to members by their correct titles.

Ed Husic (Chifley, Australian Labor Party) Share this | Link to this | Hansard source

Absolutely; I withdraw that. When they had a threat to the taxation base of this country, they did nothing in relation to bottom-of-the-harbour schemes. We had the types of arguments you have got here today that try and scoff at whether or not it is a legitimate thing. We had the member for Dunkley say the same thing. In the member for Dunkley's eyes, if this measure does not raise a dollar it is not worth doing. But even though there are some on that side who do not recognise that protecting the taxation revenue of this country is an important priority, there are some conservatives who do. For example, on 21 May last year, one particularly prominent person from their side said that this is a big issue. He said:

This is a big issue relating to the erosion of the Australian tax base. Over time, the erosion of the tax base will become material. You’ve got X billion dollars of revenue . . . being earned—

In this case he singled out Google—

paying very little tax in Australia.

Who said that? That was the shadow communications spokesperson, on the front page of the Australian Financial Review, under the headline 'Raise taxes on tech giants: Turnbull'. He goes on to say how this is a big threat to taxation revenue. He is not the only conservative to think this.

Over in the UK David Cameron sees this as a significant issue, regardless of the member for Dunkley or the shadow Treasurer thinking that this is not an issue. Prime Minister Cameron says that this requires the immediate attention of the G8. Why? Because, as he acknowledges, left on the shoulders of just one country, companies that move across borders will flout taxation laws, will erode revenue and will ensure that they find ways around it. So Prime Minister Cameron is saying that the G8 has to work on this. Here we are saying we need to work on it.

What do we have here in Australia? We have conservative politicians who—with respect to consistency when it comes to taxation revenue and protecting our revenue base—turn a blind eye to these things, to the rorts and the threats to taxation revenue, at a time when they have to plug a $70 billion hole in their estimates. But we have got others saying that this is serious enough to work on at the G8 level. The OECD is dedicating massive amounts of attention to this very issue. Frankly, as technology has changed, as we have globalised, as companies move across borders, this is a significant issue. Our taxation system taxes profits. When a company is operating across borders and sets up transfer pricing in a way that takes into account the fact that profits are taxed, it will be able, through its transfer pricing arrangements, not only to jack up prices locally for consumers but to do it in a way that lessens the ability of taxpayers to get their fair share. That is why it is an important issue.

The reason you have to listen to the contribution of some of those opposite during this debate is that this matter will be significant. In years to come, when they catch up with the rest of the world that realises that this is an issue, they will be back-peddling at a million miles an hour. You will not get a speed camera that can pick up how quickly they will back away from their words. This is a massive issue for governments worldwide. To be leaving it in their hands, saying, 'We need to have a committee process that fully looks at this,' when the rest of the world is already furiously looking at it is a joke.

How long did those opposite give for the Workplace Relations Act changes that ushered in Work Choices? When they ripped out conditions for Australian workers across the country, they did nothing—they gave no time whatsoever. Now they have become a big defender of parliamentary process, when, at the same time, we have these massive threats to our revenue. Their position on this is a joke and they need to recognise they have to speed up and get with the program.

Steve Georganas (Hindmarsh, Australian Labor Party) Share this | Link to this | Hansard source

Order! The debate is interrupted in accordance with standing order 43. The debate may be resumed at a later hour and the member for Chifley will have leave to continue speaking when the debate is resumed.