Katy Gallagher (ACT, Australian Labor Party, Shadow Minister for Finance) Share this | Link to this | Hansard source

Thank you for the opportunity to speak on the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2019. The bill contains two measures relating to multinational tax as well as a minor tax measure relating to luxury car tax. From the outset, as my colleagues in the other place have pointed out, Labor will support this bill. However, we think the government could go further and adopt measures which could provide much-needed revenue to help boost an economy that is floundering on this government's watch.

Schedule 1 of the bill deals with Australia's thin capitalisation rules. Under the rules, an entity must comply with accounting standards in determining and calculating the value of assets, liabilities and equity capital. Currently an entity can depart from this value to use figures that are not in the entity's financial statements or recognise certain assets not recognised by accounting standards and revalue intangible assets without an active market. The amendments in schedule 1 would mean that entities would have to use figures in the financial statements and could not revalue assets for thin capitalisation purposes. The amendments in this schedule would also mean that non-ADI foreign controlled Australian consolidated groups having foreign investments or operations would be treated as both outward and inward investing entities. This means that certain companies won't be able to benefit from thin capitalisation rules that they shouldn't be benefiting from. The explanatory memorandum to the bill states that this measure will raise $240 million over two years from 2020 to 2021. These amendments are all fine, and Labor will support them.

Schedule 2 of this bill requires offshore suppliers of rights or options to use commercial accommodation in Australia to include these suppliers in working out their GST turnover. These amendments recognise the reality that many people—Australians and overseas consumers—are booking accommodation in Australia online and using online service providers that are based overseas. The changes in this schedule mean that the playing field is levelled in relation to GST treatment, regardless of whether someone books accommodation directly or through an offshore provider. The explanatory memorandum to the bill says that this measure will raise $15 million in GST revenue over the forward estimates, and Labor will support this measure.

Schedule 3 of this bill is a minor taxation measure that deals with the removal of liability for the luxury car tax from cars that are reimported following service, repair or refurbishment overseas. Luxury car tax is currently applicable to taxable importations of luxury cars, not only to the initial purchase but to reimportation as well—that is, where the car re-enters Australia after being serviced, repaired or refurbished overseas. This schedule would mean that the same taxation treatment would apply regardless of where the car is serviced, repaired or refurbished. The explanatory memorandum to the bill states that this measure would have a negligible cost to revenue over the forward estimates, and Labor has no issue with this measure.

Multinational tax avoidance is a serious issue. It places serious pressure on a revenue base that is increasingly coming under strain from several sources, including from issues associated with the ageing population. Closing down tax loopholes means that more taxpayer money stays in Australia to fund critical services, such as hospitals and schools, and productivity-enhancing investments. It's also fair to say that the state of the economy, which is floundering on this government's watch, requires actions by government that will need to be funded from somewhere. Last week we saw the release of the national accounts for the 2019 June quarter, and it didn't make for great reading. The accounts revealed the lowest level of economic growth in Australia since the GFC—a level of economic growth lower than the Reserve Bank had forecast and than the government had forecast in their budget. The national accounts showed GDP per capita going backwards over the year, productivity going backwards over the year, household spending remaining weak and total private business investment going backwards. And what did we get from the government? We got nothing serious, no economic plan to turn things around. We got a fair bit of finger-pointing, blame-shifting and excuse-making—a Treasurer in his press conference last week even gloating over these figures, simply because they may have been better than some people were forecasting and better than even-worse numbers, which just sounds ridiculous.

We know that the government's heart isn't quite into all this. For example, they like to cite revenues raised by the Tax Avoidance Taskforce but never admit that most of those revenues are based on Labor's transfer pricing laws that they opposed in 2013. It was Labor's laws that the Liberals opposed that underpinned the tax office's $300 million win against Chevron. It was Labor's laws that the Liberals opposed that delivered the tax office's $529 million settlement with BHP. And let's not let the record stand uncorrected when the government continues to peddle the mistruth that Labor voted against the multinational anti-avoidance law. It's a tired old rewriting of history that government all too predictably likes to repeat.

You need only look at what Labor put forward at the last election in relation to multinational tax avoidance to judge what our position is. As the shadow Treasurer pointed out in the other place, we had 19 measures to crack down on loopholes and tax havens. These included tightening debt reductions, closing public reporting loopholes, increasing capacity for the ATO, public reporting of AUSTRAC data, and whistleblower protections. These were serious measures aimed at multinational tax avoidance. The government could take up any of these. If they put them forward, we would support them. A serious agenda to tackle multinational tax avoidance would ensure that we had the revenue to deal with future budget pressures and measures to rescue an economy that's floundering under the watch of this government.

To conclude, Labor will support this bill, as we have done with all sensible measures to deal with multinational tax avoidance. However, we know that the government can do more in this area and we urge them to do so. If they took it seriously, we might be able to generate the revenue required to deal with some of the future budgetary pressures as well as an economy that is struggling on their watch.

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

I will also keep my contribution today brief. The Greens will be supporting the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2019. I would also like to put a bit of history on record today. Given that we have so many new senators in this chamber, I thought it was worth highlighting that it was the Greens who initiated the first groundbreaking Senate inquiry, in 2014-15, into making multinationals pay their fair share of tax. I'd like to acknowledge my previous Senate colleague and Leader of the Australian Greens, Christine Milne, who was a driving force behind getting up this Senate inquiry. That inquiry delivered some amazing results not just for the two chambers in this parliament but also for the Australian people. We drove that inquiry. We went all around the country and we heard from hundreds of experts. Working with great people from within the department and even businesses and other stakeholders out in the civil society, such as Micah Challenge, we managed to deliver some changes.

It might seem nuanced when Labor get up in this place and say that they had never voted against the MAAL, the multinational anti-avoidance laws. Let me make it very clear that Labor campaigned very hard against that legislation. The Greens voted with the Liberal government to bring in that legislation—and thank God we did! Had we not brought that in by 30 December of that year not only would we have seen a number of big tax-dodging multinationals avoid disclosing new information that was essential in prosecution but it also allowed us to bring in billions of dollars in revenue for the Australian people. That would not have happened had that legislation not been supported.

You will have to ask the Labor Party why they campaigned so hard against that legislation, given that it made perfect sense. I remember former senator Sam Dastyari—who I actually have a lot of time for and worked very hard with on a number of committees—putting up a billboard in Sydney that Christmas saying that the Greens had voted against tax transparency, because of an amendment that happened to be tacked onto that bill that we didn't agree with. So there you go, if ever you wanted an example of how cynical politics can be. This chamber did a fantastic thing. The Greens worked constructively with the government to get very important laws in place that have, to this day, continued to allow the Australian Taxation Office to go after big international tax dodgers.

I want to make one other point before I conclude my contribution today. This bill seems very straightforward, though it's reasonably technical, including for those of us who spend time poring through these documents. But I do want to say something in relation to the section on thin capitalisation. This is something that we had been talking about for some time. It's been tried overseas, and it has been looked at by a number of countries, including the OECD and various groups that have looked at better information sharing and putting in place standard rules between countries. So the principle is a very good one. I also want to highlight the idea that companies would need to use their audited assets and liabilities data, which of course helps us determine their leverages and whether they are unduly claiming excess interest deductions on debt that's not reasonable. That does rely on a level of integrity at the audit level for these large corporations.

The Greens were very happy to support the Labor Party's referral to the Joint Committee on Corporations and Financial Services recently—an inquiry which is reporting by 1 March 2020, next year, on the regulation of auditing in Australia, with particular reference to the relationship between auditing and consulting services and potential conflicts of interest, other potential conflicts of interest, the level and effectiveness of competition in audit and relating consulting services and so on and so forth. Indeed, there are 12 various terms of reference that will go into some detail, looking very closely at the big four accounting firms, in particular, and the services they provide both to the federal government and to big corporations.

So it's very important that the Senate continues to do its great work that I have been here to witness in the last seven years looking at the financial services industry. I am very pleased we have another piece of legislation before us today that's going to help the government crack down on multinational tax avoidance. But I urge all senators to pay particular attention to and show interest in this joint parliamentary inquiry that's coming up. The big four auditors are being looked at very closely. Overseas, particularly in the UK, there have been a number of startling recommendations in relation to breaking up the power of big audit companies. We have to be very, very confident that the audited assets and liabilities, for example, on the balance sheets of companies that we are going to be using around our tax laws are actually fair and reasonable estimates and that there are no conflicts of interest that could possibly distort those. I conclude my contribution.

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

I too rise to speak on this bill, the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2019. I note in starting that sometimes there comes from certain sections of the commentariat and those opposite the throwaway idea that those on this side of the chamber are somehow not as supportive of integrity in our tax system as those opposite.

I'm going to run through a little of what this government has done over the last six years in the tax integrity space. As a point of philosophy, those on this side are absolutely committed to tax integrity, because everyone who is not paying their fair share of tax is putting an unfair burden on those who are. So your mum and dad and small-business owners who are doing the right thing, who are paying their fair share of tax, are hurt. The vast majority of farmers out there and the vast majority of small and medium-sized businesses are doing the right thing and paying their fair share of tax. Those companies that aren't, obviously increase the burden on those who are paying their fair share of tax.

Those on this side of the chamber are vitally aware that ensuring the integrity of our tax system is absolutely fundamental to the operation of government but also just to fairness in our economy. People need confidence that the system is going to treat them fairly, and in that way taxes can be maintained at as low a level as possible to provide the essential services that Australians need. If everyone is paying the correct amount of tax they are required to pay then no-one is, by definition, treated unfairly. If everyone plays by the rules then we do not need to burden our society or anyone in it with an unduly high level of taxation. So tax integrity—and this bill builds on a very strong government record in this space—is vital to ensure the fairness of our economy.

As I've said, this is a government that has had a long and ongoing commitment to tax integrity. This goes back many budgets now. I wish to just run through a few measures. This bill itself makes some fairly important but narrow changes to our tax system. It builds on a series of changes, over a number of years, to improve the integrity of our tax system and make sure we collect that tax which is required to be paid under the law.

This goes back to a number of things that the government has done over the last few years. There was the Banking Executive Accountability Regime to ensure that senior executives were accountable for the decisions they had made. This was a very significant reform in Australia's financial services history. It imposed a higher standard on the behaviour of banks and their senior executives and directors. It strengthened the leadership of financial system regulators by enabling ASIC and APRA each to have second deputy chair positions. That is a fundamental basis for making sure that we create a level of integrity and transparency in the system.

The government has created a one-stop shop for dispute resolution with the establishment of the Australian Financial Complaints Authority. This enables free and fast dispute resolution to consumers. There has been an increase in the powers of APRA in relation to crisis management and non-bank lenders to ensure resilience and ongoing stability in the Australian financial system, a cap to the commissions on life insurance products, a raise to professional education and ethical standards for financial advisers, and a ban on excessive credit card charges. So we can see that we're building a strong financial system by putting in place those integrity measures that the system needs.

We've also obviously done a lot in the direct area of multinational anti-avoidance law. Multinationals, due to legislation passed in the previous parliament, are no longer able to use corporate structures with foreign trusts and partnerships to avoid the application of the multinational anti-avoidance law. That was announced in the 2018 budget and has been passed through this place. The government continues its commitment to ensure that multinational entities pay their fair share of tax. The OECD estimated that globally between a hundred billion dollars and $240 billion of corporate tax revenues are lost annually due to base erosion and profit-shifting strategies. The multinational anti-avoidance laws that we saw go through in the last parliament addressed that issue.

We've implemented measures to prevent diverted profits from reducing the taxable income of large multinationals, stopping multinationals from artificially diverting profits to offshore, lower-taxing regimes. These laws have been in place for a significant period of time, since 2016. It prevents multinationals from escaping the Australian tax system by using these artificial arrangements to move their taxable presence out of Australia to lower taxing jurisdictions. This measure has had a discernible impact on the way multinational corporations are behaving. Something like $7 billion in sales revenue has already been added to Australia's tax base as a result of these changes. Thirty-eight multinational entities have changed their compliance arrangements to bring Australian sourced sales back on shore in compliance with those laws. These include the large companies that we've talked about in this place a number of times, such as Google and Facebook. Obviously we do not want to discourage innovative business models, but we do need to make sure that the way businesses are structured returns a dividend of activity within Australia to Australia through the taxation system. This makes sure that everyone is paying their fair share of tax so no other taxpayers are overburdened.

This effort to attempt to improve multinational tax arrangements is continued in this bill. It is a highly technical bill which addresses a number of issues. Schedule 1 deals with thin capitalisation. This is about ensuring integrity in the thin cap rules. Affected taxpayers have a range of options available to justify their debt levels under the thin capitalisation rules. Impacted entities with genuine commercial debt levels can continue to use the safe harbour debt test and revalue assets in their financial statements—provided that this is consistent with the accounting standards—and use an arms-length debt test or use a worldwide gearing test. This measure applies equally to all entities subject to thin capitalisation. Where entities are not able to recognise certain assets for accounting purposes or choose not to reflect the value of their financial statements, they have the option of supporting their debt using the arms-length debt test or the worldwide gearing test. Obviously these are highly technical changes; you do need to be a tax expert to understand much of this. But it is important that we have a robust outcome that adds to the integrity of our tax system and allows taxpayers to justify any deductions they claim; in this case, debt deductions are on a genuine commercial basis. In the tax law, clarity is king. Where confusion exists is where you have the potential for avoidance beyond the law.

Schedule 2 of the bill goes to online hotel bookings. This is about treating like with like within our taxation system. Currently the turnover concession in GST law means that offshore companies are exempt from counting sales of Australian hotel accommodation when calculating their GST turnover. This means these companies often do not need to register for and charge GST on their mark-up over the wholesale price of the accommodation. This very clearly gives those offshore companies an unfair advantage over Australian businesses that are providing an identical service, as Australian sellers within this jurisdiction are required to charge GST on their mark-up. This is levelling the playing field. It is about tax integrity. It ensures the same tax treatment of Australian hotel accommodation whether that accommodation is booked through a domestic or offshore company. Offshore travel companies will be required to charge GST on the mark-up they charge on hotel bookings in the same way as Australian sellers. The revenue impact of this measure is fairly modest—$15 million over the forward estimates period, which will be within the GST so it will go straight to the states and territories. As such, this is not a revenue item; this is about ensuring the integrity of our system and ensuring that Australian businesses are operating on a level playing field with their international counterparts.

Schedule 3 removes the luxury car tax on reimported cars refurbished overseas. The risk of people using this change to avoid the luxury car tax is very low. Overseas refurbishment of cars includes additional shipping costs, insurance costs, customs duties and compliance costs associated with exportation and reimportation, which is likely to outweigh any benefits from avoiding the luxury car tax. This is only going to be used, therefore, by genuine car enthusiasts seeking specialist refurbishment overseas. This has been raised with the government a number of times, in relation to the Australia-US free trade agreement, and it has decided to proceed with this option as a way of dealing with this issue.

This government has a proud track record on stopping multinationals and any company avoiding paying their fair share of tax. To do otherwise is to unfairly burden those in society who are doing the right thing.

Kim Carr (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

The Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2019 is a bill that gives us an opportunity to actually canvass some of the issues that are facing the country—the state of the economy and the extraordinary con job that was done throughout the last election. In the election period we saw arguments put, particularly by the Liberal Party and the conservative press, the right-wing press, in this country, that suggested that if the government were re-elected the economy would remain strong, the jobs would flow, and milk and honey would be on the table for every voter in every marginal seat in the land. Not for the first time the reality has mugged this fantasy, as we notice that the national accounts, which were released last week, demonstrate the weakness in the Australian economy.

The Treasurer sought to celebrate a very different world, a world in which the Governor of the Reserve Bank, Dr Philip Lowe, has tried to draw our attention, on numerous occasions now, to the real and dire situation—that the Reserve Bank simply cannot carry the load that's being asked of it and act almost on its own to try to reflate the economy. We've had a growth rate of something like 1.4 per cent over the last 12 months. We have wages stagnating, 1.8 million Australians looking for work and wanting more work but unable to find it, living standards going backwards and productivity going backwards. We've got Dr Lowe telling us that more needs to be done to avoid a very serious financial and economic situation in this country.

Instead we had the Treasurer last week telling us that we need to adopt Labor's policies in regard to business investment, but of course not until May next year. The Treasurer talked about how important it was for the business community to lift their game in terms of investing in the future of the nation. He said that it had to be done with the government doing very little, other than a rhetorical flourish, suggesting that after May next year there may be some assistance with some accelerated depreciation programs, which he pinched from the Labor Party. But other than that he wasn't going to do anything that might in any way endanger the blessed surplus.

This is a situation where the government is faced with circumstances where the Prime Minister himself has sought to lower expectations. He's told ministers they're not to comment or raise matters; they're not to take forward any new agenda items. They should only deal with matters discussed in the election campaign, which of course gives them very, very little to say—very little indeed—because the government has no substantive agenda to speak of and said very little during the election campaign.

I'm particularly interested in the Treasurer assailing the business community in what was a rather clumsy effort. The last iteration of this bill, the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill—which is an ironic title for a bill—had significant measures to deal with what the government saw as its R&D policy. That has now been removed from this bill. The Treasurer last week told his audience that business had to invest more in innovation to boost the economy. This is coming from a government which has taken $1.1 billion, in real terms, from science and research and innovation programs over the last five years. That's a reduction of 10 per cent in government outlays, in real terms, for support for innovation. In the last three financial years, on the government's own targets for business expenditure on research and development, we've seen a reduction in private sector investment of $5.3 billion—a cut of 30 per cent.

The Treasurer may well berate business. But, when it's the government that has so little to say about the future directions of the country in regard to its investment policy and so little to say in terms of the future of science and research and innovation, other than to reduce the government's budget in real terms, it is beyond galling to suggest that it's business that has failed. Despite the Prime Minister's urging that nothing should be said, the Treasurer has gone out with this half-baked, half-arsed measure to suggest that the business community is somehow or other going to fix the problems that the government itself has created with its do-nothing policy. In fact, it reflects the chaos that really characterises the way in which this government has operated.

The 2018 bill, which of course is the predecessor of the bill that we're now looking at, set up a Research and Development Tax Incentive Roundtable with industry associations. The roundtable was supposed to fix the problems that had occurred as a result of previous budgets in terms of reductions in spending on research and development. The government made it clear by their attitude that what they had in mind was not to make the incentive programs more effective but the effect of the reductions. They were, remember, reducing the incentive by $2.4 billion. The Parliamentary Budget Office showed that the real effect of the reduction in business activity, as a consequence of the government's policy position, was that it was down to $1.7 billion, and the government can't achieve those savings because to do so would further antagonise the business community. Yet the government, through the Treasurer, now wishes to berate the business community for not spending more on research and development.

I think it's only fitting that we give consideration to why the business community, particularly the tech sector, was so upset with the government's policy fiasco in this area—the ill-considered changes that it had proposed some time ago. There was a $4 million cap on annual refunds for firms with a turnover of $20 million or less. There was a proposal for the reduction of the refundable tax offset to a company's tax rates for the year plus 13.5 per cent. There was an intensity measure, which had really sharp effects on manufacturers in this country. Now, all of these changes, especially the intensity measure, were heavily contested from the time they were announced in the 2018 budget. The firms that invested or wanted to invest in research and development saw immediately what the consequences of this action would be. The most likely effects of the changes would have been that large firms would shift their research and development offshore and that small firms would cease their research and development.

The public debate on these earlier measures highlighted poor compliance and program management issues. The government thought the way to deal with this question was to clamp down on what they saw as the rorting of the system. Of course they overstepped the mark there as well. Firms found themselves being audited and being asked to repay funds which had previously been approved. Some of these audits went back years. No-one in the Labor Party, certainly not in my time or in my direct experience, is prepared to defend people who are illegitimately claiming moneys. We have to defend the integrity of the taxation scheme. There is no excuse for the rorting of the program. But we shouldn't try to find budget savings by cracking down on what were previously regarded as bona fide claims under the research and development scheme. And we shouldn't ignore the fact that the government's own review, the so-called three Fs review, suggested that there needed to be a fundamental reassessment of the way in which the research and development program in this country operated, and that the incentives that were offered to encourage a high level of collaboration between firms and our research agencies and universities needed to be addressed directly. This was the issue the government needed to pay attention to—not the side issue of claims on software development, as if that was the fundamental issue the nation needed to have addressed in terms of research and development. What is actually required is a major cultural change in the way in which this country deals with issues of research and development.

That's why in the last election—and for many years now—the Labor Party committed to a target of lifting spending, in terms of our research and development, to three per cent of GDP. The current rate is around 1.8 per cent. I understand—we'll see some figures from the ABS coming out within a month or so—it's likely that figure will show a further drop in the level of performance for our research and development capacity in this country and this will put us at the bottom end of our competitors internationally when it comes to the issue of developing research and development opportunities in this country.

The issue here then is not just what it costs in terms of the budgetary measures in regard to the incentive program under the research and development programs in this country—and I made this point on previous occasions—but that it is now the single largest policy instrument we have available within the innovation toolbox in this country. So it is appropriate that adequate consideration be given within parliamentary debate to the directions in regard to research and development in this country. This particular policy measure, the taxation concession, is the most important of all the instruments we have available, whether it be funding through the CSIRO, funding through the Australian Research Council, funding through the NHMRC or even funding through our block grants in universities. This is becoming an increasingly important area for us to be considering.

This is a government that gloats over having legislation to cut taxes but won't look at these issues that are of much greater substance in terms of the future direction of the country. It's a government that gloats about its economic performance where wages are stagnating. We have a situation where the Reserve Bank has made it very, very clear just how dire the situation is. It is a situation where the CSIRO and NAB in their Australian national outlook report, the academic and financial institutions and the Productivity Commission—of all organisations—have all made it incredibly clear how important it is for the government to actually invest in the research and development capabilities of this country. Lately the commissioners have sounded the alarm bells about the future of the economy when it comes to our scientific capabilities.

We have a situation where this government has fundamentally failed the future. The question of how we adapt to technology and how we're able to transform the way we live, particularly in an industrialised country such as ours, is really quite basic to the future prosperity of this nation. And, of course, this goes to the heart of why we should be investing in research and development. The decline in our global competitiveness has a direct correlation with the decline in our research and development capabilities and our research and development spending.

In June the IMD ratings of global competitiveness rating were released. These ratings are Swiss based but have global significance. IMD ratings are based on a comprehensive notion of competitiveness and they measure the extent to which a country fosters an environment in which enterprises can achieve sustainable growth, generate jobs and increase the welfare of citizens. Now, in 2010, Australia ranked fifth out of 63 economies. It now ranks 18 on overall economic performance. The IMD ranking was not the only measure that should disturb us. The Harvard University produces an economic complexity index which assesses the capacities of countries to produce unique products and services, based on trade data. Economic complexity is important because it has been shown to be an effective predictor of future economic growth. The Harvard index shows that Australia is losing its relative capacity for producing unique products and services. In 1995 Australia was ranked 50th. In 2017 it had fallen to 93rd. In the Harvard index ranking, the countries with the most complex economies are, in order: Japan, Switzerland, South Korea, Germany and Singapore. Other notable countries are the United States at 12, Italy at 13, the UK at 14, France at 16 and China at 19. Australia is not in the company of any of these countries.

The index places us in a group of countries that includes Madagascar, Zimbabwe, Cuba and Zambia. These countries record the fastest decline in economic complexity. There's a clear message here, and that's about decline in our manufacturing capacity and, with it, the extraordinary number of jobs we are shedding. Without new investment in manufacturing, particularly advanced manufacturing, we will not be able to diversify our economic base.

This is a very grim outlook. The Australian Outlook 2019 report released by the CSIRO and the NAB highlights a similar pattern in regard to the innovation challenges for Australia. The report declares:

Solving Australia's greatest challenges with the help of science and technology has never been more important—for our quality of life, for the economic health of our nation, and for our contribution and position in a globally competitive world.

The report warns that if we are not thinking strategically about Australia's future we face continuing wage stagnation, rising energy costs, environmental degradation, declining urban amenity, fewer government services and no action on climate change. Thinking strategically means, among other things, reversing the decline in investment in research and development. The outlook report says that Australia is very much at the crossroads. We can choose between continuing the slow decline and having a positive and more innovative future.

The dangers have been apparent since the Abbott government began the dismantling of Australia's innovation system in the 2014 budget. That's why Labor's election goals stated very clearly, when Bill Shorten outlined our position in response to the 2014 budget, the lifting of Australia's spending on R&D to three per cent of GDP by 2030. That's why we would have instituted a root-and-branch review of the entire Australian research system. That's the kind of strategic thinking that economies with a diverse economy and with superior growth prospects know they have to have. It's the kind of thinking that is simply not happening under this government.

In the previous version of this bill the government bungled its biggest opportunity to turn around the level of investment in research and development. Every country with which we are likely to compare ourselves understands why the government should create incentives for business to engage in research and development, and that's why the Treasurer's intervention last week was so inept—so extraordinarily half-baked. If the Australian economy is to thrive, the government should adopt measures that will increase investment in research and development. The government should start to fix its mess by looking again at the collaboration premium that it chose not to include in this version of this bill. It must build a stronger cultural collaboration and make that a priority for the future of this nation.

We need to be able to transform attitudes to innovation in official policymaking, let alone on the shop floor. We have to choose a better path and we must do it with a sense of urgency. The lives, the livelihoods and the real economic opportunities for Australians depend on getting that choice right. This Treasurer is so busy fighting with the Prime Minister that he's missed that very basic point.

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

I rise to speak on the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2019. If the projections in the explanatory memorandum are correct, this bill will allow Australia to secure an additional $255 million in taxes over the forward estimates—which is positive, but merely a drop in the ocean in the bigger picture. Tax avoidance is a major issue, costing consolidated revenue billions of dollars each year, and that's billions of dollars that can't be spent on doing good across society. This bill is heading in the right direction, but more can and needs to be done. The effectiveness of mechanisms and activities of foreign owned multinationals to reduce their tax payments in Australia is quite staggering. If you were to believe some of their financials you would be convinced that they are in fact non-profit organisations but continue to operate here purely because they enjoy the business. And we know that's not correct.

Drawing on numbers from the tax transparency data that is now provided by the tax office, for the periods from 2013-14 through to 2016-17, I'll elaborate on the magnitude of the problem. Madam Deputy President, let me just talk to you about five companies on this list. ExxonMobil had income over four years of $33 billion. How much tax do you reckon they paid? Zero. Not one cent of tax was paid on $33 billion of revenue. EnergyAustralia—$30 billion in income, zero tax paid. Virgin Australia—$17.9 billion in income, zero tax paid. Vodafone—$15.1 billion in income, zero tax paid. Santos—$14.9 billion in income, zero tax paid. That is a total income of more than $111 billion and not one cent of tax was paid over the four years during which the income was generated.

The name EnergyAustralia sort of conjures up the idea that this is a grassroots Australian company, but it's actually owned by a company in the British Virgin Islands, a well-known tax haven. Last year, EnergyAustralia reported an income of $6.3 billion. But, unfortunately, their costs were such that in the end there was no taxable income. Of course, this could have been just a bad year, and this could be an anomaly; however, it's not. In fact, for the past four years EnergyAustralia has not paid any tax, despite the company having a total income over that period of $30 billion and a reported taxable income of $52 million. Now, I understand that companies have bad years. But when you've got four years in a row where a company is making billions and billions of dollars and not paying a cent of tax, something is wrong.

The government, particularly through the Department of Defence as a customer, have a substantial ability to exert influence on defence companies. The government can establish the contracts, they have direct access in many cases to the financial records of these companies through their projects, and they have the ultimate choice in utilising suppliers that do the right thing. Yet, looking at the top five defence companies in terms of income, while they are maybe not as bad as the top five companies overall, from tax records we can see that their total income was roughly $14.5 billion but they paid only $287 million in tax—not even two per cent of income. To make matters worse, in reviewing AusTender records you can find cases where the Department of Defence is signing contracts directly with companies registered in tax havens. The Department of Defence has a contract with a value of almost $500 million with Intelsat LLC of 90 Pitts Bay Road, Pembroke, Hamilton, Bermuda.

On the one hand we're trying to clean up tax avoidance and ensure multinationals are paying their fair share of tax, and on the other we have a government department signing contracts with companies registered in tax havens. This is not a situation where the company has some elaborate corporate structure and is using creative loans and licensing vehicles to avoid or at least minimise their tax. These are companies where the government is simply shipping the money to the tax haven. It makes no sense. You can't be serious about tax avoidance if you're allowing those sorts of things to happen. This is despite Australia having been one of the first countries to implement the OECD's country-by-country reporting established in the Common Reporting Standard, which came into effect in July 2017. That standard was going to 'combat tax evasion by exposing taxpayers with hidden offshore investments'. It appears we're making little tangible progress. Despite the introduction of tax transparency laws, tax evasion remains a significant issue that we are yet to address.

It's entirely appropriate for companies to make a profit. That's a reasonable thing for them to do. But it's also very reasonable for those companies, when they do make a profit, to pay tax when they're conducting business in this country. When foreign companies come here and set up daughter companies, they enjoy the benefits of our social system. They enjoy the education that brings them competent and well-educated workers. They enjoy the fact that, when their workers are sick, they can go to a hospital. They enjoy the infrastructure: the roads that lead up to their workshops, the traffic lights and all of the things that make our society function. They enjoy the fact that our defence forces are making us safe at home and that our intelligence services are keeping a watch on events. All of that costs money. You can't simply come to this country and operate a business and get all those things for free. That's a significant problem that we have. I have looked at the tax transparency data that is provided by the tax office. When you look at all of the people who are paying tax, I can tell you that there are not many multinationals in there. They seem to be very aggressive in their tax practices.

Going back to this bill, the three schedules of this bill cover the tightening of thin capitalisation rules for multinational entities, the requiring of offshore online hotel booking providers to include hotel room bookings in calculating their business turnover for the purposes of GST and the removal of the luxury car tax on reimported cars sent overseas for refurbishment. The thin capitalisation has the greatest impact, however, with an estimated $240 million over the forward estimates, but it's not groundbreaking. It's quite insignificant in the big scheme of things. If we consider the top five companies and assume that their profit is just one per cent, the same as the current cash rate, there would be an additional $330 million in tax collected. At three per cent, it would be approximately a billion dollars. And that's just the top five companies.

So Centre Alliance will support this bill, but we need to be doing a lot more. We need to be dealing with these companies that come to Australia, enjoy all of our benefits and pay no tax. I am happy to inform the Senate that it's a task that I'm going to be taking on in this parliament. I am going to be calling out the names of every company that is operating in this country that is not paying tax at some stage. I'll be questioning ministers in question time as to why we're dealing with some of these companies. I'll be questioning secretaries at estimates to try to understand why they are engaging with companies that pay no tax. I think that's a reasonable question to ask, and I'm going to be very, very receptive of any answers that come from ministers and secretaries when I ask those questions, because it's not fair on Australian taxpayers. I think it was Senator Brockman who made the point that, for every company that's not paying tax but enjoying a benefit, the burden shifts to other players. So this is an important bill and we will support it, but a lot more needs to be done.

Andrew Bragg (NSW, Liberal Party) Share this | Link to this | Hansard source

I rise to speak about the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill. I will start by talking a little bit about the environment into which this bill has been introduced. The Morrison government has a plan to get our country back in the black in a budget sense. A large part of getting our budget on track is, of course, to do with the way in which revenue is raised or not raised. People would be aware and senators would be aware that there has been an issue of especially multinational companies evading taxation not just here in Australia but in other jurisdictions.

Of course, this will be the first budget surplus in over a decade, and this is some years after the former Treasurer and now chief comptroller of the Labor Party, Wayne Swan, said that he would deliver four surpluses when he was the Treasurer. We're on track to actually deliver a surplus budget, and one of the foundations of that budget has been higher corporate tax collections. This financial year, we're due to collect almost $100 billion in corporate tax. In part, that has increased because we have been prepared to take sometimes difficult actions to improve the tax collection regime here in Australia but also work with our counterparts in other jurisdictions.

As my colleague Senator Brockman noted, when big companies don't pay tax, smaller companies or working Australians have to fill the breach, and we don't agree that there's any justification for any company that does business in Australia not to pay its fair share. Where companies fail to pay their fair share, it makes it so much harder to deliver those essential services that Australians rely upon.

Our government has a fine record in this area. We introduced and passed legislation in 2016 to ensure that there would be a higher level of multinational corporate tax collection. In time, an additional $13.1 billion of additional tax revenue has been collected as a result of legislation passed by this parliament three years ago. The Labor Party, of course, voted against that bill, and subsequently they went to an election in 2019 proposing new taxes on hardworking Australians in the form of the now infamous retiree tax and, of course, the housing tax. Both of these taxes are still Labor Party policy, and I note that on the weekend Chief Comptroller Swan again was talking about the importance of hanging onto these dreadful policies. So, on one level, they'll oppose our tough measures on multinational companies, but they will propose new taxes on hardworking Australians. This new multinational anti-avoidance law that we passed three years ago has resulted in large technology companies paying more tax. Now we want to improve these laws and increase the repertoire we have to deal with this issue.

Tax evasion is a lot like climate change: it's very hard to solve without some form of global compact or agreement. We can, of course, put in place tough measures at home, and that's what we've been doing over these last few years, and that's what this bill does. But we've also sought to work with our global counterparts through the OECD and the G20 on what's known as the base erosion and profit shifting, or BEPS, regime, because we understand that, although we can do a lot domestically by ensuring that companies that want to do business in our country pay their fair share, there's also a balloon effect where, even if we are very good at doing that, we also need our partner jurisdictions to do what they can because so many of these businesses are, of course, global organisations. BEPS is considered to cost governments across the globe at least $100 billion a year in forgone tax revenue. This is revenue that should be collected by governments and, obviously, used to pay for programs that governments provide. The G20 finance ministers have been working with the OECD to develop this plan for some years. The action plan has been well known, and we have been a key jurisdiction in driving that. Schedule 1 of this bill deals with action 4 of the plan, which is about limiting base erosion involving interest deductions and other financial payments. Schedule 2 deals with action 1 in that plan by looking at the tax challenges of the digital economy.

I might step through these measures in a bit more detail. In relation to thin capitalisation, effectively this bill says there will be tighter asset valuation rules and retains three avenues for genuine commercial debt. There is the safe harbour, the arms-length test and a worldwide gearing ratio test. In relation to hotels, this bill will ensure that offshore outlets that are provided access to Australian hotel rooms and like must charge the goods and services tax. From 1 July this year, organisations like Expedia will be captured by this bill, where they have a GST threshold of more than $75,000. This, of course, is one of the many measures we are taking in respect of the digital economy. I'd like to commend my counterpart, the assistant minister Senator Hume, for all her work in and around financial technology, open banking and the like.

We have a view that it's very important to look carefully at all the issues that arise with a digital economy and basically respond to changes in the marketplace as they occur. Whilst it may have been the case that we could see dust gather on the statute books in past decades, in the fast-changing digital space—and this is one example—we are always prepared to move as quickly as we can. I think it's fair to say that parliaments are often slower than the marketplace but, given the volume of legislation coming to this place, we are building a really strong agenda addressing the challenges of the digital age. A lot of the issues falling out of the Hayne royal commission, which will be dealt by this parliament in due course, certainly relate to digital issues. No-one could accuse us of sitting on our hands on these issues.

Finally, the bill deals with the issue of the luxury car tax. We are trying to meet our trade obligations, which we always seek to do. Unlike the Labor Party, we actually do trade deals. We aren't caught by ideology. We write our own policies, and we are prepared to take on a very robust trade agenda, one that has seen Australia do trade deals with a whole range of bilateral trading partners across North and South Asia in this period of coalition government. Also, of course, we have committed ourselves. We have delivered the Comprehensive and Progressive Agreement for Trans-Pacific Partnership and we're seeking now to deliver the RSEP trade deal. So whether it's a bilateral or a plurilateral trade deal, the coalition government has got the wherewithal to push these through to a conclusion.

In summary, I would say again that this is a good example of the coalition putting in place a strong foundation in our budget. We actually believe that large companies, small companies and workers should all pay their taxes. We have put in place tangible measures over the course of this period of coalition government to ensure that multinational companies are paying their fair share of taxation. It is not fair for this parliament to give a waiver to a large company, be it an Australian company or a multinational company, in respect of their taxation. We expect all businesses that do business in this country to pay their fair share of tax, and we are always looking to tighten the rules to make sure there is no room for tax evasion. This issue of taxation evasion is like climate change: it is a difficult issue to solve on our own. That's why we've always sought to try to work with our international partners through the G20 and the OECD to try to stop base erosion and profit shifting where multinational companies use accounting tricks to avoid paying taxation where they are doing business. This again is another practical measure in line with the BEPS action plan. I commend this bill to the Senate.

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

Australians have had enough of multinational companies not paying their fair share of tax. We have seen many companies generate billions of dollars of revenue in Australia, yet pay no tax here whatsoever. How can there be companies with tens of millions of dollars with subsidiaries around the world that sell billions of dollars of products or services, yet still manage to have no taxable income? These are large global companies, successful companies, which are allegedly making no profits in Australia. It really is quite the mystery.

According to the ATO's fourth annual tax transparency report, 722 of the largest corporations paid no corporations tax in Australia in 2016-17. This includes 100 firms that reported more than $1 billion in total income. A few—very few, I think—have genuinely made no taxable profits, but there are many whose losses are purely on paper. That means that there are millions of Australian workers—cleaners, taxidrivers, truck drivers, early-childhood educators, supermarket check-out operators—who have paid more tax in absolute terms than corporations with a billion dollars of income. This is fundamentally unjust.

Some of these companies have used loopholes and dodgy tricks to artificially reduce their taxable income. One way is by paying tens or hundreds of millions of dollars in licence fees to the corporation headquarters, in low-tax jurisdictions. Others pay millions in interest payments to their company headquarters, again in low-tax jurisdictions. While I'm sure there are some legitimate loans or licence fees, many companies undertake these actions as a way of squirrelling what should be taxable income out of Australia. Ordinary Australians are hurt by these actions. By avoiding their taxes, companies are reducing the revenue available to pay for essential services for the Australian people. Not only are the Australian people harmed; companies that do the right thing are harmed as well as they face an environment which is more advantageous for their competitors that are doing the wrong thing.

During the election campaign, Labor announced a tough multinational tax avoidance and tax haven crackdown. We went to the election with 19 measures to crack down on multinational tax loopholes and tax havens. These measures included tightening debt deductions; closing public reporting of country-by-country reports; increasing the capacity of the ATO; public reporting of AUSTRAC data; closing loopholes for certain trusts that make payments to non-residents; and protections for whistleblowers. In contrast the Liberals were silent on cracking down on tax havens and making multinational companies pay their fair share; in fact I didn't hear boo from them in regard to this issue through the whole election. Instead we are faced with the limited changes that are proposed today. I hope these are but the start of what is needed to make multinationals pay their fair share. So far, however, the Liberals have shown that their hearts are not in it when it comes to making sure that multinational corporations pay their fair share of tax.

While changes in the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2019 will raise just an additional $125 million annually in revenue from 2020-21, we need to raise every dollar we can to make up for the wrecking ball that this government has slammed through its budget. Closing down tax loopholes means more taxpayer money stays in Australia to fund critical services, such as hospitals and schools, and productivity-enhancing investments.

Labor does support this bill. This bill is almost identical to the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018, which was inquired into last year by the Senate Economics Legislation Committee. This bill lapsed at the dissolution of the House before the federal election. The Senate economics committee recommended that changes were required for the schedules of the bill concerning the research and development, or R&D, tax incentives. These schedules have been removed from the bill before us today. The schedule that amends the definition of a 'significant global entity' in the Income Tax Assessment Act 1997 has also been removed, for technical reasons. This bill therefore contains just the following government policies: tightening the thin capitalisation rules, ensuring that offshore sellers of hotel accommodation in Australia calculate their GST in the same way local sellers do and removing the luxury car tax on reimported cars that have been refurbished overseas.

So, despite the title of the bill, only the first of the three schedules has anything to do with multinational tax avoidance. The changes regarding thin capitalisation raise the bulk of the revenue in this bill. For those who aren't aware, thin capitalisation is when a company's level of debt is greater than its capital. The thin capitalisation will provide for how much debt an entity can claim tax deductions against. In recent years we've seen a significant increase in multinational companies revaluing their assets. Concerns have been raised about the rigor and the accuracy of some of these asset revaluations. By valuing assets lower, a company can generate a higher ratio of debt to capital in order to claim greater debt reductions.

Currently the thin capitalisation rules allow an entity to recognise certain assets and revalue its assets in a different way, in certain circumstances, for tax purposes only. This provides a loophole that companies can exploit—and have been exploiting. The changes proposed in this bill will prevent companies from revaluing their assets solely for thin capitalisation purposes. The bill will also require that companies use the same figures in their financial statements as for thin capitalisation purposes. Through these changes it is expected that we will limit the ability of some multinationals to artificially inflate their debt levels and avoid taxation. While Labor's 2019 election policy would have placed further limitations on thin capitalisation arrangements, this bill does not implement this.

Coming to the second part of the bill, schedule 2 amends the GST Act to require offshore hotel booking sites to collect GST on Australian hotel bookings. Currently, unlike GST-registered businesses in Australia, offshore suppliers of Australian hotel accommodation are exempt from including sales of hotel accommodation in their GST turnover. This means that they are often not required to register for and charge GST on their mark-up over the wholesale price of the accommodation. This measure will level the playing field between suppliers of hotel accommodation that are operating from offshore and those that are operating in Australia. The measure will have low compliance costs, as it affects only digital transactions and builds on the expansion of GST collection to digital services. It's not likely to have implementation problems, as we saw with the government's application of GST on low-value goods. These amendments apply from 1 July 2019. It is estimated that the measure will result in a gain to GST revenue of $15 million over the forward estimates. This revenue is disbursed to the states and territories and so has no net impact on the overall budget bottom line.

The third schedule of this bill relates to the application of luxury car tax to cars that are sent by their Australian owners overseas to be repaired or refurbished. Currently the luxury car tax does not generally distinguish between the importation and the reimportation of a car. Cars exported from Australia to be refurbished overseas and then reimported are subject to the tax if the value of the car exceeds the relevant luxury car tax threshold, even if the vehicle has not changed hands. The committee, in its inquiry last year, received no submissions on the removal of the luxury car tax on reimported cars following service, repair or refurbishment overseas. The explanatory memorandum for the bill says that this item is expected to have nil or negligible impact on the government's budget bottom line. I wonder whether anyone on the government benches even knows how many luxury cars that are already in Australia are sent overseas to be reconditioned and then returned to their original owners.

Given that we are facing stagnating wages, a housing crisis and a blowout in waiting lists in our hospitals, it's curious that we are debating a measure of apparently such minor importance so early in the government's new term. As I've said previously, we are supporting this bill. Under the Liberals, working Australians have been footing the bill for unfair tax loopholes that benefit multinational corporations, and the Liberals have taken credit for changes that Labor passed when we were in government and that they opposed at the time. Only Labor has been serious about cracking down on multinational tax loopholes and making multinational corporations pay their fair share. While this bill goes some way to addressing multinational tax avoidance, more needs to be done. Every dollar of tax that companies can avoid paying, sending it overseas instead, is a dollar that is not being spent on our hospitals or our schools or being used to build a better Australia.

Pauline Hanson (Queensland, Pauline Hanson's One Nation Party) Share this | Link to this | Hansard source

My first reaction when reading the title of the bill, the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill, was: 'Great! Fantastic! Finally the Australian government is doing something about this desperate issue!' For 23 years I have been harping on about the mega-wealthy multinational companies who are more than happy to operate in Australia and build their unbelievable profits here thanks to the purchases made by the Australian people. Yet these mega-sized companies pay very little or even no tax in Australia.

There are around 700 multinational companies operating in Australia, and too many of them pay no tax here at all. These multinational companies rub their hands with glee at the stupidity of our government and its tax regime and at our stupidity, over the years, in providing concession after concession to outsiders, letting them earn their big profits here and then allowing them to ride off into the sunset with their bursting saddlebags, not paying any tax to contribute to bettering the lives of the people who helped deliver those profits.

Australia is a soft touch on the international scene when it comes to taxing foreign conglomerates that operate here. Everyday Australians—mums, dads, the elderly, workers, and teenagers with their headphones and music purchases—contribute to the incomes of these multinationals. Isn't it only fair then that those companies pay tax on their profits here? Wage earners here pay tax. Australian small businesses pay tax. Larger businesses pay tax. But those multinationals mostly don't pay tax here. Our current legislation is based on tax being paid on paper based profits, so the strategy of the multinationals is to maximise their on-paper expenses in Australia and minimise their revenues. On paper they have made no profits, so they pay no tax. On top of that, their profits are taken offshore. Some even bring their own workers into Australia, who then leave when the work is done, taking their earnings with them. So there is very little benefit at all to Australia from many of them operating here.

This has been a problem for a long time and it's having a debilitating effect on Australia. So when I saw this bill on the agenda, with its encouraging title that seemed to show some promise, I was pleased. I was pleased that the government was finally showing some initiative in attacking this multinational tax issue head-on. But that is very much where my excitement came to a crashing end. After examining the contents of this bill and realising exactly what it actually does, I was deflated and my heart sank.

This bill has a catchy title that gives you the warm fuzzies, but it actually does not do much, broadly, about the stated problem. It has a mix of initiatives that are very technical, wordy and confusing and have very little to do with the huge issue that the bill's title suggests the bill is dealing with. The bill is a massive let-down. It could be very well described as a con job. I would say the title is misleading, and I caution the Australian people to avoid being gullible and being sucked in by the notion that the massive issue of multinational taxation is being addressed in any real way here.

Foreign-owned multinational companies that operate here thrive on the strategy of moving their profits from one international jurisdiction to another until they end up landing in a tax haven. Part of the problem is that Australia is a signatory to a large number of double taxation agreements, which are open to abuse and add to the opportunities to avoid paying tax in Australia. The Australian tax office may have all the laws it need, but it cannot expect to audit and litigate every multinational to secure payment of tax which would ordinarily help the Australian government pay down debt, undertake national infrastructure projects and generally make life better for the Australian people.

Unfortunately, with this bill emerging in the parliament, it becomes clear that the government is still not doing anything close to what it needs to do to tackle the massive issue of multinational tax avoidance. Schedule 1 of this bill tightens the rules on thin capitalisation, which concerns the amount of interest paid on debt by a foreign controlled entity. This change will generate a $240 million windfall for the Australian government in 2020-21 and 2022-23. Wow! The changes will make it clearer to the multinationals that they must use their own accepted values of their assets, liabilities and equity capital in tax reporting. It removes the ability of those foreign companies to revalue—probably meaning devalue—assets, specifically to improve their thin capitalisation position from a taxation reduction point of view. This will also ensure that foreign controlled tax entities in Australia are treated as both outward investing and inward investing entities. Like I said, this is a technicality that really fails to overwhelm and also fails to set the national accounts on fire too.

Schedule 2 initiates changes for online booking agents that manage accommodation in Australia while operating from overseas. The online hotel booking providers will be required to register for the goods and services tax and so collect GST and remit it to the government. That change will generate an estimated $15 million in the three financial years from 2019-20 to 2021-22. Schedule 3 of this bill proposes changes to the luxury car tax on reimported vehicles. These initiatives introduced via this bill are really just tidy-up provisions; they might tweak a small number of taxation issues but they fail to acknowledge the big picture. We need real repairs to the taxation regime to address massive multinational taxation avoidance.

Here are some background facts that have been raised regularly by me in my time in politics. Around 75 per cent of the tax revenue that enters the coffers of the Australian government comes from individuals, the ordinary and everyday Australians who work hard each week to pay their living expenses, mortgage, food, petrol and other costs. Three-quarters of the money used by government to provide services to Australians comes from its citizens and residents. The other 25 per cent of government tax revenue comes from company taxation. Now, 98 per cent of that 25 per cent comes from companies that are Australian owned, and two per cent of that 25 per cent comes from multinational companies. Two per cent! That means Australia earns just half a per cent of its total tax revenue from multinationals.

These multinationals, who I mentioned at the outset, are happy to use Australia to boost their global profits. They include firms like Facebook; Google; Amazon—yes, the online store where your kids buy their headphones and jeans; ExxonMobil, which is worth $29.2 billion globally; Shell, which is worth $388.37 billion; American Express; Visa; Mastercard; oil giant Chevron, which is worth $158.9 billion; and the rest of them. They pay negligible tax here, yet the infrastructure they use—our NBN, the phone system, our legal system and also our Defence Force, to name some—is paid for by the Australian taxpayer. The Defence Force is of particular relevance in this matter in relation to the security of the offshore platforms operated by the global oil and gas companies.

The view of one 20-year former senior expert at the Australian tax office on this multinational tax avoidance is that it is modern-day theft on a grand scale. She has described it as white-collar crime. I agree with her. And here is the real kicker: we're talking about the sorts of dollar figures that would change the lives of everyone in Australia. We're talking about colossal amounts of money from gas fields off the coast of Western Australia that could wipe out the Australian debt. Wouldn't that be something? It's a shame that more people—including the former Prime Minister, the current Minister for Resources and Northern Australia, the Minister for Finance and journalists—haven't taken notice of these issues as they are raised.

When it comes to the big names on everyone's lips these days, it is easy to see how negligent the multinationals are towards the people of Australia. The so-called GAFA—Google, Amazon, Facebook and Apple—don't give back to the people of Australia in any significant way via our tax system. Here are some figures: Google in 2016-17 earned almost $1.5 billion in Australia, yet paid just over $33 million in tax, equivalent to around 2.2 per cent of its income. Amazon corporate and web services earned a total of $455 million, almost half a billion earned in Australia, and paid $10.4 million in tax, equivalent to around 2.3 per cent of its income. Facebook earned $331 million, and paid $12.6 million in tax, about 3.8 per cent of its income, and Apple earned almost $8.1 billion and paid $81 million in tax, around just one per cent of its income.

When it comes to oil and gas, the figures get worse. In 2016-17, Chevron Australia Holdings earned $2.24 billion in Australia, yet paid nil tax—no tax. As I mentioned earlier, this is a company worth almost $160 billion globally, yet it paid no tax over recent years. ExxonMobil Australia is another example: in 2016-17 it earned almost $8.4 billion in Australia, yet it paid no tax—nil. ExxonMobil is worth $290.2 billion globally, yet it didn't qualify to pay tax on its Australian operations. I'm sure many hardworking Australians would love to be treated as kindly by the Australian government as these multinationals are.

At present, Australia's gross debt is at $546 billion, representing 28.1 per cent of the GDP. Let me put it in simple terms: that is like every man, woman and child having a personal debt to a foreign country of approximately $21,400 each. The interest we pay on the gross debt per year is $18.5 billion, equal to one per cent of GDP per year, or $50 million per day. All of us who have families and need to stick to our weekly budgets understand the folly that would hit us quick smart if we borrowed to pay the interest on our borrowings. Wouldn't it be nice if the many huge multinationals paid a fair rate of tax, so Australia could pay off some debt, reduce our interest bill and start putting money into the infrastructure and services that would help make Australia a better place? It's a shame that this bill with its interesting title doesn't do more of what that title suggested it would do.

The need to rectify our taxation regime when it comes to multinationals is a big deal. It is a matter that should be much, much higher on the Australian government's priorities list. One Nation includes this as one of its major policies. Our view is that foreign-owned multinationals have breached their social licence to operate in Australia by not paying their fair share of tax. As mentioned earlier, by not paying tax on profits earned in Australia, these big companies do not contribute to the costs of the infrastructure they use to make their profits. Everyday Australians are paying for that hard and soft infrastructure that helps those companies to make their profits. Our comprehensive policy says this:

One Nation rejects the argument put up by foreign-owned multinationals that it is unfair to change tax policy after they have made their final investment decision and that such action will risk future investment in Australia.

The truth is that too many companies make investment decisions based on the fact they will never pay corporate income tax. When it comes to gas in particular, which has additional legislative problems, I will quote from our policy again:

As it stands the only way Australians will benefit from the export of our vast gas reserves in Commonwealth territorial waters is to buy shares in these foreign-owned petroleum companies, because these companies do not pay for our gas, they do not pay tax on the profits made from our gas and they do not reserve any of our gas for domestic use—

in many cases.

We have the weakest fiscal regime for natural gas in the world but it is not only the petroleum industry which is of concern.

One Nation provides a solution to fix the problem: get these foreign-owned multinationals to pay a fair share of tax on their Australian profits. Again, this is from our policy:

We believe foreign-owned multinationals should be progressively removed from paying corporate income tax and transitioned into a tax system based on activity transactions.

By way of example, we would put a royalty of 20% on the value of gas taken at the wellhead using meters.

These transactions are easily enough verified and royalty easily calculated. The companies would then have no further tax obligation in Australia.

Let me just inform the Australian people that offshore they don't pay royalties. Royalties are claimed only on onshore resources, so we don't collect royalties on our gas offshore. Our policy continues:

It is difficult to estimate the tax that would be collected by putting 700 multinationals in a transaction based tax system. But these companies pay next to nothing now, our view Australia can only benefit.

We estimated the tax collected from these 700 companies could be in the order of 24 billion dollars a year based on a 9% return on their known capital investment in Australia of 1.4 trillion dollars.

We propose that step by step foreign-owned multinationals would be taken out of the current tax system and transitioned to a new transaction based system appropriate to their industry.

In respect of the—

over $300 billion—

of tax credits accumulated by a clutch of foreign-owned petroleum companies, we would cease the special provisions which apply to them, including uplift factors on expenses of 18 to 30% a year.

I thank the government for putting forward this bill, because it again highlights the massive problem that we have here in dealing with the taxation of foreign companies operating in Australia. While the measures in this bill might well tidy up some relatively tiny taxation issues, its impact would be negligible when it comes to the overall flow of potential taxation dollars that are being lost to the Australian people through the failure of our taxation regime. I encourage the government to take a leaf out of One Nation's book, read our well-constructed policy and feel free to implement some of our initiatives. Let's take real action in clawing back the billions of dollars in taxation that should be paid by multinationals toward the needs of the Australian people.

I'm sick and tired, as I'm sure the Australian people are, of hearing the same old rhetoric from the Labor and Liberal parties about multinationals not paying their fair share of tax. Under your leadership, it's never going to happen. The Australian people want real change. They're sick of being gouged not only through paying income tax on their wages but also through the GST and the other high taxes in this country. It's only from election to election that these promises are made. You'll call in the multinationals. You want investments in this country. For just about everyone who wants to invest here, you tick it off and invite them into our country, but they don't pay taxes here. You think that because they employ a few people or they build the infrastructure it's a great investment, but at the end of the day, when the infrastructure's built and the workers are gone, what do we end up with? Nothing but raping this country of our resources.

If we got rid of the PRRT in northern Australia or just reduced it from 15 per cent to five per cent, the figures show we could actually get $6 billion in income over the next 10 years just from that. But you allowed the multinationals to come in and take our gas. Japan are taking our gas. They're actually getting more on it than we are in excise revenue, at nearly $3 billion. We get nothing here in Australia from that gas, and now they're turning around and we're buying our gas back from them more cheaply than they're buying it from us. It's an absolute disgrace, and the people in this parliament should actually have a look at this, make sure that multinationals pay their fair share of tax in Australia, and stop welcoming them down here. If you're going to give tax benefits to anyone, give them to the Australian companies, and give them the incentive to actually start up their own businesses here in Australia instead of taxing them to the hilt and letting multinationals get away with everything.

Helen Polley (Tasmania, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak on the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2019. It's crucial that some of the largest companies in the world operating here in Australia pay their fair share of tax, just like every other Australian has to. Labor understands the importance of trying to shut down loopholes which allow big multinational companies to send their profits overseas. This bill addresses that, but it could be doing a lot more.

It's crucial that changes to the arrangements for how multinational companies claim tax deductions occur. There needs to be greater compliance work by the ATO to track down and tackle corporate tax avoidance. We must actually crack down on multinational companies using hybrid structures to reduce tax. It's not fair that Australians work hard and pay tax while big multinationals get to play by different rules. Tax evasion is a serious issue that has not been addressed adequately. It's not fair that Australian businesses are paying more tax in Australia than big multinationals. There must be new limits on the amount of debt that companies can claim tax deductions against. Our tax system shouldn't get softer the higher it goes. How much tax you pay shouldn't be decided by how good your lawyers or your accountants are.

Last year, one of the largest companies in the world paid $80 million in Australian tax on local revenue of just over $6 billion. A local retailer, Harvey Norman, paid more tax, $89 million, on a quarter of that revenue. In the last budget, the Liberals handed back more than $1 billion to big multinationals but cut the pension; that's the priority of those opposite. Under the Liberals big multinationals pay less while young Australians pay more for university degrees. We know that big business have those opposite in their back pocket. That's not fair, and it shows just how arrogant and out of touch the Liberals are with the cost of living pressures on Australians.

I want to speak more broadly now about the state of the Australian economy under this government. Currently, the Australian economy is slowing. Economic growth is the slowest it's been in 10 years, since the global financial crisis. Wages are stagnant. There are 1.8 million Australians who are looking for work or more work and can't find employment certainty. Australian household debt is high, and living standards are going backwards. All of these nasty facts are happening under this Morrison government. The balance between economic growth and ensuring low inflationary pressure is a fine art form—an art form that this Morrison Liberal government is failing poorly at. After six years of the Liberals, the economy has slowed substantially, Australians are struggling and the Morrison government has no plan to turn things around. Weak growth like this is an inevitable consequence of a government with a pure political strategy but not a clear economic plan.

Consumer spending continues to decrease, with Australians who are in a position to spend instead making a conscious decision to save. Last week, the Reserve Bank decided to keep interest rates at a record low of one per cent after two cuts in June and another in July. It's also downgraded its economic growth and inflation forecast. The Reserve Bank Governor, Philip Lowe, has said that it is likely that interest rates could fall as low as 0.5 per cent in the coming months and that, if the world moves to negative interest rates, Australia will be forced to consider them.

The global economy is unsettled, with trade tensions between the US and China continuing to drive down stock markets and exchange rates. Furthermore, interest rates being lowered in the US and political instability in Europe are creating particularly fragile circumstances. The Australian dollar has also hit a 10-year low, of US66.77c. Right when Australians need and expect a plan from the Morrison government to get the economy going again, all they get instead is finger-pointing and blame-shifting. Those opposite fail to take responsibility for their own economic mismanagement. They're too arrogant to adhere to the Reserve Bank Governor's warnings. That's how arrogant and out of touch this government really is.

Its economic mismanagement and incompetence have left Australia's economy adrift. Australians are struggling to make ends meet. This government has attacked working people and their living standards. The government could have stopped the penalty rate cut, but they didn't. They could have addressed the wage crisis, but they haven't. Household living standards are declining under the Liberals, with real household median income lower than it was in 2013. When the global economy is shifting and the Australian economy is struggling to keep up, wages are growing at only one-sixth of the pace of profits, with this government presiding over the worst wage growth on record. That's not much of a legacy. Household debt has surged to record levels, increasing by $650 billion under this government to 190 per cent of disposable income.

The economy is floundering, and all this government has to say is, 'There's nothing to see here; it's business as usual.' Business investment is down 20 per cent since the Liberals came to office, and now it's at the lowest level since the 1990s recession. The reality is that Australia was one of the two fastest growing economies in the OECD under Labor and the eighth fastest when government changed hands in 2013. But, under the Liberals, we have dropped to the 20th spot. That's nothing to be proud of. We as a country are going backwards under this government. That's without looking at the debt situation. Gross debt has risen to over half a trillion dollars. To put that into context, that means that debt has more than doubled under the Liberals. And they call themselves the good economic managers! It's a joke, and they need to be called out for it.

Australians are currently feeling that, no matter how hard they work, they just can't get ahead, because their wages aren't keeping up with the skyrocketing energy prices, health costs and food costs—just the basic standards of living. The Morrison government repeatedly assures voters that the economy will remain strong under its government. However, the Morrison government is in denial about the weakness of the economy. You only have to listen to families and to people out in your electorates to know that they're doing it tough. They're doing it very tough. Tasmania has been hit so hard. Our economy is not moving. It's not keeping pace with the wages. Wages are stagnant and housing costs are rising, but people can't get the amount of work that they need and they can't get job security. This is all under the leadership of the Liberals.

The Liberals spend their time playing politics and talking about Labor instead of coming up with a plan to turn the economy around. The government must focus on ensuring lower unemployment and better wages for all Australians. Our economy is stronger when we have more people in work and when those in casual positions or part-time positions can have the hours that they need. The government supported cuts to penalty rates and championed how there were going to be more jobs created in this country. Well, there haven't been any new jobs created; in fact, there are fewer jobs.

This government needs to be held to account. Those on this side of the chamber will always hold this government to account and seek to have the government actually demonstrate to us and to the Australian people that they have an economic plan for the future.

Malcolm Roberts (Queensland, Pauline Hanson's One Nation Party) Share this | Link to this | Hansard source

As a servant to the people of Queensland and Australia, I want to say that we support the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2019. Yet I want to identify a huge lack of integrity in the government. This is about building facades for the government. I'm going to later ask the people we represent an important question. Do you remember the people who we're supposed to represent? What happened to fairness? What happened to honesty? What happened to service? Let's go through this bill's three parts. And while we're going through them, just remember that Senator Hanson said that half a per cent of tax revenue in this country is from multinationals, yet they use the assets that people have paid for.

The first provision in this bill is thin capital, requiring an entity—a foreign company operating in Australia—to declare the value of their assets at the same value as they carry them on their books. This eliminates a practice of devaluing assets to declare a tax loss while still showing the asset at a higher value in their accounts. That could raise around about $120 million. Remember that figure. The second is online hotel reservations. This will require foreign companies operating an online booking service in Australia to treat the value of those bookings as subject to GST and to collect and remit the GST. That covers hotels, motels, hostels, student accommodation and caravan parks. The threshold is $75,000. It relates to where a booking service block-buys hotel rooms and then on-sells them through their website. There is now GST payable by the booking company on those block buys. It does not relate to where the website acts as an agent for the motel. In that case, the GST would be paid by the motel owner when the room is paid for. This raises next to nothing; there's no figure given, in fact. Let's look at the third one: luxury car tax. It sounds promising, doesn't it? When a luxury car is imported, the purchaser pays a luxury car import tax. If the purchaser has to send the car back for service or repair then, when it is reimported, they have to pay the tax again. The legislation did not distinguish between importation and reimportation. Now it does. This will cost money—slight, small. It's reasonable, but it's immeasurable. How is this about multinationals paying fair tax? It isn't.

One Nation has been raising and championing the need to raise multinationals' taxation, yet the government is now repeatedly, after many years, labelling bills as taxing multinationals. This is a pretence. Further, it speaks to the complexity of our tax system, which is the most destructive system in this country, in my opinion. This bill is putting lipstick on a pig. It is needed, but that's all it's doing. The ATO's then deputy commissioner, Jim Killaly, said in the 1990s—I think it was 1996—and in 2010 that 90 per cent of Australia's large companies are foreign owned and, since 1953, have paid little or no company tax.

People in Queensland are already waking up to the fact that, under Mr Morrison, the government is building facades. He's a great salesman, but he's building facades and then selling them. This is a pretence. Queenslanders are already saying that the MO of ScoMo is facade building. He has taken, it seems, a leaf out of former Premier Bob Carr's manual—how to do nothing yet appear to be doing something. There is a big disconnect between what we are being told by this government and what the government is doing. The government is saying one thing and doing the opposite. They're saying that this is about fair tax of multinationals—'multinationals pay their fair share of tax'—but this is not hitting the multinationals at all. We know the government is not collecting new revenue.

Is the government acting in good faith? That's the question that the people of Australia need to judge. Another question is: is the tax system fundamentally flawed? My answer is: both. We have got to the stage where we must do something different. So let's tax multinationals fairly. Let's be fair dinkum. They are not paying their fair share of tax, and the Australian Taxation Office lacks the ability to get them to pay a fair share of tax. Whether it's transfer pricing, or double taxation so they don't have to pay company tax here, or doing it outside the rules, the ATO hasn't the wherewithal to be able to chase this. It's time for a new paradigm. Let's tax multinationals properly.

One Nation raised the taxing of multinationals, and we raised the solution—as Senator Hanson has said—yet again. She called it transaction; I call it activity based tax. It doesn't matter. What it means is that we tax multinational companies on measured output that they sell. We raised this issue in the first place about multinationals and all the Labor and Liberal governments did was laugh. Now they pretend. So here is the solution: activity based taxation for multinationals and wholly owned subsidiaries, like Chevron Australia. Taxation on measurable activity—such as the volume of gas, for example, off the North West Shelf—cannot be avoided. The Europeans are now raising this. Each industry is different, so we have to tailor this to each industry.

But let's have a look at something that's not talked about much with foreign multinationals: credit card companies, like Visa, Mastercard and American Express. They have been operating here for decades, more than 30 years, yet have paid almost no tax. The average per month of interest-bearing debt that these credit companies hold is $30 billion. They charge credit card holders 15 to 24 per cent for that debt, and merchant fees of $5 billion per year. They have been here for more than 30 years yet have never made a profit—supposedly. They recognise income, yet seem to conjure up balancing expenses. And governments—Liberal and Labor—have known about this for 30 to 40 years. It is reasonable for a company to minimise tax, yet there is a reasonable expectation for companies to pay a fair share of tax, especially when they come down here and use our resources, our education system, our legal system and our infrastructure that the people are paying for and have paid for. It is only fair that the people get a return.

Why doesn't the government call in the CEOs of these credit card companies and tell them that, unless they pay a fair share of tax, we will remove their right to operate here in Australia? Why not change the rules or the laws? What about multinational pharmaceutical companies? What about gas companies that export gas to Japan and other countries? We are the world's biggest exporter of liquefied natural gas, yet we get hardly any revenue from it. As Senator Hanson quite correctly pointed out, the Japanese government gets about $3 billion in import duty from natural gas going into the country. We don't get anything like a billion. We're under a half a billion dollars. What about the large internet platforms—Amazon, Google, Facebook—that Senator Hanson mentioned? Let's get fair dinkum. Let's start telling the truth in this. The money raised by activity based taxes would cut personal tax, cut out debt, and provide for droughtproofing Australia and investment in infrastructure.

This speaks to the economic mismanagement of our country under Labor and Liberal. Wages are falling way behind the cost of living. Energy prices are ridiculous. We've got the world's biggest export of energy and yet we have the highest energy prices. We had the lowest prices for electricity just two decades ago; now we have the highest. The taxation system, water, infrastructure, water prices—we're in a massive drought, yet farmers cannot afford to pay for electricity to pump water so they don't plant fodder. This is about the productive capacity of this beautiful country. I'll talk in a minute about agricultural hits because that's what's really destroying the productive capacity. We have immigration that's far too high for our capacity at the moment. We need to pause on that. There are housing prices; infrastructure; lack of spending; family law crippling families; crippling workers; banks controlling; sovereignty being sold out to the UN and destroying our productive capacity; and economic mismanagement.

So I'd like to talk a bit about government inflicted disaster in agriculture. Property rights are fundamental to the productive capacity of this country. Under the UN's Kyoto protocol, the government, under Mr Howard as Prime Minister, stole the property rights of farmers and went around the Constitution and didn't pay compensation—all based on fraudulent claims from the UN, and no data. Water prices and water rights have been mismanaged as a result of the UN Rio declaration that Prime Minister Keating's government signed—again, no data. Energy prices are destroying our country now under the UN's Kyoto Protocol—again, no data. There is carbon farming under the UN's Kyoto Protocol and Rio de Janeiro declaration—again, no data. Soil and chemical run-off, even though there's no evidence for it, is the pretext for destroying farmers right across the eastern seaboard of Queensland—again, the product of the UN's Rio declaration. On fishing rights, we have the world's largest continental shelf fishing zone, yet we import three-quarters of the seafood we eat, as a result of the UN's Rio declaration—again, not based on data. Forestry is being shut down in Queensland because of the UN's Rio declaration—again, no data. Trigger mapping is being used by the Labor government in Queensland to abuse farmers and steal their rights. There is a grass-fed levies inquiry. There's a white paper into a red meat memorandum of understanding. These and many other things are destroying the productive capacity of our country, and the government has the hide to come in here and say 'making sure multinationals pay their fair share of tax'. That is a scam. It's just a facade.

Here's my question for the people. That's who we represent. That's who we serve. Why is the government coming up with these pathetic diversions and not governing Australia? Why is the government full of pretence? This is what happens when we have decades of Liberal-Labor government. As Senator Hanson said, One Nation has the policies that will provide the solution. We need a change from the Liberal-Labor duopoly.

Jane Hume (Victoria, Liberal Party, Assistant Minister for Superannuation, Financial Services and Financial Technology) Share this | Link to this | Hansard source

Firstly, I would like to thank those senators who have contributed to this debate for the almost universal support for the intentions and mechanisms that are outlined in this legislation. The Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2019 will help ensure Australia has a strong tax system where everyone, including multinationals, pays their fair share of tax. It will reinforce the ATO's armoury, as the coalition has done in the past with its multinational anti-avoidance legislation and diverted profit tax. It will also ensure that programs delivered through the tax system are effective and well targeted.

Schedule 1 to this bill will improve the integrity of Australia's thin capitalisation rules. Australia's thin capitalisation rules stop multinationals from claiming excessive debt deductions by placing unrealistically high levels of debt in their Australian operations. The bill strengthens the integrity of the thin capitalisation rules by improving the reliability of asset valuations used to support debt deductions. Multinationals will be required to align the value of their asset for thin capitalisation purposes with the values used in their financial statements. The bill will also ensure that foreign-controlled consolidated groups are recognised as inward-investing entities. This will confirm that these entities are not able to use the thin capitalisation tests that are appropriate only for outbound investors. The changes in schedule 1 of this bill build on the strong actions that the government has already taken to combat multinational tax avoidance and are expected to raise an additional $120 million per annum from 2020-21.

Schedule 2 to the bill levels the playing field for Australian hotel bookings by ensuring that offshore sellers of hotel accommodation in Australia calculate their GST turnover in the same way as local sellers from 1 July 2019. This measure follows the government's decision to extend the GST to digital products and other services from 1 July 2017 and to low-value imported goods from 1 July 2018.

Schedule 3 provides for the equal tax treatment of car refurbishments regardless of where the car is refurbished. It will ensure that, from 1 January 2019, luxury car tax will not be payable when cars are reimported into Australia following service, repair or refurbishment overseas.

I commend this bill to the Senate.

Question agreed to.

Bill read a second time.