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

Given other events that are occurring in the building, one might forgive those watching the House of Representatives today if in five minutes time they were to turn to a press conference by the now apparently former Minister for Communications as he announces that he will be challenging the Prime Minister for leadership. In all honesty, I do wish my colleagues on the other side of the House well through what I am sure will be a tumultuous time, those of us on this side of the House being, sadly, all too familiar with these states of affairs.

The Tax and Superannuation Laws Amendment (Better Targeting the Income Tax Transparency Laws) Bill 2015 takes transparency away from the tax system. Transparency matters. It is fundamental to ensuring that all taxpayers pay their fair share. Over a century ago, former Justice Louis Brandeis of the United States said:

Sunlight is said to be the best of disinfectants; electric light the most efficient policeman.

It is through high-quality transparency that we can ensure that firms and individuals pay their fair share of tax.

Labor will be opposing this bill because this bill would gut Australia's existing tax transparency laws that were put in place by Labor over the opposition of the coalition in 2013. We did that not from some prurient interest in the tax affairs of Australia's largest companies but in response to growing concern that some big firms are not paying their fair share of tax. Improving transparency is one way of tackling corporate tax avoidance.

We on this side of the House believe that tax transparency is a fundamental part of good multinational tax avoidance laws, and that is why last year I moved a private member's bill to retrospectively apply this transparency measure to the 2012-13 financial year. Labor's view was that transparency needed to start even sooner to make sure we could have a high-quality debate over multinational tax fairness. Unfortunately, the coalition opposed Labor's attempts to have transparency happen sooner.

Right now, as I understand it, the Australian Taxation Office has prepared the information that would allow them to publish information on the income tax paid by companies earning over $100 million a year but they are holding off in following through on that legislative requirement because they are waiting on the outcome of a vote in this parliament. I would urge those crossbench senators still wavering on this point—and for anyone with influence with crossbench senators to tell them—not to gut tax transparency.

The laws currently apply to about 2,000 of Australia's biggest firms, but this government wants to carve out almost half of the companies affected and all of the private companies affected. These are extremely large firms. We are not talking about tiddlywink small businesses; we are talking about significant firms with major presence in the Australian market. They represent less than one per cent of all companies doing business in this country. Labor believes it is appropriate to have tax transparency for our biggest firms and that you should not be able to shield yourself from tax transparency by staying private rather than being public. Labor believes that the threshold should be a revenue threshold, an income threshold, and not whether you are private or public.

It is deeply disappointing that this is the first major piece of tax legislation the government has introduced this year, and, while the Treasurer is talking a big game about minimising multinational tax avoidance, what he has been doing has exactly the opposite effect. When he is outside this House he says he really cares about multinational tax avoidance, but when he is in here he has voted against tax transparency. He voted against Labor's package under Wayne Swan and David Bradbury in 2013 to make multinationals pay their fair share, and now he is moving to gut tax transparency. It is a real case of 'Watch what I do, not what I say.' When we brought forward that bill in 2013, we did so guided by work from the OECD which suggested that Australia's transfer-pricing rules and its anti-avoidance provisions needed to be tightened up to move with some of the sharp accounting practices that some of the world's largest firms were engaged in. David Bradbury won an award that year for being one of the world's 50 most significant tax reformers. That tax reform award was a credit to the work that David Bradbury, along with the member for Lilley, Wayne Swan, had done to make sure that Australia's tax laws were up to the minute. We did that alongside the transparency measures because we know that, as Louis Brandeis pointed out, sunlight and reform go together.

I recently submitted a freedom-of-information request to find out just how many people had written to the Treasurer and his offsiders calling for these transparency laws to be changed. 'How many Australians,' I wondered, 'want tax transparency gutted?' See if you can guess how many pensioners and parents, how many community groups and how many small businesses wanted tax transparency to be changed. The answer: zero. Not a single Australian submission has called for the gutting of tax transparency. So the question has to be asked: is this a serious change, a necessary change, or is it the kind of idea that only comes up when you get together with your mates over the second glass of wine at the Melbourne Club? This is not serious reform in the interests of small businesses, pensioners and families; this is hiding from scrutiny the tax affairs of some of Australia's largest firms.

In trying to sell this as something other than shielding their mates from public scrutiny, the Abbott government have cycled through a series of arguments. Let us take a moment to run through the various arguments they have put up in the public domain. Liberal ministers first suggested that we needed to roll back tax transparency because it presented a security risk to the owners of big firms. They dropped that argument pretty quickly when the Treasury, the Australian Taxation Office, the Attorney-General's Department and the Australian Federal Police all said they had given no such advice that tax transparency generated a security risk for the individuals involved in managing large firms. Next the government suggested that tax secrecy was fundamental to the integrity of our system. They said that such laws reveal too much information about companies. Some ministers cited the example of Japan, which scaled back its own tax transparency laws for privacy reasons a few years ago.

I agree that confidentiality is an important principle for individual taxpayers and for many businesses. But you have to balance privacy with the public interest. If you are turning over $100 million a year, you are among the most successful firms in Australia. So there is a legitimate public interest in knowing whether firms like these are paying their fair share. A recent Senate inquiry into multinational tax avoidance heard evidence about some companies paying effective tax rates of two per cent or less. These laws make public basic details about the total income, taxable income and tax paid by big firms so that we can better understand the contribution they are really making to Australia.

The Japanese case is a false flag. Where our laws apply to companies earning over $100 million a year, the Japanese threshold was set much, much lower. In today's money it was the equivalent of a threshold of $435,000. That is a very different ruling—to require publication of tax payable by firms that turn over in excess of $435,000 a year. It meant that, while the Australian law captures about 2,000 firms, the Japanese law as originally drafted applied to over 84,000 companies as well as up to 180,000 individual taxpayers. Given that the Japanese threshold was 200 times lower than Australia's, it is pretty disingenuous to suggest that an adjustment to the Japanese threshold somehow suggests that Australia too should adjust its threshold.

Most recently the government has raised the spectre of big supermarkets like Coles and Woolworths squeezing their suppliers in business negotiations if they are able to find out the total income and tax paid by a firm. But does anyone really believe that these large firms do not already have access to detailed financial information about the firms they buy from? I can look up one of several dozen online business databases right now and tell you the annual revenue of dozens of Australian food manufacturers. I would be willing to wager that the big supermarkets have access to far better sources of industry information than I do. If you want to go from income and tax to profits, you have to make some very strong assumptions about deductions. For example, you have to make assumptions about the age of the plant and therefore the eligible depreciation. You could guess at profit from knowing total income and tax paid, but you would be wrong.

The real reason for the roll-back slipped out a few weeks ago, when one of the junior ministers in the Abbott government—as it now is—said that he was worried about unleashing the 'politics of envy' if Australians had access to more information about big companies. And what the member for Kooyong presumably meant when he talked about the 'politics of envy' was that some Australians might be envious of how little tax some of these firms really pay. Some of those who are suffering under the government's cuts might also envy the way the Abbott government always seems to prioritise billionaires over battlers.

Tax transparency matters because, without it, we have no way of knowing if big companies are paying their fair share. There are plenty of big firms that pay their fair share, and their contribution deserves acknowledgement. But, more importantly, it is clear that some firms do not. When companies are paying tax at a fraction of the standard rate, Australians should ask why. At a time when the government is wanting to slug low- and middle-income Australians with a 15 per cent GST, we should look closely at whether all taxpayers are making their fair contribution.

We will not be able to do that if this government gets its way on replacing transparency with secrecy. The consequence is that some companies will be able to get away with ducking their taxes. Every single dollar that gets sent offshore or minimised with a handy loophole is another dollar that cannot be spent on things that matter—things like hospitals, schools and a liveable pension, which have been under sustained attack from the government's budget cuts.

If the government had its priorities right, it would be delivering policies that stop companies shirking their tax. It would be building on the good work engaged in by the member for Lilley, who is in the chamber, and his then Assistant Treasurer, David Bradbury, on multinational tax avoidance. Those were important reforms for bolstering the Australian tax system, for broadening the base with the possibility that we might ultimately be able to lower the rate.

Labor's multinational tax package was produced in the first half of the parliamentary term. It adds $7.2 billion to the budget bottom lines over the course of the next decade, but the Treasurer does not want a bar of it. He has had the option on the table since Labor announced our package in March. We are happy to sit down with his officials and work through how he can implement it. I agree: it is a great Labor idea, and it is there to be stolen if the government is willing to step up to the plate on multinational tax avoidance.

I do not know why this government is too stubborn to acknowledge a good tax idea when it sees it, but we do know that the issues that Labor's package goes to are important ones. We know that some big companies are transferring money into their Australian arms and dressing it up as a loan when it is really shifting money from one pocket to the other. We know that the problem of using debt to shift profits is a serious one. That is why Labor is proposing moving from the current system, which allows firms to pick their favourite debt deduction rule, to getting rid of the two debt deduction rules that lack economic sense and sticking with the one that does have economic sense: the worldwide gearing ratio. That would allow firms to claim for their Australian operation the average amount of debt they owe to banks around the world. If your multinational group owes a lot to the banks, it can claim a lot back in tax deductions. If it does not owe the banks a cent and instead is just engaging in internal loans, it cannot claim subsidies from the Australian taxpayer—those subsidies which are underpinned by all Australian taxpayers.

The current tax transparency laws, which the Australian Taxation Office will hopefully soon begin to implement, help us hold firms accountable. They help us policymakers and the broader community see where there are problems that need fixing to create a fairer tax system. When organisations such as United Voice and the Tax Justice Network—people like Mark Zirnsak—bring out reports which outline how much tax has been paid by multinationals, based on the publicly available data, then we see members of the government say: 'Oh, you can't trust that. That's based on imperfect information.' But, when Labor try to make sure that we get good information out in the public domain, the government say: 'Oh, no, you can't do that. We've got to stand on the side of secrecy.' They care far more for the feelings of big companies than they do for making sure that we have a strong tax system without loopholes.

The Abbott government should not want to be known as a government which stand up for the megarich against regular Australians. But, if they pursue this attempt to gut tax transparency laws, that is exactly what they will be doing: standing up for the secrecy of large firms against the public interest. I urge the government to withdraw this bill and to keep the current tax transparency laws in place. If they do not, we will fight them in the Senate and at every step of the way. We call on those community groups who care about multinational tax fairness and about tax transparency to join us in a conversation with Senate crossbenchers about blocking this bad bill. I move:

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

"the House declines to give the Bill a second reading because tackling tax avoidance demands more transparency, not less."

Bruce Scott (Maranoa, Deputy-Speaker) Share this | Link to this | Hansard source

Is the amendment seconded? The honourable member for Lilley is seconding the amendment?

Wayne Swan (Lilley, Australian Labor Party) Share this | Link to this | Hansard source

Yes, I am.

Bruce Scott (Maranoa, Deputy-Speaker) Share this | Link to this | Hansard source

Thank you. The original question was that the 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, I will state the question in the form 'that the amendment be agreed to'. The question now is that the amendment be agreed to.

Wayne Swan (Lilley, Australian Labor Party) Share this | Link to this | Hansard source

I also rise to speak on the Tax and Superannuation Laws Amendment (Better Targeting the Income Tax Transparency Laws) Bill 2015 and to follow the remarks of the shadow Assistant Treasurer. In 2013, Labor passed legislation that required the tax commissioner to publish the total income, taxable income and income tax payable of all entities with an annual turnover of $100 million or more. The current bill seeks to carve out Australian owned private companies from the disclosure of taxpayer information. This is an indicator of what lengths this government will go to to avoid ensuring that the integrity of our progressive tax system is maintained.

The Senate inquiry into corporate tax avoidance has exposed the extent to which a large number of multinationals have evaded or aggressively minimised their tax obligations in Australia. In conjunction with investigative reporting of the highest calibre by some of this country's top journalists, and the diligent and tenacious public service of Australian taxation officers, the inquiry has drawn attention to the legally questionable and ethically bankrupt tax practices of some of Australia's most senior corporate citizens.

Tax avoidance on such a grand scale impoverishes us all. When some companies fail to pay their fair share of tax, revenue must be found elsewhere, either from businesses, particularly SMEs, who already obey Australia's tax laws or from individual taxpayers who already pay direct and indirect tax, including the regressive goods and services tax. The billions of dollars of tax that multinationals avoid hold back billions of dollars in health, education and infrastructure investment and are being used to argue for a higher GST, which is thrust on an unwilling public. When multinationals avoid their tax obligations, one way or the other, the Australian people pay. Similarly, when some of our largest companies are so audacious in avoiding tax, it gives the green light for others to have a go as well. Surely this is not the type of corporate leadership they would want to be known for. In coming months the Senate inquiry will finalise its report. The reputations of those who have engaged in aggressive tax avoidance, of those who have provided advice and of the boards that have approved the practices are on the line. Corporations are not ends in themselves. The corporate veil should not hide the moral responsibility of those that run them and the decisions taken in their name.

Today I speak not to bury tax-avoiding corporations but to beseech them. It is not my intention to apportion blame to individuals, but to highlight the practices which ravage our revenues and breach the fundamental trust so essential to the working of a modern, inclusive and prosperous economy. To the tax avoiders I say: 'Your transgressions have damaged your standing in the community, but your exposure provides an opportunity for redemption. Be true to the values you espouse in your charters of corporate responsibility. Be transparent with your shareholders and with the Australian people about your tax liabilities, and then, perhaps, you can again be trusted by taxpayers and their governments that you too are fulfilling your social and legal obligations in Australia. Only then will your commentary on reform, particularly tax reform, be taken seriously.'

As many prominent business leaders have said to me, there is a stark contrast between the esteem in which the boards of many of these companies expect to be held and their actual behaviour. That is why this bill is such a backwards step. In seeking to roll back tax transparency it normalises tax avoidance and damages the good name of corporate citizens who do the right thing and who pay their fair share. Before considering how tax avoiding corporations can restore their reputations and join the many Australian companies who pay their fair share of tax, it is worth examining the scope of the tax avoidance problem.

Virtually every industry has its share of tax avoiders, from pharmaceuticals to media, technology and oil and gas companies, but I would like to focus on the practices of Australia's two big miners: BHP Billiton and Rio Tinto. Over the past decade these companies have treated the Australian tax system and the Australian people with contempt, whether by blatantly inflating the impact of the MRRT on their operations while funnelling their profits through foreign tax havens or by pleading for a reduction in company tax despite paying effectively half the rate faced by honest Australian businesses.

One recurring falsehood perpetuated by the miners and the Minerals Council during our time in government which has persisted to this day is that the industry is subject to a tax rate of around 50 per cent. This is false. The hearings of the Senate inquiry also demonstrate that as our government negotiated with the miners on critical tax issues mining companies were, behind our backs, expanding their tax avoidance regimes. At the same time, aided by the Minerals Council, the miners launched an advertising campaign to perpetuate the falsehood that their industry faced an effective tax rate of around 50 per cent. Mining companies never paid anything close to the tax rate claimed by the Minerals Council. While the corporate sector paid an average of 25 per cent tax as a share of profits between 2008-09 and 2013-14, the mining industry paid just 15c in every dollar. Courtesy of deductions flowing from the very royalties they were railing against, as well as accelerated depreciation rates, miners paid tax at effectively one-third the rate claimed by the Minerals Council, and this was only on the profits that they were not shifting offshore.

The duplicity and hypocrisy of multinationals, who cry poor while dodging their tax obligations in Australia, has been laid bare by the Senate inquiry. The committee's work has been supported by the diligent public service of Australian taxation officers and complemented by the tenacious investigative journalism of Neil Chenoweth for The AFR and Michael West for The Age and The Sydney Morning Herald. The tax practices of miners and other multinationals are varied and often very complex, but their cost to the tax system and the injustice they perpetrate upon the Australian people can no longer be ignored.

Today I would like to draw attention to some of the schemes which have tarred BHP and Rio as tax avoiders, but which their boards now have the opportunity to rectify. Transfer pricing occurs when a company sells a product between two arms of its operation in order to book its profits in a lower tax jurisdiction. One of these arms might be a controlled foreign company, partly or fully owned by a domestic operation and therefore obliged to pay some domestic tax. Between 2006 and 2014, the Australian arm of BHP Billiton sold minerals to its Singapore marketing hub, which then onsold them to China, imposing a mark-up in the process. After costs, including shipping costs it paid to its own freight company, BHP's Singapore hub has booked at least $5.7 billion in profits through Singapore since 2006. While BHP Billiton was obliged to pay top up taxes of $945 million to the ATO, this tax only applied to the 58 per cent share of the Singapore arm owned by BHP Billiton Australia. Overall, the tax paid by BHP represents only 10 to 12 per cent of its total profits, made almost exclusively by selling Australian resources. While BHP maintains that its Singapore operations are at arms-length from its Australian branch, I make the simple point that the directors of both the UK and the Australian entities that control the Singapore hub are the same people. This situation is clearly an artifice.

Like BHP, Rio Tinto has established a string of controlled foreign companies in Singapore. Between 2008 and 2014, Rio's companies earned $4.5 billion in profits by onselling minerals from its Australian operation at an inflated mark-up. This profit, taxed at five per cent in Singapore, was wholly submitted to Rio's holding company in the UK and not once cent of tax was paid on the $4.5 billion in Australia—not one cent.

BHP and Rio have yet to explain to their shareholders and the Australian people the true extent of their tax liabilities. After its taciturn performance at the Senate inquiry, BHP was forced to concede that the ATO had billed it for another $522 million in top-up taxes. Rio also admitted that it was obliged to pay $107 million to resolve outstanding ATO claims. In addition, for years these companies have sat on material disputes with the ATO and progressively taken up provisions through time so that they could pay the eventual bill without having to disclose it in any single year. This attitude thumbs its nose at the continuous disclosure laws demanded of every Australian listed company.

Forensic investigation of the BHP and Rio accounts has revealed that both companies began to pay withholding tax from 2011. These taxes are likely to have been levied by the ATO for profits made on Australian operations, exposing an additional loophole that the miners were exploiting. This finding is damning for the management of BHP and Rio during 2010. If these withholding taxes were levied by the ATO, it is likely that BHP and Rio were being audited and tax evasion disputes were being settled out of public view. This was at the same time as the miners had the audacity to complain about the high rate of taxes that they were not even paying during the debate around the MRRT.

Part of the motivation for BHP and Rio's questionable tax practices lies in their dual-listed structure. Both companies are partly owned by Australian and UK parents and under the dual-listing rules must pay equal dividends to shareholders in each jurisdiction. Thanks to the mining boom, the Australian parent of each company has performed exceptionally well, but, due to poor investments overseas, the performance of the UK arms has been dismal. In order to equalise dividend payments across jurisdictions, BHP and Rio have to remit an appropriate share of the profits from the Australian operations to the UK. With the intervention of their Singapore marketing hubs, both companies have avoided paying their fair share of tax in Australia, where the economic activities generating these profits takes place.

BHP and Rio have obvious incentives to aggressively minimise their tax obligations in Australia. When company executives are remunerated according to the outperformance of their shares relative to the market, any practices which maximise market share, dividends and boost share prices would appear to satisfy executives and shareholders alike. That BHP and Rio have stretched Australia's tax laws is undeniable. The impact of their aggressive minimisation is yet to be fully realised, but they are part of a scourge which has seen tens of billions of dollars in tax revenue funnelled out of Australia over the past decade. Despite this, the findings of the Senate inquiry give these companies a chance to come clean, reform their practices and re-join the majority of Australian businesses who pay their fair share of tax in Australia.

It is legislation like this that shows the Liberals are all about shifting the tax burden away from corporations and onto working families. And fighting legislation like this is one of my driving motivations for remaining in this place. The fight for a more prosperous and inclusive Australia depends so much on the decisions we take in reforming our tax system. We must have a tax system that rewards the hard work of millions through a progressive personal tax and transfer payment system, one that drives investment and encourages enterprise through a competitive and enforceable company tax regime and ensures that we make the most of the opportunities that arise in the Asian Century. I know as a consequence of these remarks today I will be targeted by those who have profited enormously from these loopholes and shady practices. I say to them this will not deter me from arguing for a tax system which is in the national interest.

We must have a tax system which nurtures a modern market economy, where the light is shone on the power of vested interest and their power to influence public policy is kept in check. The challenge of cleaning up the corporate tax minimisation is being constantly camouflaged by those who will go to any lengths to impose a higher and broader GST on the Australian population. That is not reform or wealth creation; it is a recipe for lower growth and higher wealth concentration, and that is why ordinary Australians will never accept it.

The GST hits everybody, but its incidence is particularly acute for households on low and fixed incomes. After compensation is paid to these households, historical experience shows that governments collect a lot less taxation revenue than they anticipate. In fact, the original GST package introduced by Treasurer Costello ended up costing the government $21 billion after compensation was paid.

I say to the coalition, stop thinking about campaign donations and give ordinary taxpayers the respect they deserve by ensuring everyone pays their fair share of tax.

Matt Williams (Hindmarsh, Liberal Party) Share this | Link to this | Hansard source

I rise to speak on the Tax and Superannuation Laws Amendment (Better Targeting the Income Tax Transparency Laws) Bill 2015 and on the very sensible and worthy amendment of the member for Fraser. The current bill, as it stands, I think, is basically punitive, illogical and emotion driven. It is out of the politics of envy type of thinking targeted at people and companies, private companies, who are successful. It also does not actually raise any extra taxation funds but it just reflects the politics of envy and a desire to name and shame individuals for doing what every company tries to do—that is, be successful and make a profit. Profit is not a dirty word but it seems like there is a sentiment behind this legislation we are attempting to amend that will fix everything by naming and shaming.

At the moment, private companies, once they reach an income of $100 billion, supply their private information to the Australian tax office and it becomes public. Total income, net income after costs and income tax payable being published for individual private companies is the current status. This legislation invades those private companies' sensitive personal business information. It lets their competitors know very important information. Public companies currently have all that reporting in their company statements. This is not addressing public companies; this is addressing private companies. That is why people keep them private because there are some people who want to maintain their privacy. There is nothing new that they have to report to the tax office—that goes without saying—all companies have to do that. But what is the point of publicly naming their income, their costs and all their business things to the general public? I just cannot see the point of it—this idea that by naming and shaming people, you will get more tax out of them.

If you are a private company, you have to be operating and governanced in Australia. The regulation of the company has to be within Australia so all the reporting is made to the tax office. Everyone is aware of thin capitalisation, transfer pricing, marketing hubs and the transferring of payments that the member for Lilley just spoke about, but that is not what this legislation is all about. This is about invading private citizens' information, which is given in confidence to the tax department—correctly given to them—and it changes the principle that has been around for over 70 years. If you are a holding company or a company that is controlled offshore, this does not excuse you. If you are an overseas controlled entity, you still have to report. This information can become public, but this is about Australian citizens and I think it is an offence that we have it. This amendment will address an essential issue of privacy for hardworking Australians.

Bert Van Manen (Forde, Liberal Party) Share this | Link to this | Hansard source

Thank you, Acting Deputy Speaker Vasta; just to get the order back on track. It is with pleasure I stand to speak on the Tax and Superannuation Laws Amendment (Better Targeting the Income Tax Transparency Laws) Bill 2015.

Dr Chalmers interjecting—

It is good to see my good friend the member for Rankin, as usual, contributing to the debate. On 4 June 2015, the government released exposure draft legislation for comment that would exclude Australian private owned companies from the ATO's obligation to publicly disclose certain taxpayer information. This legislation was originally introduced by those opposite and was opposed by the coalition when we were in opposition. It requires the ATO, from later this year, to publicly disclose information about all companies with a total income of $100 million or more. This legislation ignores the key concerns of key stakeholders and will have damaging commercial and reputational ramifications for the individuals and companies involved.

The previous Labor government's legislation would not have resulted in the ATO raising any additional revenue, as taxpayers must already provide the ATO with all the information relevant to making an assessment of their tax liability. If unamended, the current legislation, potentially presents significant risks to Australians by undermining taxpayer confidentiality and by exposing companies to greater commercial and security risk. Under the previous government's laws, towards the end of this year the ATO would have had to release the company's name and ABN, its total income, its taxable income and its tax payable. All this information published would be sourced from the entity's tax returns. One of the great things about our tax system for a private company or a private individual is the notion of confidentiality. This is central to the government's concerns about the existing legislation and one of the reasons we opposed it when we were in opposition.

This measure has the potential to undermine the confidentiality of taxpayer information, a fundamental tenant of Australia's tax system. As noted by the coalition in the Senate Economics Committee dissenting report:

Confidentiality of taxpayer information is fundamental to the administration of taxation law. Confidentiality is protected because ensuring the privacy of sensitive information, including commercial information, goes to public confidence in the administration of taxation law.

This is an issue that several Labor members have highlighted previously yet failed to apply in these particular circumstances. The honourable Leader of the Opposition in 2010 said:

The inconsistencies and ambiguities associated with the existing law have the potential to undermine its primary purpose—that is, to provide clear protection for taxpayer information. The taxation law has long recognised that such protection is fundamental to ensuring that taxpayers maintain their confidence in the operation of the tax system.

The importance of taxpayer confidentiality is reinforced by the OECD in Keeping it safe: the OECD guide on the protection of confidentiality of information exchanged for tax purposes. It says:

… taxpayers need to have confidence that the often sensitive financial information is not disclosed inappropriately …

Secondly, there is the issue of commercial risk. It has the potential to provide competitors, suppliers and upstream purchasers of goods or services of private companies with sensitive commercial information. As noted by the Commissioner of Taxation, Chris Jordan:

I think if you look at the history of the matter, it was really for multinational companies operating here, disclosing quite low revenue …

All of us in this place would support the notion that it is important that companies and individuals across our country pay the appropriate levels of tax.

There is also an issue around    personal and reputational safety concerns. During Labor's consultations in 2013, business stakeholders expressed the concern that the measure posed a risk to compliant taxpayers being unfairly targeted by activists and having their reputation tarnished. As the chairman and CEO of Godfrey Hirst Australia, Australia's largest carpet manufacturer, noted:

By publishing extremely limited information selected specifically to put the targeted taxpayers in the worst possible light, it invites (incites) public action against the target taxpayers and potentially those associated with them. There are national and international examples of such actions against companies involving physical damage, reputational damage and commercial boycotts.

A similar disclosure regime was also abandoned in Japan in 2005 after a recommendation from the Japanese Tax Advisory Commission, which found that there were 'various reports of the disclosure being a factor in causing crimes and harassment'.

Another issue is the effectiveness of the law. Around this, the government also has several concerns regarding the incomplete nature of the information. It ignores the fact that personal income tax is payable on the company's after-tax profits by its shareholders, who are often on the top marginal rate of 49 per cent. The information published is incomplete and misleading as it omits any reference to other taxes that private companies must pay, including the array of state taxes, fees and charges—from payroll tax to stamp duties and land tax, to local rates and charges, as well as federal fuel tax and levies. The publication of this information to a wider audience will not in any way enhance the ability of Australia's taxation authorities to collect additional revenue.

The 2015-16 budget also looked at the issue of multinational tax avoidance and produced a package including a range of domestic elements, including doubling penalties for large companies engaging in tax avoidance and profit shifting. The government is also actioning four key 2014 G20/OECD base erosion and profit shifting recommendations, including: implementing the OECD's country-by-country reporting from 1 January 2016, requiring multinational companies to report the amount of revenue, profit, income tax and economic activity annually for each jurisdiction in which they do business. Also, we are looking at incorporating the OECD's treaty abuse rules into our treaty practice. We are asking the Board of Taxation to consult on the implementation of the OECD's antihybrid rules. Importantly, we are commencing the exchange of information on preferential tax rulings through the ATO.

Country-by-country reporting to tax administrations will require large multinationals to report annually for each jurisdiction in which they do business the amount of revenue, profit, income tax and economic activity. For the first time, tax administrations will get a global picture of multinationals' operations. This is a significant step in improving transparency for tax administrations.

Every company that operates in Australia, whether private, public or multinational, is expected to meet their tax obligations. I am proud of our government's action on tax transparency. This government is committed to combatting tax avoidance, through the implementation of well-considered and balanced measures.

Pat Conroy (Charlton, Australian Labor Party) Share this | Link to this | Hansard source

I am pleased to speak on this bill, and I am pleased that the Labor Party is supporting transparency for Australian companies regarding their taxation arrangements. This stands in stark contrast to the pathetic and chaotic coalition government who as always are governing in the interests of a wealthy minority. I hazard to predict they may be electing one of those wealthy minorities as the next Prime Minister of the country in the next 24 hours.

The priority of this government is to ensure the interests of this minority are satisfied, and this bill represents a genuflection to the coalition's true masters. Working families are not a priority for this government. Pensioners are not a priority for this government. Growing the economy and employment is not a priority. Investing in education and skills to ensure our future prosperity is not a priority. Ensuring we have great health and disability insurance systems is not a priority. This bill demonstrates again that the priority for the Liberal and National parties is whatever a few wealthy Australians Australia want. This legislation should not pass, as it lessens the improved transparency introduced by the previous Labor government.

The current Prime Minister declared on election night 2013 that Australia was 'open for business'. We know now that he meant that quite literally, and this legislation is clear evidence of a government governing on behalf of a wealthy minority, with no interest in the concerns and aspirations of the of tens of millions of working Australian's that should be their first priority.

Before addressing the flaws in this disgraceful bill, I want to draw to the attention of the House the proud record of the Labor Party in tackling tax avoidance when we were in government. In government we closed loopholes in Australia's transfer pricing rules and antiavoidance provisions. The coalition voted against this. We cracked down on companies overvaluing assets in international transactions. The coalition voted against this. We signed 28 bilateral information sharing agreements with other nation's tax agencies. The tax commissioner has said that better information-sharing with other countries about multinational companies resulted in $730 million in additional tax being collected between 2012 and 2014.

We provided the ATO with $109 million to establish a specific audit program looking at the use of marketing hubs. This program has already resulted in 13 companies being given revised tax bills, worth $250 million. And I want to proudly associate myself with the comments from the member for Lilley regarding the use of marketing hubs in his contribution on this debate.

We amended the Taxation Administration Act to require the ATO to publish information regarding the income, taxable income and tax paid by companies earning over $100 million from 1 July 2015. This is a very substantial record of tackling tax avoidance. Our record should be compared to the government's regarding tax avoidance. One of the very first acts of the Abbott government was to reopen offshore loopholes worth $1.1 billion.

The measure we are debating, regarding the publishing of information regarding the tax that companies pay, was intended to discourage aggressive tax practices, to better inform public debate about tax policy and to assist in combatting the risk of erosion of profit sharing. If this bill does not pass, the first publication of this information based on the 2013-14 financial year will occur later this year.

The current system covers about 2,000 of Australia's largest companies. In this bill the government is seeking to limit the scope so that the laws no longer apply to Australian-owned private companies. It would be interesting to know how many of those companies are Liberal Party donors.

The laws will continue to apply to multinational companies operating in Australia and to Australian public companies. This bill will exclude companies earning more than $100 million from the transparency provisions if the firm is an Australian resident private company, is not a wholly-owned subsidiary of a foreign corporate group and does not have a level of foreign shareholding greater than 50 per cent. Companies that are not corporate tax entities or that report a total income of less than $100 million for an income year will continue to be outside the operation of these laws.

The bill must be opposed because this parliament should not be limiting transparency and the ability of Australians to access information about large and powerful corporations. It is a damning indictment on this government that they are seeking to limit this transparency. There is a very clear distinction between the Labor Party and the coalition: the Labor Party stands for transparency and the coalition stands for secrecy. It is not in the interests of the Australian taxpayers to limit transparency in the area of corporate taxation. The excuses we have heard from the government for why they are doing this are ridiculous. Apparently it is to reduce the risk of kidnapping of wealthy individuals, yet not a single request has been made to the government for this action. An FOI lodged by the Labor opposition revealed not a single communication to the government from a high-wealth individual or from someone who owned an Australian private company saying, 'Please change this law because we are at risk of being kidnapped.' It is a complete furphy designed to reduce the transparency in the Australian taxation system. My question is: what do the coalition have to hide? What do they have to hide in preventing the Australian people from knowing what companies with incomes over $100 million are paying in tax? What is so wrong with that information being out in the public arena?

As I have said previously, this bill tells us what the priorities of the Australian government are. In the area of taxation the government's priority is to limit transparency. The current Treasurer—and he may be Treasurer for less than 12 hours, so it would probably be more accurate to describe him as 'the Treasurer for the time being'—has talked tough on multinational tax avoidance for a long time now. I would have thought cracking down on multinational tax avoidance was a far greater priority than cracking down on corporate transparency—but not for this government. This bill sends a very clear message: 'We are looking after our corporate mates and we have no interest in sensible and rational tax policy.'

Over the last 12 months, through a Senate economics committee investigation, we have seen some very disturbing information about the taxation practices of multinational corporations in this country. I would submit that, if this government were intent on raising revenue and intent on increasing the efficiency and equity of the taxation system, then that is where they should be directing their efforts, rather than attempting to reduce transparency in the taxation system. Unfortunately, throughout history the coalition governments—and the Liberal Party in particular—have deep form on this. Let us not forget that in the 1970s they turned a blind eye to the bottom-of-the-harbour tax avoidance schemes that were rife in the late seventies and early eighties. Those schemes robbed the Australian government of millions, if not billions, of dollars of rightful taxation revenue that the Fraser government did nothing about. It is perhaps ironic that a royal commission into a corrupt trade union—and let us be frank about it, the painters and dockers were corrupt—was the only way we found out about the bottom-of-the-harbour schemes and the illicit activities of so many tax evaders in Australia. The Fraser government was very happy for those tax evaders to continue in their tax evasion until the Costigan royal commission meant they could no longer look the other way.

Then we look at the eighties, which was the golden era of economic reform when the Labor government introduced the capital gains tax—a very important taxation reform. Much to the chagrin of the Liberal Party, this tax was implemented successfully and was opposed by the coalition, by the Liberal Party, by people like John Howard. Former Prime Minister Howard likes to rewrite history and say that somehow he agreed with every sound economic measure around taxation and every other economic policy in the 1980s, but let us not forget that he opposed these very important reforms. Capital gains taxation was brought in over the bodies of the Liberal Party, yet they now try to claim that they were part of some bipartisan reform agenda in the 1980s. They were not. Their record on taxation is appalling: they are happy to turn a blind eye on tax evasion and tax avoidance, they are happy to oppose sensible taxation measures that raise revenue from people who can afford to pay more tax and they are happy to introduce concessions—let us not forget that when the GST was introduced in 1999 they halved the capital gains tax applying for assets held for more than a year. The coalition government have form on reducing the tax burden on wealthy Australians at the expense of average taxpayers in this country.

We are in a period where inequality is at a 75-year high. We should be looking at ways of making the taxation system more efficient and also more progressive. We need to use the taxation system to tackle that inequality, to raise revenue to fund the much-needed services that a Commonwealth government should be funding and to fund important programs to stimulate economic growth in this period when we have a jobs crisis. But all we have on the other side is a plan to reduce transparency in the taxation system, to let private companies that pay more than $100 million in tax not have to disclose information that is pertinent to their records.

An open and transparent system of corporate tax disclosure is necessary for Australians to have confidence in the tax system and to encourage corporate best practice. This bill seeks to narrow the scope of corporate tax disclosure, and the government is to be condemned for attempting to limit the amount of information Australians can access. Labor hopes that the Senate crossbench will join with us on the side of transparency against this shameful attempt to limit the information available to citizens about our largest companies. The bill is a damning indictment and a clear illustration that the Abbott government is on the side of big business and ignores the interests of working Australians. No matter what happens over the next 24 hours with the chaos in the Liberal party room, no matter whether we still have Prime Minister Abbott in 24 hours or—as is more likely—Prime Minister Turnbull, no matter who is Prime Minister, if they are leading a coalition government, rest assured they will be on the side of the wealthy minority. They will be on the side of those who want to not disclose what tax they pay. They will be on the side of those who want to minimise the tax they pay in this country, because their interests are not the interests of the vast majority of Australians. Their interests are the interests of a wealthy minority and, no matter who leads them, that is the story that is there. That is the truth undermining the coalition government, and that is why ultimately they will be defeated.

Jim Chalmers (Rankin, Australian Labor Party, Shadow Parliamentary Secretary to the Leader of the Opposition) Share this | Link to this | Hansard source

It is my honour and privilege to follow the member for Charlton and the member for Lilley in speaking on the Tax and Superannuation Laws Amendment (Better Targeting the Income Tax Transparency Laws) Bill 2015. I think it says it all about this government in this bill. We have a really neat encapsulation of what this government is on about when you consider this bill. It is out there cracking down on the weakest people in our society, in our community and in the labour market at the same time as it wants to make it open slather for the wealthiest people.

It also says something about the government that they say one thing about corporate tax avoidance at the same time as their actions head in exactly the opposite direction. That is not the first time that has happened in the life of this government. They puff themselves up at the G20 and they say they are going to crack down on tax avoidance at the same time as, in their first mid-year budget update, they reopen $1.1 billion in tax loopholes for some of the biggest companies that operate in Australia. They ask the Commissioner of Taxation to 'double his efforts' on tax avoidance at the same time as they sack 4,700 people from the ATO, including about 1,000 auditors. To cap things off, the Treasurer said, 'Supporting greater tax transparency and information exchange is our best weapon to crack down on tax avoidance,' and today they seek to repeal some key elements of Labor's tax transparency laws. This bill is part of the Liberal Party's campaign to make tax evasion easier for the wealthiest people in our country, at the expense of fairness for everybody else in the tax system.

One fundamental principle of Australia's egalitarian society, as the member for Charlton and the member for Lilley mentioned, is that we should all pay our fair share of tax. This includes all workers and regular taxpayers, but it should also extend to include our businesses and our corporations. Companies should pay their fair share to fund the services, the infrastructure and the legal privileges that they benefit from and that our First World, first-rate economy, in a society like ours, has a right to expect. There are two other important benefits, of course of corporate tax. Firstly, it holds the tax system together; without it, people are more likely to stash their personal income in corporate structures to escape tax. Secondly, it helps to curb inequality, to make sure that the wealthiest in our society pay tax on their income.

Corporate income tax in Australia is at 30 per cent. That is about the middle of the field when it comes to the OECD, but it is below our major competitors, including the US and Japan. Over 850,000 Australian companies lodged a tax return in 2012-13. They paid $67 billion in company tax. This represents about 19 per cent of the total federal tax receipts. So it should go without saying that corporate income tax is an important part of government revenue and an important part of maintaining fairness in the tax system.

Just as in the personal income tax system, corporations are entitled to various legitimate deductions relating to business operations, including things like costs incurred in supplying goods and services, interest payments on borrowed money, depreciation of capital goods, and research and development expenses. That is all fine. There are a whole lot of legitimate deductions to tax expenses, recognising the costs of doing business in Australia and the benefits to the wider economy of businesses operating here.

Unfortunately it is the case, and it has been proven to be the case, that some companies engage in 'aggressive tax minimisation', or even avoidance, to lower or abolish their tax bill. This is often done using less legitimate or questionable deductions against their tax liability, many of which lie in a legal grey area in Australia's tax system. The Senate Economics References Committee inquiry into corporate tax avoidance, led by my friend Senator Dastyari, has uncovered several very questionable corporate tax minimisation cases involving prominent companies operating in Australia. These examples are now well documented. I do not intend to go through all of them, but they show that clearly the current tax system in Australia makes it possible for some of the highest-earning businesses in the country to pay very little tax here, and it is not just a few isolated examples either.

Across the ASX 200, the Tax Justice Network found that the effective tax rate on corporate income was just 23 per cent, compared to the headline rate of 30 per cent. They also found that over the last five years the proportion of income tax from business shrank from 23 per cent to 19 per cent, while the proportion from individuals rose from 37 per cent to 39 per cent. So you can see a shift in the tax base in this country. In other words, the Australian corporate tax base is at risk. It is shrinking while the personal income tax base is growing, and at the same time as the corporate tax base is at risk so too is the Australian people's faith in the fairness of our tax system.

Another important consideration, particularly in our region, is the impact of systematic corporate tax avoidance on other nations. International competition can lead to a race to the bottom on corporate tax, an increase in tax loopholes for international income, and a corresponding decrease in fairness. The IMF has estimated in a paper entitled 'Spillovers in international corporate taxation' that revenue lost in this way from non-OECD countries—so, broadly, the developing world—is about 12 percent of their total corporate income tax revenue. The impact of this on revenue is not a zero-sum game. Some countries gain, but the aggregate effect is a loss, with devastating consequences for our brothers and sisters in developing countries. They are shouldering much of the burden, while a few advanced economies—but certainly not Australia—gouge the gains.

For all these reasons, the political appetite for action on corporate tax avoidance has increased over the past few years, and this is a welcome development. The think tank Per Capita had a 2015 tax survey that found that two-thirds of people in Australia think the best way to raise new taxes for public spending is to crack down on corporate tax avoidance. More than 80 per cent of people believe that corporate tax avoidance affects the fairness of our taxation system. So this is a real issue of concern for most Australians, and it should be a priority issue for this parliament as well.

The Assistant Treasurer in the last Labor government, the great man David Bradbury, is now working at the OECD on some of these matters. With the member for Lilley and the current shadow Treasurer, he did some terrific work in this area—some very courageous work, very intelligent work, characteristically for him. He made such a great contribution in this place. With his urging, and in conjunction with other colleagues, we delivered a whole raft of initiatives in this space. We delivered the Tax Laws Amendment (Countering Tax Avoidance and Multinational Profit Shifting) Bill 2013, which closed loopholes in our transfer-pricing rules. The Abbott coalition, of course, voted against that bill. We amended the Taxation Administration Act 1953 to require the ATO, from 1 July 2015, to publish information about the income and tax paid of companies earning over $100 million. The Abbott coalition voted against that change as well. We passed the Tax Laws Amendment (Cross-Border Transfer Pricing) Bill (No. 1) 2012, which cracked down on companies overvaluing assets in international transactions to distort the tax paid. The Abbott coalition voted against that bill as well. The list goes on of the initiatives that we have taken in this space—28 bilateral information-sharing agreements, and other initiatives that netted something like $730 million in additional tax that would have otherwise been avoided between 2012 and 2014. We invested in the tax office to set up a specific audit program to look at the use of offshore marketing hubs. That has already paid dividends. That $109 million invested netted something like $250 million in extra tax that would have otherwise been avoided. I pay tribute to the Commissioner of Taxation, Chris Jordan, and the work that the ATO can do when we invest in them, give them a job to do and properly resource them for that job.

We have made it clear throughout that we believe big companies should pay their fair share of tax. We have a good track record on all these issues. Since coming to government, the Liberals have taken Australia backwards on corporate tax avoidance. They reopened that $1.1 billion loophole that I mentioned earlier. They cut funding to the tax office and they made very weak changes to the general antiavoidance rules in the last budget. Their amendments were so pathetic that the Treasury could not even cost their impact on the system, so vague were they in that most recent initiative.

The bill we are discussing now is of a piece with other actions of the government—another backward step, reducing corporate tax avoidance. It removes Labor legislation which requires the tax office to publish information about the income and tax paid of companies earning over $100 million a year. The laws currently apply to about 2,000 of Australia's biggest firms, but the government wants to carve out private firms, which make up almost half the companies affected, so it is a really serious attack on the integrity of the original bill and its purpose. The result will be less transparency for Australian taxpayers. The Australian public deserve to know just how much tax our biggest companies operating in Australia actually pay. The overwhelming number of companies who are doing the right thing in this country and creating jobs in our communities right around Australia have nothing to fear from more transparency and more accountability. Other countries are going down this path. Some already have good laws in place; others are writing those laws and designing those laws now.

We had, of course, as the member for Charlton said, all kinds of excuse making from the Assistant Treasurer about the 'politics of envy' and how people would be kidnapped and all this sort of rubbish, which has been subsequently shown as a complete con, a complete smokescreen, to get in the way of the very sensible, very reasonable initiative encapsulated in the Labor bill and being walked back in this legislation that we are discussing today.

If Australian companies are doing the wrong thing and not paying their fair share of tax, it is a very simple proposition from our side. The Australian people deserve to know if and when they are being cheated. Greater tax transparency is one of the fundamental components of the OECD's response to base erosion and profit-shifting, which Australia has signed up to. Greater transparency can help reassure Australians when the tax system is working and can help identify areas where the tax system is not meeting public expectations. What we know from their position on this bill, and overall, is that those opposite are not interested in a fairer, more effective tax system; they are more interested in helping the biggest companies keep secret how little tax they often pay.

In contrast, Labor has a clear policy in response to corporate tax avoidance. First of all, we are opposing this legislation which makes the tax system less transparent and less fair. But we have also released some very detailed plans, worked up in consultation with experts—tax accountants, academics and others. I commend the member for Watson and the member for Fraser for the work they have done. There are four key components in the policy that we have announced, well in advance of an election: a worldwide gearing ratio based on the company's entire global operations; hybrid mismatching, which is standardising our law with other countries so companies cannot double-dip; increased ATO compliance, providing effective funding to the ATO to have the resources to improve compliance; and third-party data matching, which starts the third-party reporting and data matching early to improve compliance among our companies.

We believe that this strategy would earn the budget more than $500 million a year in the budget and raise at least $1.9 billion in its first three years of operation. In addition to the fiscal benefits that the nation would get from ensuring that people are paying their fair share, it would improve the overall fairness of Australia's tax system. It would help people to have the confidence that we want them to have that the tax system treats them in a fair way—so that we are funding the services and the infrastructure that the country needs if it is to grow in a sustainable way.

Labor believes that we need to do more to counter corporate tax avoidance, not less, and that is why I follow the member for Charlton and the member for Lilley in speaking against the passage of this bill.

Craig Kelly (Hughes, Liberal Party) Share this | Link to this | Hansard source

In the two years the coalition have been in government, we have had the enormous job of cleaning up Labor's mess—mess that damaged the economic prosperity of this country, suppressed job growth and retarded wealth creation. We have repealed the carbon tax—something they said would not and could not be done. We have done the same with the mining tax—something they said would not and could not be done. We have restored integrity to the borders of this nation. We have put the people smugglers out of business—something, again, they said would not and could not be done. We have also fixed the shameful unclaimed moneys legislation whereby kids' bank accounts that had no deposit or withdrawal for 36 months were confiscated and taken by the government. We have also repealed enormous quantities of red tape. In Sydney, my home city, after decades of indecision we have made the decision on where Sydney's second airport will be—which will actually be the first airport for Western Sydney. We have made that decision. And we are getting on with starting to build the roads of the 21st century. We are winding back the deficit, despite the fact that over in the Senate they try to block every piece of sensible legislation we put through. These are the achievements that we have had in the last two years.

With the Tax and Superannuation Laws Amendment (Better Targeting the Income Tax Transparency Laws) Bill 2015 we are doing exactly the same thing: cleaning up the mess that the Labor Party created. Back in June 2003 amidst the chaos and confusion in the dying days of the previous Labor government, they legislated an amendment which would require the Commissioner of Taxation to publish—publicly—the taxation records of all private companies with $100 million in turnover. Private companies are private for a reason. The previous Labor government legislated that they must declare all that information publicly. What for? What were they trying to achieve? This money is all recorded by the Taxation Office. There is no argument that these companies have not paid the correct amount of tax; that is done by the Taxation Office. It is simply a policy of envy—an attack on the integrity of these companies.

Why is this so detrimental to our nation, and why do we need to change it? The first reason is that it has always been a fundamental principle of our nation and our laws that a private individual's affairs with the Taxation Office are kept confidential. If you require private companies to declare their taxation records, you are in effect requiring private individuals to publish their private tax affairs. This is simply contrary to all good taxation policy. But that is what the previous Labor government wanted to do. There is some urgency in this legislation, because the first of these records would have been published by November 2015.

The second reason why you cannot have private companies having to publicly declare their taxation records is commercial risk. There are a few reasons for this. In this country recently, because of our concentrated markets—because the failure of our competition law has allowed market sector after market sector to become overly concentrated—we have seen many large companies misuse their bargaining power. We saw it recently with the Coles supermarket chain when it demanded payment from suppliers that it was not entitled to by threatening harm to suppliers that did not comply. When you demand a payment for something you are not entitled to and you threaten harm, to me that is nothing other than extortion. That is what we have in the commercial relationships of companies in Australia: large companies misusing their bargaining power. Coles did so because of purported 'profit gaps' from the supplier that had not been subject to a prior agreement. The whole problem with what Coles did is that they did it post contract. That is what was unconscionable conduct. They could have engaged in exactly the same conduct—made those demands of those companies to fill their profit gaps—if they had done it pre contract. Nothing under our laws would have stopped them. Therefore it is very important that private companies be able to keep their profitability, their rate of profit and their rate of return to their private shareholders confidential.

If I am working for one of those large supermarket chains and am sitting down in contract negotiations with a supplier, if I am able to get hold of their private taxation records and know how much profit they made the year before, that gives me the ability to—excuse the unparliamentary language, Mr Deputy Speaker—screw them even further. If you know the profitability of a private company you are working with and you have market power, you can abuse that market power to squeeze more profit out of them. That is the reason why private companies are private. The other reason we see in the retail leasing sector of this country, where large shopping centre owners can use their market power to squeeze their tenants. If they are able to know what the tenants' total sales are as a group and know what their profitability is, when it comes to sitting down for contract negotiations they are able to use that information, which should be kept confidential in the Taxation Office but is made public under the policy of the previous Labor government, to screw those companies' profitability.

The third reason is simply safety and security. What we are asking is to have the main owners of these companies—private companies that are paying the correct amount of tax to the Australian Taxation Office—to declare their records. We live in a hostile society. We have already seen examples of the risk of kidnapping and extortion. These people should not have their private records, their private wealth and the profits they have made the previous year exposed to every villain in the country. But that is what the Labor Party wants to do. If nothing is done—if this legislation does not go through—those records will be made public by the end of November.

But the main reason why this is poor policy is that it dampens entrepreneurial activity. If a private individual has a company that is turning over, say, $80 million to $90 million they will be concerned if they increase their sales and perhaps hit that $100 million threshold that they will have to disclose all the taxation records of that company to the public—to any Tom, Dick or Harry. Why should they? That will deter entrepreneurial activity in this country and that is something that those on that side of the chamber simply do not understand. They do not understand the importance of entrepreneurial activity for the wealth creation and job creation of this country. It is entrepreneurial activity that triggers innovation, new products and services in this nation. We need to do everything to protect, nourish, encourage and reward entrepreneurial activity. But forcing these people to make public their confidential taxation records will dampen that entrepreneurial activity.

We have seen how harmful this can be to job creation. Take the example of New South Wales versus Victoria. We have seen a change in government in Victoria, with a left-wing socialist government coming in. It has ripped up contracts and dampened entrepreneurial activity in that state. We have seen the New South Wales government, with a more free market Liberal government, the Liberal coalition government, that understands the importance of protecting and nurturing entrepreneurial activity. And guess what we have seen in job creation since the start of this year? In New South Wales, where that entrepreneurial drive and activity is encouraged, rewarded and respected we have seen the creation, since January this year, of 122,000 full-time jobs. Guess how many were created in Victoria. Have a guess. If you guessed zero, as compared to New South Wales with 122,000, and thought that Victoria had created zero jobs, you would be wrong. In fact, in the same time that 122,000 full-time jobs have been created in New South Wales, Victoria has lost over 6,000 jobs. Victoria has gone backwards because its government does not understand the importance and value of entrepreneurial activity, by ripping up contracts and giving power to the unions. Why would someone want to go and invest their money in Victoria with such a government? Is it any wonder we have seen job creation in New South Wales and a lack of jobs in Victoria?

That is why this legislation needs to pass and why it is good legislation. We need to ensure that businesses in the private sector can invest and run their companies, do all the reporting they have to do to the Australian Taxation Office—no-one objects to that; they must comply with the letter of the law—but they should not and cannot be made to disclose those records publicly. This was another shameful policy of the previous Labor government. We are fixing it.

This is one of the many hard jobs that this government is doing. There has been much criticism of this government in the press, but what is not realised is the impossible task that we have faced, the absolute policy mess that we have inherited in almost every single portfolio—complete and utter policy disaster. And repairing these things and repairing Labor's mess is hard work. It sometimes makes leaders of this country unpopular. No-one likes to know that they are having something taken off them. It is very easy as a politician or as a government to give people things—it is very easy. It is very easy to borrow the money and have another government down the track pay it off. It is very easy to do that. Each year we have to find close to $14 billion, just to pay the interest on the money that these guys borrowed over six years. That money has to come from somewhere. We face tough decisions in this country.

Leadership in this country is not easy; it is hard. When you make hard decisions it is very easy for every man and his dog to go out there and attack you. But that is what leadership is about; it is about making hard and unpopular decisions. It is about going through patches where you will be unpopular and when your polling results will go down. But, ultimately, good government in this country is about making those hard decisions and, when the election time comes around, the citizens of this country respect you. It is not about popularity; it is not a popularity contest. We continually face some very hard decisions in this country. This bill goes to some.

So far, we have done a lot of hard work, but we still have a lot more hard work to do. We still have to wind back that budget. We cannot continue to go on borrowing money and running up that debt for future generations. We can make all the decisions we want to here but, if Labor and their mates the Greens on the other side of this House, in the Senate, block the legislation, that will make it harder and harder and harder. This is a good piece of legislation. I hope those on that side of the House understand the mess that they created, understand how faulty their ideas are and that they get behind the bill and support it. I commend this bill to the House.

Kelvin Thomson (Wills, Australian Labor Party) Share this | Link to this | Hansard source

On a day on which the government that promised us they would give us a government of adults have become a national laughing stock it is interesting to hear the previous speaker, in this debate on the Tax and Superannuation Laws Amendment (Better Targeting the Income Tax Transparency Laws) Bill 2015, talking about good economic management and the need to deal with deficit and debt.

Having talked up a storm about deficit and debt this is a government that now wants to run around talking about personal income tax cuts. It is remarkable. The truth is that if we have an issue to do with deficit and debt then we need to fix that rather than seek to lead people up the garden path with undertakings concerning personal tax cuts.

In terms of dealing with issues to do with deficit and debt, we need to have a proper crackdown on tax avoidance, which has reached very great dimensions indeed. One aspect of reducing tax avoidance has been giving the tax office the power to publish details of the taxable income and tax paid by companies with annual turnovers of $100 million or more. I understand that there are about 2,300 of them. The tax office itself has said that some private groups linked to wealthy individuals with complex tax structures display more aggressive tax behaviours and characteristics. The tax office says that wealthy individuals and their private trusts often have complex arrangements and utilise flow-through entities such as trusts and partnerships in addition to companies.

On average, high-wealth individual group structures consist of five companies, five trusts, one self-managed super fund and one partnership. Amazing. But the government wants to water down Labor's transparency legislation. We will not support legislation that hides this information and we hope that the crossbenches will not support it either.

Liberal and National Party MPs have claimed that revealing information about private companies would, effectively, expose the personal wealth of those who own them, which could expose them to kidnapping. This is laughable. The information relates to companies, not personal tax details, and only those above $100 million. You do not have to be an especially bright kidnapper to work out who the directors of our largest companies are. If this argument holds any water, why haven't we scrapped the Business Review Weeklyrich list on the same grounds? I salute Dick Smith, who, notwithstanding his personal wealth, has said that, not only does he support this kind of transparency in this legislation; but he would like to see even more transparency. He says that wealthy people should be proud to disclose the amount of tax that they pay.

Treasurer Hockey once said:

… the challenge is that everyone in Australia has to help to do the heavy lifting in the budget, because if the burden falls on a few, the weight of that burden will crush them.

Everyone is going to have to make a contribution …

And he expressly nominated big business. Unfortunately, he has since backed away from action to tackle companies that avoid tax by shifting billions of dollars in profits between Australia and their international subsidiaries. His paltry effort at tackling multinational tax avoidance is worth a total of $30 million over four years—less than one-sixtieth of Labor's multinational tax avoidance package. After promising to reap billions from tax integrity measures, the Treasurer's May budget barely scratched the surface. That is one of the reasons why he has lost public support and that is one of the reasons why he will not be Treasurer for much longer.

Frankly, his budget effort was not good enough, for a number of reasons. First, the government said that it would act to stop tax avoidance by profit shifting across international borders. They said they were going to do something about it. Second, the issue of global corporations loading up subsidiaries with debt so they can claim to have made all their profits in low-tax jurisdictions was a major topic of discussion at the G20 conference, where countries were urged by civil society to stop global tax avoidance, and Australia needs to be part of the international effort to stop this. Third, the government was crying poor in releasing its Mid-Year Economic and Fiscal Outlook in December 2014, saying that it had suffered a revenue downturn and would have to cut spending.

Before the government taxes the students, the pensioners and the unemployed, it should make sure that multinational corporations are paying their fair share of tax. The Tax Justice Network has revealed a lot of detail about this issue. For example, they have revealed how Volcafe, the world's second largest raw coffee trader, with a market share of 13 per cent, managed to minimise the tax it paid through the use of the tax haven of Jersey in the English Channel. It would buy coffee from small cooperatives in developing countries at the world market price and then sell the coffee beans to its own subsidiary, Cofina, at a similar price. In that way it made next to no profit in the developing countries and paid almost no tax to the governments of the developing countries it operated in, cheating them out of much-needed tax revenue. Cofina then sold the coffee beans to the final customers such as Nestle or Starbucks. The money from the sale flowed into Jersey, where Cofina paid no tax on it. In 1998 Cofina sold US$408 million worth of coffee yet only made a gross profit of US$27 million. It was a postbox company with only one or two administrative staff. The coffee beans themselves travelled directly from the developing country to the final customer in the developed world. They never passed through Jersey. The company documents showed that the firm went out of its way to keep everything top secret, with Volcafe employees told to identify themselves as Cofina staff even though they were not.

This demonstrates the way in which this is a worldwide problem. I remember meeting with representatives of the Micah Challenge in Canberra in June last year as part of their Voices for Justice campaign and being briefed about the problems of tax evasion by multinational corporations, which deprived developing countries, on a significant scale, of vital revenue for poverty reduction and sustainable human development. Christian Aid has pointed out that, since 2008, developing countries have lost more than US$160 billion through multinational corporate tax evasion. This amount is actually bigger than the amount that these countries receive in aid, which amounted to US$120 billion in 2009.

One of the main ways tax evasion occurs is through transfer pricing, which is when goods and services are sold between subsidiaries of the same parent company. These goods and services include things like intellectual property rights, management services, branding and insurance. The sales take place within the same multinational company. As long as the subsidiaries of the company charge each other a fair market price known as an arm's length price, such transactions are perfectly legitimate. Tax is paid where it should be: the place where the business is actually taking place. However, by artificially altering the price, the company can increase its costs in a location with high taxes and transfer revenue to a location with low taxes—often a tax haven. This is known as transfer mispricing, and, with 60 per cent of world trade now taking place within rather than between multinational corporations, there are substantial opportunities to manipulate transactions to reduce tax. This is especially the case for things like brands and management services. To detect if a company is distorting the price of a particular good, you can compare it with the normal price of the good traded between two unrelated companies. But, when it comes to things like branding rights and management services, it is much harder to determine if the price being charged is a fair one. It has been estimated that Australia lost 1.1 billion euros through transfer mispricing to the EU between 2005 in 2007 and US$1½ billion in tax revenue through transfer mispricing to the US in the same period.

It is not just Australia; it is right around the world. In 2007 Bangladesh lost an estimated US$172 million in tax revenue as a result of trade mispricing of transactions with the EU and the US. Most of these losses occurred in the knitting and crocheting apparel industry. The Bangladesh government had invested technical and financial resources to facilitate the growth of this industry yet lost out on much-needed tax revenue. Micah Challenge believes that the government should require all multinational corporations registered in Australia to provide a worldwide combined report, including a country-by-country breakdown of their assets and their tax paid, and that we should have the G20 adopt this country-by-country reporting as standard.

The issue of multinational profit shifting is about fairly sharing the revenue burden. When a handful of big businesses shift their profits offshore, it hits the federal budget's bottom line, and, when a small number of big firms do the wrong thing, it is the great majority of businesses large and small, the self-employed and the PAYG taxpayers who end up paying more than they should. We do not need that kind of harmful economic activity which encourages firms to focus their energies on getting their accountants to play with loopholes that might allow debt-shifting within organisations, not in order to improve the productive capacity of the economy but in order to find the next loophole in the tax system.

We need to pay attention to the problem of financial inequality, which has been rising in recent times. There was a report in June last year called Advance Australia fair? What to do about growing inequality in Australia, written by Bob Douglas, Sharon Friel, Richard Denniss and David Morawetz, which finds:

In the wake of a declining resources boom, there is a growing gulf between those in the top range and those in the lower ranges of wealth and income distributions.

That report warns that inequality is increasing rapidly in Australia, posing dangers to 'community wellbeing, health, social stability, sustainable growth and long-term prosperity'. Given that, this is the last time that we need the government to be giving away money to firms with multibillion dollar profits while taking money away from those who can least afford it.

Australia's egalitarian values demand that we have a smarter approach on multinational profit-shifting. The union United Voice, in collaboration with the Tax Justice Network Australia, released in September last year a groundbreaking report, Who pays for our common wealth? Tax practices of the ASX 200, which revealed that 29 per cent of Australia's 200 largest listed companies pay an effective corporate tax rate of 10 per cent or less, and that 14 per cent have an effective tax rate of zero per cent. This translates into an estimated loss in annual revenue of $8.4 billion. That is a matter of very considerable concern.

The 2014-15 federal budget eliminated 3,000 jobs in the Australian tax office, and things like this greatly reduce the ATO's capacity to fight tax evasion by wealthy individuals and multinational corporations. Regrettably, what happens is that the employees who accept redundancies and leave are the ones the ATO can least afford to lose. Even worse, some of them accept private sector offers which see them put their skills and experience into increasing the budget deficit rather than reducing it. We should tackle debt-shifting, close tax loopholes and resource the tax office to properly tackle artificial and contrived business structures. The tax office could help its own cause by revealing details of the worst corporate practitioners of tax avoidance. Taxpayer privacy for individuals is of course legitimate, but large corporations cannot make the same claims with a straight face. They are required to report much of their financial affairs to their shareholders and to the market already.

Michael West, writing in The Age, has drawn attention to the low visibility of the financial statements of foreign multinationals operating in Australia. He says that viewing the statements of a foreign multinational is expensive and not very informative:

While proper audit procedures are in place in the sphere of ASX companies, there is a widespread failure of the audit profession and regulators in the foreign multinational space: accounts which don't stack up, myriad failures of disclosure, and a slew of failures to adhere to Australian accounting standards – and therefore the Corporations Act.

We need to have greater scrutiny in this area. We need to make sure that parliamentary committees like the Senate Economics References Committee hear from the real decision makers and make them account for their decisions. I think our parliamentary committees should make a point of explaining and examining the real decision makers.

A Labor government will shut down loopholes which allow big multinational companies to send profits overseas, ensuring that they pay their fair share of tax. According to the Parliamentary Budget Office, our plan will bring at least $1.9 billion back to Australia in tax from big multinationals over the next four years and raise $7.2 billion over 10 years as these tax loopholes are closed. This is the sort of approach we need. We need improved transparency and data matching, and we need a genuine commitment to tackling tax avoidance rather than the legislation before the House.

Steve Irons (Swan, Liberal Party) Share this | Link to this | Hansard source

I too rise to speak on the Tax and Superannuation Laws Amendment (Better Targeting the Income Tax Transparency Laws) Bill 2015 and the amendment to the second reading moved by Dr Leigh. I congratulate those on this side of the House who have spoken in support of the bill as we put it to the House. As we know, the previous government legislated, in June 2013, to require the Australian tax office to publish certain taxpayer information of corporate tax entities with an income of $100 million or more.

I was just listening to the previous speaker. He is not a bad bloke, but listen to the arguments he puts forward. He just has a total misunderstanding of corporations and finance and how to run a business. He wants to put all this regulation and all this exposure and transparency into the corporate sector, but is he prepared to do it for the unions? No. They do not want the unions to pay any tax. They do not want the unions to be transparent. But they want to go after those who build the wealth and those who contribute to the wealth of this country and say, 'We're going to take it to you.'

He came up with an estimate of $1.9 billion over four years. Now, if you have an estimate from anyone on that side of the House, you cannot believe it. Currently we are paying nearly a billion dollars a month in interest purely because of their reckless governing of the economy in the six years that they were in government. They stand up here, and they get on their soapboxes and take the moral high ground, but they are not prepared to make the unions pay tax or make them transparent. Let us get back to the point of this discussion, anyway. We might as well get back there; I have had the crack there!

The information that was legislated to be published included an entity's name, the entity's Australian business number and the entity's total income, taxable income and tax payable. The purpose of this government's amendment bill is to ensure that the release of information by the Commissioner of Taxation, as I described earlier, does not jeopardise the privacy, personal security and market environments of Australian-owned private companies. I do not know whether those on that side of the House understand the difference between private and public, but in the first instance, for corporate private entities, market security and corporate security would be paramount.

Mr Deputy Speaker Goodenough, I know that you ran a successful business, as I did too. Part of running a successful business is also the privacy and security; the intellectual property; and the information that your business makes its daily decisions on, called the profit-and-loss sheet and the balance sheet. That is private information. That is private information that you have earned, and you should decide what happens with that information. Obviously, it has to go to the ATO, but private companies are not required under the current law to show or publish that sort of information—intellectual property information and profit—and they should not have to, either, because it is their information, which their opposition will use and public companies will use to destroy their market share and destroy their profitability.

As the Assistant Treasurer and the Treasurer have said before, this government is committed to combating tax avoidance and is on the way to implementing well-considered and balanced measures, which I must say would provide those private companies in that group of companies targeted by the previous government with a sense of relief about the welfare and the profitability of their companies. The coalition government have several concerns—well-founded concerns—about Labor's legislation, which is why we have moved to introduce legislation to exempt Australian-owned private companies.

As I said before, this government is committed to combating tax avoidance. Australia was the G20 president in 2014. We led the global response to tax avoidance by multinational companies and ensured that it not only was on the agenda but remained at the top of the agenda. The Assistant Treasurer has stated:

Under Australia's leadership, the first of the OECD/G20's base erosion and profit-shifting recommendations were delivered last year.

The budget continued the government's strong international leadership by actioning the 2014 OECD/G20 base erosion and profit-shifting recommendations on country-by-country reporting, anti-hybrid rules, harmful tax practices, and treaty abuse rules.

Australia will implement the OECD's country-by-country reporting from 1 January 2016. We are one of the first countries to commit to implementing it.

Country-by-country reporting to tax administrations will require large multinationals to report annually for each jurisdiction in which they do business the amount of revenue, profit, income tax and economic activity. For the first time tax administrations will get a global picture of multinationals' operations. This is a significant step in improving transparency for tax administrations.

Earlier I spoke about the government's concerns about the Labor government's laws, and confidentiality was and is one of the big risks. Labor's legislation has the potential to undermine the confidentiality of taxpayer information, a fundamental tenet of Australia's taxation system.

As noted by the coalition in its Senate Economics Legislation Committee dissenting report in June 2013:

Confidentiality of taxpayer information is fundamental to the administration of taxation law.

Confidentiality is protected because ensuring the privacy of sensitive information, including commercial information, goes to public confidence in the administration of taxation law.

That confidence is vital for companies, as I stated before. The confidentiality, the intellectual property, the competitiveness in the market—the confidence in the administration of the tax law is vital.

This is an issue that several Labor members have highlighted previously themselves yet failed to apply in these circumstances. In the Hansard of Wednesday, 29 September 2010, Bill Shorten said:

The inconsistencies and ambiguities associated with the existing law have the potential to undermine its primary purpose—that is, to provide clear protection for taxpayer information. The taxation law has long recognised that such protection is fundamental to ensuring that taxpayers maintain their confidence in the operation of the tax system.

Also there was Chris Bowen, who did a media release on 13 March 2009. In that media release, he stated:

The Government affirms the importance of maintaining a high level of protection of information provided by taxpayers …

Then there was Wayne Swan, who did a doorstop interview in Brisbane on 24 January 2013. He said:

… I would have thought that everyone out there that was concerned about good public administration would see the common sense in observing what the Tax Office says about confidentiality provisions because they are important to every Australian and it's not a decision of the Government, it's the decision of the Tax Office.

The importance of taxpayer confidentiality is reinforced by Keeping it safe: the OECD guide on the protection of confidentiality of information exchanged for tax purposes, which says:

… taxpayers need to have confidence that the often sensitive financial information is not disclosed inappropriately …

There is also the commercial risk factor. It has the potential to provide competitors, suppliers and upstream purchasers of goods or services of private companies with sensitive commercial information. As you know from your private company, Deputy Speaker, in my private company, when I ran it, the last thing I wanted my competitors, my suppliers and my clients to know was the profit margins I was making. That was highly sensitive information and, obviously, would be used in commercial negotiations with all of those stakeholders in the running of my company and the handling of my market environment. Again, the commercial risk in the Labor proposal was enormous.

In the words of one of Australia's best known food manufacturers, details such as their total income and tax payable are:

… not otherwise available to our competitive suppliers which has the potential to be used in a manner that will cause real financial damage to our business.

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

Mr Deputy Speaker, I seek to intervene.

Ian Goodenough (Moore, Liberal Party) Share this | Link to this | Hansard source

Is the member for Swan willing to give way?

Steve Irons (Swan, Liberal Party) Share this | Link to this | Hansard source

I will take your question; whether I will answer it or not is another matter.

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

Perfectly understood. I wonder if the member for Swan might inform the House whether or not the private company of his own, to which he was referring, had a turnover in excess of $100 million.

Steve Irons (Swan, Liberal Party) Share this | Link to this | Hansard source

That is confidential information. That is part of our system—taxpayer information is confidential, so that question is irrelevant. I am talking about the confidential. You are talking about an arbitrary number that you have imposed as part of your legislation, and that arbitrary number is irrelevant because it is a private company and should be treated as a private company. Hopefully, that answers your question.

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

No.

Steve Irons (Swan, Liberal Party) Share this | Link to this | Hansard source

I am sure it did not, but we were not discussing the issue of the arbitrary figure that Labor came up with as a legislation point. What is the difference between a $99 million company and a $101 million company? Probably a good accountant. I say to the member for Fraser that I appreciate him asking that question.

I move on to personal and reputational safety concerns. Particularly during Labor's consultations in 2013, business stakeholders expressed concern that the measure posed a risk of compliant taxpayers being unfairly targeted by activists and having their reputation tarnished. Of course, we have seen that before. If the winners of lotto all get rung up and asked to make donations, then the same thing would apply to companies who are actively pursued by professional fundraising companies when they see what sort of turnover and what sorts of margins and profits they make.

Godfrey Hirst Australia made a submission to the Treasury discussion paper Improving the transparency of Australia's business tax system on 24 April 2013. As the chairman and CEO of Godfrey Hirst Australia pointed out, Australia's largest carpet manufacturer noted that:

By publishing extremely limited information selected specifically to put the targeted taxpayers in the worst possible light, it invites (incites) public action against the target taxpayers and potentially those associated with them. There are national and international examples of such actions against companies involving physical damage, reputational damage and commercial boycotts. Publication of the data will give information that could be detrimental to their shareholders, including to their safety.

A similar disclosure regime was also abandoned in Japan in 2005 after a recommendation from the Japanese tax advisory commission, which found that there were 'various reports of the disclosure being a factor in causing crimes and harassment'. While the Labor Party points to the publications of the BRW rich list as a comparison, a magazine's best estimate of someone's wealth cannot be compared to the release of detailed official taxpayer information by the ATO.

Regarding the effectiveness of the law, the government also has concerns regarding the incomplete nature of the information. It ignores the fact that personal income tax is payable on the company's after-tax profits by its shareholders, who are often on the top marginal rate of 49 per cent. The information published is incomplete and misleading as it omits any other reference to other taxes that private companies must pay, including the array of state taxes, fees and charges from payroll tax, stamp duties and land tax, local rates and charges, as well as federal fuel tax and levies. The legislation does not apply to entities that are not set up as companies, such as private equity and hedge funds that are not widely held trusts—and, as I said before, it does not apply to unions either. The publication of this information to a wider audience will not in any way enhance the ability of Australia's tax authorities to collect additional revenue.

Further to what I have said, the Assistant Treasurer has also said:

Australia has no harmful tax practices, but the ATO has already commenced exchanging information with other tax administrations on preferential tax regimes. This will help the ATO identify secret tax deals provided to multinationals by other countries that may contribute tax avoidance in Australia.

On treaty abuse, the government is acting now to incorporate the OECD's recommendations into Australia's treaty practice so that the multinationals do not exploit treaties to avoid tax. The government is also going further and faster than these BEPS recommendations. The government released exposure draft legislation for the new multinational anti-avoidance law to stop multinationals artificially avoiding a taxable presence in Australia and force them to pay tax in Australia on profits from the economic activities undertaken here. The legislation will be introduced shortly.

The government will also double penalties for large companies that use tax avoidance and profit shifting schemes. The Assistant Treasurer went on to say:

We will close the tax loophole that currently means digital products and services imported by the consumers are not subject to GST. Foreign providers will now be required to charge GST in the same way as domestic providers. The government has asked the Board of Taxation to work with businesses to develop a voluntary code for greater disclosure by companies of their tax information. I expect that the Board of Taxation will look at ways to provide more information to help inform the public about companies' tax information.

In conclusion, I say that I support this legislation introduced by the Assistant Treasurer. The fact is that private companies in Australia need to be protected from all the elements that will come out of releasing their information, which is private and should be confidential because they are not public companies. As we know, under current legislation in Australia, public companies have to disclose because they have public shareholders and they promote their products and promote their share sales through the stock exchange, which private companies cannot afford to do. I commend this bill to the House.

Karen Andrews (McPherson, Liberal Party, Parliamentary Secretary to the Minister for Industry and Science) Share this | Link to this | Hansard source

Firstly, I would like to thank those members who have contributed to this debate. This amendment exempts Australian owned private companies from having their tax affairs publicly disclosed. The passing of this amendment will ensure that there is greater public transparency of the tax affairs of companies but without risking the privacy, personal security and market environments of Australian owned private companies.

Private companies will still be required to provide the ATO with all the information relevant to making an assessment of their tax liability. If the Commissioner of Taxation has concern about the tax affairs of Australian owned private companies he already has the necessary information to take any action. This will not change the ATO's capacity to catch tax avoiders and will not affect company tax revenue collections. Australian owned private companies were swept up by this measure, which was proposed in the context of addressing potential tax avoidance by multinational companies.

As noted by Chris Jordan, the Commissioner of Taxation: 'If you look at the history of the matter, it was really for multinational companies operating here, disclosing quite low revenue.' The government is committed to combating tax avoidance and, while disclosure of taxpayer information can help, any action should be well considered and balanced and with the benefits outweighing the risks. We cannot be confident this is the case with Australian owned private companies. Submissions have clearly highlighted that the risks outweigh the benefits. Making the confidential details of these companies available will disproportionately risk their competitiveness, security and privacy.

There are better ways to strengthen the integrity of our tax system. The government's commitment to combating multinational tax avoidance was demonstrated in the budget. Australia is actioning the 2014 G20 OECD base erosion and profit-shifting action plan recommendations on country-by-country reporting, anti-hybrid rules, harmful tax practices and treaty-abuse rules. Our efforts go further than these BEPS recommendations. The government will shortly introduce into the parliament new multinational anti-avoidance rules to stop multinationals artificially avoiding a taxable presence in Australia and force them to pay tax, in Australia, on the profits deemed to have been derived from economic activities undertaken here.

We will also close a tax loophole and require foreign providers of digital products and services to Australian consumers to charge GST in the same way as domestic providers. The government will also double penalties for large companies that use tax avoidance and profit-shifting schemes. We have also asked the Board of Taxation to develop a voluntary code for greater disclosure by companies of their tax information. As foreshadowed in the budget, the government has signed an international agreement to enable information exchange under the OECD's common reporting standard to address tax evasion.

The government will also consider further action to address tax avoidance by multinationals, especially with the finalisation of the OECD base erosion and profit-shifting work later this year. The combination of these measures and this amendment strike the right balance between cracking down on tax avoidance and increasing transparency, without unduly risking the privacy, security and competitiveness of Australian family businesses. I commend this bill to the House.

Ian Goodenough (Moore, Liberal Party) Share this | Link to this | Hansard source

The question is that the amendment be agreed to.

The DEPUTY SPEAKER (18:06): The question now is that this bill be read a second time.

Bill read a second time.