Monday, 8 February 2016
Tax Laws Amendment (Implementation of the Common Reporting Standard) Bill 2015; Second Reading
I have been on this matter for quite some time. I have been a bit like dog with a bone—a major dog with a bone—on this matter for quite some time and particularly on the way many of these companies structure their affairs which flows through to pricing. I know that the member for Mitchell used to chip me and tease me about some of the things I raised in relation to pricing on software. We have had those discussions previously. It reflected a serious concern that the way in which hardware and software were being priced was in part driven by a recognition that, if that transfer pricing regime between a parent and a subsidiary were conducted in a particular way by recognising taxation arrangements in a specific country, it would be beneficial for the company but detrimental to the country in which the product was sold. I have always had a concern that we in this country have had inflated prices that in part reflect these arrangements.
This is something I have been on about for some time but I also remember the front pages of the Financial Review, when the member for Wentworth was the shadow communications minister. He was getting huge runs in the Financial Review, talking about his concern on how taxation arrangements were being gamed by big companies and how it would undermine the revenue base of governments across the world. As we often discover with the member for Wentworth, the tough talk is replaced by the cowards walk. You never see him actually follow through—he gets the headline, he gets the coverage, he gets the kudos and the feel-good moment; but he is never actually there to follow it up. We see it yet again, after he has said that he would be doing X, Y or Z to deal with this issue; we have seen very little.
We are seeing more dragging of the feet on this matter, and we cannot afford for this to continue. That is why we have argued through the shadow Assistant Treasurer the amendments we have and why we will continue to place our concerns at the forefront. We are guided in part by the reaction at the tail end of last year of the collective intake of breath by Australians across the nation, when they saw what big companies which have a capacity to pay were paying or, should I say, not paying—not contributing. As the member for Griffith rightly notes, when you compare what they have failed to do with the expectation on low- and middle-income earners to bear a heavier load—as with some of the ideas being actively considered by those opposite while others are get off scot free. It is simply unacceptable.
We are not the only jurisdiction to be concerned by that. In the US, I remember the Levin committee, which investigated Apple's taxation arrangements, a few years ago identified that Apple had $100 billion offshore. That estimate has recently been revised to $200 billion—massive amount of money. For five years Apple did not have corporate headquarters registered in any jurisdiction to oversee their affairs. Having said that and having been critical of that, my big concern in this debate will sound obtuse. When you look at the work that many of these firms are doing, particularly the tech firms around the globe, they are responsible for great changes—economic changes, social changes—and they have a lot to contribute. The continuing arrangements that they are prepared to abide by, I argue, undermine the moral authority of this sector.
The longer they maintain these arrangements in the absence of an effective government response—as is evidenced by the bill we are currently debating—the further they undermine their standing in the eyes of the community. They also undermine, for example, the way their own employees feel about them. I would not be surprised if employees in some of these major firms that are doing great things internationally are now more and more reluctant to tell others who they work for on the basis that their company is viewed so negatively by the public that they do not want to be associated with it.
The sector's ability to argue its value to the broader society when it is maintaining these practices impacts unfairly on smaller players in the sector. We on both sides of the fence are committed to encouraging greater early stage innovation in this nation. We on both sides of the House are prepared to change government policies—for example, taxation arrangements—to encourage that. But some would say: why would we change these taxation arrangements when the big players are not pulling their weight, when they deliberately set up their affairs in a particular way to avoid their obligations in this jurisdiction? It is a pretty tough question to answer. I say again that the sector is having its moral authority, its value, undermined by these taxation arrangements and, given the importance of the sector in the long term, it can ill afford that.
I want to make an observation in relation to international cooperation. The member for Griffith named some of the countries that have already signed up to the Common Reporting Standard and pushed for us to tackle this. I note in particular that the UK Prime Minister, David Cameron, has been on this issue for quite some time. You cannot make legal changes in one jurisdiction, because this is a global issue and the community should work together. The tech sector's argument is: 'You bring in the standards and we'll follow the law.' And yet countries are well aware that, if they bring in differentials, this will simply accelerate and worsen a situation in which a lot of these major companies game the system and pick which country they go to to get the best taxation arrangements.
I would argue that one of the jurisdictions that is holding us back on this is the US. What happens is that when the tech companies say, 'Get the global standards in place, get the laws in place and we'll follow the laws,' they then go back to the US congress and agitate for a defiance against the international push to have this rectified in a uniform, common way. We have already seen stirrings in the US congress that will make it harder to get international consensus on this front. That is an issue of great concern. The US cannot expect to have a situation in which other countries' taxation and revenue bases are undermined by these types of practices and yet it gets its own slice. As I said before, Apple has $200 billion in revenue offshore. At some point, I imagine, the Internal Revenue Service is going to want a slice of that. They want to be able to prioritise their slice. But we argue that we should not think as individual jurisdictions. The most effective response is a global one, and it will require us to all think as one on this. But it cannot be a cute situation in which global tech companies tell people in a jurisdiction such as Australia, 'You put the laws in place and we'll follow the laws,' and then go and lobby the US congress to frustrate international efforts to get this done. They can, by all means, come out and say that what I am saying is wrong—it is up to them to do so—but it is clear that someone within the US jurisdiction is being urged to follow this up. That cannot be sustained and it cannot be argued for.
I am dismayed at how long it has taken for us to make progress on this. Those on the other side often make bold pronouncements about the way in which they will move on this, and it has taken ages to do so. Having said that, I also think the onus is well and truly on these companies. We have recently seen Google agree to make a back-payment of 130 million pounds in tax in the UK following discussions with the government there. Some have observed, fairly, that that is not necessarily a massive amount of money for a global concern like Google. But there is some headway being made there, and it is a requirement to continue that elsewhere.
Those firms cannot continue to argue that they are making the world a better place through what they are doing while at the same time undermining revenue bases in other parts of the world. That is simply unacceptable. You cannot have investments in, for example, education, science and research and development if your revenue base is being undermined by these types of arrangements. As I said, the moral authority of the sector is being affected by this.
In conclusion, I come back to the observation that, while we have had the tough talk, we have not seen this government 'walk the talk'. They are happy to get the headlines but they are not happy to do the hard work. Our view is that the faster we move on this the better. We cannot afford delay. I support the amendments put forward by the member for Fraser.