Mitch Fifield (Victoria, Liberal Party, Manager of Government Business in the Senate) Share this | Link to this | Hansard source

( I table the revised explanatory memoranda relating to the bills and I move:

That these bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard.

Leave granted.

The speeches read as follows—

TREASURY LAWS AMENDMENT (COMBATING MULTINATIONAL TAX AVOIDANCE) BILL 2017

SECOND READING SPEECH

This bill implements the suite of tax integrity measures the Turnbull government announced in the government's 2016-17 budget to combat multinational tax avoidance.

Most taxpayers comply with Australia's tax rules and pay the right amount of tax.

However, there are some who do not; some who try to avoid paying Australian tax by diverting Australian profits to low tax countries.

When this happens, other taxpayers, including families and small businesses who comply with our tax laws, are left to carry the taxation burden.

This government will not stand for tax avoidance. We will not stand for the deliberate flaunting of our tax laws by major multinational enterprises.

That is why the Turnbull government has introduced some of the strongest taxation integrity rules in the world — so that those taxpayers who attempt to avoid paying tax are caught and do not undermine our tax system.

This government inherited a tax system that had not kept pace with developments in global trade and investment and digital commerce. It was left to this government to reverse the years of inaction on tax integrity, and ensure that the tax loopholes are closed and multinational entities operating in Australia pay the right amount of tax.

We are determined to have the strongest rules against tax avoidance; to level the playing field and deliver a fairer tax system for all.

In 2015 the government introduced a package of three key reforms to combat multinational tax avoidance.

The first was the Multinational Anti-Avoidance Law to stop multinationals with significant Australian activities booking profits overseas to avoid paying tax in Australia. We are already seeing positive results from this measure, with many multinationals now restructuring to book their income in Australia.

The second was to double the penalties for large companies that enter into tax avoidance or profit-shifting schemes — making them think twice before engaging in these behaviours.

Thirdly, we introduced country-by-country reporting which requires large multinationals to report to the Australian Taxation Office their income and tax paid in every country in which they operate.

But we are aware that more needs to be done.

The Diverted Profits Tax does not apply to managed investment trusts or similar foreign entities, sovereign wealth funds and foreign pension funds. These entities have been excluded as they are low risk from an integrity perspective, as they are widely held and undertake passive activities. This exclusion will ensure that such entities do not face unnecessary compliance burdens as a result of the introduction of the Diverted Profits Tax.

Similarly, the Diverted Profits Tax does not capture entities with Australian income of $25 million or less.

The Diverted Profits Tax contains a number of key features that will encourage greater cooperation between uncooperative multinationals and the ATO. As a result this will reduce the length of disputes between the ATO and multinationals.

These key features include:

Increased p enalties

Schedule 2 of this bill increases the administrative penalties that can be applied by the Commissioner of Taxation to significant global entities for breaching their tax reporting obligations.

From 1 July 2017, the government will increase the maximum penalty 100-times for these entities where they fail to lodge tax documents on time or take reasonable care when making statements to the ATO.

The penalty regime that was in place when we came to government was wholly inadequate and was not commensurate with the gravity of reporting offences that could be committed by significant global entities.

As a consequence, this bill which I am introducing today, will raise the maximum administrative penalty for significant global entities who fail to comply with their tax reporting obligations from $5,250 to $525,000 when taking into account the increase in the value of Commonwealth penalty unit announced in the 2016-17 Mid-Year Economic and Fiscal Outlook.

The government is also doubling the penalties for these entities when they make false or misleading statements to the ATO.

These changes will make the penalties applicable to significant global entities more commensurate with their turnover, and provide greater incentive for them to lodge tax documents on time and take reasonable care when making statements to the ATO.

We also announced that we would enhance the ATO's ability to detect tax avoidance by progressing work on developing a disclosure regime requiring advisers to report aggressive tax schemes to the ATO. We have also committed to new protections for whistleblowers who report tax misconduct to the ATO.

This government also announced in the 2016-17 Budget that Australia would implement OECD anti-hybrid rules to ensure that multinationals are not able to take advantage of differences in how countries tax hybrid financial instruments or hybrid entities.

We have ensured a level playing field for all domestic suppliers by passing legislation that ensured GST is charged on digital products and services imported by consumers. But we are now going even further and will remove the low-value imported goods GST threshold. This means that GST will be charged on all low-value goods imported into Australia regardless of their price.

The government is taking a strong, world-leading, but balanced approach to multinational tax avoidance.

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.

Adopting the changes in this Bill will keep our transfer pricing rules in line with international best practice and help ensure that profits made in Australia are taxed in Australia.

Full details of the measures contained in the bill are outlined in the explanatory memorandum.

DIVERTED PROFITS TAX BILL 2017

SECOND READING SPEECH

The Diverted Profits Tax Bill 2017 forms part of a package of bills to combat multinational tax avoidance.

This bill imposes a new Diverted Profits Tax that is targeted at multinationals who enter into arrangements with off-shore related parties that lack economic substance so as to divert their Australian profits to related parties in lower tax countries, in order to avoid paying Australian tax.

This bill imposes an upfront Diverted Profits Tax liability payable on the amount of the diverted profits at a penalty rate of 40 per cent.

This has the effect of encouraging greater cooperation between uncooperative multinationals and the ATO. As a result this will greatly reduce the length of disputes between the ATO and multinationals, and lead to timelier dispute resolution.

Further details of the bill and the new Diverted Profits Tax are set out in the explanatory memorandum for the Combating Multinational Tax Avoidance Bill 2017.

Debate adjourned.