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

This is a Labor bill introduced by former Senator Gallagher. On 30 May this year the Senate Economics Legislation Committee handed down its final report on corporate tax avoidance, titled Much heat, little light so far. As many experts note, there was a strong emphasis on transparency. Labor has committed to a broad-ranging multinational and tax haven transparency package: mandatory disclosure to shareholders of tax haven exposure; a public beneficial ownership register that includes trusts, a measure that the government has crab walked away from; and public excerpts of country-by-country reports by global firms about how much tax they pay and where.

This bill implements a very specific tax transparency measure. The Taxation Administration Amendment (Corporate Tax Entity Information) Bill 2017 amends the Taxation Administration Act 1953 to require the Commissioner of Taxation to publicly release tax data for large private firms with turnover of $100 million or over. This is as Labor originally legislated in 2013 in the Tax Laws Amendment (2013 Measures No. 2) Bill 2013. 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. The bill addresses a prominent deficiency in the tax transparency regime that arose after amendments were made in 2015 and it brings approximately 600 large companies into the tax transparency regime. The 2013 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, three years of tax data on corporate tax entities has been publicly released—2013-14 through to 2015-16. 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, but we've also seen a government that hates the idea of tax transparency. We needn't look much further than the highly politicised attack on ABC's Emma Alberici's analysis of tax data to see how fearful the government is. In fact, last year the government coincidentally released the remaining tax transparency data on the day the nation was engrossed in the final passage of the marriage equality bill.

With the notable exception of the government, almost everyone recognises that 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) Bill 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 sherry in the Melbourne Club …

The Senate has begun the task of restoring the previous tax transparency laws. However, in December 2015, section 3C was amended again to include private companies. This was as part of the debate of the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. However, the threshold was $200 million. No genuine policy rationale was given for either the removal of the public reporting requirement for public companies or the restoration of the requirement with a significantly higher threshold. As noted in a Senate Economics Legislation Committee report on the Tax and Superannuation Laws Amendment (Better Targeting the Income Tax Transparency Laws) Bill 2015, the Australian tax office gave evidence during this inquiry that one in five private companies earning over $100 million does not pay any tax. How did we get there?

During the Senate debate about the government's tax laws amendment bill 2015, the Liberals and the Greens engaged in a backroom deal to let Australia's largest private companies continue to avoid tax transparency. The coalition found a new partner in Senator Di Natale's Australian Greens. The Labor Party stood firm, and the Labor Party held to its position to protect tax transparency. At this point I'll note that, despite the outright fabrications of the coalition that we voted against their Multinational Anti-Avoidance Law, Labor only voted against the amendments that came about from the Liberal Party and the Greens political party deal. We took the pledge to restore the original tax threshold to the 2016 election. If the government will not fix this, we will aim to from opposition.

Schedule 1 of this bill amends the Taxation Administration Act 1953. Section 3C details the type of income and tax information the Commissioner of Taxation is required to make publically available annually for corporate entities. This bill amends 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. Item 1 section 3C(1) repeals the current wording of section 3C(1) and substitutes it with language that ensures corporate tax entities, including private companies, with total income equal to or exceeding $100 million are subject to public reporting requirements of section 3C. Item 2 clarifies that the amendment made in schedule 1 applies to the 2017-18 income year onwards. 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 would also note that, in a parliamentary sitting period when the wealthiest individuals in this country have been given massive tax cuts by this government and when it is bringing to the Senate this week a bill to give further tax cuts to the big end of town and big corporations, one of the issues that Labor is vitally concerned about is the capacity for this country to provide decent health care, decent education and decent infrastructure facilities across the country. I don't want to see this country being the equivalent of the United States of America. I don't want to see this country get to a position where the disadvantaged cannot get access to decent health care and a decent education, and where the population in general are denied access to decent infrastructure around the country—because that's where we are heading under this government. Under this government, we are heading towards the Americanisation of Australian society, the Americanisation of Australian economics.

We are in a position where we will not have significant funding to make sure that the standard of living that the fair go in this country demands can be dealt with effectively, because of the lack of funding available through the tax system. We are determined to make sure that the fair go in this country stays here. We are determined to make sure that corporations who should be paying tax do pay their tax, and this bill is an important aspect of that.

Transparency is fundamental to the tax system. Transparency is important to make sure that we've got the funds available to fund the necessities of a modern society, and the transparency that we are proposing in this bill is fundamental to that. On that basis, I conclude by saying that this bill should be supported. If the government themselves were ever keen to do anything on transparency, they should support this. They should stop hiding the problems created by the lack of tax being paid by corporations and private companies in this country. They should stop their ideological attack on the tax base of this country. They should make sure that ordinary workers in this country, families in this country and individuals in this country can access decent health care, decent education and decent infrastructure, because, without the money coming in in a fair and balanced way through taxation, this will not happen. So transparency is important, and this bill will provide that transparency.

Ian Macdonald (Queensland, Liberal Party) Share this | Link to this | Hansard source

It is quickly becoming part of the lexicon of Australia that Labor lies, and more and more Australians understand that. That lexicon, that approach, could hardly be demonstrated more than when it comes to taxation. Anyone who might be listening to this debate, perhaps some of the newer senators, might be impressed with Senator Cameron's fine words—most of which weren't accurate, but they do sound fine—and you could almost think, 'Yes, isn't that wonderful?' But let me tell you about Labor's tax record.

I have the benefit of having been in this parliament for some time. I was here in 1992-93, when the Labor Party promised the people of Australia a tax cut. More than promising a tax cut, they actually said, 'We're going to legislate this tax cut as we approach the 1993 election, and we're going to put it into law.' The then Treasurer made a big thing about them: 'These are l-a-w law tax cuts.' Others who were around in those days will remember the l-a-w law tax cuts.

These tax cuts were introduced because all the pollsters in that period of history had the Labor Party losing the election and the Liberals winning the 1993 election. So Mr Keating thought he'd be a bit smart and impose on the next government substantial cuts in revenue by having these l-a-w law tax cuts. What happened? The Labor Party unexpectedly won the election and the first piece of legislation introduced in the new parliament was a Labor bill to cancel the l-a-w law tax cuts. So anything the Labor Party ever says about taxation you take with a grain of salt. Of course we all remember the carbon tax promise by Ms Gillard, 'There will be no carbon tax under a government I lead'. I see all the Labor people leaving the chamber when these unfortunate facts are exposed. 'There will be no carbon tax under a government I lead', remember that one? It was written in blood: 'No carbon tax under a government I lead'. What was the first piece of legislation introduced when that government was re-elected, basically on the back of that promise that there be no carbon tax? A carbon tax.

Senator Cameron also berates the government for heading down what he called the American path with health and education. Again, nobody would believe the Labor Party on health again. We all remember just last election that disgraceful, dishonest campaign by the Labor Party, about how the then government, the Liberal government, was going to sell and abolish Medicare. It was an outright lie. Never was there one skerrick of evidence to suggest that. Yet the Labor Party and the unions, particularly the CPSU were out everywhere on polling day, running the line that the Liberal Party was going to sell Medicare. I remember at the prepolls in Herbert during the election that the CPSU were out there in force, telling these outright lies, standing over little old ladies, saying, 'You know, you won't have Medicare should the Liberals win this time'. It was a disgraceful lying campaign, for which the CPSU has become infamous.

Since then, the federal coalition government has increased spending on health. Senator Cameron also mentioned education. I don't know whether he's been asleep or simply doesn't understand, but he would have heard Senator Birmingham make the most radical positive reforms of education that we've seen in a long time, with all students, no matter what schools they go to, getting an increase in funding per capita over the years ahead. In Queensland, I often interact at various happy events—handing over cheques to state schools, to private schools, to Catholic schools—and teachers, who understand these things, are grateful that someone is actually doing the right thing by education funding. I have to say, more often than not I'm at functions with Catholic schools and the Catholic education people in the north appreciate the additional funding they're getting and the fairness of the funding.

Senator Cameron and many members of the Labor Party and the Greens political party will keep railing about these personal income tax arrangements that went through, which give a greater percentage of relief to lower income people than higher income people. They keep raising issues like, you know, Senator Wong will get an extra $12,000 tax cut. They don't actually use that example; they use others, but I'll use that similar one. So I say to the Labor Party, if you think it's so bad, there is a provision for you to give those tax cuts back to the tax office. If you think they're bad and you are so passionate about it, you can give them back. The Greens political party are another one. They always rail about these things. I always tell them, 'You don't have to accept the tax cuts; you can give it back'. But I can bet you, I can guarantee you, not one of them ever will. They'll just put it in their pocket and continue to blame others for it.

I have digressed slightly from the bill, and I now want to turn to it. The government has a very, very proud record when it comes to taxation anti-avoidance. We've particularly looked at multinational companies to make sure that they do pay the right amount of tax. I'm going to indicate a number of the initiatives taken by the coalition government—initiatives which didn't even reach the talking point in the Labor government of six years! Sorry: there was one thing that the Labor government did say about tax six years ago, when Mr Shorten was an economics minister. They said that we had to have a competitive tax for corporate Australia, because otherwise Australia would fall behind in investment by corporations, and that would mean that we would fall behind in manufacturing and in any sort of work that created jobs. Those jobs would go overseas because the corporate world look around. If they can make widgets in Australia and pay 30 per cent company tax on their profits, and they can make widgets in the United States, France or anywhere else in the world and only pay 20 per cent corporate tax, where are they going to make their investment? The widgets will sell anywhere in the world; the jobs can be created anywhere in the world. So if we're not competitive in our corporate tax rates the jobs will go around the world. Mr Shorten knew that a few years ago, and he was advocating it. Now—for purely populist political envy reasons—he's changed his mind.

But the government has continued to take strong action. This includes a commitment to ensuring that tax transparency rules are effective in promoting broad compliance and public confidence in Australia's taxation laws. The government introduced the Multinational Anti-Avoidance Law and the diverted profits tax, which Labor did oppose—I'm sorry, Senator Cameron: you did oppose it. These measures have been successful in bringing a further $7 billion a year in sales revenue into Australia's tax net.

Multinational Anti-Avoidance Law stops multinationals avoiding a taxable presence in Australia. This is real initiative, real legislation, from the coalition government—something the Labor Party never did in government in six years. The Greens supported them for six years but never bothered about that either. The diverted profits tax, which the coalition government introduced, prevents multinationals shifting profits overseas. That's been around for a long period of time, but it specifically related to motor cars in the 1950s. Now it applies across the board, so it doesn't allow profits to be shifted out of the taxation system.

In the most recent budget, the government announced further measures to stop multinational tax avoidance. These included strengthening the rules that limit interest deductibility to stop companies shifting profits out of Australia, including requiring companies to align the value of their assets with the value included in their financial statements. The government also broadened the range of large multinationals who were subject to the Multinational Anti-Avoidance Law and the diverted profit tax. There are some other very strong actions being taken by the government, including the establishment of a tax avoidance task force within the ATO on 1 July two years ago. We also signed the OECD Multilateral Instrument on 7 June last year. We've doubled the penalties for multinationals avoiding tax. We've increased penalties for breaches of tax reporting obligations by multinationals. We've also implemented OECD recommendations for country-by-country reporting, to give the ATO greater access to multinational transfer-pricing information, and that's essential for the ATO to do its work. We've also aligned Australia's transfer-pricing rules with the latest OECD guidelines. These initiatives have ensured that multinationals comply with the law. Since 1 July 2016 the ATO has raised—listen to this—$5.2 billion in tax liabilities from large companies.

Australia is a global leader in the international fight against tax avoidance. We are taking strong international leadership with the G20 and the OECD Base Erosion and Profit Shifting Project. This problem with profit shifting and base erosion is not, of course, unique to Australia. It is happening, particularly, in many developing countries around the world, and that's why the OECD has been so strong in promoting measures to avoid base erosion and profit shifting. The government, together with the ATO, continues to monitor the implementation and effectiveness of our tax laws. We have a very proud record of making sure that profits earned and generated in Australia are subject to the Australian tax laws.

At an estimates committee hearing a couple of years ago, this subject came to the fore—why there were so many private companies in Australia not paying tax in a particular year. Mr Cranston from the ATO said at that hearing:

… we—

being the ATO—

look at this over a number of years, because it is certain companies are at different cycles in their business cycles. Some have losses that need to be utilised, and they get utilised in different years. And there are other reasons. When we do have a look at some of these taxpayers that do not pay tax, some companies may embark on a strong investment strategy; so they actually have strong expenditure, because they say there is not the need for profits like you often seen in public companies, where there are franked dividends required. So a lot of private businesses will expand their businesses and their expenditure levels, and therefore their profits are lower. We have seen that as well. At other times we have seen where there has been aggressive tax planning, and we have dealt with that as well.

So the government and the tax office are well aware where there is illegal tax avoidance taking place, but not a lot of the statistics show the true story. Notwithstanding that, as I mentioned previously in my contribution, the government has taken a very strong stand to ensure that companies, including multinationals, pay the right amount of tax. This commitment to ensuring that tax transparency rules are effective in promoting broad compliance with and public confidence in Australia's tax laws is a continuing and ongoing one of the government. We continue, as appropriate, to bring forward legislation to stop multinational anti-avoidance procedures and to ensure that a diverted profits tax doesn't happen so that multinationals can't shift profit overseas.

I'm very pleased to be part of a government that has a sound economic record. We understand the need to manage spending very carefully, something our opponents don't seem to understand. We understand the importance of making sure that everybody in the Australian system pays their fair share and their correct share of tax, and we will continue to do that. This bill before us today from the opposition is not necessary and it is not one that I will be supporting.

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

I rise to say the Greens will be supporting this Taxation Administration Amendment (Corporate Tax Entity Information) Bill 2017 today, and we will be moving amendments in the committee stage to improve this bill. It is often said that in Australia we have a tax-and-transfer system: people pay their taxes, and then those taxes are transferred to pay for services such as schools and hospitals. But the Greens have often argued that in Australia what we have, in effect, is a tax avoidance system. I'm very proud to represent a political party that has led on this issue in this Senate, in the last five years especially.

In fact it was in 2014, nearly five years ago, that previous leader of the Greens senator Christine Milne initiated a groundbreaking Senate inquiry into tax avoidance in Australia, an inquiry that ran over a number of years and produced some very strong recommendations. Many of those recommendations and much of that witness evidence have been used to implement legislation in this place to tackle the issue of tax avoidance. I give a shout-out to those stakeholders that came to visit us in parliament in 2013, 2014—stakeholders such as Micah Challenge, an umbrella group of activists in their own way, I suppose you could say, who wanted to see changes to tax laws, to prevent tax avoidance, which of course punishes the poor; and Tax Justice Network, who have campaigned tirelessly to see laws improved.

It was interesting to listen to Senator Macdonald's speech. He actually surprised me this morning: he did a reasonable job of getting his mind around the issues. He outlined what the government have done, during their term, around some significant pieces of legislation. What he omitted, of course, was that that legislation wouldn't have passed without the help of the Greens and all the work that we've done to tackle this issue.

I need to step through the history behind why we have this bill here before us today. I know corporate knowledge tends to get eroded very quickly in this place not just in the chamber but also in the broader community and the media. This bill dates back to another bill, in June 2013, in the dying days of the Gillard government. Labor put forward the Tax Laws Amendment (2013 Measures No. 2) Bill 2013, requiring the public reporting of information on all companies—that is, private and public companies—earning over $100 million, and that passed into law. Those original Labor laws aligned the thresholds for public reporting by entities with basic tax and income information at $100 million. I'm not sure why that $100 million level was chosen; nevertheless, it passed into law. The Greens supported that bill—of course we did. We voted for it both here in the Senate and in the other place.

That act was repealed when the Abbott government came into office. They introduced a bill to remove private and public companies from any public reporting requirements. Of course, the Greens opposed that bill. Here's where it gets a little bit tricky. On 15 October 2015, the bill to repeal Labor's laws relating to tax transparency snuck through this Senate. I say 'snuck' very carefully. I was sitting in the chair as acting deputy president when the bill was being debated, and the speaking list collapsed. A critical piece of legislation from the coalition government passed the Senate without even a vote; it went to the voices. The speaking list collapsed, Labor didn't call for a division—I would have if I hadn't been in the chair, but that's where I was—and it passed without even a vote. That surprised a lot of people.

Opposition Senator:

An opposition senator interjecting—

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

You can go to the video and have a look at it if you want to see what did happen on that day. It surprised a lot of people, especially some of the stakeholders and the media, and of course I was very angry. Personally, I was very angry that we didn't have a fight on that bill, because such a critical piece of legislation was being repealed. I pay tribute to Labor for bringing those laws in when they were in government in 2013.

Not long after that, through the Senate inquiry process where we looked at significant pieces of legislation we could use to tackle multinational tax avoidance, the government, in December 2015, brought before this place a bill called MAAL, the multinational anti-avoidance law. I put up an amendment to MAAL—it was a bit cheeky—that had been in Labor's entire $100 million tax transparency package because I thought that was an opportunity for us to get it back. Unfortunately, that was voted down in the House, but, after some significant debate in this place, the government agreed that they would include a tax transparency measure in their bill along very similar lines to section 3C, which provides for annual information that companies have to make available for private and public entities, but they wouldn't come at $100 million. They agreed that they would make companies over $200 million in size disclose their financial affairs. That included around 218 or so of the largest companies that weren't disclosing their affairs. It wasn't what we wanted, but, at the same time, it allowed for the beginning of disclosure, and it allowed the MAAL, the multinational anti-avoidance law, to pass, which gave the ATO, the Australian Taxation Office, significant new powers. It provided, for the first time, country-by-country reporting, which is absolutely critical to tackle things like base erosion and profit shifting. More importantly, it forced companies over $1 billion in size to provide general purpose financial statements, not the flimsy special purpose statements that they'd been using to avoid disclosure in the first place.

We worked with the coalition. The Labor Party campaigned against that legislation and against the Greens' move to include tax transparency in the legislation. In the end, we got the legislation through this place, but not without a big fight and a lot of mud throwing, may I say. Indeed, I remember a billboard in Sydney that said that the Greens voted against tax transparency, even though we were the ones who brought it back, got it on the agenda and got laws passed—but there you go. That was a Labor billboard smashing up the Greens going into the 2016 double dissolution, although we did all that great work. Four years of Senate inquiries supported the government in their legislation, improved their legislation and introduced tax transparency—and we had the mud thrown at us. But still, with the adults in the room, we got the significant package through, and we get the chance today to work together to improve the government's current laws, and that's a good thing: the Greens working with Labor and hopefully with the crossbench and even the Liberal Party. Labor have been happy to introduce tax transparency laws in the past for companies with over $200 million; why not $100 million? In fact, why not even $50 million? Transparency is a good thing. If you've got nothing to hide, why be worried? That's the simple principle that applied to companies with $200 million. It should equally apply to private and public companies with over $50 million. Personally, I'd like to see all companies disclose this kind of information, but this would be a really good start in terms of statistically capturing a much larger number of companies.

We now have the multinational anti-avoidance law, the MAAL. The ATO told us at Senate estimates they're proud that they've been able to bring in $4 billion to $5 billion in new revenue because of this legislation. It would have been avoided previously. That revenue is absolutely critical to pay for the education of our kids, for public hospitals and for our social safety net, such as Newstart or pensions. With that tax and transfer, at least we have made some gains in actually taxing the companies that were avoiding their obligations—their obligations to all Australian taxpayers. Let's face it, if you don't pay your tax in this place as an individual, the tax office will come down on you like a ton of bricks, and so they should. Why is it that big multinational corporations have been getting away with avoiding paying tax?

Well, they need more changes, because—unfortunately, while it may be unethical and immoral—it wasn't strictly speaking illegal until we changed the laws in this place.

On that point, the Greens at the last federal election took a package around multinational tax avoidance that included another 18 policies we want to see implemented in this place for a total crackdown on big companies, big wealthy corporations, not paying their fair share, which is totally unacceptable. While we acknowledge we have made some gains, and we can do so again today, there is still a long way for us to go.

I want to talk about the legislation we would like to improve with amendments. The debate in 2015, those of us that were here would remember, wasn't quite a Senate sleepover, but it was very close to it. I think we went until three or four in the morning debating this legislation. It wasn't a pretty time. My voice was hoarse from yelling. We were all getting a little bit wound up because we wanted to see these tax laws passed.

Previous senator Ricky Muir put up an amendment to remove grandfathering clauses. Let me tell you a little bit about grandfathering. Grandfathering basically allowed nearly 1,500 companies, private companies, to essentially be exempt from filing reports to the corporate regulator, ASIC. These grandfathering arrangements had been in place since the Keating government in 1995. It was the Labor Keating government that exempted these 1,500 companies from publicly reporting. There was no political will from Labor or Liberal in this place to change that. Senator Muir moved that amendment, but the Greens pointed out at the time that the government wouldn't pass any of the legislation if the grandfathering were brought in. The Liberal Party didn't want to see their rich mates disclosing their financial information, and it was going to be a deal-breaker.

It was a difficult choice for us. I confess today, as I did at the time, it was difficult. We would have liked to have seen those grandfathering exemptions removed, but it meant that the multinational anti-avoidance laws and the new Greens tax transparency laws that we brought in wouldn't have passed this place, and the tax office and our stakeholders desperately wanted those laws passed. The reason we had the debate in December was that they needed to be passed by the new year of that year for the government to be able to get the country-by-country reporting in place. That country-by-country reporting was absolutely critical.

So we had to vote down previous Senator Muir's amendment around grandfathering. But what I said that night in the Senate—and I said it publicly to the media—was that the Greens would make a commitment to coming back to this and, at the right time, we would remove the grandfathering exemptions. We will be moving an amendment to do that today. True to our word, we want to see all companies filing those annual reports. There's no reason at all for that exemption to be in place. It's a historical precedent that's been a bad precedent because it is not transparent; it's the opposite of transparent. We would certainly be hoping that Labor would support the Greens' amendments and that we can actually get that archaic exemption removed in our tax transparency laws.

What else does this bill seek to do? It seeks to reinstate Labor's threshold of $100 million. As I said previously, the Greens would support that. We would have liked to have seen $100 million in our amendment in 2015 to the MAAL laws, but the government wasn't going to come at that. So we're quite happy to support lowering that to $100 million. We've had discussions with the Labor Party about lowering it even further to $50 million, and I'm hopeful they will support that amendment to go a step further and increase tax transparency. There's no reason that companies shouldn't be transparent in their reporting. There's no reason at all. Given what they have to file privately for the tax department anyway, you can't claim that is extra red tape. You can't claim that somehow it increases the burden on companies' reporting requirements. If anything, it's for our agencies to provide it in a format that makes it publicly available.

A whole range of people out there, many I have mentioned already, came to parliament nearly five years ago to ask us to act on things like tax transparency. It allows journalists and other public-good advocates in this area to access information and to do that analysis. Let's be frank. As senators we're very busy. We cover a lot of different areas. But many of these advocates do it full-time and many of them do it voluntarily, because they care deeply about a fair tax system where everybody pays their fair share of tax.

There's no reason at all that this kind of information shouldn't be publicly available to help shine a light on potential tax avoidance. I think Senator Cameron mentioned that one in five large private companies has been avoiding paying their tax. I don't know where that statistic comes from but the risk is there. If you can't see it, if you can't monitor it, how can you manage it? It's a simple principle: you can't manage what you don't monitor. We don't have that information available, and we know the tax department's always under the pump. This Liberal government has cut its staff numbers and resources consistently. We know if the ATO had more money it could have a war chest and fight things like profit shifting. For example, they took Chevron—one of the biggest tax avoiders in this country—all the way to the High Court and won a very big tax settlement. That's because of the MAAL laws we helped pass. These gave the ATO the ability to do that.

If we don't invest in the tax department and its people, how do we expect to get a return on investment for the Australian people? They're the ones on the front line, making sure that we do have a fair tax system and that everyone pays their fair share. Whether you're a billionaire or someone on the minimum wage, everybody needs to pay their tax. That principle is a fundamental one. If we can't get that right we certainly shouldn't be looking at new laws in this place. I understand we will—possibly even today—cut corporate tax rates even further. Considering how many of these corporations don't pay their fair share of tax or use legal but immoral loopholes to get out of paying their fair share of tax, why are we even considering cutting headline tax rates for corporations? Their effective rates are so low already.

If you don't know the difference between 'headline' and 'effective': headline is what we debate about—30 per cent down to 25 per cent—but in many cases, after all their deductions, their effective tax rates are zero. In many other cases their average effective tax rates are well below 20 per cent already. This is thanks to Australia's very generous tax laws around deductibility. Why are we considering cutting corporate tax rates when we haven't properly fixed tax avoidance in this country?

I congratulate Labor for bringing this bill on today and, at least, trying to resurrect what was lost in 2015 in the Senate when their original laws went down. I hope the crossbench see that it's in every Australian's interest to do whatever they can, whenever they can, to tackle tax avoidance in this country. It's our job as Australians to put resources and time into this and to show leadership on this most important issue. I look forward to having more to say in the committee stage.

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

Getting serious about multinational tax avoidance is a question of basic fairness. Fairness is a core belief for Australians, a quality that we all hold very dear. It's more than just an Australian value; it's an integral part of our culture. But there's something happening in Australia right now that's at odds with our egalitarian values and our sense of a fair go. We're experiencing growing levels of inequality. This year the richest one per cent of Australians own more wealth than the bottom 70 per cent combined. If that isn't obscene enough, only six Australians have more combined wealth than the bottom 20 per cent.

The policies of the Turnbull government are not only failing to address Australia's growing inequality but they are also adding fuel to the fire. I have spoken in this place several times about the problem of multinational tax avoidance and its erosion of our tax base. Multinational tax avoidance is one of the biggest contributors to inequality not just in Australia but also throughout the world.

Multinational companies use sophisticated techniques to artificially reduce their profits in higher-tax jurisdictions and increase them in low- or no -tax jurisdictions. These techniques often involve basing their headquarters in a tax haven and then reducing the revenue of their national subsidiaries through charges from the head company such as loans, licence fees or royalties. The arrangements are often made through a complex web of companies to make them difficult to follow and to exploit loopholes in the law. In July 2015, the International Monetary Fund estimated that this was costing developing countries about US$213 billion per year.

The extent of the tax avoidance problem has been revealed in the infamous Panama papers and the Paradise papers, leaked to the media by an anonymous source in 2015 and 2017 respectively. Both leaks revealed not only instances of tax avoidance but also tax evasion, fraud and money laundering. The Paradise papers included the names of over 700 taxpayers and more than 300 corporate entities in Australia. Despite the scale of the problem of multinational tax avoidance, the Turnbull government has failed to show that they are serious about it.

While Labor in government sought to introduce a number of transparency measures, many of these have been wound back by those opposite resulting in more than $1 billion being handed back to big business. Labor's measures included plugging loopholes in Australia's transfer-pricing rules and anti-avoidance provisions. We also passed legislation which cracked down on companies overvaluing assets in international transactions. Labor in government also signed 28 bilateral information-sharing agreements with tax agencies in other countries, including the Cayman Islands and Monaco, which netted about $730 million in additional tax between 2012 and 2014.

Of course, tackling multinational tax avoidance is not just about the legislative measures you put in place but the resources that are there to enforce those measures. So we funded the tax office to set up a specific audit program looking at the use of offshore marketing hubs, getting hundreds of millions of dollars in additional revenue. By contrast, of course, those on the other side, the Turnbull government, have slashed over 4,000 jobs from the Australian Taxation Office. How can they claim to be serious about tax avoidance when they're making such savage cuts to the very agencies that are charged with enforcing anti-avoidance measures?

It's been revealed just recently, through Senate estimates, that the government will be defunding the Serious Financial Crime Taskforce from July 2019. This revelation comes two months after the Minister for Revenue and Financial Services, Ms O'Dwyer, praised the task force for uncovering Australia's biggest tax fraud, which involved, funnily enough, the Cayman Islands.

The government is yet to deliver anything on multinational tax avoidance. It's quite farcical that last year this government trumpeted their so-called success in clawing back $4 billion in a crackdown on multinational tax avoidance, and yet it was revealed in Senate estimates that not one cent of that was attributable to their Multinational Anti-Avoidance Law. In fact, the government had relied on laws introduced by the previous Labor government for their tax crackdown, including laws that they had opposed.

We know the real game for the government. We know what they're playing at here. They don't want to get serious about tackling multinational tax avoidance, because it'll upset their mates in big business. However, at the same time they need to pretend that they're doing something about it, because ordinary Australians won't cop it. They won't cop having to pay more tax to make up for multibillion dollar companies that pay none.

Despite evidence of growing inequality, we have a Treasurer, Mr Morrison, who denies that the situation's getting worse but his denial is at odds with all the evidence. It's what we've come to expect from a government which is basically for the big end of town and whose leader is personally named in the Panama papers.

Corporate tax avoidance not only offends Australia's sense of fairness but has very severe consequences for ordinary citizens and taxpayers. Every dollar of revenue that is lost to tax avoidance schemes is a dollar that has to be either raised from ordinary Australian workers and small businesses or cut from essential services such as health and education. But that's not the only unfair aspect of multinational tax avoidance. It also makes an uneven playing field between multinationals and companies without an offshore presence—companies that don't have an overseas headquarters in a tax haven to which they can siphon their profits. And, for those multinational companies that choose to pay their fair share of tax, there's competitive pressure on them to engage in the same kind of behaviour as those who don't.

The Tax Justice Network advocates countries adopt three measures that they believe will help in the crackdown on multinational tax avoidance. These measures are the automatic exchange of information between tax authorities in different countries; a public register that lists the owners and beneficiaries of companies, trusts and foundations; and the requirement for multinational companies to break down their financial reporting on a country-by-country basis. It's this last measure that is addressed by the private senator's bill we are now debating. But that measure is not new. In 2013, the then Gillard Labor government passed legislation that would require the Australian Taxation Office to publish information about the taxable income and tax paid by companies earning over $100 million from 1 July 2015. This bill seeks to reinstate the $100 million threshold after the government voted to increase it to $200 million. The disclosure threshold shielded around 600 large private companies from scrutiny, and this is the kind of cosying up to big business that we have come to expect from the government.

Let me give you an idea of what we have learnt from the data that has been released under the current disclosure regime. In the 2015-16 financial year, reports were published on 2,043 large public and private entities, and 732 of those paid zero tax. I get that companies have ups and downs and can make losses from time to time, but how much of that is a genuine loss, and how much is just a loss that they've managed to put on paper? These entities had a combined income of over $500 billion. But, guess what? An average Australian worker, such as a teacher or nurse or a retail assistant, would have paid more in tax than 700 of Australia's largest companies. When ordinary Australians hear that one-third of our biggest companies didn't turn a profit, I don't think that passes the pub test. It beggars belief that close to 36 per cent of Australia's largest companies made a loss in 2015-16.

The disclosure of this information has made a very useful contribution to the public debate about tax avoidance in Australia. The government haven't offered any policy rationale for increasing the threshold from $100 million to $200 million—not any. And I find it quite ironic that the bill the government introduced to shield 600 private companies from this transparency included the words 'combating multinational tax avoidance' in the title. Embarrassingly for the government, it appears not everyone in their ranks agrees with this decision, because just last month a Senate inquiry report on corporate tax avoidance recommended reinstating the original $100 million threshold—and guess what?— was supported by government senators on that committee. Given that government senators on the Senate economics committee have endorsed the recommendation, I really look forward to hearing them speak in support of Labor's bill.

Reinstating the $100 million threshold is just one of a number of measures that are needed to tackle multinational tax avoidance. But, unfortunately, the government just pay lip-service to the issue. They pretend to be serious about making companies pay their fair share of tax, but our Prime Minister, who, by the way, as I said, is personally named in the Panama papers, has not only been busy watering down tax avoidance measures but also wants to give $80 billion to the very corporations who are engaged in this behaviour. The Turnbull government do have a chance to show they are serious about multinational tax avoidance, and that is by adopting Labor's plan.

Our comprehensive plan includes tightening deduction loopholes, greater transparency about tax information and beneficial ownership, greater protection for whistleblowers and a range of other measures. All of this is in addition to our commitment, contained in this bill, to restore Labor's $100 million threshold for public reporting of tax data for private companies.

So, if those opposite want to demonstrate a commitment to addressing corporate tax avoidance, supporting this bill would be a very good place to start—although I must admit I'm not holding my breath. We know that supporting their mates in big business is in their DNA. You only need to look at the record of those opposite to see what approach they will take to multinational tax avoidance. It's a consistent record of opposing Labor's anti-tax-avoidance measures when we were in government, a consistent record of watering down those measures while they were in government and a consistent record of pandering to their mates in big business, topping it all off with the pursuit of $80 billion in corporate tax cuts. We on this side of the chamber are proud of our record when it comes to tackling multinational tax avoidance and we're proud of the package of measures we have proposed in order to tackle it further when we are in government in the future. I support the bill.

Jane Hume (Victoria, Liberal Party) Share this | Link to this | Hansard source

I rise today to speak on the bill introduced to this place by a parliamentary colleague from the Labor Party who recently departed this place, Senator Gallagher. Senator Gallagher's bill, the Taxation Administration Amendment (Corporate Tax Entity Information) Bill 2017, as has been discussed already, lowers the threshold for publicly reporting corporate tax information of Australian private companies from $200 million to $100 million.

This is not the first time the Australian Labor Party has tried to control confidentiality and commerciality and invade the privacy of private companies whose only crime, potentially, is running a legitimate business. When in government they passed legislation to lower the reporting threshold to corporate tax entities with a reported income of $100 million or more. As noted in 2015 by the then Assistant Treasurer, my good friend and esteemed colleague the Hon. Josh Frydenberg MP:

These laws abrogate the fundamental right to confidentiality.

Moreover, the information to be disclosed, already in the hands of the Australian Taxation Office, will not help the ATO in assessing additional tax. Public disclosure of the information as prescribed in this Labor bill will not inform the public any more than they already are informed and will be unlikely to raise additional revenue that will go anywhere near compensating for the additional administrative burden, the red tape and the invasion of privacy that it will impose.

I say 'invasion of privacy' intentionally, because submissions on the measure, before it was introduced by Labor in this place, highlighted the risk that disclosing the tax affairs of closely-held companies will effectively disclose the tax affairs of those companies' owners—the individuals who own the company, not the company itself. They also highlighted the risk of making public the commercial-in-confidence information of private companies. This bill raises serious privacy concerns but at the same time does absolutely nothing to help the tax office actually assess tax. It's a violation of privacy that is a craven attempt by the Australian Labor Party to further demonise the embattled business community and it ignores the laudable efforts of the coalition government to address tax avoidance, particularly by multinational companies.

The coalition has much to be proud of in its record of addressing corporate tax avoidance. Indeed, multiple game-changing pieces of legislation have already been passed in this place and in this parliament. The government is committed to combating tax avoidance and we are implementing far more well-considered and balanced measures than this. In fact, Australia has been a world leader in combating multinational tax avoidance. As G20 president in 2014, Australia led the global response to corporate tax avoidance by multinational companies and ensured that it remained at the top of the international agenda. Under Australia's leadership the first of the G20/OECD Base Erosion and Profit Shifting recommendations were delivered in 2014. Indeed, Australia was one of the first companies to commit to implementing the OECD's country-by-country reporting. Country-by-country reporting requires large multinationals to report annually for each jurisdiction in which they do business the amount of revenue, profit, income tax and economic activity.

Introduced in December 2015, country-by-country reporting is a very effective information-sharing regime for use by tax and revenue agencies around the world, about which we have heard a significant amount from the Commissioner of Taxation, Chris Jordan, as recently as the last budget estimates. He described country-by-country reporting as being of 'enormous value' and 'transformational' in our international tax work. For the first time, tax administrations have received a global picture of multinationals' operations. This was a very significant step into improving the transparency for tax administrations, and it was Australia that paved its way.

The coalition's 2015 budget also introduced the common reporting standard to combat multinational tax avoidance by exposing taxpayers with hidden offshore investments. The common reporting standards, you may recall, call upon jurisdictions to obtain information from their financial institutions and automatically exchanges that information with other jurisdictions on an annual basis. It sets out the financial account information to be exchanged, the financial institutions required to report, the different types of accounts and the taxpayers covered, as well as common due diligence procedures to be followed by financial institutions. The coalition government legislated for this transformative reform in 2016, and we have been reporting since 1 July 2017.

In my capacity as Deputy Chair of the Senate Economics References Committee, I did, in fact, sit on the inquiry into corporate tax avoidance, which delivered its final report just last month. That inquiry has been going on since 2014 and was recommitted to this parliament immediately after the election in 2016. In that report it was noted the success of the Multinational Anti-Avoidance Law, MAAL, and also the diverted profits tax, DPT, both of which have been integral parts of the government's additional $7 billion in sales revenue coming into that tax net, something that the coalition is particularly proud of.

The Turnbull government has been extremely tough on tax avoidance and has been so while still respecting the privacy of private companies. The government has also been successful in applying pressure on multinational corporations that try to avoid paying tax in Australia and, as a consequence, many of the companies in question have changed how they report taxable activities in Australia. Coalition senators noted in our comments in that particular report that the coalition wholeheartedly agrees that transparency is important to ensure that companies pay the right amount of tax. However, we also noted that a balance must be struck between taxpayer confidentiality and the need for any information made public to be well understood and also to be relevant.

While the coalition's track record on combating tax avoidance has been undoubtedly outstanding, we acknowledge that there is more to be done and, indeed, we are not done yet. In the 2018-19 budget, the government announced further measures to ensure businesses are paying their fair share of tax. These measures include such positions as strengthening the rules that limit interest deductibility, to stop companies shifting profits out of Australia, including requiring companies to align clearly and transparently the values of their assets with the values included in their financial statements. A further measure is broadening the scope of large multinationals being subjected to the Multinational Anti-Avoidance Law and the diverted profits tax. So these measures further strengthen already legislated and implemented measures to combat corporate tax avoidance. It's imperative though that, whatever measures are established to combat tax avoidance, consideration must be given that any requirement does not unreasonably add the burden and red tape to businesses, noting that many of the businesses—in fact, the vast majority of businesses that we are dealing with—are law-abiding corporations.

This Labor bill is yet another piece of legislation from those opposite designed to inundate business with further compliance and regulatory burden. Never to be outdone, the Australian Greens, for whom the concept of business is obviously foreign, wish to amend the bill to further lower the reporting threshold to $50 million. The attitude of the Australian Labor Party and the Greens towards business is part of the irrational and desperate rhetoric of class welfare. Were we let them to have their way—

Senator Whish-Wilson interjecting—

Class warfare, not welfare!

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

Order!

Jane Hume (Victoria, Liberal Party) Share this | Link to this | Hansard source

If we were to let them have their way, they would have businesses spending more time and more money on complying with regulation than actually engaging in business activities which require that compliance. The vast majority of our businesses, as you know, are good people who are simply providing the products and services for which there is genuine need and demand. For some reason, Labor and the Greens assume that everybody out there is a criminal until proven otherwise; that they are criminals waiting for the government or the ATO to turn a blind eye. This ingrained hatred and distrust of a capitalist system that is the foundation of Australia's success and prosperity bewilders me.

Red tape is no laughing matter; it's very serious. By one estimate, red tape costs the Australian economy as much as $176 billion every single year. Every new Commonwealth government elected in Australia in the last decade has declared that it would tackle Australia's regulatory and red tape burden. In fact, I might actually point out that Kevin Rudd commissioned a myriad inquiries, reviews, commissions and tribunals into this. He personally acknowledged the scourge that is red tape. He said:

The quantity and complexity of business regulation today is eating away at the entrepreneurial spirit of Australian business.

Goodness me; are you sure he was a Labor Prime Minister!

Former Prime Minister Rudd also created the Commonwealth government's first minister of deregulation. It's not often that I speak in glowing terms of Kevin Rudd's time in the top office but I have to say: wouldn't it be nice to have a Labor leader who actually understood the value of Australian businesses. Instead of embracing the job-creating power of business, which drives our economy, the current opposition leader has sought to demonise businesses large and small, creating a chasm between the Australian Labor Party and entrepreneurial business. If only the Australian Labor Party had a leader-in-waiting in the wings who understood the importance of a healthy relationship between government and the business community. Oh, wait, hang on; I think maybe it does. It does! I note that the member for Grayndler gave a very stirring speech last Friday when delivering the annual Gough Whitlam Oration. Mr Albanese declared:

… we do have to engage constructively with businesses large and small.

We respect and celebrate the importance of individual enterprise and the efforts and importance of the business community.

I'm not exactly sure who the member for Grayndler meant by 'we' in that sentence because, far from respecting the efforts and enterprise of the business community, his leader, Mr Shorten, continues to paint those hardworking business owners as pariahs and has all but declared that, should he become Prime Minister, he will wage a war on business. We know that the ALP has no plan to create jobs, no plan to increase wages and no plan to grow the economy. The ALP is no friend of business. The legislation being debated today is yet another manifestation of the lazy and ignorant attack that is the most base of political tactics.

But I am digressing, I'm afraid. As I was saying, the coalition government has not only promised to cut regulation but has delivered on this very promise. Since the coalition came to government in 2013, the government's regulatory reform agenda has cut burdensome compliance costs for individuals, businesses and community organisations by over $6 billion. In fact, the Annual regulatory reform report, released on 27 May by my great friend and colleague, the Hon. Craig Laundy MP, highlighted the coalition's stellar track record in making it easier for businesses and households to comply with regulations. Between 1 January 2016 and 30 June 2017 the government took decisions to reduce the regulatory burden on businesses by more than $800 million a year. The biggest single regulatory saving, worth over $444 million, came from the abolition of Labor's Road Safety Remuneration Tribunal—what a surprise! As Minister Laundy noted:

This Tribunal was set up by Bill Shorten as Workplace Relations Minister in 2012 as part of a deal between Labor and the unions. It effectively pushed tens of thousands of owner-drivers—many small family businesses—to the brink of collapse, rendering them uncompetitive with big union-dominated trucking companies.

The Turnbull government will always shun unnecessary regulation, and has been working tirelessly to make our regulatory environment easier for businesses and households, encouraging growth and encouraging innovation in the economy.

If the objective is to ensure that those who should pay tax do pay tax, should we not turn our attention to the black economy more urgently? When we're talking about non-reporting and the covering up of information, the black economy is indeed their true home. Instead of creating more red tape and diminishing the privacy of Australian businesses, we in the coalition are, in fact, creating policy and taking steps that go to the heart of the problems of the black economy. Typically, the black economy refers to people who operate entirely outside of the tax system or who are known to tax authorities but who deliberately misreport their tax and superannuation obligations. The black economy can also include those engaged in organised crime and those who are engaged in the production or sale of prohibited goods. We know that the black economy exists, so we should, therefore, be devoting efforts to ensure that adequate and lawful reporting takes place, not arbitrarily targeting those businesses who already do report to the Australian Taxation Office with increasingly burdensome red tape requirements.

Acting Deputy President Sterle, you will not be surprised to hear that we on this side of the chamber are taking real steps to crack down on this type of unlawful black economy behaviour and to ensure that all businesses that should be paying tax in Australia are, in fact, doing so. The Australian Bureau of Statistics has estimated that underground production in Australia could be as much as 1.5 per cent of gross domestic product. That equates to approximately $22 billion. That is not a figure to be sneezed at. Luckily, the Turnbull coalition government is here to clamp down on the black economy.

As recently as last Friday, in fact, the Minister for Revenue and Financial Services, the Hon. Kelly O'Dwyer, announced a new advisory board to support the coalition's ambitious reform agenda to disrupt the black economy. Minister O'Dwyer announced that Michael Andrew AO, who provided such strong leadership to the Black Economy Taskforce last year, will now chair the Black Economy Advisory Board. The coalition are taking real and serious steps to crack down on those who are not, in fact, paying tax or who are engaging in non-market and offline transactions. The advisory board will advise the Treasurer about implementation of the government's decisions attacking the black economy and will contribute to a government report every five years about new threats emerging from the black economy. The black economy is harmful to those honest businesses that do report and pay their taxes. That's why the coalition are delivering real and genuine reform in this space: $315 million in additional funding to the ATO to increase its enforcement activity against black economy behaviour. The black economy standing taskforce, led by the ATO, will also ensure that a whole-of-government approach is used with agencies, sharing intelligence, best practice, and knowledge.

This is on top of the good work that the ATO is already undertaking. Commissioner Chris Jordan, the commissioner of the ATO, outlined to the budget estimates in 2017 just how the ATO will be increasing its attention on businesses not doing the right thing, the black economy, phoenix operators and individuals in the market to ensure that there is a level playing field for all businesses. The commissioner also outlined how the ATO will have a strong focus on the intermediaries—the lawyers, the accountants, the pre-insolvency advisors and the liquidators—who facilitate illegal activity in the black economy and phoenixing operations.

It's this type of important and practical work that is crucial for strengthening our taxation and reporting systems without burdening those businesses who are already doing the right thing by the government and by the nation. This piece of legislation, introduced to this place by the opposition, is no more than a distraction to a coalition agenda that is already addressing the very important issue of corporate tax avoidance, whether it be from multinationals or from domestic entities.

Slade Brockman (WA, Liberal Party) Share this | Link to this | Hansard source

I rise today to speak on the Taxation Administration Amendment (Corporate Tax Entity Information) Bill 2017. Here is a good reminder: in this place, when you stand up to speak on a bill, look at the speakers list and don't speak after someone who knows what they're talking about; it's always a very dangerous thing! Obviously, normally, I'm speaking after someone from the other side, so it's not much of a problem, but Senator Hume just gave an excellent summary of what the government has done to address these broad issues without overburdening the corporate sector with unnecessary reporting requirements.

What does this bill seek to do? It seeks to lower the threshold for public reporting of the corporate tax information of private companies from $200 million to $100 million. What this is going to achieve is slightly beyond me. I don't even know that the Labor senators opposite can tell us what it's actually going to achieve in practice, apart from putting an extra, burdensome requirement on private companies in the threshold range provided.

One thing that Senator Bilyk raised earlier, which I do want to address at the start, is this issue of the 732 companies she cited who pay zero company tax. I come from a farming family background. We all know there are very good reasons why companies, particularly private companies, pay no tax. There are agricultural enterprises in Western Australia who, through drought periods, do not pay tax for years and years at a time because they are not earning any assessable income. That doesn't mean they're not earning any income; it means they're not earning any assessable income. This is a fundamental point about our entire tax system which, in the rhetoric of this debate—and not just on this bill but on the company tax cuts bill and issues of wider reform to the Australian economy—is being completely lost. We have had for a very long time in this country a bipartisan approach on this: when we're talking about taxation, we're talking about assessable income. We understand that there are legitimate business deductions and that business losses can be carried forward. Without that ability business would simply not be able to survive and compete in our economy and in an international economy which is highly competitive.

It's not just the agricultural sector. Obviously when mining and oil and gas companies come to look at Australia, or are developed in Australia to undertake large projects, you're talking about the investment of literally billions of dollars up-front. Sometimes you're looking at a decade before there is one dollar of income from those projects. If you cannot carry losses forward, if you cannot deduct legitimate business expenses, then you will have a situation where nobody is willing to invest.

So citing 732 companies that pay zero tax is just misleading. It's an attempt to distort the debate to undermine the very important fact that we need a taxation system that is predictable, convenient and efficient. We need a corporate tax system and a tax system that delivers to government the revenue it needs—but only the revenue it absolutely needs—to fulfil important, essential government services.

Yes, tax compliance is a very important part of that. That's why the government has taken very strong action to ensure strong tax compliance, including that multinational companies pay the correct amount of tax. This has included a commitment from the government to ensure tax transparency rules are effective in promoting broad compliance with and public confidence in the Australian taxation laws. The government introduced the multinational anti-avoidance law and the diverted profit tax. These measures have been successful in bringing a further $7 billion a year of sales revenue into the Australian tax net. The multinational anti-avoidance law stops multinationals avoiding taxable presence in Australia. The diverted profit tax means multinationals shifting profits overseas are stopped from doing so or are limited in their ability to do so. In the 2018-19 budget, the government announced further measures in this area to strengthen the rules that limit interest deductibility to stop companies shifting profits out of Australia, including requiring companies to align the value of their assets with the value included in their financial statements and broadening the scope of large multinationals being subject to MAAL and DPT.

There are other examples of action taken by the government. There was the establishment of the Tax Avoidance Taskforce within the ATO on 1 July 2016. Obviously, it's delivering to the budget bottom line. There was the signing of the OECD multilateral instrument on 7 July 2017; doubling the penalties for multinationals avoiding tax; increasing the penalties for breaches of tax reporting obligations by multinationals; implementing the OECD recommendations for country-by-country reporting to give the ATO greater access to multinational transfer pricing information; and, finally, aligning Australia's transfer pricing rules with the latest OECD guidelines.

Why is it important? A number of the actions I've just read out are done in conjunction with the OECD. Why is that so important? It's important because, unless we have provisions that align with the major part of the world economy and our major trading partners, there is an incentive for multinational companies to look elsewhere. We want large companies to look at Australia in a positive light as a place where investing and operating is worthwhile; but, at the same time, we need those companies to pay their fair share of tax. To do so we must work on a multilateral basis, particularly through the OECD, to make sure our rules can be applied consistently and to make sure those companies do contribute.

These initiatives have ensured that multinationals have increased their compliance with the law. Since 1 July 2016, the ATO has raised $5.2 billion in tax liability from large companies. Australia is a global leader in the international fight against tax avoidance. We're taking strong leadership in the G20 and the OECD on base erosion and profit shifting. In fact, we are leaders in the Base Erosion and Profit Shifting Project through the G20. The government, together with the ATO, continues to monitor the implementation and effectiveness of tax law. Again, this is key to what we are trying to do with the economy: ensure that, whilst companies are paying the tax that they should pay under the law, we also incentivise companies to grow, invest and contribute to the economy and, therefore, to the tax base.

Growth is the best way of improving the tax base. Hopefully this week the Senate will look at moving forward on the company tax cuts put forward by the government in the enterprise tax plan. Through the enterprise tax plan we will incentivise companies to invest more in Australia, which will grow the size of the Australian economy and increase the size of the tax base over time. This isn't pie-in-the-sky economics; this is the reality of what occurs in the economy. If you reduce the burden of company tax cuts while ensuring that everyone pays the correct amount of company tax, you incentivise growth in the economy. This is essential to ensuring the jobs and wage growth of tomorrow are achieved.

We want to do this to create more successful and more profitable businesses. To my home state of Western Australia, this is obviously key. We've seen the growth, in the north, of both the mining and the oil and gas sector over the last 20 years—something that has fuelled an enormous amount of economic growth not just in Western Australia but across the nation. In Western Australia, nine out of every 10 jobs are private sector businesses. That is the reason why we do not want to inflict on the private sector unnecessary red tape burdens, as Senator Hume talked about extensively. We need to have those nine out of 10 working Western Australians protected and we also need to provide the jobs for the future that a growing economy can give. We want people to grow their businesses so they can hire more Western Australians.

If you take less money out of every business through the enterprise tax plan then those businesses will have more to invest and those businesses will grow. Over time they will invest, they will grow—and, yes, for a time, that investment will potentially lead to some companies paying zero tax, as they invest, as they carry forward losses and as they look to expand their businesses into the future.

If we get caught up in this idea that some companies sometimes pay zero tax, then we will lose sight of the bigger picture, which is that we need to see those companies investing and growing—and not just large companies, but small, family-owned companies as well. Many family-owned companies would fit easily within the thresholds provided for in the bill currently before this chamber. These are not necessarily massive entities; they are relatively small entities. Some of them employ significant numbers of the Australian workforce. They're family-owned companies that operate, for example, in the resources sector or the agricultural sector in my home state, and they need to be protected.

Getting back to the more general issue of taxation in this country, we really have to remember: we have to always, when we talk about taxation, get back to first principles. Taxation should be predictable, convenient and efficient. We should never look at taxation systems that overburden either businesses or individuals with reporting obligations. We should never allow such things as double taxation to ever rear their ugly heads again. And we must never disincentivise investment and economic activity through an overly harsh burden of tax.

On taxation, we really do see a very stark contrast between the two sides of politics at the moment. We have, on our side, a very strong commitment to reducing the burden of taxation and to only taking that taxation that government needs to provide absolutely essential services. To that end, we saw last week the passage of the personal income tax cuts, and obviously this week we've got the corporate income tax cuts up for consideration by this place. I'd urge all crossbenchers to seriously consider their position on those company tax cuts. We do want an economy that's investing and is growing jobs and wages, not one that is contracting, where we are going back to, quite frankly, the bad old days when double taxation was the norm rather than the exception.

I do harp on the double taxation issue, because I think it is a very dangerous path to go down and one that those opposite are now effectively advocating, through their position on dividend imputation, which is: they will be, once again, double taxing some people's income. I've talked in this chamber before about Glen Diggins from Albany who will be, under their policy, losing around 30 per cent of his income. He is a self-funded retiree on a very, very modest income who'll be losing around a third of his income under their current policy settings. Subsequent to raising that issue, I got communications from two other self-managed-super-fund retirees in Kalgoorlie—another regional centre in Western Australia. Their incomes were not quite as modest as Mr Diggins's. They had slightly higher super-fund balances. One of them, on an income of around $137,000, will be losing $37,000 of that income in franking credits. Another, on an income of around $83,000, will be losing $21,000. I would not put either of those in a very, very high-income category. The tax system certainly doesn't put them in a very, very high-income category. Obviously, they are comfortable in their retirement, I would hope. But losing one-third and 20 per cent of their income respectively is a significant blow to them as individuals, and we must always remember that they are people who've contributed to their own retirement, in a way that was advocated by all sides of this parliament, through the superannuation system. I think it's extraordinary that we would punish those people with a potential impost of a double taxation rate from the Labor Party if they win government next year. I think that would be an extraordinary burden to place on them.

So, again, on first principles, tax needs to be predictable; it needs to be convenient; it needs to be as efficient in its collection as possible. We need to keep costs down. We need to keep red-tape burdens to an absolute minimum. I do not think the bill currently before this house achieves anything in that regard. The government has taken clear, strong steps to bring more tax into the tax base through the multinational avoidance measures that it's put forward. I think that this bill will add nothing except put an additional red-tape burden on Australian companies.

Don Farrell (SA, Australian Labor Party, Deputy Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

I move:

That the motion now be put.

Question agreed to.

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

The question now is that the bill be read a second time.

Question agreed to.

Bill read a second time.