Monday, 8 February 2016
Tax Laws Amendment (Implementation of the Common Reporting Standard) Bill 2015; Second Reading
Labor will seek to amend this bill to bring forward the deadline for reporting company accounts from 2019 to 2018. Australia is a laggard rather than a leader in the Common Reporting Standard. This is an issue which is critical to the fight against multinational profit shifting. It is absolutely vital in the issue of tax enforcement. The work done by Labor through the G20, winning us the presidency of the G20, and work done through the OECD, ensured that Australia was at the vanguard of making a difference on multinational tax avoidance. Yet, since the Abbott-Turnbull government was elected, we have fallen to the back of the pack.
The government proposes that we move to the timetable not of the fastest countries in the world but to that of countries such as Russia. It is deeply disappointing that the government is unwilling to see Australia move on the Common Reporting Standard.
The Common Reporting Standard ensures that, for the first time ever, tax authorities automatically exchange information about the contents of company and individual bank accounts held overseas. Until now, multinational companies and wealthy individuals have often been able to avoid paying tax in one country simply by sending their money offshore so that tax authorities cannot see it. Under the OECD's Common Reporting Standard there will be fewer places to hide.
The former Treasurer had to be dragged kicking and screaming into signing Australia up to the Common Reporting Standard. Now, after finally bringing this bill to parliament, we can see the current Treasurer has further delayed the process, setting the deadline for implementing it way off into the distance. If the government was instead serious about stopping tax revenue continuing to drift offshore, they would ensure that the exchange of information about company accounts starts as soon as possible.
Unlike the government, Labor is not happy to let companies off the hook for another three years. We will move an amendment that will ensure that the exchange of information about company accounts happens in 2018, the same deadline the government set for reporting on individual accounts worth over $1 million.
As has sadly become the habit of the government, no explanation has been given for letting companies avoid scrutiny for another three years. There is no good reason for letting them off the hook for so long. I urge those on the other side of the chamber to support this amendment, as I do our colleagues in the other place.
Let's step back and look at the history of this issue. The Common Reporting Standard was an initiative of the OECD and G20 base erosion profit shifting project. The OECD-G20 BEPS project made a conservative estimate that globally between US$100 billion and US$240 billion every year in revenue is lost through base erosion profit shifting.
Clearly the economic effects of lost revenue are a source of consternation for the rest of the international community. But, beyond the direct economic effects, as Angel Gurria has noted, the continued presence of multinational tax avoidance leads to an erosion of trust in the fairness of tax regimes. It leaves taxpayers across the advanced world to say, 'If multinational firms are not paying their fair share, why should I?'
In 2013 the OECD launched an action plan into these concerns about base erosion and profit shifting. The OECD is hardly antiglobalisation. Indeed, it notes that globalisation 'supports growth, creates jobs, fosters innovation and has lifted millions out of poverty'.
I am a passionate internationalist. But I am also aware that, as national economies have become more globally integrated, so have multinational firms. The global scope of some of the world's largest companies and their increasingly sophisticated tax planning have allowed them to exploit opportunities to minimise their taxes. Governments receive less revenue to fund public services, and domestic taxpayers face a greater burden. It also puts smaller enterprises and companies operating only in domestic markets at a competitive disadvantage.
By implementing the Common Reporting Standard we create a due diligence framework for financial institutions to report to the Commissioner of Taxation about financial accounts held by foreign tax residents. This information will be provided by the commissioner to foreign tax authorities and, in exchange, foreign tax authorities will provide information about Australian tax residents' financial accounts information. This will be an automatic process.
Information exchanges are an important part of a transparent multinational tax regime. So important is information exchange that over 40 countries will begin reporting a year before this government would have Australia do so. Those countries include the UK, South Africa, Iceland and India. Australia is not a laggard because of factors outside our control. Australia would be a laggard because of choices of the Abbott-Turnbull government.
When the group of early-adopter countries laid out their timetable for exchanging information on corporate accounts, they described it as 'ambitious but realistic'. On this side of the House, we believe that combating multinational tax avoidance needs to be ambitious but realistic too. Throughout 2014, Labor repeatedly called on the former Treasurer to join this group of early adopter countries. Australia was conspicuously absent from the list, despite previous consultations with business and the financial sector on implementing these reforms. The government chose to sit on their submissions for months.
The former Treasurer, Treasurer Hockey, finally committed Australia to the Common Reporting Standard in late 2014, alongside all 34 OECD nations. Globally, 96 jurisdictions are now committed.
Under the timetable proposed in this bill, the first exchange of information between Australia and other countries takes place in 2018. That puts Australia behind the majority of signatory countries to the Common Reporting Standard, and aligns us with countries such as the Bahamas, Russia and the United Arab Emirates. In this bill, financial institutions must complete identification and reporting of high-value pre-existing individual accounts by 31 July 2018. They will be required to identify and report on lower-value pre-existing individual accounts by 31 July 2019.
For reasons known only to the government, they have opted to align the deadline for reporting on the accounts of corporations with that of low-value individual accounts. The government's proposed two-stage implementation process lets big companies off the hook until 2019. That is the proposed date of the election after next. While banks will have to report on the accounts held by high-net-worth individuals in 2018, the government is proposing a 2019 deadline for corporate entities. That is not good enough. They have given the Australian community no explanation for this. It suggests that this is hardly a government that is champing at the bit to tighten the global tax net.
Labor does not believe there is any good rationale for delaying reporting on corporate entity accounts by a full year. This information should be provided to the tax authorities as soon as possible. That is why we are moving an amendment on bringing the deadline for reporting on corporate entities into line with that of high-net-worth individuals. It is why I have moved that amendment.
We know that many Senate crossbenchers share our deep concern about big companies avoiding paying their fair share of tax. We would urge these senators to support Labor's amendment and ensure the Common Reporting Standard starts capturing information about companies' bank accounts sooner rather than later.
I would also take this opportunity to flag that we will be talking with our colleagues in the Senate about further possible amendments to increase the transparency of the data provided under the Common Reporting Standard. We believe it may be in the interests of our developing-country neighbours and the tax debate globally for the Australian Taxation Office to publish aggregated, de-identified information about how many accounts and what value holdings foreign nationals have in Australia.
Some of our neighbours have not yet signed up to the Common Reporting Standard. Letting some of our near neighbours in the region see how many of their citizens have financial accounts in Australia may provide an impetus for them to sign up to the Common Reporting Standard.
Labor has long argued that transparency is key to combating tax avoidance—transparency for the public, not just for tax authorities. After all, it is unlikely that the Liberal government would have moved to adopt its recent multinational tax changes at all, were it not for the recent public outcry brought about by the Senate tax inquiry led in particular by Senators Ketter and Dastyari and the disclosure of tax details under Labor's transparency laws for large firms.
You will hear, perhaps, in this debate a suggestion that Labor did not support the government's multinational tax avoidance bill. We did. We announced from the moment it had been mentioned on budget night that we would support it—even though, when you look at the budget papers, there is a series of asterisks where the revenue estimates should be. But, despite the fact that the government could not tell us what it would raise, we said we would support it. The only stipulation we had was that we wanted to make sure that there was transparency as well. Transparency and better laws go together. At a time when the government was attempting to water down transparency, we did not think it was reasonable to have those changes made. So we fought for transparency. We consistently told the government that, so long as they supported the tax transparency laws brought in by Labor in 2013, we were happy to support their uncosted multinational tax bill.
But the government's attempts to let multinational companies put off better scrutiny of their financial affairs through the Common Reporting Standard should not come as any great surprise. It comes on the back of their decision to help firms which have a turnover of over $100 million to hide from tax transparency in 2015. That again shows that the Liberals are not serious about making sure that big companies pay their fair share of tax.
Of course, the government last year needed a hand in helping rich companies keep their tax dealings secret. In a late-night closed-door deal last December, the leader of the Greens and the Treasurer agreed to raise the threshold for tax transparency from $100 million to $200 million, which put the majority of large private firms outside the transparency net—another one of those dirty deals done pretty expensively for the Australian taxpayers, for which the Greens have become famous in Decembers: in 2009 it was killing the CPRS; in 2015 it was winding back tax transparency. With a $100 million threshold, transparency laws would have applied to about 900 private firms, but two-thirds of those large companies are now exempt from transparency laws, thanks to the Greens and the Abbott-Turnbull government.
Despite the Liberals' best efforts, though, the transparency report published by the Australian Taxation Office in December last year did publish the affairs of public companies and it showed why we need to continue taking action at home and overseas to close down loopholes and opportunities for tax avoidance. The tax office report revealed that one in four companies earning over $100 million paid no tax in Australia in 2014—not one dollar. Those are the numbers that the Liberal government did not want you to see. Those were the numbers that show that in the energy and resources sector 57 per cent of multinational firms paid no tax, while in the banking and financial sector the figure was 45 per cent. Australians are quite rightly now looking to these firms to explain why they do not seem to be contributing in the same way that individual taxpayers and hundreds of thousands of small businesses do.
Every dollar that is sent offshore or minimised through a convenient loophole is a dollar that cannot be spent on things that matter, a dollar that has to be raised from other taxpayers. It means that we either have to tax ordinary taxpayers more or things like hospitals, schools and a liveable pension come under sustained attack, as they have been since this government brought down its first budget in 2014.
At the same time as the government is giving large firms an easy ride with higher tax transparency thresholds—or, as is the case today, pushing back the timetable for exchanging information about corporate accounts—the government is actively considering a higher GST. A government that persists in going softly-softly on companies paying their fair share wants to go hard, hard, hard on households by hitting them with a tax on consumption. They will tell you that the Prime Minister has ruled it out. Yet we heard in question time today that the Prime Minister singly failed to rule out a 15 per cent GST. It seems that the only time this government adopts the line 'Go early, go hard and go households' is when it is really going hard on households, when it is thinking about cutting the services that households rely on, cutting back on schools and hospitals or raising taxes on low- and middle-income Australia.
An increase in the GST by 50 per cent would not boost growth. The Japanese economy went into recession after they raised their GST from five per cent to eight per cent in 2014. It would worsen inequality at a time when inequality is at a 75-year high. Affordable housing is increasingly out of the reach of the average Australian household. And, in one generation, earnings for the top tenth have risen three times faster than earnings for the bottom tenth. As NATSEM modelling shows, raising the GST to 15 per cent takes three per cent of the top quintile's disposable income but seven per cent of the bottom quintile's disposable income. In other words, it hits the bottom twice as hard as it hits the top. So, instead of taking the fight to those companies that do not pay their fair share of tax, the government wants to push a consumption tax on low- and middle-income earners that will make the problems even worse. It will not help growth, but it will worsen inequality.
I am sure that, when it suits the member for Cook to have a debate about tax reform, he will tell this House that he cares about multinational tax avoidance, but what he actually cares about and what he actually does are two very different things. When it came time to vote for Labor's sensible changes for multinational tax avoidance in 2013, the member for Wentworth and the member for Cook voted against them. When it came to tax transparency and Labor's changes to keep open tax transparency, the member for Wentworth and the member for Cook voted against them. And when it came time to support Labor's fair and sensible changes to multinational loopholes, changing the debt deduction rules and the rules around hybrid instruments to add $7 billion to the budget bottom line, the member for Cook and the member for Wentworth argued against them. They will not support fair changes that will see fair taxation of multinationals; instead, they want to go hard on households.
This amendment is in exactly the same spirit. It is an opportunity for the member for Wentworth and the member for Cook to show the Australian people that they believe that big companies cannot dodge their tax contributions any longer in Australia. I urge the Treasurer to support an amendment which, in the words of the OECD, is ambitious but realistic. We ought to be able to commit to an ambitious but realistic timetable that takes us with 40 other countries in the world in exchanging tax information and getting a better deal for the Australian taxpayer. If the Treasurer and the Prime Minister are serious about multinational tax avoidance and if they are serious about getting tough on the big end of town, they will support this amendment as the right course of action.
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. If it suits the House, I will state the question in the form that the amendment be agreed to. The question therefore now is that the amendment be agreed to.
The coalition is determined to do what is needed to protect Australia's tax base and ensure that all Australians and all who do business here pay a fair share of tax. Indeed, Australia is leading global efforts to crack down on tax avoidance despite Labor's political scare campaign and their cynical games aimed at opposing, white-anting and frustrating this critical tax reform agenda. I welcome the Tax Laws Amendment (Implementation of the Common Reporting Standard) Bill 2015 as another example of Australia's international leadership in the fight against tax avoidance. Globalisation and other technological advances have made it easier for individuals to hold investments in offshore financial institutions. This increases the opportunity for tax evasion. However, better reporting standards and cooperation between international financial institutions and the tax administrators in other countries will provide a powerful weapon in the fight against cross-border tax avoidance.
In specifically targeting cross-border tax avoidance, a competent, measured, coherent and collaborative approach—one that works in concert with other tax administrations around the world—is required. Importantly, the Common Reporting Standard is an international framework developed by the Organisation for Economic Cooperation and Development, working with non-OECD G20 countries, to tackle and stop cross-border tax evasion. By participating in this international effort, we are enabling the Australian tax office to gather information on Australians who may choose to dishonestly hide foreign income offshore. The standard will build on the ATO's current information exchanges and will require banks to identify and report on the tax residency of customers and their accounts.
Cross-border tax evasion is not a uniquely Australian concern, but it is a global problem that threatens the integrity of our public finances. This undermines community trust in our tax system. Unlike Labor, the coalition are committed to creating a fair tax system that will help our economy become more adaptable and agile while enabling increased diversification. That is why we began a comprehensive review into Australia's tax system through the tax white paper process, a critical part of our plan to reform the economy and provide real opportunities for Australians to work, save and invest.
To achieve this, the government is continuing a tax discussion and review process which promotes a community-wide conversation on how we can create a fair tax system that supports high economic growth, higher living standards and jobs. In aligning these objectives within the purpose of this bill, let me be clear that the additional tax revenue that could result will not by itself wipe away Labor's debt, nor could it possibly fund Labor's big-spending election promises.
However, this reform is not insignificant either. Improved transparency, including the ability to exchange taxpayer information between tax authorities, is critical to improving tax compliance and reducing tax evasion. Total tax liabilities raised as a direct result of exchange of information with Australia's treaty partners was about $255 million for 2014-15.
If Australians and others who live, work and invest in Australia have bank accounts in other countries then the implementation of a common reporting standard, together with better arrangements for the exchange of tax information on request between tax administrations around the world, will give the Australian tax office and other agencies even more capacity to fight tax evasion. This bill is estimated to deliver a small but as yet unquantifiable revenue gain over the forward estimates of up to $10 million over the next two years and larger unquantifiable gains beyond the forward estimates of up to $100 million.
The root causes and symptoms of cross-border tax avoidance are not new, and cross-border tax avoidance is a problem faced by most countries. This means international cooperation and sharing of information between tax authorities is essential to fighting it. In this regard, Australia is leading global efforts to crack down on tax avoidance. This has not happened overnight, nor has it happened by accident. So I was quite incredulous last week when I heard the opposition leader ask the Prime Minister what the government was doing to rein in potential tax evasion by multinational companies. The reality is that when the government introduced an amendment to the taxation laws to combat multinational tax avoidance last year the Labor Party lined up on the same side as the big tax dodgers and voted against it. That is right. Do not listen to what the former speaker said. The Labor Party voted against it. Unlike Labor, the Turnbull government is determined to tackle it in a comprehensive and strategic way.
The coalition is proactively responding to the final reports on the OECD Action Plan on Base Erosion and Profit Shifting, including a new country-by-country reporting regime. As the Prime Minister pointed out, actions speak louder than words. The Turnbull government has already actioned key initiatives to stop multinational tax avoidance which Australia delivered as G20 President, including tough new measures that came into effect from 1 January 2016. Multinationals are now required to report to the Australian Taxation Office their income and tax paid in every country in which they operate. Multinationals who avoid paying their fair share will have to pay back the tax they owe plus interest and also face penalties of up to 100 per cent of the tax owed. In effect, the coalition government pushed forward legislation to give the Australian tax office the 21st century tools to combat ingenious 21st century tax avoidance to collect that money. These measures were legislated and passed through the Senate last year, but, notably, Labor opposed them. For the record, Labor voted against them.
On the problem of cross-border tax avoidance, Labor's track record in government and in opposition has been to quietly shift from long-term ignorance and inaction to speaking loudly, squealing hysterically and achieving precisely 100 per cent of nothing. As I said earlier, a coherent, competent and measured approach to dealing with these concerns, one that works in concert with other tax administrations around the world, is what is required.
In this regard, the G20 leaders endorsed the common reporting standard under Australia's presidency and committed to begin to exchange information from 2017, with information being exchanged by tax offices from 2018. The standard is comprehensive in the different types of investment income to be reported, including interest, dividends and income from certain insurance contracts. On top of this, financial institutions will be required to report account balances and sales proceeds from financial assets. The standard is also comprehensive in the different types of account holders covered, such as individuals and the controlling persons of companies, partnerships and trusts.
To date, more than 95 jurisdictions have committed to implementing the standard, including former tax secrecy jurisdictions, such as Luxembourg, Switzerland, the British Virgin Islands, the Cayman Islands, the Isle of Man, Guernsey and Jersey. While the names of some of these places triggered a madcap response from those opposite last year, a basic lesson in international finance and investment practices is instructive. For those opposite, who were carrying on hysterically last year, let me present the facts again. Most hedge funds have an onshore US based entity and an offshore one so that non-US investors can receive their income without the US withholding tax. Tax is generally only paid once on the earnings of Australians; therefore, the consequence of an Australian investor investing in a managed fund located in the Cayman Islands, for example, is that all of the income paid to that Australian investor is taxed in Australia and this money is paid to the Australian Treasury. Why on earth would Labor want more tax revenue to go to the US instead of coming back to Australia to help pay down the debt they left our country? Why on earth would Labor line up with the big multinational tax dodgers and try and stop the ATO collecting the money we need for schools, for hospitals and for roads?
I note those opposite put the cart before the horse when former Treasurer the member for McMahon announced that Australia would implement the common standard early, even before the timing of the international program was finalised. Those opposite, clearly, are trying to walk on water before they can swim. The reality is that an expedited implementation of the standard before our financial institutions are ready and capable would impose very high compliance costs on them. These costs, invariably, would not be borne by them but would be passed on to Australian consumers. For this reason, Australian financial institutions will be required to implement the standard on 1 July 2017, which is consistent with the time frame agreed to at the G20.
I thank and congratulate the Assistant Minister to the Treasurer for bringing this bill forward now to allow Australia's financial institutions to get ready for the changes all fair-minded taxpayers demand. This bill will help ensure all taxpayers pay their fair share of tax, by providing tax authorities with information on individuals with offshore accounts, regardless of where their financial accounts are located. Importantly, there will be greater voluntary compliance as more taxpayers know that it has just got a whole lot harder to hide funds offshore without the tax office tracking you down. This will improve the integrity of the tax system by rebuilding community confidence in our tax system. I commend the bill to the House.
In seconding the amendment, which would bring forward the tax transparency provisions and the application of the Common Reporting Standard, I think that it is very important that we do talk about what can be done to improve tax transparency and to crack down on tax dodgers in this country. That is why I am so pleased to second this amendment, because, unlike the Turnbull government, my actions are consistent with my words. I say we should crack down on tax dodging, and I want us to crack down on tax dodging. That is why I am seconding this amendment.
If the Turnbull government were going today to arrest its tendency to say one thing and do the other, then it would be voting for this amendment that is before the House today; it would be voting to bring forward the tax transparency obligations under the Common Reporting Standard; and it would be voting to support Labor's amendment, because, unlike the coalition, we are serious about cracking down on tax dodgers. We are serious about saying what we mean and doing what we say—unlike the Turnbull government, headed by a Prime Minister who is Australia's answer to Sir Jeffery Archer, a man who is doing his best to make sure that it is the most important and exciting time in the history of the world to be a tax dodger in Australia!
We have heard coalition speakers get up in this debate and say, 'Oh, Labor didn't vote for our tax bill at the end of last year.' Why would we vote for it? We stand for transparency. We believe in transparency. We believe in cracking down on multinational tax evasion and on tax dodging. That is why in 2013 we introduced greater transparency laws, to ensure that people and companies pay their fair share of tax—like you do, Deputy Speaker Scott, and like every working Australian does in this country. We introduced those measures. What does this government do? This government comes in and says: 'You know what? If you're a firm of $100 million in turnover, you should be exempted from transparency provisions.' What an utterly ridiculous and disgraceful act from this government, which is the best friend that tax dodgers ever had! Why would we vote for that legislation? Why would any sensible member of this place vote for that legislation? Why did the Australian Greens vote to water down tax transparency, one might ask.
In this place, when it comes to making sure that people are paying their fair share of tax, we say and we have always said that transparency matters—that seeing and knowing what companies are paying and what they are doing is very important in ensuring taxation compliance. It is the disinfectant of sunlight that helps the Australian people make sure that people and firms who are making profit here are making their fair contributions to the services on which we all rely—to building roads, to building infrastructure, to paying for health care, to paying for education. We think it is fair that if you do business here then you pay tax here and make a contribution to the Australian community. It is a principle that everyone in this place ought to share. Instead of standing up and grandstanding and instead of standing up and having a go at Labor for having the gall to say that $100 million turnover firms should have transparency obligations, what the coalition should be doing is supporting this amendment, the Labor amendment to improve taxation transparency right now today. They should support this amendment.
I am very pleased that this government is finally getting to the point of passing legislation to implement the Common Reporting Standard. In 2014, Australia was the president of the G20. You could be fooled into not realising this because our Prime Minister was talking about the GP tax at the G20, but most of the world's leading nations were talking about base erosion and profit shifting. There was a strong agenda for base erosion and profit shifting to be combatted and for the international community to work together. I was pleased when the then Treasurer committed Australia to supporting the Common Reporting Standard, but it took another year—a full 12 months—for the exposure draft of the Common Reporting Standard legislation to be released to the Australian public.
It is a shame that Australia has lagged behind the international community when it comes to the implementation of the Common Reporting Standard. I want to say something about why the Common Reporting Standard is so important. In the introduction to its report, which was titled Standard for Automatic Exchange of Financial Information—Common Reporting Standard Report, the OECD said:
As the world becomes increasingly globalised it is becoming easier for all taxpayers to make, hold and manage investments through financial institutions outside of their country of residence. Vast amounts of money are kept offshore and go untaxed to the extent that taxpayers fail to comply with tax obligations in their home jurisdiction. Offshore tax evasion is a serious problem for jurisdictions all over the world, OECD and non-OECD, small and large, developing and developed. Countries have a shared interest in maintaining the integrity of their tax systems. Cooperation between tax administrations is critical in the fight against tax evasion and in protecting the integrity of tax systems. A key aspect of that cooperation is exchange of information.
That is what the report said.
The Common Reporting Standard allows authorities to automatically exchange information about the contents of company and individual bank accounts held overseas. Multinational companies and wealthy individuals have often been able to avoid paying tax in one country simply by sending their money offshore to another jurisdiction so that tax authorities cannot see it, but under the Common Reporting Standard there will be far fewer places to hide. Over 90 countries will now exchange information about what is held in bank accounts in their jurisdictions so that authorities can more accurately assess tax bills and better identify profit-shifting and aggressive tax planning. It is the kind of coordinated, positive outcome that is possible when governments around the world come together and take the challenge of tax avoidance seriously.
Multinational tax evasion is an issue to which this government, the Turnbull government, had to be dragged kicking and screaming. Last year Labor announced a PBO-costed, carefully considered $7.2 billion package of measures to stop multinationals shifting their profits out of Australia and avoiding paying their fair share of tax. We are strongly of the view that there ought to be a commitment to the Common Reporting Standard by this country. We have also indicated that we will support the measures such as they have been from the coalition to crack down on multinational tax evasion now that they have been dragged kicking and screaming to doing so, even though in last year's budget the Treasurer at the time was unable to tell the Australian people how much their own measures would raise, giving us only a serious of asterisks. But, as I have said, that means making sure that companies are paying their fair share of tax through compliance and through transparency. Transparency actually matters. As I have said, it should not be left to law-abiding companies and Australian households to bear all of the tax burden while big firms are shifting their profits overseas and evading their tax obligations.
As well as facing up to tax evasion as an issue for our own budget domestically, we also need to be working with the international community to tackle this global problem because of the impact that it has on developing nations as well. The size of the foreign aid budget internationally is dwarfed by the value of tax that is evaded in developing countries by large corporations. In other words, if large corporations pay their fair share of tax in developing countries then that will assist the world in making sure that those developing countries are able to reach their potential. Those developing countries are missing out on their entitlement to a fair share of taxation revenue and, as a consequence, that obviously means greater demand for aid.
Analysis by one.org shows that at least a trillion dollars each year is being siphoned out of developing countries. It is revenue that could be used in the fight against extreme poverty, disease and hunger. It costs lives and it undermines the efforts of developed countries' aid commitments. The UN Office on Drugs and Crime estimates that every $100 million recovered from tax dodging and corruption could fund full immunisation for four million children, provide water connections for some 250,000 households or fund treatment for over 600,000 people for HIV-AIDS for a full year. In its Shine the Light campaign, Micah Challenge points out that most of the money flowing out of developing countries is not taken by corrupt politicians and dictators but by large multinationals who exploit loopholes in the global tax system to shift their profits away from the countries they operate within in in order to avoid paying tax. While all countries are being robbed of revenue through tax evasion, it is developing countries that suffer the worst. When multinationals and wealthy individuals avoid paying taxes, everyone else has to either pay more tax or go without services. When firms do not pay their fair share, it means that the rest of us suffer; it means the rest of us have to pay more tax than we otherwise would have to, or we have to forgo government provided services.
As I have said, the impact on developing countries is devastating—denying them the need to be self-sufficient and making them dependent on aid and debt. So, putting an end to tax dodging and corruption will help in the fight against global poverty and, as I have said, putting an end to it here will lessen the need to ask households to front up and pay more. This is a government that has been hanging a GST increase out in front of people for months: 'Will they, won't they? Will they, won't they?' We have a Prime Minister in Prime Minister Turnbull who has refused to come clean with the Australian people about the coalition's plans on a price rise on everything or the coalition's plans to extend a GST to health care, food and education fees. We have a Prime Minister who thinks that middle-class households should bear more of a tax burden in order for there to be tax cuts—personal income tax cuts—for the people at the top of the income distribution and for companies. This is the sort of government that is the big firms' best friend. They do not care about the fact that middle-class households would be asked to pay more of a tax burden under an increased GST. They do not care about the fact that small businesses would suffer, not just because of the increased compliance obligation from having to retain more money across more items for GST but also because the customers of those same small businesses are wage earners. If you increase the price on everything for wage earners at the same time as you are mounting an attack on their wages via the attacks on penalty rates then small businesses will suffer because those are their customers.
This is a government that does not care about small business; it is a government that does not care about working people. It is a government that has done everything it possibly can to reduce tax transparency for its mates—the big firms earning $100 million in revenue every year. A firm earning $100 million in revenue should not have an exemption from tax transparency provisions
It certainly should not. The Australian people deserve to know that firms with a turnover of $100 million are paying their fair share of tax—just as you are, Deputy Speaker, and just as every person who is earning a wage. We are all expected to pay fair share of tax. Big firms—firms that turnover $100 million or more and multinational firms—should be expected to pay their fair share as well.
We want the common reporting standard put in place as soon as possible. It is so disappointing that the Abbott and now the Turnbull government has committed us to a timetable which sees Australia lag behind most of the OECD and other advanced economies. More than 40 countries will begin exchanging information in 2017. The group of so-called early adopter nations includes the UK, Argentina, France, Germany, India, Italy and Mexico, as well as many EU members. Over the past two years, Labor has repeatedly called for the Liberal government to sign Australia up to a timetable that matches these early adopter countries.
As I said, it was fantastic at the G20 Finance Ministers' meeting in September 2014, that the then Treasurer committed us to the CRS, but it was a real shame that in the year in which we were the president of the G20, he squibbed the opportunity for Australia to take a leadership role by joining that the early adopters group. Instead, the Turnbull government has dragged its feet in bringing forward this legislation, and Australia will not begin exchanging information with other countries until late 2018. That lines us up with countries like the Bahamas, Russia and the UAE, rather than with the leading G20 nations—hardly the actions of a government that is eager to crack down on multinational tax evasion or to tighten the global tax net.
Worryingly too, the government has proposed a two-stage implementation process that will let big companies off the hook until 2019. While banks will have to report on the accounts held by individuals in 2018, the government is proposing a 2019 deadline for corporate entities. It is not good enough. The government should vote for Labor's amendment today. We do not believe there is any good rationale for delaying reporting on corporate entity accounts by a full year. There should be one reporting deadline, 2018, to ensure this information is available sooner. In moving the amendment to bring the deadline for reporting on corporate entities into line with that of individuals, we know that many of the Senate crossbenchers share our deep concern about big companies avoiding their fair share of tax. The Turnbull government claims to share this concern, but as with every other issue, they say one thing but they do another. Do not listen to what the Turnbull government says, looks at its actions. What are those actions? The government says it is cracking down on tax evasion while at the same time they are weakening transparency for firms with a turnover of $100 million.
We would urge those senators on the crossbenches to support our amendment and urge the Turnbull government to get serious about tax evasion. (Time expired)
I have been on this matter for quite some time. I have been a bit like dog with a bone—a major dog with a bone—on this matter for quite some time and particularly on the way many of these companies structure their affairs which flows through to pricing. I know that the member for Mitchell used to chip me and tease me about some of the things I raised in relation to pricing on software. We have had those discussions previously. It reflected a serious concern that the way in which hardware and software were being priced was in part driven by a recognition that, if that transfer pricing regime between a parent and a subsidiary were conducted in a particular way by recognising taxation arrangements in a specific country, it would be beneficial for the company but detrimental to the country in which the product was sold. I have always had a concern that we in this country have had inflated prices that in part reflect these arrangements.
This is something I have been on about for some time but I also remember the front pages of the Financial Review, when the member for Wentworth was the shadow communications minister. He was getting huge runs in the Financial Review, talking about his concern on how taxation arrangements were being gamed by big companies and how it would undermine the revenue base of governments across the world. As we often discover with the member for Wentworth, the tough talk is replaced by the cowards walk. You never see him actually follow through—he gets the headline, he gets the coverage, he gets the kudos and the feel-good moment; but he is never actually there to follow it up. We see it yet again, after he has said that he would be doing X, Y or Z to deal with this issue; we have seen very little.
We are seeing more dragging of the feet on this matter, and we cannot afford for this to continue. That is why we have argued through the shadow Assistant Treasurer the amendments we have and why we will continue to place our concerns at the forefront. We are guided in part by the reaction at the tail end of last year of the collective intake of breath by Australians across the nation, when they saw what big companies which have a capacity to pay were paying or, should I say, not paying—not contributing. As the member for Griffith rightly notes, when you compare what they have failed to do with the expectation on low- and middle-income earners to bear a heavier load—as with some of the ideas being actively considered by those opposite while others are get off scot free. It is simply unacceptable.
We are not the only jurisdiction to be concerned by that. In the US, I remember the Levin committee, which investigated Apple's taxation arrangements, a few years ago identified that Apple had $100 billion offshore. That estimate has recently been revised to $200 billion—massive amount of money. For five years Apple did not have corporate headquarters registered in any jurisdiction to oversee their affairs. Having said that and having been critical of that, my big concern in this debate will sound obtuse. When you look at the work that many of these firms are doing, particularly the tech firms around the globe, they are responsible for great changes—economic changes, social changes—and they have a lot to contribute. The continuing arrangements that they are prepared to abide by, I argue, undermine the moral authority of this sector.
The longer they maintain these arrangements in the absence of an effective government response—as is evidenced by the bill we are currently debating—the further they undermine their standing in the eyes of the community. They also undermine, for example, the way their own employees feel about them. I would not be surprised if employees in some of these major firms that are doing great things internationally are now more and more reluctant to tell others who they work for on the basis that their company is viewed so negatively by the public that they do not want to be associated with it.
The sector's ability to argue its value to the broader society when it is maintaining these practices impacts unfairly on smaller players in the sector. We on both sides of the fence are committed to encouraging greater early stage innovation in this nation. We on both sides of the House are prepared to change government policies—for example, taxation arrangements—to encourage that. But some would say: why would we change these taxation arrangements when the big players are not pulling their weight, when they deliberately set up their affairs in a particular way to avoid their obligations in this jurisdiction? It is a pretty tough question to answer. I say again that the sector is having its moral authority, its value, undermined by these taxation arrangements and, given the importance of the sector in the long term, it can ill afford that.
I want to make an observation in relation to international cooperation. The member for Griffith named some of the countries that have already signed up to the Common Reporting Standard and pushed for us to tackle this. I note in particular that the UK Prime Minister, David Cameron, has been on this issue for quite some time. You cannot make legal changes in one jurisdiction, because this is a global issue and the community should work together. The tech sector's argument is: 'You bring in the standards and we'll follow the law.' And yet countries are well aware that, if they bring in differentials, this will simply accelerate and worsen a situation in which a lot of these major companies game the system and pick which country they go to to get the best taxation arrangements.
I would argue that one of the jurisdictions that is holding us back on this is the US. What happens is that when the tech companies say, 'Get the global standards in place, get the laws in place and we'll follow the laws,' they then go back to the US congress and agitate for a defiance against the international push to have this rectified in a uniform, common way. We have already seen stirrings in the US congress that will make it harder to get international consensus on this front. That is an issue of great concern. The US cannot expect to have a situation in which other countries' taxation and revenue bases are undermined by these types of practices and yet it gets its own slice. As I said before, Apple has $200 billion in revenue offshore. At some point, I imagine, the Internal Revenue Service is going to want a slice of that. They want to be able to prioritise their slice. But we argue that we should not think as individual jurisdictions. The most effective response is a global one, and it will require us to all think as one on this. But it cannot be a cute situation in which global tech companies tell people in a jurisdiction such as Australia, 'You put the laws in place and we'll follow the laws,' and then go and lobby the US congress to frustrate international efforts to get this done. They can, by all means, come out and say that what I am saying is wrong—it is up to them to do so—but it is clear that someone within the US jurisdiction is being urged to follow this up. That cannot be sustained and it cannot be argued for.
I am dismayed at how long it has taken for us to make progress on this. Those on the other side often make bold pronouncements about the way in which they will move on this, and it has taken ages to do so. Having said that, I also think the onus is well and truly on these companies. We have recently seen Google agree to make a back-payment of 130 million pounds in tax in the UK following discussions with the government there. Some have observed, fairly, that that is not necessarily a massive amount of money for a global concern like Google. But there is some headway being made there, and it is a requirement to continue that elsewhere.
Those firms cannot continue to argue that they are making the world a better place through what they are doing while at the same time undermining revenue bases in other parts of the world. That is simply unacceptable. You cannot have investments in, for example, education, science and research and development if your revenue base is being undermined by these types of arrangements. As I said, the moral authority of the sector is being affected by this.
In conclusion, I come back to the observation that, while we have had the tough talk, we have not seen this government 'walk the talk'. They are happy to get the headlines but they are not happy to do the hard work. Our view is that the faster we move on this the better. We cannot afford delay. I support the amendments put forward by the member for Fraser.
I rise to sum up the debate on the Tax Laws Amendment (Implementation of the Common Reporting Standard) Bill 2015. I thank the members on this side of the House who have contributed to this debate. I say to the opposition: could you please put an end to the confusing speeches about combating multinational tax avoidance. The House has before it only one amendment, but people listening to this debate might think from the opposition's comments that the opposition has a great concern about multinationals paying tax. But members of this House will recall that on the last sitting night of 2015, here in this chamber, the government debated its Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. They kept us here until the middle of the night. Yes, it was the House's view that we should gag the shadow Assistant Treasurer, the member for Fraser. It was a popular view in this House that we should gag the shadow Assistant Treasurer because he is quite verbose.
Back to the important substance of the matter: the Labor Party under Bill Shorten, the Leader of the Opposition, and Chris Bowen, the shadow Treasurer, voted against the government's measures—the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. The Labor Party voted against it. I want to say to the Australian public that the Australian Greens voted for the government's bill. You may think the Greens are from the hard left of politics, but they are more economically responsible than the Australian Labor Party. They voted with the government for our bill, our measures, to make sure that multinationals pay their fair share of tax. There is only one political party in this country that voted against the government's measures to introduce multinational tax arrangements and that was the Australian Labor Party.
Once again today you would think this was some sort of controversial matter. This matter is completely noncontroversial. This bill is about implementing an agreed position with the OECD—the common reporting standards. That is the agreed position with the OECD. The Labor Party have one pious amendment before us today—that is it. You would think from listening to them that they had put a series of complex amendments to this bill. The amendment before this House is:
… “while not declining to give the bill a second reading—
so they have learnt something from 2015; that is, they are not going to oppose this bill—
the House condemns the Abbott-Turnbull Government for making Australia a laggard, not a leader, in implementing strong measures to stop multinational profit shifting.”
So their only amendment is to attach to this bill a Greens style set of words to have a crack on the way through. No substantive amendments to this bill have been proposed to this House—none. There are no substantive amendments to this bill so every speech you have heard from the Labor Party has been about nothing. We are debating nothing yet again. The shadow Assistant Treasurer is here arguing for measures that he has not even had the gumption to put forward in technical amendments.
I would like to. I would like to hear your view on it, because this is all we have got before us. How do we make the law in this country? How are you making law in this country? Have you consulted with the sector, like the government has? We have consulted with multinationals and we have consulted with the banks to understand that the financial year in Australia operates from 30 June to 1 July, unlike most European countries, which operate on the calendar year. There are reasons why this is happening six months later than in other countries. You simply come into this House and put in a ridiculous, infant like, pious amendment to this bill to have a crack on the way through when the government is implementing the common reporting standard in agreement with the OECD—negotiated agreement with the OECD—to ensure that we have the right measures in place so we can commence this at the start of our tax year. Nobody in Australia would find that unusual or unacceptable and yet the Australian Labor Party are once again here in this chamber trying somehow to make out that the government is not doing the right thing on multinational tax.
I want to make this blatantly clear to the Australian public. We are doing the right thing by Australians. We are doing the right thing by our economy. We are doing the responsible thing by our economy. We are patiently and calmly implementing bills and measures to ensure that multinationals pay their fair share of tax in this country and we are doing it in cooperation with the G20 and in cooperation with the OECD, as part of the BEPS process that was established under Australia's leadership at the G20. It is the Labor Party at every turn that are opposing this. They voted against the measures that this government put forward. The Australian Greens supported it. The Australian Greens knew these were responsible measures and the Independents knew these were responsible measures. It is the Labor Party that felt they could have some sort of political game with multinational tax. It is something every single member of this House agrees on and it is something that jurisdictions around the world understand—all laws need to be tightened and cooperation between countries and jurisdictions is vital to ensure that base erosion and profit shifting is taxed appropriately and becomes an option of the past.
Let us look at the actual bill, not at the ridiculous, pious amendment we have in front of us from the shadow Assistant Treasurer. That is the only thing we have a copy of. Members of this House will note that this is the only thing we have before us. I want to say that this standard of course will tackle and deter offshore tax evasion. Financial institutions in Australia are going to be required to collect information on a foreign resident's accounts and report it to the ATO. The ATO will provide the information to the foreign resident's tax authority. In exchange the Australian Taxation Office will receive information on Australians with offshore accounts and use it to ensure they are complying with their domestic tax obligations. G20 leaders endorsed the standard under Australia's presidency. For the shadow Assistant Treasurer I want to say that again: G20 leaders endorsed the standard under Australia's presidency—under this government and its determination to ensure multinationals pay their fair share of tax.
We have all committed to begin to exchange information by 2017 or end of 2018, depending of course on how your country operates with its tax and financial years, which—for the shadow Assistant Treasurer—does differ from country to country and does have serious implications if you attempt to by some imaginary amendment simply adjust a schedule without serious negotiation with those people you are going to affect—not just large multinationals but also smaller banks. Have you thought about the cost that will be passed on of course to customers just by simply exercising some imaginary complaint about this issue? This is an agreed position with the OECD. It is a negotiated position that will ensure that we meet our obligations. Indeed, over 95 jurisdictions have committed to implementing it, including former tax secrecy jurisdictions, importantly: Luxembourg, Switzerland, the British Virgin Islands, the Cayman Islands, the Isle of Man, Guernsey and Jersey. We can see real progress being made on this front, something all members of this House ought to support and ought to welcome the government's initiatives on.
In summation I want to say again that if you are serious about multinational taxation and combating anti-avoidance then you ought to be supporting this government's initiatives. The Australian Greens have supported this government's initiatives in combating anti-avoidance measures. The Independents have supported combating anti-avoidance measures. The Australian Labor Party need to drop their pious attitude towards the government's approach and get on board and understand that we are methodically working with the OECD and all other jurisdictions to implement those laws and measures necessary to ensure that we deal with this problem that has faced modern economies. So I say to the opposition: stop the resistance, join with the government, support us on the Tax Laws Amendment (Implementation of the Common Reporting Standard) Bill 2015 and please stop with the pious amendments and all of the nonsense.
I thank the honourable assistant minister. 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 immediate question is that the amendment be agreed to.
Original question agreed to.
Bill read a second time.