Tuesday, 8 August 2023
Treasury Laws Amendment (Making Multinationals Pay Their Fair Share — Integrity and Transparency) Bill 2023; Second Reading
I welcome the opportunity to speak on this bill, which will deliver on our government's commitment to ensuring that multinationals pay their fair share of tax. This is good policy. It's an important reform and, more than that, it reflects something that I know is important to a lot of Australians, including many people in my community who have brought up this issue with me and who want to see multinationals paying their fair share of tax. This goes to one of those core values that we like to think we hold as Australians—that idea of fairness. Whether you're an individual or a big business, everyone who can play their part and pay their fair share should do so. We know there's work to do in holding companies to account, and we know that this bill won't fix all the loopholes and problems that are there, but it certainly is a good start. It will level the playing field for Australian businesses and it will increase transparency. It will help ensure that large corporate groups can't avoid being upfront with the public on their corporate structures and whether they are operating with opaque or atypical tax arrangements.
Australia is not the only country trying to bring in reforms of this kind. In fact, we are in a way playing global catch-up. There is global momentum towards ensuring that firms do pay their fair share of tax. It is in our interests as a nation to do this reform. It is the interests of shareholders in this country that they have more information. It is also in the interests of these companies, who want the social licence to operate in our country, to have these rules in place and abide by these rules.
This government knows there is more to be done on multinational taxation. Two-fifths of multinational profits are currently booked through tax havens. That's $100 billion of Australian money in places like Panama and the Bahamas, where the tax rates are very low. Estimates suggest 80 per cent of the money in those tax havens is money that is in breach of other countries' tax laws. These are tax avoidance mechanisms, but they are also places where we know the consequences of that avoidance can be dire. Terrorists, kidnappers, crime syndicates and drug lords all store their money in these types of places. They are not places that Australian businesses should be transferring their money to.
Tax havens are an issue for us here in Australia, but they are also a global issue. As I said, it is a problem that the global community is trying to tackle, and it is something that Australia should be part of cracking down on. I know there have been consequences from this type of tax avoidance and issues with multinationals not doing the right thing. In my home state of Victoria, we had a case a few years ago of a tyre dump that had been transferred to a company in Panama, all in order to avoid their obligations. There were nine million tyres sitting at that dump and, by shifting the ownership off to Panama, the owners were attempting to avoid liabilities that they would otherwise have been held to. That is not acceptable. Our communities do not want that to be the type of business environment that this country allows. It is the sort of issue the government is hoping to address through this bill and through its work on multinational taxation.
In the face of what we know about the avoidance that is happening in Australia and globally, it is remarkable that those opposite have criticised this government for taking action on this issue. The member for Deakin and Senator Hume from the other place put out a media release that criticised the Prime Minister for wanting to do more on multinational taxation. That is so out of step with community sentiment. It is so out of step with where our business community should be in terms of the social licence to operate, in terms of making sure that they are upholding the standards that our community expects of them and in terms of making sure that they are holding fast to that ideal of fairness.
While those opposite were in government, they tinkered around the edges. They nibbled at the edges. They pretended they wanted to take action but, in fact, their inaction made it clear: they weren't on the side of Australians; they were on the side of the multinationals. In the lead-up to the election last year, the coalition told Australians not to support anyone proposing to raise taxes on multinational tax dodgers. Just contemplate that for a minute. They said to the Australian people: 'Don't support a party proposing to make sure that companies in this country don't avoid their tax obligations by sending money overseas.' It really is almost incomprehensible, even from those on the other side.
When Labor were last in office, the coalition voted against our multinational taxation measures, including a measure that recently saw Chevron paying an additional $300 million in tax. Those opposite abandoned multiple multinational tax measures which were ready to go. They took things down a few gears. They put things on the go-slow. They made it clear, once again, that they are not on the side of the Australian community. They are not on the side of Australian individuals who do the right thing—who file and pay their taxes. They are on the side of multinationals who choose to not face and not meet their tax responsibilities.
In 2021 a group of countries from right across the world came together to reach a deal on taxation that is an important step in the right direction on multinational taxation. More than 100 countries were part of this important deal. Australia is playing its part under that. This government is working to see the measures that were part of that implemented. Do you know who isn't playing their part in that global framework and joining with like-minded countries to say tax avoidance isn't acceptable? Those opposite. They are walking away from the issue of multinational taxation. They are at odds with the reality that this problem is deeply unfair to many Australian firms, who are left battling an unequal playing field.
If you're a new startup business in Australia, you are very unlikely to be banking in the Bahamas. You will not be out there finding an accounting trick that takes you through the Cayman Islands. You don't have an army of lawyers, accountants and consultants sitting in a conference room working to find every possible loophole they can. Instead, you are working hard to come up with a business model for your company. There is enough for you to do without having to face the inequity of big multinational firms and tax dodgers who are tipping the scales in their own favour and using tax havens to cheat Australian businesses who are doing the right thing out of competition and business they should have. Our government wants to level the playing field. We know that that is the right thing to do and the fair thing to do for Australian businesses who want to do the right thing and who want to be competing on a level playing field.
This bill contains two schedules. Both are important to the aims this government is pursuing in taking action on multinational taxation. The first targets listed and unlisted Australian public companies to disclose their subsidiaries and where they are located. This will help in holding companies to account, particularly large corporate groups, requiring them to be more transparent about their corporate structures and about whether they are operating with opaque tax arrangements. For example, this would apply if they were using a subsidiary located in a low-tax jurisdiction.
The information revealed by these changes will help inform us as to whether tax laws are operating as intended in collecting the right level of revenue. It will give us the opportunity to conduct a better economic analysis. As part of a company's annual financial report, we will see this information in line with international approaches such as those already underway in the United Kingdom. It's an approach that aims to reduce the compliance burdens many businesses may face. From the time our government included these plans for reform in 2022, as we looked towards the election, through to now, we have been conducting valuable consultations to ensure that stakeholders have been heard and had their concerns understood in the work that is being done. So there has been consultation around these measures and how they will apply.
The second schedule is a measure aimed at revenue raising. It targets a known tax planning arrangement to ensure that those utilising them are paying their fair share of tax. That's what this bill is about: making sure that people are paying their fair share of tax. It will limit multinationals' debt deductions. It will help to level the playing field for Australian businesses. The reforms will strengthen Australia's thin capitalisation rules and, as I said, will align Australia's approach with those of many other countries around the world—the United States, the United Kingdom and most of the European Union—in implementing earnings based interest limitation rules.
There are real differences between the approach our government is taking—and, in fact, the work on multinational taxation that was done under the previous Labor government—and the approach we have seen from those opposite. Labor have a track record, and we plan to build on it. We will keep a focus on this issue. It is something we promised before the last election. It is something that I know people in my community want to see implemented. It is something that they continue to talk to me about. We are following through on that commitment. We know that it is an important commitment for the Australian community, Australian businesses and our country more broadly that we have these rules in place and that we make sure this key issue of fairness is being addressed through our laws, through the system, through the way we say businesses should be operating in this country. It is that idea of fairness that we all sign up to as Australians, the idea of making sure that the rules don't rig it for those who have an army of lawyers on speed dial, that the rules don't rig it for those who can make these kinds of complex arrangements and avoid their tax liabilities.
We are supporting those who play by the rules. We are supporting those who are trying to start new businesses in this country. We are supporting those who are trying to do the right thing. We are making sure that those Australian individuals who do the right thing when they pay their tax on time know that there isn't one rule for them and another rule for that big multinational around the corner. That is a fundamental, simple thing that should really be at the heart of what we do in this place but has been ignored for too long.
Those opposite have criticised the approach this government is now bringing to this place. That is disappointing. I say to those opposite: now might be an ideal time to reconsider that approach and the decision you've taken on this legislation. Have a chat to your communities and see if they're really saying: 'Yes, absolutely. It's time to stand up for multinational tax avoiders. That's what we sent you to Canberra to do. Please make sure you get on your feet in the House and say that's what you're there for.' That's certainly not what I'm here for and it's certainly not what this government is here for.
We don't like it when someone gets an unfair advantage, when they find the loopholes to work their way around the rules that are there for a reason. We don't like it when someone doesn't pay their fair share. Australian businesses shouldn't be disadvantaged by going up against multinational firms and the tax havens they're running their profits through. It's not fair. Our government is taking action on it, and we will continue to do the work that needs to be done to fix it.