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

I move:

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

"whilst not declining to give the bill a second reading, the House calls on the Government to explain why it is desperate to hide in this bill, and the Diverted Profits Tax Bill 2017, a $50 billion tax cut for big banks and multinationals behind a phoney war on tax avoidance".

Labor will support the Treasury Laws Amendment (Combating Multinational Tax Avoidance) Bill 2017, but we do note, in debating this bill, that this government are 'the hollowmen' of multinational tax action. How is it that the government's actions on multinational tax end not with a bang but with a whimper? The $200 million of revenue that accompanies the diverted profits tax is the bounty of a government that has launched a phoney war on multinational tax avoidance, desperate to distract from their $50 billion tax giveaway to the very companies that they claim to be targeting with this bill. This is entirely in keeping with the government's inconsistency on the issue of multinational tax avoidance—when the coalition was in opposition and now in government. That should be no surprise to impartial observers. To paraphrase David Hume, the coalition are so much the same in all times and places that history informs us there is nothing new or strange in this particular. History's chief use is only to discover the constant and universal principles of their nature.

We only need to traverse through recent history to see this: from when the coalition voted against the previous Labor government's bill to strengthen transfer pricing and anti-avoidance provisions, through their watering down—once they were in government—of tax transparency measures that Labor had enacted, to the distraction we have before us today. The measures the government have introduced, to quote the Labor senators in the other place in their comments in the Senate inquiry into this very bill, have been 'patchy and belated', ' lagging behind the expectations of the Australian community that multinational companies pay their fair share of tax', and 'behind measures announced by the Labor opposition'.

In 2013, Labor began clamping down on the loopholes large companies use to siphon profits offshore and avoid paying tax in Australia. Nowadays, transfer pricing and the anti-avoidance rule have become part of the Australian tax lexicon, thanks to Labor's forward-thinking action and the work being done at the OECD under their base erosion and profit-shifting project. Yet the coalition were not having a bar of it. Here is what Senator Sinodinos said about closing tax loopholes in the 2013 bill:

We need less regulation, not more regulation. For that, among other reasons, we will be opposing this bill.

The former member for North Sydney, Joe Hockey, decided to cast aspersions on that bill's estimates of preventing $1 billion of tax losses by stating:

It is a nice round number: a billion dollars. It has a whiff of convenience to it, don't you think?

Well, that is five times more over the forward estimates than this bill is projected to raise. The now Minister for Finance, Senator Cormann, said to the parliament in 2013:

Let me just say up-front that the coalition will be opposing this bill—

it was a bill which was cracking down on multinational tax avoidance—

and we will be opposing it strongly because we think it is not in our national interest. It is a bill that is undermining our national interest.

Later on in his speech he described it as an 'overreaction'.

When Labor introduced the Tax Laws Amendment (Cross-Border Transfer Pricing) Bill (No. 1) 2012 to crack down on companies overvaluing assets in international transactions, members opposite voted against it. It is almost ironic—and I use that word in the Alanis Morissette sense—that a coalition largely stocked with the same members and senators who voted against Labor's strengthening of transfer pricing rules are here today bringing to the parliament an update on transfer pricing rules that is in line with the 2016 OECD recommendations.

On this side of the House, Labor have continued the fight for tax transparency and for multinational tax fairness. This is a core issue for us. Over the last two years Australians have been given an insight into the tax affairs of large firms. Data from the Australian Taxation Office in December has shown that for two years in a row one in three large companies paid no tax. We only have that information thanks to Labor laws, opposed by the coalition.

Despite the fact that that information tells us that one in three big companies pay no tax, the Turnbull government still thinks that cutting company tax rates should be Australia's top economic priority—that was the centrepiece of last year's budget. Under laws largely passed by the former Labor government, public, private and foreign owned entities with a total income above $100 million had high level data released for scrutiny by the Australian public. But the coalition objected to those laws when they were in opposition, and then in government they did their best to shield some of Australia's largest firms from scrutiny. Initially their aim was to remove all tax transparency for large private firms, using arguments such as kidnapping risk, described by one expert as a laughable excuse. It is as though the BRW rich list had never existed!

They went through their various excuses suggesting that somehow firms might be disadvantaged in negotiations with suppliers, that CEOs might be under kidnap risk or that people might feel 'envious', which was the word that the member for Kooyong used. Yes, it is possible they might have felt envious when they discovered that regular small businesses were paying tax and large private businesses were not. Ultimately, though, they found a way through. You can always rely on the Greens to come to a dodgy deal, and they did in this case. That is why tax transparency applies to large public firms with income over $100 million but only applies to private firms with income above $200 million. In effect, the dodgy deal between the Liberals and the Greens took two out of three large private firms out of the tax transparency net. Nonetheless, the data tells us a lot. If we compare the most recent figures, for 2014-15, with data for the previous tax year we see that the share of large firms paying no tax stayed unchanged at 36 per cent in both years. That points to the coalition's failure to crack down on multinational tax avoidance in their first term.

The first iteration of the coalition's attempts to mount a phoney war against multinational tax avoidance was the former member for North Sydney's own multinational tax avoidance bill—one which, when it was produced, had not budget estimates but asterisks. Not even Treasury could say how much revenue it would bring in. The multinational anti-avoidance law, or MAAL, had its genesis in a thought bubble, when the government said in 2014 it would adopt a diverted profits tax. The former member for North Sydney was floundering about looking for something to back up his rhetoric, and so he latched onto Britain's approach of a so-called Google tax. He dropped the idea just as quickly when it was pointed out to him that Australia already had anti-avoidance laws.

As I have noted, the bill that made it to parliament had a series of asterisks where there should have been revenue estimates. Let us be clear: if it was Labor that said to the Australian people 'We are really serious about cracking down on multinational tax avoidance, here is our multinational tax package which will raise asterisk of revenue', we would rightly have been laughed out of this place. Yet, that is exactly what the government did. Over the course of the first few years of the Abbott-Turnbull government saw we not only inaction on multinational profit shifting and the shielding of big firms and tax transparency but also cuts to the Australian Taxation Office. Over 3,000 jobs were slashed from the Australian Taxation Office. Then, when Labor proposed a suite of measures including closing debt shifting loopholes, cracking down on hybrid mismatches and a targeted spend on ATO staff in order to bring in additional revenue through compliance, it was ridiculed by former Prime Minister Abbott. Indeed, coalition MPs cheered when former Prime Minister Abbott told parliament in 2015:

So far the only idea Labor have come up with is to spend $100 million on the ATO to raise $1 billion. Well, next time they will be telling us to spend $1 billion on the ATO to raise $10 billion. That is the problem. All they can think of is spending more and taxing more. They just cannot help themselves. I actually think that deep down the Leader of the Opposition is better than that, and I would ask him to start demonstrating that now.

It should be stated that when you decimate the tax office—and that is being generous; it was worse than a decimation—you lose the auditors and the institutional knowledge that are vital to enforcing Australia's tax laws. When the biggest firms in the world are armed with armies of accountants and lawyers just looking for loopholes and you cut back on tax office staff, it goes without saying that you are going to see increased multinational tax avoidance. Without proper oversight, the revenue evaporates and multinationals get away with not paying their fair share.

Belatedly, the 2016 budget included some additional expenditure for the tax office—a $679 million investment, forecast to raise more than five times as much—$3.7 billion. That does raise two questions. First of all, what on earth was former Prime Minister Abbott, now the backbench member for Warringah, going on about when he said that it was a ludicrous idea that there was a link between how much you spent on tax office staff and how much you raised in revenue? In 2015 they were telling parliament that was a ludicrous idea; in 2016 it was an idea right in their budget. Their budget itself said that spending money on the tax office would return money to the budget. The other implication of that, of course, is that if a targeted spend in the budget can raise revenue, as Labor suggested when we put together our package which included a targeted ATO spend, it must also be true that cutting the tax office hurts revenue. It must be the case that the government's savage cuts to the Australian Taxation Office, axing thousands of jobs, have cost revenue over the past three years and have allowed multinationals to get off without paying their fair share.

Labor is the party that has sought to take action on thin capitalisation changes. The 2013 budget had a detailed package protecting the corporate tax base from erosion and loopholes. Recently, the member for Higgins, speaking at the Minerals Council of Australia's tax conference, was taking credit for enacting that 2013 Labor budget measure to tighten thin capitalisation. It is true that the measure passed the parliament under the coalition, but it is, essentially, a technicality, given that it was a Labor measure—implemented reluctantly by the coalition. What the member for Higgins did not say to the Minerals Council of Australia's tax conference was that shortly after the election the government set about watering down that thin capitalisation package, which had been announced by Treasurer Swan in the 2013 budget. The coalition dropped Labor's proposal to deny deductions made under section 25.90 of the Income Tax Assessment Act 1997. At the time, Treasury put a $600 million figure on dropping the changes to section 25.90 of the income tax act—$600 million.

As the parliament well knows, Labor has continued to apply pressure on the area of debt deductions. In the 2016 election, we took a package to the Australian people which included a worldwide gearing ratio. What this essentially means is that right now big firms can pick their debt deduction rule. There are three rules in the tax act. They are: an arbitrary thin cap threshold; an arm's-length test; and a worldwide gearing ratio. Really, only one of them has strong economic sense. That is the worldwide gearing ratio—a rule that says if you owe a lot of money to the banks then your Australian operation can make deductions up to the same ratio. But if you do not owe a brass razoo to the bank, and if you have an inter-company loan coming into Australia in order that you can send profits out of Australia through the interest payments, then you cannot claim that as a deduction. You cannot claim as a deduction an inter-company loan if you are not a borrower, if your multinational group is not borrowing anything from the banks. It is a perfectly reasonable approach to take. So with three debt deduction rules in the Australian tax law, two of them are not grounded in strong economics and one of them is grounded in strong economics. Labor's proposal is that we keep that one.

The other thing that you can say about that measure is it is extremely clear for firms. I will not pretend that every multinational firm likes Labor's plan, but it is very clear what their position will be under it. Their accountants will naturally have looked at their multinational group's position under each of the three debt deduction rules and will know how they are affected according to which debt deduction rule is in place. That package was costed to raise $1.6 billion over the forward estimates, $5.9 billion over the decade.

There was a brief period in which Treasurer Morrison was tempted to actually take action on debt deduction loopholes. Prior to his first budget speech, the Treasurer's office was briefing journalists that the government would reduce the so-called safe harbour level and thin capitalisation rules from 60 per cent of total assets to 50 per cent. That would have still been an arbitrary approach economically inferior to Labor's, but it would have cut the amount of debt deductions from multinationals and added to the government coffers. But, at the last minute, Treasurer Morrison backed away from plans to address multinational tax avoidance. He got cold feet. He was, apparently, bullied—a word I know the government likes to use—into backing down. We know that it was a last-minute backdown because the budget includes a glossary term that is not in the budget. So it has a definition of thin capitalisation, but there is nothing in the budget about thin capitalisation. The only reason you would do that is if you had a thin cap measure which you then scrubbed from the budget papers and someone forgot to clean up the glossary. So it is very clear that the government is not serious about multinationals paying their fair share of tax. By contrast, it is clear that Labor is serious about making multinationals pay their fair share by closing debt deduction loopholes exploited by multinationals, a plan which would deliver nearly $6 billion to the budget bottom line over the decade.

We have also seen an ongoing drip feed of revelations about multinational tax avoidance. In April last year, the Panama papers hit the press. The Australian tax office, despite the staff cuts that it had been subjected to, was nonetheless on the front foot, with reports noting that it was investigating more than 800 high-net wealth Australian individuals using tax havens to avoid paying their fair share of tax. The ABC's Four Corners program reported on the legal twists, turns and loopholes that multinational companies and individuals use to avoid tax—that emerged from that explosively.

But Australians were also getting to know a new Prime Minister and getting to know that this new Prime Minister, Prime Minister Turnbull, said nothing and did even less on multinational tax avoidance. The silence was deafening. Not one coalition MP appeared on the program—not even to rhetorically condemn tax avoidance. The former Prime Minister, the member for Warringah, said:

… fundamentally the Turnbull government is seeking election on the record of the Abbott government.

He was referring in part to the multinational tax space—a record which showed a government that had gone soft on tax avoidance by individuals and firms, that had slashed 3,000 tax office jobs and that had undermined their investigative and enforcement abilities.

In response to the Panama papers, other countries stepped up to the mark. Then US President Barack Obama said: 'We should not make it legal to engage in transactions just to avoid taxes. There is a basic principle of making sure that everyone pays their fair share.' IMF head Christine Lagarde said: 'The rules appeared to be skewed towards some and do not apply to all.' Finance ministers of Britain, France, Germany, Italy and Spain put out a joint statement, saying

The recent extensive leaks from Panama show the critical importance of the fight against tax evasion, aggressive tax planning and money laundering.

Then World Bank President Jim Yong Kim said:

When taxes are evaded, when state assets are taken and put into these havens, all of these things can have a tremendous negative effect on our mission to end poverty and boost prosperity.

And yet here in Australia it was the deafening sound of silence from a government that is not interested in cracking down on tax havens and multinational tax avoidance.

We have seen too the government's foot dragging on the issue of the beneficial ownership register. Almost a year ago, the member for Higgins Kelly O'Dwyer told The Guardianthat 'there needs to be a registry of beneficial ownership in our country' and confirmed that Australia would establish a public register of beneficial ownership for firms. However, at an international summit shortly afterwards on the issue, Australia would only commit to 'exploring options' for a beneficial ownership register. In October 2016 the government committed to consult by the end of December. Halfway through February 2017—well beyond their self-appointed deadline—the government finally released the consultation paper. The failure of the government to make good on its promises on a beneficial ownership register can only be put down to one thing: this is a government focused on looking after the big end of town; its only ability is to get tough is on the weak, but it goes jelly at the knees when it comes to taking on the strong. It is unable to ensure that we have the transparency measures necessary to force multinationals to pay their fair share.

Then there is the Common Reporting Standard. Under Treasurer Hockey the government dragged its feet in signing Australia up to the Common Reporting Standard. It refused to join the Early Adopters Group—a large group of countries that were willing to move quickly on automatic information exchange. When introducing the bill to implement the Common Reporting Standard in Australia, Treasurer Morrison then set the timetable which would have let the companies off the hook by not having their accounts reported until the end of 2019. Labor would not have it; we forced amendments on the government to bring forward the reporting date. Rather than letting big companies off the hook and having their accounts reported at the end of 2019, we ensured that that timetable was accelerated. Labor's amendments also ensured that the Taxation Office publishes an aggregated report of Australian financial holdings by foreign residents from each individual tax jurisdiction. The purpose of that is to increase public transparency about Australia's place in the global money flows, because we have seen the transparency matters—whether it is the Panama papers, the Lux leaks, the Senate committee hearings run first by Senator Sam Dastyari and then Senator Chris Ketter who followed Sam Dastyari as chair. Public attention on multinational tax avoidance has been critical in making sure multinationals pay their fair share.

Tax transparency groups have called for the amendment that Labor forced on the government. They called for it because they wanted to ensure that Australia was not inadvertently playing a part in tax avoidance schemes originating in neighbouring countries in our region. The government criticised Labor in the House of Representatives for attempting to amend the Common Reporting Standard and then saw sense in the Senate and agreed to support these important changes.

Any multinational tax avoidance measure requires appropriate penalties. With the government's tepid measures, the maximum penalty a firm would pay if it failed to lodge country-by-country reports was $5400. For a company with $1 billion of revenue that represents 0.00054 per cent of their annual revenue. To put it into context, the fine for failing to lodge country-by-country reports was lower than the fine for streaking at the Sydney Cricket Ground. Naturally that raises the risk that big multinationals will simply opt to pay the fine rather than to do the right thing and launched their country by country reports.

In February last year I introduced a private member's bill to toughen up penalties for companies that do not comply with Australia's new country-by-country tax reporting rules. Labor raised that issue and took the job of taking a stick to companies that do not comply with the Australian tax laws. In May the government finally did an about-face and announced the higher penalties contained in the bill that we are debating today. Like so many other Labor policies that the government has adopted—cigarette excise increases, better targeting of superannuation concessions—we welcome it, but it beggars belief that it took so long and that it came in waves of bluster. The thing about Treasurer Morrison is that he is always confident: he is confident when he is attacking Labor and he is confident when he is adopting Labor measures. He never waivers for a moment in his public delivery; it is his policies that are always wavering.

Ten months ago the Treasurer announced the Diverted Profits Tax, but there are hazards in playing catch up—most notably, the propensity to trip as you are attempting to catch up. Immediately before the election and then again in October, the Treasurer promised Australians that he would introduce the Diverted Profits Tax before the end of the year. Was it introduced in this place before the end of the year? No, it was not. He failed to keep that promise, and in October 2016 at the Senate estimates hearings, Treasury officials informed Senator Ian Macdonald that 'the legislation is yet to be drafted'. Eventually draft legislation was introduced but it turned out that what was brought to parliament was a draft—given today's track-covering amendment changes the government's own bill.

Let's not forget that the multinational anti-avoidance law established by the former Treasurer was a de facto diverted profits tax. This Diverted Profits Tax aims to ensure that tax paid by significant global entities with a global income greater than $1 billion properly reflects the economic substance of their activities in Australia and aims to prevent the diversion of profits offshore through contrived arrangements. Since the draft legislation was introduced, the government has made tweaks, most behind closed doors. At the last minute we see that the government has been diverted on the diverted profits tax, because now they are amending their own bill. The government has been unable to meet their own timetable on a diverted profits tax. They have been unable to bring to this parliament a measure that raises serious revenue. Let's not forget that Labor's measure over the forward estimates would raise eight times as much as the diverted profits tax we are debating today—Labor's measure would crack down on multinationals eight times more stringently than the government's diverted profits tax. But they cannot even get the drafting right, and that is why today we are seeing the government amending their own Diverted Profits Tax Bill.

Of course, while they are failing to make multinationals pay their fair share and fighting for a $50 billion corporate tax cut for the big end of town, the government are punishing working- and middle-class families by taking away penalty rates that will cost a weekend worker $77. In the middle of this year, a millionaire will receive a personal income tax cut from Prime Minister Turnbull which is worth $16,400. The benefits of that will go only to those earning over $180,000 a year, and 94 per cent of the benefits of this top income tax cut will go to the top one per cent—a group that has doubled its share of national income in the last generation.

While we have seen wages grow three times as fast for the top 10th of the distribution when compared to the bottom 10th, we have a government that wants to cut penalty rates which disproportionately go to lower paid workers. With one hand, they are cutting penalty rates for low-paid workers. With the other hand, they are giving a tax cut to millionaires worth $16,400. With one hand, they are wanting to give a company tax cut worth $50 billion to the largest companies in Australia—$7 billion alone will go to the big banks. With the other hand, they are going weak on multinational tax avoidance, raising a mere $200 million—raising a tiny fraction through this bill of what they will give back to multinationals through their $50 billion handout.

I do not have time in the minutes remaining to me to go through the economic arguments against the corporate tax cut. But, for those who are interested in the economics of it, I would urge them to do nothing more than to look at the government's own modelling. Look at what the government's own modelling says will happen to households as a result of their corporate tax cut. There are three scenarios as to how you might raise the revenue. The first is a federal land tax. We have not had one of those since 1952, so it will probably not be that. The second is cuts in spending—well, they have increased spending, so it probably will not be that. And the third is higher income taxes.

A corporate tax cut funded by higher income taxes will boost household income, according to the government's own modelling, by 0.1 per cent—not per year but in total. There is a month's income gain which is, according to the government's own modelling, projected to be delivered in the 2030s. The government needs to drop its corporate income tax cut and adopt Labor's plans to get tough on multinational tax avoidance.

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

Is the amendment seconded?

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

I second the amendment and reserve my right to speak.

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

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

Ted O'Brien (Fairfax, Liberal Party) Share this | Link to this | Hansard source

It is hard to follow 30 minutes of a rewrite of history from the member for Fenner, who enjoyed giving us a good narrative of a Labor version of alternative facts as well as his own manifesto of tax. As fascinating as that was, he barely touched on the very legislation which is before the House today. Where he did, however, his main accusation was that the coalition government has not been taking adequate action when it comes to tax avoidance on behalf of multinational companies.

I remind the member for Fenner that $2 billion will be clawed back in this very financial year due to the multinational anti-avoidance legislation introduced by the coalition. The member for Fenner might think that $2 billion is not much, but, in fact, it does represent a dollar figure for action being taken to date by the only party that has decided to ensure that the money that should be paid to the Australian government by multinationals is paid. But that does not mean the job is over, and that is why I stand here today to talk about this bill—the Treasury Laws Amendment (Combating Multinational Tax Avoidance) Bill—which is part of a global response to a global and not just Australian problem. Although it must be said that this bill will place Australia at the head of the pack in how to address the problem.

Essentially, the measures in this bill are part of a coordinated and planned response to the fact that more and more business is being done around the world, including here in Australia, by very large companies that operate across multiple jurisdictions. Many of these large multinational companies do the right thing and fully remit their tax liability. There is no doubt about that. But, likewise, there are some that do not. Indeed, there are some multinational companies that seek to consciously avoid paying fair and reasonable tax in the place where they do business. In fact, evidence suggests that some actively plan to do just that.

This is one of the uglier realities—one of the uglier by-products, if you like—of globalisation, which is a phenomenon that I otherwise support wholeheartedly because it has not only served our country well but also dragged hundreds of millions of people out of poverty in other lands while facilitating greater peace and prosperity around the world. Nevertheless, even in this modern and highly integrated global economy where markets operate based on the rule of law, and whose design is largely based on Liberal principles to which our country subscribes, the darker side of human nature is still widely evident and poor behaviours still arise, including dodging tax.

Action by individual nation-states, such as Australia, as represented by this bill, is therefore needed. Of course, to be truly effective over time, more international cooperation is required so together, with other affected jurisdictions, we can plug the loopholes that allow some multinationals to avoid paying their dues. When they avoid paying their due they effectively rob communities, leaving governments short-changed, with less for hospitals, schools, roads and services and less to fund welfare to support the disadvantaged. This cannot stand.

It is, of course, a given that companies will always seek to minimise their tax bill. They are, quite naturally, keen to reduce their tax liability as much as possible so they can boost their after-tax profit and maximise shareholder value. Companies are, common-sensibly, bound to find the lowest possible corporate tax regime they can, and it is common practice that companies often try to stretch the law to the limit to maximise profit for their shareholders. For multinationals, especially, there are plenty of opportunities and many temptations. The truth is that some jurisdictions provide significantly lower tax regimes than Australia. Highly competitive locations, such as Hong Kong, Singapore, Switzerland and Ireland, have prospered mightily by offering companies some of the lowest corporate tax rates in the world—as low as 12½ per cent in the case of Ireland. Our corporate rate, for all but the smallest of companies, is currently 30 per cent. While the US rate is currently a whopping 39 per cent, one of the highest in the world, the new Trump administration has signalled a clear intention to significantly reduce the US corporate tax rate down to as low as 15 per cent. As a medium-sized, free-market economy that is a net importer of capital, it is essential that we keep our corporate tax rate competitive. That is precisely what the Turnbull government is seeking to do courtesy of the Enterprise Tax Plan that the member for Fenner just spoke about.

The previous member—it surprises me, given his academic background in economics—seems to be in denial of the fact that by reducing corporate tax you increase companies' return on investment. When they have a higher return on their investment they invest more, and with more investment comes more jobs. Therein lies the value of the Enterprise Tax Plan.

However, the bill being debated today is not addressing the competitiveness of our rate, but rather the adverse behavior of some multinationals, which do business in Australia and then seek to abrogate their responsibility to contribute by not paying their fair share of tax. Given the diversity of corporate tax rates around the world, is it any wonder that some large multinational corporations channel their profits to jurisdictions with much lower corporate tax rates? They have been doing it in a number of ingenious ways, all of which essentially amount to shifting profits from high-tax environments to low-tax environments, all with a view to achieving one key objective—to avoid tax.

It is one thing to take reasonable and lawful steps to limit one's tax liability, but it is quite another to ruthlessly evade tax by shifting on-paper profits beyond the markets where the transactions take place and where the tax is rightly payable. Aggressive intragroup pricing—transfer pricing, as it is more commonly known—is one way this can be done, especially for debt and intangibles, and it plays a major role in corporate tax avoidance. Transfer pricing describes the price a company charges another arm of its own operation as part of the supply chain to create a product. One subsidiary sells to another subsidiary, which can lead to the practice of large profits artificially being shifted along the supply chain to lower-tax jurisdictions. While the trade in physical goods and services can and has been successfully exploited by such schemes, it is the ever-expanding global trade in intellectual property and online services that is especially prone to manipulation of this type. Tech companies, for example, often maintain that their success is based on the quality of their R&D—their technicians, the priceless brainpower that developed the better mouse trap or the better app. Putting a dollar value on that can be extremely difficult for tax authorities to estimate. It can also be advantageous to a high-tech corporation if the price it puts on such intellectual property is high and if the bulk of revenue earned in a jurisdiction like Australia gets shifted to another jurisdiction where the company says the value of its IP really resides and where the IP behind the better app was developed, which can inevitably be a place with a lower tax rate.

Loan arrangements are another issue. Let's say a realistic rate for a loan from one division of a company to another is five per cent. If the rate that ends up being charged is in fact eight per cent, then the deduction that the company may enjoy via a tax concession for servicing its debt in a jurisdiction like Australia is made artificially high. Thus, tax is avoided and the company's profits are increased.

None of these tactics are necessarily new. What is different now, however, is the size of the multinationals, the huge growth in their share of the global economy and the sheer scale of tax avoidance, ripping untold billions out of communities right around the world. In Australia alone, a recent report to Senate estimates by the tax commissioner looked at this and suggested that the impact of these sorts of tactics is now measured in billions of dollars. That makes sense in terms of foregone revenue when you consider Australia's tax regime. Corporate tax is the second largest source of revenue for the federal government, at about 20 per cent, after personal income tax approaching 50 per cent. It is therefore the second-most important source of servicing funds for the Australian community, providing services such as health, education, child care and of course a welfare safety net.

In 2012-13, for example, 850,000 companies lodged tax returns in Australia and paid $66.9 billion—close to 20 per cent of all receipts, a proportion that has actually declined over subsequent tax years, while inversely the percentage contribution of personal income tax has continued to increase. Our critical exposure to the scourge of corporate tax avoidance is demonstrated by the fact that companies with a turnover of $250 million or more accounted for 60 per cent of corporate tax receipts in 2012-13, even though they represented just 0.2 per cent of all companies, and, according to the ATO, just 69 companies, with a turnover of $5 billion or more, accounted for a very substantial 42 per cent of the corporate tax base. This correlation clearly demonstrates our heavy reliance on corporate tax receipts, and the relatively narrow base that accounts for much of that revenue. It therefore takes only a handful of big companies to divert profits in an attempt to outflank the tax authorities, and, with no corresponding benefit to the wider economy, the impact on Australia's bottom line is potentially devastating.

Most of these companies are multinationals, and there is a growing recognition, both worldwide and here in Australia, that some of these massive corporations have been playing governments off a break. Tax law in most countries has simply not kept up with the ingenuity being brought to bear by the legions of lawyers and accountants whose job it is to find ways to play the system and win. International interest in dealing with the problem gained welcome urgency in the wake of the global financial crisis. With most countries strapped for cash to service their obligations, given the depth of the crisis and indeed the slow recovery, there was a broad recognition that reducing corporate tax avoidance was a worldwide problem that needed to be addressed, for too much was being lost, due to the behaviour of some multinationals that were at best cheating; at worst actively participating in criminal activity. The OECD got involved in developing approaches that countries need to take, the G20 also got involved, and I am pleased to say that Australia has been a key player in and around these forums in urging and developing the sort of concerted international action that is now being taken, of which this bill is an important part.

At the end of the day, in order for us to deal with multinationals that decide they wish to avoid their tax obligation, we need to take action. That is why our record so far is a proud one, of around $2 billion being clawed back in this financial year alone, and the measures discussed in this bill today will only strengthen that regime. 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

I am speaking in support of the amendment that has been moved by the member for Fenner, and in doing so I am critical of the government because, although we are supporting the Treasury Laws Amendment (Combating Multinational Tax Avoidance) Bill 2017, it is a soft touch. It is another wasted opportunity for this government to tackle what is a very big issue for our nation's finances—that is, multinational profit-shifting, which results in less revenue coming into the Australian budget, revenue that can fund important health, education and aged-care services and, importantly, go towards reducing the deficit, which has increased substantially under the Abbott and Turnbull governments. This piece of legislation really is a missed opportunity. Under these proposals that we debate here today, the government raises an additional $200 million. However, if they had adopted Labor's much stronger reforms on multinational tax avoidance then the budget would be $1.6 billion better off over the forward estimates and $5.9 billion better off over the decade, a much greater increase in revenue and a much stronger response to a problem that has been identified by a number of countries and dealt with through reforms such as this and others, like the ones that Labor proposed in the lead-up to the last election.

Nonetheless, this bill does implement three different elements of the government's tax integrity package. The first is a diverted profits tax, also known as a Google tax, something that has been done in the United Kingdom that we are now following here in Australia. The second is an increase in administrative penalties for global firms with revenue over $1 billion that seek to transfer profits overseas and avoid paying their fair share of tax here in Australia. The third is updating Australia's transfer pricing guidelines to bring them in line with OECD guidelines, which have recently changed as part of the OECD's approach to base erosion and profit-shifting, something that Australia signed up to a couple of years ago.

Firstly, the diverted profits tax aims to ensure that the tax paid by significant global entities—defined as firms with a global income greater than $1 billion—properly reflects the economic substance of their activities in Australia, and aims to prevent the diversion of profits offshore through contrived arrangements. If the DPT applies, the Diverted Profits Tax Act will impose a tax on the amount of the diverted profit at the rate of 40 per cent, and the diverted profits tax applies when the ATO believes that an entity is transferring profits to a related entity in another jurisdiction which has a lesser and more favourable rate of multinational tax to that here in Australia, thereby avoiding paying their fair share of tax, and duping the Australian budget and the Australian people out of revenue that would fund important services in our community.

That rate applies if a company with more than $1 billion in turnover seeks to transfer funds to a foreign jurisdiction with a tax rate below 24 per cent, and that includes jurisdictions such as Singapore, Hong Kong, the United Kingdom and Ireland. Unfortunately, we have seen celebrated cases over recent years of big multinational companies seeking to transfer profits, and they generally do it in the form of a loan to a subsidiary company in another jurisdiction, particularly in Singapore. We have seen some of Australia's large resources companies seeking to transfer their profits to related entities in Singapore. A number of tech companies and IT companies have been transferring profits to head offices in Ireland.

Schedule 2 of the bill increases the administrative penalties that can be applied by the Commissioner of Taxation to those significant global entities to encourage them to better comply with their tax obligations, including lodging tax documents on time and taking reasonable care when making statements. The shadow Assistant Treasurer introduced a private member's bill in February 2016 designed to raise penalties for noncompliant reporting. What we are seeing here in this bill is that the government is actually adopting Labor's policies on noncompliant reporting. They say that imitation is a form of flattery. In that case, Labor is flattered by the fact that the government has seen fit and has seen the merit in Labor's policy and has sought to adopt it in some of these measures here today.

Schedule 3 of the bill amends the Income Tax Assessment Act to update the reference to the Organisation for Economic Cooperation and Development, or OECD, transfer pricing regulations in Australia's transfer pricing rules in division 815 to include the 2016 OECD amendments to the guidelines.

In terms of revenue, schedule 1 raises $200 million over the forward estimates, whilst schedules 2 and 3 have unquantifiable revenue gains. But let's be clear about this. As I said earlier, this is nothing more than the government paying lip-service to the notion of ensuring that big businesses pay their fair share of tax. You need look no further than this government's approach to domestic company tax policy to see how fair dinkum it is about ensuring that companies pay their fair share of tax. At a time when our budget is under considerable strain, when the deficit has been increased by a very large amount, when the ratings agencies are starting to question Australia's AAA credit rating—a downgrade of which has implications for anyone who has a mortgage or a business with a loan facility because it means higher interest rates over the longer term—this government is proposing to offer a $50 billion tax cut to corporate Australia, most notably some of the biggest corporations in this country. This comes at a time when we need that revenue to fund important services such as the National Disability Insurance Scheme, aged-care services, our education reforms, our health care and its increasing costs.

I have to say that for all of the bluster from the coalition about fiscal rectitude, about reining in budget deficits, they sure have a pretty good record when it comes to promising things and putting expenditure in the budget that is unfunded. In fact, they wrote the book on how to do it, particularly the Howard government. They were the best of all of the Australian governments at making promises and spending taxpayers' money but not finding a source in the budget from which to fund them.

I am speaking in particular of their policy of reducing the capital gains tax discount that applies to sales of capital gains tax goods—the discount that was introduced when Peter Costello was the Treasurer—and the effect that had on the budget. Again, that was unfunded. The superannuation reforms from Treasurer Costello towards the end of the Howard government years allowed people to pump as much money as they wanted into their superannuation. That was forgone revenue, unfunded in the budget. So they have form on this issue of not funding properly in the budget promises and additional spending commitments.

This is again the case with their $50 billion tax giveaway, because the Treasury modelling on the government's company tax cut indicates that it will only generate 0.1 per cent in economic growth and create next to no jobs. The Australian public has seen with their own eyes this government's favourable treatment of big businesses through their treatment of the banks. Some of the organisations that will benefit from this $50 billion company tax cut over the longer term will be Australia's biggest banks. Can you believe it, Deputy Speaker? What the banks have put the Australian public through—the number of people they have ripped off, the number of claims they have denied through their insurance arms, the number of dodgy financial advisers who worked for them who have ripped off Australian taxpayers over recent years—has been astounding. And the Turnbull government wants to give them a tax cut. That says everything about this government's approach to fairness and equity in the Australian budget and taxing people fairly. They are giving the biggest businesses, including the banks, a tax cut, but at the same time they want to slug pensioners. They want to slug people with a disability. They want to slug people who are unemployed. They want to slug single mums and working families. Labor says that that is not on. That is unfair. That is not the way that you should be managing Australia's finances—by hitting the most vulnerable and letting off Australia's big businesses.

Since the Liberals took office, net debt in Australia has blown out by an estimated $317 billion. Deficits over the forward estimates have blown out by another $10 billion and a weakening economy has delivered more than $30 billion in revenue writedowns. In 2015 coalition MPs cheered when Prime Minister Abbott told the parliament:

So far the only idea they—

Labor—

have come up with is to spend $100 million on the ATO to raise $1 billion. And they all cheered and thought that that was wonderful from their then Prime Minister—and then, of course, they got rid of him.

Yet we find in the 2016 budget—most of which has still not been passed by the parliament—that the government did precisely what the member for Warringah was criticising the Labor opposition for, claiming that an additional $679 million investment will raise more than five times as much: $3.7 billion. If this is true, then it must also be the case that the government's savage cuts to the tax office, in axing over 3,000 jobs, will have cost revenue over the past few years and will do so into the future. Promising to restore some of the tax office's funding in this budget is an admission of failure—it is an admission that they got it wrong—and is not a new crackdown on multinationals. If the government truly had an appetite to close the tax loop holes that are exploited by multinational corporations, they would do something about the one in three big companies that pay no tax at all here in Australia.

The 2014-15 tax office tax transparency data shows that 109 companies did not pay any tax, despite reporting more than $1 billion in total income. This transparency data report, covering 1,904 companies in total, is only available thanks to Labor's reforms when we were in government. The former Assistant Treasurer, David Bradbury, introduced these excellent reforms that now allow Australians on an annual basis to see how much tax private companies are paying. These reforms were passed over the objections of the coalition. Let us never forget that the Liberals and Nationals—all of those on that side of the chamber—voted against these reforms to increase transparency on the amount of tax that Australian private companies are paying to the Australian government. And a couple of years later, after we established these reforms, both the Nationals and the Liberals voted with the Greens to water down those tax transparency laws and ensure that two-thirds of those private companies that were previously captured by those laws were now cut out. Well, so much for tax transparency in Australia!

In stark contrast, Labor is tackling multinational profit shifting. Our proposal is to move to a worldwide gearing ratio for calculating the amount of debt that companies can claim deductions on in Australia. Under our preferred approach, deductions would be assessed on the third-party debt-to-equity ratio of a company's entire global operations. That would be achieved by eliminating the existing safe-harbour and arms-length tests and making the worldwide gearing ratio the only test for the level of allowable deductions. This is a shift away from the current safe-harbor rules which let companies claim deductions on up to 60 per cent of their Australian debt without needing to show how this debt relates to their real business activity.

This bill makes crystal clear this government's preference to protect their big business mates at the expense of low-income Australians. Labor is committed to ensuring that we are fair dinkum about tackling multinational tax avoidance. That is enshrined in our policies, and that is why I am supporting the amendment moved by the member for Fenner.

Kevin Hogan (Page, National Party) Share this | Link to this | Hansard source

I rise to speak on the non-amended bill that was originally introduced by the minister, the Treasury Laws Amendment (Combating Multinational Tax Avoidance) Bill 2017, and the Diverted Profits Tax Bill 2017. I think everyone—even those not necessarily au fait with finance or economics—certainly understands what multinational tax avoidance is about. It is pretty easy to intuitively understand that many companies around the world have activities in multiple countries around the world and, of those countries that they are active in or are participating in, those countries all have different taxes and different company tax rates that apply to their local jurisdiction.

It is obviously in the interest of companies that they lower their tax bills. And, as we know, some of them are diverting revenue or profits from one jurisdiction to another to lower their overall tax bill. So it is important that we do everything we can to make sure that that is not happening within our jurisdiction. If the money that they are making is made in Australia we want them to pay tax in Australia. This bill is going a long way towards recouping more multinational tax, which is obviously a good thing. As a government we provide many services, and those services have to be funded from somewhere and, if multinational companies are getting away with not paying their fair share of tax, that is obviously going to have to be made up for by the Australian taxpayer. So this is very, very important legislation.

The Diverted Profits Tax Bill 2017 forms a package of bills. It imposes a new diverted profits tax that is targeted at multinationals that enter into arrangements with their offshore related parties that basically—and we are coming down to how we measure it—lack economic substance. The Commissioner of Taxation will have the authority to have a look at these movements of cash and, if anything looks suspicious, will have the power to have a very close look at it. The bill imposes an upfront diverted profits tax liability payable on the amount of the diverted profits at a penalty rate of 40 per cent. So, if they are found to be diverting profits to another jurisdiction, we will charge them a penalty rate. This will have the effect of encouraging greater cooperation between multinationals and the ATO, and the ATO have said that this will reduce the length of disputes between the ATO and the multinationals.

As a government we introduced previous legislation in 2015 to make multinational companies pay their tax on Australian earnings. We did that to ensure a sustainable revenue base to deliver the services and supports that governments should provide. The previous law, the Multinational Anti-Avoidance Law, or MAAL, together with what we are doing now means that around $2 billion in tax is expected to be clawed back this financial year due to a crackdown on multinational tax avoidance. The tax commissioner has said:

Pleasingly, we are seeing positive changes in behaviour from taxpayers and their advisors. They are abandoning their contrived structures and restructuring to models whereby the sales are booked in Australia.

There have been reports that both Facebook and Google have changed structures in order to comply with our government's laws in response to the laws we introduced in 2015, and Facebook stopped booking its Australian revenue with its Irish office. In addition to the MAAL work, the ATO has also done around 100 audits of large public and multinational corporations that are underway, with 70 related to multinational corporations, in light of the legislation we introduced previously.

This new bill, the Treasury Laws Amendment (Combating Multinational Tax Avoidance) Bill 2017, will prevent multinationals shifting profits offshore. Through the bill we are expecting to raise $100 million extra revenue a year from 2018-19. The bill will also, as I mentioned previously, increase penalties for multinationals who do the wrong thing. The change will see the maximum penalty now 100 times more for large multinationals that fail to lodge tax documents on time, and the penalty for large multinationals that fail to comply with obligations will increase to over $½ million. We are also doubling the penalties for large multinationals where they make false or misleading statements to the ATO, and we are going to continue to apply pressure so that they pay the right amount. We need to be very vigilant on this, and we will be doing so.

I have explained the rationale for the diverted profits tax. It is an anti-avoidance measure to make sure that these companies that are operating in many different countries are paying the appropriate tax on the revenue they make in Australia—the measure within Australia's anti tax avoidance which will give the commissioner greater ability to determine the profits that have been diverted from an Australian taxpayer to an overseas associate. In making this determination the commissioner will consider whether the outcome from the arrangement reduces the taxpayer's global net liability by more than 20 per cent and whether the commissioner considers that the principal purpose of the arrangement is to reduce the Australian taxpayer's liability. We obviously have to get quite specific as to what determines whether we look into something or not.

The commissioner will not impose the diverted profits tax if the taxpayer can show that all the associates in the arrangements have economic substance. But once the commissioner determines that the profits are being diverted, the commissioner will, as I said earlier, be able to issue an assessment at a 40 per cent penalty rate of tax, and this will need to be paid within 21 days. It can be adjusted by mutual agreement during a 12-month review, but the taxpayer cannot appeal the assessment until the end of the review. We think this is really important, because sometimes the threat of these things changes behaviour, and earlier I gave an example of Facebook, which already, because of previous legislation and this legislation, has worked out that if it continues to do what it is doing then it will be slugged the penalty tax and therefore has already changed its behaviour. The DPT will encourage even greater compliance by multinationals with their obligations in Australia. This will encourage greater openness with the commissioner and allow for speedier resolution of disputes.

In regard to the rationale for increasing the penalties then obviously, again, companies are becoming more averse to doing what they are doing, because they know that if they are judged to be avoiding tax then the penalty will hit. So, from 1 July 2017 the increased administrative penalties that can be applied by the commissioner to a significant global entity—that is, one with annual global income of $1 billion or more—which fails to adhere to tax reporting obligations will be increased 100 times, where they fail to lodge tax documents on time or take reasonable care. This means the maximum administrative penalty for significant global entities that fail to comply will increase from a very small $5,250 to $525,000. Importantly, the penalties will also be doubled for these entities when they make false or misleading statements to the ATO.

The new penalty amounts are based on the 2016-17 MYEFO announcement that the value of the Commonwealth penalty unit will be increased from $180 to $210 with effect from 17 July. These measures also make a minor amendment to ensure that the administrative penalties apply as intended if a significant global entity does not lodge a general purpose financial statement as required under the taxation laws. Again, by increasing these penalties, the penalty amounts will be more commensurate with their turnover and act as an incentive for the these entities to take reasonable care when making statements to the ATO.

Obviously the rationale for strengthening the rules on transfer pricing—literally transferring the revenue from one place to another—is that Australia's transfer pricing legislation currently specifies that it is to be interpreted so as to best achieve consistency with the OECD's transfer guidelines for multinational enterprises and tax administrations, which was last updated in 2010. To incorporate the OECD's 2015 recommendations, the reference in Australia's legislation will be amended to include the OECD guidelines that were updated in 2015. Doing this will ensure that Australia's transfer pricing rules remain at international best practice and, importantly, are aligned with those of our major trading partners. Incorporating these OECD recommendations into our transfer pricing rules will also provide greater guidance to industry on the application of the arm's-length principle, particularly for cost-contribution arrangements and transactions involving intellectual property and hard-to-value intangibles. Obviously this gives these companies that are trading in many different areas and in many different countries consistency across those borders. The amendments will also clarify how the transfer pricing analysis should reflect the economic substance of the transaction rather than the contractual form of the enterprise.

The diverted profits tax will commence on 1 July. It is estimated that it will raise an extra $200 million in revenue over the forward estimates and, again, will reinforce our position as having some of the toughest laws in the world to combat corporate tax avoidance. Around $2 billion in tax is expected to be clawed back over the financial year under our crackdown. Since the establishment of the new laws the ATO has worked to identify 175 companies as potentially being in the scope of the previously introduced legislation, the MAAL. Of those companies that the ATO assessed, 69 were medium to high risk in breach of the MAAL, and they were placed under current audit; 17 are subject to a current risk assessment. So, I commend this original bill as introduced by the minister to the House.

Stephen Jones (Whitlam, Australian Labor Party, Shadow Parliamentary Secretary for Regional Development and Infrastructure) Share this | Link to this | Hansard source

The message has to be made loud and clear: if you want a fair society then multinational companies have to pay tax and if you want a strong economy then multinational companies have to pay tax. It sticks in the craw of many hardworking Australians when they pay their tax. They go to work week in and week out, they pay their tax week in and week out and they are happy to make a contribution to society, but what sticks in their craw is when they learn that some of the wealthiest companies in the world and some of the biggest companies operating in Australia are not paying their fair share. Australians are a generous people and they are willing to put their hands in their pockets to pay for the schools, hospitals, roads and ports that make this a great country—a great country in which to do business, to bring up your family in and to run a small business—but what sticks in their craw is when they see that the playing field is skewed so that the biggest companies in the world with some of the largest incomes are not paying their fair share of tax. Frankly, they look at the Turnbull government and they know that the Turnbull government is not doing a good job of reining them in.

Australians reading the newspapers over the last fortnight would see that our country, with some of the biggest gas reserves in the world, is exporting its gas overseas to countries like Japan that are earning more taxation revenue through importation taxes on our gas than governments in Australia are earning on the exportation and royalties from that gas. Something is very, very wrong with our taxation system if this is allowed to occur. The government has to get serious about getting tough on multinationals and they have to do something to ensure that one in three of Australia's largest companies start paying their tax. It is a disgrace that those opposite decry government debt yet, according to the 2014-15 tax office transparency data, one-in-three large firms pay no tax at all. The people that we represent go to work every day and pay their tax and they look at this and they know that it is not fair and it is not right. Something has to change. That one-in-three includes 109 companies that paid no tax despite reporting a total income of over $1 billion. How can that be right? How can it be right that 109 companies with an income of over $1 billion are paying no tax?

We know this because we looked at the tax transparency data—tax transparency data that would not be available to the Australian people had it not been for the actions of the Australian Labor Party when in government introducing the legislation that made this data available. Of course, we did not have the support of the opposition back then in 2013. We did not have their support. There was full-throated objection from every coalition MP. Every National Party MP who now bellows from the government benches about how we have to do more to rein in this excess was standing on this side of the House arguing against our tax transparency laws. They later voted with the Greens, in the last parliament, to water down Australia's tax transparency laws, taking two-thirds of private companies out of the reporting net. They have a very, very bad track record indeed when it comes to putting in place the framework for tax transparency and when it comes to ensuring that multinational companies are paying their fair share.

Comparing the most recent figures for the tax year 2014-15 with the data for 2013-14 shows that the share of large firms paying no tax has stayed unchanged—36 per cent for both years. Under this government there has been no change. This points to the coalition's absolute and abject failure when it comes to cracking down on multinational tax avoidance. Labor led the way on tackling multinational tax avoidance under the Gillard government in the face of blanket opposition. They were not in the boat for ensuring that we could put in place proper multinational tax avoidance laws. The coalition government has had to be dragged into action.

George Christensen (Dawson, National Party) Share this | Link to this | Hansard source

Rubbish! What did you do? Why isn't it fixed then?

Stephen Jones (Whitlam, Australian Labor Party, Shadow Parliamentary Secretary for Regional Development and Infrastructure) Share this | Link to this | Hansard source

I hear the member for Dawson piping up. He is a lion in his electorate, but when he comes down here to Canberra he votes for every single one of Malcolm Turnbull's economic policies. He thunders to the newspapers in Mackay and in his electorate, but when he comes in here he creeps into the chamber and votes for every single one of Malcolm Turnbull's economic policies, which are doing his electorate in the eye and he knows it. He is in trouble and he knows it.

Back in 2015, coalition MPs cheered for then Prime Minister Tony Abbott when he stood at that dispatch box and criticised the Australian Labor Party for pointing out the obvious: when you invest in the resources of tax collection, you get a return to the taxpayer and when you invest in resources for tax collection, the government gets a return. It means there is more money coming in the door, which means there is more money available to spend on services and infrastructure for the people of Australia. But on that side of the House they laughed at it. The then Prime Minister said:

… the only idea that they have come up with is spending $100 million more on the ATO to raise a billion dollars.

I know that there are a lot of investment bankers who would look at that and say, 'That's not a bad return on investment, $100 million in and $1 billion out.' That is a pretty good return on investment. Well, those opposite laughed at it. They are slow learners, but within 12 months they were back here doing exactly the same thing. In the 2016 budget, the government did exactly that and decided that they would invest $679 million to raise more than five times that much—$3.7 billion over the forward estimates—to ensure there was revenue coming in the door.

Of course, they mucked it up, and they have not been able to undo the damage they have put in place over the last four years. I have in mind the 3,000 jobs they have slashed from the Australian Taxation Office—the people who are charged with the responsibility of chasing down the tax avoiders, including the multinational companies. They are the people who have the expertise to deal with these issues. The coalition parties—the National Party and the Liberal Party—are giving them all a free go by sacking the people whose job it is to collect that revenue. If you are bringing more money in—if everyone is paying their fair share, including the multinational companies—more resources are available to the government to do the things that Australians are looking to government to do. I have in mind some of the big ideas that have been talked about in this place.

Mr Deputy Speaker Mitchell, as a keen follower of these things and as a member who represents a regional seat yourself, no doubt you would have seen the government harking back to some of the policies that were put in place by the former Whitlam government in the 1970s, such as decentralisation policies. It was the Whitlam government who really invested in it and had a long-term plan for decentralisation—unlike the current mob, who think decentralisation is a funny graphic on Facebook, and who are stuffing up a program to move a small government agency out of Canberra and into the Deputy Prime Minister's electorate. They think that is an example of decentralisation policy, when it is not. It is monumental incompetence. The member for Hunter, who is in the chamber with me at the moment, has pointed out in precise detail the vandalism that has been done by the Deputy Prime Minister through this strategy. Nearly 50 per cent of staff resigned from the agency, resulting in lost expertise. The member for Dawson laughs at this, but the roosters will come home. This program is going to cost $25 million. It is not just about collecting the revenue; it is about using it properly, and $25 million has been wasted. Can you imagine the number of trainees that we could have put on, the number of apprentices that we could have employed or assisted in regional towns around the country instead of this boondoggle, shifting a small agency to the Deputy Prime Minister's electorate? It is a joke.

If you are going to do decentralisation, you do it properly. You need a long-term plan for what you are going to do for the regions. And it is not just about moving a few public servants from Canberra to a regional city, as useful as that might be. You might look at not sacking so many public sector workers in the first place. I have in mind the recent decision of this government to sack over 200 workers from the Australian Taxation Office in regional towns around the country. Added to that are the number of workers they have sacked from the CSIRO, largely from regional towns around the country. So we have a situation where the Deputy Prime Minister is slapping himself on the back for wasting taxpayers' money and moving a few dozen public sector workers to his electorate. At the same time he is sacking hundreds and hundreds of public sector workers from regional towns all around the country. This is not an example of decentralisation and this is not an example of sound use of taxpayers' money. If you are raising the money properly, you have many more resources available to do things, particularly for people in regional Australia.

I want to say something about the important initiatives of the Labor government which deal with ensuring that every region around the country is connected to a national broadband network and has the communication facilities available that people in city take for granted. The coalition was not content with stuffing up the Labor government's national broadband network by condemning regional towns all around the country to a second-rate copper-based national broadband network, which is going to cost the NBN and taxpayers more over the long term and which is going to deliver them a lesser service than is available to people in the big cities. Not content with that, they stand in question time, as the Minister for Urban Infrastructure did yesterday, and slap themselves on the back for introducing programs which have been a monumental failure.

I have in mind the Mobile Black Spot Program, much heralded by the coalition. Here we are, four years since the launch and 18 months since round 1 of the program. Over 500 base stations were announced. As it has been over four years since the program was announced, you would think that you would have those 500 base stations switched on. Maybe you would allow a bit of time because of the complex engineering work. Maybe you would say 400 of them should have been switched on. Maybe, if you were an absolute coalition supporter with a blind eye to the ill performance on this matter, you would say, 'Okay, fair is fair—maybe it is 300 that are switched on.' No, four years after the commencement of this program, 100 out of 500 have been switched on, and they slap themselves on the back.

More than that, they have not learnt from the mistakes they made in this program. If you were going to badge something as a mobile black spot program, you would think that you would ensure that you were putting base stations in areas which are fixing black spots. It stands to reason that the mobile phone black spot program is going to fix mobile phone black spots. But, as an example of how the government cannot properly use taxpayers' money that they are raising, the audit commission has found that 20 per cent of the funded mobile phone black spot programs did not extend mobile phone coverage. Nor did they improve competition, because they gave the overwhelming majority of these mobile black spot base stations to the incumbent, Telstra, further entrenching their dominant position in regional telecommunications. They cannot be trusted with multinational tax avoidance and they cannot be trusted with the funds raised through addressing it.

Mark Coulton (Parkes, Deputy-Speaker) Share this | Link to this | Hansard source

The debate is interrupted in accordance with standing order 43. The debate may be resumed at a later hour.