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

It is not often that I get up in this place. There is nothing wrong with a free trade agreement and there is nothing wrong with foreign investment; it has just got to be on a level playing field, be captured by our revenue base, not distort the capital market and not distort the commodity market. All of these things can be at risk in a free trade agreement. I congratulate Australia for getting on and getting some free trade agreements. But it is not the free trade agreement you have got to worry about, it is what goes around it and what safety mechanisms we have within it. When we signed the American free trade agreement we were at 65c. Most people will not remember this. When we enacted it, in the following year, we were at 67c. We did away with five per cent and 15 per cent tariffs and within three years we had a 40 per cent deficit in our terms of trade because we went to parity. So the tariffs did not matter, it was the currency.

My question for this parliament—which is what I yelled out from the back of the room, as I often do, when we signed the free trade agreement over there in the Great Hall—is: when are you going to say to the Chinese officials, 'When are you going to put your currency on the market? How can you have a fair dinkum free trade agreement when your currency is a non-market currency? Please explain! Maybe the Minister for Finance or someone would like to explain that in due course. I have asked the question of Andrew Robb and, to his credit, he was quite polite. They have worked hard to do these things but we need to look at the detail around it.

Everyone knows that in most of Asia, which is a different culture to Australia, you can get a signature on any bit of paper you like as long as you find the right person to pay the facilitation fee to—in other words, 'bribe'. To its credit, China is getting rid of some people who are seriously in that league. Most companies in China have come out of the sovereign side of it. We read about Nugan Hand in recent days. A lot of that sort of money is coming into Australia out of Asia. It is hot money. And congratulations, by the way, to 60 Minutes for finding Mr hand.

So what we have got to do with a free trade agreement is make sure there is something in it for Australia long term besides the trade. You can have as much trade as you like, but if you are not collecting the revenue, what is the point? We will be having an argument in the parliament this week about the GST and superannuation tax arrangements et cetera. But like the institutions and child abuse and the judges and lawyers who used to go to Costello's—which I note did not raise a flag even though it is true—we turn a blind eye to it; we do not want to talk about it. Last year, the World Bank estimated there was $3 trillion on the merry-go-round running away from international tax arrangements. I do not have any notes, by the way; this is not prepared. There are nine sovereign entities in the world that have zero tax for corporates. Even our own Future Fund has some tax arrangements in tax-free sovereignties. I know we are talking about the free trade agreement with China, but an important part of it is: how do we get the tax law to catch up with technology? Technology has outsmarted the law. The World Bank said that, last year, $3 trillion was running away from tax in the Group of Eight. The US estimated that, in the same year, they missed out on between $650 billion and $800 billion. Does anyone know—hopefully the finance minister does—the turnover in the derivatives market last year? It was $30 trillion—and it is one of the major ways of diverting your tax.

We have signed a free trade agreement with China. It has potential. By 2070 China will have gone, barring a human catastrophe, to just on two billion people. Asia will have lost 30 per cent of its productive land due to urban sprawl and contamination. Two-thirds of the world's population will live in that area. Darwin is closer to that market than Sydney. So there is great potential. But it is a waste of time if we do not make sure that we capture it in our revenue base and that it does not distort by direct fully interposed trading—in other words, that it does not come on the market, which distorts the commodity market. If it is hot money, the investment potential is not to get a return on your money if you are over there and you are a crook—and there are plenty of them; there is plenty of it coming into Australia—but it is to find a safe haven for your money. So we have a bit of work to do. Sure, it is a great thing. Congratulations to everyone.

I just want to go to—and I know this is rambling a bit, Madam Acting Deputy President—Landbridge Industry Australia Pty Ltd. On the front page of The Financial Review today, there is a photo of JBS Swifts' boss—a Brazilian company with a Brazilian government guarantee and with a global market in beef. They are fantastic global manipulators of that market and fantastic tax avoiders in that market. We talk of Wilmar—the same in the sugar and oils industry. Fantastic. As Senator Sterle would know, before they did that deal in Queensland a couple of years ago, I said, 'These blokes will end up screwing the sugar growers,' because they are serious market manipulators—the same as ADM was, and still is. Sure enough, they have done it. We thought it was fantastic at the time, but they are going to screw us. We really have to be careful about the detail—a bit like the TPP, but I will not get onto that. I just want to go to Landbridge, which is on the front page of The Fin Review today. They have bought the Darwin harbour lease for 99 years. They have to be looking up. They have companies based in Australia. But hidden in the paperwork is who their business partners are. I asked the appropriate people in this government and in the Northern Territory government if they knew. To his credit, the Chief Minister rang me. I have also talked to Defence. The two business partners are two provincial governments. For God's sake! We are up there fighting them in the South China Sea and we have said to them: 'Hey! Come down here. You can have the harbour.' Two partners in the Landbridge company are—according to their paperwork; God knows what it is in reality—two provincial government companies.

I got up rudely before—without a point of order, trying to pretend it was—to say to anyone who says that what we are doing now with global investment is not redefining sovereignty: it is. It is absolutely redefining sovereignty. But maybe that is the way the world wants to go—I don't know. If it is true what the paperwork says, that Landbridge have business partners, and I am unaware of the extent, the present tax law says that, if you are an sovereign investor coming into Australia and you make a passive investment—in other words, you lend Senator Cormann the money to go and do something—you, under our international convention, as the sovereign investor, do not pay any tax. But, if Senator Cormann were the receiver of it and the investor here, he would get tax deductions. So it is a double hit on the market—on the taxpayer. And, God knows, we will put up all of the other taxes and fiddle around with the GST but we will look the other way on corporate stuff. I see today in the papers the yarn around how they went to the Senate committee, with Senator Whish-Wilson and others, and put it over them with some sort of dodgy front company as to why we could not reveal how much tax people pay. The largest tax avoidance case in the US in the last financial year, to June 2014—do you know who it was with? It was with an Australian company. They got a lot of publicity at the time—and I will not name them—for rearranging their corporate affairs. They put up some BS excuse, but it was to do with tax avoidance.

So, I am afraid, I have great difficulty with just flagging through the redefinition of sovereignty. Free trade agreements are part of the global economy. We no longer get around in bloody canoes. It used to take the cricket team six weeks by ship to go to England to play cricket when you can now go there overnight. The world is changing—with technology et cetera and online buying. But what we have to consider is: do we want to protect our sovereignty? To his credit, former Treasurer Joe Hockey took it to the G20—and it will have to happen at that level—to try to get the law to catch up with technology when it comes to collecting tax in order to maintain your capacity to have your own sovereignty. What you had to bring the army with you to do 100 years ago, if you were a foreign sovereigner coming into another sovereignty, now you just bring your chequebook. Sure, as long as everyone is alert to the fact that this is happening, they may well agree to it, because we are bloody lazy. But, if we want to maintain our hospitals and schools and an ageing population et cetera, in my view we have an obligation to protect our revenue base. I will not go through some of these free trade agreements. But what I am talking about is not just peculiar to the Chinese free trade agreement. As I say, China is a huge potential market, as is, in due course, India—which is 35 years behind China. Just about everyone in India has a mobile phone, but 800,000 people do not have sewerage—so there is a bit of work to be done. China, by the way, is moving some of its labour force work into Bangladesh, where—get this—the average person, 80 per cent of the population, lives on about $34 a month. They are pretty low labour costs.

The world, because of technology, transport and modern communication, is changing, and that aids and assists free trade agreements. China are ahead of the game. They recognise they have these serious problems with going from 35 per cent urban dwelling to 64 per cent urban dwelling, with people coming from the bush, the urban sprawl et cetera. You can go to places up there and never see the sun, not because of the cloud but because of the smog. They are, to their credit, on the ball. We need to take the opportunity that that presents to us, but we need to protect our sovereignty. People do not want to talk about this and I yelled at Senator Zed Seselja because he said it is garbage to talk about sovereignty. It is bloody not garbage; it is true. It took 50 years for us to realise what was going on in the churches with the altar boys, as it were. Let's wake up early about this, before it is too late. It is not too late; we just have to get the law to catch up with where we are. The bulk of the corporates are not breaking the law; they are avoiding tax. It is just that the law is out of date. It is telegram-era law.

The Foreign Investment Review Board did not look at the Landbridge purchase of Darwin port because that company had done a deal somewhere else in Australia and got the tick for that and, therefore, the FIRB gave it an automatic tick for Darwin. But, when I asked them, 'Do you know who they actually are?' they said, 'Yes, Landbridge—here it is, with their corporate headquarters in Melbourne or somewhere.' I said, 'There's a bit more to it than that.' They said, 'Oh, well, it's too late now.' Australia's defence forces are up in arms about that. I will not embarrass the government by telling what I hear and what I know, but it was a deal that was sort of half under the carpet.

In the future, two-thirds of the world's population will be just across the water. I think that madmen in Russia, Putin, is more likely to flex his muscles than China because, I think, China are doers and goers and are having a crack. The increasing middle class there has certain expectations, and at least the leaders are trying to do something about the corruption. It is like local government in Sydney: it is fairly endemic.

My message to the parliament is: sure, these things are good—and good on you, Andrew Robb—but we need some safety measures and there has to be a caveat. Australia on its own cannot be the solution. These free trade agreements will be good for certain parts of the economy. Doing away with tariffs or whatever and selling more wine to China are good things, but we have to make sure there is something in it for the Australian taxpayer so that we do not get smashed. We do not want to get to where the US got to at one stage. If you got sick, they left you in the gutter unless you had a shitload of money. It is endemic.

I will say another thing. A meat company in New South Wales—I will not name them because I do not want them knocking on my door—have just taken on an equity partner from Asia. Their adviser, a major, major accountancy firm in Australia, is having a blue internally with some of the people in the company because the major, major accountancy firm wants them now, with the opportunity they have, to do all transfer pricing of their products so their profit gets moved away to a low-taxing regime. This is a well-known Australian company. I think it is a disgrace, and I think it is a disgrace that people are not prepared to get up and say, 'We're living in the generation that may see sovereignty redefined.' It may be the way it has to go. I do not know; it might be like local government amalgamations. But I cannot see how we can maintain the expectations of Australia. Australia is still the best place in the world to raise a family, breathe fresh air and drink clean water. If we turn a blind eye, I cannot see how we can expect our hardworking taxpayers here, when they get to the frail-age stage in life, to look after themselves.

When the US objected to some of the tightening of tax arrangements, the US corporates lobbied the US politicians. If it cost $1.4 billion for Hillary Clinton's campaign for the presidency—and they are corporate donations—you can imagine that the corporates have the ear of the particular politician. I am not saying there is anything going wrong there, but then the corporates get up and say, 'We're not worried about the amount of tax we're not paying in America. We're supplying employment.' Hello? They wonder why the health system is breaking down, along with all the other things.

So, while free trade agreements are a great idea, they have to have some safeguards around them. I go back to my first question: how can you really have a free trade agreement and not have it shoved up you—I had better not say where—when your trading partner's currency is not on the market? There is an old bush saying where they shove something up you. You can have the potential to have something shoved up you if the country you have the free trade agreement with will not put its currency on the market. On the day I yelled that out here, luckily for me Mr Obama, in different language, said the same thing in America, urging China to come to the market with their currency. Otherwise they could just play with us to suit themselves. I am not saying there is an easy solution. Certainly there is potential because, as world experts say, between 2050 and 2070, barring a human catastrophe—Senator Sterle, who is in the chamber, has heard me say this many times—there will be about one billion people on the planet unable to feed themselves, which is not much different to today. Fifty per cent of the world's population will be poor for water. Two-thirds of the world's population will live in Asia. Thirty per cent of the productive capacity of Asia will have gone out of production. There could be up to—get this—1.6 billion people displaced on the planet.

We have to develop Northern Australia. We have to do it so there is something in it for the Australian taxpayers. I welcome all that northern development, being the original Chair of the Prime Minister's Taskforce on Northern Australia. Cape York Peninsula is twice the size of Bangladesh and has 14,000 people, who live out off the city of Cairns and down the coast. Bangladesh, at half the size, has 160 million people, who, if the sea rises to 40 per cent of what is predicted, will have to find somewhere else to live. We have got some issues. We should not shy away from them.