Sam Dastyari (NSW, Australian Labor Party) Share this | Hansard source

I begin by thanking Senator Milne for her contribution and acknowledging that, despite what other senators believe, this is actually a longstanding issue that Senator Milne has expressed a long-term interest in. I acknowledge that the Senate Economics References Committee, of which I am the chair, has a reference at the moment dealing with the broader issue of taxation and tax avoidance. There will be a full and better opportunity to explore in detail, through the appropriate committee process, some of what is being discussed today. I understand that sometime in the first half of next year we will be producing a report.

I want to touch on some of the earlier contributions from senators and, in particular, from Senator Edwards. Before doing so, I want to put the framework of what it is that we actually here talking about at the moment. There are two very distinct taxation challenges that sometimes tend to be blended into one, and we are talking about two large, equally important challenges that are very, very different. On one hand, there is the issue of multinational tax avoidance. What that refers to is multinational companies from around the world—your Googles and your Apples—who do business, who do trade, who do activity in Australia, and yet structure their businesses at an international level in such a way as to minimise any form of domestic taxation payment. Traditionally it was the Cayman Islands, Luxembourg or other places. More recently it tends to be places like Ireland and others that have more favourable tax regimes that get used. You are dealing with international companies structuring themselves in such a way as to minimise any form of domestic payment. That is something that does need to be dealt with at an international level. That is something that should be explored in places like the G20. That is something you are not going to be able to tackle solely as an island, as an individual nation.

The second issue you are dealing with is the taxation arrangements for Australian firms and how Australian firms are able to minimise their own taxation through either some form of international leveraging or a process of deductions and tax credits that allows them to minimise their tax liability. Let's be clear, because Senator Edwards touched on the Tax Justice Network report. What the Tax Justice Network report is not saying is that these companies are not paying their legally required amount of tax. They are not saying they are not paying 30 per cent of their taxable income; the point they are making and wanted to highlight in their report is: 'Hang on. Why are we in such a system where there are so many deductions, where there are so many accounting tricks, where there are so many different ways of structuring your own accounting practices that allow companies to take what are sometimes quite large figures'—and you are right; they were looking at cash profits. There is a real disconnect at the moment between cash profits and taxable income. The question we should always be asking ourselves and need to be ever vigilant on is how you make sure you are minimising the gap as much as possible to make sure that, where there are legitimate tax exemptions with inputs and other matters, those legitimate exemptions should and will always exist.

Those on that side of the chamber may disagree on different things. They may disagree on R&D, environmental or whatever kinds of tax concessions are available, but how do you make sure legitimate tax credits are there and it is not simply being used as a vehicle for people minimising their taxation? I think what is important is that this is a debate and discussion where, wherever possible, it is important to try to raise it outside the simple, day-to-day political debate and to actually make it about something a bit bigger. We as a parliament need to be ever vigilant and realise the fact that this is never an issue that gets settled. We could have the best tax system tomorrow. We could close half a dozen loopholes. We could improve it as much as we can improve it, and in four or five years time we will need to come to the table again and be prepared again to look at how we tackle these issues.

I note that in the recent estimates hearing into the Department of Finance we actually had Peter Costello, the 11-year Treasurer of Australia. He made quite an interesting point, which is that there are these new challenges that really were not there several decades ago and it is largely tied into the way in which money is transferred and how transactions are made. You have this quite complex question: if I am dealing with a simple financial transaction within two countries which results in a good being sold in a third country, where is the responsibility for taxation to be paid in that kind of scenario?

What worries me is there is a lot of rhetoric and there has not been enough action. It is great to see Senator Edwards get up and talk about how active the government has been and this and that. I note that the Treasurer did vote against Labor's countering tax avoidance and multinational profit-shifting bill in 2013. The Liberal National Party and their colleagues also attempted to block the cross-border transfer pricing bill in 2013. The Treasurer has five significant Labor tax measures which were to stop more than $1.1 billion in profits being siphoned offshore. This is a live debate. This is a real debate.

I also note that you cannot be serious or talk about being serious about tackling these issues when you go out there and sack 4,700 staff from the Australian Taxation Office. That has a material impact on the ability to collect taxation revenue. I think we have to be careful in this debate. You are dealing with a sector where people are very advanced, very technical and very experienced in creating opportunities and ways in which to minimise their taxation. We have to make sure that on the government side we have the right skill set and the right people because this is becoming an international business. Tax avoidance is an international business. There are international consultants. You only have to spend five minutes on the internet and you can find consultants around the world based in Luxembourg, Belgium, tax havens like the Cayman Islands and others who will for a small fee completely restructure your entire business to make sure you are not paying Australian tax. The question before the Senate that needs to be explored is how we recreate the Australian tax system. How do we change our rules to make sure that on one hand we are collecting the maximum amount of tax and on the other hand are not risking—and do not want to risk—driving business and profits overseas. That is a huge challenge.

While it is good to have this brief debate today, I think there needs to be a detailed process. We are going through that detailed process through the Senate inquiry process. I urge senators to participate in that debate. We are going to have some experts come provide proper evidence. I do not think we are going to have the opportunity today to have the kind of detailed debate we need to have when we are dealing with an issue as big as multinational and domestic tax avoidance. But I do want to say that the laws in Australia at this point in time have not kept up with the practices that are taking place. That is why there needs to be a review. That is why there needs to be a rethink. That is why it is simply not good enough to put our hands up and say, 'We can't do anything here if it's not being done at an international level as well.' Yes, we should play a role in the G20 and other forums at raising these issues. Yes, we should play a role in trying to make sure we are elevating this into an international issue through whatever forum is appropriate. But we also have to look at the domestic tax rules and structures, at the credits, at the input and at the tax minimisation procedures available at a domestic tax level with which we have allowed so many companies and Australian businesses to pay minimum tax.

When we use the term 'effective tax rate of 23 per cent', we are not saying that they are not paying 30 per cent of their taxable income; we are saying that the deductions and other things that have become available have allowed them to minimise their taxation and to reduce their taxable income to such an extent that it is having a material impact. While we are having a debate about the age of austerity, while we are having a debate about cuts and while we are having a debate about which programs can and cannot or should and should not exist and what can and cannot be funded, part of that debate needs to be about how we are raising and collecting maximum revenue. I think that is where this debate needs to go. We have a process and an opportunity to do that, in a much more detailed way then we will today, through the Senate Economics Committee process.