Tuesday, 8 August 2023
Treasury Laws Amendment (Making Multinationals Pay Their Fair Share — Integrity and Transparency) Bill 2023; Second Reading
McBRIDE (—) (): I'm pleased to rise to speak to the Treasury Laws Amendment (Making Multinationals Pay Their Fair Share—Integrity and Transparency) Bill 2023. This bill will level the playing field for Australian businesses and increase transparency of large corporate groups, and I'm pleased to follow the contribution of the member for Bean.
This legislation is important for all Australians as it will make a fairer Australian tax system that will benefit the millions of individuals and businesses who pay their fair share and make their contribution. At last year's election, we were clear—we could not have been plainer—that a Labor government would make sure multinationals paid their fair share of taxes. That's just what we're doing.
This bill is split into two schedules. Schedule 1 of this bill will hold multinational companies to account, increase transparency and shine a light on the use of subsidiaries in low-tax jurisdictions—important work. Having companies disclose their subsidiaries and where they are located will also help reduce compliance burdens. This disclosure will allow the Australian Taxation Office to ensure companies are doing the right thing and paying their fair share. This, as other speakers on this side of the House have mentioned, is in line with other international approaches, with the United Kingdom having similar measures in place. Listed Australian companies will be required to disclose information on all of their subsidiaries within their annual financial statements, making things transparent, making them accountable. In practice, the disclosure of subsidiaries will mostly impact large multinational companies with complex corporate structures. Small Australian companies that do not have any subsidiaries would only have to disclose a nil statement, limiting any additional reporting burdens for many smaller companies.
Schedule 2 of this bill targets known tax planning arrangements by limiting multinational corporations' debt deductions, making sure that they are paying their fair share of tax in Australia. This legislation is a key step in creating a fairer Australian taxation system and follows the lead of other OECD nations. It builds on efforts to ensure large multinationals are paying their way, paying their fair share and doing the right thing. Schedule 2 follows on from what international jurisdictions, such as the United States, the United Kingdom and many countries within the European Union, have already implemented.
Like schedule 1, schedule 2 will help level the playing field for Australian businesses, including businesses in my electorate of Dobell on the Central Coast of New South Wales—contributing businesses, good corporate citizens. This will be done by limiting debt related deductions to 30 per cent of profits. This is a new earnings-based test, and it will replace the safe harbour test currently in place. The current safe harbour test allows companies to deduct debt up to a threshold of 60 per cent of assets. It is estimated that, by the end of 2025-26, schedule 2 will raise $720 million in revenue. This change will help improve tax integrity while continuing to make sure that Australia is an attractive place for investment. It is a priority for our government, the Albanese government, to make our tax system fairer for all Australians—for individuals and for Australian businesses.
Schedule 2 amends the already existing thin capitalisation rules. The amendment will not change the existing exclusions for smaller entities and entities with mostly Australian assets, which is important. This ultimately benefits small Australian businesses and helps limit the continuing tax avoidance of some multinational companies. Every Australian wants multinationals to pay their fair share, and now we're making them do it. This bill will help make the Australian taxation system fairer, levelling the playing field for Australian businesses—businesses that are doing the right thing and contributing, businesses in the outer suburbs, in the regions and right around Australia, including those on the Central Coast of New South Wales, the area which I represent.
I have the opportunity, day to day, to listen to local business people, to understand the challenges that they face, and to listen to the solutions that they suggest. Businesses in my community want to make sure that multinationals are paying their fair share. They want a level playing field so that, whether they're a start-up or a more mature business, they have a fair go and multinationals don't have an unfair advantage. This bill, at its heart, is about fairness. I know that the small businesses in Wyong, Toukley, the Entrance and many other areas of the coast don't have subsidiaries set up overseas to shift profits made in Australia. I know they pay their fair share, and I know they want to contribute to our local community and economy. They're good corporate citizens.
This morning I spoke to leaders from Central Coast Industry Connect. It's a not-for-profit limited organisation genuinely committed to developing a vibrant, connected and innovative manufacturing sector that provides strong employment in our region. I've had the chance to work with Central Coast Industry Connect since I was elected, and I had a good conversation with the leaders of the company this morning. They wanted to acknowledge that we've got some large multinational organisations on the coast that are doing the right thing—good corporate citizens that exercise sound corporate social responsibility—but they want to make sure that every large corporate does that. It's important that we strike the right balance. They told me that if those organisations are not paying appropriate tax or their fair share then it clearly disadvantages local manufacturers. The food and beverage industry is one of the biggest industries on the Central Coast. Whether it's Eastcoast Beverages, who are now available in the parliament, or companies who are just starting out, we want to make sure that small businesses, more-mature businesses—Australian businesses—have a fair go. That's a level playing field, and that's what this legislation intends to create.
Central Coast Industry Connect and other business leaders on the Central Coast who I have spoken to have told me that those organisations aren't paying their fair share. If they're not paying the appropriate tax then that's clearly a disadvantage for our local businesses and manufacturers. There are no two ways about it—it's simply not fair. That's why this bill is important to me as a local person and as a local MP whose first job was making coffees in her family's small business in what was then Wyong Plaza. This bill will level the playing field and benefit Australian companies right around the nation, in every town, suburb and city and on the Central Coast, which I represent. Our government is genuinely committed to making the tax system fairer for every Australian, wherever their business is run.
In the cost-of-living crisis, with many Australians doing it tough, including business owners, multinational corporations must be paying their fair share. This tax avoidance by multinational companies is not a victimless crime. When companies avoid tax through loopholes, the tax revenue that would be used to fund a range of critical investments in healthcare, education, infrastructure and aged care is short-changed. Making listed and unlisted companies within Australia disclose their subsidiaries and strengthening Australia's thin capitalisation rules will not only increase fairness, but benefit society as a whole. By requiring large multinationals to disclose all their subsidiaries, we can follow the lead of our international counterparts and deter multinationals from shifting profits made in Australia to overseas.
We know times are tough. Many Australians are doing it tough. I also know that these Australians will benefit from this bill.