Mark Coulton (Parkes, Deputy-Speaker) Share this | Link to this | Hansard source

The original question was that this bill be now read a second time. To this the honourable member for Fenner has moved as an amendment that all words after "That" be omitted with a view to substituting other words. If it suits the House, I will state the question in a form that the amendment be agreed to. The question now is that the amendment be agreed to.

Trevor Evans (Brisbane, Liberal Party) Share this | Link to this | Hansard source

I rise to speak in favour of the Treasury Laws Amendment (Combating Multinational Tax Avoidance) Bill 2017. These laws come at a critical stage for the federal government as we work to reduce taxes for small business and as we continue to focus on the important priority of budget repair following those years of growing Labor debts and deficits.

I was unfortunate enough to hear the last speaker on this bill, the Labor member for Whitlam, before question time today. I imagine that businesspeople, especially small businesspeople, would not have known whether to laugh, cry or shudder at his confusion between business turnover and profit. I am not sure, either, whether that was deliberate or inadvertent confusion on his part. But we do know that most of those on the opposition side of this chamber have never had a background in small business.

And on the specific topic of multinational tax avoidance, the member for Whitlam and all Labor members who are speaking on this bill are trying to make a lot of noise here as a distraction, because the fact is that when in government during those Rudd-Gillard-Rudd years, they did absolutely nothing about multinational tax avoidance.

This government has already achieved $2 billion of tax clawed back from multinationals through our work to date on the subject. And here we are now, with our second tranche of measures—$20 billion of budget repair by this government so far in gross terms and counting. It is important to note that about two-thirds of that budget repair has come from eliminating waste and wasteful spending. But when it comes to the one-third of our budget repair efforts that look at tax revenues, it is important, for both proper governance and community support, that we ensure that existing taxes are fairly applied and properly enforced as they were intended when those tax laws were passed by this parliament. The last thing that we want, when budgets are tight and taxpayers feel pressured, is to let some big taxpayers shirk their responsibilities, leaving other honest taxpayers to shoulder an unfairly high burden. I will return to this point again and again. This government's work to date is already paying dividends—$2 billion of additional taxes raised because of the good steps we have already taken in combating multinational tax avoidance. Now, we are here to do more when it comes to combating multinational tax avoidance and diverted profits.

I held another round of mobile offices in every suburb of my electorate over the last fortnight, and can I say that people are attuned to the way that the world is changing and the newfound capacity to use new technologies and different legal models and different jurisdictions around the world to evade local laws. It is a line of reasoning that applies equally to tax, to product safety and warranties, to intellectual property, to labour laws, to the trade in goods and services—you name it. Australia needs to keep its tax laws up to date as the world changes. Indeed, in cases like this where international cooperation is necessary to solve a problem and ensure enforcement of and compliance with tax laws around the world, Australia should be at the leading edge of efforts and international cooperation—and, with this new bill before the parliament, we are.

These laws mean that Australia is at the front of the pack, leading the world in combating the increased ability in this new world to shift profits and avoid paying a fair share of taxes. When I talk to locals about multinational tax avoidance, they talk about it in terms of lost taxes that could have been spent in areas like health and education. They talk about in terms of being able to afford the things we need to support local jobs and maintain our lifestyle and grow our economy. They talk about not disadvantaging our local small businesses who cannot and do not attempt to avoid paying their fair share. They talk about how better enforcement will enable us to afford the benefits of lower taxes and better services for those small businesses who are at the centre of our local economy and most need it. That is why the integrity of our taxation system matters for the people in my electorate of Brisbane. By their very nature, these bills go hand in hand with our plan to grow the economy.

In my maiden speech I noted that the Liberal Party was founded on the notion that the small-business middle class needs a strong voice. In Robert Menzies' most famous address, 'The forgotten people', he said that the rich and powerful 'are as a rule able to protect themselves'. He said he wanted to represent 'shopkeepers, skilled artisans, professional men and women, farmers and so on'. We want small businesses locally to grow into big businesses and to create the jobs and the opportunities that Australians critically need. My family, coming as they do from small business, are naturally suspicious of concentrated power, whether that is found in the clumsy power of central governments, the institutional influence of big trade unions or the market power of big multinational businesses. I believe the more powerful you are, the more responsibility you have to wield your power in a way that is true to your origins and that benefits and protects the little guys coming from the same place where you started. This is yet another area where some of the world's biggest businesses, who have enjoyed the fruits of Australia's economy, have an obligation to share in the responsibility of contributing back. They must accept and abide by our tax laws to ensure a level playing field for all.

One important part of this government's measures to tackle multinational tax avoidance will see an increase in administrative penalties for significant global entities. This increase in the penalties will help ensure that these entities do not opt out of their reporting obligations. It means that, from 1 July this year, increased administrative penalties can be applied by the Commissioner of Taxation to a significant global entity—that is, an entity with annual global income of $1 billion or more—who fails to adhere to tax reporting obligations. The maximum penalty will be increased 100 times over for these entities where they fail to lodge tax documents on time or take reasonable care when making statements to the ATO.

By increasing these penalties, we are simply encouraging businesses to comply with our taxation standards. Once enacted, the maximum administrative penalty for significant global entities who fail to comply will increase from about $5,000 now—a piddly fine that would not deter most people in cases of multinational tax avoidance—to a more serious deterrent fine of over half a million dollars. Penalties will be also be more harsh for these entities if they make false and misleading statements to the ATO. By increasing the administrative penalties, the penalty amounts will be more commensurate with their turnover and will act as an incentive for these global multinationals to do the right thing.

The Diverted Profits Tax Bill is an anti-avoidance measure which will help ensure that any money made by multinationals which is subject to Australian tax will be payable to the ATO. When implemented, these laws will give the Commissioner of Taxation greater powers to recoup legitimate tax dollars that have been taken offshore. The legislation will commence on 1 July this year, and it is expected to raise $100 million in revenue a year from the 2018-19 financial year. It provides a powerful new tool for the ATO to tackle contrived arrangements and uncooperative taxpayers and it will reinforce Australia's position as having some of the toughest laws in the world to combat multinational tax avoidance.

If the commissioner determines that profits are being diverted, a penalty rate at 40 per cent will be applied, and it will need to be paid within 21 days. The liability can be adjusted by mutual agreement during a 12-month review period, but the taxpayer cannot appeal the assessment until the end of the review period, after which, generally, no new information would be considered. By making it easier for the commissioner to apply Australia's anti-avoidance provisions and applying that 40 per cent penalty rate of tax, which cannot be appealed until the end of the review period, this will encourage greater compliance by multinationals, encourage greater openness with the tax commissioner and allow for the speedier resolution of disputes.

We know these laws will work, because, as I mentioned earlier, already the Turnbull government's efforts in this place are paying dividends. Around $2 billion of tax is expected to be clawed back this financial year under this government's earlier measures cracking down on multinational tax avoidance. That is $2 billion that would have otherwise not have been able to fund more schools, hospitals, pensions and government services. It is $2 billion of tax burden that would have fallen unfairly otherwise on the shoulders of other taxpayers, such as the small businesses at the heart of our economy. The $2 billion in tax liabilities from multinationals is expected to come from assessments relating to just seven audits of large multinational companies in the energy, resources and e-commerce sectors. This is further proof that the implementation of the government's multinational anti-avoidance legislation and the recently established Tax Avoidance Taskforce within the ATO are effectively dealing with noncompliance behaviour of multinationals in Australia.

While it is clear that the opposition love to talk about the big end of town, it seems to me that it is this government that is actively working to make sure multinationals pay their fair share, while the other mob appear to be busy running around running interference to distract from their big deals with big businesses and big unions to cut penalty rates. Of course, we know that the opposition voted previously against the last set of multinational tax avoidance measures presented in this place—just one more sign of the hypocrisy of today's Labor Party. They kick and scream, fight tooth and nail and deliberately mischaracterise tax cuts aimed predominantly at small business, yet they did not back the last measures to penalise the biggest businesses for tax avoidance. I am not sure if it is deliberate or inadvertent hypocrisy, but it is a worrying sign, certainly, that the shadow Assistant Treasurer had trouble last week working out the difference between custodial and beneficial shareholders. Hopefully, they will not be missing in action this time around.

In conclusion, it is clear through our major successes already achieved in this area that the Treasury Laws Amendment (Combating Multinational Tax Avoidance) Bill 2017 is necessary if we want to keep Australia up to date as the world changes. The community in Brisbane wants these laws. No-one in Brisbane works harder than the small business owners and operators. They are paying their fair share. In fact, I would suggest they are paying more than their fair share. This bill helps to decrease the pressure of their tax burden. We are supporting their ability to invest in their businesses, to grow their businesses, so they can turn their mind to putting on their next employee—a job for a local in Brisbane—improving our local economy. That is what this government is all about. Through greater powers and greater penalties we are simultaneously ensuring integrity in our tax system and continuing our important work on budget repair. I commend this bill to the House.

Matt Keogh (Burt, Australian Labor Party) Share this | Link to this | Hansard source

I think it only right, before getting to the body of what I want to say on the Treasury Laws Amendment (Combating Multinational Tax Avoidance) Bill 2017, to refer to the remarks just made by the member for Brisbane, and particularly to those he made towards the end of his contribution, where he had a bit of a crack about the Labor Party's policies in relation to tax avoidance, which, it has to be said, are much stronger than the approach taken by the government. His remarks were almost like being flogged by a wet lettuce leaf.

The critical thing is that the government has seriously mismanaged its budget and has put the AAA credit rating of this country at risk. The figures that we are seeing and have seen in the budgets and in the mid-year financial statements is that the debt and deficit that this government has been delivering for the nation are continuing to grow. Net debt has blown out to an estimated $317 billion since the Liberals took office. That is up from the $184 billion it was when they took office. They have blown out net debt for the nation, and the deficits over the forward estimates have net debt blowing out by a further $10 billion. Since their first budget, the budget deficits have blown out tenfold, from $2.8 billion to $28.7 billion.

When it was announced in the last budget that the government would introduce this diverted profits tax, Labor signalled that we would support it. We supported it because we support any attempts to close tax loopholes. Labor supports these measures, but we do note that the government has squibbed the opportunity. It has lost the opportunity to close even bigger loopholes in multinational tax. If the government was actually serious about getting tough on multinationals, it would do something about the one in three big companies in Australia that are paying no tax; 109 companies are paying no tax, despite having over a billion dollars in income. All of this really boils down to one thing, the attempt by this government to distract from its $50 billion tax cut for big business. It will do anything to distract from what it is trying to do, give tax cuts to the people earning the most in this nation. What will the government get for its diverted profits tax? It will raise $200 million over the forward estimates. It will give away $50 billion but it will only be raising several hundred million dollars.

Labor led the way when it came to putting forward a policy for tackling multinational tax avoidance. Right back in the time of the Gillard government, the Labor Party was looking at how we could make sure that companies were paying their fair share of tax here in Australia. The Labor government looked at investing $100 million to give the ATO the proper resources so that it could raise $1 billion of additional tax revenue in this country. But what did former Prime Minister Tony Abbott, the then Leader of the Opposition, say? He criticised the Labor government for trying to invest in the ATO to make sure that it had the proper resources to raise revenue from multinational companies that were avoiding paying their fair share of tax in Australia. Now, in its last budget, what has this government done? Now it wants to invest over half a billion dollars—$679 million—to try and raise $3.7 billion. Which is it? Is the government saying that you cannot give the ATO resources to raise the revenue that companies should be paying here or is it saying that we can invest lots of money to raise that revenue? When we look at the track record of this government, what do we see that it has actually done? It has axed 3,000 jobs from the tax office over its time in government. Imagine how much revenue we could have been getting if we had had a properly resourced ATO over the term of this government.

The hypocrisy of this government is shown in its approach to dealing with the fair payment of taxation by multinationals in this country. It highlights the difference between Labor and the Liberals. We will put people first, and the Liberal Party is just looking after its mates in big business and multinationals. Our reforms, which we took to the last election, if implemented would have delivered $1.6 billion over the forward estimates. Look at that difference: $200 million over here from the Liberal government and $1.6 billion would have been raised under Labor's approach if we had been put into power at the last election. That would have been $5.9 billion over the next decade in comparison to several hundred million dollars and a whopping big $50 billion tax cut. The thing about that $50 billion tax cut, of course, is: who is the major beneficiary of that tax cut? It is foreign shareholders. It is not Australians, because we have tax imputation in Australia. Who gets the main benefit of a tax cut for big business? Foreign shareholders. Thanks very much, Turnbull government.

This is all while the government wants to make cuts and changes that will negatively affect households across the nation. It wants to make changes to family tax benefit and changes and cuts to Medicare and it wants to not properly fund our school system. All of the things that this government wants to do will hurt working families. They will hurt ordinary Australians. Meanwhile, the government makes this piddly little attempt to try and say it is chasing multinational taxation, but it is not doing the job properly. All of this, meanwhile, is putting our AAA credit rating at risk, because the people on that side of the House cannot manage a budget properly. The people on that side of the House are driving up debt and deficit. They like to talk about how they are the great fiscal and economic managers of the Australian political scene but, in reality, they are fiscal vandals, and this legislation only serves to highlight just how out of touch they are with managing the nation's finances.

When it comes down to it, this $50 billion tax cut—Malcolm Turnbull's one-point plan for jobs and growth—by the mid-2030s will result in a rise in household income of 0.1 per cent. Well, knock me over with a feather. That is an entire—wait for it!—one month's income growth in the 13 years that we have between now and 2030. It is absolutely ridiculous, if this is what you are pinning all your hopes and dreams on for economic recovery. Yet this is what they bring us.

There are a few other points in this bill that I want to turn my attention to. There are the increased administrative penalties. That is a good thing. We support an increase in the administrative penalties. It is good to see they are making a substantial increase, to make sure there is proper compliance with taxation laws in Australia and these proposed changes to the taxation law.

It is great to see that the government has decided that they really want to enforce compliance with the taxation law—which is really not doing half the job it needs to do—but what are they doing about increasing the penalties on a range of corporate offending provisions in the Corporations Act that ASIC and many others have been screaming about for probably more than a decade? They have been saying, 'We need higher penalties to make sure that the law is complied with in a whole range of areas.'

Everyone agrees that this needs to happen, yet all we get is a slight change to the penalty unit, which is great, but no wholesale analysis of the changes that need to be made to corporate regulatory enforcement. They will make this change to taxation law—that is good; we support that—but if you are going around making changes to ensure there is compliance by business with the laws of this country, which are so important, let's get on with the program and get it right.

The other issue addressed by this bill is transfer pricing. This implements the new OECD-consistent guidelines that have been updated to include issues surrounding intellectual property and hard-to-value intangibles, which are vitally important to make sure there is effectiveness in the regime that is being implemented by this legislation.

There is one other thing I want to touch on before I end. It is the amendments that have now been moved to this legislation by the government. These are supported by the Labor Party. We are not taking any issue with what they are seeking to do. The amendment clarifies the interaction between the diverted profits tax and the rules for controlled foreign companies to ensure that double taxation does not occur. That is the right thing to do. We have no difficulty with that. It does concern me somewhat, though, that given the commitments made by the government about when this legislation would be introduced and the way in which they dragged their feet and only got it into this parliament after they said it would happen, they could not even get the law right that they introduced.

That is a very troubling and concerning thing and it is not the first time I have had to raise this point. We saw it with the crowdsource funding legislation that has been put up by the government, where a failure to consult properly with industry, in that situation, has led to legislation that is probably not going to be as effective as it could be, and that is something that we on this side of the House would like to see.

It is very concerning that we see a detailed tax law amendment—that we desperately need to see, to make sure that multinationals pay their fair share of tax in this nation, as they should, especially as we need to arrest the debt and deficit that has been growing massively under this government—yet they could not get the legislation right when they introduced it. Of course, this is the process: you move an amendment. I am not filled with confidence about this government's capacity.

Let me close by saying Labor does support the bill, but the bill does demonstrate the wrong priorities of this government. It raises $200 million. It does not get anywhere near the $1.6 billion that Labor says these sorts of tax reforms should be raising and, at the same time, it is not delivering the sort of revenue it should. We have a government that is making cuts to family tax benefits, changes to pensions, is not supporting education or Medicare and is delivering a $50 billion tax cut to business with most of the benefits going to overseas shareholders. This is a shame and a travesty, and it demonstrates the wrong priorities of this government.

Julie Owens (Parramatta, Australian Labor Party, Shadow Parliamentary Secretary for Small Business) Share this | Link to this | Hansard source

I have heard the speakers on the government side talk about this Treasury Laws Amendment (Combating Multinational Tax Avoidance) Bill 2017 as the great step forward in combating multinational tax avoidance. I have heard them brag about the government's performance over the last four years.

I really wish it were true. The community is well ahead of the government on this. The community has an expectation that our biggest companies start paying the tax that they owe us. This government, for four years, has stepped away from combating multinational tax avoidance and wound back laws, cut staff to the ATO and weakened Australia's capacity to collect tax from our biggest companies.

Today, in their fourth year—they are not approaching their first budget, they are approaching their fourth budget—they have come into this parliament with a bill which, in its totality, will generate—on its own figures—$200 million over the forwards. Anybody out there who has been reading or paying attention to the number of large companies in Australia that do not pay any tax at all will wonder how $200 million is the figure for the big centrepiece of combating multinational tax avoidance. Schedule 1 is $200 million. Schedules 2 and 3—asterisks—are for increasing administrative penalties and updating transfer-pricing guidelines. Schedule 1, diverted profits tax, is the one that generates the big numbers: $200 million.

Labor's policy on the same matter, diverted profits tax, would have generated $1.6 billion over the forwards. This one: $200 million. The centrepiece of this government's combating multinational tax avoidance bill is $200 million over the forwards. What a very sad state of affairs that is!

We heard today the Treasurer, in question time, at the dispatch box, shouting proudly about the government's tax collection measures. He was referring to a $3.7 billion revenue gain as if it was a change in law. Actually, it was not. That $3.7 billion—and I am glad to see it being collected—was actually caused by the government's decision to replace some of the staff at the tax office that they had cut in the previous years. This government, in its first three years, managed to cut 3,000 staff at the ATO. It was an enormous cut in a government department and an incredible loss of knowledge. The public sector is a really interesting thing. People do their job and, almost as a by-product of doing their job, they develop relationships and an understanding of businesses and of the sector, and a knowledge of what works and does not work. They become this great resource of knowledge. When you make savage cuts to a department, you do not just lose its capacity to do what needs to be done today, which is to pursue companies that are avoiding tax, but you also lose the capacity of that organisation to think and to contribute to policy debate. You lose people's relationships and the connections that help them do their job well. You do damage which is impossible to replace in the short to medium term. It cannot be replaced. Every time this government gets out the knife and cuts more away of our public sector, we lose something incredibly valuable, and we lost that at the tax office.

Now, of course, we have the government in the last budget—the budget of 2016—putting back $678 million to employ not 3,000 staff but 1,300, some of which are already there, and 390 new specialised officers. That replacement of those staff is estimated to generate $3.7 billion in revenue—by replacing staff that they cut before. What would those 3,000 staff have done? We have had a Treasurer walk in here and brag that he is going to generate revenue by putting back staff that he cut. What an achievement! It is the fourth year of the government—destroy it in the first three years and then jump up and down and ask for applause when you put some of it back. What we actually have today is a government that has repaired some of the damage it did—not all of it, but some it. Some of the damage from those cuts cannot be repaired. What we have today is a government that has walked into this House with its major, multinational tax avoidance package that will generate $200 million over the forward estimates.

I want to talk a little bit more about the ATO's capacity—those 3,000 job losses undermining the enforcement capacity and the loss of knowledge. In 2014, the ATO Second Commissioner, Neil Olesen, admitted that for every dollar spent on staffing resources they would yield six in revenue collected. In 2015, the coalition ridiculed Labor's PBO costed proposal for additional ATO staffing as a way of clawing back revenue. They said it was not true. Now, of course, they demonstrate by their own figures that it is true, and it always was—by the ATO second commissioner's own figures, for every dollar you spend on staffing resources, if you spend them the right way, you can yield six. What a return that is. What a savage cut those 3,000 positions were. You do not pay attention to this government's spin. They have a lot of spin. They have not much more than spin. It is like on a cycle—lots of action but no speed. The coalition's diverted profits tax will raise just $200 million over the forward estimates compared to Labor's plan, which would have been $1.6 billion over the forward estimates.

It is also worth looking at what else this government has done in terms of winding back the tax office's capacity to ensure that businesses pay. If the government were serious about getting tough on multinationals, they would do something serious about the one in three big companies that pay no tax. The most recent 2014-15 tax office transparency data shows that more than one in three large firms pay no tax at all, and 3,000 staff were cut from the ATO. This includes 109 companies that paid no tax, even though they reported more than $1 billion in total income. They paid no tax at all—109 companies with a total income of $1 billion.

The transparency data report, covering 1,904 companies, is only available because of Labor's tax transparency laws which passed the parliament in 2013 over the objections of the coalition. The coalition objected to these tax transparency laws. They certainly were not committed to anything to do with non-payment of tax back then. The Liberals and Nationals voted against those laws at the time and, a little while later, they joined with the Greens to water those laws down further, taking two-thirds of private companies out of the reporting net. They voted against Labor's transparency bill and then, when they got into government, they weakened it. The effect of that weakening is absolutely clear. If you look at the 2014-15 year and the previous year, the share of large firms paying no tax at all remained at 36 per cent. There was no change whatsoever as a result of this watering down of this law—none. Labor led the way on tackling multinational tax avoidance under the Gillard government against the blanket opposition of the coalition. While the coalition government has had to be dragged into action, over 3,000 jobs were slashed in the first three years, undermining the enforcement ability and losing institutional knowledge. What we have is a government that has not acted in any serious way over the last four years. They can come in here, jump up and down, and ask for credit for this bill, and we will support it because it is better than nothing, but, honestly, after four years, this is it—two hundred million dollars over the forward estimates when one in three large companies do not pay tax.

I want to quote then Prime Minister, Tony Abbott, back in 2015. This is an extraordinary quote:

So far the only idea they have come up with is to spend $100 million on the ATO to raise $1 billion . Well, next time they will be telling us to spend $1 billion on the ATO to raise $10 billion. That is the problem. All they can think of is spending more and taxing more. They just cannot help themselves. I actually think that deep down the Leader of the Opposition is better than that, and I would ask him to start demonstrating that now.

So, back in 2015, we were being bagged over the dispatch box because we said, 'You have to resource the tax office properly so that it can pursue these big businesses and raise more tax.' We were saying $100 million could raise $1 billion. The ATO representative said you could raise six for one. Now we have the Treasurer doing exactly that, replacing some of the staff that he cut, with $679 million to raise $3.7 million. When we suggested that in 2015, it was a terrible idea! At that time, the government were cutting the staff of the tax office. They changed their minds, and now they think it would be a good thing. They have promised to restore some of the tax office funding. That is an absolute admission of their failure in cutting it in the first place.

We have an interesting situation here. We have a government that is not only quite soft—I think that is the appropriate word—on combating international tax avoidance but also going after some of the most vulnerable people in Australia. They are cutting welfare payments; they are cutting family payments; they are cutting the energy supplement; they are reducing the pension for people who travel overseas for more than six months, unless they have been here for more than 35 years—you name it. They are reducing access to child care for the most disadvantaged, from two days to one. Across the board, at the lowest levels of economic strength, they have the knives out. They are cutting and cutting and cutting. We have heard today that there will be major cuts to some of our Federal Police. We know that they are in favour of the recent cuts to penalty rates which will hurt up to 700,000 of our lowest paid workers.

But, while the government are cutting and cutting and cutting away at the most vulnerable end, it does not really seem that their hearts are in ensuring that the biggest end of town contributes to this society in the way that we need them to, in the way that they should. You only have to look at the figures under their $50 billion tax cut to business, including to some of the biggest businesses in Australia and many international ones. This is a $50 billion tax handout to big business which, it is estimated, will increase household income by 0.1 per cent by the mid-2030s. This is a huge handout to big business that, all the figures show, will not actually provide a return to taxpayers, who will pay for that tax cut in lost tax revenue. Also, based on the latest figures, the estimate is that that $50 billion handout will cost this country $4 billion in interest.

So we have a government that, on one side, introduces a tax cut of $50 billion that will cost $4 billion in interest, and, on the other side, introduces its fabulous centrepiece to counter tax avoidance that generates $200 million over the forward years. What a difference that is. When you look at those figures, you would have to say that this is no more than a fig leaf. You have a government giving $50 billion in tax handouts, paying $4 billion in interest to get it and introducing measures to counter international tax avoidance by the biggest companies in the country and some of the biggest around the world that will generate $200 million. You have to assume that this is absolutely a fig leaf and nothing more.

I would be making a completely different contribution today if I thought the government were actually serious about this. But, again, look at the history. Do not listen to the spin; look at history. They have voted against, have argued against, every measure to combat tax avoidance that Labor introduced. They watered one down when they got into government. They cut 3,000 staff from the tax office without a qualm, without a word, as if the skill level and the work that the ATO do is not important. That is the actual history. And then they pick up a small part of a Labor policy that would have generated $1.6 billion, and water it down so it only generates $200 million over the forward years.

This is not a policy to combat tax avoidance. This is, at best, a fig leaf. I really urge the government, if it wants a genuine debate on restructuring the economy, if it wants a genuine debate on restructuring welfare, to look at the whole band of where the money is. You have to look at the biggest businesses and you have to go all the way through; you have to look at it all. You cannot just look at the most vulnerable people in society but give the biggest businesses in the world a free pass, and that is what you are doing. That is what you have been doing for four years—not one but four years of government. After four years, this is all you have got? You have got to be kidding.

Wayne Swan (Lilley, Australian Labor Party) Share this | Link to this | Hansard source

Multinational tax evasion in this country has reached epidemic levels, and, as the Commissioner of Taxation himself said, 'Enough is enough.' The previous speaker, the member for Parramatta, was correct: there is something missing in this bill. Some of the measures could well be effective if they are properly implemented. Yet the Treasury Laws Amendment (Combating Multinational Tax Avoidance) Bill 2017 raises virtually nothing, a fig leaf—a measly $200 million. When you consider that one in three private companies pay absolutely no tax, and one in four public corporate entities pay absolutely no tax, to say that, through a measure like this, all you are going to raise is $200 million proves it could well be merely a popgun.

If we assumed, for example, that five per cent of tax revenue that is lost to tax evasion and aggressive minimisation were returned to the budget, that would be something like $13 billion over four years. So what is quite implausible about the bill is the estimate that it is only going to raise $200 million. This bill could well be a toothless tiger.

I do accept that the efforts of the tax commissioner, using anti-avoidance provisions which were put in place by Labor, have made some progress in exposing tax evasion by some of our most respected companies. Those efforts are most welcome, and they go to the competence of our tax commissioner. But he has been hamstrung in his efforts by this government's failure to follow Labor's reform agenda, which was to crush the debt deduction loopholes which have been bleeding revenue. That is still a major issue which has not been dealt with by the government. Labor put a comprehensive package in the 2013-14 budget and most of it was knocked out by the Abbott government. The truth is a significant number of our most respected companies have become fiscal termites, eating away at the foundation of our corporate tax system. We must give our tax commissioner all of the power and all of the weapons to deal with these fiscal termites.

When we are dealing with the fiscal termites, they generally specialise in debt dumping and aggressive transfer pricing. We know that two of our most respected companies, BHP and Rio, have been very much into transfer pricing—that was on parade at the Senate inquiry into multinational tax avoidance. Over a two-year period, that Senate inquiry into multinational tax evasion gave an insight into the very tawdry behaviour of so many so-called respected companies and executives. As the tax commissioner himself said at the time, 'Enough is enough'. Corporate Australia has a moral and legal obligation to pay tax here and to support the economic system which supports them. A progressive tax system for corporates and individuals is central to a country's capacity to fund its own growth—growth with equity. The sort of rampant tax evasion we have seen here and around the world has trashed public faith not only in our political system but in our whole system of government.

It is pretty clear from what we now know publicly—largely thanks to Labor's transparency legislation, which meant that we knew the figures around what tax was paid by companies in any one year—that there has been a culture of avoidance in our most respected company, BHP. They have tried or sought to evade tax on $5.7 billion, which they have held in their Singapore tax shield. Rio has been up to this as well. Both BHP and Rio have also sought to evade state royalty payments through their transfer-pricing activities. The governments of Western Australia and Queensland have been treated very poorly. When companies are rorting the system, both at the state and federal level, they give a green light to everybody else to get in there and do the same.

The shame with BHP in particular is that it has backed up its evasion with unprecedented political interference and thuggery—most recently in the Western Australian state election. We have seen the newspapers over the weekend, where its acolytes were bragging about their success in taking out a leading politician, Mr Grylls. Let me make it very clear: I welcome the election of the McGowan Labor government in Western Australia and I welcome their win in the Pilbara, but we are not going to get better politics in this country when business lobbies in general and the mining lobby in particular do not practice what they preach. They claim to be honest taxpaying corporate citizens. Many are, but some are not. Sadly, the Big Australian has become known as the Dishonest Australian for its activities in the use of its Singapore tax hub and, now, for its attempts to fleece revenue from the state governments of Western Australia and Queensland.

It might be okay if political campaigning was all that BHP was up to. Most people would say: 'Fair enough, it's a private entity. Go out and defend your economic interests; you are perfectly entitled to do that.' And they are. The problem here is that behind that apparent use of our democracy are their shady operations, their dishonest operations and their tax evasion. Behind the scenes, they are deliberately evading the laws of our nation, and it does not make their political activities respectable when the purpose is actually to cover up a much more evil intent. They are fleecing from federal and state treasuries billions of dollars of essential revenue which needs to be there to fund health and education, among other things.

What we have in this country is a 'Commodities Kremlin', where some of these big companies are behaving like governments, treating the people of this country with contempt and behaving as if they are above the law. That sort of behaviour produces political polarisation and alienation with the political system, which we have seen in parts of the world, including here. We have this 'Commodities Kremlin', through the Minerals Council but particularly through BHP and Rio, where they do what they want when they want and they get even with those who have been in their way. As I said, normal political practice would say that it is shareholders' funds and to use them as they wish—it is a democracy. But when it has been used in the context of covering up, if you like, a darker layer of activity which eats away like termites at our revenue base then I think we should think again.

The failure of the Business Council of Australia to speak up against aggressive minimisation and evasion completely erodes any credibility it has as well. Why is that important? Because the Business Council of Australia has been the loudest advocate for the $50 billion unfunded corporate tax cut, which the government says is the central element of its drive for jobs, investment and growth. The $50 billion unfunded corporate tax cut is a pure form of trickle-down economics. Trickle-down economics operates on what I call voodoo logic—that tax cuts for the wealthy will drive economic growth and improve the lives of everyone in the community from the top down. Hey presto! A lot of money to the people at the top, it all comes down, everybody is happy and on we go. Well, the results internationally from this have been appalling: a growing concentration of wealth and income at the top across most developed economies, most particularly in the United States; a hollowed out middle-class; and vast armies of working poor—as we saw on Four Corners a week or so ago. The truth is that corporate tax cuts alone cannot, necessarily, drive jobs, growth and investment, and it is absurd to claim so. It is utterly absurd and insulting to claim so. To see our Prime Minister put forward purest form of trickle-down, when he sits there in his Point Piper mansion—a multimillionaire who has his portfolio in the Cayman Islands, a tax haven—and expect that the Australian people would believe that a corporate tax cut is going to drive higher wages and many more jobs is just preposterous. But yet that is where our economic debate has got to under this Prime Minister.

In the time remaining I want to talk about some of the myths, about the so-called elixir of this unfunded $50 billion corporate tax cut. It is a con to start with. The average rate paid by Australian companies is 24 per cent, not 30 per cent. We have heard before that, in any one year, one in three, or one in four, are paying nothing. So the notion that people are getting a tax cut is a nonsense when tax is not being paid. The truth is there are a few companies that pay it; many do not. The fact is that a corporate tax cut does not necessarily encourage investment and does not necessarily encourage growth, because many people are not paying any tax at all. David Gonski, a very respected businessman in this country, spoke out against the stupidity of the government and the Business Council last week and made the very obvious point that it will not necessarily drive jobs and growth.

If we look at OECD countries between 2011 and 2016, Australia's GDP increased by 15.6 per cent and we were ranked 11th in the OECD, but not one of the 10 countries who achieved stronger economic growth over that period did so by cutting their corporate tax rate. It does not matter where you go on the data, there is not any real international evidence that backs up the claims that are being made for this corporate tax cut.

The other ridiculous myth is that the corporate tax cut will flow through to increased wages. That would make a cat laugh. Profitability in the Australian economy is high. The profit share is going up; the wage share is going down. We are not seeing higher wages as the profit share goes up. So that claim is absurd. The other one is that somehow global capital is scarce; we have to be part of a race to the bottom—take our rate down; get it below a tax haven like Ireland or Singapore. The US is about to go from 30-plus down to 15. Race it down, race it down—what a nonsense. The fact is that the world is awash with capital. What they are looking for is a safe haven and profitable investments. If there are profitable investments, they will come to this country at zero, 15, 30, 35—and they do come here. But many of them come here knowing that they are going to pay nothing, because they can get away with it.

So we need a strong set of laws to make sure that the effective rate paid is closer to the nominal rate. There will always be deductions that companies should be claiming, and that is good for investment. But, as in our personal tax system, we have in our corporate tax system a gap—a big gap between the nominal rate and the effective rate. The effective rate here, at 24, is not the rate of 30 that the government talks about. The fact is the world is awash with capital, and people are coming here for a whole variety of reasons that have nothing to do with the corporate tax rate: the rule of law, the quality of our people and the quality of our institutions, which of course will be starved over time. If we join a race to the bottom in tax rates, both personal and corporate, we do not have the money to invest in the infrastructure of the country that brings the investors to the country in the first place. So it is just a con job. The $50 billion unfunded corporate tax cut which the government now appears ready to drop, leaving it without any central economic message or reason for being, is going nowhere.

Worse than that, what we have had in this country is a number of people who sit on the boards of some of our most respected companies who have been part and parcel of breaking what I call the Australian social contract. We need to see a lot better behaviour from some of our most respected companies and to see their public rhetoric matched by their private action. We need to see an end to the white-anting of our tax system by respected companies and a renewed commitment to the country that has nurtured them so that they pay their fair share of tax and we as a country can raise the revenue we need to grow more strongly and to grow fairly.

Rebekha Sharkie (Mayo, Nick Xenophon Team) Share this | Link to this | Hansard source

Mr Speaker, I commend the government for taking this key step to combat multinational tax avoidance. Until now, too little has been done to recover the unpaid tax that is rightfully owed to Australians. The additional burden that hardworking Australians and taxpaying businesses bear as a result of multinational tax avoidance should not be understated. Whilst standing orders prevent me from moving amendments to further strengthen taxes in a bill, there are still changes that I strongly urge the government to incorporate into the final version of the Treasury Laws Amendment (Combating Multinational Tax Avoidance) Bill 2017.

Currently, this proposed tax only applies to the very biggest of businesses, namely, 'significant global entities' with an annual global income of $1 billion or greater. The Nick Xenophon Team believes that this threshold should be reduced from $1 billion to $250 million. Whilst I appreciate that the Australian Taxation Office faces significant difficulties when chasing multinational tax avoidance, a company with $250 million in annual global income is still a very big business. Indeed, this would align with the Australian Taxation Office's own classification system, which rightly identifies companies with turnover levels of $250 million or greater as large businesses.

Secondly, the 'sufficient foreign tax' test should become more stringent. Naturally, tax rates between countries will differ, but this bill proposes that the diverted profits tax would only activate when tax reduction strategies result in a 20 per cent or more reduction in total tax paid. The Nick Xenophon Team believes that this threshold should be lowered to 10 per cent, such that, in the technical jargon, 'the foreign tax liabilities of foreign entities resulting from tax avoidance schemes is 90 per cent or more of the reduction in the tax liability'. This would also further reduce the incentive to shift genuinely Australian-based business offshore just to take advantage of lower taxes elsewhere.

I also urge the government to consider how to reverse as much as possible the burden of the enforcement of the diverted profits tax from the Australian Taxation Office and onto multinational companies. The accounting trail for multinational companies is notoriously opaque and complex. Even the government tax departments have difficulty in finding the web. For example, one possible approach could be to require up-front disclosure by multinational companies if they believe they may have transactions that would attract a diverted profits tax, to be combined with significant penalties for failing to disclose. I believe this would dramatically assist the Australian Taxation Office in their efforts to investigate potential multinational tax avoidance.

This bill is only the starting point on a range of measures that the government should consider in strengthening Australia's ability to recover unpaid tax from multinationals. Multinational tax avoidance is particularly widespread in the big tech giants. In 2014, an investigation by The Australian Financial Review concluded that between 2002 and 2013 Apple had shifted an estimated $8.9 billion in unpaid taxes from its Australian operations to tax havens in Ireland. Although the numbers are secret, the tax-dodging strategy is not. The same investigation by The Australian Financial Review referred to Apple Sales International 2009 accounts, which state:

The company is not tax resident in any jurisdiction …The average tax rate for all jurisdictions in which it operates is approximately 4 per cent.

This is absolutely utterly appalling.

The huge multinationals of Facebook and Google are no different. These two companies have a duopoly on online advertising that is only strengthened with every passing week and month. Digital advertising is the biggest source of advertising revenue in the local media sector and, to echo the comments of my colleague Senator Xenophon, he believes that many politicians:

… don’t realise the commercial and social impact they are having, particularly on the ability of Australian media companies to provide news and local stories.

Although Google earned an estimated $2.5 billion in income from local advertising in 2015, it only declared revenue in Australia of one-fifth that amount. Google paid just $16 million of tax that year, a paltry 0.64 per cent—just a fraction of one percent—of its estimated revenue of $2.5 billion. This means that Google is only paying $1 of tax for every $157 they earn in revenue. This is a tax rate that any person in this chamber, and certainly any Australian, would be absolutely envious of. But it is wrong, and it needs to change.

Facebook Australia is wholly owned by Facebook, its parent company in the US. By market capitalisation, Facebook is a $400 billion company, and it makes more than $1 billion in profit every three months. These figures are absolutely staggering in their size. Yet, in 2015, Facebook Australia's gross revenue figures were reported to be a measly $33.5 million. Investment bank Morgan Stanley estimated that Facebook Australia actually earned between $500 million and $600 million from advertising in our country in 2015, yet Facebook Australia only paid $814,000 in tax. This is absolutely disgusting. Facebook, Google, Apple and a plethora of other multinationals are absolutely dudding the Australian people. Let's be very clear: this is taking money out of our schools, this is taking money out of our hospitals, this is taking money away from pensioners and this is taking money away from aged care.

Australian workers and businesses who do the right thing are labouring hard under taxes to afford the services our community needs and to try to close our budget deficit, but some big businesses seem to believe that they are more equal than others and that these taxes do not apply to them. We need to get better at clawing back these millions and billions of unpaid taxes. To quote The Australian:

… Facebook and Google have made billions out of being innovative businesses, we need to find innovative ways to make them pay back a fair share of their profits to the companies they are taking content from.

In relation to Google and Facebook, one idea that should be considered is requiring them to pay a content fee to host Australian media stories. This would allow local media companies to compete more effectively with the Google and Facebook duopoly. This is not a flight-of-fancy idea: the European Commission is actively investigating a similar proposal for the European Union. As my colleague Senator Xenophon said:

… Facebook and Google’s market dominance amounts to unfair competition. They cannibalise existing media outlets, which provide content, which they sell on for vast profit. It’s critical they pay their fair share of tax, but we need more than a super profits tax.

Or, may I add, we need more than just the proposed diverted profits tax.

Another idea that warrants full investigation and consideration is the possibility of taxing companies according to metrics other than profit, such as input costs. According to Professor John Mangan from the University of Queensland:

In this way society gets a return on the use of all scarce resources; discouraging inefficient resource use and providing firms with incentives to minimise costs.

The incentive for transfer pricing disappears as firms now want to minimise rather than maximise internal costs of production or operation. One way in which they may do this is to reduce discretionary internal costs such as executive salaries.

Unitary taxation with profit apportionment agreements may be another approach that could be considered in international bilateral or multilateral tax treaties. Recommendations from the Senate Economics Reference Committee's two reports on corporate tax avoidance in 2015 and 2016 also provide very useful ideas for the government to act upon.

In summary, I support the government for taking a moderate but constructive step towards addressing multinational tax avoidance, and I urge the government to strengthen this bill by reducing the significant global entity threshold to $250 million, further tightening the sufficient foreign tax test and considering penalties for multinationals who do not disclose that they may have diverted their profit tax liability. I encourage the government to view this bill as an instalment towards ensuring that everyone in Australia who directly benefits from the Australian economy pays their fair share of tax so that those of us who do the right thing—small businesses in particular—do not have to bear an unfair burden compared to those who do not. That will fund our hospitals, that will fund our education system and that will provide funding for the most disadvantaged in our society.

Adam Bandt (Melbourne, Australian Greens) Share this | Link to this | Hansard source

The government has two tax bills on the books at the moment. One aims to give a $50 billion tax cut to some of the biggest companies in Australia, and that includes giving a $7 billion-odd handout to the big four banks. That tax bill keeps getting lower and lower and lower on the agenda, on the Notice Papersomehow we never seem to get around to debating it in this place. That is probably a good thing; perhaps the government is starting to get the message from the Australian public that people are sick of multinational companies making huge amounts of money in Australia—operating here, selling here, employing some people here—and then paying no tax. People are increasingly sick of Australian based very large companies operating here and making millions if not billions of dollars in profit and then, through clever accounting schemes and loopholes in the law, paying no tax. People are sick of finding out that, for example, when it comes to LNG exports people can extract resources from underground or under the ocean in Australia, sell them off and countries like Japan make more on tax from those LNG exports from Australia than Australia does itself. People are sick of watching mining booms come and go, leaving behind crashing house prices and high levels of unemployment in states like Western Australia. We look around and ask what has the public got to show for it—what lasting infrastructure is left? Have we really benefited or have we just missed a once-in-a-generation opportunity to raise the money we need to build the infrastructure and services that Australians rightly expect?

It is no surprise that the government is deciding to soft pedal on its tax cuts for big businesses and instead push higher up the agenda something that might have the effect of making some big multinational companies pay something close to their fair share. But, as is always the way, the government had to be dragged kicking and screaming to it. The Australian public does not accept being asked to pay more to see the doctor or less money going to people who find themselves between jobs and looking for a new job, or paying more to get certain health tests, only to fund corporate tax cuts. The Australian people are rightly saying the parliament has to be the custodian of the public interest—not the corporate interest but the public interest. It should be our job as parliamentarians not to do whatever big companies want but instead to stand up to big companies and say, 'You have to pay your fair share of tax if you want to operate in Australia,' because that way we will have enough money available so that people can go and see the doctor and take their kids to go and see the doctor and not be asked to pay big co-payments along the way. So the campaigning from inside this parliament and outside the parliament might have started to have an effect.

What the government has brought here is a good start. It is following some other countries who say to multinationals, 'Look, if you are going to operate here you have to pay effectively a minimum amount of tax here.' The Greens hope that that will have some effect, and that is why we are supporting the Treasury Laws Amendment (Combating Multinational Tax Avoidance) Bill. It is one of a suite of measures that are necessary. The Greens took to the election a very comprehensive 18-point plan for ending the epidemic of tax avoidance and making sure that the companies that operate in Australia—which is a good place to do business—pay their fair share of tax, and we are pleased that in the last couple of years the government has clearly looked through the Greens policy that we took to the election and decided that there are some good things in it.

If you are going to have a law, that law is only as good as its enforcement. If we have a law that looks good on paper but the Australian Taxation Office does not have the resources to chase it up, then it is not going to deliver the kind of extra money that the government has proposed. The Greens were the only party that went to the election saying that over the coming few years we will restore all of the funding that has been cut from the ATO. To give you an idea of what has been ripped out of the ATO, if you were to restore all of the funding back to the ATO that has been taken out of it, on last year's figures you would be looking at $1.62 billion over four years—$1.62 billion that needs to go back into the ATO, because that is how much over successive years has been taken out of it. If you want to know why we have a problem with declining revenues in this country, a squeeze on revenues, that is a good place to look first. We have taken money out of the ATO, and that means fewer people able to chase not only companies like Google, like Facebook, but also those large companies that operate here as well, and make them pay their fair share of tax. We are pleased that the government has come some way towards restoring some funds to help implement legislation like this, but unless we fully restore funding to the ATO it is not going to be enough and we are going to find ourselves back here doing half measures all the time.

Ultimately this comes down to whether as a parliament we say that we will be the guardians of the public interest. We will say Australia remains a good place to do business, and we want it to be a good place to do business, but tax is the price you pay for doing business in a prosperous country like Australia. Everyone wants the Australian economy to do well but people do not want large companies operating here and using their money and their wherewithal to hire clever accountants and lawyers and get themselves out of paying tax. I am glad that this bill has been elevated rather than the company tax cut bill for debate because it suggests, as the penny drops, that the government might have heard the message that there are better ways to balance the books than taking the axe to the young, the old, the sick and the poor. This might be a good start in having more money coming into the public coffers that should have been here in the first place.

There is a question—and we will pursue this in the Senate—about whether the tax office is going to commence its investigations at a too late or too low of a point, where the presumption about the amount of tax being paid is the right one. We will pursue that when we get to the Senate. But for here, as a good start it is much better that we are debating this bill than the bill to cut company tax. It is much better that we are debating this bill than a bill to give $7 billion to the big banks. For that reason, the Greens will be supporting the passage of this bill through the House.

Scott Morrison (Cook, Liberal Party, Treasurer) Share this | Link to this | Hansard source

Firstly, in summing up, I would like to thank those members who have contributed to this debate. I thank them for the support for these measures that has been expressed by members on both sides of the House and, as we have just heard from the member for Melbourne, by the Greens, as well. This bill continues the government's strong stance against multinational tax avoidance. It implements three new measures announced in the government's 2016 budget.

Earlier today in question time I made reference to the results that the government is getting on making sure that multinationals pay their fair share of tax. Some $2 billion has been clawed back on the advice of the Australian Taxation Office from multinationals this year as a result of the measures we have already introduced. These measures go beyond those. Most taxpayers comply with Australia's tax rules and pay the right amount of tax. The coalition has always believed that taxes should be lower but that everyone should pay them. We should ensure a system of great integrity to make that the result. However, there are some who do not share that view and do not pay their tax, and there are some who try to avoid paying Australian tax by diverting Australian profits to low-tax countries.

The measures in these bills will help ensure that the Australian tax payable by significant global entities properly reflects the economic substance of the activities that those entities would carry on. This bill also encourages multinationals to provide relevant information and to cooperate with the ATO to ensure faster resolution of tax disputes. The diverted profits tax will strengthen Australia's anti-avoidance rules and complement our transfer pricing rules by targeting multinationals who enter into arrangements with offshore-related parties that lack economic substance to avoid Australian tax by diverting profits to lower tax countries. It is expected that the diverted profits tax will apply in very limited circumstances. Most companies do the right thing and meet their tax obligations. The diverted profits tax is focused on tax avoidance arrangements that are artificial or contrived. The diverted profits tax will allow the commissioner to impose the diverted profits tax on the basis of a reasonable assessment of the available information and impose an upfront tax liability payable on the amount of the diverted profits at a penalty rate of 40 per cent. Where a multinational changes a diverted profits tax assessment through an appeal to the Federal Court of Australia, they will generally be unable to introduce information that was not previously made available to the ATO.

We will also introduce tough penalties for multinationals who fail to comply with their tax reporting obligations from 1 July 2017. Large multinationals that breach their tax reporting obligations will now face penalties of $525,000 rather than $5,250. This increase is much more in line with the financial size and capacity of large multinationals and provides greater incentive to comply with their tax reporting obligations.

Transfer pricing rules will also be updated to give effect to the 2015 OECD transfer pricing recommendations. These changes will ensure our transfer pricing rules remain in line with international best practice. Together with the DPT, they will ensure that profits made in Australia are taxed in Australia. These changes also send a clear message to multinationals and the international tax community that Australia is absolutely committed to conducting multinational tax avoidance.

We continue to be a leader on the world stage in this regard. Just on the weekend when I was attending the G20 there was a substantial report provided by the OECD on the BEPS process which highlighted the fact that Australia was in the top of the pack when it came to implementing the base erosion and profit shifting agenda. We are a world leader when it comes to combating multinational tax avoidance. That is a far cry from the situation we inherited when we were elected to government in 2013. We have been an early adopter of the BEPS recommendations and are taking steps to ensure that our rules not only comply with our agreed minimum standards but are effective across all BEPS issues.

The international corporation which is essential to make these BEPS processes work has been brought about by both working through the OECD and the G20. I had the opportunity to thank the many other countries who have been working together on these measures. It means that you get a greater pressure on compliance between jurisdictions for companies that operate on a multinational basis. We continue to implement the OECD BEPS package and are currently progressing work on new rules to enhance the ATO's ability to detect tax avoidance by requiring advisers to report aggressive tax schemes to the ATO. The government is taking a strong, world-leading but balanced approach to multinational tax avoidance, and we are getting results. The Turnbull government has said that enough is enough when it comes to multinationals diverting profits offshore and failing to meet their tax disclosure responsibilities.

Once again, I commend the bill to the House.

Scott Buchholz (Wright, Liberal Party) Share this | Link to this | Hansard source

The original question was that the bill be now read a second time. To this the honourable member for Fenner has moved as an amendment that all words after 'That' be omitted with a view to substituting other words. The immediate question is that the amendment be agreed to.

Question negatived.

Original question agreed to.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.