Doug Cameron (NSW, Australian Labor Party, Shadow Minister for Human Services) Share this | Link to this | Hansard source

Labor is more than happy to provide support for sensible measures when we see them. We will provide our support to this measure, the Tax and Superannuation Laws Amendment (2014 Measures No. 4) Bill 2014. At the outset I want to make it clear that this is a different bill from the Tax and Superannuation Laws Amendment (2014 Measures No. 5) Bill 2014 about which many people have expressed concerns. The No. 5 bill is not being debated here today, but, when it is, we will be opposing measures including changes to research and development and to the seafarer tax offset.

The Tax and Superannuation Laws Amendment (2014 Measures No. 4) Bill 2014 has five schedules. Schedule 1 tightens the debt limit settings and the thin capitalisation rules to ensure that multinationals do not allocate a disproportionate amount of debt to their Australian operations. Schedule 2 reforms the foreign non-portfolio dividends. Schedule 3 amends the Income Tax Assessment Act 1997, ITAA 1997, to ensure that the foreign residents capital gains tax regime operates as intended. Schedule 4 requires the Commissioner of Taxation to issue a tax receipt to individuals for the income tax assessed to them and for the proportional allocation to total government expenses. Schedule 5 makes a number of miscellaneous amendments to taxation and superannuation laws. These are all sensible measures because, as in the case of schedules 1 and 2, these are further examples of the Abbott government implementing the former Labor government's approach. We are more than happy to give credit where it is due and to commend the government for implementing Labor's proposals to reduce multinational tax avoidance.

I do want to say more things about multinational tax avoidance because it is a very important issue for Australia. When we were in office we laid out a very comprehensive plan to deal with multinational tax avoidance. It was at the end of the story and there was always more work to be done, but it was a very comprehensive plan indeed. There were measures that would have prevented $5 billion in revenue being moved offshore. We put all these measures in place because they are important principles. Labor or the coalition will always need to fund important government services, so there will always be a certain measure of tax which needs to be collected. If it is not collected from multinationals, then it is collected from somebody else. It will be collected from small Australian businesses which do not have the ability or the resources to engage in elaborate and complex tax avoidance schemes. It will be collected from Australian personal income tax payers or it will be collected from others through the tax system.

This is all about fairness. It is also about competitive neutrality because businesses that do not pay their fair share of tax should not be disadvantaged in their competition against these multinationals who seek not to pay their fair share of tax. This is a very important principle. We put in place comprehensive measures which the Treasurer, just last sitting week, referred to as being robust and world-class. These are the measures put in place by the previous Labor government—addressing aggressive tax structures that seek to shift profits by artificially loading debt in Australia; better targeting resource sector concessions for depreciating assets to support genuine exploration; improving the integrity of, and ensuring better compliance with, the foreign residents capital gains tax regime; closing loopholes in the offshore banking unit regime; preventing sophisticated investors from engaging in dividend washing; and, importantly, increasing ATO compliance checks on offshore marketing hubs and business restructures. As I said, the Treasurer himself referred to the robustness of this approach—a Labor approach.

I do want to take the opportunity to recognise the significant work put in by the former Assistant Treasurer in the previous government, David Bradbury. Mr Bradbury provided detailed leadership in implementing these changes. So good was his work that after leaving the parliament he was engaged by the OECD in the important role of advising the OECD on tax reform. He now resides in Paris advising the OECD on international tax. It is a long way from Penrith to Paris but Mr Bradbury has made that change very well. The Treasurer has referred to the work of the OECD and to the Secretary General of the OECD, Angel Gurria, who was in Australia last week in Cairns. The Treasurer ought also recognise that, in very large part, the work of the OECD has been led by David Bradbury, the former Assistant Treasurer. It is testament to the work he did in his portfolio that he was recognised by this international organisation and was engaged by it.

Most of the previous Labor government's work has been retained by the current government. However, the current government wants to leave open tax loopholes which are worth over $1.1 billion. This to the government's great discredit. It is to the government's great discredit that it is reversing, or not implementing, changes that the previous government was putting in place which further minimised international tax evasion.

This was at a cost to the Australian taxpayer of $1.1 billion. This goes to priorities and values. This is a government that says in its budget: 'We have to make tough decisions'—that is, 'We have to change the way we index pensions and make it less fair. We have to make people wait half a year for important Newstart arrangements. We have to cut $80 billion out of health and education. We have to make all these unfair cuts. But, by the way, we can give $1.1 billion back to tax evaders.' That just shows the wrong priorities that this government has. The priorities should be pensioners, people who cannot look after themselves, young people in this country who are struggling to get a job and maintain food on their table. That is what we should be doing here, not providing a $1.1 billion scheme for international companies to evade tax in this country. That is the wrong priority. Our priority should be those who need help in Australia, not the multinationals.

If the Treasurer wants to recognise the error of his ways and reverse his reversal of the previous government's initiatives, he will have our bipartisan support. Our shadow Treasurer, Mr Bowen, has said on previous occasions that we fully accept and recognise that there can be implementation challenges in complex law changes; and, if the Treasurer has a different way of doing it, we are more than happy to look at that. If he takes advice about how it could be done better, we would be more than happy to look at that. But he does not because he does not want to provide the leadership necessary to ensure that these changes can be made. This just goes to show that this is a Treasurer who is strong when it comes to standing up to the weak but weak when it comes to standing up to the strong. He is not prepared to take on multinational companies who are engaging in tax fraud and tax evasion. He is not prepared to take them on. He is prepared to talk about it, he is prepared to beat his chest and he is prepared to say to other countries around the world that they should be doing more; but he is not prepared to show that leadership here in Australia, and that is to the discredit of the government and the Treasurer.

We think that more needs to be done when it comes to international tax avoidance. It is not good enough for the Treasurer to say time and again in the other place that he has instructed the tax commissioner to double his compliance efforts in this regard while at the same time reducing the tax office's resources. You cannot be serious when you say they should double their efforts but you are cutting back on their resources. The tax commissioner has the Labor Party's support in his endeavours. He is a very good tax commissioner. But how is he meant to double his compliance efforts at the same time as this government is reducing resourcing for the Australian Taxation Office? We have to be sure that any reduction in resources will not impact on compliance measures. But it will. You cannot demand a doubled effort with fewer resources; it just does not work. Because of this government's cuts—let us be very clear—there will be tax avoidance. It will not be stopped because compliance is reduced because this government reduces resources. The tax office must be resourced effectively.

The Treasurer is good at rhetoric. He is good at beating his chest and saying that he has issued an instruction to the tax commissioner to double his compliance efforts. The Treasurer has spent a good deal of his time puffing out his chest about last weekend's G20 agreements but his actual record on multinational tax avoidance is much less impressive. Every time the Treasurer and the coalition had the chance to work with Labor to close tax loopholes in the past few years, they voted against this. For example, the now government voted against Labor's Countering Tax Avoidance and Multinational Profit Shifting Bill 2013. That bill would have plugged loopholes in Australia's transfer pricing rules and anti-avoidance provisions. You see, you cannot just have the rhetoric; you have to support the measures that will do the business. If you do not support the measures that are meant to deal with multinational tax avoiders and you just talk about it, you are being disingenuous. You are putting more pressure on Australian taxpayers and you are being totally unfair and totally against what is in the best interests of this nation—and that is to make sure multinationals pay their fair share of tax.

The coalition also attempted to block Labor's Cross-Border Transfer Pricing Bill 2012, which cracked down on companies overvaluing assets in international transactions. Since the coalition took government, the Treasurer has ditched five significant Labor tax measures which would have stopped more than $1.1 billion in profits being siphoned offshore. These include dumping reforms to the offshore banking unit and not proceeding with changes governing reporting for multiple entry consolidated groups. Before the Treasurer gives himself too much credit for tackling multinational tax, he should take a good look at his own record. His actions betray a total lack of interest in making major multinationals pay their fair share.

In relation to schedule 4, let me make clear that this is a stunt by the government. Labor is not opposing this schedule. Labor always welcomes genuine measures to improve transparency. But let us call a spade a spade. This measure is a stunt pure and simple. It is a stunt that is trying to distract from the government's unfair budget that is making severe cuts to services and increasing taxes for lower- and middle-income Australians.

We the opposition are prepared to give our support to the Tax and Superannuation Laws Amendment (2014 Measures No. 4) Bill 2014 on the basis that it is largely implementing measures that were contemplated and begun by the previous Labor government. We commend the government for proceeding with them. We condemn the government for handing back $1.1 billion to international tax avoiders by not proceeding with the previous Labor government's other important changes.

It is absolutely unacceptable for this government to claim that it is doing something about multinational tax avoidance when its history and record clearly indicate that it does not have the courage to deal with multinational tax avoidance. As we have seen with this budget, it is all about putting more pressure and more taxation issues back on the poorest people in this economy. The cost-of-living pressures arising from the budget will not greatly affect senators in this chamber, the multinational companies, the richest people in this country and the best paid executives with their $16 million salaries. But they will affect families which are trying to send their kids to school and put food on the table, and they will affect pensioners, who battle day in and day out to get a decent standard of living. They will affect young people who are at a disadvantage and do not have a job. They are targeted at the poorest people in this country. While these changes are targeted at the poorest people in the country, the multinational tax avoiders are getting off scot-free under this government.

Senator O'Sullivan interjecting—

It is always interesting when we get a National Party senator intervening in a debate about fairness and equity. The National Party are the absolute doormats of the government. The Liberal Party wipe their feet all over them day in and day out. National Party members have got more people in their electorates who are affected by this budget than Liberal Party members. The National Party are the party which have poor people, unemployed people and pensioners in their electorates. Yet what do they do? They just bow down to the coalition. When the coalition should be dealing with international tax avoidance, the National Party come in here and snipe at the Labor Party for standing up for the poor, the disadvantaged and young people in this country.

When the National Party have got the backbone to stand up for their own electorate, then they can come in and attack the Labor Party. But when you are a jellyback party, when you have no backbone, when you are weak at the knees in the coalition and will not stand up for your own electorate, do not come here lecturing the Labor Party about fairness, equity and jobs.

The National Party have no guts, no credibility in looking after the young people and the pensioners of this country. Why would the National Party agree to this budget? Why would the National Party not say: 'Let's get this $1.1 billion, the result of multinational companies avoiding their tax. Why would they attack their own electorate—the pensioners who are doing it tough, the young people who cannot get a job and the families who are battling to get school boots and uniforms for their kids? Why do they do that? Why do they attack some of the poorest paid people in their communities and take away payments that they could have got for their superannuation into the future? The National Party have got an absolute gall by coming into this place and representing some of the poorest people in this country. When you grow a backbone, then come in here and actually put your point. But when you need a coathanger up your back to give you some stability, do not come in here arguing that we are doing the wrong thing. We are not doing the wrong thing by saying to multinational companies in this country, 'You must pay $1.1 billion.' We are going to make sure that people who can afford to pay tax will do so.

We will not be sitting in the front seats of Bentleys, with supporters handing over brown paper bags so that they do not have to pay tax in this country. We will not be doing that. That is the style of the National Party and the Liberal Party. They look after the big donors and the multinational companies that put money in their pockets. The National Party look after the money, their donors and the tobacco companies that are killing Australians day in and day out. That is their style.

I am always happy for Senator O'Sullivan to raise issues with me when I am speaking, because I will go to the issues of their lack of confidence, the doormats that they are, the lack of guts, the lack of spine and the lack of backbone that they have. Stand up to for your community. Get $1.1 billion out of the multinationals and look after the people you should be looking after. You are an absolute disgrace. The Liberals are all over the top of you and you will not do anything about it.

David Leyonhjelm (NSW, Liberal Democratic Party) Share this | Link to this | Hansard source

It is telling that Labor and the coalition deem this dog of a bill to be non-controversial, to be waved into law over lunch with no divisions. The Tax and Superannuation Laws Amendment (2014 Measures No. 4) bill is an example of the unceasing churn in tax law, based on the forlorn hope of the ATO that they can keep up with the tax-minimising taxpayer, causing ever greater complication of the already impregnable tax law and causing a groundhog day of transition costs for business and bureaucracy alike.

The bill seeks to dictate how businesses do business and is littered with retrospective and adverse provisions. Schedule 1 ramps up the pressure on businesses to fund their activities through foreign equity injections rather than through foreign borrowing. For instance, the government in its wisdom is decreeing that—where, previously, 75 per cent of foreign injections could come in the form of foreign borrowing without a tax penalty—now only 60 per cent of foreign injections can come in the form of foreign borrowing. The motivation for these 'thin capitalisation' rules is that the government has decided to tax the returns on foreign equity injections at a higher rate than the returns on foreign borrowing—that is, the government taxes dividend payments flowing overseas more heavily than interest payments flowing overseas.

The Henry tax review recognised the madness of differential tax rates, and the madness of attempts to control the debt/equity decisions of businesses as a consequence. Stepping back, the greater madness is the idea that income tax can and should continue to generate $250 billion each year. The costs of eking out the last drops of this tax revenue are extremely high and far outstrip the benefits achieved when government spends these last drops. The costs consist of administration costs, compliance costs, and the cost of people changing their behaviour—which means giving up on what they most wanted to do. With income being an increasingly mobile concept, every tax official in town would agree that the costs of income tax are rising rapidly. Both the past and current governments have ignored the Henry tax review recommendations in this area, have ignored that ongoing reliance on income tax is delusional, and have chosen instead to re-arrange deckchairs on the Titanic. To top it off, schedule 1 involves retrospective provisions that are adverse to taxpayers.

Schedule 2 contains fiddly provisions necessary to maintain the odd system where returns on foreign equity investment are taxed differently depending on whether the investment is made by one big investor or lots of little investors.

After reading schedule 3, I thought, 'Surely it wasn't Treasury that drafted this bill but Franz Kafka.' Schedule 3 fiddles with the capital gains tax system. Part 1 of schedule 3 applies from 14 May 2013 for some taxpayers and from 13 May 2014 for other taxpayers. When I read that, I thought that it must be a typo. The same provision starts on 14 May 2013 for some, and on 13 May 2014 for others. I ask the Assistant Treasurer, or perhaps the parliamentary secretary, to please inquire as to whether some Treasury official is about to succeed in getting a joke entered into tax law. The only thing consistent about these two dates is that they occur in the past. Maybe this schedule wasn't inspired by Franz Kafka but by Marty McFly.

The explanatory memorandum's explanation for this retrospectivity is as follows:

The retrospectivity … is warranted as the amendments correct a defect in the operation of the Principal Asset Test that would otherwise prevent it from operating as intended.

So: adverse retrospective legislation is warranted whenever the Treasury screws up. If they intended for people to pay more tax, it does not matter that it was not the law of the land; the tax shall be paid.

Another part of Schedule 3, which changes the definition of taxable Australian property, commences from 12 December 2006. The EM claims that this extreme retrospectivity does not adversely affect taxpayers. To do this, the EM seems to draw inspiration from either George Orwell or George Lucas, with a gall reminiscent of Obi-Wan Kenobi saying: 'These are not the droids you are looking for; move along.' The EM reads:

These changes … do not negatively affect any taxpayer because the scope of the definition of taxable Australian property aligns with the intention of the original provisions.

So: what was once your money under the law of the land will no longer be your money under the law of the land, but you are not negatively affected because it was never intended to be your money.

Schedule 4 of the bill will require the ATO to tell you a story about how your tax dollar is spent, which would be fine if it told low income earners that every tax dollar they paid miraculously came back as more than a dollar of welfare, and if it told high income earners that every tax dollar they paid went almost entirely to other people who consider them to be evil. However, that is not the story that the ATO will tell taxpayers.

Schedule 5 wraps up the bill with some incomprehensible 'miscellaneous' matters, which I am sure no-one, and I mean no-one, has read. So, as a pop quiz to our parliamentary secretary, could I ask him to educate us with a brief explanation of just one of these 'miscellaneous' matters when he speaks again on the bill, just to assure us that someone, somewhere, has opened the pages of that schedule.

All in all, what we have here is a standard tax and superannuation laws amendment bill. In fact, this bill is called 'No. 4' because we have already had three others this year. And yes, just like an episode of Thunderbirds, there is a No. 5 waiting in the wings. I can't wait.

To our Hansard colleagues: what I am about to say is not a typo.

I condemn this bill to the House.

Scott Ryan (Victoria, Liberal Party, Parliamentary Secretary to the Minister for Education) Share this | Link to this | Hansard source

I cannot let the contribution by Senator Cameron go unremarked, given that today really is a special day for Senator Cameron and all those opposite, because earlier today the final budget outcome for Labor's last year in office was released, and of course the final budget outcomes showed that the Labor government left a $48 billion deficit for the 2013-14 financial year. Let us remind people that this was the year where we were originally about to have a $5 billion surplus—a $5 billion surplus under eight successive budget updates offered by the Labor Party. We were going to have a budget surplus, but, like every other promise about financial management, that just disappeared. It is always a mirage—the closer you get, the faster it disappears. They always had excuses: the excuses of massively inflated and soaped budget estimates, with forecasts of massive revenue growth. That was always the problem: those forecasts never came true. But Labor never talked about their spending problem The Labor government never, ever talked about its spending problem and the rapid, unprecedented and record rate of increased government spending that occurred on their watch.

Let us look at the last 12 months. In May last year, in his last budget former Treasurer Swan forecast that this was going to be a year where there was only—and I know Labor say 'only' when there are small budget deficits—a $14 billion deficit. By the time Prime Minister Gillard had been replaced by Prime Minister Rudd and we had an economic update from the new Treasurer, former Treasurer Bowen, the $14 billion deficit in about eight weeks had become a $25 billion deficit—a blow-out of nearly 50 per cent in only a matter of weeks since the budget was presented. What we see today is the final budget outcome—a $48 billion deficit. The budget deficit increased by a factor of three, because you can never trust what a Labor Treasurer says at the dispatch box about financial management. You can never trust their observations about this sort of legislation.

I turn now to some of Senator Cameron's observations. The Labor measures referred to by Senator Cameron that the government is not implementing are simply not able to be implemented. They would not deliver the revenue that Labor claimed or they would have caused severe disruption to legitimate Australian business activity and they would have imposed dramatic compliance costs. They were, again, one of these landmines that Labor leave in a budget.

The last 12 months of Labor in office was the most profoundly irresponsible period of financial budgeting this country has ever seen. They left financial cliffs for program after program. They kicked the can down the road and gave programs an extra year of funding. With the record budget deficits that were forecast, it is amazing to know the number of programs that were still left unfunded. They attempted to confect budget surpluses in the forward estimates, as they had for the previous six years since they went on their spendathon. When the GFC hit North America and Europe, Labor went straight back to base and found any excuse to just throw the money out and permanently increase government spending. Remember: government spending increased by more than $100 billion a year between 2007 and 2013. What the Labor Party did was propose measures they knew they would never have to implement, that they knew could never be implemented, merely to pad their misleading budget forecasts. This government has taken responsible action and not progressed with Labor's proposals, particularly because of the costs they would have imposed.

Schedule 1 to this bill amends the income tax laws to protect Australia's tax base by tightening and improving the thin capitalisation rules. This bill amends the thin capitalisation statutory debt limits to bring them more closely into line with commercial debt levels or to regulatory requirements in the case of banks and non-bank financial entities. It provides additional flexibility with the introduction of a new test for inbound investors to allow gearing of the Australian operations up to the level of gearing of the worldwide group. In line with the government's commitment to reduce compliance costs for business, this bill increases the de minimis threshold from $250,000 to $2 million of debt deductions. Taxpayers below this threshold are not required to comply with the thin capitalisation regime.

Schedule 2 contains improvements to the tax exemption available to Australian companies for their foreign non-portfolio dividend income. The changes allow broader access to the exemption and allow it to flow through interposed trusts and partnerships. The changes also improve the integrity of the tax system, in particular the thin capitalisation rules by ensuring the exemption only applies to returns on instruments treated as equity for tax purposes.

Schedule 3 to this bill amends the taxation laws to improve the integrity of the foreign resident capital gains tax regime by preventing the double counting of certain assets under the regime's principal asset test. Schedule 3 also makes a technical amendment to the regime's reference to a permanent establishment definition to ensure the regime applies where assets are used in carrying on a business through a permanent establishment in Australia.

Schedule 4 to this bill amends the income tax laws to require that the Australian Taxation Office send every eligible Australian taxpayer a tax receipt. This tax receipt will detail how the total amount of tax assessed to that taxpayer for that income year was notionally used to finance different categories of Commonwealth government expenditure.

Schedule 5 makes a number of minor amendments to ensure the law operates as intended by correcting technical or drafting defects, removing anomalies and addressing unintended outcomes. Making periodic minor amendments to the tax and superannuation laws furthers the government's commitment to deregulation, reducing compliance costs for taxpayers.

I commend this bill to the Senate.

Question agreed to.

Bill read a second time.