Rex Patrick (SA, Centre Alliance) Share this | Hansard source

I move:

That this bill be now read a second time.

I seek leave to table an explanatory memorandum relating to the bill.

Leave granted.

I table an explanatory memorandum and seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows—

The purpose of the Public Governance, Performance and Accountability Amendment (Tax Transparency in Procurement and Grants) Bill 2019 is to reform Commonwealth procurement rules to place greater knowledge and transparency arrangements on government agencies entering into contracts with companies that are, or have related entities, domiciled in recognised tax havens.

The law will also introduce similar measure into arrangements for the provision of grants by Commonwealth entities.

The Australian Government has declared its desire to combat multinational tax avoidance.

However there have to date been no measures to provide the government with information on the foreign tax arrangements of companies seeking to contract with the Commonwealth to provide goods or services.

Nor have government departments and agencies been obliged to consider the tax arrangements of companies in the tender process.

Finally, there have been no public reporting requirements for government departments and agencies entering into contracts with companies that are, or have related entities, domiciled in recognised tax havens.

The same deficiencies in information collection, consideration and reporting also apply in regard to the entities that receive grants from Commonwealth Government agencies.

As a consequence there is no effective transparency in relation to government contractors or grant recipients that are, or have parent companies, domiciled in tax havens – for example, the Cayman Islands.

While there may be a wide range of legitimate reasons for companies to make offshore tax arrangements, including in recognised tax havens, there is a strong public interest in ensuring taxation transparency from entities that receive taxpayer funds, whether through government contracts or grants.

This Bill will remedy these very obvious deficiencies in the Australian Government's procurement arrangements and grants schemes.

The Bill will amend the Public Governance, Performance and Accountability Act 2013 to require the responsible Minister to prescribe foreign countries or parts thereof as tax havens.

In determining whether a country or area should be designated as a tax haven, the Minister will be required to consult with the Commissioner of Taxation.

The Minister will be required to publish a notice setting out the country, or the part of the country, the Minister proposes to prescribe; and invite interested parties to make submissions about the proposed prescription. The Minister must have regard to advice and submissions received before deciding to prescribe a tax haven.

This process will ensure that the Minister's decision is based on independent expert advice from the Commissioner of Taxation and provides the opportunity for input from any interested parties, which may include representatives of the country in question or companies domiciled in that country or area.

The Bill will further establish three key requirements for both procurement and grants – a disclosure requirement, a consideration requirement and a publication requirement.

The disclosure requirement will mandate that a company responding to a Commonwealth Government tender where the offered price for goods or services exceeds $4 million (or $7.5 million for construction services) will need to disclose whether the company, or any of its related entities, are domiciled in a tax haven.

These thresholds ensure that the taxation transparency arrangements will only apply to major public procurement.

A supplier or grant applicant will also be required to give details of foreign entities that might not otherwise be available on account of the secrecy laws normally encountered in tax haven jurisdictions.

The consideration requirement will require officials to consider, in consultation with the Australian Taxation Office (ATO), any additional risks that a company, or any of its related entities being domiciled in a tax haven, may have on tax avoidance and transparency.

The publication requirement will impose an obligation on agencies that award contracts to companies that are, or have related entities, domiciled in a tax haven to publish the number of contracts and the total value of contracts in their annual reports.

Similar requirements will also apply to the award of grants by Commonwealth agencies.

The Bill will not make it unlawful or otherwise prevent the award of contracts or the provision of grants to companies and entities that have tax haven links. However it will establish a much-needed transparency scheme and impose additional due diligence requirements on officials to ensure that the public interest is properly weighed in Australian Government contracting and grants processes.

Australian taxpayers have a right to know if any significant amount of taxpayer money is being given to entities with tax haven links. They have a right to expect that Australian Government procurement will take into account international taxation issues.

This law will achieve these objectives, and the information that flows into the public domain will inform policy makers and public debate about further measures that may be required to strengthen Australia's efforts to combat multinational taxation avoidance.

I seek leave to continue my remarks later.

Leave granted; debate adjourned.