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

If we want to have good schools and good hospitals in this country and a safety net that means people get a good income to retire on when they reach retirement age or are looked after if they fall through the cracks and find themselves falling on hard times through no fault of their own, government needs to raise the revenue for it. We also know that, increasingly, the government is not raising the revenue to fund those things. The coalition government's response to that is, firstly, to go out and talk about cutting some of those services—cutting education and cutting the pension. Its second response is to say, 'Perhaps we do need a bit more revenue, but let's ask everyday Australians to pay for it.' Their reaction, in their first budget, was to say, 'Let's address the growing revenue crisis by making people pay more'—to go and see the doctor, for example—or, 'Let's remove some other concessions that people might enjoy in this country.' That was their first response.

Quite rightly, this parliament and the Australian people stood up to them and said that not only was that not what they were elected on but also that they were breaking a fundamental point of principle in Australia, which is that we are an egalitarian country. Part of that means asking those who can most afford it to pay more tax so that we can continue to have those services. What became apparent then was that multinational companies who are operating here in Australia are not paying their fair share of tax. But it was not the government's first inclination to seek to remedy that. No: the government's first inclination was to turn on everyday Australians. The government has been dragged kicking and screaming to understanding that the only way we will secure the revenue base in this country will be by doing a number of things, including making multinational companies pay their fair share of tax.

Having been brought to that point, the government is wavering with this bill; the government is equivocating. What they are not doing with this bill it tackling one of the core problems in the legislation at the moment. We know that the general anti-avoidance tax provisions in our tax code are famously difficult to prosecute. The ATO has to be able to prove that a transaction was entered into for the dominant purpose of avoiding tax. How will the ATO be able to approve that without spending millions of dollars in courts? As we found out through the Senate inquiry, which I will talk a bit about in a moment, our big miners are setting up Singapore marketing hubs, for example. Miners will be able to argue that they set up these hubs to be closer to customers and because of the favourable business environment—nothing to do with being able to pay much less tax in Singapore. So, there is a hole in our legislation at the moment that makes it very, very difficult to prove that multinational companies are trying to get out of paying their fair share of tax in Australia, and this bill does nothing to address that.

There is another way in which this bill fails, and the government is clearly on notice about this. Thanks to the work of the likes of the Tax Justice Network, of Micah Challenge and of a number of journalists who have been drawing attention to the behaviour of multinational companies here in Australia, we know that one thing that could be done to help make companies pay their fair share of tax is to be prepared to name and shame companies if they do the wrong thing. People in Australia have a right to know how much tax multinational companies are paying in this country and to have them outed and named if they are not paying the fair amount. The best way to dissuade companies from tax avoidance is to threaten reputational risk to prominent companies, who cannot afford to have their brand tarnished.

Opening financial details to public scrutiny of these big companies should be a strategic priority of this government and this parliament. With an international agreement to develop a uniform approach to tax avoidance, strong transparency changes are unilateral measures that Australia can take straight away without disrupting these multilateral discussions, while also showing that Australia is serious about confronting this global blight on governments. A strong suite of financial disclosure measures would be far more effective and less costly to the government than these proposed general anti-avoidance measures or the existing ones, which, as I have said, are notoriously difficult to prosecute.

Public dissemination of a company's financial accounts carries with it a severe reputational risk to many globally significant firms. Public exposure of tax arrangements in the UK has seen companies like Starbucks and amazon announce that they will commence paying tax on UK sales, after the public outcry. Similarly, during the Senate inquiry that is the reason the government has been dragged into this—a Senate inquiry initiated by the Greens—Glencore announced that it would close its marketing hubs so that transactions can incur a tax in Australia. If we really do believe, as the economists tell us, that you need good information to be able to make good investment decisions, then efficient protection of the public interest and public revenue requires the removal of this information asymmetry where the corporations know exactly what is going on but the public does not. That means, through legislation and through the tax office, being prepared to let people in Australia know exactly how much tax these companies are paying.

What became clear during the Greens-initiated Senate inquiry was that the Public Service, the Senate and the general public have largely been kept ignorant about the depth and breadth of aggressive tax minimisation by globally linked companies. The significant public interest and outcry that we have heard around the inquiry and that we have read about in the papers can be largely attributed to the fact that there is not enough information available for people to know what is going on and how much tax is being paid by the companies that are operating here. Investigative financial journalism has a very important role to play in translating this information to the public. We have been grateful as an Australian people for the work done by journalists such as Michael West, Neil Chenoweth and Nassim Khadem.

But one thing needs to be made clear. When you think of the big multinational companies that operate in Australia, some of them are media companies. And when you think about our reliance on journalists at the moment, you have to also take into account something the Senate inquiry learnt during its hearings, which is that the ATO's most at-risk company for tax evasion was News Corporation. If they are on the ATO's watch list, then we cannot just leave it up to journalists to find out what is going on by these companies that are operating here; we cannot just leave it up to journalists. We have to empower the tax office, through legislation and through resources, to have all that information themselves and then make it available to the public. That way, it will be trusted and people will be able to vote with their feet and with their dollars on whether to support a company. Then we might see behaviour such as that in the UK and the US, where large multinational companies, in order to continue their social licence to operate here in Australia, decide to pay tax in Australia. As long as we do not know what they are getting away with, they will continue to get away with it. Sadly, we have seen the government move the other way last week with their rich mates amendment bill that they passed to ensure that private companies, who are making enormous amounts of money here in Australia, do not have to disclose their affairs.

The government told us that there were concerns about people who operate some of these large companies being kidnapped, and that is why they could not tell us the information. What became apparent during the Senate inquiry was that the committee sought information from the Treasury and the Australian Taxation Office as to whether that advice had ever been provided. No evidence was provided to the Senate inquiry that the threats of kidnapping were based on information provided by any government agency. It was made up by the government to protect its mates, and that is why the government in this legislation, similarly, with large public companies is not being frank with the Australian people and saying, 'We will make large multinational companies tell you how much tax they are paying in Australia.'

The problem is that by carving out these kinds of exemptions, as we have seen with private companies and as this bill allows to continue to happen with public companies, there is a chance that that is in fact going to assist further tax minimisation.

The Uniting Church of Australia Synod of Victoria and Tasmania's submission to the estimate inquiry said:

... a document obtained from the Australian Taxation Office (ATO) under freedom of information has revealed that the private companies linked to Australian high wealth individuals have average profit margins lower than the other categories of companies … in the group that the legislation applies to. Almost half of these companies are foreign-headquartered and two-thirds have some form of international related party dealings.

They account for most of all international related party dealings reported to the ATO, despite being only 21% of the businesses caught under the tax transparency measures of the Tax Laws Amendment (2013 Measures No. 2) Act. It is possible that the lower average profit is simply due to this category of companies performing worse on average than other categories of businesses. However, there is the possibility that the lower average reported profitability is due to aggressive tax practices.

In other words, when you do not tell people what is going on and you allow certain groups of people to keep large companies—not individuals—operating here to keep their tax affairs private, you provide an incentive for them to do things that most Australians do not have access to and most would find abhorrent. That is why, instead of going the way the government is going, we need to pass laws that allow us to name and shame these companies so that, if a multinational coffee company is not paying tax in Australia, people know and can threaten to go somewhere else and make them pay tax here in Australia.

One of the other things that ought to be looked at, if the government is serious about tackling this, is the publish what you pay bill. This is a bill that the Greens currently have before the parliament which would establish mandatory reporting requirements for payments made by Australian based extractive companies to foreign governments. It would require that companies disclose these payments on a country-by-country and project-by-project basis. We know that companies are operating and making payments to governments often with questionable human rights records, labour standards and environmental standards. Again, this is another area where we need transparency because, if Australians know what companies are doing under their name, then they are going to be much more likely to bring pressure to bear on those companies.

The opposition has announced a separate measure around debt loading as a tax avoidance mechanism. Like the government's approach, it goes some way to addressing the problem but it will not go far enough until we name and shame these companies. The opposition's policy to tighten thin capitalisation rules, which limits the amount of debt deductions that can be claimed to the ratio of Australian equity in each company, is insufficient because it would be powerless against companies like Apple, which buys its products off itself at a price marginally below the retail price so its profits are artificially tiny. It is not about debt; it is about their pricing. That has to be tackled and it would not be tackled by the opposition's bill.

The opposition's proposal also would not capture our big mining companies that are using Singapore marketing hubs so that the sales are booked to those businesses instead of here in Australia. The only reason that companies like Glencore even said to the Senate inquiry that they were prepared to do it was that we called the Senate inquiry in the first place. We called them to front up and explain publicly what was going on. When public pressure is brought to bear and people are able to look down the lists and realise that multinational companies are paying tax rates sometimes of less than 10 per cent—sometimes in single figures—then Australians will say, 'Something is wrong here. 'Don't ask me to pay more to see the doctor, unless you're going to crack down on those multinationals. Don't tell me that we've got to take $80 billion out of money going to states, schools and hospitals while you are letting multinationals get away with paying tax rates in a number of per cent that you can count on one hand.'

Until we tighten that up, we are not going to see the egalitarian spirit of Australia reflected in our tax system. This government is being dragged kicking and screaming to do something about it. It is a bill worth supporting, because it makes a bad situation slightly better. Until we make it easier for the tax office to prosecute these companies and we out, name and shame these companies, this problem is only going to continue.

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