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

Let me begin by just saying that multinational tax avoidance is not a victimless act. Every dollar that is avoided, every dollar that is minimised, is a dollar that is not going to our schools, to our hospitals, to our social services that rely on this funding.

Senator Canavan interjecting—

And, Senator Canavan, it concerns me. It concerns me greatly that there are a handful of international and multinational companies who are behaving in such a way that is bringing this burden upon all of us.

The former Treasurer should be congratulated for saying and doing many good things in this policy area. The former Treasurer Joe Hockey, with this bill that we are here to debate tonight, the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015, actually went a very important step in the right direction. This is a bill that fundamentally addresses many important concerns around multinational tax avoidance. Does the bill go far enough? Frankly, I do not believe it does. Can the bill be improved? Yes. Is this the answer to our multinational tax problems? No, I do not believe so. That being said, I do believe it is an important bill. I believe it is a bill that should be supported. I think it is a bill that demonstrates the right intentions. Even though it is not a bill that encapsulates everything that I would like to see in a multinational tax avoidance bill, that does not mean it is a bill that should not be supported.

Labor's position is that we support this bill. We have been calling for more action on multinational tax for over two years. It is good to see that the government has actually come on board with this legislation. Let us be clear: there is an international process currently underway through the OECD BEPS Project, the Base Erosion and Profit Shifting Project. This bill will complement that process. I anticipate that, in coming months, we are going to see some additional legislation. I anticipate that we are going to see new bills come before this parliament to encapsulate and capture everything that is being proposed via those changes. But, in the meantime, we can and should take unilateral action. That is fundamentally what this bill advocates. Labor is not going to stand in the way of attempts to tighten Australia's tax net, despite the fact that we believe that this legislation is an inefficient and insufficient attempt at addressing those concerns. Labor will continue to take a constructive, open and helpful approach to protecting Australia's revenue base. In the same spirit, we believe that, because we are supporting this bill—supporting the government's attempts to tackle this through this legislation—this parliament should also adopt the $7.2 billion tax package that has been put on the table by Labor. What is so outstanding with the budgetary challenges that we face as a nation is: Labor has proposed measures that will raise $7.2 billion over the next 10 years, and this government has decided not to take those changes and not to take that package. Let us be clear: they are not Labor's costings we are talking about; these are independent costings from the Parliamentary Budget Office, which has determined this $7.2 billion figure.

There are four schedules in this bill, and they all warrant some investigation. Schedule 1 introduces a new concept into the tax law, with this idea of a 'significant global entity', potentially capturing up to 1,000 companies with annual income of over $1 billion. It is a recognition that things have changed, that business has changed, that the world has changed and that how business operates is going to continue to be different. Schedule 2 amends the existing anti-avoidance provision to counter instances when multinational firms use artificial arrangements. Again, these artificial structures, artificial arrangements, are at the heart of multinational tax avoidance. Let us be clear about the principle of multinational tax avoidance. It is about creating the impression, through accounting and other techniques, of being as unprofitable as possible in a decent or higher tax jurisdiction like Australia and of being artificially as profitable as possible in a lower tax jurisdiction. Again, it is an artificial corporate tax structure that does not reflect the reality of how that business operates. Schedule 3 doubles the maximum penalties for firms involved in tax avoidance and profit-shifting schemes. However, these stronger penalties will not apply where there is a reasonable, argued position, where there is a decent case being put forward that happens to be deemed to be incorrect. Schedule 4 implements the OECD's action plan on transfer pricing.

It needs to been noted that this multinational tax bill takes an untested approach to corporate tax and, importantly, fails when it comes to this key measure of transparency. At the heart of tackling multinational tax avoidance needs to be a new approach to transparency, to openness, to making sure that the relevant information is out there for Australian consumers and Australian taxpayers. Fundamentally, where this bill has failed is that it has not adopted that simple benchmark of an open and transparent approach. I have been arguing in this chamber for over a year now that we need to adopt a naming and shaming approach. We need to expose and highlight the worst offenders and the worst companies—those engaging in the sharpest accounting techniques—and force them to come out into the community and justify their position, justify the stance they have taken and justify their approach. I think that would create a better tax system where there is more openness and transparency.

Let's be clear. The tax office already knows who some of the worst offenders are. They are in constant debate and constant engagement with some of the worst offenders. The people who do not seem to know are Treasury, the government and the taxpayers in the Australian community. I say: let's empower those people. Let's have a more open and transparent approach. Let's shine some sunlight in the dark corners of multinational tax avoidance. There is a body of research that demonstrates that, in doing so, you will achieve better tax outcomes and better outcomes for the Australian community.

This multinational tax bill takes an untested approach to corporate tax. While I do believe the bill warrants support, I highlight the fact that there are some serious concerns with it. There are no precedents for this approach around the world. Furthermore, we have sat there with Treasury official after Treasury official at Senate estimates and other Senate hearings, and they are quite clear: they cannot even tell us how much revenue this is going to bring. They cannot even put a figure on it. Their argument is: 'If it's successful and effective, it's going to result in people paying the tax they are due to pay, so this measure itself won't raise revenue.' If you are to accept that, you also have to accept that they cannot even give you a figure of the increase it will bring to other revenue they believe this measure will create an uptick in. We have a bill here for which the government and Treasury themselves are incapable of putting forward a simple figure of how much revenue it will bring.

The main measures in this bill have their genesis in work that was done by the previous member for North Sydney and previous Treasurer, Joe Hockey. I have to say: the former Treasurer deserves credit for a lot of the right rhetoric around multinational tax. The problem always with the former member, Mr Hockey, was that his rhetoric never matched the reality of what he was proposing—and this bill highlights that. What was proposed to be introduced had a scope that was much larger, much more detailed and much more extensive than what was finally put before the parliament. Late last year, the UK government announced the so-called 'Google tax'. In that, I think, was the genesis of what became this bill. It was an idea that was dropped when it was pointed out that we already had anti-avoidance laws and that the UK's approach would breach a whole raft of European Union tax treaties. Having said that, part of what is being proposed in this legislation is based on the idea that, if you create a strong enough penalty, people will behave the right way. Fundamentally, that is not an approach that those of us on this side of politics necessarily oppose. It is not an approach that should be opposed, but it is a question of the implementation of it in this bill. Tough enforcement is necessary, but, when its implementation is not complemented with proper transparency measures and a proper, open approach to tax minimisation, it is going to fail.

I note that, when they were in opposition, those on the other side of the chamber did not give Labor anything like the same support in our efforts to tighten Australia's tax net and address major companies shifting their profits offshore that we are prepared to give the current government, despite the fact that we have such concerns about this proposed legislation. When we brought forward the Tax Laws Amendment (Countering Tax Avoidance and Multinational Profit Shifting) Bill in 2013, which plugged loopholes in Australia's transfer pricing rules and anti-avoidance provisions, those opposite—those who are proposing the current bill—opposed it. When we introduced the Tax Laws Amendment (Cross-Border Transfer Pricing) Bill in 2012, those opposite vehemently opposed it. When we amended the Taxation Administration Act, through a lot of good work done by, amongst others, the previous member for Lindsay, Mr David Bradbury, who is now working at the OECD, members opposite voted against it. Right now, as we are supporting this bill, those opposite support carving out almost half of the Australian companies from tax transparency laws that apply to them, shielding Australia's 800 richest firms from scrutiny.

It is important that we place the debate around multinational tax avoidance above politics. The Labor Party and those on this side are proud of what we were able to do in government and what we are trying to do in opposition. Importantly, in March this year, we announced a $7.2 billion package. It was the first time that an opposition had proposed any legislation of its kind that early in its term in opposition. Frankly, a lot of us expected that it would be adopted by the government, and we were happy for it to be adopted by the government. We were happy for the legislation approached in a bipartisan way. There are four parts to Labor's plan. Firstly, we propose reversing the current thin capitalisation rules to reduce the amount of debt that companies could claim reductions for in Australia. Our view was that companies must not be able to create their own scenarios, rules and structures simply to load their Australian operations with international debt. Secondly, we say that Australia should better align its rules on hybrid entities and instruments with tax laws in other countries. Again, this is about making sure we minimise the number of mismatches and the number of hybrid rules that allow these loopholes. Thirdly, we also said that you need to properly fund and resource the ATO. Finally, and importantly, we have been saying that you need to have more transparency, more openness and more accountability.

Labor's package, if the government chose to adopt it, could actually work side by side with this legislation. The important difference is that our costed policy would bring in $7.2 billion over the next decade. What is astounding is that the government has legislation here that, by its own account, it cannot put one single figure behind as to what it is actually going to bring in. We can—and these are not our figures; these are independently costed figures from the Parliamentary Budget Office.

Why is that the case? This bill fails to address the practice of companies loading debt onto their Australian operations to artificially inflate their tax deductions. We have seen that just in recent days. Let us have a look at the example of Chevron that has been reported on in the past few days. Today we found that the amount of tax that a company like Chevron is paying at the moment in their Australian operation would equate to what a normal Australian family spends on their weekly shopping. Let me be clear: there are legitimate situations for deductions, and at different stages of the business cycle there is going to be, understandably, less profit and, as a result, less tax. What concerns me is: if we do not get these tax settings right now, then—as we move away from the mining boom that was based around iron ore towards the importance that LNG and gas are going to provide to the Australian economy—it will result in a situation where some of Australia's largest companies are able to minimise their tax, not just through what we have seen in the past with transfer pricing but particularly as it relates to debt.

So we have a situation where Australia needs a multinational tax system that is tough, that is open, that is transparent and that is equitable. And that is not what we have at the moment. What we have at the moment is a system of rules and laws that are geared towards a handful of companies.

Over the past year, through the work that has been done by the Senate Economics References Committee's inquiry into multinational tax avoidance—and I do need to credit the incredible work that was done by the former leader of the Greens, Christine Milne, in this space—we saw example after example of multinational firms structuring and gearing themselves in such a way as to minimise their Australian tax liabilities. By the end of this year, we will be coming out with our final report; two months earlier, we came out with our interim report. The interim report really focused on this issue of transparency. Our final report will focus on issues like transfer pricing and debt loading. But it is important to understand that—as important as it is to make sure that we have the rules right, the settings right and the laws right—what we actually need is parliamentarians and public leaders to be debating about making sure that we have the equity right and we actually have a system that is fair, transparent, open and tough, and that tackles that handful of companies that are behaving poorly. We know who they are. We know their structures. We know they largely seem to be multinational firms that operate internationally with structures they have created in Australia to minimise their tax liabilities. We know the sectors that they exist in—they are largely spaces like the tech sector, the mining sector, the pharmaceutical sector and other kinds of international sectors.

This is a bill that deserves support. But let me be clear: this is not the perfect bill. This is not the solution. And this is not the best way of approaching the challenges that we have.