Katy Gallagher (ACT, Australian Labor Party) Share this | Link to 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 I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows—

Today, Labor introduces the Taxation Administration Amendment (Corporate Tax Entity Information) Bill 2017. This Private Senators' Bill amends the Taxation Administration Act 1953.

Section 3C of the Act details the type of income and tax information the Commissioner of Taxation is required to make publicly available annually for corporate entities.

This Bill amends Section 3C(1) to align the threshold for private corporate entities with that of public corporate entities by lowering the threshold from $200 million to $100 million.

This restores the public reporting of corporate tax entity to its original intent as introduced by the former Labor Government in 2013 in the Tax Laws Amendment (2013 Measures No. 2) Bill 2013.

This Bill addresses a prominent deficiency in the tax transparency regime that arose after amendments were made to the Act in 2015, and brings approximately 600 large companies into the tax transparency regime.

Tax Transparency Information

In 2013, the Australian Government introduced and the Parliament passed the Tax Laws Amendment (2013 Measures No. 2) Bill 2013. Among the amendments, the Bill introduced Section 3C Reporting of information for corporate tax entities with reported total income of $100 million or more.

The measure was a significant advance in tax transparency that accompanied and complemented other significant reforms to close tax loopholes used by large companies.

Since then, two years of tax data on corporate tax entities has been publicly released, 2013-14 and 2014-15. It has facilitated constructive discussion about corporate taxation in Australia. Civil society and advocacy groups argue that tax transparency data is a vital tool for oversight, scrutiny, and policy debate.

Tax transparency improves behaviour. Large private companies know that they will be held to account for the amount of tax they pay and that will change behaviour.

As originally passed, Section 3C was a tax transparency measure that aligned the thresholds for public reporting of public and private corporate entities' basic tax and income information at $100 million.

Section 3C was amended in October 2015 to completely remove private companies from public reporting by the new government in the Tax and Superannuation Laws Amendment (Better Targeting the Income Tax Transparency Laws) Act 2015.

My colleague in the House of Representatives, the Shadow Assistant Treasurer, said at the time that the Coalition did so after "an astro-turf campaign, following really, what might have just have been an idea dreamed up after the second cherry in the Melbourne Club".

The Senate had begun the task of restoring the previous tax transparency laws.

However, in December 2015, section 3C was amended again to include private companies (as part of the debate Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015), however the threshold for reporting was set at $200 million.

No genuine policy rationale was given for either the removal of the public reporting requirement for public companies, nor the restoration of the requirement with a significantly higher threshold.

The $200 million threshold results in approximately 600 large private companies (about two-thirds of those affected by the original measure) not having high-level tax information scrutinised, unlike comparably sized public companies.

As noted in a Senate Economics Legislation Committee report Tax and Superannuation Laws Amendment (Better Targeting the Income Tax Transparency Laws) Bill 2015[provisions], the Australian Taxation Office "gave evidence during this inquiry that one in five private companies earning over $100 million do not pay any tax".

How did we get here? During the Senate debate about the Government's Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015, the Liberals and the Greens engaged in a backroom deal to let Australia's large private companies continue to avoid tax transparency.

The Coalition found a new partner in Senator Di Natalie's Australian Greens. The Labor Party stood firm, and the Labor Party held to its position to protect tax transparency. We took the pledge to restore the original threshold to the 2016 election. If the Government will not fix this, we will aim to from Opposition.

That is an important point. The Turnbull Government is shielding some of Australia's largest companies from scrutiny at the same time as handing banks and multinationals a $65 billion tax cut.

The Government is also tearing itself apart over an internal culture war. Labor is developing serious policy. Where we can, we will try and implement from Opposition, just as we have sought to do with the Competition and Consumer Amendment (Small Business Access to Justice) Bill 2017.

In a context where aggressive tax minimisation by large companies and high net worth individuals are under intense public scrutiny, this measure will restore the original public reporting threshold for large private companies.

Detail in the Bill

Schedule 1 of this Bill amends the Taxation Administration Act 1953 ('the Act'). Section 3C details the type of income and tax information the Commissioner of Taxation is required to make publicly available annually for corporate entities.

This Bill amends section 3C(1) to align the threshold for private corporate entities with that of public corporate entities by lowering the threshold from $200 million to $100 million.

This Bill would repeal the current wording of subsection 3C(1), and substitute it with language that ensures corporate tax entities (including private companies) with total income equal to or exceeding $100 million are subject to the public reporting requirements of section 3C.

The amendment made in Schedule 1 would apply to the 2017-18 income year onwards.

Labor is the party of tax transparency

This policy complements the suite of tax transparency measures Labor has announced and intends to implement should we form Government.

Labor's comprehensive measures will massively increase transparency on the use of tax havens by corporations and high net-worth individuals and add more civil society voices to official tax deliberations.

Tax havens threaten Australia's tax base. When tax revenue gets lost to tax havens, Australians ultimately have to pay higher taxes or suffer cuts to vital services. For example, the Cayman Islands have been criticised by the OECD and by tax commissioner Chris Jordan for their excessive secrecy. They have more companies than people. A single building in the Caymans – Ugland House – is home to over 18,000 companies.

As Tax Commissioner Chris Jordan recently said in a speech to the Tax Institute: 'Many of these [tax] matters involve deliberate tax evasion, often using overseas tax havens or complex corporate structures to avoid detection and recovery.'

The shockwaves from the Panama Papers and similar scandals involving corporations and high net-worth individuals aggressively minimising their tax are being felt around the world. Other governments have been jolted into action on transparency measures since the public outcry over the Panama Papers.

The Turnbull Government has done virtually nothing. With rising inequality and rising government debt, the time for acting on tax havens and tax transparency has come.

Labor proposes to introduce a series transparency measures that I will briefly outline.

Labor will introduce public reporting of country-by-country reports. High-level tax information about where and how much tax was paid by large corporations (over $1 billion in global revenue) will be released publicly.

Labor will introduce whistle-blower protection and incentive/rewards; to provide protection for whistleblowers who report on entities evading tax to the Australian Taxation Office. Individuals who highlight tax evasion would collect a share of the penalty collected.

Labor will introduce mandatory reporting of 'material tax risk' (tax haven exposure) to shareholders. Companies would be required to disclose to shareholders as a 'Material Tax Risk' if the company is doing business in an international material tax risk jurisdiction (i.e. a known or suspected tax haven). There is no current legal requirement to do so currently.

Labor will introduce public reporting of AUSTRAC data; that is, we would require AUSTRAC to publicly release International Funds Transfer Instructions (IFTI) data for every calendar year (or, if more practical, financial year).

Labor will introduce disclosure of 'material tax risk' for government tenders. We would amend Government procurement process requirements such that the Australian Government tender process requires all companies to state their country of domicile for tax purposes.

Labor will develop guidelines for tax haven investment by superannuation funds – task the ATO (in collaboration with ASIC, and APRA re: self-managed super funds) to create/review guidelines for responsible investment for superannuation funds.

Labor will introduce a publicly accessible registry of the beneficial ownership of Australian legal entities. We would fully implement the G20 principles Australia signed in 2014 and ensure transparency over how ultimately owns a company, rather than just who is listed on company paper-work.

Labor will introduce an ATO disclosure of settlements and reporting of aggressive tax minimisation; high-level reporting in the ATO's annual report on how many settlements were achieved per financial year and associated data.

This Bill, and the policies I've just mentioned, all build on Labor's proud policy legacy.

This Bill is the first step to restoring tax transparency to where the previous Labor Government left it. It is the foundation upon which we build our further measures.

Conclusion

I encourage all those who consider themselves friends of transparency to support this Bill and help us deliver one of the vital tools for public discussion about the integrity of our tax system.

I seek leave to continue my remarks later.

Leave granted; debate adjourned.