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

I move:

That all words after "That" be omitted with a view to substituting the following words:

"whilst not declining to give the bill a second reading, the House condemns the Government's inaction on multinational tax avoidance that have resulted in broken promises in the budget leading to tax increases and cuts to essential services."

In March 2010 the United States Congress enacted the Foreign Account Tax Compliance Act, also known as FATCA. The aim of the act was to improve compliance with US tax laws. FATCA imposed certain due diligence and reporting obligations on non-US financial institutions, including Australian institutions. Two years after the passing of FATCA, the member for Lilley, Wayne Swan, the then Treasurer, met with United States Treasury Secretary Timothy Geithner in Washington and issued a statement on 7 November 2012 announcing that Australia had commenced formal discussions for an intergovernmental agreement with the United States to minimise the impact for Australians of FATCA. That statement noted that an intergovernmental agreement would also improve existing reciprocal tax information-sharing arrangements between the Australian Taxation Office and the United States Internal Revenue Service, which would help ensure Australian tax laws are effectively enforced so that Australian businesses and individuals who pay their fair share of tax are not disadvantaged by those who seek to evade their tax obligations.

Under the agreement which has been signed with the United States and was announced by the Treasurer on 28 April this year, we now have an intergovernmental agreement which sees Australian financial institutions complying with FATCA. Under this arrangement, a broad range of Australian financial institutions are affected: banks, building societies, credit unions, specified life insurance companies, investment funds, custodial institutions and some brokers. Those financial institutions are to be required to register with the US IRS.

Under this bill, from 1 July 2014 the affected financial institutions will review customer accounts to determine whether they are reportable accounts, US citizens or US tax residents under the intergovernmental agreement and will report to the ATO in the 2015 calendar year the required account information for the 2014 calendar year, which will then be passed on from the ATO to the IRS. This bill puts in place those appropriate arrangements in order to see Australian institutions complying with FATCA.

It is pleasing for those of us on this side of the House to see the end of these negotiations, begun under the member for Lilley and concluded under this government. The Labor Party welcomes sensible steps to assist tax authorities in ensuring compliance with tax regulations. What we are concerned about, however, is that while the government has managed to conclude this deal, it has dropped the ball on multinational profit shifting. More than $1 billion of loopholes have been opened up under this government, which will allow multinational firms to shift profits overseas. So while dual Australian-US citizens will be affected by FATCA, the multinationals will be able to continue to shift profits overseas. In a speech earlier today I listed the measures, five of them, on which the government has backtracked. The total amount is $1.1 billion.

Multinational profit shifting is a painfully detailed area and we were fortunate in government to have Assistant Treasurer David Bradbury focusing on these reforms for us. It might be helpful to the House if I outline in straightforward terms how multinational firms shift profits out of Australia and into low-tax jurisdictions. One simple example that members might think about is an arrangement in which the Bermuda arm of a company sells the Australian arm a paperclip at a cost of $1 million. The Australian company then claims that as a $1 million tax deduction and the money is effectively shifted offshore. That particular loophole has been closed, but a parallel trick can still be played with debt, in which the Bermuda subsidiary makes a multimillion dollar loan to the Australian arm and effectively $1 million a year is shifted out of Australia in the form of interest payments. Those interest payments are a tax deduction in Australia and the profit can be moved to Bermuda, where the company tax rate is considerably lower.

The concern that the Labor Party has on this is that multinational profit shifting will invariably become more tempting as industries internationalise. As more and more business is done over the internet, we are moving from a closed economy to a very, very open economy. And a government which is going soft on multinational profit shifting is a government which is increasingly going to miss out on revenue. Australia already has a higher than average share of revenue collected from company taxes, and so failing to close company tax loopholes is a significant issue for Australia. And because this government is unwilling to close corporate tax loopholes it has to do things like taking money away from children on the first day of school—getting rid of the schoolkids bonus payments, which is targeted towards low- and middle-income households, because it is going soft on multinational profit shifting. The Treasurer talks the big talk when he is at the G20, as the Prime Minister does when he is at Davos. But when it comes to actually walking into this House and passing bills which see multinationals pay their fair share of tax, this government is not up to the job. As a consequence, ordinary Australians will have to pay more tax or receive lower services.

The total effect of the government's budget was to increase the deficit. Don't take my word for it: the member for Cook in question time yesterday said:

If I go back to the PEFO—as we know, the PEFO is where the officials tell the truth about what the budget really is from the previous government. From the previous Government, that's what it does, that's what it does.

A little repetitious, but you get the idea. PEFO is the true state of the books, so let's compare where we are at under the true state of the books, the Charter of Budget Honesty state of the books, with the current budget.

The current budget's deficit is higher this year. It is higher next year and it is higher over the forward estimates. So what the government has done effectively in this budget is to redistribute resources—redistribute them from the most vulnerable to the most affluent. This is not only a failure of the fair-go test, because those who were most vulnerable have, after all, been doing it worse over the past generation, a generation in which incomes have risen faster for billionaires than for battlers, but now we have a budget that transfers resources from battlers to billionaires. A simple example of that: the budget raises the non-concessional superannuation cap pushing it from $150,000 to $180,000—a measure which will help some of the most affluent.

But the vulnerable Australians do not just have low incomes; they also spend a larger share of their incomes. In fact if you look at those in the bottom income group, they tend to spend all of their incomes; and those in the top quintile tend to save about a quarter of their incomes. So, if you take $10 billion, you move it from the bottom quintile to the top quintile and then you take $2½ billion dollars out of the economy. What would that do? You would expect it to have a hit on retail trade, and we are already seeing retail trade figures down. You would expect it to have a hit on consumer confidence, and we have the ANZ Roy Morgan Consumer Confidence measure now falling faster than at any time since the global financial crisis. We have the Westpac Melbourne Institute consumer confidence survey at nearly a three-year low.

Part of what is going on at the Westpac Melbourne Institute consumer confidence survey is that confidence has fallen to a lousy 74.9 among Labor voters. I have news for those opposite: Labor voters may not have supported them in the last election but, if you are a retailer, a dollar coming out of the wallet of a Labor voter is just as good to you as a dollar coming out of the pocket of a coalition voter. This pessimism in the economy is hurting retail trade.

Robert Menzies liked to say that about half the people didn't vote for him at each election and they could not all be wrong. It neatly sums up the value of bipartisanship but it is particularly important when we are thinking about economic policymaking. Governments must govern for all Australians. They must recognise that retailers are depending on the spending of coalition voters and Labor voters alike. But a government which is behaving as political scientist Judith Brett wrote recently like 'a bunch of winners taking it out on the losers … It all feels a bit like student politics and its short-term point-scoring, its payback and its intense personal antagonisms.' A government of that kind is a government which will not engender confidence in the economy.

Perhaps we should not be surprised then that the Australian Institute of Company Directors biannual survey found that fewer than one in three company directors believe the federal government is having a positive impact on their business decisions and consumer confidence.

This is a measure which improves transparency, and it is good to see this government supporting transparency. As Justice Brandeis said—that is not 'the-would-be Justice Brandis'; that is the real United States Justice Louis Brandeis—sunlight is the best disinfectant. I am a strong supporter of transparency, but it does strike me as strange that the government is very keen on transparency for US-Australian citizens in exchanging information between the ATO and IRS but less keen on transparency when it comes to what has happened in our detention centres, what is happening with boats.

When it comes to the Australian Charities and Not-for-Profits Commission, a commission set up to ensure transparency in the charitable sector and to ensure that Australian donors can see the organisations to which they are donating, the government wants to scrap the ACNC and reduce transparency in the charitable sector.

The government is yet to hold a single community cabinet, a great transparency measure introduced under Labor. The government has said that it will not release the Treasury blue books under the freedom of information laws as they were after the two previous elections.

The government in another anti-transparency move has taken the Family Impact Statement out of the budget. The family impact statement was put in the budget by Peter Costello, and maintained when the Rudd and Gillard governments were in office. We thought they were a good thing, so we kept them there. This year they disappeared, and families will not be surprised as to why. If you are a family in the bottom quintile in income distribution, families with children lose 6.6 per cent of their disposable income as a result of this budget; they lose more than $1 in $20. The poorest single parent families with children lose more than $1 in $10—$1 in $10 is being taken out of their wallets as a result of this. No wonder the government is backtracking on transparency with the Family Impact Statement.

On the measure championed by Labor, which would have required the tax commissioner to publish the amount of corporate tax paid for entities with a total income of $100 million or more, the coalition has already sent out strong signals that it is not going to proceed with that particular transparency measure. They were so proud of that particular announcement that they brought it out in the first week of the new year—not normally a time in which you announce the things that you are very excited by—but the time when then Assistant Treasurer Arthur Sinodinos chose to drop the story to the Australian Financial Review.We have heard nothing of it so far, but I am deeply concerned that this transparency measure will be dropped as well.

The opposition supports this sensible measure. The FATCA agreements were initiated under Treasurer Swan and concluded under Treasurer Hockey. I wish the spirit of this bill would better pervade the government's actions. Transparency is good enough for FATCA and it ought to be good enough for other areas of government policymaking. If it is good enough to close down tax loopholes to stop tax minimisation then it ought to be good enough to close down tax loopholes that are allowing a billion dollars of tax owed by multinationals to escape.

Russell Broadbent (McMillan, Liberal Party) Share this | Link to this | Hansard source

Is the amendment seconded?

Joel Fitzgibbon (Hunter, Australian Labor Party, Shadow Minister for Agriculture) Share this | Link to this | Hansard source

I second the amendment and reserve my right to speak.

Russell Broadbent (McMillan, Liberal Party) Share this | Link to this | Hansard source

The original question was that this bill be now read a second time. To this the honourable member for Fraser has moved as an amendment that all words after ‘That’ be omitted with a view to substituting other words. If it suits the House, the chair will state the question in the form that the amendment be agreed to. The question now is that the amendment be agreed to.

Michael Sukkar (Deakin, Liberal Party) Share this | Link to this | Hansard source

I want to briefly speak on the Tax Laws Amendment (Implementation of the FATCA Agreement) Bill 2014. I want to congratulate the Treasurer, Joe Hockey, on so quickly coming to the aid of Australian financial institutions and concluding the FATCA agreement. The unilateral decision by the United States has meant that Australian financial institutions with any presence in the United States could be subject to a withholding tax rate of 30 per cent. In announcing the signing of the agreement, the Treasurer highlighted the importance of this change in reducing the burden on Australian financial institutions and in particular that due diligence that would be required from Australian institutions in managing each of the accounts that may or may not be relevant to the FATCA requirements. In order to comply with the relevant reporting obligations, Australian financial institutions would have been required to undertake a range of procedures in identifying all relevant accounts. Broadly, FATCA requires foreign financial institutions to provide the US Internal Revenue Service with information on US citizens living abroad who have more than $50,000 in their accounts. So it is a wide-ranging and significant compliance burden on Australian financial institutions.

The commencement of the regime is looming on 1 July 2014, as the member for Fraser said, and it will obviously have a huge impact on Australian financial services. One of the reasons that Australia has had to enter into the agreement with the United States which is now the subject of this bill is that Australian privacy laws generally prevent compliance with these US based regulations and some Australian state and territory antidiscrimination laws could also prevent the interrogation of customer accounts based on US citizenship. In recognition of the fact that many of these domestic laws would otherwise prevent foreign financial institutions from fully complying with FATCA, the US developed an intergovernmental agreement approach to manage these legal impediments, simplify practical implementation and reduce compliance costs for relevant financial institutions. That is why I congratulate the Treasurer, Joe Hockey, for moving so quickly to sign the intergovernmental with the US in April.

As always, this government has its eye on the ball when it comes to making sure that our businesses are not weighed down with red tape and unnecessary administrative costs. Unfortunately, that was not the case when those opposite were in government. Treasurer Joe Hockey was advised soon after last year's election that 96 tax and superannuation announcements, with one dating back as far as March 2001, had not been legislated. One of those announcements related to FATCA. The former Treasurer announced his intention to negotiate an intergovernmental agreement with US on FATCA in November 2012, but it was not signed by the former government. This slack approach was not fair on Australian businesses or consumers and it created uncertainty, particularly with the likelihood of a withholding tax applying to Australian financial institutions. That approach has changed and we have ended the uncertainty with the subject of this bill. We are listening to businesses and consumers.

Importantly, the Australian Bankers Association welcomed the signing of the intergovernmental agreement. Steven Munchenberg, chief executive of the ABA, said:

We congratulate the Australian government in securing this agreement. It will enable Australian investors and savers to more easily access the US economy without suffering a prohibitive 30 per cent withholding tax cost.

This is an essential development in facilitating capital flows into and out of Australia while having best practice regulation.

The current and previous governments' work in this area will ensure Australia continues to have one of the world's most competitive financial services sectors, a major factor in economic growth.

Again, I want to congratulate the Treasurer for ensuring that the uncertainty that applied with the possible application of a withholding tax in the United States is not an issue that Australian financial institutions have to worry about any further.

There are of course compliance costs associated with this measure. As a government, we are proud that the approach we have adopted ensures that the compliance costs are the lowest of all the available options. Again, it is to ensure that capital that flows in and out of Australia can be as free as possible and not subject to interest withholding tax. I again congratulate the Treasurer.

Andrew Giles (Scullin, Australian Labor Party) Share this | Link to this | Hansard source

I rise to make a contribution on the Tax Laws Amendment (Implementation of the FATCA Agreement) Bill 2014. As previous speakers have noted, this bill in effect requires Australian financial institutions to collect information about their customers who are likely to be taxpayers in the United States of America and to provide that information to the Australian Tax Office which will, in turn, provide that information to the US Internal Revenue Service. This of course gives effect to the Australian government's commitments as set out in the Agreement between the Government of Australia and the Government of the United States of America to Improve International Tax Compliance and to Implement FATCA—the Foreign Account Tax Compliance Act—which was signed in Canberra in April 2014, as the member for Deakin noted a moment ago.

FATCA has been described by TheEconomist as 'by far the biggest catalyst' of a movement towards global tax-transparency or, indeed, tax fairness. I note that the UK has also, in the aftermath of FATCA, taken what may be regarded as similar steps to the US, and that the OECD is progressing the implementation of a single global standard for the exchange of relevant information. This year's G20 finance meeting in Sydney endorsed common standards for sharing account information across borders, with automatic exchange taking effect by the end of next year. This is an important development—although, as is the case with the bill before us, there is obviously considerably more work to be done.

I note in that regard—and I think the member for Deakin also touched on this—the very important work that the former Treasurer and Deputy Prime Minister, the member for Lilley, did in the lead-up to this bill, by commencing the formal discussions between Australia and the US following a meeting between the Treasurer and US Treasury Secretary Tim Geithner in November 2012. I also note the important work that former Assistant Treasurer David Bradbury did in the area of cracking down on corporate profit-shifting and tax minimisation schemes. I congratulate him on his recent elevation at the OECD. It is well deserved and I wish him very well, though I think it is appropriate that I also say that he is very much missed in his former role in this place in the government of Australia.

The FATCA is an American law, developed to reduce offshore tax evasion and regain federal tax revenues from American account holders at foreign—that is, non-American—financial institutions internationally. It obviously, in that regard, has implications for Australia and Australia's financial institutions. The impetus for the act in America was a 2009 court case in which Swiss Bank UBS was found to have assisted American nationals to evade paying American taxes. As a result, UBS agreed to pay the US government US$780 million in fines, in restitution, and also to provide the names of suspected tax cheats. There has obviously also been some significant subsequent litigation in this area. According to the US Department of Justice, the use of offshore bank accounts to avoid paying American taxes costs the US Treasury, in total, at least US$100 billion annually. This is of course a cost to American society of the same magnitude.

The wide-reaching FATCA was passed in the 111th Congress as part of the 2010 Hiring Incentives to Restore Employment Act, the HIRE Act, becoming law in March 2010, and requires individuals to report their financial accounts held outside of the United States; and foreign—again, that is, non-United States—financial institutions to report to the IRS about their American clients. To enforce the FATCA, it has become necessary for the US government to sign agreements with foreign governments such as Australia's, allowing the trade of individuals' financial data.

Labor welcomes any sensible steps to assist tax authorities, whether in Australia or overseas, to ensure compliance with tax regulations. The Treasurer has acknowledged that some multinationals are not even paying their fair share of tax anywhere and called for a global response. I welcome this, too. But there is more to be done—much more.

This government has demonstrated a significant gap between its rhetoric and its actions when it comes to ensuring that multinationals pay their fair share of tax within Australia. By not proceeding with similarly sensible measures, as are implemented in this legislation, the Australian people have foregone over a billion dollars in revenue. This is resulting in cuts to essential services. And, as the member for Fraser has noted, every dollar avoided by multinational companies must, in effect, be paid for by Australian taxpayers and businesses, or, of course, by cutting services—essential services maintaining the fabric of our society. We have seen with this budget which side this government is on. It asks those with the least to do the most, time after time after time, as we heard in the matter of public importance discussion only a few minutes ago.

Ultimately, I think it is important to acknowledge that cracking down on multinational profit-shifting is not just about making sure that firms pay their fair share of tax, important as that is. Critically, it is also about making sure that the burden of tax is fairly shared across businesses.

I am reminded of the comment of the Justice of the Supreme Court of the United States, Oliver Wendell Holmes Jr: 'Taxes are what we pay for a civilized society.' That was as prescient of the debate in Australia at the moment, as we argue in this place and outside it about what makes a civilised society. I note the context for that remark. It was made in a dissenting judgement in a 1927 case involving a Spanish tobacco company seeking to minimise its tax arrangements on insurance in the Philippines, then subject to the law of the United States. Even by today's standards—the standards that FATCA is engaged in working through—it was a very complicated case. But his honour saw through the complex taxation arrangements then, and we must do our best to do likewise now. To quote him more fully: 'It is true … that every exaction of money for an act is a discouragement to the extent of the payment required, but that which, in its immediacy, is a discouragement may be part of an encouragement when seen in its organic connection with the whole.' This notion of an 'organic connection with the whole' is one that deserves some greater consideration.

I believe that this principle is at the very heart of taxation. Taxation should never be seen in isolation, as those opposite and their right-wing cheerleaders insist it should be. It is true, of course, that our roads, schools, hospitals and all of our services are, in large part, funded from tax revenue, but this is part of a broader purpose—that purpose being, of course, to build a society where people are not left behind or excluded because of the material circumstances in which they entered this life.

This is why the coalition's budget has been so devastating, because its basic message is: if you are not born into comfort then you will not get to fully participate in society. And this is why we, on this side, describe the budget as cruel. To say to someone that, no matter how hard you work or how smart you are or how well you apply yourself, you do not stand a chance to get ahead in life because your parents' wealth does not allow for it—this is cruelty. Interestingly, that seemed to be acknowledged to some extent by the former Prime Minister, John Howard, in his contribution at the National Press Club today.

Countries that have progressive taxation systems tend to have the least inequality and, in turn, tend to be more collectively prosperous and productive. One only needs to look at the Scandinavian examples as proof of this—evidence, as opposed to neoliberal theory. Can those opposite point to examples of prosperous, productive and equal societies that operate under these sorts of neoliberal regimes? I doubt it, and I again reflect on the contribution of John Howard, a former conservative Prime Minister, in his remarks on the state of the US society.

I am pleased that the US has passed laws to crack down on tax evasion and that Australia is assisting with collection. But it is somewhat ironic that the US is where those opposite look to as a model for Australia. Whether it is for universities, health care or gated communities more generally. The US system is in too many respects based on concepts of user-pays exclusivity. It applies a moral lens to those who, for instance, cannot afford to take on massive amounts of debt, who cannot find work or who until recently could not afford health care. It divides their community into haves and have-nots, deserving and undeserving. This has never been the Australian way, and it cannot be so in the future.

I applaud the US administration for getting the high-roller tax evaders to pay their fair share wherever they may be. I note that these measures are permanent, not temporary like this government's deficit tax on high earners. Our government could learn from the US government to treat foreign companies and people the same as it treats Australian companies and people. What is this government doing to tackle Australians seeking to evade taxes here and abroad?

I return once more to Holmes' decision:

The result of upholding the government's action is just. When it taxes domestic insurance it reasonably may endeavor not to let the foreign insurance escape. If it does not discriminate against the latter it naturally does not want to discriminate against its own.

Indeed, getting foreign or domestic companies or wealthy individuals to contribute to the running of a society and system of government from which they derive a profit or protection from is entirely just.

And so the principles of this legislation are supported by Labor. But again, it is only part of what is needed to be done. The government wants to repeal Labor's tax transparency reforms. These reforms would have ensured the public could see how much tax Australia's largest companies are paying. They are supporting transparency for US citizens vis-a-vis their tax obligations, but not for large businesses here. If the government is serious about making sure companies pay their fair share of tax, why are they trying to let these same companies hide how much tax they are paying?

Steven Ciobo (Moncrieff, Liberal Party, Parliamentary Secretary to the Treasurer) Share this | Link to this | Hansard source

This is your best speech so far!

Andrew Giles (Scullin, Australian Labor Party) Share this | Link to this | Hansard source

Well, one day it might be as good as one of your best ones. Stephen! If I am very, very lucky!

Steven Ciobo (Moncrieff, Liberal Party, Parliamentary Secretary to the Treasurer) Share this | Link to this | Hansard source

I know!

Andrew Giles (Scullin, Australian Labor Party) Share this | Link to this | Hansard source

And one day I might get the same audience as is sitting behind you now too!

Ross Vasta (Bonner, Liberal Party) Share this | Link to this | Hansard source

What? Quality like me?

Andrew Giles (Scullin, Australian Labor Party) Share this | Link to this | Hansard source

The coalition is also not proceeding with Labor's changes to the offshore banking unit regime or the abolition of section 25-90, which allows companies to deduct interest expenses on debt related to foreign untaxed income. According to the government's figures in MYEFO, this will cost Australian taxpayers around $700 million. So while the US is cracking down on people evading tax, the coalition government seems to be doing the exact opposite—indeed, facilitating it.

At the heart of this debate is a discussion about the revenue-raising capacity of the government and its distribution of this finite resource. Governments all over the world, faced with structurally lower revenue bases, are facing the choice of whether to accept this neoliberal dogma and go down the austerity path of cutting people loose and dividing the haves and the have nots, or to get those most able to to do their fair share of the heavy lifting.

Most importantly, we do need to have a broader debate about the role of government which, of course, partly manifests itself in this taxation debate. To this extent, the government has started this debate with its neoliberal, extremist budget. For the record, I take this opportunity to say that I believe that there is such a thing as society, and that there is a major role for government in society. Those opposite say that government should get out of the way so that we are left with a dog-eat-dog, survival-of-the-fittest contest that punishes the weak. I believe that government can, indeed must, be a check on the unfettered power of the strong over the weak.

And so, in supporting the important principles and the intergovernmental agreement that are enabled through this legislation, I also express the hope that it might inspire further action for Australia as a responsible global actor, but also domestically, to ensure that fair contributions are made to support a fairer society.

Steven Ciobo (Moncrieff, Liberal Party, Parliamentary Secretary to the Treasurer) Share this | Link to this | Hansard source

I want to thank those members who have contributed to this debate. The Tax Laws Amendment (Implementation of the FATCA Agreement) Bill 2014 gives effect to Australia's obligations under the treaty status Agreement between the Government of Australia and the Government of the United States of America to Improve International Tax Compliance and to Implement FATCA.

The bill will require Australian financial institutions to collect and provide certain financial account information as specified in the agreement annually to the Australian Taxation Office which, in turn, will provide it to the United States Internal Revenue Service. This will enable Australian financial institutions to comply with the United States Foreign Account Tax Compliance Act in the most cost-effective way possible. In particular, I draw the attention of the House to page 34 of the explanatory memorandum, which details the compliance cost saving this bill will bring about—a saving of more than $583 million over 10 years. The bill will also help to enhance the tax system integrity by providing for improved cooperation between Australia and the United States for the purpose of preventing tax evasion.

I note the amendment that has been moved by the shadow assistant Treasurer, and also take this opportunity to highlight that the government will not support the opposition's amendment. And I note that while there has been a good contribution by government members in relation to this debate, unfortunately, we see another pious amendment that has been moved by the Australian Labor Party in relation to this bill. This time, of course, it is reflecting on the fact that they believe the government should be doing more in relation to multinational tax avoidance. I cannot help but think that once again we see a situation where Labor's narrative in the House sits at strange odds with the general community perception about Labor's economic approach.

The actual amendment that has been put before the House sits, and dovetails quite nicely, with Labor's ongoing narrative that the way in which—as best as I can tell—Labor intends to pay for their multi-tens-of-billions of dollars of additional spending is to look at being able to recoup additional revenue through the use of the kinds of initiatives that they allude to in this amendment.

And so it is that I consistently hear from Labor members opposite—and we heard it in the contribution of the shadow assistant Treasurer and from the member for Scullin—that Labor's approach in relation to now wanting to put some $38 billion to $40 billion of spending back into the budget is that it will be funded through a crackdown on multinational institutions. The amendment that has been put in relation to this debate goes to the core of Labor's attempt to try to pretend that that is in some way going to provide the revenue that they need to bring about the kind of fiscal consolidation that the government is focused on.

Unfortunately though, the facts simply do not accord, yet again, with Labor's narrative in relation to both those issues—those two issues being multinationals paying tax and the second being their ability to raise enough revenue to make sure that those additional spending initiatives that Labor would like to reintroduce into the budget are actually able to be covered off.

We have seen the Labor Party attempt, very poorly, to make changes to transfer-pricing rules in 2012 and 2013. They did it through the Tax Laws Amendment (Cross-Border Transfer Pricing) Act and through the Tax Laws Amendment (Countering Tax Avoidance and Multinational Profit Shifting) Act 2013. It was very clear to the coalition then that the consequence of those acts was going to be that the government was going to massively ramp up compliance costs but not actually get the balance right with respect to ensuring that compliance versus the integrity of the tax system would be in fact balanced. Labor is big on rhetoric when it comes to this matter but their follow-through is, unfortunately, quite poor.

The coalition, in contrast, has a proud track record in this sense. We have long supported legislation that counters transfer-pricing, having introduced the original legislation in 1982. In fact, the Treasurer identified addressing base erosion and profit shifting as one of the key issues that G20 finance ministers are focusing on throughout this year. Indeed, in the February meeting of finance ministers in Sydney as part of the G20 process, the Treasurer was able to steer a very good outcome for those G20 members to ensure that there would be strong in-principle agreement. It actually was part of the BEPS process—that is, base erosion profit shifting process—which is taking place throughout this year. There is action by the coalition both in an historical context—having moved the original legislation—and now more recently through our activities in the G20.

I say to the Australian Labor Party a very simple message—that is, the government is actually acting on base erosion and profit shifting. Labor's approach was heavy-handed when it came to red tape and compliance. Labor's approach has failed miserably. Most importantly, not for one second should Australians hold the view that Labor's narrative, their attempt to pump some $38 billion or $40 billion back into the budget, will be covered off by an attempt to try to squeeze more money out of international institutions. The government is alert to failings in this regard. The government is making reforms and, in fact, the coalition is leading international discussions in making sure that the BEPS issue is addressed. It stands in stark contrast to the kind of political games of the Australian Labor Party are playing with an amendment such as the one that has been moved by the shadow Assistant Treasurer.

Fundamentally, the Australian Labor Party needs to recognise that they need to make some hard decisions when it comes to fiscal consolidation and when it comes to putting the budget back on the right track. They cannot mask their decisions by saying, 'Well, we will find the additional revenue for $30 billion or $40 billion of additional spending by magically squeezing more money out of multinational institutions. No, that is in fact not going to provide anywhere near the kind of revenue the Australian Labor Party is proposing. Rather, what Labor needs to do is undertake some of the tough choices about making sure that Australia as a nation and the federal government as an entity live within their means.

When I hear contributions like that from the member for Scullin, who made comments that he believed the budget unfairly put too much pressure on pensioners, for example, and on those of lower socioeconomic status, I say to the members opposite, 'Why is it that Australian Labor members profess so much concern for pensioners yet will happily turn a blind eye to the fact that they are lumbering the next generation of Australians with debt that will take decades to repay?' I stand at the dispatch box here and when I look up at the Australian students in the gallery I know that those children are going to be the ones that will be paying off Labor's debt for the next 20 or 30 years. I say to the children of Australia that they are going to be responsible for paying back this government's largess for decades. I say to the Australian Labor Party we do not need lectures about there being an unfair burden on particular elements of the community. Because the reality is that the Australian Labor Party are being grossly hypocritical by making comments like 'it is unfair that this particular group is penalised' meanwhile conveniently ignoring the fact that the very real impact of the past six years of Labor's failed economic approach has been that young Aussie kids are now indebted and will take 20 or 30 years to pay back that debt.

The reason that is germane to this debate is because the fig leaf that Labor uses, trying to explain how they can possibly put forward a proposal to reintroduce $30 billion or $40 billion of spending back in the budget, is to miraculously find the revenue in multinational institutions. I have heard it from the shadow Treasurer. It is not only the shadow Assistant Treasurer who comes up with these pithy little amendments; it is also the actual shadow Treasurer—the alternative Treasurer of the country—who turns around and makes comments such as 'we will find the revenue from multinational institutions who are not paying their fair share'.

I think it is important that all Australians recognise that these kinds of amendments, while they are fun and games for the Australian Labor Party and while it might tick some kind of factional box for the shadow Assistant Treasurer, the reality is that it will not provide anywhere near the revenue that Labor needs. Labor needs to actually step up to the plate, make some hard decisions and recognise that the populist approach to economics got them into trouble in the first place. It will not get them out of trouble until they have the fiscal discipline to implement the kinds of tough decisions that mean Australia can live within its means. In rejecting the opposition's amendment, I also take this opportunity to commend the bill to the House.

Rob Mitchell (McEwen, Australian Labor Party) Share this | Link to this | Hansard source

The original question was that this bill be now read a second time. To this the honourable member for Fraser has moved as an amendment that all words after ‘That’ be omitted with a view to substituting other words. The immediate question is that the amendment be agreed to.

Question negatived.

Original question agreed to.

Bill read a second time.