Wednesday, 4 May 2016
Joint Standing Committee on Treaties; Report
() (): On behalf of the Joint Standing Committee on Treaties, I present the following reports: Report 161, Treaties tabled on 1 December 2015, 3 December 2015 and 2 February 2016andReport 162, 20th Anniversary Seminar.
Reports made parliamentary papers in accordance with standing order 39(e).
by leave—Today I present two reports for the Joint Standing Committee on Treaties: Report 161 and Report 162.
Report 161 contains the committee's views on an agreement to strengthen the Niue Treaty, two international shipping codes and a taxation treaty with Germany. Report 162 provides a summary of the seminar held to mark 20 years of the committee's work.
The Niue Treaty was implemented in 1993 to assist Pacific Island nations enforce their fisheries laws and deter breaches. The agreement on strengthening the Niue Treaty is intended to improve the management and development of the fishery resources of the South Pacific region. It will help to ensure sustainability and maximise the social and economic benefits that sustainability brings. It provides a legal framework for cooperative regional fisheries surveillance and law enforcement activities.
Australia plays a key role in maritime surveillance in the South Pacific and is committed to supporting regional cooperation on maritime security in the region. The proposed agreement will assist Australia to better utilise resources in this area.
The two international shipping codes, the polar water code and the code for ships using low-flashpoint fuels, are further enhancements to the International Maritime Organization's regulations. The polar code addresses the specific risks of operating in polar waters. The IGF provides an international standard for ships using low-flashpoint fuels. Both will increase ship safety and security as well as providing environmental protection measures.
The taxation agreement with Germany updates and modernises our existing agreement, which was implemented in 1975. Australia has used the opportunity to incorporate the OECD/G20 recommendations to prevent base erosion and profit shifting. This agreement puts Australia at the leading edge in this area and provides a precedent for future treaties.
The committee recommends that these four treaties be ratified and binding treaty action be taken.
The second report complements report 160, which I tabled in March. It provides a summary of the one-day seminar that the committee hosted here in Parliament House to mark 20 years since the establishment of JSCOT. During those 20 years, treaties have become increasingly complex. Australians are more connected to the broader world through trade, education and migration. International agreements increasingly affect not only broad issues of state but the actions and responsibilities of individual citizens.
The seminar brought together approximately 80 participants from a diverse range of backgrounds including parliamentarians, academics, public and parliamentary servants, students and representatives from business and other interest groups. The report summarises the presentations, reflects on the committee's work and provides an assessment of its performance. It also provides some thought-provoking ideas on the future direction of the committee's operation. It includes a full transcript of the presentations and useful statistical data.
I am confident that the information included in this report will prove useful to experts, academics and students of the treaty-making process in Australia. On behalf of the committee, I commend both reports to the House. I would also like to commend the support that I have received in the brief time that I have been chair by my deputy chair, the member for Wills, who has been a longstanding member of the committee and a strong advocate for its work.
by leave—I, in turn, wish to thank the member for Cowper for his work as Chair of the Treaties Committee and his predecessors Wyatt Roy, the member for Longman, and Angus Taylor, the member for Hume. It has been a pleasure to work with each of those chairs and with the other members of the committee during the life of this parliament as well.
I want to make some specific remarks about the taxation agreement between Australia and Germany. As the chair noted, this agreement aims to update the existing bilateral tax arrangements between Australia and Germany, and achieve, among other objectives, the prevention of base erosion and profit shifting in accordance with the OECD and G20 recommendations regarding this matter. So it is surprising to me that the first-round impact of the agreement is an $85 million revenue loss as a result of reduced tax collections, and that the administration costs for this agreement will be absorbed by existing resources of the ATO rather than beefing it up—as I believe needs to be the case if we are serious about addressing base erosion and profit shifting. When questioned about the second-round impacts of the agreement, Treasury said that tax treaties are about 'removing or reducing tax impediments', 'facilitating greater trade and investment' and 'growing the pie'. Frankly, this is trickle-down economics, and the trouble with trickle-down economics is that it does not work in practice. The agreement is described as an opportunity to set a precedent for future taxation treaties in preventing base erosion and profit shifting, and thus furthering international efforts to minimise tax avoidance. This is a laudable intention, but it is difficult not to feel a little sceptical when this agreement actually shrinks revenue.
In the budget last night, the Turnbull government budgeted to raise just $200 million over the forward estimates—or $650 million if we include the costing they now attribute to last year's measures. I recall that, last year, coalition MPs cheered when the member for Warringah told parliament:
So far the only idea they—
have come up with is to spend $100 million on the ATO to raise $1 billion. Well, next time they will be telling us to spend $1 billion on the ATO to raise $10 billion. That is the problem. All they can think of is spending more and taxing more. They just cannot help themselves.
Yet this budget does precisely that, claiming that a $679 million investment will raise more than five times as much—$3.7 billion. If that is true, it must also be the case that the government's massive cuts to the tax office, axing 4,700 jobs, have cost revenue over the past two years. Promising to restore some of the tax office's funding in this budget is an admission of failure, not a new crackdown on multinationals. It is nowhere near adequate to deal with the size of the multinational tax avoidance problem. It falls well short of Labor's multinational tax package, which raises $1.9 billion over the forward estimates, according to the Parliamentary Budget Office, and $7.2 billion over the decade. Unlike the coalition, Labor will close debt deduction loopholes that allow multinationals to siphon money out of Australia. Under Labor's policy, there will be no arbitrary thin capitalisation threshold. Firms will be subject to a worldwide gearing ratio, meaning they can only deduct debt from their Australian operations up to the overall level of debt held by the multinational group.
There is no doubt in my mind, when we see scandals like the Panama papers, that there have been too many words and not enough action on multinational tax avoidance. Our tax system should not get softer the higher it goes, and how much tax you pay should not be decided by how good a lawyer you have. To give some examples of the avoidance that we have seen recently, Apple paid just over $80 million in Australian tax in 2013 on local revenue of over $6 billion. By comparison, the Australian retailer Harvey Norman paid $89 million in tax on $1.5 billion. They paid more tax on just one-quarter of the revenue. Documents leaked in 2014 showed that over 300 Australian firms had been involved in routing money through Luxembourg and other low-tax jurisdictions to minimise their Australian tax bills. That included AMP, Macquarie Group and Lend Lease. The amount of tax avoided through these schemes potentially reaches into billions of dollars. Seventy-six multinational corporations pay an average tax rate of only 16.2 per cent—just over half the going company rate and significantly less than your average nurse or construction worker, who pays an effective tax rate of 24 per cent—this is costing us billions of dollars.
Labor's approach has been developed in consultation with multinational tax practitioners, academics, industry and costed by the independent Parliamentary Budget Office. This approach also draws on the OECD's global action plans for countering base erosion and profit shifting. To assist with the implementation and refinement of these measures, Labor will form a multinational tax expert panel. Labor will use the expert panel to ensure that these changes work as intended. In addition, Labor will continue to consider multinational tax issues such as increased penalties and powers for dealing with tax avoidance and country-by-country reporting. We will work with our international partners in bilateral tax treaties to consider ways to avoid double no-tax scenarios.
When it comes to tax, everyone should pay their fair share. How can we ask Australians to work hard and pay their tax if we let big multinationals off the hook? Our priority needs to be to shut down loopholes that allow big multinationals to send these profits overseas. We need to crack down on what is appalling corporate free loading!
This is the last treaties report that I will be speaking to. I take this opportunity to thank the other treaties committee members for their hard work and their support over the life of this parliament and previous ones. I take this opportunity also to thank the treaties secretariat for their professional work—Lynley Ducker, Dr Narelle McGlusky, Kevin Bodel, Belynda Zolotto and Cathy Rouland. I and wish them all the best for the future.