Gavin Marshall (Victoria, Deputy-President) Share this | Link to this | Hansard source

I inform the Senate that the President has received the following letter, dated 1 December, from Senator Siewert:

Pursuant to standing order 75, I give notice that today I propose to move "That, in the opinion of the Senate, the following is a matter of urgency:

The Treasurer's failure to tackle corporate tax evasion."

Is the proposal supported?

More than the number of senators required by the standing orders having risen in their places—

I understand that informal arrangements have been made to allocate specific times to each of the speakers in today’s debate. With the concurrence of the Senate, I shall ask the clerks to set the clock accordingly.

Christine Milne (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I move:

That, in the opinion of the Senate, the following is a matter of urgency:

The Treasurer's failure to tackle corporate tax evasion.

Australia has a revenue problem. It is not a budget emergency; it is a revenue problem. The biggest contributor to the revenue problem is the failure of corporations in Australia and multinational corporations to pay an appropriate amount of tax. The Treasury secretary, Mr Parkinson, in a speech just in the last few days, hit the nail on the head. He strongly put to Australian business that there had been a complete and utter lack of leadership on taxation reform from business. He said that the ethos was 'take from the citizenry at large and give it to us'. That is very much exactly what we see from multinational corporations operating in Australia and big business in Australia. Frankly, the Abbott government facilitates big business in going about this ethos of 'take from the citizenry at large and give it to us'.

The classic case we have seen in the lack of leadership on corporate tax was, of course, the Abbott government's decision to abolish the carbon price. This is a case of 'take from the citizenry and give it back to us' the big polluters in Australia. But there was also the mining tax—get rid of the mining tax but take out of the pockets of the citizenry all of those measures that the mining tax was to fund and that have, of course, been kept. It is Prime Minister Abbott's choice to spend more than $5 billion in the next two years partly to support the war in Iraq and partly to facilitate the deal that the Prime Minister's office has done with Mr Palmer from the Palmer United Party to abolish the mining tax. So do not come in here and tell us that there is a problem caused by anyone other than the big end of town saying 'take from the citizenry at large and give it to us.'

Tax evasion absolutely comes into this. Tax minimisation, in terms of the loopholes, is one thing; then there is outright tax evasion. Globally, everybody knows that multinational corporations are essentially just moving their taxable income around the world so as to avoid paying tax. We have seen it in absolutely blatant terms from companies like Google, for example and Apple. In fact, there are billions of dollars that they have not been paid tax on, because they have been able to move their income around the world.

The G20 was supposed to deal with this. At the G20 there was an agreement that exchange of information automatically between G20 countries would occur by 2017. What did Australia do? Australia pushed for having us be subject to completing the necessary legislative procedures by 2018—to push it out by a year. Why did we do that? Why weren't we one of the early movers? It is no use the Treasurer standing up and talking about tax evasion and then getting himself along to the G20 and pushing out Australia's obligation in order to give business another year. When asked why he had pushed it out and why Australian could not be one of the early movers, he said that it was because big business in Australia was not prepared to agree to it and get ready in the time frame. That is exactly what we have going on.

What do we need to do? We need to require large corporations to provide more public disclosure and transparency. That is the first thing, because nobody is aware of the extent to which they are hiding their capacity to pay tax, of where they are hiding their money or, in fact, of how they are minimising their tax. We need to increase the fines for tax evasion and extend laws to effectively cover the full range of corporate tax avoidance strategies. We need to eliminate or restrict the use of stapled securities for tax arbitrage according to the global norms. We need to ensure that the Australian Taxation Office is adequately funded and staffed. The Treasurer stands up and says that he wants to make a focus on tax evasion but then sacks from a tax office the very people who might actually be able to do the work. And where do they go? They get picked up by KPMG, PricewaterhouseCoopers, Ernst & Young and Deloitte. And what do they do over there? They advise their corporate clients how to minimise and avoid tax. You cannot tell me that a government that was serious about cracking down on tax evasion and tax minimisation and about ending the loopholes would sack the very people in the tax office whose job it was to do that work, only to see them go across to those corporations that are making a fortune out of assisting those very same companies in avoiding their tax obligations.

If the government were serious about this, it would also have been leading the G20 to adopt tough and effective global rules to combat corporate tax dodging. But instead of that we have just had that huge dump of information about what has being going on in Luxembourg, for example, with corporations from around the world putting their money into the procedures overseen in Luxembourg. Now we are expected to believe that these companies are in any way serious.

There have been many stories written lately as to ways in which this could be done, but I have in the Senate here a 'publish what you pay' piece of legislation. I am glad to say that a delegated committee has just passed this legislation in the House of Commons and I would like to get support for it here in Australia. It is a legally binding requirement for large companies involved in natural resource extraction to provide in their annual reports details of the payments they have made to governments across the world on a project-by-project basis. We need to know what deals have been done with these governments and how they have been paid off, because we know that when that money goes into those poorer countries it goes into the pockets of the officials to give them especially good rates on everything and to avoid their responsibilities. In the absence of strong democratic institutions and stronger governance the people of those countries are unable to hold corrupt officials to account and those officials siphon off the money. We are going to see exactly that when the Australian government pays Cambodia. Ministers in the Hun Sen government will have that in their back pockets. There is no way that it will go to help refugees on the ground there.

But the first thing you could do—a really obvious fix for tax dodging—is to make it mandatory for all foreign subsidiaries to be disclosed in financial statements. The Tax Justice Network, for example, noted in 2013:

BHP had 462 subsidiaries in 49 countries; tax payments were disclosed in 12 countries, but not in the other 37 countries with 128 subsidiaries. Rio Tinto had 926 subsidiaries in 71 countries; tax payments were disclosed in 28 countries, but not in the other 43 countries with 111 subsidiaries.

So why wouldn't you require these corporations based here to actually nominate their subsidiaries so you can see where they are transferring their taxable income in order to avoid tax?

We are also told that there is going to be a crackdown on tax havens, but we have yet to see that. Of course, we saw at last year's federal election in the caretaker period when the tax office chose not to challenge the court ruling on the $880 million rebate being paid the from the tax office to Rupert Murdoch's corporations. To this day I have not been able to find out who authorised the tax office to decide not to challenge that in court. Why should Rupert Murdoch's companies be able to get away with what they have managed to get away with, and that is all money coming out of the budget. If we want to fix things in Australia we need to raise revenue and that means a serious effort to crack down on tax evasion; not take it out of the pockets of the poor, the sick and the unemployed. The big end of town is taking from the citizenry and they intend to keep on doing it. We will stand up against it. (Time expired)

Sean Edwards (SA, Liberal Party) Share this | Link to this | Hansard source

It pleases me to rise to speak on this issue today:

The Treasurer’s failure to tackle corporate tax evasion.

Senator Milne, it would—

Gavin Marshall (Victoria, Deputy-President) Share this | Link to this | Hansard source

Senator Edwards! Through the chair!

Sean Edwards (SA, Liberal Party) Share this | Link to this | Hansard source

I do take note of Senator Milne's contribution. It would be the usual links that the Greens have with an Iraq war and the carbon tax comes into play. Why, I am not really quite sure, because when you were in your three years of coalition we did not hear any of these things from you in your cosy coalition with the Labor Party then, who were in government. In actual fact it is indeed this government which has gone about the reform that this country requires. It is somewhat shrill to see this here, as if it is some kind of new issue that has beset countries all around the world and indeed Australia. I notice that Senator Milne's contribution referred to the G20. Well, we put it on the agenda in the G20. This is a global issue. This is something that we are very concerned about. To come into this chamber and suggest that we are not concerned about it and suggest they, the Australian Greens party, are the only ones with the moral and economic guidance of Australia today—what absolute nonsense. It just highlights the Greens populism and the crass dishonest politicking they do often resort to when they reach to please their electoral fringe.

It is the coalition government that has asked the commissioner of taxation to redouble his efforts in tax avoidance. I did not hear anything from the Greens party when they were in their cosy coalition—nothing at all.

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

4,700 less staff!

Sean Edwards (SA, Liberal Party) Share this | Link to this | Hansard source

Oh, we've just had a little thought bubble over there! Let's have a go at this. We are on the job. We have been in over 12 months and we are on the world stage with this one.

Senator Dastyari interjecting—

Gavin Marshall (Victoria, Deputy-President) Share this | Link to this | Hansard source

Order!

Sean Edwards (SA, Liberal Party) Share this | Link to this | Hansard source

In the conduct of tax reform of this nature, no nation can allow itself to be an island. Reform in isolation would only lead to the transfer of our economic activity to other jurisdictions.

Senator Dastyari interjecting—

Have you ever heard of that? That's right, we did that with a carbon tax, didn't we. We had the carbon tax that we were going to lead the world with. Unfortunately, the world did not follow us. So here we are again going to do something in isolation. Come on! It is a globalised place out there now and all we do if we do it in isolation is export the jobs. It is a global issue and that is why it was brought up on the global stage. At least in the contribution that the Leader of the Greens made they did refer to the G20, which is the appropriate global forum for this to be brought up at.

To date the important work of this government covers 15 specific action items to address tax avoidance by multinational companies. I will give some idea to those that may be listening to this contribution. It includes increasing transparency in the tax system through country-by-country reporting, which will provide tax authorities with a clear overview of the location of profits, sales and assets, and where taxes are to be paid and accrued. I hope you are taking note, because this is actually going on. This is not just some empty little thought bubble in the morning: 'What are we going to have an urgency motion about in the chamber today?' The Greens say that businesses are shirking their responsibility and that the tax system is principally funded by the poor, who they say are subsidising the rich, who in turn do not pay their taxes either. That is not just a gross falsehood and intellectually dishonest; it is so easily shot down with the red pen of anyone informed in these matters.

One wonders how such an argument can possibly take flight in the first place. Well, it takes flight because it suits the Greens' politics of envy. This is their special brand of dog whistling. That is why they so eagerly pushed the recent report by the Tax Justice Network. What a lovely cover that is! It sounds nice! The report is a piece of fiscal fiction that should embarrass its supporters as much as its authors. It is claimed that the ATO is missing out on $8 billion in forgone revenues due to tax avoidance. You do not think that we would be onto that? We are all over here playing golf every day that we come to work!

I might note who the authors actually are. The Tax Justice Network consists of such unions and left-wing activist groups as the ACTU, the Australian Education Union, Greenpeace, Oxfam Australia and Victorian Trades Hall.

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

Oh no! Not Oxfam!

Sean Edwards (SA, Liberal Party) Share this | Link to this | Hansard source

Yes; damn right. If a study being associated with such groups does not afford it some intellectual scepticism in the first place, the report's methodology surely does. The authors added the average tax paid by ASX 200 companies during the last decade, compared that to pre-tax profits and determined that a tax rate of 23 per cent was paid, rather than the statutory rate of 30 per cent.

I notice that Senator Milne referred to former ATO people that go and work in private companies. Grant Wardell-Jones is at one of those big firms. He is a senior tax partner at KPMG, and he said the following in the press:

These statistical assertions are clearly misleading and are a misuse of information.

Time available does not afford an adequate opportunity to lay out the flaws in their embarrassing fullness. Suffice to say—

Senator Dastyari interjecting—

Through you, Mr Deputy President, I will take that interjection from Senator Dastyari, because he obviously wants to be on the Hansard. This report uses the amount of tax a company pays as a percentage of reported profits—you might learn something here—compared with the statutory corporate tax rate of 30 per cent to calculate effective tax rates. That is reasonable. This analysis is flawed as the tax rate is not applied to accounting profit but applied to taxable income. That is another good point. There are significant differences between accounting and tax profit, such as: the treatment of capital gains and losses, recognition of foreign income, treatment of franking credits, and a tax system delivering some programs like research and development incentives and small business tax breaks. But that is all a little bit complicated for you over on the other side. That would be looking at in the way in which it actually plays out around the world. Those are international accounting policies, not political policymaking on the run. The thought bubble this morning that brought this matter of urgency to the chamber is surely that.

Companies release accounting notes to reconcile current and deferred tax and they explain significant tax issues and what may appear otherwise to be discrepancies. The report did not analyse those notes but simply applied the 30 per cent headline rate to cash profits and labelled the difference tax avoided or evaded. That is not a research document; it is a slur—a slur that the Greens eagerly associate themselves with and use as the basis of statements like that today. Any accountant worth his salt can go through any of this contribution that I have made, and they can put my argument up against your argument and see how you go. I notice that Senator Whish-Wilson is in the chamber. He comes from a finance background, and he might like to get up and confirm that what I have just said is true and accurate, rather than what is being peddled around the place. I will be interested to hear it from here.

The coalition is proud of its work in this space. We have done more work than those on the other side did in six years. Labor's record on tax during that time consisted of some matters that are a little less pride-worthy, including a $9 billion carbon tax—by the way, you have pledged to bring that back in if re-elected, haven't you? You are going to bring that back in. They brought in a mining tax that raised 2.5c per Australian in its last quarter but had billions of dollars of linked expenditure; a chaotic fringe benefits tax, and the shadow Treasurer has insinuated Labor will bring this back as well; shock changes to employee share schemes; and 90 unimplemented tax changes. (Time expired)

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

I begin by thanking Senator Milne for her contribution and acknowledging that, despite what other senators believe, this is actually a longstanding issue that Senator Milne has expressed a long-term interest in. I acknowledge that the Senate Economics References Committee, of which I am the chair, has a reference at the moment dealing with the broader issue of taxation and tax avoidance. There will be a full and better opportunity to explore in detail, through the appropriate committee process, some of what is being discussed today. I understand that sometime in the first half of next year we will be producing a report.

I want to touch on some of the earlier contributions from senators and, in particular, from Senator Edwards. Before doing so, I want to put the framework of what it is that we actually here talking about at the moment. There are two very distinct taxation challenges that sometimes tend to be blended into one, and we are talking about two large, equally important challenges that are very, very different. On one hand, there is the issue of multinational tax avoidance. What that refers to is multinational companies from around the world—your Googles and your Apples—who do business, who do trade, who do activity in Australia, and yet structure their businesses at an international level in such a way as to minimise any form of domestic taxation payment. Traditionally it was the Cayman Islands, Luxembourg or other places. More recently it tends to be places like Ireland and others that have more favourable tax regimes that get used. You are dealing with international companies structuring themselves in such a way as to minimise any form of domestic payment. That is something that does need to be dealt with at an international level. That is something that should be explored in places like the G20. That is something you are not going to be able to tackle solely as an island, as an individual nation.

The second issue you are dealing with is the taxation arrangements for Australian firms and how Australian firms are able to minimise their own taxation through either some form of international leveraging or a process of deductions and tax credits that allows them to minimise their tax liability. Let's be clear, because Senator Edwards touched on the Tax Justice Network report. What the Tax Justice Network report is not saying is that these companies are not paying their legally required amount of tax. They are not saying they are not paying 30 per cent of their taxable income; the point they are making and wanted to highlight in their report is: 'Hang on. Why are we in such a system where there are so many deductions, where there are so many accounting tricks, where there are so many different ways of structuring your own accounting practices that allow companies to take what are sometimes quite large figures'—and you are right; they were looking at cash profits. There is a real disconnect at the moment between cash profits and taxable income. The question we should always be asking ourselves and need to be ever vigilant on is how you make sure you are minimising the gap as much as possible to make sure that, where there are legitimate tax exemptions with inputs and other matters, those legitimate exemptions should and will always exist.

Those on that side of the chamber may disagree on different things. They may disagree on R&D, environmental or whatever kinds of tax concessions are available, but how do you make sure legitimate tax credits are there and it is not simply being used as a vehicle for people minimising their taxation? I think what is important is that this is a debate and discussion where, wherever possible, it is important to try to raise it outside the simple, day-to-day political debate and to actually make it about something a bit bigger. We as a parliament need to be ever vigilant and realise the fact that this is never an issue that gets settled. We could have the best tax system tomorrow. We could close half a dozen loopholes. We could improve it as much as we can improve it, and in four or five years time we will need to come to the table again and be prepared again to look at how we tackle these issues.

I note that in the recent estimates hearing into the Department of Finance we actually had Peter Costello, the 11-year Treasurer of Australia. He made quite an interesting point, which is that there are these new challenges that really were not there several decades ago and it is largely tied into the way in which money is transferred and how transactions are made. You have this quite complex question: if I am dealing with a simple financial transaction within two countries which results in a good being sold in a third country, where is the responsibility for taxation to be paid in that kind of scenario?

What worries me is there is a lot of rhetoric and there has not been enough action. It is great to see Senator Edwards get up and talk about how active the government has been and this and that. I note that the Treasurer did vote against Labor's countering tax avoidance and multinational profit-shifting bill in 2013. The Liberal National Party and their colleagues also attempted to block the cross-border transfer pricing bill in 2013. The Treasurer has five significant Labor tax measures which were to stop more than $1.1 billion in profits being siphoned offshore. This is a live debate. This is a real debate.

I also note that you cannot be serious or talk about being serious about tackling these issues when you go out there and sack 4,700 staff from the Australian Taxation Office. That has a material impact on the ability to collect taxation revenue. I think we have to be careful in this debate. You are dealing with a sector where people are very advanced, very technical and very experienced in creating opportunities and ways in which to minimise their taxation. We have to make sure that on the government side we have the right skill set and the right people because this is becoming an international business. Tax avoidance is an international business. There are international consultants. You only have to spend five minutes on the internet and you can find consultants around the world based in Luxembourg, Belgium, tax havens like the Cayman Islands and others who will for a small fee completely restructure your entire business to make sure you are not paying Australian tax. The question before the Senate that needs to be explored is how we recreate the Australian tax system. How do we change our rules to make sure that on one hand we are collecting the maximum amount of tax and on the other hand are not risking—and do not want to risk—driving business and profits overseas. That is a huge challenge.

While it is good to have this brief debate today, I think there needs to be a detailed process. We are going through that detailed process through the Senate inquiry process. I urge senators to participate in that debate. We are going to have some experts come provide proper evidence. I do not think we are going to have the opportunity today to have the kind of detailed debate we need to have when we are dealing with an issue as big as multinational and domestic tax avoidance. But I do want to say that the laws in Australia at this point in time have not kept up with the practices that are taking place. That is why there needs to be a review. That is why there needs to be a rethink. That is why it is simply not good enough to put our hands up and say, 'We can't do anything here if it's not being done at an international level as well.' Yes, we should play a role in the G20 and other forums at raising these issues. Yes, we should play a role in trying to make sure we are elevating this into an international issue through whatever forum is appropriate. But we also have to look at the domestic tax rules and structures, at the credits, at the input and at the tax minimisation procedures available at a domestic tax level with which we have allowed so many companies and Australian businesses to pay minimum tax.

When we use the term 'effective tax rate of 23 per cent', we are not saying that they are not paying 30 per cent of their taxable income; we are saying that the deductions and other things that have become available have allowed them to minimise their taxation and to reduce their taxable income to such an extent that it is having a material impact. While we are having a debate about the age of austerity, while we are having a debate about cuts and while we are having a debate about which programs can and cannot or should and should not exist and what can and cannot be funded, part of that debate needs to be about how we are raising and collecting maximum revenue. I think that is where this debate needs to go. We have a process and an opportunity to do that, in a much more detailed way then we will today, through the Senate Economics Committee process.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I am glad this has come back to the chamber. This is the second urgency MPI motion that we have had.

Bill Heffernan (NSW, Liberal Party) Share this | Link to this | Hansard source

Talk some detail instead of the usual political bullshit.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I am only 15 seconds in, Senator Heffernan, through you, Chair, so I hope I will be able to add some detail to the debate. It is the second time that we have had an urgency motion on this and we have asked numerous questions during question time in the last nine months. In relation to what Senator Edward said, I think we need to be very clear about who has this on the agenda, who got this on this government's radar—

Bill Heffernan (NSW, Liberal Party) Share this | Link to this | Hansard source

We have been talking about it for four years, Mate.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I certainly acknowledge Senator Heffernan's role, as I have done before. The groups that actually got this on the agenda where the community groups who came to Parliament House. I am sure they have walked into everyone's room in the last 12 months, the two main ones being Micah Challenge, who came here in June, and of course the Oaktree foundation. They visit us every year. Community groups right across this country have run a very strong campaign for tax justice and the lack of common reporting standards, problems with profit shifting, base erosion and transfer pricing—all the different techniques that are used by multinational corporations to minimise tax.

I think we need to give credit where credit is due. It was put on the agenda at the G20. However, Senator Heffernan is absolutely right in what he said as he walked out the door. He has been banging on this drum for over four years and Senator Milne has been banging on this drum for years—the issue of common reporting standards. When I did my Securities Institute course, back in the mid-nineties, there was an issue about trying to get common reporting accounting standards across multinational corporations. They were impossible to value because they used different accounting standards between countries. It is not even in the last five years; this issue has been around for well over 20 years. Since I last spoke on this we have had the Luxembourg leaks. We have a very chilling snapshot of the amount of tax being avoided by large multinational companies using loopholes.

Senator Dastyari is right about one thing today and that is the Tax Justice Network report was looking at the potential taxes that could be paid by corporations if they paid their fair share of tax—that is, the tax that would be levied at the corporate tax rate. There is no denying that the various ways they go about deducting tax are legal. This is a problem that the Greens have raised before—that is, where the system allows companies to pay virtually no tax. Glencore is an example that I raised at question time over six months ago with Senator Cormann—earnings of $15 billion and paying no tax. If the system allows that to happen, then it is pretty simple that we have to change the system. We have to look at the laws and the regulations, starting with information sharing. Looking at the integrity of our tax base is good start. But if we are going to allow the types of financial engineering which especially multinational companies use, then it is really going to be to naught. We will be banging our heads up against a wall if we still allow them to make these deductions.

Senator Edwards spent at least half of his discussion today talking about what a waste of time this was and why we were having an urgency motion. I would like to remind Senator Edwards why we are debating this urgency motion. The government put this matter on the agenda at the G20—that is good; congratulations—but this is going to require a very high level of action and political support. Top-down political support might be apparent now but it has to transfer into action. I want to read you a quote from the author Kerrie Sadiq, Professor of Taxation at QUT Business School, where she is talking about the G20 tax reform:

The political will must exist if outputs are to be realised in a practical sense. Governments are going to continue to be lobbied by those with vested interests. Some groups and authors suggest multinationals are doing nothing wrong, while others suggest there are no solutions to a broken tax system. Clearly, the G20 leaders do not agree and these voices are likely to become less vocal.

Welcome to the world of the Australian parliament. It has been my biggest insight in the last two years being near those vested interests and special interests that run this place, especially this government. While we are off to a good start, I have absolutely no doubt that behind the scenes there is significant pressure to slow this down. Why, for example, are we doing this a year later? Why are we coming to the party on information sharing or the disclosure of companies and what tax they pay in this country a year after the other countries have come together on common reporting standards? Why does it take Australian corporations that much longer to comply with new accounting standards, all designed to reduce tax minimisation?

These are issues that we have been asking Treasury at estimates time, but it is a question for which we have not had a clear answer. Senator Cormann mentioned giving companies time to adjust by trying to find middle ground, but it seems to be okay for corporations overseas. This has been on the agenda for a long time. There is an urgency right now, today. We have a revenue crisis in this country because this government has removed a price on carbon, which was going to bring $18 billion to this country in revenue, not to mention lower emissions that lead to global warming and help to incentivise the transformation of our economy, the jobs and the innovation that this country desperately needs.

They have also removed the mining tax. They have not got the guts to fix the mining tax to solve a revenue crisis but they are happy to take money off the poor, the sick and the needy in this country. We need to remember the words of Ken Henry before he left. I have to say I was impressed by Dr Martin Parkinson's slam on the government as he left last week, saying almost exactly what Ken Henry said when he left as Secretary of Treasury—that is, it is vested interests and special interests that run this country. If we cannot take them on politically and get them to pay their fair share of tax, or prevent their RET-seeking behaviour, which is very common to big companies trying to look after their stakeholders and shareholders first, then what hope have we got?

It is good to see that, at least in the G20, we are getting some action together to try and crack down on tax minimisation, at least starting with information sharing. It has been raised twice today: why are we cutting so many staff from the ATO when we have already seen that so far the tax department has identified and brought in an additional $480 million of revenue? There is a figure for Senator Heffernan, who is waiting over at the door: $480 million has already been identified and recaptured through the start of information sharing. And there is plenty more potential when it comes to private tax avoidance as well. We have seen figures of up to $20 billion of revenue at risk that has been avoided from private individuals in this country, let alone multinational corporations. So there is plenty of scope there to recover this money.

Transfer pricing is something I am sure Senator Heffernan is going to talk about—another issue that needs to be confronted about the way we do business with multinational corporations and in our global economy. I would like to give a quick plug in the little time I have left for why we do not put in place binding agreements for information sharing in the trade deals that we sign in this country. It is okay to have G20 and have that as a forum. Given that we have just signed five bilateral trade deals—with Korea, Japan, China and we are negotiating a large deal with a transfer partnership agreement.

With this regional cooperation and economic partnership, why don't we include things like tax avoidance and information sharing in those deals? It is so simple. Our negotiators are sitting down with negotiators from other countries—and these deals are being driven mostly by lobby groups and business groups and vested interests—that is the time to confront this. The Greens firmly believe that is the time to confront fair trade issues, like binding environmental standards, and ethical and social standards like wages. These are things that can be dealt with in trade deals very effectively. It is good that it started in the G20 but we could do a lot more in our region to crack down on tax deduction.

Lastly I would like to talk a little bit about digital companies. They are a specific target for tax avoidance. We noticed recently—in estimates through Senator Milne's questioning—no tax return was even being lodged by a company the size of Facebook. Under a loophole in Australian corporations law Facebook was allowed to claim that they were a small company and therefore get an exemption from even lodging a tax return. So ASIC is off chasing that now, and we hope that they will get some information for us before next estimates. Either way, there are lots of ways we can start addressing tax minimisation and start bringing revenue back into this country.

Matthew Canavan (Queensland, Liberal National Party) Share this | Link to this | Hansard source

It is great to speak on this Greens motion. It is great to see the Greens want to take some action on corporate tax evasion. Hopefully they will support the government's bill to clamp down on R&D issues for large companies. My understanding is that the Greens are not supporting that. Certainly the Labor Party are not supporting it right now.

All these comments we are hearing today, about wanting to tax corporations more apparently, are just empty rhetoric, because we have a bill in front of this parliament right now—we heard about it during question time as well—that would reduce deductions for companies that have a turnover of more than $20 billion.

These are not small companies; these are big companies, the kinds of companies the Greens typically do not like—Rio Tinto, BHP. We have decided as a government that they should fund their R&D themselves. Indeed the Labor Party came to the same conclusion just a year ago when they were in government. But right now those changes are being held up by—wait for it!—the very people that have moved this motion today saying that corporations do not pay enough tax. We hear from the Greens about how the Tax Justice Network report shows that companies do not pay enough tax. But they do not pay their taxes because of the deductions they are allowed to make, and a big part of those deductions are to do with research and development incentives, which the Greens want to keep for big companies.

Senator Heffernan before asked for some facts, and I think that is fair enough; you should have some facts.

Senator Heffernan interjecting—

You might not like my facts, Senator Heffernan, but they are facts. Corporations in Australia pay more corporate tax, as a percentage of GDP, than almost any other OECD nation—

Bill Heffernan (NSW, Liberal Party) Share this | Link to this | Hansard source

It is a global problem.

Matthew Canavan (Queensland, Liberal National Party) Share this | Link to this | Hansard source

I agree it is a global phenomenon but we are also talking about Australia's issues here, Senator Heffernan. Our companies pay 4.5 per cent of GDP in corporate tax. It was as high as seven per cent in the peak of the mining boom. The average in the OECD—which has been pretty flat over the last decade—is three per cent; and we are at 4½ per cent. We in this country do not necessarily have a domestic issue with base erosion and profit shifting. Nonetheless, I agree with Senator Heffernan that it is a global issue that needs some action.

When we hear Senator Dastyari also complain about the ATO not having enough staff, it is another example of hypocrisy in this debate because as we learnt in Senate estimates the other day—in the economics committee, which I think Senator Dastyari was at—the tax office clearly outlined that the 4,000-odd staff that they will be reducing over the next four years are a direct consequence of the efficiency dividends placed on them by the former Greens-Labor government. The former Greens-Labor government put in place those efficiency dividends on the tax office. They did not have the guts to outline how many staff that would mean, but their reduction in funding was made under the Greens-Labor government.

With an organisation like the tax office, I am sure something like 70 or 80 per cent of their costs would be in wages, so the only way they are going to fund those efficiency dividends is to reduce the staff, and that is what they have had to do. Given the tight budget, we of course are maintaining those efficiency dividends. When the Labor government announced those efficiency dividends, they made no change to the tax that would be raised over the next few years; likewise, we have made no changes.

Both Greens senators have also raised the issue of Treasury and the fact that Mr Parkinson said in a speech last week or sometime recently that there are vested interests that are controlling this country. I am not going to dispute the Treasury on its statements in that regard but I was surprised the Green senators raised Treasury in this debate because one thing they did not raise was the evidence that Treasury gave at the last Senate estimates. Senate estimates were only three or four weeks ago. At that hearing, I asked Mr Heferen, who I think is head of fiscal group in Treasury, very directly, when we were discussing the Tax Justice Network report that Senator Milne raised earlier: do you think the report was misleading? Mr Heferen said that yes, it was misleading.

Senator Heffernan interjecting—

It was misleading, Senator Heffernan, because they mixed up, as Senator Edwards said before, gross and taxable income. They had the wrong evidence on debt and equity ratios for Australian companies using capitalisation rules. And they also included in a table the average tax rates of companies that pay zero tax including trusts as well, Senator Heffernan, and that lowered their average. So this idea there was an $8-billion magic pie out there is incorrect in regards to Australia. But if the Greens and Labor Party want to do something about corporate tax avoidance in this country, support the R&D bill, do not just support motions in this chamber.

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

At a time of a claimed revenue emergency, you would think this government would be doing everything it could to look at and improve revenue streams. Rather we see this government based on broken promises and twisted priorities hopping into the sick, the pensioners, the motorists, the students, the ABC and SBS, and our Defence Force personnel. So we see the hollowness of their claims very clearly when we look at the lax approach that this Treasurer has taken to ensuring international companies pay their fair share of taxation. I am amongst those who recognise that there is a global dimension to this particular issue requiring international cooperation. But of course there are always things which we can do as a country to address this particular issue.

I note that the Australian Financial Review investigation in March 2014 looked at one company, Apple, and found that Australians bought $27 billion worth of Apple products since 2002. Over that period of time, the company paid only $193 million to the Australian Taxation Office—that is, just 0.7 per cent of the turnover. So there is a significant gap between this government's rhetoric and its actions when it comes to ensuring that multinationals pay their fair share of tax in Australia. The government's lack of action on this shows just how misguided the priorities of the Liberals are on economic reform.

Those opposite claim that the Senate is holding up the government's economic reform, but there is nothing reformist about the cost-shifting proposals of this government. That in essence is what this government is about—shifting costs from their own bottom line onto the states, onto councils, onto hospital patients, onto motorists and onto students. There is nothing reformist about legislation giving financial advisers free rein on the savings of mum-and-dad investors, which the Senate sent packing from here recently. To use a small business analogy which those opposite enjoy throwing around: this government is not paying its bills; it is just forwarding the invoices to somebody else. This is a government which reportedly held back on releasing its planned tax reform discussion paper until after the Victorian election. If there are worse things in store than the GP tax, $100,000 degrees and massive cuts to health and education, I dread to see what they will be. This government's policy agenda has been so rejected by the public that the Prime Minister did not even visit Victoria during the election campaign.

We cannot expect to see too much from this government on the issue with multinational tax avoidance. But Labor has a proud record of reducing multinational tax avoidance. When in office, Labor introduced key reforms that would have prevented $5 billion in revenue being moved offshore. As the current Treasurer said in 2013 when opposing the Tax Laws Amendment (Countering Tax Avoidance and Multinational Profit Shifting) Bill 2013, 'We must really start this debate by asking whether these amendments are required at all.' He went on to call measures in the bill 'an unnecessary overreaction, more red tape for business'. As the current finance minister, Senator Cormann said on the same bill:

We do not support Labor Party knee-jerk overreactions in the face of yet another desperate attempt to raid more cash to feed its spending addiction …

It is a principle of Labor that companies that earn profits in Australia must pay tax in Australia. As I said, we do have a strong record with respect to multinational profit shifting. That is why we introduced a $5.3 billion tax package when we were in government to protect the integrity of our tax system. While willing to talk the talk on multinational profit shifting, the Abbott government has been all bluff and bluster when it comes to specific policies. Since coming into government, the coalition has walked away from $1.1 billion in sensible Labor savings measures in this space.

Multinational tax avoidance leaves small businesses and everyday Australians to pick up the slack for government services. Major companies benefit from: Australia's highly educated workforce; our extensive road, rail and port infrastructure; our secure energy supply; and our willingness to attract investment. It is reasonable that those companies should also make a fair contribution to the tax base which funds those things. Unfair tax arrangements also advantage large multinational companies over domestic Australian companies. This is unproductive, inefficient and unfair.

A recent report released by the Tax Justice Network, which was talked about earlier in this debate, found that overall the effective tax rate of ASX 200 companies over the last decade is 23 per cent. Had these companies paid the statutory rate of 30 per cent, this would have produced an additional $8.4 billion in corporate tax annually.

As the OECD's 2013 report, Action plan on base erosion and profit shifting, indicates:

… Base Erosion and Profit Shifting (BEPS) undermines the integrity of the tax system, as the public, the media and some taxpayers deem reported low corporate taxes to be unfair. In developing countries, the lack of tax revenue leads to critical under-funding of public investment that could help promote economic growth. Overall resource allocation, affected by tax-motivated behaviour, is not optimal.

Labor does not just talk about increasing transparency, we acted to increase transparency. If Joe Hockey were serious about cracking down on multinational tax avoidance then the budget bottom line would improve, rather than getting worse. By not proceeding with the sensible measures we implemented to close tax loopholes, the Australian people will forego $1.1 billion in revenue. And the government, as we have already heard, has stripped the Australian Taxation Office of the resources it needs to pursue multinational tax avoidance. Their job is being made harder because the government is leaving the tax office woefully underpowered to go up against the big global firms.

The budget shows that the government would prefer to take revenue from Australia's most vulnerable citizens, rather than from some of the world's wealthiest companies. But do not take my word for it; here is what Ross Gittins, economics editor of the Sydney Morning Herald, had to say just this morning when talking of the government's unfair budget:

But a politically stupid degree of unfairness isn't the only reason this budget was such a poor one. Its other big failing was the poor quality of its measures. It sought to improve the budget position not by raising the efficiency and effectiveness of government spending, but simply by cost-shifting: to the sick, the unemployed, to the aged, to university students and, particularly, to the states.

I could not have put it better myself.

In the closing couple of minutes of my contribution, I do want to point out the disconnect between this government and ordinary people in this country—particularly young people. Earlier this year I was privileged to meet with a number of volunteers from an organisation called Oaktree, who were undertaking an 'End Poverty Roadtrip' from Brisbane to Canberra. I met with them on 2 October this year. This organisation is dedicated to ending global poverty, and one of the ways they intend to achieve that is by addressing the issue of multinational tax avoidance.

I was absolutely inspired by these young people, who travelled to Canberra to get their petition signed and to share their personal stories with me. I met with Caitlin, Alexander, Brendan, Hume and Benjamin in my office. Aside from discussing their ambitions with me around ensuring that Australia is doing its fair share to end poverty, they also advocated steps that Australia can take to crack down on the unfair avoidance of tax by multinational companies. The Oaktree website talks about the lack of transparency in the global tax system. It is difficult to put an exact figure on the amount of money that is lost due to tax avoidance, but it is an indictment of this government that it is not prepared to tackle this issue. It is prepared to put things off and not get into looking at this issue in a sensible manner. It is, rather, interested in attacking the sick, the poor and students, and in cutting services that would otherwise be there.

So, I ask this government to get serious about this issue. Let's look at global tax avoidance.

Bill Heffernan (NSW, Liberal Party) Share this | Link to this | Hansard source

Right. I only have five minutes and I need 50. I will do it on another day. I have been on this for four years. Let's deal with some facts; I am not interested in the political BS that goes on, which is part of what this debate has been all about.

We are going to live through a generation that has redefined 'sovereignty' unless we fix this issue. It is now normal behaviour for multinationals to remain competitive that they expect they can minimise their tax or pay no tax. Just to put a couple of things on the table on the risk of the redefinition of 'sovereignty': we have the US business lobby—and we have the same lobby here—saying to the US government—the IRS—'We don't mind if the tax goes offshore; we are creating jobs.' It just depends on whether you want to have public schools and public hospitals, and a Defence Force that you can afford and an ABC that you can afford.

Last year there was about $3 trillion in tax avoidance in the Group of 20. For those who do not know, the turnover in the derivatives swap market last year—most people do not even know what that is—was $700 trillion. The shadow banking market was 1¼ times the global GDP—it is interesting if you get some figures into this debate—at $125 trillion. The cost of the actual bribes that the World Bank estimates for around the world last year was $1 trillion, and the cost to the global economy was $5 trillion.

So if we really want to do something about being able to afford schools and hospitals—and not having to take Senator David Leyonhjelm's line, where he does not think we should have public schools and public hospitals—and where we should be in this chamber is not making political points against each other, which I think is BS! Let's get to business—let's get down to it. We should harmonise.

Why would Peter Costello admit that the Future Fund actually now has 17 companies in tax havens? Because there is no harmonisation. Sovereign entity in Australia has immunity from taxation not captured by a revenue base for a passive investment. A sovereign investor in Australia who actually declares the income from their production produced here for a humanitarian purpose gets charitable status. Do we really think this makes sense? Do we really want this to go on?

Of course it is up to a group of nations, because the global businesses will simply isolate you if you are the only one who picks this up. I say that if we really want to fix the job that we have to put the politics aside, we have to put national interest first and we absolutely have to understand the immensity of the problem. This is a huge problem in which no-one is breaking the law.

FIRB is a little section in government which has a few people with no power. You can argue for as long as you like about whether it is for $3 million, $5 or $6 million or $100 billion when you have to go to FIRB if you are a foreign investor coming into Australia; when you get there, you report it and nothing happens. That is why the Ord is now trying to be freeholded, so that the guy who has bought Ord stage 2 and who wants Ord stage 3 can put it on the Hong Kong market, same as you would put a housing subdivision on the market. I got that out of the guy's mouth himself the other day at the free trade agreement signing here.

This is a serious problem, where people need to understand the immensity of the problem. It is an immense problem. I got the heebie-jeebies with ADM on the Graincorp matter because they are serious tax avoiders—serious tax avoiders just like Wilmar, who is going to put the cleaners through the sugar market in Australia. It is normal behaviour to maximise the share price and to minimise tax without breaking the law. The law is completely out of date. Last financial year it was estimated $3 trillion was involved in tax avoidance globally. The US does not know exactly how much tax it missed out on, but it is between $650 billion and $800 billion.

Don't tell me about Australians, like an earlier speaker did. We are not purer than the angels—we are trying to compete with the rest of the world. The largest tax case the IRS had last year, the American tax officials, was with an Australian company. No-one talked about it—it is like the churches with the altar boys for the last 50 years being in denial about what was going on, and now they are all apologising, saying it has been going on for 50 years. That is where tax avoidance is—if we do not fix it we are going to redefine sovereignty. Getting your head around Bitcoin is another step in that direction, as a matter not of redefining sovereignty but of demolishing sovereignty.

Question agreed to.