House debates

Tuesday, 14 August 2018

Bills

Treasury Laws Amendment (OECD Multilateral Instrument) Bill 2018; Second Reading

5:54 pm

Photo of Matt ThistlethwaiteMatt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Assistant Minister for Treasury) Share this | Hansard source

I'm speaking in support of the amendment moved by the member for Fenner. The Treasury Laws Amendment (OECD Multilateral Instrument) Bill 2018 contains amendments to the tax agreements act to give the force of law in Australia to the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting. Labor does support this bill, subject to the amendment that's been moved by the member for Fenner. But we note that the government has declined to adopt two of the articles in the convention that are designed to deter the use of tax havens. Under a Shorten Labor government we will review the decision not to sign up to those parts of the treaty, utilising the resources of Treasury.

Looking at the detail of the bill, the multilateral convention is a tax treaty that enables jurisdictions to quickly modify their bilateral tax arrangements. This helps to give effect to internationally agreed tax integrity rules and improve dispute resolution mechanisms. The multilateral convention is one of many action items of the OECD's and the G20's base erosion and profit shifting strategy to coordinate global action against tax avoidance and minimisation strategies by multinational companies. The project was initiated at the G20 in 2012 and is headed by the OECD. Although Australia has adopted the majority of the multilateral convention articles, it has not agreed to a number of key aspects. They are article 10, which is the anti-abuse rule for permanent establishments situated in third jurisdictions—or tax havens, as they are more commonly known—and article 12, which covers artificial avoidance of permanent establishment status through certain agreements. I want to note that, without a clear rationale from the Turnbull government about their refusal to sign these tax haven measures, a future Shorten Labor government, if we are elected at the next election, would utilise the resources of Treasury to explore the ramifications of not signing these two articles.

When it comes to tackling multinational tax avoidance, it's Labor that's been leading the way, with the Turnbull government following in our wake. One in five of Australia's biggest companies have paid no tax for at least the past three years. There's a lot of anger and resentment out there at the moment in the community about many of these corporations. We've seen that in the approach that many people have taken to the banking royal commission and to the disclosure of the amount of tax that big companies actually pay in this country and the enormous deductions that they're able to use to basically reduce their taxable income and in some cases pay no tax at all. It should never be forgotten that it was Labor that originally established these tax transparency rules to oblige those companies to disclose the amount of payments they are making to governments through the taxation system. And it was the coalition that got into bed with the Greens and watered down those tax laws. They reduced the number of companies that are subject to the law and therefore have to report on an annual basis.

This government claims that they're about tax transparency. But in practice they're actually doing the opposite, reducing the amount of transparency and the number of companies that need to disclose the tax that they pay to the Australian government. We all know that this government's priority at the moment is an $80 billion tax break for the biggest companies throughout the country. They want to give a tax cut to some of the largest corporations in Australia—which include those big banks that have done such a wonderful job by the Australian people over the course of the last decade! As we're seeing in the royal commission, they've been such great backers of Australian small businesses, farmers, and families and have been so generous in their approach to their insurance arms, to their wealth management arms and to disclosure and transparency! Yet this government wants to give those sorts of organisations and the people who run those organisations, and their shareholders, a tax cut. Well, Labor simply won't stand for it. We've had enough of these organisations ripping off the Australian people, being deceitful, being dishonest—sending farmers, small businesses and families to the wall—and getting a tax cut. It's not on, and we're going to stand up for those hardworking small businesspeople, the farmers, Australian workers and their families, and oppose this government's dastardly attempts to give those organisations a tax cut.

Australia is also missing out on billions in tax revenue thanks to loopholes that the Turnbull government refuses to act on, despite Labor's tax transparency laws showing just how much the people of Australia are losing. The introduction of key public reporting of country-by-country reports, as suggested by Labor—in particular in the resources and extractive industries such as mining, oil and gas—could help stem the flow of missing tax revenue.

Labor's also leading the way in ensuring that large Australian resources companies are good corporate citizens and maintain accountability and transparency through systems that not only ensure they pay their fair share of tax but help combat corruption, particularly in countries where they're operating offshore mining and resources projects, many of them in our backyard in the Pacific. Our policy will require large extractive companies to disclose payments arising from any activity involving exploration, prospecting, discovery, development and extraction. Disclosure under the regime will be on a country-by-country and project-by-project basis. Payments to be disclosed include taxes on income; production and profits of companies; royalties; dividends; signature discovery and production bonuses; fees, including licence fees, rental fees and entry fees; other payments, licences and concessions; payments for infrastructure improvements; and production entitlements such as profit resources. Payments must be disclosed if they are made to any national, regional or local authority of the country, including a department, agency or state-owned enterprise.

Disclosure under this regime should apply to large extractive companies in Australia. A large company shall be defined as a company that meets at least two of the following criteria: it has a balance sheet total that exceeds $50 million, its net turnover on the balance sheet date exceeds $100 million or the average number of employees during the financial year to which the balance sheet relates exceeds 250. A single or series of related payments within a financial year must be disclosed if the payments amount to at least $150,000. A mandatory reporting regime for extractive industries will increase the availability of verifiable, disaggregated information from company financial reports regarding payments made to governments, and this information would build public accountability and trust in companies and governments.

A Shorten Labor government, if we're elected, will also establish a multistakeholder committee to work with the government on the implementation of the reporting regime, including defining project-level reporting and the establishment of an online reporting mechanism to ensure public transparency and accessibility. The legislation would include equivalency provisions so that companies captured by other jurisdictions due to cross-listing on stock exchanges would only be required to lodge one report. If we're elected, the extractive industries transparency regime will require subjected companies to begin reporting payments in 2020.

In line with consultation from interested stakeholders, this policy mirrors as closely as possible the UK scheme and the equivalent provisions contained therein. Our policy, if we are elected, will ensure that extractive companies are among the most transparent and accountable in the world. Our companies will be adopting best practice when it comes to ensuring that they're disclosing payments to government and they're transparent, accountable and combatting corruption in the countries in which they operate. Improved transparency and accountability in extractive industries is an effective mechanism to combat corruption in developing and developed countries.

Again, it's clear that the Turnbull government doesn't want to close some of the corporate tax loopholes that exist. Some of those relate to tax havens that are part of the OECD and the G20's base erosion and profit shifting agenda. That's evident in the fact that they're not signing up to that article contained in that plan. Despite soaring corporate profits and the fact that Australia's company tax rate places us in the middle of the G20 pack, the only policy that they have is one for a big business tax cut, not further transparency, and that's simply not good enough.

That's why Labor is proposing to look at those additional two articles that the government hasn't signed up to, and that's why we're proposing and promising that if we're elected we'll go further, with additional transparency and accountability, particularly in the resources and extractive industries, on a country-by-country and project-by-project basis. I urge all members to support the very sensible amendment that has been moved by the member for Fenner.

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