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

I foreshadow at the outset that Labor will be supporting the Treasury Laws Amendment (Tax Integrity and Other Measures No. 2) Bill 2018, but we will be moving an amendment to the start date of schedule 3 in the consideration in detail stage. I will return later in my remarks to the precise reason for that. The Treasury Laws Amendment (Tax Integrity and Other Measures No. 2) Bill contains a series of tax integrity measures. Schedules 1 and 2 of the bill implement parts of the OECD's hybrid mismatch rules, which are designed to prevent entities that are liable to income tax in Australia from avoiding income tax or getting a double non-taxation benefit by exploiting differences in the tax treatment of entities and instruments across different countries.

As the explanatory memorandum notes, the new amendments:

They also:

Unfortunately, between announcing this measure and bringing it to the House, the government has missed its originally proposed implementation date of 1 July 2018. The implementation date is now a year later, 1 July 2019. As a consequence, revenue has potentially been lost, although, according to Treasury, the gain to revenue of this measure is unquantifiable.

Labor supports this measure, as we have other multinational tax measures that the government has brought to the House. The government often likes to claim Labor voted against the Multinational Anti-Avoidance Law. That is a lie. Labor did not vote against the Multinational Anti-Avoidance Law. What the government is misrepresenting is our attempt during that debate to improve tax transparency. It was an amendment, not a vote against the bill. We always supported the Multinational Anti-Avoidance Law despite the fact that we have been sceptical that it is the panacea that the government has proposed.

When it comes to voting against measures to close multinational tax loopholes, let's talk about a party that did vote against closing multinational tax loopholes. In 2012 and 2013, Labor changed transfer pricing laws in a way that the coalition voted against. Those laws were subsequently used to secure a tax judgement against Chevron that was worth some $300 million to the budget. But rather than walking back into this House and saying, 'We got it wrong when, in opposition, we voted against Labor's tightening of multinational tax avoidance laws,' the government instead attempted to claim credit for the Chevron High Court victory. That was despite the fact that, if they had their way, the loophole would have stayed open and the budget would be hundreds of millions of dollars worse off.

Labor improved transparency, and we are committed to extending that to tackling tax havens. We have a comprehensive set of policies to tackle tax havens that would ensure better reporting to the Australian Taxation Office of the use of tax havens by government tenderers, working with superannuation funds on the way in which they deal with tax haven investments. Labor is committed as well to public country-by-country reporting, which ensures that civil society has appropriate oversight. It is interesting to note from recent reports that the European Union appears to be moving strongly in that direction as well. Yes, we welcome the government implementing the OECD hybrid mismatch rules, but that is a small part of what needs to be done to crack down on multinational profit shifting.

The fact is that this is a government that just isn't serious about getting tough with the big end of town. This is a government which is, right now in the Senate, attempting to ram through tax cuts for big businesses—many of them multinationals—where the beneficiaries in the first round would be offshore shareholders. As a result of our dividend imputation scheme, the first-round beneficiaries of a corporate tax cut to big firms are offshore shareholders. Yet the government is committed to that and wants Australia to believe that they're doing something about multinational tax avoidance. We'll support these modest measures, as Labor supported the Multinational Anti-Avoidance Law, but they need to go further. They need to crack down on tax havens and crack down on multinational profit shifting. Only Labor has led the way on that.

Schedule 4 to the bill amends the Income Tax Assessment Act to provide an income tax exemption for the International Cricket Council Business Corporation and to exempt from withholding tax payments of interest, dividends and royalties made to the IBC. That provides support to the International Cricket Council staging the ICC World Twenty20 in Australia in 2020. The measure applies to assessable income derived on and from 1 July and to interest, dividend and royalty withholding tax liabilities arising on and from 1 July 2018. It was announced by the Treasurer on 8 May 2018 as part of this year's budget. It's common for major events to receive this tax treatment, consistent with what the previous Labor government did in relation to the Cricket World Cup held in Australia in 2015.

Schedule 5 to the bill amends the Income Tax Assessment Act 1997 to list Melbourne Korean War Memorial Committee Inc. as a deductible gift recipient under the income tax law, which means donations given to the memorial between 1 January 2018 and 31 December 2019 are tax deductible. That was announced as part of a measure contained in the 2017-18 MYEFO to list a number of deductible gift recipients. The cost to revenue has been estimated at $1.1 million over the forward estimates to 2020-21.

I come now to the amendment that I will move in the consideration in detail stage. Schedule 3 to the bill amends the Income Tax Assessment Act 1997 to ensure that the film producer offset is better targeted at supporting the Australian film industry when an offshore location is used for principal photography. The amendment as drafted applies to expenditure incurred in relation to films that commence principal photography on or after 1 July 2017. The government's argument has been that this measure will ensure the offset works as intended. The measure reduces expenditure by $6 million over the forward estimates, and we do appreciate the briefing from Treasury on the matter that followed our request. But the specifics of the legislation came as a surprise to many in the film industry. While the measure was announced in broad terms in the May 2017 budget, the draft legislation was not available until a year later, May 2018. So many film sector stakeholders contacted my offices and the office of the shadow minister for the arts saying that there hadn't been appropriate consultation and there wasn't a regulatory impact statement. So much for the government's avowed commitment to regulatory impact statements! There was none in this case. The stakeholders also said that the measure was retrospective—that they were being hit in May 2018 with a measure that was to take effect from July 2017.

Labor supports tax integrity measures, as I've outlined earlier in my remarks. We have urged the government to go further in closing loopholes in the area of multinational tax avoidance, but we do have a strong belief that retrospectivity is not appropriate in this case. Noting the lack of sector consultation and the retrospective nature of this change, Labor will move a detailed amendment in the House to make the start date 1 July 2018. We understand the government is supporting the amendment, which would indeed be a good outcome for parliament and for the Australian film sector.

Michael Sukkar (Deakin, Liberal Party, Assistant Minister to the Treasurer) Share this | Link to this | Hansard source

Firstly, I thank all those members who have contributed to the debate. The Treasury Laws Amendment (Tax Integrity and Other Measures No. 2) Bill 2018 incorporates several measures which are designed to improve the sustainability and integrity of both the Australian and international tax systems and to support local initiatives.

Schedules 1 and 2 to the bill implement the OECD hybrid mismatch rules. These rules will prevent multinational companies from gaining an unfair tax advantage due to differences in the tax treatment of a particular instrument or entity between jurisdictions. The rules also include an integrity rule which will apply where a taxpayer attempts to circumvent the hybrid mismatch rules by routing funds through foreign interposed entities with the aim of gaining an Australian income tax deduction and deliberately avoiding those hybrid mismatch rules. The hybrid mismatch rules build upon previous government actions on tax avoidance, including the introduction of stronger transfer pricing rules, the Multinational Anti-Avoidance Law and the diverted profits tax. The government has also increased penalties for companies that fail to take reasonable care when making statements to the ATO and has expanded the ATO's capacity, through the tax avoidance task force.

Schedule 3 to this bill clarifies the expenditure that can be claimed under the producer offset for films undertaking principal photography overseas. The government is a proud supporter of the Australian screen industry and the producer offset allows production companies to claim a tax rebate, on qualifying Australian production expenditure, for films with significant Australian content. In situations where the subject matter of the Australian film reasonably requires shooting in a foreign location, some overseas expenditure may be claimed. For example, a documentary about Gallipoli would require some filming to take place in Turkey. The amendment ensures that only expenditure relating to services performed by Australian residents, including cast and crew, can be claimed under the so-called 'Gallipoli clause'. The amendment ensures the producer offset continues to serve its policy objective to support the Australian screen industry and strengthens and encourages the employment and use of Australian-resident cast and crew on productions filming overseas.

Schedule 4 to the bill will deliver on the government's 2018-19 budget promise to provide a five-year income tax exemption to a subsidiary of the International Cricket Council. The exemption will assist the International Cricket Council to stage the ICC World Twenty20 in Australia in the year 2020. The bill will provide to the IBC an exemption from withholding tax liability for interest, dividend and royalty payments over that same period.

Schedule 5 to the bill amends the Income Tax Assessment Act 1997 to include the Melbourne Korean War Memorial Committee Inc as a specifically-listed deductible gift recipient, between 1 January 2018 and 31 December 2019. This allows members of the public to receive income tax deductions for donations they make between those dates to the Melbourne Korean War Memorial Committee.

I commend the bill to the House.

Question agreed to.

Bill read a second time.