Daniel Mulino (Fraser, Australian Labor Party) Share this | Link to this | Hansard source

I'm pleased to rise today to speak in support of this bill, the Taxation (Multinational—Global and Domestic Minimum Tax) Bill 2024. I would note from the outset that is one of a package of three bills which together enact a 15 per cent global minimum tax and domestic minimum tax for multinational enterprises operating in Australia with an annual global revenue of 750 million euros or greater, which is approximately A$1.2 billion. There are other bills as part of this package which relate to capital thinning and greater transparency across jurisdictions.

I think it's important to set the context here, which is that multinationals have, in the post-World War II period, risen in importance in the global economy. On balance, I think that is a positive. It reflects increasingly sophisticated supply chains and increasingly integrated global economies. I think the rise of multinationals has reflected a broader trend towards greater sophistication, integration and specialisation in the global economy. This in turn has enhanced productivity growth. But, in terms of each economy's capacity to protect its tax base, it has led to domestic economies and national governments having to face up against companies increasingly able to shift profits and underlying profit-generating activities in ways that often aren't particularly transparent.

This occurs through a range of mechanisms. For example, very large multinational organisations can shift interest payments between different entities and different jurisdictions in a way that materially reduces their taxation burden. They can undertake transfer pricing in ways that arguably, in many instances, don't reflect the underlying economic activities being undertaken in different jurisdictions. We see this quite often when large multinational organisations pay very little tax in one jurisdiction—a jurisdiction with a high notional tax rate—and attribute substantially more economic activity to other jurisdictions, often jurisdictions which have a very low population base and very low overall economic activity but which have a more favourable tax treatment.

This practice is often undertaken in ways which are incredibly complicated and non-transparent, raising questions across the whole of the OECD—and, I would say, the global economy—about the ways in which we might try to counteract some of these measures, particularly the ones which are artificial and only exist to try to reduce the tax burden. It's becoming particularly difficult, though, in an era of digitalisation and an era where high-productivity companies—companies operating in the social media world, in the world of the internet—are increasingly able to make judgements and rulings, driven by taxation considerations, about which jurisdictions their economic activity is occurring in and attribute it accordingly.

There's often no particularly obviously way to attribute where the economic activity of these highly digital companies occurs. We see this, for example, with social media platforms and search engines. It might be that the activities are wholly or largely attributed to a particular jurisdiction because that's where the algorithm is deemed to operate, but that doesn't necessarily lead to a particularly sensible or satisfactory outcome in terms of that company paying taxation where its customers connect with it. I believe this comes down to a set of very tricky questions about how to value intellectual property and how to decide where a company's activities occur. It might be that there's a range of different people connecting with it but they're doing so through an entity that exists in a different jurisdiction altogether.

We are facing, I believe, an increasingly challenging environment in looking at taxation when it comes to highly productive multinational entities for which it's not at all obvious how to attribute activities or interactions between a company and a consumer to a particular jurisdiction. The base erosion and profit shifting program out of the OECD is one response to that problem. It's a program which has a whole series of initiatives falling under it, including minimum tax arrangements in a whole range of economies, and greater transparency. There are a whole range of measures aimed at an international tax regime where taxes are fairer and more transparent and fall more naturally in jurisdictions where the economic activity is occurring, and where there is less incentive for some jurisdictions to go out on a limb with extremely low tax rates to attract companies.

Profit shifting hurts Australia. It hurts many advanced economies. A lot of economic studies have shown profit shifting hurts developing countries the most. There have been a number of studies by the World Bank and a number of studies by the OECD showing profit shifting is bad for many national governments. Many developing countries struggle to lift their already vulnerable and fragile tax bases in the face of these kinds of activities. But Australia is not immune, and Australia is one of the OECD countries that, I would argue, can benefit from a more sensible and more sound international set of arrangements.

The BEPS actions have many components—minimum taxation arrangements and moving taxation arrangements across major OECD economies in a joint manner so that we are all moving together, but also taking into account the fact there are certain sectors where this is particularly a challenge. I mentioned digital companies. Intellectual property is very much an issue, with the difficulty of measuring the value of that but also the difficulty of attributing different actions to different jurisdictions.

These bills will provide for a global minimum tax that will enable Australia to apply a top-up tax on a residential multinational parent or subsidiary company where the group's income is taxed below 15 per cent overseas. It will also provide for a domestic minimum tax which will enable Australia to apply a top-up tax for any low-taxed domestic income before a foreign country would otherwise take that tax under the new rules.

The floor on tax competition offers Australia important benefits. First, it reduces the incentive for multinationals to shift profits away from Australia to low-tax jurisdictions. That is occurring at the moment in many instances, in situations where there is no reason for that profit shifting other than what can be described as an artificial mechanism to reduce tax. In many instances it has nothing to do with any kind of sound, rational or policy based attribution of the company's activities between jurisdictions. This will also improve the competitiveness of smaller domestic businesses in Australia, due to the reduced tax advantages of multinationals.

In addition to it being important in terms of supporting the government's tax base, it also reduces an unfair competitive disadvantage for smaller and medium local companies—many of whom might be trying to move up the productivity ladder, many of whom might be trying to become globally competitive themselves. That is extremely important in terms of both the government's tax take and the level playing field within our own economy.

Implementing a global and a domestic minimum tax will reduce the corporate tax rate differential between Australia and low-tax jurisdictions, making Australia a more attractive place in which to invest. This will give effect to the global anti-base erosion rules that have been set out by the OECD and agreed and finalised by the OECD inclusive framework, which is now a network of 145 member jurisdictions. I believe one of the key elements of this is that jurisdictions move together as much as possible on the key elements of this. Only by doing that, only by joint action, can we take away the incentive for countries to continue to undercut each other.

The government intends to finalise subordinate legislation in relation to these bills in the form of ministerial rules, which will be necessary for these bills to operate effectively. These rules will build upon the framework established by the bill, setting out various computational and administrative provisions necessary to give effect to the global and domestic minimum taxes. Enacting this bill is estimated to increase receipts by some $370 million over the five years from the 2022-23 financial year. It's a material amount of revenue. But as I said, in addition to protecting the government's revenue, there is an important levelling of the playing field with respect to how some multinationals are taxed, versus how domestically based companies are taxed. Many of those domestic companies themselves are trying to build more of a multinational profile. This is both about economic efficiency and about fairness.

The company tax rate, is really, in a sense, a fairly modern part of the modern economy. In Australia, our company tax rate was introduced in 1915, and it was introduced at a low rate back then. I think that the initial company tax rate in the United States might have been around one per cent. It increased in Australia in successive steps, and I think it's fair to say that it's been at around the 30 to 40 per cent level, or in the 40s, for most of the postwar period. But, of course, compliance with that nominal tax rate has changed at various points in time.

There are estimates that an increasing proportion of multinational profits has been shifted throughout that period, and, really, it's that compliance with the nominal rate that is critical. It's really in response to the fact that in Australia, but also in the US and in other major OECD countries, as important as the nominal rate is, in many sectors of the economy, compliance with that nominal rate has been falling off over time. That's why it's critical that we put in place minimum tax rates but that we also do that in conjunction with other OECD countries. This is an important step forward. It's one of a number of bills this government has put in place to ensure greater transparency, and to move forward our multinational tax treatment in alignment with our major trading partners.

Simon Kennedy (Cook, Liberal Party) Share this | Link to this | Hansard source

I commend the member for Fraser, whom I hold in high esteem, and I agree with all of the content of his speech. I think this is an area of bipartisanship. We need a global approach to tax, and we need multinationals to be taxed where their activity occurs. We need to stop profit shifting; it hurts Australia and it hurts developing countries. We do not want companies to purely focus on minimising tax or avoiding tax in our country.

In the coalition, we welcome the continuation of the OECD's two-pillar solution to multinational tax avoidance. This was started by the coalition, very proudly, and has been continued by the government. We also welcome the government following our lead on tax avoidance. The coalition took extensive action on this nine years ago. As the host of the G20 in 2014, Australia played the leading role in the original Base Erosion and Profit Shifting Project. It was initiated in 2013 and delivered in 2015 under a coalition government. Under the coalition, Australia was an early and vigilant adopter of the OECD BEPS recommendations. These recommendations established the multilateral approach to prevent tax avoidance and increase tax transparency to tax administrators like our ATO. The coalition government's measures included introducing the diverted profits tax, which limits companies' ability to shift profits outside of Australia. We introduced the multinational anti-avoidance law, which ensured companies do not avoid a taxable presence in Australia. We strengthened the thin capitalisation rules, strengthened transfer pricing rules and doubled the penalties for tax avoidance. We also established the ATO Tax Avoidance Taskforce. This taskforce, which was created in 2016 under a coalition government, still enforces the existing laws and supports the current government's new tax avoidance measures, targeting these multinational enterprises, large public and private groups and wealthy individuals.

From July 2016 to November 2021, the ATO raised $24.2 billion in tax liabilities against large public groups, multinational corporations and privately owned and wealthy groups. This generated collections of $17.3 billion for the Australian taxpayer, to be spent on the Australian taxpayer. A total of $15.3 billion of the liabilities was raised against large public groups and multinationals. This $15.3 billion from multinationals was spent on Australians. A total of $13.6 billion of the liabilities and $9.5 billion of the collections are attributable to this taskforce, started by the coalition.

Our system of tax is undermined when people or organisations avoid or attempt to avoid their tax obligations. In my electorate of Cook, where there are many small and medium businesses, the fact that these multinationals avoid tax is a constant source of irritation for these hardworking everyday Australian small and medium business owners who can't park profits in tax havens. And it's uncompetitive; it's not a level playing field. Already these small and medium businesses are fighting these multinationals with one hand tied behind their backs. We don't need to give them a tax leg-up on top of that.

In my first speech I talked about the fact that small businesses hire in our economy while large businesses fire. Small and medium businesses employ 70 per cent of Australians. Small and medium enterprises were responsible for all the net job growth in this economy. That means, as a whole, large businesses fire more people than they hire, while small and medium businesses hire more people than they fire. But, unfortunately, under this Labor government up to 16,000 businesses have now become insolvent. Small business is doing it tough, and we need the government to do a better job of listening. Yes, we're thankful for the targeting of multinationals avoiding tax, but small and medium enterprises need more support than they are currently getting from this government.

This legislation, while good, highlights an important point: Labor have broken their tax promises. Jim Chalmers said at the election:

We've made it very clear … that we don't have any proposals for tax increases beyond working with other countries to make the multinational tax regime fairer.

If only this were true. This promise before the last election to only increase tax on multinationals has been broken. It has been broken by Labor raising tax on superannuation. In time, this will capture one in every 10 Australians and young Australians earning average wages today. That is according to Treasury's own modelling. Labor are now going to tax unrealised capital gains. This is a wealth tax, which is unprecedented in Australia and unprecedented around the world. It's an assault on family owned businesses, it's an assault on people who own real estate or farms in their self-managed super and it's an assault on middle-class Australians. Labor are increasing taxes on franking credits, banking half a billion in taxes from Australian companies, Australian retirees, Australian super funds and Australian charities. Again, this is a tax on middle Australia. Labor have ended the small business tax concessions. They are getting rid of the instant asset write-off relied on by Australia's small businesses

Yes, it's great that we're taxing multinationals and reducing the amount of tax they avoid, but we need to provide more help for small businesses and more help for everyday Australians. These higher taxes will not help a cost-of-living crisis. These higher taxes will not solve our anaemic economic growth. These higher taxes will not solve the fact that we've been in a household recession for over a year. These higher taxes will not solve the collapsing productivity we've had under this Labor government. These taxes will not solve the fact that the Treasurer is not running this economy; inflation is running our economy.

We're in a household recession, and our economy is shuddering to a halt. This is what everyday Australians are experiencing. Everyday Australians are experiencing their personal income rise by 20 per cent. Everyday Australians are experiencing prices rise by 10 per cent. Everyday Australians are experiencing real wages collapsing by eight per cent as they get poorer year on year. Everyday Australians are experiencing living standards collapsing by eight per cent. They're experiencing their household savings fall by 10 percentage points. A family with a typical mortgage of $750,000—and it's much higher for many in my electorate of Cook—are now $35,000 worse off under this Labor government.

Our inflation is now much higher than in most of the developed world. Australia is at the back of the pack compared to our peer nations. We have higher spending, higher interest rates for longer and higher taxes, with an extra $315 billion across three budgets. We have broken promises on taxes on super, franking credits and small businesses, and we have sneakily increased income tax. There are increases through bracket creep. These should be indexed to inflation. Changes to multinational tax arrangements in this bill do not make up for these taxes on aspirational, everyday Australians, for Labor's inaction on inflation or for the 12 rate rises in a row that have happened under Labor's watch. And changes to multinational tax arrangements do not make up for this economic warfare on everyday Australians.

Australians deserve a government focused on the challenges they face today. Yes; we agree with the government on this legislation. But we do not apologise for holding the government to account for their broken promises on tax, for the cratering productivity numbers and for their failure to fight inflation. In my community of Cook, people are concerned. They're concerned about a government spending more for longer and taxing more. They're concerned about inflation staying higher for longer, and they're working out how they will make ends meet. While the Treasurer spins that real wages actually are going up, we know that's not the case. Everyday Australians feel it, and they're paying the price.

Community groups are stepping in. In Cook, I caught up with St Vincent de Paul. They're helping people facing homelessness. They're helping people who can't afford food by providing food hampers and helping people pay their electricity bills. There are people in my electorate doing it tough. I'm listening, and we're going to hold the government to account to make sure they listen. The spending that this government is doing is resulting in people facing higher housing insecurity, because interest rates are higher for longer. The spending has resulted in members of my community looking to move interstate. I was just speaking with a school teacher last week. He's looking at moving himself, his wife and their family to WA because they can't make ends meet, and they can't afford a house in Cook. They'll be away from their parents and grandparents. We are ripping away the Australian dream of growing up with your family, paying off your house and spending your Christmases, Easters and school holidays with your family, because people can't afford it.

Labor's approach is to spend first and then ask questions about the inflationary impact. Expert after expert has called this out. Michelle Bullock commented:

… we've revised up our forecasts for demand growth and that's due to stronger forecast public spending …

Independent economist Chris Richardson said that the RBA's statement was 'as clear as they can be'. He went on to say there is extra spending in the system. The savings of hardworking Australians in my electorate are being eroded by inflation. The household savings ratio in December was revised down from 3.2 per cent to 1.6 per cent. What does this do to the retirement prospects for members in my electorate? It takes them away. It erodes their retirement savings. We can see that Australia is failing to control inflation by looking at our inflation compared to other countries. It's higher than in Sweden, the UK, Norway, Canada and the USA. 'Why?' must be the question. The answer is uncontrolled government spending. While the private sector is cutting back—cutting back on spending, cutting back on investment—the government has its foot to the floor on the accelerator with increased government spending. Australia is the only G10 nation with inflation going up. The question must be 'Why?'

How has this spending helped Australian households? It's $30,000 of increased spending for every Australian household. When I speak to the community members of Cook, do they feel $30,000 better off per household? They don't. They feel poorer than they did three years ago. So I ask the Labor government to stop the uncontrolled spending and give back the money through tax cuts to everyday Australians. My constituents can't afford more of the same. They can't afford another $315 billion over another three years. They can't afford more interest rate rises fuelled by inflation. They can't afford the Labor Party's ideological energy policy that risks driving up energy even more than it's been driven up already.

We know the former government consistently delivered lower taxes for families and small business and implemented more than a dozen measures to combat multinational tax avoidance. I welcome this legislation. I welcome the Labor government's multinational tax avoidance measures, building on what we did over nine years. But the current government voted eight times against delivering a bigger tax cut to small business in last year's instant asset write-off. Small businesses need more help. Yes, it's fine to punish large businesses, but we need to start helping small businesses more.

The current government's last multinational tax bill was so badly designed that it taxed Australian companies. Yes, this legislation is better, but it's taken a while to get it right. Since that election, Australians are now paying 20 per cent more in income tax because of sneaky bracket creep. The government has banked over $60 billion from everyday Australians in bracket creep. It's about time bracket creep was indexed to inflation.

Despite the promise to only raise taxes on multinationals, the government has broken promises, raising tax on superannuation, on unrealised capital gains, on franking credits, on personal income tax and on an end to the small-business tax incentives. Yes, this is good legislation, but Middle Australia and small-business Australia need more. I know the small businesses in Cook expect more action. I know we must ensure that small businesses keep more of the money they make. So, yes, let's tax multinationals, but let's give small business a leg-up too.

Alicia Payne (Canberra, Australian Labor Party) Share this | Link to this | Hansard source

Integrity is at the heart of everything that this Labor government seeks to achieve, and the Assistant Minister for Competition, Charities and Treasury, Dr Andrew Leigh, has been a champion for integrity throughout our tax system since he was appointed. Now we're taking on the next challenge: multinational companies not paying their fair share of tax. We are acting on a commitment that Labor took to the 2022 election. This included supporting the OECD G20 two-pillar solution, a multilateral solution representing the most significant reform to the international corporate tax system in a century. Reforming the international tax system is no easy feat, but we join with our global community to ensure that global firms are paying their fair share of tax and not exploiting unintentional loopholes across jurisdictions.

Australia has long been a champion of the global 15 per cent minimum tax, and we are now in the first group of nations to implement the global minimum tax and domestic minimum tax of 15 per cent. From this year, this tax will apply to multinational enterprises with an annual global revenue of at least 750 million euros, which is approximately A$1.2 billion or greater. The global minimum tax will ensure large multinational enterprises pay a minimum level of tax on income arising in each jurisdiction where they operate. This will support global momentum towards a fairer international tax system by putting a floor on tax competition and levelling the playing field between large multinational enterprises and Australian businesses.

The global minimum tax is a crucial step in the ongoing efforts to ensure integrity and fairness across the system.

The global minimum tax will reduce the tax rate differential between Australia and low-tax countries. It will help protect Australia's corporate tax base by reducing the incentive to shift profits abroad. It will make Australia a more attractive place to invest. And it will boost economic growth. Putting in place the global minimum corporate tax will allow us to apply a top-up tax on large multinational groups operating in Australia where their overseas income is taxed below 15 per cent. Under the domestic minimum tax, it will give us additional taxing rights on the low-taxed Australian income of large multinational groups.

Implementing a domestic minimum tax complements the global minimum tax and ensures that Australia collects revenue from locals under taxation. Australia's legislation will be peer reviewed by the OECD to ensure it produces outcomes consistent with the Global Anti-Base Erosion Rules and is recognised by the jurisdictions. By making multinationals pay a minimum effective tax rate of 15 per cent, the OECD estimates annual global revenue gains of over $300 billion. In many cases, this revenue is being channelled away from the tax systems of developing nations, consolidating a global divide between sophisticated financial centres and resource-rich, less-developed parts of the world. Australia joins the United Kingdom, Canada, Japan, South Korea, the European Union and other jurisdictions in implementing the global minimum tax from 2024.

Our government will help ensure large multinationals pay their fair share of tax. This is the most recent in a suite of multinational tax measures delivered by the Albanese Labor government. Our government has already delivered four significant multinational tax reforms. First, our new subsidiary disclosure law will require public companies listed and unlisted to disclose information on the number of their subsidiaries in the country of tax residency. This will make the way companies structure their subsidiaries, including for tax purposes, transparent to both the government and the public.

Second, companies with tenders and government procurement processes valued above $200,000 are now required to disclose their country of tax residency as part of the Buy Australia Plan under the Fair Go Procurement Framework. This requirement to disclose their country of tax residency complements broader changes implemented by our government in taking decisive action on tax adviser misconduct, including by increasing tax promoter penalties and increasing the powers of tax regulators.

Third, in our first budget in October 2022, we boosted funding for the Australian Taxation Office's tax avoidance taskforce by $200 million a year. In this year's budget we have extended the operation of this taskforce to 2028, allowing the ATO to crack down on tax-dodging by multinational enterprises, large public and private groups and Australia's wealthiest individuals.

Finally, we've also tightened Australia's thin capitalisation rules to stop a common approach taken by multinationals to minimise their tax. Our new approach reduces the ability of taxpayers to create artificial interest-bearing debt in Australia as a way of maximising interest-related deductions and in turn reducing their overall tax bill.

Our government is also delivering five further multinational tax reforms. First, the government's bill to create a public country-by-country reporting register has been introduced to parliament, and, once it is passed, reporting requirements will apply from 1 July this year. Creating a public country-by-country reporting register will deliver a key part of the government's multinational tax integrity election commitment. It will see Australia put in place a world-leading set of disclosure laws.

Second, the government is progressing its election commitment to implement a public register of beneficial ownership, which will show who ultimately owns, controls or receives profits from a company or legal vehicle operating in Australia.

Third, we've also added to our election agenda by strengthening the way our foreign investment system reduces the risk of multinational investors avoiding tax. On 1 May this year, the Treasurer announced changes to deliver a stronger, more streamlined and more transparent approach to foreign investment. Foreign investment has a key role to play in our economy, but only when it's in the national interest. We are making sure that foreign investors pay their fair share of tax in Australia. This includes releasing updated guidance about the kinds of tax arrangements that will attract greater scrutiny, such as those that are overly complex.

Fourth, to further protect our tax system from foreign investments where investors currently have incentives to circumvent intended outcomes in our tax settings, we're strengthening the foreign resident capital gains tax regime. As part of this year's budget, the government announced it will strengthen the regime in line with the OECD standards to ensure foreign residents pay their fair share of tax in Australia.

Fifth, in this year's budget, we also announced a new royalty penalty. From 1 July 2026, the penalty will apply to significant global entities with annual revenue of over $1 billion where they avoid Australian royalty withholding tax by understating the value of royalty payments or disguising them as some other kind of transaction.

These nine measures—four that we have already delivered and five that are in progress—demonstrate the government's strong commitment to multinational tax integrity. It's important to see this in its historical and international context. The last leap forward on transparency was introduced by the Gillard government in 2012. The then Assistant Treasurer, David Bradbury, put in place the legislation that has ensured public transparency of tax payable by large corporate entities. The landmark changes allowed for the publication of the tax liabilities of large corporate entities, including multinational corporations.

Then we had almost a decade of inertia on transparency and an on-again-off-again approach to multinational tax integrity. The coalition have a chance to show, in spite of their slow-motion charge towards a fairer global tax system, that they can change pace and keep step with these plans and that they won't let passing time deliver further proxy bonuses to multinational tax cheats.

No government in Australian history has done more than the Albanese Labor government to address multinational tax dodging. No other country is doing more to improve multinational tax fairness. We've already made a significant move in increasing the transparency of tax arrangements for multinational enterprises, and we are taking it further. Our multinational tax integrity policies will address tax loopholes exploited by multinationals and improve global tax transparency. Our plan is good for taxpayers, good for competition and good for Australia.

By tightening our debt deduction laws and committing to be part of the global 15 per cent minimum corporate tax rate, we are keeping faith with the OECD's best practice on global tax integrity. Over 131 nations have signed up to this OECD plan. We promised that we'd involve industry in constructive consultations to ensure our policies didn't have an unwarranted impact on legitimate commercial arrangements, and that's what we've done. As you'd expect with these complex changes to tax laws, there has also been extensive consultation with experts and civil society.

Tax transparency is a critical part of the social contract multinationals have with the communities in which they operate. The government's focus is to encourage a behavioural change by multinationals and large corporates about how they view their tax obligations, including their decision-making around tax planning strategies. Enhanced public scrutiny on tax information will help provide the community with a better understanding of how much tax multinationals pay relative to their activities. Just as the Gillard government passed laws requiring the tax office to annually report the tax payable by our largest of firms, the Albanese government is moving to improve tax transparency.

Public companies, listed and unlisted, will now be required to disclose information on the number of their subsidiaries and their country of tax domicile. That means public companies will be required to be upfront with the public about how they're structured, including for tax purposes. This will increase transparency on their corporate structures and whether they are operating with opaque tax arrangements.

Creating a public country-by-country reporting register will deliver a key part of the government's multinational tax integrity election commitment. It will see Australia put in place a world-leading set of disclosure laws. Our government is progressing its election commitment to implement a public register of beneficial ownership, which will show who ultimately owns, controls or receives profits from a company or legal vehicle operating in Australia.

Multinational tax reform has several benefits for our economy. Economists Thomas Torslov, Ludvig Wier and Gabriel Zucman estimate that close to 40 per cent of multinational profits, around US$600 billion, are shifted to low-tax countries each year. This global profit-shifting industry causes significant damage to the revenue base of countries such as Australia. Wier and Zucman calculate that, in 2019, around 10 per cent of corporate tax income was lost as a result of global profit-shifting. They estimate that, back in 1975, this figure was less than 0.1 per cent. A race to the bottom between nation-states has seen average corporate tax rates fall from 49 per cent in 1985 to 24 per cent in 2019.

Australia relies more heavily on company tax relative to other OECD countries, even though Australia's aggregate tax burden across all levels of government is lower than the OECD average. Since company taxes comprise 19 per cent of Australia's revenue base, the accounting tricks and dodgy behaviour of multinational firms have a massive impact on Australia.

A division having been called in the House of Representatives

Sitting suspended from 17:15 to 17:28

Keith Wolahan (Menzies, Liberal Party) Share this | Link to this | Hansard source

Seventy per cent of my electorate are first- or second-generation migrants. I wasn't born here. In fact, I was born in the Republic of Ireland. Like many migrants, my heart is here and my complete loyalties are to Australia, but you still have a bit of your heart that longs for home. One of the things I note about my original birthplace is its corporate tax rate of 12½ per cent.

Honourable Member:

An honourable member interjecting—

Keith Wolahan (Menzies, Liberal Party) Share this | Link to this | Hansard source

To be clear, I arrived in Australia when I was 10, and it's fair to say I did well at school but not so well that I knew that the corporate tax rate was that. And I'm pretty sure the corporate tax rate wasn't that when I left. It was done later and for a particular reason that has direct impacts on our country and what we do. Why does that matter? It matters not just now but into the coming decades for the sort of country we pass on to future generations.

We receive many documents and reports, but there is one that should stand out amongst all others—the Intergenerational report. The Intergenerational report has some very sobering numbers and graphs. On page 177, from memory, there is a graph that really jumps out; it is the graph on projected government spending at a Commonwealth level through to 2063—so the report looks 40 years into the future. That graph is adjusted for inflation—so it's on 2022-23 dollars. It tells you there was a spike in Commonwealth government spending during COVID-19; we all know that happened. But when you revert back to the Commonwealth spending per person in Australia it's at about $24,000 per person—not per taxpayer. Without any improvements in productivity, on 2022-23 dollars that will be at $40,000 per person. 'Without productivity improvements' is important because if we don't have improvements on productivity then our average and median wages will be the same or worse. What are they? They are $95,000 for the average wage and $65,000 for the median wage. How does that work for future generations if one level of government, not accounting for state and local expenditure plus all the other costs, is going to take $40,000 per person when the average wage is $95,000 and the median wage is $65,000? It is unworkable.

There are two main streams we as a nation and legislators have to turn our minds to. One is the spending side and the other is tax side. Briefly, on the spending side—that's not the subject of these bills but that matters too—the Intergenerational report says there are five line items that will have the bulk of growth. Three of them are in the care economy—part of that is a product of an ageing population—and the others are defence and interest on debt. Those five line items are growing more than any other. There is work for us to do, and we should do that in a constructive and bipartisan way where we can, particularly when it comes to the care economy, because we can all agree they are essential items of government expenditure but they can be done more efficiently. Where we can do that without politicising it, we should do it because it's in the national interest.

The other side of the Intergenerational report that matters is the tax side. There is a disparity in how we tax in this country, particularly on the corporate level. There is a disparity of power. If you are a small, a medium or even a larger domestic company that doesn't have a presence globally, or the resources of huge law firms and the big four accounting firms to help you produce a company structure so complex that it looks like a drawing from Mr Squiggleand, full disclosure, I helped write some of those when I was a junior mergers and acquisitions lawyer. Surprise, surprise—and I'm not breaching any client confidentiality—the company at the top wasn't here; it was somewhere else. They are often in an exotic location, like the Cayman Islands or somewhere else like that—or my homeland of Ireland, if you were to look at a company like Meta.

What are the consequences of that? The consequences of that are that we are treating companies that have a disproportionate level of power differently. The consequence is that that lost tax revenue—because the tax isn't being collected here; it's being collected at a reduced rate offshore by a sleight of hand, a trick—means we then have to turn to Australian taxpayers and Australian companies to raise more. For those who, through bracket creep, are pushing more towards the top rates, when you add other taxes, particularly on goods and services, we're paying more than half of our income as Australians on tax. That is unfair when companies are extracting those profits from here but paying 12½ per cent in Ireland or even lower in other countries.

The intent behind these bills is something that has bipartisan support and is something that we support. Wherever we can, whether it's through power or prosperity, we should acknowledge the human instinct and inevitability of seeing power and prosperity concentrated. The antidote to that is that we should turn our minds to principles and policies that see the democratisation of power and the democratisation of prosperity—not the socialist dividing up and allocating of it but the democratisation of it, which means that, through your own endeavours and your own choices, we make it a fair game and that those who work hard and compete hard will be rewarded.

Again, we live in a global world but, if you were to use the metaphor that many international relations scholars use of a billiards table, each of us as nation-states are spheres on that table. We are sovereign, and we have rules that are enforced. But there is a state of anarchy in between those billiard balls, and the incentive for larger multinational corporations to shift around the billiards table to those that have the lowest tax rate is one that we as a sovereign nation are entitled to address.

It's important that when we do that—and we have supported this—we acknowledge, at the same time, that it's not the only solution to reducing the burden that we put on domestic companies and domestic individuals. This government has broken its promises on domestic reform—domestic tax reform, in particular. The promise was made before the election—and promises matter; they should matter—that there would only be increased taxes on multinationals. That's what we're doing here, and we agree with that. But let's turn to the record of the government and what they actually did. They raised taxes on superannuation, they are taxing unrealised capital gains, they are increasing taxes on franking credits and they have ended the small-business tax concessions. On any measure, that is a broken promise. The social media tile that says they're only taxing multimillionaires is a nonsense, because it's not indexed. Through bracket creep, all Australians have been pushed forward into these higher tax brackets.

We know that those higher domestic taxes are going to do nothing to help with the cost-of-living crisis. They are going to do nothing to lift productivity growth as is required for us to fund the care economy and still do all of the other things that make our nation great and prosperous. They're not going to do anything to solve the delicate balance that we are leaving all of the work of achieving to the RBA, which is to bring inflation down and not collapse the economy. That's the highwire that the RBA are trying to walk. But it's very hard to do that when the government's pulling you in one other direction. You have to lean on the other like a seesaw that's out of balance.

These are important bills. They have our support, but that support should not be given by the coalition in a way that doesn't acknowledge the promises that have been broken and the serious work that has to be done on out-of-control spending by this government which is impacting the task of bringing inflation down now and doing nothing to fix that horror story that we see in the Intergenerational report of 40 years from now. We must all, as a matter of urgency, turn our mind to that.

Tania Lawrence (Hasluck, Australian Labor Party) Share this | Link to this | Hansard source

When multinational corporations pay less or no tax, ordinary Australian workers end up paying more. I rise to speak on the Taxation (Multinational—Global and Domestic Minimum Tax) Bill 2024 and the associated bills. I do so knowing that there will be legislators in many countries speaking to congruent legislation at this time. These bills address tax challenges that have existed for many decades and which are exacerbated by the continuing digitisation and globalisation of the economy.

The global minimum tax will allow a top-up tax to be imposed on a resident multinational parent or subsidiary company where the group's revenue is taxed below 15 per cent overseas. The domestic minimum tax will likewise apply on any low-taxed domestic income. The purpose of these bills is to reduce the incentive that has for many years encouraged multinational companies to shift profits and revenue between jurisdictions by various artifices in order to exploit differences in taxation regimes and, by doing so, minimise the tax that they pay.

In his second reading speech, the assistant minister noted that we would be joining hands with countries like Canada, the EU, the UK and Japan, among 60 states that have already taken legislative action to address tax evasion. In June 2021 the G7 stated their support for this initiative, and shortly thereafter, in July 2021, 130 countries at the OECD meeting in Paris endorsed a global minimum tax rate of 15 per cent. In 2021 US President Biden stated that the agreement was 'an important step in moving the global economy forward'. There is some tension today in the US, with some not wanting to miss out on the changes and some not wanting the US to be an early adopter. The current administration's attitude is to do whatever it takes to get it done. We will need to wait and see how long it takes the US to join the party, but the momentum is there. Brazil is on board, Vietnam is introducing it and Kenya is considering the change.

We have a progressive tax system in place in Australia whereby we require those who have greater income to contribute more to the social good. The fact that for many years very large companies have made significant revenue in Australia and yet paid nowhere near the tax that they should have is a disgrace. The problem now accelerates as the economy digitises. This bill, in concert with the actions being taken by countries around the world, will reduce the incentive to shift operations to low-tax jurisdictions. The reduction of the tax advantages currently exploited by very large companies will in turn create a more level playing field and encourage and support the small and medium-sized businesses—many of them Australian—that currently find it difficult to compete. As Minister Leigh stated, suburban firms shouldn't have to compete with tax-dodging multinationals, and I quite agree. For years that unfair competition has been going on, and it is still going on, as I speak, be it in the Hay Street Mall in Perth, in Middling Gate or at the Ellenbrook shopping centre, in my seat of Hasluck.

This legislation will make Australia a more attractive place for international investment. It will be good for competition, not just here but around the world. It will take effect immediately, capturing income from the start of this year, with the first returns due in mid-2026. Since 2021, and before, companies have been on notice that this was coming. It will capture companies with a combined global revenue of 750 million euros, which is just over A$1.24 billion. Some of the companies that will be captured are Amazon, Exxon, Apple, Shell, Volkswagen, Alphabet, or Google, Toyota, Glencore and bp. It is salient to consider that many of these companies have annual incomes that eclipse many of the GDPs of independent nations. Walmart—the largest, perhaps—has an annual revenue larger than the GDPs of Thailand, Austria or Norway.

Let's unpack the example that Minister Leigh gave: Google's $19 billion of revenue in Bermuda in 2016. Leaving aside the fact $19 million of economic activity on an island of less than 54 square kilometres would undoubtedly destroy said island, we should never allow legal fictions to stand, because they always cause poor outcomes. Australians account for perhaps up to one per cent of the internet users of the world. On that basis, one per cent of that $19 billion of revenue was in reality created in Australia. That's $190 million that we just didn't see, or tax. If there was an Australian company trying to be competitive in search at that time, or since, how could they compete with Google?

Getting this law in place at this time, here and internationally, is crucial. Our economies are not going to be less digitised in the years to come. Without ensuring a level playing field, competition and initiative will be quashed, the revenue base will be eroded and economic equality and fairness will be further reduced. Some estimates put the annual loss of tax revenue due to the ongoing global shell game at 10 per cent. We need to bring this home to what it means for our local communities. When some of the very largest companies are making money in Australia but are not paying their way, it has a real effect on what should be the revenue collected by government each year, and so it has a real effect on the services that government are able to provide.

Evasion of taxation means less money for education in Hasluck. It means public schools will not have the facilities that they should have. Evasion of taxation means less money for health in Hasluck. It means that our local cancer treatment centre might not be able to meet the demand that presents to it and that local residents already facing hardship have to travel further and wait longer for treatment, making them sicker. Evasion of taxation means that competition is reduced everywhere in Hasluck, which means that a new venture that might have meant local jobs can't get a start because it just can't compete. The local cafe can't afford to stay open in the afternoon. Fewer tourists stop in the valley. In short, the economy is better and life is better when we don't have major global corporations freeloading on us.

Small, medium and large companies in Australia who do the right thing and pay their tax feel rightly annoyed when they see the large, very wealthy global companies getting away with what amounts to a deception played against the Australian people. In countries that are not as wealthy as ours, this practice of avoidance means a smaller pool of national income for projects designed to assist development across health and education and for other development goals. Our participation in this global effort, in partnership with other nations, will reap benefits far beyond our shores.

As Australians we don't like freeloaders. This government is taking action to ensure that anyone who wishes to hide from the tax obligations that we all share will find hiding more and more difficult and uneconomical as time goes on. We shouldn't have to wait for a leak of documents, like the Panama papers in 2016 or the Luxembourg leaks in 2014, before wealthy companies and individuals are made to meet their just tax obligations in the countries that they actually live, operate and earn income in. After the Panama papers, the ATO launched investigations that found over $140 million of unpaid tax liabilities. The Panama papers included historic references to BHP Billiton, Westfield, Alcan Corporation, ANZ bank and the National Australia Bank.

Many of the tax havens used by wealthy corporations and individuals are small islands like Bermuda or the Cayman Islands. The fact that these are Commonwealth territories is embarrassing. The EU is fully behind the changes, yet Luxembourg, a founding member of the EU, has been a low-tax environment for many years and is utilised by many companies within Europe for that reason. Money talks.

The major reason change has been so slow to come in this field is that there are many economically powerful corporations and wealthy individuals who have concomitant political clout and are well motivated to sustain the status quo for as long as possible.

Apparently the Cayman Islands are lovely. There's scuba diving on shipwrecks and crystal clear waters. Above sea level, things are not so crystal clear, though, with more companies registered there—a hundred thousand—than there are residents. I trust that there are currently no Australian politicians who have interests invested in the Cayman Islands or like havens.

The member for Hume, in his speech on the bill, did manage for about three vainglorious minutes to speak in favour of it, and so I expect the bill will have support across the House. He spent the remainder of his time speaking on irrelevant matters related to his own political interests. It seems to me that on a matter of such importance we should try to confine our remarks and our amendments to the causes and scope of the legislation, and I hope other members opposite will do better.

The member for Hume likewise moved an amendment. This is serious legislation, yet the amendment proposed by the member for Hume is an incoherent ramble that does not in fact address any part of these bills. I can only hope that no unlucky legislator in another country, casting about to see what others are saying about this landmark global legislative change, accidentally comes across the member for Hume's amendment and tries to understand how on earth that has any relevance to the bills. The member for Hume should be careful not to waste the time of innocent legislators and their staff overseas, and he certainly shouldn't be wasting the time of this parliament either. I will be voting against the feckless amendment from the member for Hume.

The former coalition treasurer Josh Frydenberg appeared to support these global rules. It is unclear how much support he received from former prime minister Morrison. In any event, the adoption of this legislation has been Labor policy since before 2022, and the coalition simply didn't get it done. As in so many other areas of policy, such as the NACC and environmental law, they now have a chance to support legislation that they had every chance to enact but dragged their feet on or ignored. The coalition years were a litany of lost opportunity.

Transparency and the availability of good data are essential to planning and to good policy, and this is true in any area or field. Tax transparency is part of the social contract that businesses have with the communities in which they operate and make money. This is true whether the business is a sole practitioner working from home in Midland, a distillery in the Swan Valley that employs 20 people or Google, with annual revenue of US$305 billion. At the end of the day, delivering value for shareholders can never be done at the expense of the communities within which that value is created.

This is good legislation, and it evidences Australia's commitment to a better, fairer and more equal economic global order. Ernst & Young described the introduction of this regime as a significant shift in global taxation. Australia has been a firm champion of the global 15 per cent minimum tax rate on multinationals. By enacting this legislation now, we will be among a strong group of first movers, the actions of which will bring other nations more quickly to agreement and cooperation. I support the bill and look forward to seeing the intent of this legislation supported across this parliament and across the world.

Adam Bandt (Melbourne, Australian Greens) Share this | Link to this | Hansard source

The Greens will support this bill, the Taxation (Multinational—Global and Domestic Minimum Tax) Bill 2024, through the House, but we will reserve our position in the Senate.

Since the pandemic, big corporations in Australia have been making eye-watering profits. In 2022, corporate profits reached their highest level ever, and they haven't stopped there. At the moment, over 30 per cent of the entire economy goes to the profits of big corporations. Australia's 500 biggest companies made $98 billion in so-called crisis profits post the pandemic. Corporations like Woolworths, Hancock Prospecting, National Australia Bank, AGL Energy and Harvey Norman reaped billions of dollars in profits off the back of forcing people to pay higher prices.

These corporate profits are driving the cost-of-living crisis. They are making more because you are paying more. Wages are not keeping up. According to the latest OECD data, real wages are now at 4.8 per cent below prepandemic levels. The share of profits which goes to working people through wages is at record lows. We've lost nearly 14 years of progress on wages growth and, according to the RBA, it's going to take another 15 years for us to make up the lost ground.

This is an economy that has been rigged by Labor and the Liberals in the interests of big corporations. The RBA governor, Michele Bullock, admitted at the beginning of the year what we all knew: big corporations were using the cost-of-living crisis as cover to push up prices. Alan Fels held an inquiry into price gouging and found that people are paying too much too often for the basics they need in life. He cited submissions like those from Danielle, a nurse whose bills rose by over $8,700 during 2023 while her wages increased by only $102. What makes it worse, though, is that people like Danielle pay more tax than many multinational corporations. In fact, one in three big corporations in this country pays no tax at all. And when it comes to the coal and gas sector, that number of corporations that pay no tax at all is more like two in three.

There are 91 coal and gas corporations and corporate entities operating in Australia but, upon going through the tax database, we found that 54 of those 91 corporations paid no tax—not a cent. Just to spell it out, three out of every five coal and gas corporations operating in this country paid no tax. Those 54 corporations boasted $100 billion of income last year and paid not a cent of tax. What an absolute scam! It's a truly rigged economy. Seventy per cent of gas corporations in Australia don't pay any tax. Thirty-three gas corporations earned over $68 billion in revenue and didn't pay any tax. Petronas Australia—$1.14 billion in total income, no tax paid. TotalEnergies—$2.6 billion in revenue, no tax paid. Chevron Australia Downstream Holdings—$5 billion in total income, no tax paid. ExxonMobil—$15.5 billion in total income, no tax paid. ExxonMobil Australia has never once paid tax in the eight years of corporate tax reports.

Coal companies aren't much better. Half of them avoided paying any tax, and the half who didn't made a tidy $28 billion in total income. To top it all off, some of these coal and gas corporations are getting handouts from the government, subsidised by you—the taxpayer. That's billions that we could use to build more housing and use for mental health care, disability support and students struggling with completely unaffordable degrees. We're all victims of a grand extortion, a swindle, a fraud—and Labor and the coalition are all in on it. In the 2023 financial year the major parties received $2 million in donations from fossil fuel corporations—companies like Adani, Woodside, Santos and Chevron, and they're just the ones that we know about due to our broken donation system.

What do we get in return? We get a nurse that pays more tax than a multinational and a Labor government that's giving 14 times more to corporations to turbocharge the climate and cost-of-living crises than it will to the national disaster relief fund. It's a joke, and people are sick of it. There's not a gas shortage in Australia; there's an integrity shortage. There's a shortage of politicians who actually represent their constituents, not the interests of the coal and gas corporations paying them off. One nurse shouldn't pay more tax than 33 gas corporations. One teacher shouldn't pay more tax than 21 coal corporations. In the 10 years between 2014 and 2024, all the teachers in this country paid twice as much tax as the entire oil and gas sector. There's more in HECS and student related loans going to the government of the country than there is revenue in the PRRT, the big gas tax which is designed to raise revenue from the oil and gas industry. It's no wonder that the Australian Taxation Office described the gas industry as a systemic nonpayer of tax.

The Labor government has failed to mention the role of big corporate profits in driving up the cost of living. How can you tackle a crisis when you can't even say who's causing it and when you can't even identify those big corporations that are price gouging? Rather than cracking down on the big supermarkets, the Prime Minister is more likely to dress up in a Coles high-vis top and pose for photos with them, and, rather than making big corporations pay their fair share, the Prime Minister is more likely to have dressed up in a Rio Tinto shirt. That's because the Prime Minister is more concerned with managing the economy for the profits of big corporations and billionaires than he is with the concerns of everyday people. While people are struggling to keep a roof over their head, being smashed at the supermarket and paying too much on their power bills, Labor is backing the big corporations.

In the past year, in the middle of a cost-of-living crisis, CEOs have given themselves double-digit pay rises, while many of the same corporations call for restraint when it comes to the pay of their workers. In this wealthy country of ours, we now have over 3.3 million people living in poverty. The number of people who can't find an affordable place to live is growing, as is the number of people who are homeless. People are skipping meals so their kids don't miss out.

This country's economy is rigged. Labor and the Liberals both take huge donations from the big corporations, Labor and the Liberals have both refused to make the big corporations pay their fair share and Labor and the Liberals have both refused to do anything about price gouging from the big corporations. People are fed up with the Coles and Woollies of politics ripping them off at every turn. This is why, every day, more people are telling us it is getting harder and harder to tell Labor and the Liberals apart.

It doesn't have to be this way. We can make the big corporations pay their fair share of tax. We can make groceries cheaper by making price gouging illegal. We can freeze rent increases and drive down the cost of housing to the point where people can afford it. If we make the big corporations pay their fair share of tax, we can actually get to the heart of what's driving the cost-of-living crisis and start to invest in people.

A division having been called in the House of Representatives

Sitting suspended from 18:00 to 18:13

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

The Albanese Labor government is committed to ensuring that big multinational corporations that make a profit in Australia pay tax in Australia. This was an election commitment, and I'm happy to speak in support of this necessary reform, the Taxation (Multinational—Global and Domestic Minimum Tax) Bill 2024. It builds on the substantial reforms already implemented by Labor regarding the taxation of large multinational corporations.

Our foundational belief is that tax transparency is a vital part of the social contract that multinationals have with the communities in which they operate and that they profit from. This means insight into decision-making around tax strategies and management of tax obligations, this means shining a light into the dark places of the tax dealings of large multinationals and this means giving the Australian public more information and understanding about how much tax these companies pay in comparison to their profits.

Labor is committed to achieving this transparency through a raft of reforms. We moved to require that both listed and unlisted companies disclose information on their subsidiaries and their country of tax domicile. Again, this will provide a new and welcome level of transparency on how multinationals are structuring their businesses for tax purposes. It will also indicate whether they are operating with opaque tax arrangements. This information will be required in annual financial reports commencing on or after 1 July 2023.

Further transparency is guaranteed with the Buy Australian Plan, under the Fair Go Procurement Framework. Companies tendering in government procurement processes for contracts worth over $200,000 will have to list the jurisdictions where they pay tax. In other words, to win a government contract, these companies need to make it clear that they're paying their fair share of tax. They must be good global citizens. In the October 2023 budget, we directed $200 million a year, for four years, to boost the ATO's Tax Avoidance Taskforce, which is cracking down on tax dodging by multinational corporations as well as domestic entities.

The thin capitalisation rules have curbed the practice of abuse of debt deduction rules. If left unchecked, this can eat away at our tax base and leave Australian individuals and small businesses paying more. The former government did not see this as a problem during their wasted decade in office, but Labor does. One of our election promises was to implement an interest limitation measure. The Labor government has toughened the rules around debt deductions to ensure tax fairness, limiting the ability for taxpayers to create artificial interest-bearing debt in Australia in order to maximise interest related deductions that reduce their tax bill.

This bill focuses on the reality that the taxation of multinational corporations, and the lack of transparency around it, has long been recognised as a global problem. The international corporate tax system is in dire need of reform, a fact recognised by the OECD and G20 nations. Many of the international conventions for corporate income taxation are now outdated. They do not account for digitalisation and globalisation. As the Treasury said:

By using digital technologies, large multinationals increasingly have the ability to operate at 'scale without mass' in countries where they earn significant revenues without needing a traditional physical presence.

These countries are then constrained from collecting corporate tax because traditionally such tax is collected in the country where the employees and assets are based. Additionally, multinationals have been able to move profits around from higher taxing countries to low- or even no-tax jurisdictions. This new business environment has led to threats to the stability of the international tax system. Some countries have introduced a digital service tax, prompting the United States to threaten retaliatory trade action. Other countries have decreased their corporate income tax rates to ensure that multinational companies keep investing in them.

This negatively affects other countries and their ability to tax multinationals, and it also affects domestic businesses. To deal with this, in 2021, 136 nations—90 per cent of global GDP—agreed on what is called the Two-Pillar Solution. This focuses on the allocation of taxing rights to market jurisdictions and the imposition of the global minimum tax rate of 15 per cent. This was subsequently endorsed by G20 leaders. Pillar One focuses on the 'scale without mass' problem and seeks to avoid a situation of escalating trade tariffs due to digital service taxes. Pillar Two is the subject of this bill, a global minimum tax on large multinational corporations. It's not easy to reform the international taxation system, but it's critical that Australia does so. We're doing so with this bill.

Labor is taking a leadership role in instigating this multilateral change to ensure that big corporations pay their fair share. This reform means that these companies will have to pay a minimum level of tax in every jurisdiction where they operate—a big pat on the back for Australia for taking the lead on this. The global minimum tax and domestic minimum tax of 15 per cent will apply to multinational corporations with an annual global revenue of approximately A$1.2 billion.

There are substantial benefits to these reforms—firstly, the tax rate differential between Australia and low-tax countries will be reduced. This will decrease the incentive for corporations to shift profits overseas. Ultimately it will make Australia an investment target and boost our economic growth. Australian businesses will benefit as well, because the reforms will level the playing field when it comes to competing with large multinational corporations. They will adhere to the Global Anti-Base Erosion Rules that were agreed by the OECD Inclusive Framework. This framework encompasses 145 jurisdictions.

A minimum corporate tax rate enables Australia to apply a top-up tax on large multinationals operating in Australia where their income is taxed overseas at a lower rate, and the domestic minimum tax rate enables additional taxing right on the low-taxed Australian income of these companies. The domestic minimum tax is vital to ensure that Australia collects the revenue from these countries rather than other jurisdictions. There are over 50 jurisdictions in the process of implementing the two-pillar solution, so it's crucial that the domestic minimum tax protects Australian interests.

In keeping with the global nature of these reforms, this legislation will be reviewed by the OECD to ensure that it is working as intended and to indicate to other jurisdictions that it is recognised. Other jurisdictions working to implement these reforms are the United Kingdom, Canada, Japan, South Korea and the European Union. These countries all recognise that it is time to address the global divide between sophisticated financial centres and less-developed but resource-rich countries.

There is more to come with this government when it comes to holding multinational corporations accountable. We have introduced a bill to implement a public country-by-country reporting register—a world-leading set of disclosure requirements. We have set the application date of country-by-country reporting to 1 July this year to align it with the European Union's implementation of a similar register. Importantly, it strengthens the global momentum towards transparency and fairer tax arrangements.

This is complemented by our progress towards our election commitment to develop a public register of beneficial ownership. This will provide information on who owns, controls or receives profits from a company operating in Australia. This register will assist regulators and law enforcement agencies with their work on tax evasion, money-laundering and complex financial crime. It is complicated, arduous work, but it will result in fairness for Australia.

This bill, which is receiving broad support, is not the end of the Albanese Labor government's action to make multinational corporations accountable. In May the Treasurer announced moves to ensure a stronger, more streamlined and more transparent approach to foreign investment. Another aspect is strengthening the foreign resident capital gains tax regime to make sure foreign residents pay their fair share of tax too. The May budget also announced a new royalty penalty. This will mean that companies with an annual revenue of $1 billion will attract a penalty if they avoid Australian royalty withholding tax.

All these measures will have a positive effect on the bottom line and they will increase public confidence that the large multinational corporations that operate in Australia are paying what they should be—their fair share. I'm a bit disappointed that the Leader of the Greens spent his entire speech, after saying he would support the legislation, talking about the Labor Party and the Liberal Party. He didn't actually do the hard work of going into the legislation and seeing what it would do. He just had a litany of whingeing rather than looking at this hard, complicated international legislation and how it will have impacts on Australia's businesses and multinational businesses. It was very disappointing that the jeremiad of whingeing from the Greens continues, mainly targeted at Labor people and Labor seats. I obviously call on the opposition to support these reforms and be in step with the global push towards fairer corporate taxation regulation. Much of the work was actually started under the former government—I will acknowledge that. I commend this bill to the House.

Rebekha Sharkie (Mayo, Centre Alliance) Share this | Link to this | Hansard source

I supported the Treasury Laws Amendment (Making Multinationals Pay Their Fair Share—Integrity and Transparency) Bill in 2023 as I believe in the principles of fairness. This is a belief that is shared and resonates across Australia. Working Australians see their hard-earned dollars whittled away by taxes while multinational companies that are earning millions, and in some cases billions, pay little or no tax, and they have every right to be frustrated and angry. The 'making multinationals pay their fair share' bill was just one positive step in a process of urgently required taxation reform. This bill supports a coordinated, global effort to set a 15 per cent global minimum tax and domestic minimum tax for all multinational enterprise groups with an annual revenue of at least $1.2 billion. While the changes are only expected to increase domestic taxation revenue by $210 million over the forward estimates, it is the indirect impact that is of greater importance. Assuming cost-shifting and other tax mitigation measures secured in this place are effective, multinationals must now carefully consider other factors, such as sovereign risk, industrial relations, environmental laws, intellectual property risks and security against local taxation conditions.

A multinational may accept a high degree of risk in undertaking a business in one country if the tax is sufficiently low. However, this equation quickly changes when the tax rates are equalised. Under the proposed arrangements, supported internationally by 135 countries, a minimum 15 per cent tax is applied. When the threshold is not met, it triggers either a top-up tax in the originating jurisdiction or a top-up application in the headquartered country, depending on the effective tax rate. The effect of this is twofold. A multinational entity may decide that a higher business risk in a particular country is no longer worth it without the benefit of the lower tax rate. Consequently, countries such as Australia with a higher corporate tax rate but lower sovereign risk become more attractive. Companies domiciled in Australia also benefit from multinationals that choose to remain in lower-tax countries. They'll see their taxes increase, and this tax gap reduction between Australia and other countries bridges some of the cost disadvantages of operating in Australia.

Equalising or at least bringing business costs closer, irrespective of where the business is domiciled, can't come at a more important time. Across Australia, corporate insolvencies are surging, as inflation, cost of living and energy prices are taking effect. In the last 12 months, insolvencies exceeded 10,000 for the first time since 2013. The trend is alarming. For the first nine months of the financial year, insolvencies rose by 36.2 per cent on the previous corresponding period. Monthly filings reached 1,137 insolvencies in March 2024. That was a record until May, when 1,249 new cases were initiated. While most of these companies are local, the benefit of a globally [inaudible] tax system will result in more companies investing or relocating their operations to Australia, with flow-on effects to the local economy. It is also reasonable to conclude that some of the $976 billion—nearly a trillion—in outbound foreign direct investment emanating from Australian businesses in 2022 would be redirected into Australia, creating local jobs and local opportunities. This bill provides improved fairness across the global economy. It is an appropriate reform and one that I certainly support. I thank the House.

Andrew Wilkie (Clark, Independent) Share this | Link to this | Hansard source

It being virtually 6.30 pm, the debate is interrupted in accordance with standing order 192B. The debate is adjourned, and the resumption of the debate will be made an order of the day for the next sitting.