Catryna Bilyk (Tasmania, Australian Labor Party) Share this | Hansard source

Australians have had enough of multinational companies not paying their fair share of tax. We have seen many companies generate billions of dollars of revenue in Australia, yet pay no tax here whatsoever. How can there be companies with tens of millions of dollars with subsidiaries around the world that sell billions of dollars of products or services, yet still manage to have no taxable income? These are large global companies, successful companies, which are allegedly making no profits in Australia. It really is quite the mystery.

According to the ATO's fourth annual tax transparency report, 722 of the largest corporations paid no corporations tax in Australia in 2016-17. This includes 100 firms that reported more than $1 billion in total income. A few—very few, I think—have genuinely made no taxable profits, but there are many whose losses are purely on paper. That means that there are millions of Australian workers—cleaners, taxidrivers, truck drivers, early-childhood educators, supermarket check-out operators—who have paid more tax in absolute terms than corporations with a billion dollars of income. This is fundamentally unjust.

Some of these companies have used loopholes and dodgy tricks to artificially reduce their taxable income. One way is by paying tens or hundreds of millions of dollars in licence fees to the corporation headquarters, in low-tax jurisdictions. Others pay millions in interest payments to their company headquarters, again in low-tax jurisdictions. While I'm sure there are some legitimate loans or licence fees, many companies undertake these actions as a way of squirrelling what should be taxable income out of Australia. Ordinary Australians are hurt by these actions. By avoiding their taxes, companies are reducing the revenue available to pay for essential services for the Australian people. Not only are the Australian people harmed; companies that do the right thing are harmed as well as they face an environment which is more advantageous for their competitors that are doing the wrong thing.

During the election campaign, Labor announced a tough multinational tax avoidance and tax haven crackdown. We went to the election with 19 measures to crack down on multinational tax loopholes and tax havens. These measures included tightening debt deductions; closing public reporting of country-by-country reports; increasing the capacity of the ATO; public reporting of AUSTRAC data; closing loopholes for certain trusts that make payments to non-residents; and protections for whistleblowers. In contrast the Liberals were silent on cracking down on tax havens and making multinational companies pay their fair share; in fact I didn't hear boo from them in regard to this issue through the whole election. Instead we are faced with the limited changes that are proposed today. I hope these are but the start of what is needed to make multinationals pay their fair share. So far, however, the Liberals have shown that their hearts are not in it when it comes to making sure that multinational corporations pay their fair share of tax.

While changes in the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2019 will raise just an additional $125 million annually in revenue from 2020-21, we need to raise every dollar we can to make up for the wrecking ball that this government has slammed through its budget. Closing down tax loopholes means more taxpayer money stays in Australia to fund critical services, such as hospitals and schools, and productivity-enhancing investments.

Labor does support this bill. This bill is almost identical to the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018, which was inquired into last year by the Senate Economics Legislation Committee. This bill lapsed at the dissolution of the House before the federal election. The Senate economics committee recommended that changes were required for the schedules of the bill concerning the research and development, or R&D, tax incentives. These schedules have been removed from the bill before us today. The schedule that amends the definition of a 'significant global entity' in the Income Tax Assessment Act 1997 has also been removed, for technical reasons. This bill therefore contains just the following government policies: tightening the thin capitalisation rules, ensuring that offshore sellers of hotel accommodation in Australia calculate their GST in the same way local sellers do and removing the luxury car tax on reimported cars that have been refurbished overseas.

So, despite the title of the bill, only the first of the three schedules has anything to do with multinational tax avoidance. The changes regarding thin capitalisation raise the bulk of the revenue in this bill. For those who aren't aware, thin capitalisation is when a company's level of debt is greater than its capital. The thin capitalisation will provide for how much debt an entity can claim tax deductions against. In recent years we've seen a significant increase in multinational companies revaluing their assets. Concerns have been raised about the rigor and the accuracy of some of these asset revaluations. By valuing assets lower, a company can generate a higher ratio of debt to capital in order to claim greater debt reductions.

Currently the thin capitalisation rules allow an entity to recognise certain assets and revalue its assets in a different way, in certain circumstances, for tax purposes only. This provides a loophole that companies can exploit—and have been exploiting. The changes proposed in this bill will prevent companies from revaluing their assets solely for thin capitalisation purposes. The bill will also require that companies use the same figures in their financial statements as for thin capitalisation purposes. Through these changes it is expected that we will limit the ability of some multinationals to artificially inflate their debt levels and avoid taxation. While Labor's 2019 election policy would have placed further limitations on thin capitalisation arrangements, this bill does not implement this.

Coming to the second part of the bill, schedule 2 amends the GST Act to require offshore hotel booking sites to collect GST on Australian hotel bookings. Currently, unlike GST-registered businesses in Australia, offshore suppliers of Australian hotel accommodation are exempt from including sales of hotel accommodation in their GST turnover. This means that they are often not required to register for and charge GST on their mark-up over the wholesale price of the accommodation. This measure will level the playing field between suppliers of hotel accommodation that are operating from offshore and those that are operating in Australia. The measure will have low compliance costs, as it affects only digital transactions and builds on the expansion of GST collection to digital services. It's not likely to have implementation problems, as we saw with the government's application of GST on low-value goods. These amendments apply from 1 July 2019. It is estimated that the measure will result in a gain to GST revenue of $15 million over the forward estimates. This revenue is disbursed to the states and territories and so has no net impact on the overall budget bottom line.

The third schedule of this bill relates to the application of luxury car tax to cars that are sent by their Australian owners overseas to be repaired or refurbished. Currently the luxury car tax does not generally distinguish between the importation and the reimportation of a car. Cars exported from Australia to be refurbished overseas and then reimported are subject to the tax if the value of the car exceeds the relevant luxury car tax threshold, even if the vehicle has not changed hands. The committee, in its inquiry last year, received no submissions on the removal of the luxury car tax on reimported cars following service, repair or refurbishment overseas. The explanatory memorandum for the bill says that this item is expected to have nil or negligible impact on the government's budget bottom line. I wonder whether anyone on the government benches even knows how many luxury cars that are already in Australia are sent overseas to be reconditioned and then returned to their original owners.

Given that we are facing stagnating wages, a housing crisis and a blowout in waiting lists in our hospitals, it's curious that we are debating a measure of apparently such minor importance so early in the government's new term. As I've said previously, we are supporting this bill. Under the Liberals, working Australians have been footing the bill for unfair tax loopholes that benefit multinational corporations, and the Liberals have taken credit for changes that Labor passed when we were in government and that they opposed at the time. Only Labor has been serious about cracking down on multinational tax loopholes and making multinational corporations pay their fair share. While this bill goes some way to addressing multinational tax avoidance, more needs to be done. Every dollar of tax that companies can avoid paying, sending it overseas instead, is a dollar that is not being spent on our hospitals or our schools or being used to build a better Australia.