Andrew Leigh (Fraser, Australian Labor Party, Shadow Assistant Treasurer) Share this | Hansard source

The Australian Financial Centre Forum's report, Australia as a Financial Centre: Building on Our Strengths, generally known as the Johnson review, recommended that government should reduce the regulatory requirements on corporate debt issuance to retail investors. The rationale for that is that the Australian corporate bond market has traditionally been too shallow. The number of Australian companies issuing bonds is quite small. On average, over recent times only around 30 bonds have been issued in the domestic market every year, with just a few more being issued in the offshore market. On the benefits to Australian corporations, the Johnson review argued that non-bank corporate debt financing within the Asia-Pacific region would increase over time and that Australia could potentially play a role in facilitating the issuance of this type of debt and in managing Asia-Pacific corporate debt portfolios. So this bill is to be welcomed.

The total Australian corporate bond market is currently too small and Australian corporations could benefit from a larger corporate bond market. This is an issue which was important to the former Labor government. I had the privilege as Parliamentary Secretary to the Prime Minister of officially launching exchange traded Australian government bonds at the Australian Stock Exchange on 20 May 2013. The government's rationale for encouraging the ASX to relaunch exchange traded Australian government bonds was in order to assist the creation of a deeper and more liquid domestic corporate bond market. That, in our view, allowed Australian banks to reduce their reliance on offshore funding markets and, in turn, had benefits for Australian investors and consumers. The 2010 competitive and sustainable banking reform platform that Labor put forward had as a major plank the creation of a deeper and more liquid domestic corporate bond market. The creation of exchange traded Australian government bonds created an instrument against which corporate bonds could be pegged, as well as, of course, providing an investment opportunity for superannuation funds and allowing another way for Australian investors to diversify risks.

Regarding the bill before the House, the former Labor government introduced many of these changes in schedule 1 of the Corporations Amendment (Simple Corporate Bonds and Other Measures) Bill 2013, which lapsed with the 2013 election. Schedule 1 of that bill was virtually identical to the bill that the House is debating today. The key difference is that, under the bill Labor introduced, the term of a bond could be no more than 10 years and this bill changes that to no more than 15 years. But both bills are grounded in the Johnson report and the bipartisanship that that report enjoys in this House. Both sides of the House are keen to reduce the regulatory burden on the issuers of corporate bonds, while making sure that fair standards of consumer protection are maintained. Under the changes in this bill, the issuance of certain corporate bonds to retail investors requires the provision of a two-part simple corporate bond prospectus and that simple corporate bonds be able to be traded using simple retail corporate bond depository interests. The bill also makes changes so that directors and proposed directors of a body making an offer have liability for any misstatement in, or omission from, the disclosure document only when they are involved in a contravention of section 728(1).

The measures in the bill, as I have noted, are part of Labor's broad commitment to a stronger corporate bond market, which is part of ensuring that Australia plays an important role as a regional financial centre. Australia has many strengths in attaining this. A strong education system, great diversity of languages being spoken and our time zone are among them, but it is important that our regulatory settings are appropriate to attaining that goal. In recent years, the United States has been rocked by revelations of high-frequency trading. Michael Lewis's book Flash Boys has highlighted vividly the harm that can be done to investors of front running, in which buyers of shares do not get a fair price in the market because they are outbid by milliseconds by a computer program. Australia, thankfully, has not seen the sorts of high frequency trading problems that have beset the United States market, and that is another strength for our region and for the aspiration for Australia to be a regional financial centre.

The Johnson review, of course, had a range of other recommendations which are going to take time to implement. I believe the removal of state insurance taxes is a goal which is supported by both sides of this house. It was a high priority of the Henry review which noted that insurance taxes penalise the sort of behaviour that governments should be encouraging. People hedging against their own risk should not be penalised for so doing. The recommendations of the Johnson review are an important underpinning of Australia as a financial centre.

It is also important that we ensure we have a strong public service and the right policy settings to underpin the growth of the financial sector in Australia. I am concerned by recent developments of this government; for example, the decision to axe 3,000 staff from the Australian Taxation Office which, according to evidence given by ATO officials at a Senate hearing, will cost, for every dollar of staff wages saved, between $1 and $6 of lost revenue to the budget. This is, as my colleague the member for Griffith said in an interview, penny-wise but pound-foolish.

We have seen today revelations from Australian Taxation Office insiders that they believe the revenue collection ability of the Australian Taxation Office will be gutted as a result of the government's staff cuts to the Australian Taxation Office. A good, strong taxation system is fundamental to Australia as a financial centre because when some firms are able to dodge tax with impunity others feel a lack of confidence about the institutional structures.

The same issue affects the government's approach to multinational profit shifting. Australian domestic firms—a mum and dad cafe, a small business set up to produce products for the domestic market—do not have the opportunity of engaging in profit shifting, using instruments such as differentially pricing assets or pricing debt. But to the extent that the government has chosen to leave open $1.1 billion worth of loopholes, it is unfairly advantaging firms which are able to use clever structures to avoid paying their fair share of tax.

We on this side of the house are deeply troubled by the way the government is talking the talk of the G20 about cracking down on multinational profit shifting, but it is failing to walk the walk. We have seen recently revelations of the low amount of tax paid by Glencore, formerly Xstrata. The Treasurer is apparently concerned about these reports. I would say to the Treasurer that he could well put his concerns into action. He could act to crack down on multinational profit shifting by implementing the full gamut of Labor's reform put together by Wayne Swan and David Bradbury, David Bradbury now having taken over a senior job in taxation in the OECD.

That was a $4 billion package which has now been taken down to a $3 billion package by this government, which is then seeking to re-present it to the Australian people as though it is getting tough with multinational profit shifting. It is as though the Treasurer has received a box of chocolates for one Christmas, taken out a quarter of the chocolates, eaten them, and is now trying to re-wrap the package and present it to the Australian people as a terrific Christmas gift for next time around. The fact is that the government is not serious about tackling multinational profit shifting and, again, that raises concerns about the fairness of corporate income tax. Those Australian firms which pay the 30 per cent rate will look askance at multinational companies that are able to avoid their fair duty to contribute to building a better society—which is what taxes do—by multinational profit shifting.

I am also concerned about the message that is sent by the government's hasty deal with the Palmer United Party over the Future of Financial Advice laws. This is a deal done very, very quickly but lacking the backing of peak interest groups such as National Seniors and Choice.

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