Ms Anna Burke (Chisholm, Australian Labor Party) Share this | Link to this | Hansard source

The question is that the amendment be agreed to.

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

Thank you, Madam Acting Deputy Speaker; it is good to see you back in the chair. Before question time and 90-second statements, I was commenting on the points in this debate raised by the member for Fraser where he indicated that it was Labor's position to force private companies to make their tax affairs public. It appears the member for Fraser has a complete misunderstanding of the difference between public and private companies.

Public companies make their taxation records, their sales and their profitability public because the average man on the street can buy and trade their shares on the stock market. So how profitable those companies are at any particular time is a very important factor that needs to be disclosed to the market so there is full transparency and people can invest or not invest in those companies.

However, private companies are not trying to raise capital from the public. Therefore the only people who need to know about their personal tax affairs—and a fundamental principle of our system of government and Australian society is that they can keep their affairs private—are the tax office and them. That should be a fundamental requirement of our system. It is quite disturbing that members of the Labor Party think that they want to force private companies to disclose their private taxation records to the public.

There are a few reasons why this is such a bad idea. Firstly, think of a company with a $90 million turnover. The member for Fraser suggested that a $100 million turnover should be the threshold for a private company to disclose their records. Take a company with an $80 million or $90 million turnover: if they get to that $100 million mark, all of a sudden, the records that they keep as private must be disclosed to the public. This becomes a disincentive for those companies to go out, invest, take risks, innovate and create new jobs. What absurdity and what nonsense—how could anyone suggest that that is in the interests of the Australian economy? That is what the member for Fraser suggests.

Secondly, another thing the member for Fraser clearly does not understand is negotiations between companies and sales. If you are a company and you are negotiating with a Coles or a Woolworths, the very last thing you want them to know is your turnover and profitability. We have very many highly concentrated markets here in Australia where there is a complete imbalance of bargaining and marketing power in these negotiations. If you were to enable these very large multinational companies to be able to determine the profitability and sales of medium sized Australian companies, you would be putting those companies at a serious disadvantage.

A similar scenario is: if you are negotiating to rent or purchase a house and the person that you are buying or renting that house from has access to your taxation records to know what you income and expenses were last year, no-one would think that that would be fair. However, that is exactly the policy that the Labor Party wants to impose on medium sized Australian companies.

Back to the specifics of the bill: it is very important that we have a taxation system that is competitively neutral between local companies and companies that deal overseas. Companies that have substantial transactions overseas can organise their affairs where they can artificially load up debt in their Australian subsidiary or overcharge their Australian arm for goods and services purchased or imported from overseas. Likewise, they can undercharge on goods that are being exported. That is why it is very important that we have good surveillance by the Australian Taxation Office of large multinational companies that have this ability—so they are paying their fair share of tax.

I have also been hearing criticism from the Labor Party on this proposal. Profit shifting by companies that deal in different jurisdictions is nothing new, so I ask: what have the Labor Party done about this? What did they do in the six years they were in government? They complain about what we are doing and say it is not going far enough, but they had six years in government to do whatever they wanted on this issue, yet they did nothing. It is the coalition that is taking the lead.

Another thing is that I often hear members of the Labor Party say, 'If only we could get all these evil multinational companies to pay their fair share of tax there would be no need for us to take any tough measures.' We currently have a debt and deficit problem in this nation. After the Labor Party's six-year spending spree, the interest bill this country has to pay is more than $1 billion every month. That is the interest on the spending spree in the six years of the previous Labor government. That money has to come from somewhere. That is $1 billion every month.

There are no costing estimates of what this bill will raise, but we have heard the Taxation Office estimate it will be in the hundreds of millions of dollars. Let's say that it is $100 million that is raised in additional taxes paid by multinational companies, which would be fantastic. To put it in some context: that would pay the interest on Labor's debt for 72 hours. If it raised $100 million, it would pay 72 hours of interest on the reckless spending spree of the six years of the previous Labor government. That puts in some context the task we have of trying to balance the budget and return to some type of surplus.

The other issue when we talk about our tax system and multinational companies is that we need to have an internationally competitive tax system. The fact is that we currently do not. If we as a look at personal tax rates we can see that the top rate of personal marginal tax in this country is now 47c in the dollar, plus the Medicare levy. We are approaching the point where, once you hit that marginal tax rate, 50c in the dollar goes to the government and 50c goes in your pocket. Compare that to New Zealand where it is just 33c, Singapore where it is only 20c or Hong Kong where it is just 15c.

In maintaining this taxation system, especially as there is more globalisation, more Australians travelling overseas, more Australian companies doing business overseas and more opportunities for Australians overseas than ever before, we risk many of our talented Australians taking their ideas and entrepreneurial skills offshore where there is greater reward for their efforts and risk-taking. This is why we must be very careful with our taxation system.

Then there is the issue of our corporate rate of taxation. The 30 per cent rate of corporate tax we have is currently still one of the highest in the world. We need to aim to reduce our taxation rate. When I say 'reduce our taxation rate', I do not mean we should reduce the amount of tax flowing to the government. I believe it is possible to reduce the corporate rate of tax and increase the number of dollars flowing into the Taxation Office. Why do I say that? It is because history has shown that every time we have done that in the past that is exactly what has happened.

Over the last 40 years, every single time we have lowered the corporate rate of tax—from close to 50 per cent down to 40-something per cent, to 36 per cent, to 33 per cent and then to 30 per cent—we have not got less tax; we have got more. We have got more as a percentage of GDP. I believe that we are currently in the same position. I believe that if we reduce the rate of corporate tax in this nation we will see more tax dollars flowing into government revenue. It does not matter what side of the chamber we sit on or what our ideology is, we agree that it would be good if the government could get more taxation to pay for the things that we need. If we can do that by having lower tax rates that is what we should be aiming at.

The specifics of this bill is simply that it is aimed to stop multinationals using many of the complex tax schemes to avoid paying tax in Australia by booking their revenue overseas. We are doubling the penalties applying to large companies engaging in tax avoidance and profit shifting. This applies to only about 30 large multinational companies that have a global turnover of $1 billion. One of the provisions will require them to report their revenue and profits in all countries. The coalition are taking good, sensible steps to look at the issue of multinational tax avoidance after nothing at all was done in the six years of the previous Labor government. With that, I commend this bill to the House.

Alannah Mactiernan (Perth, Australian Labor Party) Share this | Link to this | Hansard source

I want to respond to a number of the comments that have been made today by the previous speaker and to a series of speeches that I have heard in this place not just in relation to this bill. Last week, the same issues came up in the discussions on social security legislation, legislation about our education system and fees for our education system. I think that when I listen to the contributions of the members opposite, I really do—

Government Member:

A government member interjecting—

Alannah Mactiernan (Perth, Australian Labor Party) Share this | Link to this | Hansard source

Sorry?

Ms Anna Burke (Chisholm, Australian Labor Party) Share this | Link to this | Hansard source

The member for Perth has the call and will not respond to interjections.

Alannah Mactiernan (Perth, Australian Labor Party) Share this | Link to this | Hansard source

I was trying to be good natured. I am interested in having a debate. As I have been listening over the last week to these contributions, what struck me was how profoundly unaware members were of alternative models and visions of where our economy is going and, indeed, the sorts of ways in which we might divide up the community pie.

The Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015 that is before us today is legislation that we do support. It is a modest measure to reduce tax evasion by multinational companies. We have noted that the government has been unable to give us any sort of estimate beyond an asterisk as to what, indeed, this might collect. Today we had the Treasurer being optimistic, talking about hundreds of millions of dollars. It will be really great, fine and good if we get hundreds of millions, but we are dealing with a problem where, in fact, we need to raise billions more dollars in revenue. We need to do that for a very good reason, and a number of measures that have been put forward by this side of the House have been rejected out of hand by the government.

I just want to reflect on one matter, and that is the growing inequality not just across the Western world but, indeed, across our country. Inequality is happening globally, and I think we have talked about this in the past. There was a period coinciding with the end of that very radicalising experience of World War I and going right up until the 1980s where we saw the historic inequalities in the spread of income and wealth in society changing. Over that period, basically from 1920 to 1980, we saw an economic democratisation take place where the share of the overall return of an economy that went to wages versus that which went to profit changed. What we have been seeing since 1980—and, indeed, what I believe is now accelerating—is a reversal of that.

In fact, what we are seeing is societies, including our own, becoming more and more unequal in the way in which they reward effort. The reward you get out of profit is now increasing compared to the reward that you get out of labour and, in relation to the various types of labour, that reward is becoming more and more distorted. I will give you a couple of key facts. Over the past generation—in the last 30 years or so—Australia's top one per cent income share of wealth has doubled and the top 0.1 per cent income share has tripled. From 1975 to 2014, real wages have grown by a mere $7,000 for the bottom one-tenth and by $47,000 for the top one-tenth. If we look at actual wealth, I think that we will see that it is not just income, that this is actually compounded in terms of the spread of wealth.

This is a question of fairness, but it is also an economic question. Is this what is going to deliver us a strong and stable society into the future? I do urge members on the other side to look at the work of Nobel Prize-winning author Joseph Stiglitz. His work The Price of Inequality really shows that we do not only risk destabilising our democratic institutions by this growing sense of unfairness that we are seeing emerging around the world and that it is not just the radicals in the Occupy movement who are aware of this. People are becoming increasingly aware of this growing inequality and increasingly disillusioned that the political class appears to be unable and unwilling to do anything about this.

What we are seeking to do is try to balance the budget to get us out of the problems that fundamentally came from the global financial crisis, a crisis which emerged primarily because of the greed of large corporations. They created an absolute crisis. By and large, the people that were at the heart of that crisis have gone on to even greater benefit, and communities like ours and those across Europe and North America are now trying to deal with this catastrophe that has been created by those who pursued a philosophy of greed and the unbridled pursuit of wealth.

We are now being told that we have to cut really important things like investment in education. I have heard member after member get up on the other side and say, 'There's no such thing as a free education. Someone has to pay for it.' Someone does have to pay for it. But what we are saying is that the proposition that university education should be largely the responsibility of government or that technical and further education should largely be the responsible of government is not at all an unreasonable proposition.

We note that in some of these most successful economies—such as in the Scandinavian economies—they provide free tertiary and technical education. They do not find it absolutely preposterous that the bulk of that should fall upon the tax revenue, because they have a more sophisticated understanding of who is actually benefiting out of the system and how we create the social stability that we need for economies to prosper. I think this is an increasing problem that we have on the conservative side of politics—that they seem to profoundly misunderstand the nature of the social contract.

We have billionaires in this country who believe that somehow or other their innate value and their innate genius have been the things that have turned them into billionaires, rather than this being the result of a particular structure that we have in our society. The Gina Rineharts of this world in fact rely very much on there being a particular value placed on a mineral for them to be able to generate the sorts of vast profits that they do. But there is nothing logical or in any way self-evident about the fact that a CEO of a bank, for example, should get $15 million, while an ordinary working person in that bank might get $50,000. These things are not self-evident. There are structures that have emerged that have enabled people to generate vast wealth.

It is really important to understand the trend line here. The trend line is taking us to more and more inequality, and that inequality feeds further inequality, because the people with this ever-increasing wealth are able to buy political influence, either directly or indirectly, and to mould media opinion. Just look at Rupert Murdoch. The reason why Rupert Murdoch wanted to run all of those red tops was not that he was particularly interested in exposing the private lives of people but rather that this gave him the mechanism for controlling. The fear that he generated within the political class ensured that he had a very high level of control over the decisions of government, to ensure that his particular interests were advantaged.

We need to get on top of the fact that we have to do something more about this growing inequality. I have heard members talking about the top taxation rate. The top taxation rate is somewhat farcical if we do not know what people are in fact paying in tax. Many of the people who may notionally fall within income brackets that require them to pay substantial amounts of tax actually are not doing that because they have the availability of tax havens—be it the Cayman Islands or elsewhere—and top tax advice that enables them to avoid or to minimise their tax, to a point where the ratio of tax that they are paying bears very, very little relationship to what people think should be paid by those people. Hence the Buffett principle was that there be an absolute limit on the amount of deductions that one could call upon, so that there would be a guaranteed minimum level of taxation paid.

We are going to have to deal with these things. I agree with welfare reform. I think that there are a lot of unintended consequences that come out of creating a welfare system that can foster intergenerational dependence. But there is an incredibly strong argument here that we are cutting back our social safety nets while at the same time operating a protection racket that has seen the top 10 per cent, the top one per cent, the top 0.1 per cent, of our communities getting richer and richer.

I note that Stiglitz says here:

… if we were serious about deficit reduction, we could easily raise trillions of dollars over the next ten years simply by (a) raising taxes on people in the top—because they get so much of the nation's economic pie, even small increases in tax rates raises substantial revenues …

He goes on and advocates a number of provisions like this. So I just urge the members opposite to think a bit more broadly, to think a bit more deeply, about these matters and to reflect on these profound changes in economic structures that are coming across the world. I have referred in the past to Thomas Piketty's book Capital in the Twenty-First Century. He points out that, across the globe, we are now pretty much back at the position that we were in in the 1890s, in the Belle Epoque, in terms of inequality. If we want to prosper as a society, if we want see this broad commitment to our democracy, if we want to see our economy thrive and have a deeply engaged, stable community, then we need to address these issues. We have got to get beyond the very cliched representations that we have been seeing from the government members over the last week. We support this legislation, but in no way does this go anywhere near far enough in addressing the massive issue of how we get a decent tax response from the wealthiest in our community.

Jane Prentice (Ryan, Liberal Party) Share this | Link to this | Hansard source

I rise to offer my support for the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. I am always pleased to support legislation that fulfils three key criteria: firstly, it is necessary; secondly, it is considered; and, thirdly, it is proportionate to the problem it seeks to resolve. This bill ticks all three boxes. It is in keeping with the government's broad and determined commitment to ensure that companies that earn income in Australia and benefit from the Australian economy pay their fair share of tax here. It is a simple principle but, for reasons that I will outline, it is increasingly difficult to administer in the modern, global, connected community.

This is fundamental question of fairness and equity. Companies that earn income in Australia should pay their fair share of tax in Australia. Most are happy to comply with their obligation, in this regard. Small- and medium-sized Australian businesses or businesses with a significant bricks-and-mortar presence in Australia do not, generally, have the ability to significantly reclassify revenue for the purposes of tax avoidance. Small- and medium-sized companies do not fall within the scope of this bill. Instead, it specifically targets revenues earned by large multinational corporations, companies that conduct business in Australia and overseas.

With advances in technology, in recent decades, the geographical location of a company and where it does business has become blurred. For example, 30 years ago it would have been rare for customer service and support to be provided by an overseas call centre. Twenty years ago it was rare for an Australian, living in Australia, to purchase retail goods from an overseas retailer. Ten years ago we could not have envisaged using mobile apps based overseas to book car journeys or private accommodation in Australia.

The increasingly globalised and digitalised economy is a net benefit for relatively small, modern, open, trade oriented countries, such as Australia. The downside is that these market conditions make it easier for companies to use convoluted accounting tricks to minimise their tax obligations in relatively high corporate-tax jurisdictions, such as Australia. By way of example, in recent months the political lexicon has been treated to a profit-shifting measure known exotically as the 'double Irish Dutch sandwich'. I will spare the House the complexities of this arrangement but, suffice to say, it is a method by which multinational corporations engage in channelling profits from Australia and elsewhere through a variety of Irish and Dutch subsidiaries. The profits then end up in a tax haven beyond the reach of the Australian Taxation Office.

This sort of creative accounting by multinational corporations fails the fairness test. It allows them to dramatically reduce their overall corporate tax rate, which denies revenue to the Australian government to fund necessary services for Australians. This means that more of the burden of taxation must be borne by other companies and individual taxpayers. It also gives multinationals operating in Australia an unfair competitive advantage over smaller competitors that either lack the multinational reach to engage in similar practices or are unable or unwilling to do so.

The coalition government made a clear commitment to address tax avoidance as part of the 2015-16 budget. This bill delivers on that commitment. Schedule 1 to the bill defines the bill's scope. It targets large foreign multinationals. The bill defines these as 'significant global entities' with a global turnover of more than $1 billion dollars per annum. The Australian Taxation Office has identified about 30 companies that are targeted by this law. In total, about 100 companies may need to review compliance with the new laws.

Schedule 2 to the bill introduces the multinational anti-avoidance law. This law will take effect on 1 January 2016 and will target artificial or contrived arrangements to avoid the attribution of business profits to Australia—arrangements such as the double Irish Dutch sandwich earlier described. Multinationals found to be avoiding Australian tax under the new anti-avoidance laws will not only have to pay back the tax they owe but also will face additional penalties of up to 100 per cent of the value of the tax owed.

Schedule 3 to the bill doubles the penalties for tax avoidance and profit shifting. Schedule 4 to the bill implements Australia's commitment to country-by-country reporting under the Organisation for Economic Cooperation and Development's action plan for base erosion-and profit-shifting.

This has been a multilateral effort, over several years, to achieve a coordinated approach to monitoring and reporting transfer pricing. The extent of transfer pricing undertaken, across national boundaries, by multinationals is not fully understood by governments, which limits effective monitoring. With the implementation of these new documentation standards, governments will have more visibility over transfer-pricing practices, which will aid enforcement and improve compliance.

As has been the case, previously, the ATO will retain a policy that rewards proactive disclosure and will look favourably upon companies that take positive steps towards complying with the new laws. The former Treasurer noted, in introducing this bill, that the tax office has already been contacted by some companies seeking information about how they might restructure their activities to improve compliance. This is a good sign that the proposed changes are well targeted and will achieve the intended effect.

The contents of this bill will not come as a surprise to industry and other stakeholders. Exposure drafts covering the contents of this bill have been released publicly and stakeholder comments invited. Feedback from the consultations has been taken into account and is reflected in the contents of the final bill. This bill is just the next step in the coalition government's ongoing reforms of Australia's taxation system. The government is pursuing tax reform to make our system more competitive and efficient and to reduce its complexity.

Already, we have introduced a suite of small-business-friendly measures, including tax cuts, extensions to tax write-offs and other initiatives to reduce red tape for small businesses. We have also secured in-principle agreement from the states and territories to apply the GST to products purchased online from overseas—another initiative that will level the playing field for small- and medium-sized businesses in Australia.

In closing, I reiterate that this bill should be supported because it is necessary, it is considered and it is proportionate. That it ticks all three boxes is a credit to the former Treasurer, the member for North Sydney, who has long been a champion for reform of taxation relating to multinational entities. If this legislation is to form part of his legacy then it is a fine legacy, indeed. I commend the bill to the House.

Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Parliamentary Secretary for Foreign Affairs) Share this | Link to this | Hansard source

The nation faces some significant economic challenges. One of those significant challenges is restoring fiscal balance to the way the economy grows and the way that the nation grows. We have a large and growing budget deficit. The levels of debt that this Liberal government has undertaken have increased since it came to government. Many Australians would not understand this or know this, but this government has in fact made the budget deficit worse.

Over the course of the last two years, the Liberal coalition government has doubled the budget deficit. The deficit has gone from approximately $26 billion to $52 billion. There has also been an increase in the level of debt. They are figures that most Australians would not be aware of, but they are facts. The levels of debt the government has introduced need to be paid for and they will be paid for by future generations of Australians if we do not restore some balance and an even keel to the fiscal position of the nation. We need a sensible approach to restoring sustainability and balance to the budget. That requires governments to make savings and also to look to measures to raise additional revenue to fund important social services, in particular those safety net services that many Australians rely on to be able to participate in our society.

Labor is acutely aware of this challenge. That is why, over the course of the last two years, there has been a great effort from the Labor Party—and in particular the economic team, led by Chris Bowen—to consult with Australian businesses, with Australian tax experts and with organisations that work in the field of fiscal responsibility to put together a set of policies that are responsible, that restore sustainability to the budget and are balanced and fair. These policies also promote growth within our economy, promote growth in jobs and provide additional revenue to fund programs that are vitally important—for instance, the Gonski reforms to education, which are necessary to ensure that our nation has a competitive education system, and funding programs that are providing incentives for people to take on more education, particularly at the higher education levels through university and TAFE colleges.

Labor has developed a set of policies that are balanced and fair. We have done this in a different manner to a coalition government. We have taken a different approach to those opposite. Those opposite—in the first budget and the following budget of the Abbott government—attacked pensioners, attacked the sick by attempting to introduce a co-payment for visits to the doctor and attacked students by attempting to introduce $100,000 university degrees. In many respects, those opposite attacked the most vulnerable in our community. They attacked the people who, really, we should be giving the incentives to and a leg up so that they can prosper, establish businesses and grow our economy into the future.

Not only have they attacked the most vulnerable in our community but they have also given tax breaks and tax savings to some of the most profitable and wealthy businesses and individuals in our economy. A classic example of this is removing the minerals resource rent tax, allowing the biggest mining companies in the world a tax break whilst putting a tax increase on the lowest paid women in the country—those earning less than $38,000 a year—by removing the low income superannuation contribution. That has been the philosophy of this government when it comes to looking at restoring fiscal balance to our budget. That is the point: there is no balance. It is unfair and is unbalanced.

That is why Labor undertook this process of consultation, working with experts and looking to areas within our economy where additional revenue can be raised while still promoting growth and promoting jobs. We did that through two policies. One tackles superannuation tax concessions by taxing those who have more than $1 million in their superannuation fund and are earning an income of interest based on that capital value in the superannuation fund. Anyone earning more than $75,000 per year as income off their superannuation balance—so we are not talking about reducing the actual capital balance in the superannuation fund, but about earning that income of that—will have to pay a little bit more tax. That is because the experts say that superannuation tax concessions are going to consume the budget and they are going to overwhelm, particularly, the amount of expenditure that we afford to the age pension.

We have also looked at this issue of multinational tax avoidance. We have come up with a policy that is balanced and fair. It looks to raise $7.2 billion of additional revenue by asking some of the most wealthy multinational companies—which earn super profits in Australia off their operations but pay very little tax in Australia—to pay a little bit more tax. When you have average employee Australian taxpayers paying an effective rate of tax of 21 per cent, as workers and as employees, and multinational big businesses paying less than 10 per cent effective rates of tax, then there is an imbalance in the system. The government needs to rectify that.

But the government has not done that and it has been up to Labor to develop a policy which does just that: it raises $7.2 billion worth of additional revenue to ensure that we can fund those important educational programs and other programs. Labor believes when it comes to multinational profit shifting and corporate tax avoidance that really enough is enough and the time has come for real action, particularly given the deteriorating state of the budget and the increase in the deficit that is being undertaken by the Abbott-Turnbull government.

Whilst it is difficult to accurately determine the true scale of corporate tax dodging, it has been brought to light in particular in recent years, leaving many in the community rightfully outraged. Earlier this year, we saw that the Senate inquiry into corporate tax avoidance highlighted the size of the problem when it revealed that the nine largest global pharmaceutical companies—which made $8 billion in sales in 2014 in Australia and received $3.5 billion in subsidies from Australian taxpayers through the Pharmaceutical Benefits Scheme—had paid collectively just $85 million in income taxes. That is one per cent of their revenue. Now most Australian PAYG taxpayers, workers and employees would love to pay just one per cent of their earnings as income tax but they do not; they pay a lot more. The average Australian wage earner pays a standard 21 per cent of their income in taxes, and small businesses and small corporated businesses in Australia pay 30 per cent. It is clear just how unbalanced the taxation system is and why there is a need for reform.

Other examples include: Apple, which paid just $80 million in Australian tax in 2013-14 despite earning local revenue of over $6 billion; James Hardie, which, despite average annual profits of over $200 million, operates at a net taxable loss in Australia allowing it to claim tax deductions on annual payments to the compensation fund for victims of asbestos products; and Glencore, which, depending on who you believe, either paid zero dollars or $400 million on local revenue of $15 billion.

In its submission to the tax inquiry, the Australian Tax Office reported that, of Australia's $300 billion in cross-border trade, more than $150 billion was made up of companies transferring money from their Australian operations to international jurisdictions, many of which featured very low tax rates. We believe that, when it comes to tax, Australians and Australian companies should pay their fair share. That is why in March this year Labor released the policy I mentioned earlier, which will raise $7.2 billion for measures to stop multinational profit shifting out of Australia. I contrast that to this policy and the bill that is being debated here. Under this bill here, the government cannot say how much revenue will be raised by this suite of measures. In fact, when you look at the budget papers, on the revenue side for this particular measure, there is an asterix. It is unacceptable that the government do not know how much a particular measure is going to raise. It really does highlight the fact that in many respects their hearts are not in it when it comes to restoring balance to the budget.

Our approach is multi-faceted and seeks to ensure tax deductions are based on a company's entire global operations, not just their operations here in Australia. It will stop the issue of shifting profits overseas and will stop a company claiming that the profit that they make here that they send to another division of that company in another country as a loan cannot be used for income purposes and therefore cannot be taxed. We are not just looking at what they do in Australia but at what they do internationally. We will also standardise our tax law with other countries so that companies cannot double dip. We will improve compliance with the Australian Taxation Office by: providing effective funding to ensure that the tax office has the necessary means, the staff and the personnel to crack down on these avoidance schemes; and we will start third-party reporting and data-matching early to improve compliance.

We have repeatedly called on the government to adopt a bipartisan approach to this issue. We got out early on this particular measure and said in the lead up to the last budget: here is a way you can raise $7.2 billion of additional revenue; it sits well within the OECD guidelines for base erosion and profit shifting; and it could have been adopted on multipartisan approach. We could have said that this parliament is serious about tackling this issue but, no, the government has said they will not even look at the measure. A cooperative approach would have plugged the holes through which Australia is losing millions and billions of dollars in forgone tax revenues and would have been particularly beneficial given that, as I said, the deficit is getting worse and debt is increasing under this government.

Of course Labor has worked for a number of years now to ensure large firms pay their tax bills. In 2013 Labor passed laws requiring the Australian Taxation Office to publish information about the income tax paid by companies earning more than $100 million. This law applied to around 2,000 companies. But again we have seen this particular Liberal government remove some of that scrutiny, remove some of that transparency that Labor put into the system. The government now wants to exempt about 800 of those companies to allow them to keep their tax affairs confidential. They argue that private firms should not be held to the same standards as public companies.

The government has introduced this bill despite the fact that it was uncovered, through a freedom-of-information request, that there had not been one complaint received by the Treasurer or Prime Minister's office about the law that Labor introduced to improve taxation transparency and to ensure that these companies publish their taxation records. This just proves that this is a completely ideological approach that this government is taking, which is not in the best interests of Australians, which does not restore fairness and balance to our taxation system and that is why it deserves condemnation for the approach that it is taking. Nonetheless, Labor takes a constructive approach to these issues and that is why we have offered support for the government in the passage of this bill.

The bill does introduce significant new concepts to our taxation law—the notion of a global entity. It seeks to clamp down on multinational firms using artificial arrangements to avoid paying to corporate tax in Australia, it does double the penalty for firms of involved in tax avoidance schemes and it implements some of the OECD's action plan for transfer price documentation and country-by-country reporting. However, as I said, the government still does not know how much revenue this measure will raise. When it comes to ensuring we restore balance to our taxation system, the government should be working with Labor on the proposals that we have put forward.

Alex Hawke (Mitchell, Liberal Party, Assistant Minister to the Treasurer) Share this | Link to this | Hansard source

I rise to support the government's Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. It is a great bill that shows the government is committed to ensuring Australians have a fair and sustainable taxation system.

I was pleased to see that the member for Kingsford Smith got the memo from the member for Fraser that the opposition is indeed supporting the government's measures, as they recognise that these will add extra integrity to the Australian tax system, and indeed will provide for more revenue and ensure that there is not tax evasion by multinational companies in Australia. I do want to take up the member for Kingsford Smith on a couple of the points that he made, because I think it is important in the context of this debate to understand why it is that the government has not put a figure on the revenue to date. Not only is that the expert advice from the ATO; the approach of the government has been to have the ATO working with the multinational companies and working with the government to ensure this legislation has been drafted correctly and ensure that we meet our international obligations under BEPS with the OECD on base erosion. All of that process has meant that we will not make fanciful claims about the amounts of revenue that the government is seeking to get from these changes to this law. I think it is fanciful for the opposition to say it would be $7.1 billion, given that they will not release any of the assumptions made or the modelling relied on to make that claim.

So it is just like it was with the MRRT, and I was stunned to hear the member for Kingsford Smith mention the dreaded MRRT, the minerals resource rent tax—a tax that was implemented by Labor in government that did not actually raise any revenue—as an example of anything that Labor would be putting forward. Really that shameful episode ought to be put back in the drawer and never mentioned or heard of again. This parliament and this country would be better off if we never heard about the MRRT, that foolish proposal, ever again.

It does go to show that they may not have learnt the lessons here: that you do not make overinflated and hyperventilating claims about the amount of revenue you are going to book in the budget. The budget line item in relation to this measure, which comes into place on 1 January 2016, does not have a figure attached to it at this point in time because that is the expert advice—that it is very difficult to assess exactly how much revenue will be raised by the measures that are proposed in this bill. That does not mean we should not proceed with them. That does not mean that we should not listen to all sides of the debate here. The government has said on many occasions: if the Labor Party has amendments that they wish to put up in relation to this legislation, they should put them forward. The government has said that, if there are loopholes that Labor believes it can help close that will deliver revenue, and if there are shortfalls in the tax system, we are prepared to consider those sorts of proposals. So I do think it is odd for the opposition to say that they will book $7.1 billion in revenue without being willing to say: 'Here are the assumptions; here is the modelling; here is exactly how we believe it can be done.' I think everybody who would consider this matter, given that they would not release those figures, would come to the same conclusion—that you really could not claim anything like that, and you really could not claim that of course you could produce that revenue. And I think that is the case. I think when you hear members of the opposition talking about terms like 'super profits' again—and we heard that return to the Rudd era: 'super profits'—you kind of get the sense that they are missing the point about the significance of these measures to combat multinational tax avoidance that we have here.

There are several schedules here that I think are relevant to this debate. We have the multinational anti-avoidance law in schedule 2. In schedule 3, we have stronger penalties, importantly, penalties being a significant part of the government's agenda in relation to combating multinational tax avoidance. In schedule 4 we have country-by-country reporting, which of course is critical when you consider what the OECD is doing in relation to base erosion; that reporting is absolutely vital for different tax jurisdictions to share and to consult with each other on to ensure that tax is booked in at least one jurisdiction.

The schedules that the government has put forward in this bill make sense. They are good measures. So it is welcome that the member for Fraser and the opposition have come on board because, working with the OECD, it is essential that immediate action is required so that the Australian tax system is fit for purpose—fit to deal with the most egregious tax avoidance arrangements, recognising some of those things.

So, while I accept some of what the member for Kingsford Smith says about the rate of multinational tax avoidance and while we want to make these changes to ensure that more tax is paid here in Australia where profits are booked, he did of course then move on to a typical Labor agenda of conflating the income tax system with the company tax system and tried to convey to people that the PAYG system is somehow related to the rates of company tax and that there is some one per cent or something he was talking about, versus the effective 21 per cent of income tax providers.

I think it is important to remind people at this juncture that we are not a competitive tax jurisdiction internationally at this point. We are not competitive on income tax levels. But we are also not competitive on company tax rates, and this is a dual problem. While it is very important to bring down the rates of tax for income pay-as-you-go earners, it is also important to clearly articulate in debates such as this on multinational tax avoidance that we are talking about the design of our laws for a new phenomenon in world history—that is, the multinational and the international nature of the jurisdictions, given the digital age and the new era that we live in. I am talking about company tax which is just as high and just as anticompetitive for Australian companies as it ever has been—in fact, 30 cents in the dollar is a very uncompetitive rate, given all of the comparable economies in our region, and, indeed, that is why the government has moved to lower the small business tax rate to 28.5c, and that is a welcome step by all my colleagues in ensuring the company tax burden is reduced, because, by reducing the rate of company tax and the company tax burden on small businesses, we will create more jobs, more prosperity and of course deliver a stronger growth in our economy, which will deliver more revenue.

But in particular this bill is about producing more revenue from multinational tax avoidance, and I want to commend the former Treasurer and our current Treasurer for the work that has been done here that is ahead of what has been happening in the OECD, but also in sync with what is happening in the OECD, and I think it is important to remember that the measures in this bill will only apply to large multinationals with annual global revenue of more than $1 billion. That is why I think the member for Kingsford Smith fails when he talks about super profits—he is talking about companies that are under $1 billion—and says that somehow they are super profitable or that we should be doing more in this space, when we have a very high rate of company tax.

It is not responsible for a national government in this time, in this era, in the climate that we find ourselves in, in the competitive nature of that digital age that we live in, to be talking about super profits and tax. We know that global growth is on a trend downwards. We know that China's growth is on a trend downwards. We know that we have to compete not just for foreign investment; we have to compete for brains, for people and for people wanting to establish their businesses—for start-ups and venture capital. That is why the Prime Minister is so focused on running the economy and the government of the 21st century. It does require laws such as this—multinational tax avoidance laws—but it also requires an understanding that high rates of tax, uncompetitive rates of tax, both company tax and individual tax, make our economy less attractive to that international flow of capital, that international flow of ideas and that international flow of people and brains that Australia must be in the hunt for if we are to replace the loss of revenue in commodity prices and in particular in iron ore. That is why I welcome the measures.

I think it is important to talk a little bit about what we are doing in schedule 2 with the multinational antiavoidance law. For significant global entities with revenues above $1 billion—and it is estimated that about 1,000 companies will need to consider these rules—our approach has been to have the ATO working with each of the multinational companies to ensure that we can bring in the revenue. We do not necessarily take the stick approach in full swing to these companies without allowing for a change in the law and allowing them to comply with the new law, recognising that with most of the arrangements there has been a failure in legislation and a failure of parliaments to legislate fast enough for a changing and emerging economy rather than illegal behaviour. That is something that emerged from the Senate inquiry in this area. If you are considering this matter, it is important to understand that the stronger penalties regime will of course mean that the government does have a stick in relation to this and we are significantly strengthening the stance against tax avoidance in the legislation. The bill doubles the maximum administrative penalties that can be applied by the Commissioner of Taxation to large companies that enter into tax avoidance and profit-shifting schemes. It will deter multinationals from entering into contrived tax avoidance and profit-shifting schemes. Deterrence is a key element, as we have recognised in the past, in the fight against tax avoidance behaviour.

You might also know that the government has made changes to the thin capitalisation rules, understanding that the nature of the economy is changing and those thin capitalisation rules reflect a pretty deep understanding by the government of the nature of modern arrangements and structures. Combined with those measures, you will see the resources that are dedicated to tax minimisation and opportunities to avoid tax through the offshore activities and larger potential gains that were there. The stronger penalties will help deter any major taxpayers from taking aggressive tax positions, given the government's approach.

Recognising that tax is a very complex area, particularly in Australia, if there is a reasonably arguable position then they will not be affected. That is an important part of the government maintaining confidence in our economy and the way our laws are designed and constructed. There are those who have sought to do the right thing, have obtained the right professional advice and can reasonably argue their position in a multinational context, understanding that the world and the economy are different than they were even five years ago. It is a recognition that tax law does not always provide certain tax outcomes—something that we have failed to grasp from the opposition time and time again.

Returning to my earlier points, I am glad to hear that the opposition will be supporting the government on these measures. That is welcome. As I said earlier and as I think the Assistant Treasurer said earlier today, we welcome any idea that the opposition might have for an amendment or a tax loophole that could be closed. We will consider those ideas in the context that they are put forward. If they are positively framed, if the opposition genuinely believes there is opportunity for billions of dollars of revenue to be recovered in a legitimate way from multinationals, then the government certainly wants to hear about it and will work with the opposition in that regard.

It is, however, a misnomer for the government to repeat the mantra that there is a figure of $7.2 billion available to the government when they will not release any of the assumptions or any of the modelling and will not discuss how they arrived at that figure. We have heard this all before when Labor has talked about the revenue that they can make from a tax. The member for Kingsford Smith spoke about the minerals resource rent tax—the single greatest example of tax design failure, arguably in world history, not just in Australian history. It is the single greatest failure in tax design by the Australian Labor Party—a new tax on a 'super-profitable mining sector', in their words, that did not raise a single cent in revenue. It is obviously a tax design failure. So we certainly will not listen to the architects of the minerals resource rent tax in designing our bill to combat multinational tax avoidance, but we will accept any idea and will consider it carefully in the context that it is put forward. That is a good approach from the Turnbull government.

This is a serious issue and the Australian government has moved in a serious way to ensure that we have fair and sustainable tax system. We have some of the strongest integrity rules in the world and we have changed some of those rules in relation to critical areas, like thin capitalisation. We know that some multinationals are structuring to avoid Australian tax by booking revenue from Australian sales offshore. That is why the government is adopting the measures that are in this bill and that is why the government will continue to work with the OECD and will continue to comply with the base erosion and profit-shifting program of the OECD. In particular, there is schedule 4—country-by-country reporting—which ensures that we are working and cooperating with every international tax jurisdiction, especially within the G20, to ensure that nobody is evading tax by jurisdiction-hopping. That is another worthwhile measure in this bill.

That is what it is all about: well designed tax laws that prevent tax evasion and profit-shifting offshore, recognises that Australia has a lot of work to do in the taxation space, both in the individual income tax space, where our rates uncompetitive, and in the company tax space. We still have one of the highest rates of company tax in any comparable economy in the world. That is something that we do need to look at and it is something that, over time, we need to ensure reduces so that we can be internationally competitive. In relation to this bill, I strongly recommend it to the House. I welcome the opposition's support on this important measure. This will be good for Australia and good to work with our OECD friends to ensure that tax evasion is reduced.

Tony Zappia (Makin, Australian Labor Party, Shadow Parliamentary Secretary for Manufacturing) Share this | Link to this | Hansard source

I support the position outlined earlier today by the member for Fraser, on behalf of Labor, on the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. The issue of tax avoidance by multinationals—transnationals—is a matter that I have raised previously in this place. Indeed, it is a matter that I have some serious concerns about.

Whilst we on this side of the House will support this legislation I made the point, to reiterate the point made by other speakers from this side of the House, that we see this as a tokenistic effort being made by the government in order to appease voters about a matter that most people I speak with feel very angry about. Last week we saw the government reverse the tax payment disclosure laws that Labor had put into place, which meant that any entity that earnt over $100 million would have to have the amount of tax they paid disclosed. That clearly indicates to me, and to people I speak with outside of this place, that this government is clearly on the side of big business and it is there to protect big business in whatever way it can. It is also clear to me that while this legislation may go some way towards reining in the amount of tax that is being avoided by companies, it goes nowhere near far enough.

Can I say to the member for Mitchell, who spoke just a moment ago, that with respect to the $7.2 billion that was part of the package that Labor announced it would introduce to stop multinational companies from shifting their profits out of Australia—and in turn $7.2 billion would be returned to the Australian government in the years ahead—those figures were costed by the Parliamentary Budget Office. Even if members opposite want to question the figures, the real question is: why do they want to question and oppose the initiatives that Labor would have put in place? In other words, even if you do not believe how much tax is likely to be collected, isn't the real question that needs to be addressed when responding to Labor's proposal one of whether the measures are fair and reasonable and should be implemented—and time will tell how much money they will raise—rather than simply saying, 'Because we don't trust your figures, we won't even consider your measures'?

According to an article written by Peter Martin in The Sydney Morning Herald on 30 April this year, there were 55 people in Australia who earnt over $1 million in the year 2012-13 and paid no income tax. Their combined earnings were almost $130 million. Forty of those people paid a combined amount of $42.5 million in costs for managing their tax affairs. It begs the question as to whether it would have been better for them to have simply paid their fair share of tax than to manage their tax affairs. But, be that as it may, they were prepared to spend a huge amount of money in order to minimise or avoid paying tax.

In 2011-12 the figure was even higher, with 75 people each earning over $1 million—and they had combined earnings of $195 million between them—paying no income tax. It is no wonder that people in the community feel angry with the government for not doing something about that, when the truth is that people in ordinary homes around Australia pay their fair share of tax while others are not paying their fair share of tax. Indeed, the only people who do pay their full rate of tax up-front and on time are lower-income wage earners, who have their tax deducted from wages each pay period, and that tax is then remitted straight to the Australian Taxation Office. They have no opportunity to minimise or avoid paying their fair share of tax, through either negative gearing investments, questionable business expenses, transfer pricing schemes, asset depreciation or any number of other lawful means used to minimise tax.

Avoiding or minimising tax would be one of the most attractive and easy ways of building wealth, because few investments that I can think of provide a return of 20 per cent, or 30 per cent or at times even perhaps 40 per cent, which is the rate that most tax might be applied at. So, when you are getting those rates of return, effectively, on your money by avoiding tax, it quickly makes sense as to why it has become a major industry not just here in Australia but around the world. Tax avoidance is legal, but if it occurs through manipulation—or, as it is more kindly referred to, 'through the use of loopholes'—it is unethical and should be made illegal. When dealing with multinationals operating in a world where countries have very different tax rates, very different tax laws and very different tax enforcement regimes, the use of loopholes is made easier, more justifiable and more difficult to track or control.

The world appears to be increasingly influenced by the agenda of multinationals. As the influence of multinationals spreads across more countries, more of the global wealth is owned by fewer entities. I note that one per cent of the people of the world own 48 per cent of global wealth. I also note that 80 of the richest people in the world doubled their wealth between the years 2009 and 2014, and those 80 people have the same amount of wealth as the bottom 50 per cent of the entire world's population. It certainly highlights the growing inequity that is occurring throughout the world, and it is only made possible through countries not closing tax loopholes that currently exist, and through multinationals using the global system for their benefit. It is also contributing to government budget problems in so many countries, including Australia. I suspect that if all Australian companies and all Australian taxpayers paid their fair share of tax we would not have the current government debt we have.

Last week when we were debating the shipping legislation, I did a bit of research into where most ships are registered and who owns them. I found out that, when it comes to the deadweight tonnage of ships, Greek entities are the largest and most dominant owners of global shipping in the world. But their ships are all registered and flagged in low-cost tax jurisdictions, including the Marshall Islands and Malta. I imagine that the finances of those fleet owners are also centred in those jurisdictions or other low-tax, low-cost countries. I do not know how much tax Greek shipping owners contribute to the Greek government, but I suspect that, if they all paid their fair share of tax, the Greek economy, which has been at the centre of global discussion and debate, would not be in the difficulty that it currently is in.

The issue of transfer pricing by international companies has long concerned me. This is the practice by which international entities manipulate their accounts and business affairs so as to ensure that all the profit is made in the lowest tax jurisdiction. This should be described not simply as tax loopholes but, quite frankly, as tax fraud. In fact, it is interesting to note how the language used in tax avoidance is softened to create the impression that the law is at fault, not the tax avoider. Perpetrators are even applauded as being smart business operators rather than referred to as crooks and scoundrels, cheating on society and their fellow citizens. The tax that they do not pay—the tax that they avoid—is shouldered by the low-income people of the world, who do not have the ability, as I said earlier, to employ shrewd accountants and lawyers or to put their money in international financial schemes that, in turn, reduce their tax liability. They simply pay their tax every week or every fortnight, whenever their payday is, directly to the ATO before they even receive the money.

When I spoke about this matter last in this place, it was about a year ago. I want to quote one of the passages from the speech I made then because I believe it applies equally now. I said at the time:

Tax Justice Network, a UK-based global non-government social justice organisation, estimates that between $21 trillion and $32 trillion—

I repeat that: between $21 trillion and $32 trillion—

is hidden by the world's wealthiest people in around 70 global tax havens. The tax that would be paid on the earning of that money is estimated at between US$190 billion and US$280 billion annually. Unethical multinationals and wealthy individuals use transfer pricing to rort the tax system, and then stash away funds in secretive bank accounts within low-tax regimes.

That goes to the heart of this issue. It is occurring right now across the world, and I am sure that there are entities and individuals within Australia that are part of these global tax avoidance schemes. And it is only made possible because of countries that are not prepared to disclose the incomes of the people who invest their money there and, in fact, that maintain a very high level of secrecy about who invests in their countries. That is what has to be stopped. I note that the matter was raised at the G20 conference last year. Hopefully, we will start to see some global breakthrough with respect to all of this—because the truth is: it is not just Australia that is being affected; it is the rest of the world as well. If all companies paid their fair share of tax, I have no doubt that the global debt that is being created around the world and the debt position of most governments of the world would be far, far lower. More importantly, whilst the money is being stashed away, it means that governments do not have the funds to provide the social support systems that they would like to provide in each of their own countries.

My concern is also that, even if we do reach agreement with some countries, unless there is agreement reached between Australia and all countries which provide tax havens or financial havens for people who want to stash their money in those countries, we will still not be able to get to the bottom of this problem because, whilst there are opportunities for people to avoid tax, they will find them and they will use them. This is not a case of closing the loopholes in one particular country and that solving the problem; we will only solve the problem if we are able to do it across the world. The issue of investing in some of the 70 countries that I referred to where people have been investing their money is also not necessarily fixed simply because those countries are prepared to disclose the amount of income to Australia of, say, an Australian national who has invested there. Whilst countries maintain secrecy, again, we do not know just how many other accounts are held by Australians in those countries under names that will never be disclosed.

Lastly, I want to make this point: one of the justifications for using those countries has been that, by doing so, they avoid what is referred to as double taxation. My view is that, if people were genuine about wanting to pay their fair share of tax and act ethically, investing through an Australian based entity here in Australia would also avoid double taxation. They would only ever be taxed once if their money was invested through an Australian firm. That is what I would like to see occur.

I said at the outset that this is a matter that makes people very angry, and rightly so. People see that pressure is being put on them and their family budget each and every week by the Australian government—and, in particular, by the current coalition government—using the argument that the government needs to restore the budget position and get the budget back into the black. They also see that most of the pressure is on them and most of the money that will restore the budget appears to be coming from them when there are other people in this country, and multinationals who operate from this country, who, every year, make millions and millions of dollars and yet pay very little tax, if any tax at all. It is wrong. Quite frankly, it is a fraud and it ought to be stopped.

Melissa Price (Durack, Liberal Party) Share this | Link to this | Hansard source

I am very pleased to rise today to speak on the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. The Turnbull government is building an innovative and sustainable economy for a safe and secure Australia, and this bill is an important element of that. The bill implements three 2015-16 budget measures delivered by the former Treasurer, Joe Hockey: multinational anti-avoidance law, country-by-country reporting and new transfer pricing documentation standards, and stronger penalties to combat tax avoidance and profit shifting.

If there is one thing the people of Durack loathe it is unfairness, and I would like to note the comments by the member for Makin that perhaps we should be using words like 'thieves' and crooks'. I happen to agree with him, because, as we know, currently there are some multinationals operating in Australia who are not paying their fair share of tax, and I think 'thieves and crooks' is indeed a better description for them. These measures are part of a package of domestic measures announced in the 2015-16 budget to strengthen Australia's existing laws to ensure that active multinationals in Australia pay their fair share of tax. This bill is consistent with the government's, the Liberal Party's and my values of making a fairer tax system. With multinationals avoiding paying their fair share, it has created an unfair playing field for local businesses, who, unfortunately, lack the reach of these much larger organisations. Families and small businesses in Durack are therefore forced to shoulder more of the tax burden, which undermines confidence in the tax system. I personally would like to see tax rate cuts across the board, and I look forward to seeing recommendations from the tax white paper.

The bill we are debating will allow the Commissioner of Taxation to treat these large multinationals as though they have a taxable presence in Australia and make them subject to Australian law. It applies to large multinationals with annual global revenue of $1 billion or more. This bill is expected to claw in billions of tax dollars, and the Australian Taxation Office has about 30 companies in mind that it will target under this law once it is passed. We are targeting the largest multinationals not only because it is fair but because it is these companies that have the greatest opportunities to avoid tax through offshore activities and represent the highest risk to Australia's tax base.

This bill goes to the heart of a key Liberal core value, and that is strong financial management. Despite the iron ore price more than halving and the weakening of other international economies, Australia remains on a credible path to surplus. As a new government we inherited a $48 billion deficit, but the good news is that we are set to reduce this deficit by $10 billion this year. Directly as a result of our actions, gross debt in a decade will be $110 billion lower than what we inherited two years ago.

I would like to take this opportunity to congratulate the Minister for Trade, Andrew Robb, on negotiating Australia's participation in the Trans-Pacific Partnership Agreement. The TPP, as we call it, is the largest global trade deal in the past 20 years. It will improve Australian trade across 12 different nations which together make up 40 per cent of the global economy. It will be of enormous benefit to my electorate of Durack in many industries but particularly in the cattle industry. This will be on top of the free trade agreements Minister Robb has signed with Korea and Japan since coming to office.

Additionally, if we can get the Labor Party to drop the politics and follow the advice of former Labor icons such as Bob Hawke, Kevin Rudd and Martin Ferguson, the China free trade agreement will also be passed by the end of this year, growing the important industry of agriculture, as one example—an incredibly important industry in my electorate of Durack—by an estimated $300 million. It is these deals that have led the way to the creation of 12,500 new jobs in Durack since I was elected and, very pleasingly, over 335,000 new jobs throughout Australia since this government was elected to office back in September 2013.

As I said earlier, the people of Durack loathe unfairness. There are more than 13,000 hardworking small businesses in Durack. It is simply not fair: these hardworking local small businesses do the right thing and pay their fair share of tax, unlike the large multinationals that we are discussing today, which have enjoyed an unfair advantage.

I am particularly proud that Australia has led on this global issue. As president of the G20 last year, Australia led the way on the OECD's BEPS action plan to ensure that multinational entities pay the right amount of tax. Under our country's leadership the G20 delivered the first level of an action plan to address multinational tax avoidance. Following this work, this government announced a package of domestic measures in the 2015-16 budget.

I would like to take this opportunity to put on record and fully acknowledge Joe Hockey's work with this particular matter. Mr Hockey worked hard to ensure that these multinationals operating in Australia start, at last, to pay their fair share. Pleasingly, the Turnbull government is going beyond the OECD recommendations. We are planning a voluntary transparency code by May next year. This code will enhance public confidence in the tax system and the community's understanding of the tax affairs of large companies. I am pleased to say that this government is ensuring that the ATO has unprecedented resources to deal with international tax avoidance. We are providing an additional $87.6 million to the ATO over three years to investigate international tax avoidance.

To date it is estimated that the program will raise over $1 billion in total, and I am pleased to say that this is $1 billion that is going to help to start to pay down the debt we inherited from those on the other side. Under this bill, the government will prevent multinationals from using complex schemes to avoid paying tax in the country by booking their revenue overseas. The stronger penalties measure of the tax laws amendment will double the penalties applying to large companies that are engaging in tax avoidance or profit shifting. Businesses in Durack and indeed throughout Australia will not be impacted, but for those who are operating illegally: be aware; we are coming for you. And just remember, if you are not doing anything wrong, you will have nothing to fear from this new legislation.

The government has been working closely with the business community as well as tax professionals and academics for the last two years on the OECD's profit-shifting agenda. We have consulted with stakeholders, including business, practitioners and the ATO, to develop the legislation to ensure the law will not have unintended consequences.

To those opposite, I would be surprised if you do not support this bill as I know that you too would like to crack down on multinational tax avoidance case. Let's be clear: it is this government which has an effective policy for direct action in this area.

Only the Turnbull government can cut down on large foreign multinationals not paying tax in Australia. What we have heard today during this debate is that this bill will further minimise the tax burden, already decreased by this government, especially for the hardworking businesspeople of Durack and for the rest of Australia. It will end the unfair advantage that large multinationals, who are avoiding tax, have over local businesses and create a standard of fairness not seen when the others were in charge.

As I outlined earlier, we are targeting the largest multinationals, because it is these companies that have the greatest opportunities to avoid tax and represent the highest risk to Australia's tax base. This is a very fair piece of legislation, and I commend the bill to the House.

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

I rise to speak on the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. Benjamin Franklin said:

In this world nothing can be said to certain, except death and taxes.

With medical advances, I think death can be deferred but it is still pretty certain; however, when we come to tax, it is not quite as certain as it was in Benjamin Franklin's day.

The way business is conducted has fundamentally changed. The way we consume products has fundamentally changed. We live in a global digital society where we purchase products that can be delivered to us in digital formats. There are no cassettes in my Sony Walkman when I go for a walk; instead it is an iPod where I can access music from around the world. It is much less certain today where those products, even songs, are made or where a company's transactions are taking place. Companies have been able to take advantage of the transient nature of modern corporate business ventures to structure their corporate affairs and shift profits to low-tax or no-tax regimes—and we heard a little bit about that last week in this place.

This is a very real problem for modern governments where nation states' boundaries are much blurrier than they were 100 or even 50 years ago. Three of the five biggest companies in the world today are making revenue from trading—not something tangible like a cassette but something that we cannot see and measure: they are trading their intellectual property. Previously, these companies would have been major contributors to their country's taxation system. In our global economy, those companies are now at liberty to transfer revenue from their Australian operations to an international subsidiary located in a low-tax jurisdiction—located being a term in inverted commas. Those low-tax jurisdictions have always been around—whether it is Switzerland, Luxemburg, the Bahamas or even the Cayman Islands—and this has implications for the Australian government.

The Australian Taxation Office has reported that, from the $300 billion a year in cross-border trade, over $150 billion is channelled to very low-tax jurisdictions. This is quite simply lost revenue for Australia. Our society operates by each of us contributing through the taxation system—paying the fair amount. It is how we pay for our roads, schools, justice system and other services. The state and Commonwealth governments spend about $150 billion on health budgets a year—the Commonwealth budget is about $65 billion, about 61 per cent. So think about that: that money could go into health, and think of the good it could do.

If these multinational companies are not contributing to our taxation system but shifting revenue to low-tax havens, then the rest of us—be it private individuals, small businesses or Australian registered corporations—have to pick up the slack. This is particularly important in 2015 as we are an ageing Australia. It is the first time ever that we have two generations in retirement. It is good that we have improvements in health and we are able to live healthier lives; however, it is obviously a challenge for a system such as the pension. When the pension was established, the life expectancy of a male was 62 and there were about seven workers for every person on the pension. That ratio is going down and down and down, and it will not be long before we have two or three workers per person on the pension. That has implications for us as a nation, if we want to be a nation that recognises a fair go and offers a helping hand for people in difficult times.

Most Australians live quite simply. They work or run a business in Australia and pay their fair share of tax. For the average Australian, it is about 21 per cent of their income. If they are a wealthier Australian, we have a tax system that means they pay more. If they are a small business, they pay about 30 per cent. Of course they might have write-offs and the like. Obviously, many small businesses do not make a profit so they do not have to pay the full 30 per cent.

If we were all able to shift our income to and arrange our tax affairs in low-tax havens, Australia, as we know it, would fall apart. Support in the nation would come to an end. There would be no money for our wonderful education system that recognises need, whether it is state or private schools. Our world-class Medicare—something that is the envy of the world—would fall apart. Our judicial system, where we provide access to justice for all, would come to a screaming halt. Other important social frameworks—such as child care, that make our wonderful society what it is; the glue that holds the Australian community together—would start to fall apart

The social contract we have as Australians is to contribute our fair share—that is what makes this country prosper. There are legitimate ways to minimise our taxation burden. A common deduction that most people from time to time claim is a charitable donation, and we are a generous nation when it comes to private individuals. It is sad to see that in the context of a coalition government that has slashed $11.3 billion from the budget at a time when we should be reaching out to the world. Instead, we have a foreign minister that has overseen that obscene slashing of our foreign aid budget.

But, as private individuals, Australians are always happy to put their hands in our pockets and help out our neighbours or people around the world or even domestically who need a helping hand. We saw that when the tsunami hit our neighbours back at the start of the last decade. I am sure many people here have put their hands in their pockets—and I know the member for Kingsford Smith has done to financially help the surf lifesavers—to help the Red Cross, Oxfam or Diabetes Australia. I am sure the member for Hasluck would have done the same to help the cause of diabetes. I know he is passionate about that. I have even seen it in my electorate with local groups setting up charities to help not only locals but people around the world who are experiencing hardship. There is a common good to the government forgoing some tax revenue and allowing people to give that money to worthwhile charities.

Often constituents come in and say they want to set up a charity or a local service organisation. One of the first things I always ask them is, 'Have you looked at what is available now? Is the service you intend to provide already being undertaken by an established charity?' If it is money that the government is forgoing, as in a tax deduction, then it is important that it is spent wisely. Otherwise, the money would be better spent by the government when it is collected as tax.

As politicians we need to be ever vigilant to the constantly changing techniques being utilised to minimise tax legally. I am not talking about criminal endeavours here. Where these techniques eventually become not in the national interest, measures should be taken to make sure they are made to be in the nation's interest, perhaps even to the extent where such techniques, arrangements or loopholes become illegal. If companies are utilising Australia's great laws and protections for their own prosperity, they should contribute their fair share. They are getting the benefits of the Australian system, so they should put in their fair share.

Evidence was presented before the Senate's corporate tax inquiry that one big multinational firm may have paid as little as two per cent tax on the billions of dollars of revenue it earned. That does not pass the pub test. It is just not fair. As I said, these multinational companies benefit from the protections, safety and services offered by Australia, so they should pay their fair share of tax, as individual Australians do and as Australian businesses do, be they small or medium or one of the larger companies that stride around the world.

For instance, these multinational companies are more likely to be utilising our judicial system than most ordinary Australians yet they are contributing very little to maintaining that judicial system which, at the moment, is struggling from a lack of resources. Australia cannot afford to let these very prosperous multinational corporations avoid paying their full share of taxation. Tax reform for multinational companies is vital to close the loopholes that currently exist that allow these companies to avoid tax. As I said, we are not talking about them doing something illegal—but we have to have a focus on the national interest.

Labor supports any measures that will close such loopholes and protect revenue from taxation that should be staying in Australia and benefiting Australians. Labor announced a $7.2 billion package of measures to prevent multinationals from avoiding tax by moving their profits offshore. That package was costed by the Parliamentary Budget Office. Sadly, the Abbott government rejected the measures proposed by Labor for what could only be short-sighted political reasons.

The measures contained in this bill, while welcomed as at least something, are untested. The government has no idea how much revenue these measures will save. In fact, in the budget papers there is only an asterisk. We saw the Treasurer floundering when asked this question today. Labor has taken a bipartisan approach to this important issue and will not stand in the way of these measures. It is important that these companies contribute as they should. It is also important that all measures necessary to ensure that multinational companies pay their fair share of taxation in this country be put in place.

More measures are needed to ensure that this occurs. The government needs to be serious about this issue and not tear down the measures put in place by the Australian Labor Party in 2013. Those measures required the Australian Taxation Office to publish details of the income and tax paid by companies earning more than $100 million. When it comes to taxation, transparency is important. Public companies are obliged under the Corporations Act to make sure shareholders know what is going on. Companies earning more than $100 million should be paying their fair share of tax in Australia. If they are not, surely Australians are entitled to know that. Australians are handing over their hard-earned, fully taxed dollars to these companies on the expectation that those companies will support our Australian economy by paying their fair share also.

These transparency measures apply to only about 2,000 companies in Australia. The government wants to reduce that number by about 800 companies. One has to wonder why these companies are so keen to keep their taxation expenditure secret. The government's argument is that private companies should not be held to the same level of accountability as publicly listed corporations. In fact, publicly listed corporations already have significant reporting requirements and the measures put in place by Labor evened the playing field between private companies and publicly listed corporations. If a private company is paying very little taxation, it should be called to account; it should explain why that is the case. There are sound public policy reasons for keeping these transparency measures in place.

We heard that ridiculous claim by the now minister for mining and then Assistant Treasurer Josh Frydenberg that there were real concerns about the implications of the publication of the tax data of private companies. In The Sydney Morning Herald article by the Nassim Khadem and Gareth Hutchins on 17 March he said:

… there were safety concerns because it made those individuals potential kidnap targets.

By this logic, the BRW Rich 200 list should be closed down in the interests of safety. The article goes on to make the point:

The decision to wind back the laws comes amid intense lobbying by business groups for the laws to be scrapped …

I cannot see how Mr Frydenberg could come to that conclusion. Transparency measures are important. The measures in this bill are welcomed. The measures Labor proposes in our $7.2 billion package of measures would go further to ensure that multinational companies are fully contributing to the economic wellbeing of Australia.

It is sign of a lazy government that has already run out of ideas when they take the easy road when it comes to taxation reform. We have seen a hiking up of the GST flagged by a couple of backbenchers opposite already. This is an unimaginative, simple solution that hits the poorest hardest. If the tax is broadened to fresh food, that would particularly attack communities that are struggling with their diet. You could not avoid such a hike unless you did not consume, and we cannot all sit around and grow our own vegetables. A rise in GST would hit low-income Australians, Australians who can least afford to pay more tax. Obviously we cannot structure our arrangements to send our finances off to Luxembourg, Switzerland, the Bahamas or even the Cayman Islands. Low-income Australians do not have many avenues to minimise their taxation burden. These measures are to be commended, but they need to go further.

Tony Pasin (Barker, Liberal Party) Share this | Link to this | Hansard source

I rise today to speak on the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. This bill seeks to address the challenges and the increasingly globalised market created for sovereign taxation collection. It is often said—indeed, the member for Moreton said it himself—that two things in life are certain: death and taxes. But it is becoming increasingly clear that some multinational companies are effectively avoiding the latter.

Taxes are a fundamental prerequisite for effective governance. Without tax, governments cannot fulfil their roles. Taxes have been with us since ancient Egyptian times and were formalised under the Roman Empire. These taxes initially were raised to aid the state in arming various militias and armies in defence of the state. The Greek historian Herodotus claimed taxes in Egypt provided a better standard of living, based on overall health of the people, than most other civilizations he had seen. Documentation dating back the first dynasty in Egypt, between 3000 and 2800 BC, shows evidence that pharaohs appeared before the people to collect taxes. The royal tour, called the Following of Horus, made it clear that tax revenues were due to the Pharaoh as the head of the state. Unable to handle the process themselves, pharaohs appointed ministers called viziers who acted as tax supervisors. The viziers kept records of taxes collected and ensured that the needs for labour and grains were met.

'No taxation without representation' was the cry which unified the forefathers of our close ally the United States to seize their independence from the British. Tax, indeed, has quite a long and chequered history.

Tax avoidance is a problem that has confronted authorities since taxes were first imposed by authorities. In ancient Egypt, the Pharaoh had to send auditors to ensure that people were not seeking to avoid their tax on cooking oil. In modern times, it is essential that we, too, ensure that taxes are paid. The rapid globalisation of the world economy has delivered new mechanisms for those that wish to avoid their responsibilities. This is especially true of large multinational corporations who can leverage their size and multinational structure to manipulate profits and artificially minimise those tax liabilities.

Taxes have always been a mechanism to redistribute resources to fund the governance of a given nation, and taxes are often a reflection of the values of a community. I am in agreement with Herodotus that effective taxation coupled with responsible government delivers better outcomes for all citizens. An effective taxation system is, indeed, a fundamental requirement in the governance of any nation. It is, of course, a finite and precious resource. Indeed, in the coalition we understand our obligation to apply these finite resources wisely. Whilst this government is cutting back on unnecessary spending, we must also address the issue of multinational tax avoidance. This government treats this issue with the upmost seriousness, as each and every dollar that is forgone through tax avoidance is a missed opportunity. We are opening our markets through our free trade agreements with China, Korea and Japan, alongside the recently announced Trans-Pacific Partnership. Australia is firmly situated in an enviable global position. Part of ensuring that our businesses are not disadvantaged in this new and freer market is to police multinational tax avoidance.

The coalition is committed to lower and simpler taxes. Australians understand the importance of tax, and the vast majority of taxpayers pay their fair share. Australian taxes enable our comprehensive social welfare and healthcare systems. Australian taxes deliver capabilities which ensure our national security through our potent Defence Force and our profession national security community. It is Australian taxes that deliver our world-class education system through funding for the early childhood, primary, secondary and tertiary education sectors. It is Australian taxes which enable this government to unlock the potential of each and every Australian citizen.

Australians families pay their taxes, Australian farmers pay their taxes and Australian small businesses pay their taxes. It is only fair that we ask large multinational companies to pay their fair share. Currently, large corporations simply are not doing enough, and that is why we have taken measures in this bill to enhance the government's response to this important issue. Whilst there has been much rhetoric on this issue, especially from those opposite, we are taking the necessary action to deal with this issue. This bill delivers on our commitment to deal with this issue.

At this point I would like to reflect on the member for North Sydney and his time as Treasurer. He delivered a budget in 2014 and another in 2015 and he took a leading role in this space in the G20. I spoke in my maiden speech about political courage. I would like to acknowledge the political courage of the member for North Sydney in his time as Treasurer of this nation. We see some of the dividends of that courage in this bill and in the way that he has led the globe in addressing this issue of multinational tax avoidance.

Some multinationals are artificially structuring to avoid Australian tax by booking revenue from Australian sales offshore. This means they have an unfair advantage over local businesses, families and small businesses, who have to shoulder more of the tax burden, and it undermines confidence in our overall tax system. We are committed to ensuring Australia has a fair and sustainable taxation system. That requires a steady, constant and consistent approach. Whilst we have delivered lower taxes for Australians, we must also ensure consistency in the manner in which businesses are taxed. The current system benefits big business and ultimately hurts the Australian taxpayer.

This bill implements three 2015 budget measures to level the playing field and ensure multinationals pay their fair share of tax: the multinational anti-avoidance law, to encourage entities to book their revenue in Australia when they have significant sales activity here; stronger penalties to combat tax avoidance and profit shifting, to deter taxpayers from taking aggressive tax positions; and country-by-country reporting and new transfer-pricing documentation standards, to give the Australian Taxation Office a greater ability to assess transfer-pricing risks. These measures will apply to large multinationals with annual global revenue of $1 billion or more. It is these large multinational companies that represent the highest risk to the Australian tax base.

If we do not take the action required and deliver the measures in the bill, we are missing an opportunity and letting down our citizens most grievously. This bill is utterly consistent with the government's commitment to levelling the playing field for small business. These actions will strengthen Australia's taxation system, but further effort is still required. We acknowledge that there is more work to be done in this space and we are working towards innovative and effective tax reform. Yet it is absolutely evident that we must take measures to combat multinational tax avoidance.

The multinational anti-avoidance law will allow the Commissioner of Taxation to treat these large multinationals as though they have a taxable presence in Australia and subject them to Australian tax. The package implements a new multinational anti-avoidance law from 1 January 2016, to stop multinationals artificially avoiding a taxable presence in Australia. This bill delivers on our 2015 budget commitment to target major entities with Australian activities who avoid booking profits in Australia. Whilst we made this undertaking in the budget, this bill, introduced on Wednesday, 16 September 2015, is an even stronger piece of legislation. This should highlight the government's resolve in ensuring tax is correctly calculated and paid.

The multinational anti-avoidance law will be broadened so all 'significant global entities' with revenues above $1 billion will be included. That is over 1,000 companies that will need to consider these rules. This means that, if you are structuring with a 'principal purpose' of avoiding Australian tax, the Australian tax office will have the tools to catch you and ensure that you pay your fair share. By removing the 'no or low' tax requirement and relying solely on a 'principal purpose' test, we are sending a clear message that it is not acceptable to deliberately and artificially avoid paying Australian taxes. Removing the 'no or low' requirement will also provide additional certainty and minimise disputes around whether a company operates in a 'no or low' tax jurisdiction where it is clearly structured for the purpose of avoiding tax. The new law targets the specific behaviour of around 30 companies that are believed to be artificially booking revenue in 'no or low' tax jurisdictions and avoiding Australian and foreign taxation. These companies are undertaking significant work in Australia, selling to Australians but using contrived structures to book revenue overseas and avoid paying Australian taxes. It is simply wrong for those companies to take advantage of the stability and affluence of the Australian market without paying their fair share of tax.

There is a strong moral and economic imperative to paying adequate taxation. Taxation fundamentally enables this government's capacity to govern this nation, further facilitating the prosperity of this nation. Without adequate tax revenue, government cannot govern and prosperity will be negatively influenced. It is crucial that multinationals pay their fair share. This bill and the measures within it complement the existing general anti-avoidance rule by clarifying that the specific arrangements used by multinationals selling into Australia are considered to be tax avoidance and will make it easier for the ATO to establish a case by catching arrangements that are designed to obtain both Australian and foreign tax benefits, and lowering the purpose test from 'sole or dominant purpose' to 'one of the principal purposes', making it easier to apply. This effectively delivers a better outcome for the taxpayer. This measure will allow the Commissioner of Taxation to treat these large multinationals as though they have a taxable presence in Australia and are subject to Australian tax. Multinationals will now be required to pay tax on profits from Australian activities. The legislation will also protect Australia's tax base by acting as a deterrent to companies from engaging in complex schemes.

The coalition understand the importance of responsibility. We understand the importance of delivering adequate and proportional penalties across the legislative space. The status quo is simply not good enough when it comes to large multinational companies and tax compliance. The government has taken a hard but necessary stance in strengthening penalties. It is a stance completely consistent with our values. Consistent with the government's position on tax avoidance, this bill doubles the maximum administrative penalties that can be applied by the Commissioner of Taxation to large companies that enter into tax avoidance and profit-shifting schemes. We take tax avoidance seriously and we know that these penalties will deter multinationals from entering into contrived tax avoidance and profit-shifting schemes. Deterrence is recognised as a key element in the fight against tax avoidance behaviour. It is crucial that we impose significant costs on doing the wrong thing. Currently, doing the wrong thing delivers a financial benefit to big business. It is through measures such as strengthening and doubling the penalties that we shift the cost-benefit analysis and change the status quo. Multinationals have dedicated resources for tax minimisation, greater opportunities to avoid tax through offshore activities and larger potential gains to be made if they are successful in avoiding tax. Stronger penalties are required to help deter major taxpayers from taking aggressive tax positions.

As always, this government is not seeking to punish those doing the right thing. Companies that are not engaging in illegal tax avoidance will not be affected. This government is not looking to punish those who have sought to do the right thing and obtain professional advice that can be considered reasonable. This government is committed to a safe, secure and prosperous Australia. This bill delivers on that commitment. Through claiming forgone revenue we strengthen our revenue base and secure it against disruption caused by the globalised economy. This bill levels the playing field and ensures that big business multinational companies are paying their fair share. This bill takes steps toward bringing our tax system into the 21st century.

Lisa Chesters (Bendigo, Australian Labor Party) Share this | Link to this | Hansard source

I note the words of Dave Arthur, a security guard from Melbourne who came to parliament not that long ago to talk about this very issue. He and his union, United Voice, were talking about the issue because the government at the time were not. They commissioned the report Who Pays for Our Common Wealth? Tax Practices of the ASX 200 into what is going on with the top 200 companies in Australia. Dave's words feature in the report and are something many in this place would agree with, yet it has taken the government over two years to act. He said:

Australian people aren't stupid. If you show them the facts and figures, that we’re losing so much money because of loopholes in the tax system … I think the Australian people will come around. We’re not after jet planes for ourselves; we’re not after penthouses or anything like that. All we’re asking for is the money that rightfully should go to the government that can be then spent on the community.

Dave Arthur is earning just above the minimum wage as a security officer in Melbourne. He, like other hardworking people of Australia, particularly those who are paying their fair share of tax and are on small to medium incomes, agree that it is time we had action on this issue.

This report that Dave helped write, through the comments he made and through the work of United Voice, exposed this issue. It is great to see that the government has caught up with United Voice and its members and I congratulate Dave and others for speaking out. I know it is not common for a union to speak out about tax avoidance. It is great that they have caught the attention of this government and that the government is now taking their concerns seriously.

The report's executive summary highlights 200 of Australia's largest listed companies on the ASX and what they are currently paying compared to what average Australians are paying. It shows that some of the multinationals, such as Apple and Google, are paying less of a percentage in tax than some United Voice members pay. It found that cleaners of Westfield's shopping centres pay more in income tax, as a percentage of their income, than Westfield itself pays the government in tax. This is a demonstration of the loopholes in our system. If anybody has met Westfield's cleaners, including cleaners of the Westfield Doncaster shopping centre, you would know they work very hard, happy to pay their fair share of tax. But, as they highlight in this report, it is about time Westfield also paid its fair share of tax.

The Australian budget is more dependent on corporate tax than other OECD countries. In fact, it is the second most dependent after Norway. After personal income tax, company tax is the second largest source of federal government revenue in Australia. Tackling corporate tax avoidance is an urgent priority; Australia does not have a spending problem, it has a revenue problem and it must be fixed. That is why the report commissioned by the union—and reports since—highlight how much, in the way of revenue, this country is missing out on. It is because we have not tackled this critical area of tax reform.

The report found that approximately $8.4 billion in corporate tax is being avoided, every single year, because of loopholes that have not been closed. Other key findings include: nearly one-third have an average ETR of 10 per cent or less; 57 per cent of the disclosures have been subsidiaries in secrecy jurisdictions; a combination of 1,075 disclosed subsidiaries registered in secrecy jurisdictions; and 60 per cent reported debit levels exceeded 75 per cent of equity, suggesting that the higher levels of debt may be artificial to lower taxable profits. This report was done to highlight the loopholes and what is going on with the top 200 Australian listed companies.

Let us talk about some of the case studies on who is avoiding paying their fair share of tax. Apple paid just over $80 million in Australian tax, in 2013-14, despite earning local revenue of over $6 billion. By comparison, the Australian retailer Harvey Norman paid $89 million in tax compared to $1.5 billion in revenue. That is the problem we have. Harvey Norman pays more tax than Apple despite the fact that their revenue is very different.

James Hardie, a construction firm:

… operates at a net taxable loss in Australia despite average annual profits of over $200 million. In the past two years the company has paid out almost $600 million in dividends to its shareholders, and its CEO is currently paid over $12 million. It operates at a loss because it claims tax deductions on annual payments to the compensation fund for victims of its asbestos products.

Let's just reiterate how this company is avoiding paying its fair share to the Commonwealth: it operates at a loss, because it claims tax deductions on annual payments for the compensation of victims of its asbestos products. Is that fair? Many in Australia, including good, hardworking people like Dave Arthur would argue that it is not. Let's just go back to the beginning of that case study as well. It is paying $600 million in dividends to shareholders and it is currently paying its CEO $12 million, yet it is operating at a net taxable loss. The only people not getting their fair share from the profits of James Hardie are the Australian taxpayers—the Australian people—and therefore this government

Case study No. 3, Glencore:

A 2014 Fairfax Media investigation alleged the mining giant had paid no tax in Australia over the past three years despite earning revenue of $15 billion, by using a complex series of intra-company loans. Glencore disputed this account by claiming that it had, in fact, paid $400 million in tax on this revenue.

So who is right? Yes, there needs to be transparency, we need to make sure that we can investigate this and we need to expose what is going on within these multinationals. These multinationals have a lot of incentives to lower their tax bill and have the resources available to them to investigate the best way to do it. This is why the role of government is so critical when it comes to tax reform. It is up to the government to set the rules and to make the rules as tight as they can so that companies who have the resources cannot avoid paying their fair share of tax in this country.

Some of the recommendations in the United Voice report that I first mentioned include:

Greater transparency on the purpose and function of subsidiaries in secrecy jurisdictions.

We need to know how much money exists and how much money is being hidden so that we can know how much is the fair share that they should be paying. Another recommendation that I support is:

Voluntary reporting of revenue, profits, staff levels and taxes paid in each jurisdiction until such a measure is implemented by law…

They are calling on people to do it until we set the laws in this place. They say:

Some companies, particularly in the mining sector, have already taken steps towards increasing disclosure.

But not all of them will and they only will if we make them. That is the role of government. They say we need to ensure that companies are:

Avoiding setting up subsidiaries in secrecy jurisdictions.

Again, these are tax dollars that the Australian people and taxpayers should be getting.

Remembering back to the early days—and I know this government loves to harp on about the mining tax—the core principles of the mining tax were because Australian people were saying, 'We aren't getting our fair share of our resources. Where's our fair share of our resources?' This sits with the Australian people to say it is not fair. This is another way that we are trying to make these big mining companies pay their fair share of tax. For anybody that you bump into in a regional area, it sits with them and it annoys them that they are paying their fair taxes—and they have the ATO constantly offering to do audits, helping them, and they are the ones having to pay their tax—yet we have big multinationals that are not paying their fair share.

Taken together, the four schedules that have been proposed in this legislation before us today do make some progress towards combating multinational tax avoidance; however, they do not deal with the issue of debit deductions, which is the primary focus of Labor's multinational tax package. This bill focuses on companies that artificially avoid booking revenue in Australia so that they do not have to pay tax on their profits. That is an important issue to tackle and we hope this bill will force companies to restructure their operations so that profits made here stay here. That is a critical thing that Australian people want to see: profits made here must stay here so that our government can then use those resources to help fund our schools, to help fund our hospitals and to help build the infrastructure that this country needs.

This bill, however, does nothing to stop companies from using debit reductions to send money offshore, whereas Labor's proposal does. It goes to the heart of what Dave Arthur and the United Voice report were calling for. Companies can easily transfer money between their subsidiaries to dress it up as a loan even though it is just transferring money from one pocket to the other. This is where the government's bill fails; it fails to tackle these issues. If the government was serious about this issue and if they supported the Labor proposal that we put forward, then in essence there would be an extra $7.2 billion that would come into the revenue for this country and for this Commonwealth that could be spent on government programs.

If this government was committed to ensuring that major corporations paid their fair share of tax, then what they would do is make sure that they move on transparency and that they introduce better transparency rules into the legislation that is before us—yet we have not seen real action on this issue. If the government was serious about making sure that they would get the fairest share for Australians, then they would adopt Labor's package, which would see an extra $7.2 billion coming in for our government.

This is an important issue. I would like to commend the work of people like Dave Arthur, a security officer, who stood up, raised this issue and got this parliament talking about the importance of making sure that multinationals pay their fair share of tax. Ordinary working people like Dave Arthur expect this government to have robust and rigid tax laws in this country to make sure that everybody pays their fair share. It is how we ensure that our country does not continue to have a revenue problem.

I know this government likes to talk up having a spending problem, but the fact remains that it is actually a revenue problem. By taking real and serious action on multinational tax, making them pay their fair share, we can start to address some of those tax loopholes that exist. Just because a company has the means to know how to avoid tax does not mean they should get away with it. It is up to all of us in this room to make sure that the legislation before the House is not just window-dressing, that it is not just to silence people like Dave Arthur and all the other constituents concerned about this issue. If the government is serious about real tax reform it will vote up the amendment that has been moved today to make sure this legislation will address the real issue that we have in this country—a revenue issue—and to make sure that all companies, multinational or local, pay their fair share in tax.

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

I listened intently to the member for Bendigo's contribution to the debate on the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. I think if I had a dollar for every time she said 'fair share' and I donated it to the ATO, we actually would not have a revenue problem anymore. That was the incessant cry from that side of the chamber.

I am not going to go through in detail, like every speaker previous to me, the specific provisions in this bill. I want to speak a bit more broadly. Tackling tax avoidance, however it is formed, has been a role for government since time immemorial, and it will continue to be. Like any tax law, there will be taxpayers who try to find the most advantageous way to interpret or to structure their affairs within those rules. There will also be cases where taxpayers deliberately contrive arrangements to get around those rules. That is ultimately what we are talking about here when discussing combating multinational tax avoidance.

The Labor Party have all of a sudden discovered tax avoidance because it enables them to address one major problem. They have no savings measures, they have not released the costings on their so-called changes to multinational tax avoidance, and they can pluck this $7 billion figure out of the air and it fixes a few other issues for them. While in government, the Labor Party never spoke about multinational tax avoidance, even though our tax base was being eroded by an ever-changing economy. All of a sudden, in opposition, they discovered multinational tax avoidance. But for six years we saw nothing from them.

Inevitably our economy has moved from the old anvil industries of manufacturing. We still have good advanced manufacturing in this country. But, increasingly, our economy will be based on high-tech R&D, intellectual property. That poses a major problem for our tax system. A hundred years ago when we were manufacturing widgets, they may have been manufactured in one country and sold in another. It was very easy to ascribe the profit margin to a particular item, because it was manufactured in one country and it was marketed and sold in another. It was relatively simple. What are the inputs that go into the manufacture? What is the skill, the time and effort that goes into the manufacture? Whatever we ascribe to that, that is the profit attributable to that jurisdiction. What is the profit attributable to the jurisdiction in which that particular item is sold, where it is marketed, where the contractual arrangements are entered into? What are the profits we ascribe to that part? It was always in some senses a difficult task for governments, but the laws were in pretty good shape in determining what profit we would attribute to one jurisdiction and what profit we would attribute to the other.

That changes and becomes a lot more difficult when we involve multiple jurisdictions that may have many tens of inputs that come into one final product and, more importantly, where the inherent value in that product is not in the physical product itself. The member for Bendigo mentioned Apple and Google. Nearly all of us have an iPhone. We pay a fortune for them; they are expensive but they are extraordinarily valuable, and that is why we buy them. The cost attributable to the physical material of that phone is only a miniscule proportion of its actual cost, because the value of that phone is in its intellectual property in its components—how it works, the amount of time and value that people put in to developing that technology. That is where it becomes a lot more difficult for our tax system. Where do we attribute that value? Therefore, which jurisdiction has a right to claim that taxable amount?

While that was increasingly occurring when the former Labor government were in office, they did absolutely nothing and said nothing, but then, in opposition, they had a conversion on the road to Damascus. All of a sudden we hear them carping about combating multinational tax avoidance. If combating multinational tax avoidance were just the low-hanging fruit that the Labor Party suggests it is, every Western jurisdiction and First World economy would not be having this problem. It is extraordinarily difficult. That is why I commend the former Treasurer for his work with the G20—because one jurisdiction on its own cannot and should not purport to be able to fix this problem. Inevitably, we have to work with comparable jurisdictions to ensure that there is not anywhere that these multinationals, who operate across many, many jurisdictions, can hide or shelter income inappropriately.

There are inherent incentives for any economy—and we saw it in the last decade or so—to attract investment by trying to put in place extraordinarily attractive tax rates or extraordinarily attractive tax incentives. Whenever you have that inevitable contest between countries, there will be corporates, multinationals, that seek to get the best outcome. What we are doing through this legislation is attacking those companies that contrive structures purely for the tax advantage.

If, for example, you are a multinational company that operates in 100 jurisdictions—and it makes sense for you to do so because of your particular industry, for the particular service or product you are providing—it might make complete sense for you to be in Timbuktu or you name it and you will not be attacked by these rules. But what we will get to are the contrived arrangements, with companies trying to utilise double-tax treaties for their own advantage. That is when it gets really tough, because the reality is that historically we have had competition between jurisdictions. For every extra dollar that the Australian Taxation Office laid claim to, that was one dollar less that another jurisdiction got. So there was inevitable tension between nations.

But it is not a zero sum game. Unfortunately, what has happened in recent years is that income has been sheltered from both jurisdictions. Take the case of arrangements with, say, a US multinational that sells products into Australia. They might contrive a structure by utilising European tax treaties, which means that not only does Australia not get the tax that should be attributable to the profits but the US does not either. So we actually now have a real incentive. That is why I commend the former Treasurer for really leading the charge at the G20 to bring these first-world economies with robust tax systems together to actually try to address these issues.

Let us remember that we do have an extraordinarily robust tax system. But, as I said at the beginning of my contribution, tax laws are not set and forget. The minute you come up with one law there will be a creative way to structure your investment differently, to get a different tax outcome for that taxpayer. So governments must be nimble.

Today is not the end of it. Last year we did a great job in reducing the debt that was allowable under the thin capitalisation rules. That was one piece of the puzzle. Today we are debating this bill—and I am glad that we have bipartisan support—which has a range of measures to combat multinational tax avoidance. These will not be the panacea at all. It would be disingenuous for anyone to say that they would be. But I am very confident that these rules will have a material impact, most importantly, on the future behaviour of multinationals that have income over $1 billion and that are operating in, in many cases, in tens of jurisdictions.

Again, I say that I am very pleased that Labor has had the conversion on the road to Damascus. It is now supporting this legislation, although if I were a person in the gallery listening to the contributions from those in Labor, I would walk out of parliament and say, 'I'm sure they must be voting against that legislation. I'm sure they must be voting against it because I just heard 15 minutes from the member for Bendigo about how little we've done and how disappointed she is with this so-called inaction.'

Well, she might want to look at what was done for six years under the Labor Party. Our tax system and our tax base were being eroded and they were asleep at the wheel. It is very easy to discover these problems in opposition. I am very proud to be part of a government that is actually trying to address these things in a methodical and sensible way. Let's remember why we have to be methodical, consultative and sensible—it is not just for the relationships with our trading partners. In some cases, as I said, every extra dollar of tax that we put our hands on means a dollar less for someone else. But we do not want to discourage investment in this country. We want people to invest by the rules.

I say to some people in the community that, as PAYG taxpayers, we do not have the ability to structure our affairs or to reduce our tax. We get our paltry tax deductions each year on various little bibs and bobs, but by and large we do not have those opportunities, and nor should any multinational. But it is a bit like grasping sand at the beach—the tighter you hold it, the more it slips through your fingers. And so we have to be very careful here that we structure arrangements in a way where multinational companies will have certainty in their investments and, provided they have not entered into those contrived arrangements, that their structures and their investments in this country will be respected.

As I said earlier, let's remember that in a world where increasingly our wealth will be embodied in intellectual property and investment in research and development—not in hard commodities, like they were 100 years ago—it is more difficult for any jurisdiction to actually point to the point in the chain of what value is attributable to that, like in the example of the iPhone that I used earlier. In Australia we import the iPhones; they go into an iPhone store—that is where I bought mine—and they are sold for a few hundred dollars. What part of that profit is attributable to Australia? Should more be attributable here because this is where the purchase is made? Or should more be attributable to the jurisdiction which had the hundreds of highly-skilled people working for Apple to come up with all the component pieces of the iPhone? I am talking about the software here.

In my view, that is where the value is embodied in an iPhone. It is not the physical plastic or the physical metal; it is not the components on the inside. It is a bit of a lump of plastic and metal, if you ask me. But its value is in the intellectual property. That is why these rules are so important. It is so much more complex in the way that we need to do that.

But we have to strike the right balance. For years Australian taxpayers have been struggling under the weight of transfer-pricing documentation. I would not want to see any proposals put into this parliament that increased those requirements. In many cases—and I saw it in practice—it was an exercise done to tick a box with the ATO rather than trying to achieve a substantive outcome. I think, having read through this bill, that it will strike that balance.

I also think the country-by-country reporting is important as well, and I think anything that adds more accountability to these large companies will hopefully mean that they do stick to those sensible investments, to structures that make sense rather than the contrived arrangements that this legislation is trying to attack. We do not want to see companies structuring their investments into Australia in such a way as to get a benefit from either our tax system or, quite frankly, the tax systems of our trading partners. Unfortunately, if that happens, it will only end up being a race to the bottom. I congratulate the former Treasurer and the current Treasurer on this bill and I commend it to the House.

Joanne Ryan (Lalor, Australian Labor Party) Share this | Link to this | Hansard source

Those of us on this side obviously support the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. The bill was motivated by information that suggested that multinational companies worth billions of dollars were operating in this country—trading, selling, making a profit—but not paying their fair share of tax. Like most Australians, I was surprised to learn that this could be the case. This issue arose at a difficult time for the government, in the wash-up of its 2014 budget—at the height of the debate about that first budget. That budget was focused on cutting spending, with lots of rhetoric about cutting spending to pay down the debt and deficit and then, lo and behold, it is exposed by journalists that we have multinational companies in this country not paying their fair share. Like all pay all PAYG taxpayers, I was appalled. The debate quickly moved from spending and most Australians started to look to a review of revenue—to the revenue side of the country's balance sheet, if you like.

The time of the national debate following the 2014 budget was an interesting time because it brought our attention sharply to spending and what revenue we should count on. We had a government that was telling us that there was debt and deficit after they had doubled the deficit, and they have now become the highest taxing government since John Howard was Prime Minister. This exposure of the fact that multinationals were not paying their fair share in this country really did sharpen that debate, and the brouhaha caused by the multinational tax avoidance practices has left many Australians very interested in the international tax system—much more interested than they would have been in the past. It falls to this chamber to ensure that transparency in taxation is what the Australian public gets every time we debate taxation. The question of who is paying their fair share is left simmering in the minds of the public. The situation was not helped by the case studies that came out of the Senate inquiry, with the Lux leaks—documents released in 2014 showed that over 300 firms had been involved in routing money through Luxembourg and other low-tax jurisdictions to minimise their Australian tax bills. Firms named in media reports included AMP, Macquarie Group and Lend Lease. The amount of tax avoided through these schemes potentially reaches into billions of dollars.

This raises the question of transparency. This government has just passed legislation to limit transparency around millionaires and the details of the tax they are paying. I want to speak on this bill today because I want to speak for the people of Lalor; I want to represent them here by saying that what they want is transparency. They want to know when companies are not paying appropriate tax. The only thing the man in the street can do about it is hear the name of that company and determine that they do not want to do business with them. It is important that through this process, through the Senate inquiry, we have heard some of those names—and some of those names are household names, as I have just said. There are discussions about iPhones and which piece of them should be paid tax on in this country. The people of Lalor believe that Australia is more than a marketplace for big business—they believe it is a community. Of course every one of us who pays tax knows that we are making a contribution not just to the country but to the community. At the very core, Australians believe that everybody should pay their fair share.

Australians also understand that the tax they pay, whether it be personal tax or company tax, should go to running the country—that our taxes pay for our roads, rail and other transport, for schools, for the justice system that we rely upon, for the public service, for defence and for the universities that train our next generation. Our taxes pay for infrastructure like the NBN, and the simplest test that most Australians would apply to the question of multinationals making a contribution in this country is pretty simple—do these companies utilise these nationally-provided systems?

If we go through them, of course they do. Do they utilise our roads, our rail, our transport systems? Of course they do. Do they get value from our school system? Of course they do. If they are employing Australians, then they are relying on that school system to deliver them quality students who become quality workers. Do they rely on the justice system? Most definitely. If multinationals have an issue, they have redress through our court system. In fact, many people would argue they make better use of it than most of the Australian citizenry. Do they make use of the Public Service? Of course they do. Do they make use of our universities? Of course they do.

All of the things that our taxes go towards paying for, the multinationals have access to and make use of, so it is absolutely reasonable that they be expected to pay their fair share for doing business in this country. I do not think there is one person in Australia who does not believe that should be the case. So, in terms of this piece of legislation and what it might do to ensure that, obviously this side supports it. But, in the spirit of that same bipartisanship, we would ask that those opposite take into consideration the measures that we have put forward in our policy to stop multinational tax avoidance, and introduce legislation that would ensure those loopholes are closed.

In Australia, the average taxpayer, the average wage earner, pays tax to the tune of 21 per cent of their income, and small businesses pay 30 per cent in corporate tax. It is absolutely unreasonable that, by comparison, multinational corporations, through the way they have been able to use both the tax system in Australia and tax systems in other countries, have paid less than that. In fact, the Senate Economics References Committee's recent inquiry into corporate tax avoidance heard evidence that one big multinational firm may have paid as little as two per cent tax on billions of dollars in revenue. If the average Australian wage earner paid tax at that rate instead of at the standard 21 per cent, they would be paying almost $15,000 a year less. So it is perfectly reasonable that we ask those multinationals to pay their fair share in this country. Without strong action to tackle multinational profit-shifting and corporate tax avoidance, Australia will continue to lose millions or even billions of dollars in forgone tax revenue. With government debt continuing to rise under the coalition, we cannot afford to let tax revenue drain away offshore.

That brings us back to this chamber, where we hear day in, day out about spending from a government that has demonstrated for the last two years that it is prepared to break the social compact with the Australian public and to punish the disadvantaged, and suggests that all the issues with our national accounts come down to spending, when clearly here we can see that there are revenue issues. We see a government that is prepared to do some things to change that balance but not enough to come to a bipartisan agreement with Labor in terms of the introduction of our policy.

Labor are taking forward a positive policy on multinational tax avoidance and we are asking for a bipartisan approach to this important issue, and it is in that spirit that the government should adopt our $7.2 billion tax package and tackle all the loopholes that let companies send their profits offshore. This is a reasonable thing to ask—a very reasonable thing to ask. We also note that it is costed, at $7.2 billion, while those opposite are bringing in this legislation and the budget papers indicate what it will save or what it will accrue with a few asterisks. Today in question time the Treasurer said that it is hundreds of millions of dollars. I take little comfort in a Treasurer who talks in terms of hundreds of millions of dollars rather than a specific figure while we are actually debating this legislation in the parliament. So I was aghast in question time today, after the question was asked, that we did not get an answer that provided a clear costing.

Nonetheless, we will support this legislation. We will support this multinational tax avoidance bill through the parliament because we believe tackling tax avoidance and protecting Australia's revenue base should be above politics. We are disappointed that the $7.2 billion multinational tax avoidance plan that we have as policy has not been adopted, but we are hopeful that, rather than have Australians taken for mugs, the government will come on board and implement that as well.

I finish by saying that the question of transparency is at the heart of this for the Australian people. We should not be relying on journalists to determine where we have missed picking up revenue from multinational companies doing business in this country. This government should act to ensure transparency around tax arrangements so that Australians can feel confident that, when they hear about spending, they have a government that is equally committed to ensuring the revenue streams that Australians are entitled to.

It is critical that this legislation be passed quickly and acted upon quickly, and I would also suggest it is critical that those changes be monitored. As we have heard throughout today's debate, tax is complex—earlier, someone likened it to shifting sands or trying to hold sand in your hand—so it is important that the Australian Taxation Office remain nimble and alert, and watch the way the tax system is used by multinationals, so that we can continue to change the laws as required and ensure that revenue stream for Australians.

I make one further comment, which is that, if those opposite argue that for six years the Labor government did nothing to stop this occurring, it belies their own assessment that these things occur because multinational corporations are changing so quickly because the way our markets work is changing so quickly.

It is important that we work together in a bipartisan way so that we remain agile and so that the tax office is given the appropriate resourcing to ensure that it is delivering to the Australian public all tax revenue that is due to this country.

John Cobb (Calare, National Party) Share this | Link to this | Hansard source

I rise today to speak about the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. This bill is about ensuring multinationals and probably a few others that have activity in Australia pay tax in Australia and are on the some playing field as the Australian businesses which they compete with. We live in a global world and so obviously companies that operate right across the theatre take advantage of the tax laws where they are most conducive to them paying least tax—not all, probably not even most but certainly some, and some of the very big ones as well.

I guess the downside of a global world, global trading and companies operating out of multiple countries is that they are able to do this. While I hope the amendment legislation which we are talking about this evening goes a long way towards dealing with some of those issues, it certainly will not deal with them all. I believe that only cooperation between most of the major trading countries in the world will be able to deal with it in a fully meaningful way. I know that the former Treasurer did talk—and I am quite sure the current Treasurer, Mr Morrison, will also be talking—with his counterparts overseas, because whether it is the G8 or the G20 or whoever, they do have to have common laws to deal with the problem fairly.

Currently, some multinationals are avoiding paying up through artificially structuring to avoid Australian tax by booking revenue from Australian sales offshore. It obviously gives them an unfair advantage over our local business, families and small business who are shouldering more of the tax burden. This undermines confidence in the system whether or not they are exporters. While Australia has some of the strongest integrity rules in the world, certainly more needs to be done. As the previous speaker, the member Lalor, said: this is not a problem about politics; it is problem about trade and business.

The coalition government is determined to maintain the integrity and fairness of the Australian tax system. Multinational tax avoidance is unacceptable and we are committed to leading the fight against it. In 2014 the government strengthened our already robust defences against tax avoidance by tightening our thin capitalisation rules and limiting the scope for multinationals to claim excessive debt deductions. The legislation that we are debating tonight now builds on those changes, with it implementing three 2015 budget measures to level the playing field.    The first is the multinational anti-avoidance law to encourage entities to book their revenue in Australia when they have significant sales activity here. This piece of legislation has been further strengthened from that announced at budget. It has been broadened so all global entities with revenue above $1 billion—which is estimated to be over 1,000 companies—will need to consider these rules. The Australian Taxation Office will now have the tools to catch out those structuring with a principal purpose of avoiding tax, ensuring they do pay their fair share. The removal of the 'no or low' tax requirement and relying on the 'principal purpose' test sends a clear message: tax avoidance is unacceptable. It will further minimise disputes around whether a company operates in a 'no or low' tax jurisdiction where it is clearly structured for a purpose of avoiding tax. These changes specifically target around 30 companies that are believed to be artificially booking revenue in 'no or low' jurisdictions to avoid Australian taxation. This will also protect our country's tax base by acting as a deterrent to companies from engaging in complex schemes.

These changes ensure that people avoiding will be held accountable, with this bill doubling the maximum administrative penalties. The introduction of stronger penalties will not only hold companies to account but act as a deterrent to multinationals from entering into contrived tax avoidance and profit-shifting schemes. Deterrence is an effective measure and response to tax avoidance behaviour. Those who are doing the right thing will not be impacted under these changes. Those who have sought to do the right thing and obtained professional advice that can be considered reasonably arguable will not be affected. This recognises that tax law does not always provide certain outcomes—and I am sure we have all seen that.

The measure will require multinationals to report to the ATO on income and tax paid in every country in which they operate. This was one of the key recommendations of the G20 action plan. As I said earlier, this has to be an international solution as well as an international problem. We expect these measures to be implemented broadly by other jurisdictions, but we, Australia, look to lead the way. These amendments will see entities provide a statement to the Commissioner of Taxation through a three-tiered approach, including a country-by country report containing key information on the location of the economic activity undertaken by the multinational group of which the reporting entity is a part. A master file is a high-level description of multinational group's global business, and a local file is an analysis of the reporting Australian entity's operations and cross-border related party transactions. This marks the first time the veil will be lifted on major multinationals. For the first time, we will be able to have an understanding of aggressive taxpayer behaviour beyond our shores.

Multinationals doing the right thing have nothing to be worried about. However, those avoiding will now be scrutinised and penalised. This legislation will not impact negatively on investment by multinationals. Rather, it will make sure they are playing by the rules. The government has a responsibility to Australian companies to make sure it is a fair marketplace and they are not being forced to bear a tax burden that multinationals avoid. Our government is sending a clear message: it is unacceptable to enter into tax avoidance and profit shift schemes. Australia will now not be taken advantage of, and multinationals must comply.

Australia is particularly vulnerable, I think, because we are such a big trading nation. It is what we do best. Whether it is agriculture, whether it is mining or whatever it is, trade, obviously, is the way in which opportunity arises for a multinational company or a big family company—it does not just have to be a multinational company. The way in which they operate is, obviously, on the basis of trade. We are one of the big trading nations, per capita, in the world. We might not be the biggest producer, but we are a very big trader. That is why we are more susceptible than, probably, most countries to tax avoidance by large companies. I commend the bill.

Nick Champion (Wakefield, Australian Labor Party) Share this | Link to this | Hansard source

Deputy Speaker Kelly, I heard your contribution on this debate earlier on. I will resist the temptation to reflect on it. I would not want to anger the Deputy Speaker in any way. It is interesting that we are talking about these matters. I got married in Gibraltar about a year ago, and Gibraltar is a very, very lovely place.

Government Members:

Government members interjecting—

Nick Champion (Wakefield, Australian Labor Party) Share this | Link to this | Hansard source

It is a wonderful place to go to. It was, of course, a noted military base during the Second World War, as I know the member for Batman would be very, very interested to hear. My honourable friend opposite, the member for Riverina, says that Fiona was a very lucky woman to marry me there in Gibraltar.

The interesting thing about Gibraltar is that it has been accused of being a tax haven, and one of the election policies that the Labour Party in Britain had was to force Britain's overseas territories, such as Gibraltar, to declare, for transparency purposes, all of the companies that are listed there as shell companies for taxation purposes. It is interesting that a place as lovely as Gibraltar—and I cannot recommend it enough both as a place to get married and also a place to visit—

David Feeney (Batman, Australian Labor Party, Shadow Minister for Justice) Share this | Link to this | Hansard source

I think that Spain wants it back.

Nick Champion (Wakefield, Australian Labor Party) Share this | Link to this | Hansard source

With all due respect to my Spanish friends, as the member for Batman helps me out there—but it is a really wonderful place but a place where there is this tax haven issue. I guess that that is why this bill is before the House and the opposition's amendment is before the House. When we were in government, we were pretty much the only people talking about this. I remember the Assistant Treasurer—the former member for Lindsay, out Penrith way—David Bradbury, being really a lone voice, in many ways, taking on this issue and talking about it. His work goes on, as he is now working with the OECD.

We know that workers, on average, pay about 21 per cent tax; we know that small businesses pay around 30 per cent tax. All of the workers and the small businesses that I meet in my electorate want to do their fair share, because they live and work in the community. Often they do more than their fair share. They go out and do civic works. Many small businesses donate their time and money to good causes in the electorate. You see these Australians wanting to give back to the local schools and to the local hospitals to make sure that this is a strong country. I do not think that it is unreasonable to expect that those multinational companies, whether they be Australian or internationally based, do the same thing—that they do not just pay what they miserly reduce out of the system, but that they pay their fair share. There have been many, many examples given. Apple has been a notable example. They have $6 billion worth of revenue, and they are paying $40 million of tax or something like that—about the same amount as Harvey Norman. You think to yourself that that clearly does not make sense, and you know that there is something wrong when that can occur.

During the mining tax debate—we have had that debate many times in this chamber, so I will not till salted ground—we had mining companies out there, through the Minerals Council of Australia, bragging about the contribution that they make in terms of taxation, yet we find that they are often engaging in taxation arrangements that would make you blush. The reason why they have been so aggrieved, behind the scenes, about the economics committee of the other place, led ably by Senator Dastyari, and the reason why there are so many complaints about the good senator is that he is doing a good job. He is revealing to Australians some of the egregious practices that have been going on for decades.

We only have to look to James Hardie to know that that is true. There was a company that made a terribly toxic product, the consequences of which we are seeing even today and which we will go on seeing for years. I think what happened with asbestos is a matter of bipartisan condemnation. Of course, what happened with James Hardie is that they went to the Netherlands seeking not just to evade their liabilities but also to find a more allowable taxation culture. To give you the extent of the problem, the Taxation Office thinks that about half of the $300 billion a year that is transferred in and out of the country—some $115 billion—might be subject to these arrangements. So you can see an extraordinary amount of money sloshing through an economy that is internationalised, and we want it to be internationalised. We want these companies to come here and we want them to make a profit, but we also want them to pay their fair share of tax.

The government has done some good things in this bill. I think my predecessor in this debate has talked about, and probably the member for Hindmarsh, who follows me, will talk about the descriptions of the measures in the bill, the significant global entity provisions aimed at some of these big entities and the multinational avoidance law allowing the taxation office to see through complex taxation arrangements that are set up as a shell game—pea and thimble trick—in order to reduce taxation. The penalties are doubled, which is a good thing, and country-by-country reporting of course is a critical part of the OECD's action plan on base erosion and profit shifting. We think they are useful things to do so we are supporting the bill.

But we also want the government to adopt Labor's plan to raise about $7 billion worth of taxation off of multinationals to close down some of the loopholes around interest deduction. We all know that, with the intangible nature of the digital economy, payments between Australian subsidiaries and the international parent company have been allowed to grow exponentially and unreasonably because of the values associated with licensing, intellectual property and the like. We want them to do a very simple thing—that is, come to the table. We are supporting them; they could support us. The Australian taxpayer and the Australian community would be the victor. They would be the ones to get better schools, better hospitals. Of course every dollar not paid by a multinational—and we only want them to pay their fair share—is a dollar less that the average pay-as-you-earn taxpayer has to pay or the small business has to pay or it is one more brick in a school or hospital that we want to see.

To conclude—I will not delay the House's time any longer—we want to visit places like Gibraltar and, I guess, Ugland House, if you are tempted to go there, in the Cayman Islands because of their intrinsic beauty and maybe their lax marriage laws—I do not know; Gibraltar is a great price to elope to. As I said before, I recommend it to anyone. We want them renowned for their marriage laws and not for being tax havens. Again, we want these places not to be famous for being the recipients of all of this money sloshing around the world. We want that money to work as it normally would.. It is important that companies make profits but it is also important that companies pay a fair share of tax office off of that, not just simply for this country but for every country around the world, so that we can progress the cause of humanity.

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

Before the member for Wakefield disappears, I look forward to the ongoing dialogue he has with the officials of Gibraltar. I will be most interested in how that relationship goes and I am sure they will appreciate his promotion of their fine part of the world.

We are here today to discuss and debate the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. We are committed to making sure that multinationals pay their fair share of tax. We are committed to ensuring Australia has a sustainable taxation system in particular. We already have some of the strongest integrity rules in the world but we know that some multinationals are artificially structuring their operations to avoid Australian tax by booking revenue from Australian sales offshore. We have heard plenty of examples of this over the last year or so through the media and other forums. The coalition government is continually on the search for ways to ensure that Australian individuals and companies pay their fair share of tax, probably even before the late Kerry Packer went to a parliamentary hearing and made his famous statement that Australian individuals and companies have been trying and will continue to try and minimise their tax.

This year, the ATO has stated that there are over 4,600 high-worth individuals. The ATO is again targeting those who try and cheat the system, as they do, and the government is very happy to support the tax office in this. The ATO is also chasing explanations from people who have had large one-off or unusual transactions or a history of aggressive tax planning and lifestyles not supported by after-tax income. The tax and revenue committee talks to the ATO about these matters and know it is committed to pursuing these with all its resources.

Speaking of something done in recent years, there is also Project Wickenby, a cross-agency task force that plays a role in the government's fight against tax evasion and avoidance. It was established in 2006 by the Howard government to protect the integrity of Australia's financial and regulatory systems. The task force consists of eight federal agencies and became necessary because of the scale of the tax avoidance. As an example of the success of the government and the ATO, just last financial year there were some 33 convictions for tax crime and, importantly, some $10 million was recovered. The most significant of those was a Queenslander sentenced to seven years jail with a repatriation order of over $1 million. So the government is serious about this. We have taken some action, had some success and will continue to have more success as time goes on.

As I mentioned before, there has been a great deal of press about multinational corporations minimising their tax. Companies like Apple and Ikea have been in the spotlight among others. This is not a problem unique to Australia. Governments around the world that are challenged by the new economy, the digital economy, international operations, the use of the internet and intellectual property laws, we find that they can restructure their corporate and financial activities. Great Britain are onto this as well; they have come up with a diverted profits tax to counteract contrived arrangements used by large groups—typically, multinational enterprises—that had resulted in the erosion of their tax base in the United Kingdom. With this bill, the government is taking another step to ensure that multinationals that have activity in Australia pay tax in Australia, and we understand from the tax office that this amount will be hundreds of millions of dollars, so it is not insignificant.

The multinational anti-avoidance law will allow the Commissioner of Taxation to treat large multinationals as though they have a taxable presence in Australia and are subject to Australian tax. The government is determined to maintain the integrity of the system, and we have led the fight in this. This is not something we have just looked at over the last few months. We did this last year at the G20 where Australia was President. We have led the global response, and other countries have responded, quite rightly. Last year the government strengthened the already robust defences against tax avoidance by tightening our thin capitalisation rules, limiting the scope for multinationals to claim excessive debt deductions. This measure is only one part of a package.

This same bill will also implement country-by-country reporting, which was a recommendation of the OECD and the G20, and increase penalties for those engaging in tax avoidance and profit-shifting. If we have a look at the resources that the government is providing to the ATO, they are considerable—around $90 million to the ATO over three years. I also know that they have targeted at least 30 multinationals, and I think that number has increased just recently. To date, the program has raised over $400 million—a considerable amount—in tax liabilities and is estimated to raise $1.1 billion in total.

So there are significant things that are being undertaken. We will work closely with academics, tax professionals and the business community in ensuring the OECD's profit-shifting agenda is carried out as well. It is one of these things on which international collaboration is important in getting a result. That is because, as I said before, every country faces these problems, so we are not alone in this area. It is consistent with work being progressed by the OECD, importantly, on the Action Plan on Base Erosion and Profit Shifting that will be finalised later this year, and the government will consider what steps need to be taken to strengthen Australian laws at this time. The OECD has expressly asked countries to look at their domestic laws; we are doing so, and we are strengthening our anti-avoidance laws.

In closing, this law will affect entities with annual global revenue of $1 billion or more, so it is very targeted. The G20 countries have all agreed that the country-by-country report will only be shared between tax administrators. So we are taking a lead internationally and taking correct action in Australia so that multinationals pay their fair share of tax. So the federal government is taking action. The ATO is delivering and we look forward to results to help increase the sustainability of our tax system.

Terri Butler (Griffith, Australian Labor Party) Share this | Link to this | Hansard source

If multinationals do not pay their fair share of tax, that means that Australian businesses and households bear more of the tax burden, have reduced services or both. That is why global firms earning billions of dollars in revenue in Australia should give back to our community. Our roads, our schools, our justice system and the other public services that are publicly funded go towards making this country a great place to do business—and we are a great place to do business. We are a low-corruption country. We are a very modern and progressive country. We are a country that is prosperous. And part of the reason for that is that we do have robust publicly-funded public services and infrastructure.

That infrastructure and those public services cost money. Multinational firms should not be able to avoid contributing to those costs via fair taxation just like everyone else does—just like domestic businesses do and just like households do in Australia. Someone earning the average Australian wage pays about 21 per cent in tax. A small business pays the corporate rate, if they are incorporated, of 30 per cent on their profits, but in the past few years there have been increasingly regular reports about huge companies paying just a fraction of that.

Deputy Speaker Wicks, as you know, the Senate's recent corporate tax inquiry heard evidence that one big multinational firm may have paid as little as two per cent tax on billions of dollars in revenue. If the average Australian wage earner paid tax at that rate instead of the standard 21 per cent, they would be paying almost $15,000 less a year. Wage earners pay their tax. They do not get a choice about whether to pay their tax. Wage earners generally cannot afford sophisticated tax avoidance measures. We pay our tax. Everyone in this place should be paying their tax—and I can only assume that they are. But multinationals, it seems, are doing what they can to avoid paying fair taxation through the use of things like tax havens—places like Ireland, for example, and Luxembourg and others.

In its submission to the tax inquiry, the Australian tax office reported that more than half of Australia's cross-border trade, over $300 billion a year, is made up of companies transferring money from their Australian operations to their international arms. Over $115 billion of this revenue was channelled to very low tax jurisdictions. For example, documents leaked last year showed that over 300 Australian firms had been involved in routing money through Luxembourg and other low tax jurisdictions to minimise their tax bills. Firms named in media reports included AMP, Macquarie Group and Lend Lease. The amount of tax avoided through those schemes potentially reaches into billions of dollars.

I, like many people across the world, was very concerned about what was happening in Luxembourg and also was concerned about the ability for people to blow whistle in Luxembourg about tax evasion—because of course tax evasion does not just affect Australians. Tax evasion is not something that just affects developed countries. Tax evasion also affects developing countries, and there are some estimates that suggest that the value of tax evasion globally actually exceeds the amount of aid paid out globally. Of course, if we had tax justice and if we had transparency around the world, and if everyone paid their fair share of tax in all jurisdictions, then that would take some of the pressure off aid and would help developing countries with their economic development. I think everyone in this place would agree that it would be a positive for our globe if in fact developing countries were able to develop more quickly and provide for their own economic prosperity, thus taking pressure off the rest of the globe.

Another example of a case study of multinational tax evasion is of course Apple. Apple paid just $80.3 million in Australian tax in the 2013-14 financial year, despite earning local revenue of over $6 billion. By comparison, the Australian retailer Harvey Norman paid $89 million in tax on revenue of $1.5 billion—more tax on just a quarter of the revenue. It is not a level playing field and it is not fair on domestic companies who are trying to do the right thing in Australia.

Another example is James Hardie. The construction firm operates on a net taxable loss in Australia despite average annual profits of over $200 million. In the past two years, the company has paid almost $600 million in dividends to its shareholders and its CEO is currently paid over $12 million, but it operates at a loss because it claims tax deductions on annual payments to its compensation fund for victims of its asbestos products. In other words, Australian taxpayers are subsidising James Hardie's compensation to asbestos victims. The final example is Glencore. A 2014 Fairfax Media investigation alleged that the mining giant had paid no tax in Australia over the past three years despite earning revenue of $15 billion by using a complex series of intracorporate group loans. Glencore disputed this account by claiming that it had in fact paid $400 million in tax on this revenue.

Of course, those sorts of revelations undermine public confidence, not just in whether corporations are paying their fair share of tax but in the corporate tax system as a whole. Of course, the consequence for the revenue is that, if people think that other people are getting away with not paying their tax, if they think that it is okay not to pay tax and if there becomes a societal norm that says that it is acceptable to seek to avoid and minimise taxation, then that of course discourages voluntary compliance in the wider community. Why would anyone pay the right amount of tax if they thought no-one else is paying the right amount of tax? You would have significant difficulty in the cultural norm around taxpayer compliance.

Deputy Speaker Wicks, you would be aware that the Taxation Commissioner and his leadership team in the Australian Taxation Office are moving to transform the Australian Taxation Office to the sort of office that engages well with taxpayers, seeks to engender a spirit of voluntary compliance and avoids more coercive ways of seeking compliance unless absolutely necessary. It is better for everyone if people voluntarily and willingly pay their taxes in the appropriate way and in the appropriate share, but, as I said, if people think that big companies are getting away with paying little or no tax on the amount of money that they are making in Australia, then that is counterproductive to the move towards voluntary and willing compliance.

Without strong action to tackle multinational profit shifting and corporate tax avoidance, Australia will continue to lose millions or even billions of dollars in forgone tax revenue. With government debt continuing to rise under the coalition, we cannot afford to let tax revenue drain away offshore. Tax reform for multinational companies is a priority today because of globalisation and the digitisation of the world economy. Today, three of the five biggest companies in the world are companies that make their money primarily on the basis of intellectual property. This has greatly complicated the task for traditional tax regimes. They assume a firm has a permanent establishment in a physical place where its product is made. None of that applies in a digital business and this has greatly increased the scope for firms to profit-shift to low-tax or no-tax regimes, regardless of where their profit is really produced. Our tax laws have to keep up with changes and close the loopholes that allow larger firms and globalised businesses to avoid tax.

This multinational tax bill takes an untested approach to closing some of those loopholes. There are no precedents for this approach around the world. Not even Treasury can say how much revenue it will bring in. The Treasurer today in question time was also unable to say how much revenue it will bring in. It remains to be seen if the bill will protect even one extra dollar of Australian tax. If you look at the budget papers and turn to the page featuring this measure, you will see that there is no revenue amount; there is just a set of asterisks where there should be revenue estimates, because the government does not know how much this tax evasion bill is purportedly going to raise. The government cannot tell us. As I said, the Treasurer was completely unable in question time today to tell us. If we had turned up with a tax and said, 'We've got no idea how much this is going to raise,' people would have laughed at us and rightly so.

Michael McCormack (Riverina, National Party, Assistant Minister to the Deputy Prime Minister) Share this | Link to this | Hansard source

Does the minerals resource rent tax ring a bell?

Terri Butler (Griffith, Australian Labor Party) Share this | Link to this | Hansard source

Instead, we are entitled to be laughing at the coalition's multinational tax evasion package that raises asterisks.

Michael McCormack (Riverina, National Party, Assistant Minister to the Deputy Prime Minister) Share this | Link to this | Hansard source

How much money did that raise?

Terri Butler (Griffith, Australian Labor Party) Share this | Link to this | Hansard source

In fact, I do not know if you have ever tried to take an asterisk or any other punctuation mark to the bank, Assistant Minister, but I do not think that one of the banks is going to give you much in return for the punctuation marks that you truck down to the teller at the local branch, and why would they? It is ridiculous. Fancy turning up with a federal budget and saying, 'We've got a revenue measure here. We've got no idea what it's going to raise, but this is the centrepiece of our multinational tax evasion policy.' It is just embarrassing. We were the president of the G20 in 2014.

Mr McCormack interjecting—

The G20 agenda was about cracking down on base erosion and profit shifting, as the assistant minister is well aware. As the president, you would think that we would have been at the forefront, at the vanguard of multinational tax evasion policy, cracking down on base erosion and profit shifting—

Mr McCormack interjecting—

but, as the assistant minister knows, we were not even amongst the early adopter countries for the common reporting standard. How embarrassing for Australia that so many countries around the world signed up as early adopters of the CRS and what were we doing? We were saying, 'We're not sure about that,' dragging the chain and kicking the can down the road, just as this government likes to do on all sorts of difficult policy issues. Just look at what they are doing on marriage equality. That is all a bit too hard for this term, isn't it? We are not going to have a free vote on that, are we? 'We're not going to have a free vote on marriage equality. We're not going to bother getting that done now,' and so it was with the common reporting standard in the year that we were the president of the G20, when one of the major parts of its agenda was dealing with base erosion and profit shifting. One of the major parts of the G20's agenda was cracking down on multinational tax evasion, not just for the benefit of the developed countries and the G20 but for the benefit of the entire world. Those developing countries are missing out on their entitlement, their fair share of taxation revenue, and as a consequence they are relying more on aid than they ought to.

The idea that you are just going to raise some asterisks as revenue is ridiculous and it stands in stark contrast to Labor's multinational tax evasion policy. As the assistant minister is well aware, in March this year we announced a PBO costed, carefully considered $7.2 billion package of measures to stop multinational companies shifting their profits out of Australia and avoiding paying their fair share of tax. I have never said our policy was the last word on tackling multinational tax—of course not. We know that work is being done across the world, in the G20, in the OECD, to tackle what is a global phenomenon of base erosion and profit shifting. We have regularly called on the government to adopt our measures alongside their own.

The bill before us focuses on companies that artificially avoid booking revenue in Australia so that they do not have to pay tax on the profits. That is an important issue to tackle and we hope that this bill will force companies to restructure their operations so that profits made here stay here.

Mr McCormack interjecting—

I don't think it is funny. The assistant minister at the table seems to think it is a funny bill. I don't think it is a funny bill. I think it is important.

Mr McCormack interjecting—

Dr Chalmers interjecting—

The assistant minister is very fortunate that my friend the shadow minister for superannuation is leaping to his defence. The shadow minister is a kind man and certainly very kind to the assistant minister.

We do need to make sure that companies are paying their fair share of tax. It should not be left to Australian companies and Australian households to bear a burden because multinationals are shifting their profits elsewhere. So this is an important bill. We do hope this bill will force companies to restructure their operations so that profits made here will stay here.

But this bill does nothing to stop companies using debt deductions to send money offshore, unlike our policy. Companies can easily transfer money between their subsidiaries and holding companies and dress it up as a loan, even though it is just a transfer of money from one pocket to another. Just like other business expenses, interest costs on loans are tax deductible. These artificial loans become a way for companies to shift their profits into tax havens at the expense of the bottom line here in Australia. This is a loophole that we need to close.

We are not going to stand in the way of this attempt by the government to tighten Australia's tax net, no matter how small or insufficient or unknown it may be, in terms of revenue to be raised. We are taking a positive and bipartisan approach to this important issue. In that same spirit, the government should adopt our $7.2 billion tax package and tackle all the loopholes that let companies send their profits offshore.

If this government is committed to ensuring that major corporations pay their fair share of tax, they also need to drop their push to gut Australia's tax transparency laws. Transparency is one of the most effective tools we have available to combat profit shifting and tax avoidance. In 2013 we passed laws requiring the Australian Taxation Office to publish information about the income and tax paid by companies earning more than $100 million. Unfortunately, this government has mounted an attack on those laws.

Having said that, we are supporting this multinational tax bill through the parliament, because we believe tackling tax avoidance and protecting Australia's revenue base should be above politics. Under the former Prime Minister, the member for Warringah, and the former Treasurer, the member for North Sydney, there was just a blunt rejection of our package. It was very negative. It was typical, unfortunately, of this coalition's track record. It was just a political refusal. They did not want to talk about our idea, just because it was our idea. I hope that this government will take a different approach. I have to say that it would be beneficial and in the national interest if, instead of just rejecting things out of hand, the government actually considered the policies and ideas that we raise, and I look forward to a much more constructive and fruitful set of discussions on this and all other issues into the future.

Nola Marino (Forrest, Liberal Party) Share this | Link to this | Hansard source

I rise to support the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. I cannot ignore the comments by the member for Griffith. They were quite embarrassing when you consider it. She spoke about a range of issues around this policy but totally ignored the absolute failure of the Minerals Resource Rent Tax. When discussing what could or could not be earnt, we know that Labor not only made some incredible projections with the mining tax, which basically did not raise anywhere near what Labor said it would. Not only that, they actually spent the money before they got it. Therein lies one of the challenges that face this government.

The member also made reference to debt. I know what debt and deficit are, and they were left to us by Labor. Looking at what Labor left us with, I came across this quote by Dwight D Eisenhower—and this is what Labor did:

As we peer into society's future, we—you and I, and our government—must avoid the impulse to live only for today, plundering for our own ease and convenience the precious resources of tomorrow. We cannot mortgage the material assets of our grandchildren without risking the loss also of their political and spiritual heritage. We want democracy to survive for all generations to come, not to become the insolvent phantom of tomorrow.

Labor basically spent our grandchildren's inheritance. They left intergenerational debt for children in this country. That is what they left us with.

As we know, with tax there is a conflict as old as civilisation. As long as there has been both money and government, there has been a fight conducted by those who make it to keep it from the government, which both wants and needs it—perhaps these two in differing amounts. It was Einstein who said:

The hardest thing in the world to understand is the income tax.

We have heard about the tax system going back to ancient Egypt. Early taxation is also described in the Bible. It was in Genesis, I think:

But when the crop comes in, give a fifth of it to Pharaoh. The other four-fifths you may keep as seed for the fields and as food for yourselves and your households and your children.

But as long as there has been tax there has been tax avoidance. In fact, many historians have suggested that tax avoidance played a role in the collapse of major civilizations.

As we know, 70 per cent of Commonwealth revenue in Australia comes from personal and corporate income taxes. The ATO notes that 69 key taxpayers, with a turnover of more than $5 billion annually, represent 42 per cent of the entire corporate tax base, and that financial services and the mining industry represent over half of all corporate tax revenue. Our 30 per cent corporate tax rate is similar to the average corporate tax rate of that of the 10 largest economies.

As we know, there are major disrupters to Australia's tax system, as well as international tax systems—disruption caused by the exponential improvements in the reach and efficiency of the internet, as well as significantly increased globalization. All mean that we have an interconnected marketplace in which multinational companies operate.

The bill before the House today implements the government's 2015 budget commitment to combat multinational tax avoidance. This delivers on our promise to ensure that Australia is at the forefront of the international fight against tax evasion. We already have some of the strongest taxation integrity rules in the world, and we are determined to make these rules stronger still. We know that some multinationals continue to try to avoid paying tax on Australian profits. This undermines the public's faith in the tax system and leaves families and small businesses to unfairly carry the taxation burden.

Australia has been at the forefront of the global response to multinational tax avoidance. Under this government's leadership, the first of the OECD-G20's base erosion and profit-shifting recommendations were delivered. Australia is continuing to work with the OECD and G20 to promote greater integrity in the international tax system and ensure that entities pay tax where they have earned their profits. The OECD will report to the G20 finance ministers in October 2015 on the outcomes and final recommendations of its action plan on base erosion and profit shifting.

While our international efforts are important, it is vital that we take appropriate action now, as this government has done, to better protect Australia's tax base. Last year, the government took action to tighten Australia's thin capitalisation rules to limit the scope for multinationals to claim excessive debt reductions. In the 2015 budget, the government announced a package of measures that will level the playing field for local businesses and ensure that competitors pay their fair share of tax. This bill represents part of that package and implements a new multinational anti-avoidance law, stronger penalties for large companies that engage in tax avoidance and profit shifting, and country-by-country reporting to give tax authorities greater visibility of multinationals' tax structures. These three measures will apply to over 1,000 large multinationals operating in Australia with an annual global revenue of $1 billion or more. The measures are consistent with the government's commitment to deregulation and our support of small business.

Schedule 1 to this bill amends the Income Tax Assessment Act 1997 to include a standard and centralised set of concepts that can be used to determine whether an entity is a 'significant global entity'. An entity is a significant global entity for a period if it has annual global income of A$1 billion or more. It may be a significant global entity as well if it is a member of a group of entities that are consolidated for accounting purposes as a single group and the global parent entity of the group has an annual global income for the period of A$1 billion or more. A global parent entity is one that is not controlled by another entity according to accounting principles or, where accounting principles do not apply in relation to the entity, commercially accepted principles related to accounting. A global parent entity will usually be a member of a group of entities where the global parent is the one that is not controlled by any of the others. Subsidiaries of the global parent may be located in other jurisdictions. However, it is possible for a global parent entity to be a single entity that does not control any others. So, if a global parent entity is a member of a group that are consolidated for accounting purposes as a single group, the global parent's annual global income for a period is the total of the annual income amounts of the consolidated group as shown in the total or disclosed in parts in its latest global financial statement for that period.

Schedule 2 of this bill implements a new multinational anti-avoidance law from 1 January next year. This will stop multinationals artificially avoiding a taxable presence in Australia, delivering on our 2015 budget commitment to target major entities with significant Australian activities that avoid booking profits in Australia. The tax office estimates that around 30 large multinationals are engaging in commercial activities in Australia but use contrived structures to book billions of dollars of revenue overseas and avoid Australian tax. The new multinational anti-avoidance law will allow the Commissioner of Taxation to force those companies to pay tax in Australia on profits from economic activities undertaken here. This is the right and fair thing to do, as Australian taxpayers and small businesses would say. We have strengthened the law by removing the condition for multinationals to operate in a no-tax or low-tax jurisdiction. All significant global entities with revenues over $1 billion that book their revenue offshore will need to consider these rules and may need to review their structures. This simplifies the law and makes it easier for the tax office to apply, removing the need to prove an additional requirement. As a result, if a multinational has a structure with a principal purpose of avoiding tax, the tax office will have the tools to catch it and ensure it pays its fair share.

By removing the no-tax or low-tax condition and relying solely on a principal purpose test, the government is sending a very clear message that, if a company deliberately and artificially avoids paying tax in Australia, this is not acceptable. This rule will complement our existing anti-avoidance rules for multinationals by clarifying that the specific arrangements used by multinationals selling into Australia are considered to be tax avoidance. This new measure will make it easier for the ATO to establish a case by catching arrangements that are designed to obtain both Australian and foreign tax benefits, and by lowering the purpose test from 'sole or dominant purpose' to 'one of the principal purposes'. This new measure will force entities to book their revenue here, in Australia, where they have significant sales activity. Where a tax avoidance scheme is identified, the Commissioner of Taxation will be able to apply the tax rules as if the multinational had booked the profit from Australian sales in Australia. The company will have to pay the tax they owe on these profits, plus interest, and double the existing maximum penalties for tax avoidance and profit-shifting schemes. This new measure will protect our tax base by acting as a deterrent to companies to engaging in complex schemes. Companies that pay their fair share of tax will no longer be at a competitive disadvantage.

Schedule 3 to this bill doubles the penalties for large companies that enter into tax avoidance or profit-shifting schemes. The maximum penalty applicable will be 120 per cent of the amount of tax avoided under the scheme. Schedule 4 implements country-by-country reporting from 1 January 2016. Australia is leading the way, and we expect the country-by-country measures to be implemented by other jurisdictions around the world. Country-by-country reporting will require large multinationals to report to the Australian Taxation Office their income and tax paid in every country in which they operate. This will be exchanged between tax authorities to assist in the assessment of transfer pricing risk and targeting of audit inquiries.

Consistent with the OECD s guidance, this schedule will also require two more reports to help manage transfer-pricing risk. Companies will be required to lodge a master file, which will require detailed information on the multinational's organisational structure and financial activities. Companies will also be required to lodge a local file, which will focus on specific information on transactions between the reporting entity and related entities in other countries. This will include the entity's detailed analysis of the transfer pricing determinations they have made.

The government's measures are well-considered and balanced and will effectively strengthen our tax system to ensure that it is fair and sustainable. The government will report to G20 finance ministers in October 2015 on the outcomes and final recommendations of our tax avoidance agenda. This government will continue to take the lead in the OECD and the G20, and the final recommendations will provide a strong platform for even further action towards strengthening the integrity of our tax system and making sure that those entities that earn profits in Australia pay tax in Australia.

David Gillespie (Lyne, National Party) Share this | Link to this | Hansard source

I rise to speak on the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015, and I commend it to the House. Everyone has heard of the 'Who's on first, What's on second and I Don't Know's on third' routine of the famous Abbott and Costello, which has been seen on YouTube by millions of people. Before YouTube, I saw it when I was a child, and even then I understood: that is humour. But when you look at this bill, that is what comes to mind—when you hear of the double Irish-Dutch sandwich, the mechanism by which multinational tax corporations have avoided tax by shifting money between corporate identities that bear no relationship to where products are made or sold. But it has been a legal way of avoiding tax, which, as one prominent Australian outlined at an inquiry many years ago, is Australia's national pastime.

But really the things you have heard about tax avoidance in Australia look quite mickey mouse when you see some of the tricks that very clever accountants and tax lawyers have been up to in avoiding tax, not only in Australia but around the world. And because of this very issue the OECD has been very active, and we have been leading the pack. But as well as the double Irish-Dutch sandwich, there is the use of hybrid securities and various forms of thin capitalisation whereby, in essence, equity in a company is dressed up as massive debt, which then generates a massive interest payment that then goes offshore to the parent company via various other entities in other countries and, funnily enough, it might even end up in a low-taxing or no-taxing country.

There is frequent use of intellectual property fees, whereby a company operating in Australia is charged a massive IP fee which, coincidentally, matches the amount of income or profit that the local Australian identity is due to pay. Hence they avoid paying tax in Australia, and the tax is then transferred as a fee to another entity in another country, and it might do the merry-go-round as well, in the sandwich formation, and again end up in a low- or no-tax-paying entity and/or country. The old chestnut is trading hubs, whereby a product made in Australia or produced in Australia is sold for a low-profit fee but the same product, without any value adding or value creation, is resold in and out of a trading hub in another destination, or a low-tax, no-tax destination.

These are all legitimate manoeuvres, but the whole aim of the exercise is to have Australian companies that generate their profits in Australia pay tax on those profits in Australia. It is ultimately morally imperative and justifiable to have a system in place that achieves just that. We are not being mean, tricky or nasty; we are just applying common sense, because this very issue occupies the minds of many treasurers, not just the Australian Treasurer. The OECD and the G20 have had many meetings on many occasions, quite recently, and Australia has been at the forefront. The former Treasurer, the member for North Sydney, led this agenda at the G20 meeting and its subsequent meetings. The aim of the exercise is to raise money through the Australian company tax rate on profits that are made here.

Transfer pricing, trading hubs, IP fees, thin capitalisation and other forms of hybrid securities—there are a few other little tricks that they employ. It is a bit like 'Who's on first, What's on second and I Don't Know's on third' all over again. That is, you can be an entity and be resident in two countries, and when you go to pay tax in one country you say, 'No, we'll pay it over there', but then when you go over to the other country you do not pay it there, and you might even move it around. All these manoeuvres need to be addressed by multiple nations. We cannot just jump on board and do things by ourselves.

That is the whole idea of the base erosion and profit shifting conventions the OECD is employing, which they have brought to bear, and we are leading the pack. Recently, 30 multinational companies have been observed by the Australian tax office. If they are earning more than A$1 billion in revenue, they are being observed to make sure that they do not employ structures that have a principal, sole or dominant purpose for avoiding tax being paid on their profits in Australia.

With this bill, tax rules will be applied if they fail that test—or what might better be described as passing that test. If they have set up structures that have a principal, sole or dominant purpose for avoiding tax on profits on products or services made in Australia, tax rules will be applied. The tax will be levied in Australia, and there will be an interest payment and/or a fine of up to 120 per cent.

You would be surprised to hear that the lot of these things were not enforced. They make so much common sense. In the world of legislation, a complex issue often takes hours to get your head around, but this is a pretty straightforward issue. I do not think there is much objection on either side of the House or in the community—this passes the pub test, the sniff test and barbecue conversations. People are in universal agreement: that is, people should pay their fair share of tax.

I do not think we will have any objections to these rules being applied, having these treaties in place with enforcement of country-by country-reporting transparency and a common reporting standard across all these countries. Having them enforced in Australia is existentially and financially a very sound thing for the Australian tax office to do.

I am surprised we have not had a common reporting standard before. If you have all these rules in various entities in various countries, I am surprised that people have not ventured down this avenue before. It seems like the logical thing to do so that there is one rule for all. I am sure the Australian tax office will be pleased to achieve these simple, straightforward measures as $1.1 billion is a lot of money that could be applied to reducing our debt, balancing our books, providing services like Medicare or pharmaceutical benefits, providing equipment for our Defence Forces or building parts of the Pacific Highway.

One of the first things you have to do as a government is defend your nation. Two, you have to supply security for the nation. You have lots of other commitments in Australia. In Australia, we have a massive social security safety net, which takes over $140 billion of our tax revenue. What we are hoping to do is not overtax people; just make sure that these corporate or private entities using these manoeuvres are compliant with a tax regime, particularly, a tax regime in Australia when they are operating in Australia. So $1.1 billion raised from this is the estimate, but it may be much more and that would be great. It is a lot better to get some tax than a lot of nothing, which is what happened in the past.

Coming back to where I started: I hope this is the end of the double Irish-Dutch sandwich, the subway of tax accounting. We want fair and reasonable taxes paid in this country. If transparency and simple uniform procedures are achieved around the world, it would be a great thing for all countries but, in particular, Australia leading the way is a very good outcome and something that we can be proud of. I commend this bill to the House.

Michael McCormack (Riverina, National Party, Assistant Minister to the Deputy Prime Minister) Share this | Link to this | Hansard source

The Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015 implements three 2015-16 budget measures: the multinational anti-avoidance law; country-by-country reporting and new transfer pricing documentation standards; and stiffer penalties to combat tax avoidance and profit shifting.

Whilst I have been listening intently to my colleagues and those opposite on this bill, I must say it was an excellent contribution, as always, by the member for Lyne. I have been reading a couple of documents: one, The

Financial Review's Smart Invest or November 2015 publication talks about the search for growth, where to find it and how to get on board; and the State of Regional Australia 2015an inaugural report in which Mike Mrdak, the Secretary to the Department of Infrastructure and Regional Development, in his foreword says:

An evidence based understanding of a region’s performance should underpin community development initiatives, policy settings and investment strategies which can enable a region to prosper and harness the opportunities associated with its own unique advantages.

This got me thinking about my own unique electorate—the Riverina—and the opportunities that could be harnessed, are being harnessed and will be harnessed in the future. Those opportunities are enhanced when everybody—taxpayers, businesses—is paying their fair share of tax. In the Riverina, I would like to think that everyone who is earning an income, be it a taxpayer or indeed a company, is paying their fair share of tax.

This legislation goes to the heart of those multinational corporations which are not paying their fair share of tax. Before I discuss the substance of the bill, I will just talk about a few of the contributions made, particularly, by those opposite. The member for Wakefield, in his speech, talked about the revenue that could be raised from this bill being one less dollar that Australian taxpayers and businesses have to pay. That is not correct. It is not one less dollar that Australian taxpayers and businesses will have to pay; it is one more dollar that we will collect, that should be being collected and that should have always been collected. It is not one less dollar that is going to have to be paid; it is one more dollar that will be paid.

The Minister for Immigration and Border Protection last Wednesday, 14 October, asked how many members opposite had been involved in a small business and just one put up their hand—the member for Melbourne Ports. I appreciate that the member for Parramatta may well have been involved in a small business in her past before she came to this place, but this goes to the heart of the matter. When the same question was asked of the coalition, just about everybody put their hand up. We understand business. We understand the need for tax collection. We understand the need for equitable distribution of that tax which is collected. But the member for Wakefield just does not get it. He said that Senator Dastyari is doing a good job in this space. I can tell you that the good senator is running around at the moment claiming that he understands the Murray-Darling Basin—that is far from the truth.

This particular bill is important. Australia has been a world leader in ensuring that we get on top of multinationals avoiding paying their tax. The key driver of this was the member for North Sydney, the former Treasurer, who led the way during Australia's presidency of the G20. Last year at a doorstop interview on 9 December, he was asked: 'Do you think it's a risk that Australian companies that are operating overseas in other jurisdictions could face a backlash from other agencies or countries that are not as proactive on base erosion and profit shifting?' He talked about this being a challenge. He said that there were large number of Australian companies that operated overseas and emphasised that that is why we need to work collectively and globally to address this. We did that at the G20. We started the process off. Australia's reputation on the international stage is very good. It follows our excellent presidency of G20. The head of the International Monetary Fund, Christine Lagarde, spoke very highly of the work of the member for North Sydney, Joe Hockey, in heading G20.

The member for North Sydney spoke in an interview with David Speers of Sky News three days after that initial interview on 9 December. On 12 December he said in answer to a question about the Google tax of measures to tackle multinationals which do not pay what they ought to in Australia:

It has got to be coordinated global response and this is why the previous Government failed. They had announcements that they never legislated and they never had any coordinated global action. We are determined to work with other countries. We have used the leadership of the G20 this year to get that coordinated global action. We have got a number of fronts that we are dealing with. Firstly, we are working with the OECD on what is known as the Base Erosion and Profit Shifting Plan. We are half way through that, which means there are common rules around the world, particularly in tax havens that ensure that people do start to pay their fair share of tax.

The good work done by the member for North Sydney was certainly front and centre of the G20 in Istanbul, Turkey, which I attended on 9 and 10 February. In session 6 on international tax—

Chris Bowen (McMahon, Australian Labor Party, Shadow Treasurer) Share this | Link to this | Hansard source

Did you go?

Michael McCormack (Riverina, National Party, Assistant Minister to the Deputy Prime Minister) Share this | Link to this | Hansard source

I did go, actually, Member for McMahon. I did go. I attended that. You were not yet in the chamber when I was speaking earlier about the excellent reputation that the member for North Sydney forged as far as our G20 presidency was concerned and the high elevation that he gave Australia's G20 presidency.

The Turkish G20 presidency priority for 2015 included a section on international tax that stated:

We will be monitoring the implementation of the 2014 deliverables of the Base Erosion and Profit Shifting (BEPS) Project. We will also work to ensure a smooth transition to the 2015 deliverables of the BEPS project to secure progress in this field. To enhance inclusiveness of the international tax system improvements, we will continue to incorporate the developing country perspective to the G20 tax agenda, with an increased emphasis on bilateral and multilateral cooperation between tax authorities.

As I said, Australia's reputation at G20 was highly regarded and certainly Turkey was continuing on the good work started by the member for North Sydney and that is now being adopted by the member for Cook, the now Treasurer. That is because this is important.

We have heard during this debate Labor talking about how much this would make. If we look at the second reading amendment that Labor has put forward, it says:

… "while not declining to give the bill a second reading, the House notes that its revenue impact is unquantified, and calls on the Government to adopt Labor’s fully-costed multinational tax package to raise $7.2 billion over the next decade".

We know about Labor's ability to get it so wrong when it comes to estimating how much money might be raised by a particular project. We know that under the Labor government when it was in power the original resource superprofits tax announced by Kevin Rudd and the member for Lilley was estimated to raise $49.5 billion from 2012-13 to 2016-17. The revised mining tax announced by the former member for Lalor, Julia Gillard, and the member for Lilley was originally estimated to raise $26.5 billion over the same period.

Net revenue from the mining tax in the 2014-15 budget was expected to raise over $300 million in total, but we know how wrong Labor got it. The fact is that Labor then spent the money they did not have in typical ALP fashion. They spent it on a whole range of projects and drove our good economic situation that they inherited in 2007 into something that just went from bad to worse. I admit that we did have a global financial crisis. I admit that that knocked our expected revenues about. But we did not need Labor to then run around and spend money that we never had a hope of raising. That was just typical of Labor, spending money it did not have, spending money we never had a hope of raising and tearing the forward estimates asunder.

This is an important piece of legislation. It is good that Labor is actually getting on board with us, despite the amendment. These measures are part of a package of domestic measures announced in the 2015-16 budget to bolster Australia's existing laws to ensure that multinationals pay their fair share of tax. We know that a fairer tax system is one in which all taxpayers meet their tax obligations, and that is why we are committed to addressing tax avoidance by multinationals. If a company makes a profit in Australia, it needs to pay tax in Australia. We do not want individuals and small businesses unfairly carrying the tax burden, for all the reasons that I spoke about earlier. We need to ensure that regional Australia maximises its opportunities. We need to ensure that we are able to roll out and can continue to roll out the infrastructure plans and policies of this government, because we are a road and rail government. We are a government that is investing in ports. We are a government that is investing in valuable infrastructure, ensuring that we protect, preserve and support regional Australia.

In the 2015 budget, the government announced a package of actions to further strengthen Australia's tax laws and level the playing field for domestic business. We are introducing a multinational anti-avoidance law right here tonight to stop multinationals using complex schemes to avoid paying tax in this country by booking revenue overseas. We are also closing the digital tax loophole to ensure that the goods and services tax applies to digital products and services that are downloaded in Australia, and that is important as well. We are also introducing new OECD country-by-country reporting requirements to strengthen the Australian Taxation Office's capabilities to identify profit shifting. Country-by-country reporting will ensure that multinational companies with global revenue exceeding $1 billion need to annually report to tax authorities the amount of revenue, profit, income tax and economic activity that they are generating for each jurisdiction in which they do business.

We need to make sure that there are suitable penalties for large companies engaging in tax avoidance and profit shifting. We need to make sure that there is deterrence for those companies to make sure that they do not try to risk it. This is important legislation. It is good that Labor is getting on board with this legislation, because it is important that we get that revenue base and that we ensure that our base is not continually eroded by those tax avoiders who should be paying their fair share. I commend the legislation to the House.

Scott Morrison (Cook, Liberal Party, Treasurer) Share this | Link to this | Hansard source

Firstly, I want to thank all those members who have contributed to this debate on the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015 and I want to thank the opposition for their support for the bill. The government will not be supporting the amendment to the second reading, and I will come to those matters shortly.

Multinationals need to pay their fair share of tax in Australia. We all agree with that. That is an important principle. It is one that is being pursued through multilateral forums. For some years Australia has been in the vanguard of that approach. It has led that approach, and the former Treasurer, who introduced this bill to the House, was the principal driver of that agenda for the government. I acknowledge his contribution in bringing this bill before the House because it brought to a head the matters that he had been championing through the G20 and other forums.

This bill implements the government's 2015-16 budget measures to combat multinational tax avoidance. These measures will force multinational companies with significant activities in Australia to pay their fair share of tax. This is what it does, this is what this bill is, and that is why it is a bill worthy of support. This will level the playing field for taxpayers and ensure that families and small businesses are no longer unfairly carrying a greater tax burden because those large multinational companies are not carrying theirs.

The new, broader multinational anti-avoidance law will target, at this stage, 80 large multinationals that the ATO has identified as having significant activities in Australia and as potentially using contrived structures to book billions of dollars of Australian sales overseas to avoid Australian tax. Before this bill was introduced there were only 30 such companies that were actually working with the ATO. Now that these measures are being put in place, this has more than doubled the net that the tax office has been able to put out in terms of ensuring multinational organisations will be paying their fair share of tax. So it has already had a significant impact and it is yet to pass this place. The Commissioner of Taxation will be able to force them to pay tax on profits from economic activities undertaken here in Australia. Multinationals will no longer be able to justify contrived schemes to avoid paying tax.

This rule will strengthen our anti-avoidance rules for multinationals by catching arrangements that are designed to obtain both Australian and foreign tax benefits to stop companies claiming they are only seeking to avoid foreign tax and by lowering the purpose test from sole or dominant purpose to one of the principal purpose, making it easier to apply. This means that they will now pay tax on profits from their Australian activities. That is the objective, and that is what this bill is designed to address and will address. Penalties for large companies that enter into tax avoidance or profit-shifting schemes will be doubled from 1 July 2015. These are measures with teeth.

Country-by-country reporting, a key recommendation of the BEPS process that has been worked through by the OECD, will be required, where large multinationals will need to report additional information to the ATO about what tax they are paying and where. This is a significant improvement in transparency and will help the ATO undertake targeted assessments of transfer-pricing risk. While we have not put a figure in the budget—and I note that that is one of the issues raised in the opposition's second reading amendment—I have been advised by the Commissioner of Taxation that the amount of revenue to be raised is in the hundreds of millions of dollars.

Contrary to the unfounded accusations of those opposite, this approach is actually consistent with responsible budget practice in respect of measures that are not readily quantifiable. I note that the opposition took this approach when they amended part IVA of the Income Tax Assessment Act 1936 in the 2012-13 budget, when they amended the transfer-pricing rules in 2013 and when they introduced the petroleum resource rent tax in 1987. In each instance, those opposite, when they were in government, put no revenue in the budget. That is a standard practice for these types of measures, and the government is following the same practice. But those in opposition are seeking to score, I think, quite cheap political points about this, when at the end of the day the government is following exactly the same practice that those opposite followed when they were in government.

Another thing they did when they were in government was, when they first published the mining tax measure, in the 2010-11 budget, they put a revenue figure in. They were very proud about the revenue figure. They budgeted for $12 billion of revenue over the first two years of its operation. Twelve billion dollars was going to come from the mining tax measure outlined in the 2010-11 budget. But they did not just put the revenue in; they booked the spending off the back of the revenue as well. They irresponsibly locked in billions of dollars of spending against revenue that vanished before their eyes. This government does not operate like that. This government actually carefully considers these measures. We do not get ahead of ourselves and look for the grand big press conference where they stand there and thump the table and say, 'This will raise X billion dollars.' They tried that and they got themselves into awful trouble, and this government has had to unpick these things since we came to office. The actual revenue was not $12 billion from the mining tax. Before the measure was repealed, it had raised a mere $200 million, creating a significant budget shortfall.

We are not going to repeat the folly of those opposite when it comes to these very important measures. The government is taking a strong and balanced approach to dealing with multinational tax avoidance. These measures are not about plugging a budget hole but are about achieving meaningful behavioural change around corporate tax avoidance. I want to commend the Commissioner of Taxation on the positive approach he is taking with these multinational companies domiciled in Australia. They are engaging. They are working the issues through. With the advancement of the broader multilateral approach to this issue, multinationals are recognising that it is time to bring it to account—it is time that they will have to pay tax where they earn the revenue—and they are working with tax authorities, particularly working here with our tax authorities, to ensure that these matters are resolved.

The opposition have proposed a number of measures which they claim will deal with multinational tax avoidance. That is principally by limiting interest deductions by applying worldwide gearing ratios to all multinationals. This is a very blunt instrument for the opposition to apply, and I would encourage them to think through the implications of what they are putting forward. Unlike the government's actions, these proposed changes to the thin cap rules will deter investment and cost Australian jobs. That is not just the view of the government; that is the advice I have received—that they will actually deter investment and cost Australian jobs. Investors who are principally equity funded would be particularly affected. Investors such as large pension and infrastructure funds, who invest in critical sectors such as infrastructure and are typically debt funded at the project level, would be unfairly impacted and disincentivised from investing into Australia because of the very blunt approach that the opposition are proposing, as opposed to the bespoke approach which the government is actually following, where you look at the actual project, the actual investment and the actual nature of the business activities being pursued by that company and then you tailor the tax treatment to reflect what they are actually doing.

The opposition do not do that. They just want to apply a blanket, broad based rule which takes no account of the sensitivities and nature of the investments and will, frankly, scare pension funds and others off from investing in Australian infrastructure and scare off the jobs that come with them. I do not know why they are so wedded to this particular proposal, when the measures that the government is already following deal with exactly the same issues that they are raising around thin cap rules around the world. We are leading the world on these issues. Why would they seek a point of difference on this? The only point of difference is: what the opposition are proposing to do will actually deter projects and investments and jobs. This would clearly adversely impact the legitimate activities of many multinational companies headquartered in Australia and could actually drive them offshore from where they are currently located here in Australia. Their policy on multinational tax avoiders does not really go to the heart of the issue either. The policy primarily targets debt deductions while ignoring the fact that the government has already taken action to significantly tighten Australia's defences in this area, as I just mentioned. As such, the opposition's policy does not focus on areas where there is the greatest potential to address profit shifting by multinational companies.

Our encouragement is: stay focused on the ball. You have got to follow the ball, not the man. Playing the man is what the opposition are trying to do. They played the man very much here in this very chamber the other day, raising questions about this issue and drawing links to the Cayman Islands and the Prime Minister. They are playing the man, not the ball. The ball is: ensuring that we are going after the tax revenue of multinational companies, which is what our measures do. Those opposite want to play the man. They want to play the politics of envy and they want to play the politics of xenophobia when it comes to foreign investment. They can do that, but it demonstrates that they are not being part of a constructive agenda. I recognise that they are going to support the measures in this bill—as they should, because they are good measures and they will do the job—but I would encourage them to stop their process of playing the man rather than playing the ball when it comes to the issues of tax and broader economic policy in this country.

The government's measures as outlined in this bill are well considered and balanced and will, effectively, strengthen our taxation system to ensure it is fair and sustainable. We are closing the digital tax loophole also to ensure that the goods and services tax applies to digital products and services that are downloaded in Australia, and this government has taken action to tighten Australia's thin-cap rules to limit the scope for multinationals to claim excessive debt reductions.

We have asked the Board of Taxation to work with businesses to develop a voluntary code for greater disclosure by companies of their tax information. I met with the chair of the Board of Taxation today to discuss these very measures. As G20 president in 2014, the former Treasurer led the global response to tax avoidance by multinational companies. Under Australia's leadership, the first of the OECD G20's base erosion and profit shifting, also known as BEPS recommendations, were delivered last year. The OECD finalised last week its report to G20 finance ministers on the outcomes and final recommendations of the BEPS action plan.

The multinational anti-avoidance law, which is being debated here in this House this week, is entirely consistent with the final OECD report and recommendations, and the final recommendations provide a strong platform for further action to strengthen the integrity of our tax system and ensure it is fair and sustainable. We will continue to take the lead in the OECD and G20 to restore fairness in the international tax system and ensure entities pay tax where they have earned their profits. I commend the bill to the House.

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

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

Question negatived.

Original question agreed to.

Bill read a second time.