Bill Heffernan (NSW, Liberal Party) Share this | Hansard source

I thank Senator Seselja for his space in this play. I could probably take an hour without notes and give you all the details without any political background or crap. There are nine tax havens in the world that have zero tax for corporates, and they are fundamentally used as a normal procedure now for most multinationals. There are also countries like Singapore that have a tax rate of 15 per cent. Obviously no-one is breaking the law under the present regime and that is why John Phillips, the past chairman of the Foreign Investment Review Board, said the whole act and the international convention on tax needed to be rewritten. Obviously it has to be done as a group of nations, which is why Swan when he was Treasurer sent his Treasury officials around to see me for two hours. They did not understand what a derivative swap was—and hands up all those in the chamber who can give me a tutorial on how derivative swaps work. No? No-one knows that that is part of the mechanism. The legislation that protects our revenue base was written when it used to take six weeks on a ship to go to England to play cricket. As John Phillips said, it needs to be brought up to date.

We welcome foreign investment but it has to be on a level playing field so it does not distort the capital market, does not distort the commodity market and does not distort the revenue base. As Senator Williams said, with sovereign investors, our acquisition act does not deal with foreign acquisition. If under the international convention you are a sovereign investor and you come out here and declare your income from the production of whatever it is you have invested in, you get charity status if it is for a humanitarian purpose—you bypass the tax system altogether. Obviously transfer pricing has a real part to play in this, and of course there are the likes of ADM. I chaired that inquiry. One of the reasons I did not appreciate what they were up to is that they are serious corporate crooks when it comes to tax. Having left here, having said they had turned over a new page, they got a $700 million bill in the US.

If we are going to deal with this we have to understand the enormity of the problem. I agree that it is not fair on wage earners to have to pay more tax. Institutions were in denial for 50 years about what they were doing with kids, and all of a sudden everyone is up apologising at the royal commission: 'Yes, it has been going on and we apologise.' Tax, internationally, has got to that stage. It is normal behaviour now for multinationals to expect to pay minimal max, whether it is through transfer pricing, thin capitalisation, the derivative swap market or deadset charity status. We need to get the legislation up to date and I congratulate the government on taking the lead at G20, but Swanny took it up as well. He took it to an earlier G20. I appreciated him sending people around so I could explain to them what a derivative swap was. The US do not like us saying this, but the US is technically insolvent. The largest debt they have is $5 trillion to their own pension fund, which is a double debt. Last year they estimate they missed out on $600 billion through tax avoidance. By way of interest, without naming anyone, the largest anti-tax avoidance case the US government had last year was against an Australian company. We are in it up to our necks Fair enough, they are not breaking the law—as Packer said, you would be a mug if you did not minimise your tax. Let's get the law up-to-date, let's do it as a group of nations, let's not play political games in this chamber about it. Why in God's name do we not have a GST on online trading when online trading is putting retail trading out of business? It does not make any sense.

There is no need to play politics with any of this. It is about preventing the redefinition in the Western world of sovereignty. As I have said to the various officials, if you model out what is happening now and look at the increase in the graph for the take-up of the opportunity, without breaking the law, of not paying tax, we have no capacity in the future to meet the expectations of the electorate, to expect to go to a clean and safe hospital, to have roads that are safe and bridges that do not fall apart, to have a defence force and to have schools. Even though there are some people in this chamber who argue we should not have public schools and public hospitals and we should pay less tax, I think we should pay our fair share of tax and I think the multinational corporate world should be part of that because it is normal behaviour now, as part of the bottom-line profit for a lot of these countries, which adds to their share price, to pay little or no tax. It is just not giving the taxpayers of Australia a fair go. We have to rewrite the legislation and we have to do it as a group of nations because if Australia tried to do it on our own we would be isolated.

Why is it that even our own Future Fund—this is a bit sensitive—has entities in tax havens? Why is it that foreign capital coming into Australia is more patient than Australian capital? It is because of the tax advantages for capital coming into Australia. Our super funds should be investing in the development of Australia but that does not happen because of the return on the capital and because of the tax arrangements for foreign capital. As I say, I need an hour to do this sensibly, without notes because I know it all backwards. We could fix it. Last year it is estimated—it is only an estimate—there was about $3 trillion involved in derivative swaps and tax avoidance to June 30 last year. It is fair to say to the Australian people that as a parliament we want to address this. If we do not address it—as I say, some of the institutional stuff is a bit sensitive—it just becomes a nightmare which will redefine sovereignty.

How do you convince some of the accounting firms who make a living out of giving advice on how to avoid tax that we have to redefine what they have been doing? They will have teams of lobbyists coming to parliament. I had a bloke ring me up and blow the hell out of me this morning because I got a bit of a run in the paper today on this. This should not be about politics; it should be about the national interest; it should be about keeping Australia as the best place in the world to raise a family, breathe fresh air and drink clean water. It should be about the group of the Western developed world being able to provide for its own people as well as look after the wellbeing of some of the less wealthy countries. We can't do that if the $30 trillion—Senator Whish-Wilson, you mentioned 20 trillion—they think it is closer to $30 trillion stacked away. As you are probably aware, the US government is in the process of bringing in a moratorium so they can repatriate some of the capital—a bit like a gun buyback. How do you fix all this? The only way to fix it is for the group of 20 nations to tackle it, but bear in mind that some of that group of 20 are beneficiaries and that sovereignty as we know it cannot continue unless we do.