Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Hansard source

I rise to also speak on the release of the Senate Economics References Committee interim report on tax avoidance. I must confess that, yes, I nearly choked on my coffee on Sunday morning, watching Insiders, when I noted that they were speaking about the conclusions of this report, because, as Senator Edwards said, now is when we should be releasing those conclusions and talking about them. This is not necessarily a political process, but this is a matter of due process. The Greens certainly want to note that it is disappointing for a committee which has achieved so much, which was initiated by my previous colleague Senator Milne for very good reasons and which has been conducted in a spirit of tripartisanship—if I could add more numbers to that, I would. It has been conducted in a spirit of tripartisanship. There have been numerous hearings, and an incredible amount of work and effort has gone into this. It is disappointing that it has been sullied at the end by what has obviously been a leak. All I would say on behalf of the Greens is that we hope that, whatever comes of it, it does not happen again.

What I want to say here today is pretty simple. We have heard numerous recognitions of people who have contributed to this report. It was almost two years ago that I was visited by the Oaktree foundation and they raised this issue of tax avoidance as being a key thing that they were going to target. We have also had visits from the Tax Justice Network and United Voice, and we have had a considerable amount of input from Mark Zirnsak, from the Tax Justice Network, to help us with our additional comments. That was providing input to us during the committee process and in the conclusions that we have drawn as a party.

I would say that tax avoidance is out of control in this country. It is one of Australia's biggest exports, but it should not be. We are talking about—the numbers we have seen are quite mind boggling—billions of dollars. Revenue of $388 billion went offshore from Australia to related parties in the year that we looked at, 2011-12. For comparison, the total amount collected by the federal government for domestic tax revenues that year was $330 billion. We are almost seeing an equal amount of revenue going offshore through multinational networks as we are collecting in this country. It is a significant problem that we have to tackle. Just to give you another comparison, in 2011-12 we exported nearly $57 billion worth of iron ore in Australian dollar terms, and that year we also saw—from information that was provided to the committee—nearly $60 billion that went to tax havens. That is a pretty interesting point of comparison.

How do we tackle this? Unfortunately, you cannot tax what you cannot see. We do know that reputational risk is taken seriously by large corporations, particularly corporations that have strong brands and sell products. Customers, no matter where they are, do not like the fact that companies might be avoiding their tax or using legal loopholes—and it must be pointed out that in a lot of the cases we are dealing with tax minimisation; it is not necessarily illegal. It is a fact that we need to change the laws, especially between countries, to make sure that this kind of thing does not occur, because there are too many loopholes that allow tax minimisation.

We need to see people power working. We need to see people voting with their feet and penalising companies that are clearly being named and shamed for tax minimisation. I do not mind using that term. I know it was debated on Q&A last night, but I think we know that reputational risk is important to companies and that they are not going to want to see their names being dragged through the mud for tax minimisation.

We found, while going through the inquiry, that there were a number of large companies that were exempted by ASIC from providing publicly detailed financial accounts. This has to end. To take one example from a hundred, Facebook have never lodged a financial report in Australia. They have been granted exemption from full financial reporting because they were a small proprietary company controlled by a foreign company but they are not part of a large group. Who among us can characterise Facebook as a small company? This is just one of the ludicrous points that came up very early in the inquiry. Most of the big global companies either are completely exempt from financial reporting or have permission to file special purpose accounts. Special purpose accounts tell us nothing of the value and are given out like candy in the name of red tape reduction. The Greens want all these exemptions to be scrapped and full financial disclosure to be made public in accordance with prevailing accounting standards. Every time 'GST' comes out of this government's mouth, the public need to remember the phenomenal amount of money that we are losing from tax dodging in this country. If we tighten the rules and regulations, we can bring that revenue back into society to help fund schools, hospitals and the other things we need it for.

One company that the ATO classified as being in its most at-risk category was News Limited. What the ATO said about the company was that it ranked as the most at-risk because of:

… the history of their aggressive behaviour in tax over a period of time. But, importantly, it is about transparency and willingness to be open with us.

These are direct quotes from the ATO:

Historically, this particular taxpayer has made it quite clear that they have not had an interest in being open with us and discussing any of their affairs with us prior to their doing transactions.

News Corp Australia transferred $4.5 billion to its New York parent by a return of capital through share acquisitions instead of disbursing, as it normally would, through a dividend. That is the kind of example that the committee heard, and these are the kinds of rules and regulations we need to have a look at. This is only an interim report. We are looking at things such as base erosion, profit shifting, thin capitalisation rules et cetera in the second half of the report, but we need to get some solid understanding about how to tackle those issues.

One thing that became very clear to us also was that the Australian Taxation Office, as we already knew from previous estimates inquiries, is significantly under-resourced. It does not have the resources to tackle these issues of large multinational tax minimisation. We heard that, in this country, taxation in this area is by negotiation. It is settlement by negotiation. They literally march into the offices of these companies with their lawyers. The companies are totally lawyered up. A lot of the experts these companies have are actually previous tax office employees, and they negotiate as to what tax they are going to pay. There is very little litigation around this. Senator Canavan was in Melbourne when we had a whistleblower from the tax office, a previous tax office employee, tell us all about this. The ATO lacks resources and expertise. It needs to be fully armoured so that it can take this issue seriously.

The Greens have made seven recommendations in our additional comments. They are available for anybody to have a look at. Recommendation 1 is:

The Australian Taxation Office should be required to publish the details of the top 10 Australian companies that transfer wealth off shore in each financial year. A right of reply will be afforded to each named company to justify its transactions.

Recommendation 2 is:

Australian companies that are part of a larger group of international companies should not be eligible for special purpose accounting treatment and must provide ASIC with detailed financial reports to prevailing accounting standards.

Recommendation 3 is:

Australian companies that are part of a larger group of international companies should include in their financial statements the value and purposes of all transactions between related companies.

There are a number of other recommendations there that relate to provision of information. Efficient markets work on the provision of information, and we cannot actually tackle this issue until we can get that information first, so that is really where we have to start. The second last recommendation is:

That the Parliament establish a public register of beneficial ownership of companies and trusts so that identification of financial beneficiaries can be traced and publicly identified. The Australian government should also work closely with other countries to establish a global standard for such registers.

The bigger context of this debate around multinational tax avoidance is that we need to raise revenue in this country. We do not actually have a deficit problem in Australia; we have a revenue-raising problem. We need to raise revenue and not raise these issues around taxing the poor, as we have seen in this government's first budget, and going after the sick. We need to think about other ways that we can raise revenue to spend in this country. We need a fair and equitable tax system, and it is simply not fair that large multinational corporations—because they have significant resources, can lawyer up in negotiations with the tax office and are almost impossible to pin down unless we have global cooperation—can get away without paying their fair share of tax. That is not fair, it is not equitable and it is not acceptable. I look forward to this committee doing a lot more good work to pursue this area.