Andrew Leigh (Fraser, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

I move the second reading amendment which has been circulated in my name:

That all the words after "That" be omitted with a view to substituting the following words:

"while not declining to give the bill a second reading, the House notes that its revenue impact is unquantified, and calls on the Government to adopt Labor's fully-costed multinational tax package to raise $7.2 billion over the next decade".

Labor's position is to support the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. Labor has been calling for more action on multinational taxation for over two years and we will not be standing in the way of significant action on multinational taxation—or even insignificant action, which may well be what this bill being debated before the House is. We are taking a constructive position on this and we are willing to work with those opposite. We hope that, in return, the hand of constructive bipartisanship might be returned, and the government might look seriously at Labor's $7.2 billion package tackling a different set of loopholes from those addressed in this bill.

The bill contains four schedules. Schedule 1 introduces a new concept into tax law, the notion of a 'significant global entity', which will potentially capture up to 1,000 companies with annual income of over A$1 billion. Schedule 2 amends the existing anti-avoidance provision to counter instances where multinational firms use artificial arrangements to avoid paying corporate tax in Australia. Schedule 3 doubles the maximum penalties for firms involved in tax avoidance and profit-shifting scams. Those stronger penalties will not apply where the taxpayer has a reasonably arguable position. Schedule 4 implements the OECD's action plan on transfer-pricing documentation and country-by-country reporting.

Labor notes that this multinational tax bill takes an untested approach to corporate tax. There is no precedent for this approach anywhere in the world, and indeed not even the Australian Treasury can say how much revenue it will bring in. It remains to be seen if this bill will protect even one dollar of Australian tax. The bill has its genesis in an initial thought bubble from the member for North Sydney. Last year the British government announced it would adopt a diverted profits tax, commonly known as the 'Google tax', and the member for North Sydney latched onto that approach. When it was pointed out that Australia already has anti-avoidance laws and that there are significant limitations with the British approach, including the fact that it may well breach a whole raft of European union and international tax treaties, the member for North Sydney dropped that idea. It remains to be seen whether the British 'Google tax' is enforceable or effective. There has not been one single case brought under it so far.

Following that flipping and flopping over the question of an Australian 'Google tax', the member for North Sydney released an exposure draft of this bill. That exposure draft, though, was heavily criticised by various outside groups. The Law Council of Australia stated, 'The bill should not be enacted in its current form.' So what we are debating today is the third attempt by the Abbott-Turnbull government to come up with a viable plan to tackle multinational tax avoidance—from the thought bubble of the 'Google tax', to the exposure draft, to the current bill. The new Treasurer must be hoping this is third time lucky. He cannot, unfortunately, say how much revenue will be protected by this package, because the Treasury has been unable to cost it.

If one looks at Budget Paper No. 2, page 14, there should be revenue estimates sitting next to this bill, but there are not; there are a set of asterisks. Just a handful of asterisks represent the revenue that should be added to the budget bottom line by a good multinational tax package. One can see the situation immediately by just imagining what would happen if the boot were on the other foot, if I were walking in here today and announcing on behalf of Bill Shorten's Labor opposition a tough multinational tax plan from Labor that would raise an unspecified amount of revenue. Commentators would rightly laugh at such a package, and that is the approach that many commentators ought to take in the case of the government's package. We will give the government the benefit of the doubt. We will pass this bill, because we believe that protecting Australia's revenue base is too important to let politics get in the way.

I should note that, while we were in opposition, the other side of the chamber did not give Labor the same constructive bipartisanship support in our efforts to stop multinational profit-shifting and crack down on tax avoidance loopholes. When we brought forward the Tax Laws Amendment (Countering Tax Avoidance and Multinational Profit Shifting) Bill 2013, which plugged loopholes in Australia's transfer-pricing rules and anti-avoidance rules, members opposite voted against it. When we introduced the Tax Laws Amendment (Cross-Border Transfer Pricing) Bill (No. 1) 2012, which cracked down on companies overvaluing assets in offshore jurisdictions, the coalition members voted against it. When we amended the Taxation Administration Act to bring better tax transparency and ensure huge companies are held accountable for their contribution to Australia, members opposite voted against it. And, what is worse, last Thursday the government rammed through the Senate changes that have gutted Australia's tax transparency laws, taking around half of the affected companies out of the tax transparency net, pushing the dial towards secrecy and away from transparency. It is the wrong approach at a time when we need more sunlight, not less. The Abbott-Turnbull government has put a cloak of secrecy over the tax affairs of private companies earning more than $100 million a year. It has now ensured that Australians cannot have an open and informed discussion about how much tax big private companies really pay.

Labor introduced tax transparency in 2013 because we know that scrutiny and openness help make sure that everyone pays their fair share. Without transparency, dodgy dealings can flourish in the dark. We had evidence that around a fifth of those companies who are affected, who have been taken out of the tax transparency net, paid no tax last year. Labor has consistently fought the government's efforts to gut tax transparency. No party has argued longer or louder to keep transparency in place and make all companies with total income over $100 million publish what they pay. We took the lead in addressing multinational tax avoidance when we were in office and we have continued to take that lead from opposition. We remain the only political party in this parliament which has a carefully costed plan that adds significant revenue to the budget bottom line in the area of multinational tax avoidance. That plan was announced in March this year—the first time since the early 1990s that an opposition has put forward a costed, significant revenue package in the first half of the parliamentary term. We have consistently argued that our package delivered in concert with the full implementation of the OECD's multinational base erosion and profit-shifting action plan would get our tax rules right for the future.

Labor's plan has several parts. First, we propose revising the current thin capitalisation rules to reduce the amount of debt that companies can claim deductions for in Australia. Companies will no longer be able to automatically claim deductions, up to a 60 per cent debt-to-assets ratio, for their Australian operations. Second, we propose to better align Australia's rules on hybrid entities and instruments with tax laws in other countries. Hybrid instruments are often classified differently around the world. Some jurisdictions treat the assets as equity, others as debt.

Standardising the rules reduces the opportunity for companies to double-dip and claim tax exemptions in one country and tax deductions in another. I am yet to meet a tax expert who thinks it reasonable that while tax advisers can look at how an international jurisdiction treats a hybrid instrument the ATO has not been able to do the same thing. While pursuing those reforms, Labor will invest new resources in the Australian Taxation Office. After big budget cuts under the Abbott government Labor will ensure that the tax office has the resources it needs to identify and investigate multinational profit shifting.

The thing about Labor's changes is they can be implemented alongside the changes in this bill. That is because this bill fails to address the practice of companies loading debt into Australia to artificially inflate their tax deductions. Even as the government is cracking down on GST compliance for small businesses they are turning a blind eye to how some of the world's biggest firms are using deductions. We do know, from things like the PwC Lux Leaks, that some big companies are transferring money into their Australian arms and dressing it up as a loan, even though it is really just shifting resources from one pocket to another. In paying back those artificial loans companies are, effectively, sending the profits offshore by pocketing a tax deduction in Australia.

We know that the problem of debt deductions is a real one, and that is the problem that Labor's package zeros in on. At the present, there are three debt-deduction rules but only one of those debt-deduction rules has good economic rigour behind it. Labor's proposal is to remove the two debt-deduction rules that lack sound economic grounding and keep the one that has it. It is a worldwide gearing ratio approach, which allows companies to claim deductions against the average amount of debt they owe to banks around the world.

The worldwide gearing ratio is simple, in concept. If a company owes a lot of debt to the banks it can claim a lot of tax deductions but, if it does not owe the banks a cent, if all its debts are opaque internal loans at high-interest cost to offshore subsidiaries, then, no longer can a claim be the basis for debt deductions in Australia. We have to remember that every time we support a tax loophole that is a higher amount of tax other taxpayers need to pay. Importantly, the worldwide gearing ratio is already in the Australian tax law, so no-one can argue that what Labor is proposing is untested or unproven. Accountants for any large firm have, surely, already tested their firm's position against the three debt-deduction rules, so they will know their position under the worldwide gearing ratio.

I was surprised that under the member for Warringah and the member for North Sydney our $7 billion multinational tax plan was rejected out of hand. The cries of doom and disaster rang hollow to the many Australians who are unable to set up offshore entities in which they are able to claim debt deductions. I would urge the member for Wentworth and the member for Cook not to make the mistake of their predecessors, to look seriously at the Labor tax plan and to work constructively so that we can add to the budget bottom line, as this bill does not.

Australia needs a tax system that rewards the productive, the innovative, the resilient, the clever and the competitive. We do not need a tax system that rewards those willing to push the envelope the furthest. Loopholes in our tax system function a bit like the old-fashioned tariffs in the era of protection all round. McEwenism was grounded in special-interest pleading. The result was that others had to pay more. That is the way a tax system with loopholes operates.

Because Australia is an importer of capital, it needs investment from overseas. I spoke in the last sittings of parliament about the benefits of foreign investment for the Australian economy. We need firms to invest in Australia because they think Australia is a good deal, not because they think they can get a tax advantage from the Australian government. We need a plan that leverages the ingenuity of the Australian workforce to the strength of Australia's institutions and the quality of Australia's infrastructure. Our plan for winning investment from the world should be grounded on our fundamentals, not on having a tax boondoggle for big companies that lacks sound economic rationale. While the government attacks Labor's tax policy, it is attacking the only multinational tax plan that has been proposed, in this parliament, that will add to the budget bottom line.

We cannot let this bill mark the end of the government's efforts on multinational tax. In recent weeks the OECD handed down its final set of deliverables for its base erosion and profit-shifting action plan. This plan has been more than two years in the making and lays out a comprehensive 15-point agenda to close the loopholes that have opened up in the tax net due to changing technology and an increasingly global business environment.

The 15 items in the action plan tackle everything from the taxation of intangible goods to hybrid instrument rules and the creation of a multilateral tax instrument to allow more rapid coordination of rules between OECD countries in the future. Australia is making progress in some of these areas—for example, in the effort to extend the GST to digital downloads, which was supported by both Labor and Liberal state and territory governments. But there is still a lot of work to do.

The Treasurer now has the OECD's blueprint and, with it, the chance to take positive, practical steps to fix more of the loopholes in our tax system. Yes, Australia should move with the OECD but now that the OECD's plan is on the table there should not be excuses and delays. Billions of dollars in tax revenue are at stake and Labor's plan tackles those loopholes in a constructive way, which is consistent with the principles of the OECD.

At next month's summit in Turkey, G20 leaders will decide on a time line for implementing the plan. The Prime Minister should push for its rapid and complete implementation and stand firm against efforts to water it down or delay it. If the Prime Minister comes home from Turkey with anything less than a clear commitment and time table for delivering the OECD's tax plan, it will show that nothing has changed in the Abbott-Turnbull government and that it remains a government that is tough with the weak but weak when it comes to the strong.

With this bill, Labor is demonstrating our willingness to work constructively with the government to tighten Australia's tax net. We would like to see the government do the same by focusing on Labor's tax package. If they would like briefings on any detail of Labor's tax package, our door is open. I am happy to sit down with members opposite to talk about how to make our tax system fairer and to make sure that we do not have loopholes and boondoggles left open in the tax net. For all their complaints about debt and deficits, we have seen the doubling of the budget deficit under this government. We have seen net debt projected to peak at around 13 per cent in the Pre-Election Economic and Fiscal Outlook; it is now projected to go to 18 per cent under this government.

If the Abbott-Turnbull government is really serious about closing the gap between taxation and spending, then they will work constructively with Labor. They will work constructively and engage with our tax plan, and add $7 billion to the budget bottom line over the next decade. I hope that the government will take up this offer, contribute to the budget bottom line with more than fine rhetoric and contribute real dollars.

Craig Kelly (Hughes, Liberal Party) Share this | Link to this | Hansard source

Is the amendment seconded?

Brendan O'Connor (Gorton, Australian Labor Party, Shadow Minister for Employment and Workplace Relations) Share this | Link to this | Hansard source

I second the amendment.

Craig Kelly (Hughes, Liberal Party) Share this | Link to this | Hansard source

The original question was that this bill be now read a second time. To this, the honourable member for Fraser has moved as an amendment that all words after 'That' be omitted with a view to substituting other words. The question now is that the amendment be agreed to.

Andrew Nikolic (Bass, Liberal Party) Share this | Link to this | Hansard source

I always listen with interest when the member for Fraser is speaking; but at the end of his contribution I heard him speak about debt and deficit, which is dangerous ground for the members opposite, given that when we came to government debt was on a trajectory to $667 billion a day, our country was borrowing hundreds of millions of dollars each week more than it was earning in revenue and we had spent the legacy that had been bestowed by the Howard government at the end of 2007.

Nevertheless, I appreciate the opportunity to contribute to the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. That is because the issue of multinational tax avoidance is one that hurts every country regardless of its size or the nature of its economy. Without fair and appropriate tax revenue, no government can progress its agenda or provide the wide array of services that matter most to its people and which are amongst the hallmarks of a civilised society. These services include health, education, employment services, social security, research and development funding, defence and national security. Each of these, and a myriad of others, are both vital and expensive. Inevitably, too, they occupy the heartland of tax and tax related reform.

In Australia's case, the issue of fair tax revenue is made even more important, even acutely so, by declining revenue from the most recent resources boom. Over the last decade or so, this boom has provided strong, reliable income for many Australian companies, delivering significant tax revenue to government. It is vitally important that a fair share of tax is paid on income earned.

Let me be very clear about this: those who, by whatever means, seek to avoid their taxation responsibilities are an unacceptable drain on our society. Those engaging in such behaviour are all too often short sighted. This is because, in an often futile effort to advantage themselves, they inevitably short change their own future opportunities and, on the balance of probabilities, will likely be caught anyway by a raft of increasingly sophisticated measures, technologies and ever tightening legislation, of which this bill represents a current case in point. When—rather than if—such individuals or organisations are identified, they will be appropriately dealt with by our laws. A wide range of penalties may be imposed, including those of a financial and punitive nature.

But let me start with a rhetorical question of sorts: where does this bill sit in the hierarchy of modern tax reform? It is, of course, not the be-all and end-all of tax control, legislation and/or reform, nor will it be the last such reform to warrant wide consideration, discussion and action in this House and in the Senate. But, nevertheless, it does constitute an important step in compelling large profit-making entities in Australia and further afield to pay their way and to contribute fairly to the betterment of the lives of all Australians.

I would like to provide a grassroots view of this matter, which strikes to the heart of why this bill is important, the extent of the community feeling it arouses and the way in which it reflects and may even assuage strong community sentiment. Each of us in this House is privileged to represent a unique part of the Australian federation. While each of our electorates is very different, I would hazard to say that they do have at least three things in common. This is the common ground of financial livelihood, a reality felt keenly in and across each and every Australian electorate from north to south and east to west.

First, each of our electorates is populated by a majority of people who might well describe themselves as being average, everyday Australians. They would also likely say that they are doing their level best to improve their family's lot in life. This means keeping the most of what they earn to expend on their cost of living. Second, many of these Australians tell me that alleviating cost-of-living pressure is their key concern. I hear this all the time in calls, emails, survey responses and other encounters. It is a very strong message that everything seems to be getting more expensive everywhere. Third, again to a person, most would refer to their tax burden as being too high, particularly for those being paid average wages. The system of tax must address the conduct of those individuals and companies who try to avoid paying their fair share of tax. If anyone doubts these observations, come and join me in Launceston, Scottsdale, George Town or any number of beautiful places in my electorate of Bass, and we can start a discussion along these lines. These views will be put often and often very forcefully.

This then is the overarching intent and point of this bill. It seeks to inject greater fairness back into the system, so that those who can most afford it are no longer afforded the dubious luxury of evading their tax responsibilities. To put it another way, it means that the future tax base will not be disproportionately borne by the mass of those who can least afford to do so. This is putting the fair fiscal go back into what it means to be an Australian.

To those who might say that this reform is late in coming, I would simply say that the issue of tax reform, like most other public policy or even life itself for that matter, remains a continual and often dynamic work in progress. To this end, this bill represents a constructive reform for all Australians. By its passage, it will exert a material impact on the schools, hospitals and other public facilities and infrastructure of the 21st century for all Australians.

In introducing further facets to this bill, the government has in fact employed a pragmatic carrot-and-stick approach. The carrot derives from the enhanced clarity which will be afforded through the introduction of new OECD standards on transfer pricing documentation and country-by-country reporting. Of course, the stick relates to the introduction of larger penalties for profit shifting and tax avoidance. Without the dual and complementary elements of this carrot-and-stick approach, it is unlikely that the desired rate of compliance would be achieved.

Allow me now to make a few additional observations about each of these carrot-and-stick measures. The issue of country-by-country reporting is a key plank in reducing and even closing existing opportunity for large multinationals operating in Australia to evade their tax responsibilities to this Commonwealth. The key weapon being used here is that of clarity, borne of the future lawful requirement for relevant high-earning multinationals to report annually by way of a statement to the tax commissioner with key information sufficient to enable that statutory officeholder to carry out transfer-pricing risk assessments. This information will likely include some or all of the following three key elements: first, a country-by-country report containing information on the location of the economic activity undertaken by that multinational group; secondly, a master file which provides a high-level description of the multinational group's business operations; and, thirdly, a local file describing the Australian entity's, operations and cross-border related party transactions.

The absence of such annual information until now has in effect supported the ability of large entities to evade, at least in part, their fiscal responsibilities to Australia and its overall common good. In turn, the combination of both the omission of such a reporting requirement together with the natural tendency of large corporates of every kind and nationality to seek to maximise profit has cost Australia and its people significant revenue flow, shifting the tax burden elsewhere. In retrospect, such financial losses are significant, regrettable and even amoral. Accordingly, closing the administrative reporting shortfall that allowed them to occur in the first place does this government and this parliament much credit.

The government's adoption of the OECD's country-by-country reporting standards, starting after 1 January 2016, requires multinational companies to provide the ATO with a much more comprehensive picture of their worldwide operations, including subsidiaries wherever they are located. The new transfer-pricing documents will show the revenue, profit, tax paid and the numbers of employees in each country the multinational operates in. The ATO can then use this information to assess the risk more effectively.

In addition to the future regime of the reporting just described, the other edge of this government's weapon against such revenue loss is punitive in nature; it enforces compliance. These amendments double the maximum administrative penalties for large companies that are found to have entered or to have engaged in tax avoidance or profit-shifting schemes. These increased penalties apply only to companies with annual global revenue exceeding $1 billion and that do not adopt a tax position that is reasonably arguable. Judgements about whether or not a multinational has a reasonably arguable position about a related party transaction turns on factors like whether the transaction is a genuine arm's length price and whether appropriate processes were followed.

It is worth nothing that multinationals with revenue over $1 billion covers around 90 per cent of all multinationals' revenue in Australia which will be subject to the stronger anti-avoidance rule. This will capture artificial or contrived arrangements that are designed to avoid a taxable presence in Australia. We expect this new rule will apply to approximately 30 large multinationals. It is anticipated that significant diverted profits will be brought back into the Australian tax net. In so doing, the government, through this bill, seeks only to be fair and to achieve an equitable state of balance. This is a balance between the need to curb multinational tax avoidance whilst also continuing to encourage multinational business activity in Australia. Future business activity by multinationals will continue in so many ways to stimulate and support our economy, including, not least, the provision of employment opportunities, which are themselves the source of individual tax revenue.

It is worth noting that, in addition to the government's multinational tax avoidance agenda, we are also moving on other fronts to boost compliance. That includes efforts to ensure a level playing field for domestic suppliers of intangible services like movie downloads, which the member for Fraser mentioned, where we are applying the GST to digital services sold into Australia from offshore. This is expected to raise $350 million over the forward estimates—all of which goes to the states. This measure complements the work being done through the OECD and the introduction of similar rules in a range of countries, including Japan, South Korea and EU member states.

I also highlight the announcement in this year's budget that $128 million will be allocated to establish a new interagency task force to tackle serious financial crime. Agencies involved in this effort include the Australian Crime Commission, the Australian Federal Police, ASIC and the ATO.

In conclusion, allow me to reiterate to the House the importance of this bill, which is aimed largely at securing the lifeblood of Commonwealth expenditure for the future wellbeing and benefit of all Australians. This lifeblood is in fact the 'common wealth' of the Commonwealth of Australia. As such, it is only right and proper that every reasonable and prudent step be taken to garner and protect it now and in the future. I commend the bill to the House.

Kelvin Thomson (Wills, Australian Labor Party) Share this | Link to this | Hansard source

I am pleased to speak to support the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015 and also the amendment moved by Dr Leigh. The Labor opposition supports this bill. Before any government puts the tax bite on students, pensioners or the unemployed, it should make sure that multinational corporations are paying their fair share of tax.

The Tax Justice Network have revealed a lot of detail about this issue. For example, they have revealed how Volcafe, the world's second largest raw coffee trader, with a market share of 13 per cent, managed to minimise the tax it paid through the use of the tax haven of Jersey in the English Channel. It would buy coffee from small cooperatives in developing countries at the world market price and then sell the coffee beans to its own subsidiary, Cofina, at a similar price. In that way it made next to no profit in the developing countries and paid almost no tax to the governments of the developing countries it operated in, cheating them out of much-needed tax revenue. Cofina then sold the coffee beans to the final customers, such as Nestle or Starbucks. The money from the sale flowed into Jersey, where Cofina paid no tax on it. In 1998 Cofina sold US$408 million worth of coffee yet only made a gross profit of US$27 million. It was a post-box company with only one or two administrative staff. The coffee beans themselves travelled directly from the developing country to the final customer in the developed world. They never passed through Jersey. The company documents showed that the firm went out of its way to keep everything top secret, with Volcafe employees told to identify themselves as Cofina staff even though they were not.

This demonstrates the way in which this is a worldwide problem. I met with representatives of the Micah Challenge in Canberra in June last year and again just last week as part of their Voices for Justice campaign. I was briefed about the problems of tax evasion by multinational corporations, which deprived developing countries, on a significant scale, of vital revenue for poverty reduction and sustainable human development. Christian Aid has pointed out that, since 2008, developing countries have lost more than US$160 billion through multinational corporate tax evasion. This amount is actually bigger than the amount that these countries receive in aid, which amounted to US$120 billion in 2009. I want to congratulate Micah Challenge on their commitments to the world's poor and their ongoing commitment in raising these issues.

One of the main ways tax evasion occurs is through transfer pricing, which is when goods and services are sold between subsidiaries of the same parent company. These goods and services include things like intellectual property rights, management services, branding and insurance. The sales take place within the same multinational company. As long as the subsidiaries of the company charge each other a fair market price—known as an arm's length price—such transactions are perfectly legitimate. Tax is paid where it should be: the place where the business is actually taking place. However, by artificially altering the price, a company can increase its costs in a location with high taxes and transfer revenue to a location with low taxes—often a tax haven. This is known as transfer mispricing.

With 60 per cent of the world's trade now taking place within rather than between multinational corporations, there are substantial opportunities to manipulate transactions to reduce tax. This is especially the case for things like brands and management services. To detect if a company is distorting the price of a particular good, you can compare it with the normal price of the good traded between two unrelated companies. But, when it comes to things like branding rights and management services, it is much harder to determine if the price being charged is a fair one. It has been estimated that Australia lost 1.1 billion euros through transfer mispricing to the EU between 2005 and 2007 and US$1½ billion in tax revenue through transfer mispricing to the US in the same period.

This is not just happening in Australia; it is happening right around the world. In 2007 Bangladesh lost an estimated US$172 million in tax revenue as a result of trade mispricing of transactions with the EU and the US. Most of these losses occurred in the knitting and crocheting apparel industry. The Bangladesh government had invested technical and financial resources to facilitate the growth of this industry, yet lost out on much-needed tax revenue. Micah Challenge believes that the government should require all multinational corporations registered in Australia to provide a worldwide combined report, including a country-by-country breakdown of their assets and their tax paid, and that we should have the G20 adopt this country-by-country reporting as standard.

The issue of multinational profit shifting is about fairly sharing the revenue burden. When a handful of big businesses shift their profits offshore, it hits the federal budget's bottom line and, when a small number of big firms do the wrong thing, it is the great majority of businesses, large and small, the self-employed and the pay-as-you-go taxpayers who end up paying more than they should. We do not need that kind of harmful economic activity which encourages firms to focus their energies on getting their accountants to play with loopholes that might allow debt-shifting within organisations, not in order to improve the productive capacity of the economy but in order to find the next loophole in the tax system.

We need to pay attention to the problem of financial inequality, which has been rising in recent times. A report in June last year called Advance Australia Fair? What to do about growing inequality in Australia, written by Bob Douglas, Sharon Friel, Richard Denniss and David Morawetz, found:

In the wake of a declining resources boom, there is a growing gulf between those in the top range and those in the lower ranges of wealth and income distributions.

That report warned that:

Inequality is increasing rapidly in Australia … and poses dangers to community wellbeing, health, social stability, sustainable growth and long-term prosperity.

Given that, we should not be giving away money to firms with multibillion dollar profits while taking money away from those who can least afford it. Australia's egalitarian values demand that we have a smarter approach on multinational profit-shifting.

The union United Voice, in collaboration with the Tax Justice Network Australia, released in September last year a groundbreaking report Who pays for our common wealth? Tax practices of the ASX 200. It revealed that 29 per cent of Australia's 200 largest listed companies pay an effective corporate tax rate of 10 per cent or less and that 14 per cent have an effective tax rate of zero per cent. This translates into an estimated loss in annual revenue of $8.4 billion, which is a matter of very considerable concern.

In 2013, 57 per cent of ASX 200 companies disclosed subsidiaries in tax havens. This figure could be higher as reporting is not mandatory. As Dr Mark Zirnsak, from the Tax Justice Network Australia, says:

The frequent use of subsidiaries in secrecy jurisdictions in combination with the shifting of debt and profits is resulting in lost tax revenue in Australia and overseas where it should be paying for essential services to help lift people out of poverty. Last financial year a massive $47 billion flowed from Australia to secrecy jurisdictions.

An internal Australian Taxation Office memo obtained under freedom of information and reported by Heath Aston in The Age in April said 10 companies had channelled a combined total of over $31 billion from Australia to Singapore in the 2011-212 financial year. An energy company operating in Australia transferred more than $11 billion to the low-tax jurisdiction of Singapore in that year. In the same year, an estimated $60 billion in so-called 'related party' transactions went from Australia to tax havens. Energy companies have established marketing hubs in Singapore, but their principal purpose appears to be as a destination to shift profits in order to pay less tax.

BHP and Rio Tinto reported $2.6 billion a year in profits in their Singapore marketing hubs, where tax rates are as low as 2½ per cent. These arrangements save the two companies more than $750 million a year in Australian tax. In 2005, the Singapore government registered a new company called BHP Billiton AG Singapore Branch and granted it Pioneer Service Company status, meaning it pays no income tax at all until 2020. Rio Tinto set up a string of Singapore companies in 2007 which were given development and expansion incentive status by the Singapore government, meaning they would only pay five per cent tax until 2022. It is deeply ironic that this blatant tax avoidance was going on at the very time the mining industry spending over $20 million, including $17 million from the Minerals Council, on advertising campaigning against Labor's Resources Super Profits Tax and making claims about how much tax they paid.

Large multinational companies have also used other devices to avoid Australian tax. Chevron Oil has been raising debt in the US at two per cent and lending the money to their Australian arm at nine per cent, with the interest payments cutting its Australian taxable income. US tech giant Apple has an Irish marketing arm, Apple Sales International, which takes ownership of Apple products manufactured in China while they are on the boat to Australia and Europe, adding a huge mark-up and reselling them to local Apple retailers before they reach port. It is a rort and we should not allow it.

The 2014-15 federal budget eliminated some 3,000 jobs in the Australian Taxation Office. Things like this greatly reduce the tax office's capacity to fight tax evasion by wealthy individuals and multinational corporations. Regrettably, what happens is that the employees who accept redundancies and leave are the ones the ATO can least afford to lose. Even worse, some accept private sector offers which see them put their skills an experience into increasing the budget deficit rather than reducing it. We should tackle debt shifting, close tax loopholes and resource the tax office properly to tackle artificial and contrived business structures. The tax office could help its own caused by revealing details of the worst corporate practitioners of tax avoidance. Taxpayer privacy for individuals is of course legitimate, but large corporations cannot make those same claims with a straight face. They are required to report much of their financial affairs to their shareholders and to the market already.

Michael West, writing in The Age, has drawn attention to the low visibility of the financial statements of foreign multinationals operating in Australia. He says that viewing the statements of a foreign multinational is expensive and not very informative. He says:

While proper audit procedures are in place in the sphere of ASX companies, there is a widespread failure of the audit profession and regulators in the foreign multinational space: accounts which don't stack up, myriad failures of disclosure, and a slew of failures to adhere to Australian accounting standards—and therefore the Corporations Act.

We need to have greater scrutiny in this area. We need to make sure that parliamentary committees like the Senate Economics References Committee hear from the real decision makers and make them account for their decisions. I think our parliamentary committees should make a point of explaining and examining the real decision makers.

A Labor government will shut down loopholes which allow big multinational companies to send profits overseas, ensuring that they pay their fair share of tax. According to the Parliamentary Budget Office, our plan will bring at least $1.9 billion back to Australia in tax from big multinationals over the next four years and raise $7.2 billion over 10 years as these tax loopholes are closed. This is the sort of approach we need. We need improved transparency and data matching, and we need a genuine commitment to tackling tax.

It is regrettable that the government has walked away from some of the tax transparency legislation which Labor passed in 2013. Without greater transparency, Australians will never know whether major corporations are paying their fair share of tax and, at a time when the government is talking about hitting low-income Australians by jacking up the GST, it is right to look closely at whether all taxpayers are making a fair contribution. Gutting tax transparency is the wrong move. Labor is supporting this multinational tax bill through the parliament. We believe that tackling tax avoidance and protecting Australia's revenue base should be above politics. Under the former Prime Minister and the former Treasurer, the Liberals rejected our $7.2 billion multinational tax plan out of hand. They pursued tax transparency rollback, because it is popular with their mates, rather than for any sound public policy reason.

I hope that the new Prime Minister and the new Treasurer do not make these same mistakes. With this bill we are demonstrating our willingness to work constructively with the government to tighten Australia's tax net. By way of response, I hope that the government does the same by taking up our $7.2 billion tax package and abandoning their attempts to gut Australia's tax transparency laws.

Eric Hutchinson (Lyons, Liberal Party) Share this | Link to this | Hansard source

I rise in support of the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. Indeed, this was Australia's legacy in the presidency of the G20, in 2014. Australia led progress on the OECD's base erosion and profit-shifting action plan for ensuring multinationals do pay their fair share of tax. It was under former Treasury Hockey's leadership that the G20 delivered the first tranche of recommendations to address multinational tax avoidance. Of all the issues raised by members of parliament from time to time, in terms of multi-partisanship, of broad and wide-ranging support, I think this is absolutely morally the right thing for government to be doing. It is an important issue in the eyes of many people right across our country, including in my electorate of Lyons, that corporates, particularly multinationals, pay their share of tax. As has been highlighted here today, mums and dads, families, individuals and small businesses all pay their share and have much less capacity to be able to put in place sometimes very complex arrangements to avoid paying what should rightly be paid. There is a range of different taxes, from income tax, to company tax, to the GST and to various state based taxes. It is right and proper that multinationals profiting in Australia are paying their fair share of taxes.

In this country we already have some of the strongest taxation integrity rules in the world, but we as a government are determined to make these rules stronger. That is why with this bill we are delivering on an election promise to set regulations in place to combat multinational tax avoidance.

What is also proper about this bill is that it enables a discussion to take place—one that often comes up from below the surface—about whether or not some multinationals avoid paying taxes on profits made in Australia to take place. If that is the case, it is simply right and proper that we do something about it. The public expects us to do that, because it undermines the public's faith in the tax system and leaves families and small businesses to unfairly carry the taxation burden.

Some multinationals are artificially structuring to avoid paying tax in our country, by booking offshore their revenue from Australian sales and profits. This means that they have an unfair advantage when it comes to Australian based businesses, often family businesses, sometimes small businesses and certainly Australian based corporates, with whom they are competing on an uneven playing field.

The new multinational anti-avoidance law will allow the Commissioner of Taxation to treat these large multinationals as though they have a taxable presence in Australia and are subject to Australian tax of profits generated locally. I think this is the right thing and a good thing for our country.

Country by country reporting is also part of this package, which will increase penalties—in fact it will double them—for those engaging in tax avoidance and profit shifting. The reporting will include identifying tax paid in every country in which they operate. Information is then shared with other tax authorities, and vice versa.

The government is also consulting on rules targeting hybrid mismatches, as well as taking action on harmful tax practices and treaty abuse rules. A voluntary transparency code that will be introduced by May next year will enhance public confidence in the taxation system and will provide better community understanding of the tax affairs of large companies, particularly multinationals. The Australian Taxation Office will have unprecedented resources to deal with international tax avoidance, with the government providing an extra $87.6 million to the ATO over three years to investigate tax avoidance, and act where appropriate.

The program so far has raised more than $400 million in tax liabilities, and it is estimated it will raise more than $1 billion in total. The tax office has identified around 30 companies to whom this law would likely apply. The revenue these big multinationals are earning in Australia is expected to be in the billions of dollars. They are being targeted because it is these companies that, through offshore activities, have the greatest opportunity to avoid paying tax, and they represent the highest risk to Australia's tax base.

The new law should not have an impact on Australian based businesses, because they are already taxed here in Australia and there are appropriate mechanisms by which they are checked, and the checks and balances apply to the payment of the appropriate amount of tax that is due.

This law focuses, absolutely and unapologetically, on foreign multinationals who are avoiding Australian taxation by booking their revenue overseas. The government has been working closely with academics, tax professionals and the business community for the past two years on the OECD's profit-shifting agenda. This new law was also released for public consultation on budget night. We have consulted with stakeholders such as business, tax practitioners and the Australian Taxation Office to develop the legislation to ensure that the law will not have unintended consequences. This is aimed at targeting only the most complex schemes. Multinationals who are not artificially structuring to avoid paying taxes will not be impacted. Multinationals with annual global revenue of over $1 billion will need to consider whether they fall within this new law. Stronger penalties will apply, as I mentioned before, to those corporate entities that are found to be in breach of this rule. In fact, the penalties will be doubled for tax avoidance from profit-shifting schemes. It has been shown that deterrence is recognised as a key measure in tackling tax avoidance.

As I touched on, we made commitments in the 2015 budget. This legislation delivers on those but builds even more strongly on those things committed within the budget this year. In particular, the system will be broadened so that all significant global entities with revenues above $1 billion—estimated to be over 1,000 companies—will need to consider these rules. It means that, if you are structuring with a principal purpose of avoiding tax, the ATO will have the tools to catch you and ensure you pay your fair share. By removing the no- or low-tax requirement and relying solely on a principal purpose test, we are sending a clear message that, if you are deliberately and artificially avoiding paying Australian tax, this is simply unacceptable. Removing the 'no or low' requirement will also provide additional certainty and minimise disputes around whether a company operates in a no- or low-tax jurisdiction where it is clearly structured for a purpose of avoiding tax.

Mums and dads, families and hardworking Australians in small business, this legislation is for you. This is about responding to what the community clearly has demanded of us as a government—and, as a local member, I can certainly say that this issue is raised with me wherever I go around my electorate. It is right that we pay a fair share of tax. It is the role of government to fund a whole range of different services, and the priorities of government lie in delivering a welfare system that is a safety net for those Australians who have found themselves in hard times and are unable to support themselves. It is about paying for our infrastructure. It is about paying for our health system and our education system.

A question has been asked of me in recent times: how much revenue is this expected to raise? It is very difficult to estimate that. The revenue that these large multinationals are earning in Australia is expected to be in the billions of dollars, but, as to exactly what the taxation revenue from this measure will be, that will come to pass in time. I have touched before on who will be affected by the new law. The ATO has around 30 multinational companies in mind that could be targeted by this new law. It should not have an impact on Australian based businesses, because they are already taxed within this country. Another question that is asked quite frequently is: will the new law impact negatively on investment by multinationals in Australia? I think we all understand in this place how important foreign investment is to Australia. It has been thus since 1788. We have a big country with a small population, and the importation of capital into this country has benefited our nation and benefited the creation of jobs and opportunities for many Australians. The answer to the question is no. The risk that the targeted multinationals would scale back their Australian operations to minimise tax consequences is low. One other question, I guess, that should be addressed is: does this measure override any other bilateral tax treaties that we have in place? Again, the answer is no.

It is well-considered legislation—and, again, I pay due credit to former Treasurer Hockey and the work that he did in leading the discussion with the other members of the G20 during Australia's time in the role of president. We were able to achieve a result here that I think most Australians will see as a very positive step in the right direction in addressing tax avoidance by multinationals making profits in Australia.

Adam Bandt (Melbourne, Australian Greens) Share this | Link to 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.

Brett Whiteley (Braddon, Liberal Party) Share this | Link to this | Hansard source

I rise today to speak on the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. As Australia competes on the global economic stage, it is absolutely essential that we take steps to ensure companies pay their fair share of tax. The government strongly believes that profits made in Australia should be taxed in Australia. That is why we are taking steps in this bill to implement three budget measures announced in May this year.

Currently, some multinational companies operating in our nation are avoiding paying the correct level of taxation through employing complex profit-shifting schemes. This not only leads to substantial amounts of forgone taxation but also substantially disadvantages our local and small businesses, families and individual enterprises who all pay their fair share.

Today this government is rectifying that disadvantage through strengthening tax compliance measures on multinational corporations with a global turnover of more than $1 billion. Businesses across my electorate of Braddon already compete on the global stage, and I am proud to be part of a government that is levelling the playing field when it comes to paying tax.

The coalition's multinational anti-avoidance law will stop multinationals using complex schemes to avoid paying tax in Australia through booking their revenue overseas. We are empowering our Commissioner of Taxation to treat those multinationals as taxable here in Australia. Our country-by-country reporting implements recommendations from the G20 and will ensure transparency in multinationals' income and tax paid in each country they operate in, greatly enhancing our capacity to chase foregone revenue. Concurrently we are doubling the penalties applying to large companies engaging in tax avoidance or profit shifting. This government remain committed to delivering a fair share of tax back to the Australian people and are delivering on that commitment today.

The coalition government are leading the fight against multinational tax avoidance. It is an issue we pursued as president of the G20 last year. We fought to get it on the agenda of the G20 and are now delivering on our rhetoric in this space. Australia led the global response to tax avoidance and we continue to do so in this bill. This bill is consistent with this government's overall approach to this issue. In 2014 this government, under the previous Treasurer, strengthened our defences against multinational tax avoidance. We have already tightened our thin capitalisation rules, which will substantially limit the scope for multinationals to claim excessive debt reduction. We are also allocating unprecedented resources to the Australian tax office. We have provided an additional $87.6 million to the ATO over three years to investigate international tax avoidance; the program is estimated to have raised $1.1 billion.

Our side of politics is often accused of being run by big business. I echo the recent words of the Prime Minister in categorically refuting that claim. This bill stands testament to the unshakable commitment of the coalition to the Australian business sector. We govern with regard for the national interest, not the interest of some exterior body pulling the strings. That is why we have delivered free trade agreements with Japan, Korea and China. That is why we have delivered the Trans-Pacific Partnership. We are creating growth and jobs through freer markets. Yet, whilst on this side of the chamber we realise the importance of freer markers, we also have the national interest squarely in mind.

This multinational tax avoidance bill delivers on our commitment to the Australian people. It is this government and only this government that can achieve both a broadening and deepening of our market access whilst also setting the economic frameworks that will deliver effective taxation into the 21st century and beyond.

I think it is important to outline how this bill will result in better outcomes for the Australian people. I believe it best achieved in assessing how this legislation will operate once enacted. The coalition is committed to simpler taxes and that is why the process is so simple under this legislation. Under the multinational anti-avoidance law we first establish that a company is a foreign company. We then assess if it has a global revenue of over $1 billion. We then establish if Australian sales have been booked overseas and assess if the principal purpose of the scheme was to avoid tax. If it is found that a foreign large company has been engaging in tax avoidance, they will pay the income tax on profit that should have been booked in Australia, pay interest on unpaid taxes and pay a further 100 per cent of the Australian tax avoided in penalties.

This is a serious solution to a serious problem and will deliver foregone revenue for the Australian taxpayer. This government is taking a responsible and measured stance on multinational tax avoidance in this bill. I am proud to stand against unfair tax avoidance by large multinational companies. I welcome the benefits this bill will bring to Australia and our citizens, and I commend this bill to the House.

Craig Kelly (Hughes, Liberal Party) Share this | Link to this | Hansard source

I am pleased to speak on the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. I would like to start by picking up on a few comments by the member for Fraser, the shadow Assistant Treasurer, when he talked about what Labor believes is the importance of having private companies declare their taxation records and make them public. That simply shows why those who sit on the other side of this chamber are completely unfit for office. They do not understand business. They do not understand the risks that entrepreneurs take to create jobs and to spread wealth in this country.

Firstly, the other side propose a threshold of a $100 million turnover and that once you reach that turnover, even if you are a private company, you have to you make all your taxation records open to the public. Why a $100 million threshold? Why not $95 million, $90 million or $50 million? What guarantee can the Labor Party give that they would not lower that threshold and make all private companies disclose their records?

Think of a company that has a turnover of $90 million. What a disincentive it would be for that company to go out there and expand their sales, expand their market and create new jobs if they knew that once they hit that magic turnover mark of $100 million they would have to make all their taxation records public. It is correct that a public company makes its records public. That is because the public can invest, buy and trade in those shares. That is why the taxation information, sales and profitability of that company need to be public. That is why private companies remain private—so that there taxation records remain between themselves and the taxation department.

The other reason why such records need to be kept confidential is negotiations—something that people on the other side do not understand. If you are firm negotiating with a Coles or Woolworths, the aim of that negotiation for those big buyers is to try to screw as much rebate and margin as they can from you. If you are company that has had to make your profitability records public, that information will be known to the person you are negotiating with. It will put you at a tremendous competitive disadvantage in those negotiations. It would be the same circumstance if you were making an offer to buy a home and the seller of the home was able to get hold of your tax returns to know what your salary was the previous year.

Ian Goodenough (Moore, Liberal Party) Share this | Link to this | Hansard source

It being 1.30 pm the debate is interrupted in accordance with standing order 43. The debate may be resumed at a later hour.