Chris Ketter (Queensland, Australian Labor Party) Share this | Hansard source

I rise this evening to speak on the issue of corporate tax avoidance. As Chair of the Senate Economics References Committee, I have been leading recent work in the corporate tax avoidance inquiry. And at this point I wanted to thank my illustrious predecessor, Senator Dastyari, for his considerable work as chair and the initial work which has been completed in this space; it's certainly set the stage for a worthy, considerable policy debate on ensuring that corporations in Australia make their fair contribution to this great country.

Over the last few years, the corporate tax landscape has changed considerably. The OECD has issued significant guidance on the base-erosion-and-profit-shifting framework, which is starting to be adopted internationally. Here in Australia, we have recently passed the multinational anti-avoidance legislation and the diverted profits tax legislation. Some change has been made in the area of tax transparency as well, although it is well known that Labor would have liked to have seen more done in this area.

It's important at this stage, almost three years after the Senate first referred the inquiry, to spend some time to circle back and evaluate where we stand with regard to corporate tax. Is the legislation having the intended effect? Have multinationals restructured to comply, or have they found ways around our laws? How has the ATO responded to the challenges of corporate tax avoidance? How has work on multilateral standards for corporate tax administration and reporting progressed? They are all worthy questions that need answering.

Corporate tax avoidance is not a victimless crime. Whether it's someone else, an ordinary Australian, paying more tax than they should or it's a school or hospital that misses out on additional funding for a teacher or a nurse, it's important that corporations pay their fair share of tax. It's important also that there be a level playing field—that those who properly pay their taxes aren't put at a competitive disadvantage compared to those with sharp business practices.

In recent developments, we've heard from news outlets and from the ATO directly that the ATO has raised $4 billion in liabilities recently, of which $2.9 billion has been raised against seven companies. To better understand this situation and to understand how our legislation is working more generally, we asked several learned academics to appear before the committee last month to put forward their views on how our current corporate tax arrangements are working.

Professor Richard Vann emphasised that much of the work has been 'much heat, little light'. He's concerned that interest in corporate tax avoidance has declined and that more work is needed to be done in this space. Indeed, Professor Vann went on to say yesterday at a conference hosted by The Tax Institute in Sydney that the government is relentlessly eager to talk up the need to attract foreign capital with a lower company tax rate, but the 'elephant in the room' was that rich locals had a lot to gain too. It's the high-net-wealth individuals who will benefit from this tax cut, and this is because they will get a lower tax rate in relation to their bucket companies.

To put this in the simplest possible frame: there is too much give to the top end of town, both to companies and to individuals who operate under complex corporate structures to maximise their returns. While there's nothing wrong with an individual or company seeking to minimise their tax, we have to seriously question those who, because of their wealth, are able to minimise their tax to a point that it's damaging to the Australian economy and, in turn, damaging to everyday Australians. It's simply unfair. It's estimated that trillions of dollars are lost globally each year due to crime, corruption and tax evasion. The local cost of tax avoidance is also high, with estimates that United States corporations avoid an estimated $2 billion of tax in Australia each year by shifting their profits to low- or no-tax countries.

Labor has called these hearings because multinational tax avoidance has been at the centre of political debates in Canberra during the past two years and was one of the key policy issues leading into the federal election in July last year. We've held multiple hearings around the bad behaviour of multinational companies, and the Panama Papers really helped to set the groundwork for further scrutiny, but, now that that has quietened down, it's important that we revisit the issue.

Previously, we've hauled Uber and Airbnb before the committee to face questions about tax structures that allow them to route profits through the Netherlands and Ireland. Uber and Airbnb made submissions to the inquiry arguing that they comply with Australian tax laws and claiming that their Australian operations merely provide support services to parent companies based in the Netherlands and Ireland respectively. But this just doesn't pass the pub test. Similarly, I've also called executives from other multinationals including Chevron, ExxonMobil, Shell, Caltex, BP, Viva Energy, Woodside, Santos and Origin Energy to appear at various hearings. Nevertheless, a number of companies, including tech giant Google, restructured their tax affairs in anticipation of laws passing, and others have been negotiating with tax commissioner Chris Jordan. In the absence of any true reform from the Turnbull government, I'm hopeful that these discussions can continue and that Australians receive the flow-on benefits from these companies injecting some of their wealth back into our economy.

Going forward, the next hearing into multinational tax avoidance will be held in Sydney on Tuesday, 22 August, and I will be hauling major tech companies Apple, Google, Microsoft, Facebook and IBM to appear before the committee for a 'please explain' on their corporate tax arrangements. Many of these companies are likely to be included in the $2.9 billion net, so it's important that the Senate and the public understand the nature of the liabilities and understand if, and how, these companies have responded to legislation. Additionally, we'll be hearing straight from Tax Commissioner Chris Jordan so that we can get an unbiased opinion as to how differing pieces of legislation are working cohesively to ensure that outstanding tax debts are paid and that future tax debts won't continue to burden Australians or the Australian economy.

Lastly, I think in our quest for fairness it's only right that, if a company operates in Australia, makes money in our country and turns a profit, it pays its fair share of tax. If we're going to have a debate about multinational tax avoidance, as complicated as it is, we need to ensure that we have the public on board. People need to be able to understand exactly what is happening with Australia's tax affairs. Until companies are able to pass the pub test, they can continue to expect scrutiny from me, the committee and parliament generally. I encourage those listening tonight to attend or to tune in via the internet to find out more about Australia's corporate tax structures and the way in which these structures can be improved.