Wednesday, 4 March 2020
Treasury Laws Amendment (2020 Measures No. 1) Bill 2020; Second Reading
It's my pleasure to speak on the Treasury Laws Amendment (2020 Measures No. 1) Bill 2020, and I'm pleased to see so many members in the House who've come down to listen to it. I foreshadow that, at the conclusion of my contribution, I will be formally moving the amendment that has been circulated in my name.
Mr Falinski interjecting—
I'd rather hear what the member for McKellar has got to say in the body of the debate. Now that we're able to do that, I look forward to listening to what the member for McKellar has got to say in reply.
The bill contains two measures relating to the integrity of Australia's tax and superannuation system. I'm delighted we're going to have the opportunity to debate these two very important schedules. I won't hold you in suspense. You would've taken, through my contribution in the procedural debate, that Labor's going to support these bills. We actually think that they're important. The bill has sensible improvements in our tax legislation.
Schedule 1 deals with the issue of significant global entities. Schedule 1 extends the definition of a 'significant global entity' under tax legislation to include more entities, including members of large business groups headed by proprietary companies, trust partnerships, investment entities and individuals. Being defined as a 'significant global entity' carries with it a range of important requirements and impositions under current tax law, including significant penalties around false or misleading statements, increased reporting requirements and multinational anti-tax-avoidance measures. Expanding the definition will defeat attempts to restructure corporations to avoid multinational tax avoidance laws, which were introduced by Labor when we were in government. It's a sensible measure, as I've already said. But, according to the government, it won't do anything to close the enormous multinational tax gap. This goes to the heart of the second reading amendment that I will be moving. The explanatory memorandum notes that the revenue impact of this measure is estimated at nil.
The multinational tax gap was estimated at more than $2 billion by the Australian tax office when it was last publicly estimated in 2016-17. We questioned that estimate back in 2016-17, and a lot of water has passed under the bridge since then. That's likely to be a very conservative estimate. Other estimates put the estimate at closer to $13 billion. I'm sure members in this place would agree that, whether it's $2 billion or $13 billion, it's tax owed and it's tax that should be paid. That money can be put to better use in this country, improving our infrastructure, our school education system, our university education system, our vocational education system, our hospitals, our health care and the quality and availability of pharmaceuticals in this country. I'm sure all honourable members of this place would agree that that is a much better use of that money. Whether it's $2 billion or $13 billion, as more reliable estimates put it, it is money that should be paid and it's money that should be put to work by this parliament.
Company after company have been exposed as paying zero tax on their Australian operations, including, as I mentioned in the previous debate, large companies such as Goldman Sachs, Shell and IBM. Under the previous governments and under this government, one-third of all large companies paid no income tax whatsoever. It's extraordinary and worth repeating—one-third of all large companies paid no income tax whatsoever. Data issued by the Australian tax office in December last year showed that out of 2,214 large companies, as many as 710 of them paid no tax whatsoever in 2017-18. That number includes 102 firms reporting more than $1 billion in total revenue. I want you to contrast that picture to the picture of an average Australian worker. A single Australian worker pays 25 per cent of their income in taxes; however, these large companies earning over a billion dollars have average tax payments of only two per cent of income. I want you to think about that for a moment. One earns a billion dollars; another one is earning an average income of under $80,000 a year. One is paying no income tax, or an average of two per cent of their income; the other is paying 25 per cent of their income. It's not fair, it's iniquitous, and more needs to be done about it.
We only know about the scope of this tax avoidance because of Labor's tax transparency laws, which I hasten to point out the coalition members voted against. Is it any wonder they didn't want to bring this debate on today? It is a significant embarrassment for government members. The tax transparency laws, which enable us to identify the extent of tax avoidance, were opposed by this mob opposite. When they get up and speak in this debate about their commitment to doing something about multinational tax avoidance, I want them to remember the ignominy and the shame of the fact that they voted against Labor's tax transparency measures—and they would still rather avoid the spotlight. They release this report through gritted teeth every single year in the doldrum days of December after the press gallery has gone home for their Christmas holidays. The coalition want you to think that they're tough on tax avoidance, but nothing could be further from the truth. That's why they spent $24 million last financial year on an advertising campaign promoting tax integrity and their so-called Tax Avoidance Taskforce. Remember that number: $24 million promoting the Tax Avoidance Taskforce. This task force was announced as a budget measure back in 2016, but it's simply not true, like so much that this government does. They've got a plan for everything, but they follow through on nothing. When you peel back the detail, what you discover is that it is all marketing and deception.
As the Audit Office has recently revealed, there is no Tax Avoidance Taskforce. It was a blatant untruth. The Treasurer knows it. The Prime Minister knows it. They're trying to hoodwink the Australian taxpayers and their own backbench that they're somehow serious about this issue of tax avoidance. They spent $25 million on an advertising campaign. Doesn't that tell you everything about this Prime Minister? It tells you everything you need to know about this Prime Minister. It's about coffee cups and T-shirts saying 'Black in black'. It's about a $25 million anti-tax-avoidance advertising campaign. But, when it comes to doing something about tax avoidance, they are missing in action, and that's why they wanted to delay this debate: because they were embarrassed. It takes a lot to embarrass this mob over here, but they were embarrassed about the fact that they promoted an anti-tax-avoidance task force that simply did not exist. There was no consistent methodology for assigning tax avoidance resources and no actual Tax Avoidance Taskforce. There was no actual task force unit within the tax office. The Prime Minister has been caught out with a red-hot deception once again.
Indeed, the ATO's methodology for assigning resources was so convoluted that the Auditor-General could not confirm whether resourcing was supplied in line with the budget estimates. So not only was their advertising campaign completely misleading and untrue; but the way that they arranged resources within the tax office themselves was, it appears, designed to be an untruth as well. Funding may have been used to cover up real cuts to baseline staff in affected areas. So not only are they not allocating resources as they said they were going to do in their budget papers; but it appears that they've actually cut resources. They've actually taken staffing resources out of the anti-tax-avoidance area. Is it any wonder that this mob do not want to talk about this issue today? There was money spent on ad campaigns to promote actions that simply aren't happening. This is something that the hollow men would be proud of.
This farcical approach of this government to multinational tax avoidance shouldn't surprise anybody. In fact, this is exactly how the Morrison government generally responds to most of its problems. It goes something like this. Step one: ignore the problem. Call it a Labor conspiracy. Step two: when the public pressure mounts, finally claim that you're responding to the problem while actually doing nothing at all. Step three: spend taxpayer money on a high-concept ad campaign promoting your nonresponse to the problem. This is their game play on so many issues. They've got a plan—a plan for an advertising campaign that advertises the fact that they're doing absolutely nothing. And I'm sure that those government backbenchers who are lined up to speak after me will be happy to supply that final step of ignoring the problem and then spending taxpayer money on an advertising campaign. Sorry; I said there were three steps. There are actually four: when it all goes pear-shaped, blame Labor.
The Australian people deserve better than the absolute sideshow of this full carnival. The Treasurer and the Prime Minister should spend less time on ad campaigns and more time ensuring big companies pay their fair share of tax. A small change to an obscure definition in the Income Tax Assessment Act might be a sensible move. Labor backs the measure but we don't back the government, and our money's not on the government's willingness to do anything about this $13 billion problem.
I'll make some comments about schedule 2, 'superannuation and fund mergers'. Schedule 2 will make superannuation fund mergers simpler in the future. It does this by extending tax relief measures that were first introduced by Labor in 2008 to remove unnecessary impediments that would otherwise apply to fund mergers. I will always be in favour of any measure that helps to ensure better returns for fund members. Smaller and underperforming funds in whatever sector—whether they're in the retail sector or the industry sector—cannot be tolerated. Merging achieves better performance for members when they simply cannot achieve those returns in their current state.
The now permanent tax relief measures will allow super funds to transfer revenue and capital losses to a new merged fund and to defer taxation consequences on gains and losses from revenue and capital assets. This sensible Labor reform has proved effective in giving fund trustees certainty when planning merger activity. In fact, just today, two funds in Queensland—together with two funds in Western Australia, I'm advised—have announced their intention to merge. This sensible reform will ensure that their members aren't hit with an unintended tax burden on either capital gains or the ability to distribute capital losses on the merger of those funds. It makes sense. It's in the interests of members. We support it. Every Australian deserves to retire with dignity and independence, and Labor will always fight to make a stronger and fairer superannuation system as a result of this reform. The Productivity Commission recommended making it permanent, and the government has finally agreed. I'd now like to formally move my second reading amendment. I move:
That all words after “That” be omitted with a view to substituting the following words:
“whilst not declining to give the bill a second reading, the House:
(1) calls on the Government to commit to the legislated increase of the superannuation guarantee to 12 per cent; and
(2) notes that the Government’s failure to make sure multinationals pay their fair share of tax in Australia is weakening our economy”.
This amendment calls on the government to commit to the legislated increase to the superannuation guarantee to 12 per cent.
I welcome the fact that the member for Goldstein and member for Mackellar are in the chamber today, because they're going to have the opportunity—
Mr Tim Wilson interjecting—
You always know when they're in the chamber because the volume goes up but the sense goes down. They are going to have the opportunity to vote in favour of the policy that they took to the last election, by voting in favour of my second reading amendment. The test will be on them. Will they confirm the promise that they made to the Australian people, not six months ago, by voting in favour of the legislated increases to superannuation for ordinary Australian workers or will they vote against the increases? We offer them this opportunity today—because we think that it's important that if promises are made they're actually honoured. We think that's important.
Mr Falinski interjecting—
Mr Tim Wilson interjecting—
It's always good to hear from the member for Mackellar. It's been a big puzzle for me for most of this week why there's been a rush on toilet paper but the member for Mackellar, with his contributions, makes it perfectly clear today.
Mr Tim Wilson interjecting—
The member for Goldstein, on a point of order?
Mr Tim Wilson interjecting—
The member for Goldstein will resume his seat. He's made his point: he is correct. I was trying to correct the member on a technicality in that I think that the member was referring to the member for Goldstein, who had been interjecting—not in terms of the substance of what the member for Whitlam had said. Having said that, I'd like to remind the member for Mackellar that he may not interject while he is not in his seat. The member for Whitlam will continue.
I thank you for your guidance, Madam Deputy Speaker. As I was saying, because the parliamentary procedures do not have a collective noun—common usage has a collective noun to refer to the member for Mackellar and the member for Goldstein, but I rather suspect—
Mr Tim Wilson interjecting—
The member for Goldstein has been very keen to speak during my allotted time. I look forward to hearing what he has to say in this debate. I'm more interested in not so much what he has to say as how he votes. You can say a lot of things in this place, but it's how you vote that matters—how you exercise the freedom to vote. There are lots of Australians who are very keen to hear what these two have to say—these two who have had a lot to say about superannuation and the promise that they made and their desire to renege on the promise that they made to the Australian people not six months ago on the superannuation guarantee legislation—people are very keen to hear what they've got to say and how they vote on my second reading amendment. I commend the legislation and the amendment to the House.
The original question was that this bill be now read a second time. To this the honourable member for Whitlam 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.
That was the most insufferable few minutes I have ever experienced in my life from the member for Whitlam. That's a surprise, because we've had other members like the member for Holt, who have also excelled themselves in the chamber, like the member for Fraser amongst others. In the end this bill—without the amendment—comes down to a simple proposition. It goes to the point of tax integrity, about the idea that we're going to have a tax system where people who have obligations are going to meet them. We're in favour of doing that. We're in favouring of making sure people can do that, making sure that corporations can do that; but also making sure that we provide appropriate relief in the circumstances for superannuation funds.
In saying that, I do understand that the concept of tax integrity—or integrity, period—is difficult for the member for Whitlam because has the same—
I withdraw. I will continue on my reflections on the legislation and raise my general concerns about the integrity of the system and the integrity of the people who espouse it and integrity in the situation where we might have particular people who have a complete disregard for tax integrity. There are of course some people inside and outside this place who have little regard for the expenditure of public money and how it is spent. So I welcome the opportunity, at least because it seems that the member for Whitlam in his address still has not come to terms with the basic reality of the extent of multinational tax avoidance. In fact, he started from the proposition of the member for Mackellar, who got up directly and challenged the fact that he was claiming $13 billion of foregone revenue when in fact it was only $2 billion. That can only happen in a situation where they have little or no interest in the facts of the matter and in the legislation at hand.
The basis of our support for this legislation is simple: we want to make sure that super funds can merge appropriately in the best interests of their members. It's a legitimate objective and one that we should support on basis of integrity, but also to make sure that super funds can act where they see fit through consolidation. It's also about making sure we have global entities meeting and honouring their obligations to the Australian taxpayer. The reality is that when you have a tax system with leakage or opportunities where people can forego their responsibility, somebody else has to pick up the burden, and it falls on the Australian taxpayer to carry the cost to society. Everybody must share in that responsibility. That is the basis on which I support the legislation but not the show ponying of the opposition in their amendment to the legislation.
I rise today to speak in favour of the amendment moved by the member for Whitlam. I very much hope that those opposite vote for that amendment, in line with the stated position that they took to the last election and in line with the stated position of the Prime Minister, the Treasurer and many others opposite who have spoken in favour of taking superannuation to 12 per cent, a much-needed reform. But I'm going to make a few observations today in relation to the parts of this bill, the Treasury Laws Amendment (2020 Measures No. 1) Bill 2020, that relate to multinational corporation taxation, and echo the sentiments of the shadow Assistant Treasurer.
In particular, what I wish to echo is that we don't oppose the content of this bill. But, as with so much that we face in this chamber, while it is a step in the right direction, it is a tiny step, a tiny shuffle, in the right direction. At the same time, it is a wholly inadequate, unambitious and uncreative response to what are very serious problems.
In this instance, we are dealing with one of the great challenges to our taxation system, yet what we face in this bill is a change to a definition. We should be debating deep, structural, long-term changes to our tax system that make it more sustainable. When one looks at this issue, one can see dozens of countries around the world simultaneously trying to deal with it. The OECD has a base erosion and profit-shifting framework—a very wide ranging, large-scale set of initiatives—that over a hundred countries have signed up to, the reason being that, on some estimates, something in the order of $240 billion off the tax base of OECD countries is currently under threat from profit shifting.
As the shadow Assistant Treasurer outlined, there are far too many major companies in this country who are paying little or no tax, and people in our community, for good reason, are outraged. They are seeing their own personal income tax rise year on year, their own capacity to pay the bills is under pressure, but in the media they see company after company paying little or no tax. I want to spend a couple of minutes running through why this is happening and why there is urgency to this issue.
A lot of this, I believe, comes down to fundamental changes in the global economy. When one goes back to international trade theory in the 19th century—for example, Ricardian tax theory or Heckscher-Ohlin—it was a world where people imagined that we had some economies focusing on advanced goods and some economies focusing on resources and inputs, and most trade was between those kinds of economies. Most trade was between countries that were focused on producing the inputs to production processes and countries that would then import back advanced manufactured goods. The vast majority of trade theory in the initial decades of economics was focused on that kind of thinking, and that was actually useful and did describe large parts of the world economy for a long period of time.
Fast-forward to the post World War II era, and one can look at someone like Paul Krugman, who won the Nobel prize for economics for very deep insights into a changing world. He found that much of the world's trade post World War II was actually shifting from what one might consider north-south trade to trade between OECD countries. There was very highly specialised trade of very similar products between countries. His trade model, which was very different from the economics of the first two centuries of the discipline, looked at hyperspecialisation in the automotive industry, for example, where there was massive trade in cars between Japan, Europe and the United States. Krugman hypothesised that this was driven by consumers' demand for a variety of goods. Another example was the fact that the French specialised, through the company Valeo, in air conditioning for passenger cars, whereas the Germans specialised in air conditioning for buses. Fast-forward yet again and I believe that the world economy is now going through as fundamental a change as that, if not more fundamental, where, instead of just specialisation between advanced economies, what we are moving to now is a world where we are seeing competition not between companies based in advanced economies but between global value chains.
What we're seeing now, for example, is that Honda is partnering with parts producers in Vietnam and BMW is partnering with parts producers in India. If one looks at the period 1988 to 1998, and what is often referred to as the I6, which is China, India, Korea, Poland, Indonesia and Thailand, what we see is that the growth in completed goods exports, so motorcycles and cars, grew, but not very much. But the growth in parts and components grew more than tenfold. Those parts and those components were often being exported to advanced economies, like Japan, the United States and Western Europe. The point is that we have moved to a different kind of global economy. We've moved to an economy where we shouldn't think of companies as being based in one country. Companies are now globally entities, and they can shift their profits from any country to any other country. We are in the middle of this transformation. The reason this is so fundamental is that this is one of the key drivers of the erosion of advanced economy tax bases. Another related change that's going on in our economies is technological change which is allowing production to occur in any country through 3D printing, or services to be provided far from where the person is with the expertise. For example, we can see all sorts of services in the health sector provided by people in other countries—Indian experts providing diagnostic services to people in Australia, the United States or Europe.
All of these technological changes are leading to greater productivity growth but they are also leading to opportunities for these multinational companies, multinational agglomerations, to shift profits. It is happening now and it is growing. This is an example of an issue which the OECD recognises is a first-order issue. Something in the order of up to $240 billion is under threat in the OECD tax base, and that is growing. And what do we have from the government? A bill that changes a definition. That is really what we are challenging here today. It is a step in the right direction, but this is not what we should be doing after seven years of this government. It's simply not good enough that this government is bringing into this policy area something so wholly inadequate.
But, as the shadow Assistant Treasurer alluded to in the procedural debate earlier, it's not just this bill; it is bill after bill after bill that we end up supporting, but as a step in the right direction that is wholly inadequate. In policy area after policy area the debates that we are engaged in in this place are so wholly inadequate that they're reflecting a government whose agenda is so lacking in ambition, so lacking in content and so lacking in creativity that it is simply not good enough for a country that is facing a whole raft of long-term challenges. This is one of them. This is a first-order issue for the federal government, because our tax base is under threat and we need a whole-of-government comprehensive strategy for dealing with this issue; not a hollow government entity that is spending its money on advertising but a long-term strategy where our tax base can be protected. But, as I said, this bill is also symptomatic of this government's overall agenda.
We don't oppose this bill, as with other bills that have gone through this place over recent sitting weeks that we haven't opposed, but it's with a degree of regret at the lost opportunity. Time after time, we're seeing bills debated where the content of the bill only constitutes a few minutes of most speakers' speeches and then the rest of their speeches are devoted to the weighty matters that we should be considering in far thicker bills, but unfortunately, because of this government's inactivity, we're not. As I said earlier, it's all the more inadequate given the fact that this is a third-term government. It's not like they haven't had time. They've had seven years now to develop a full agenda on this issue. Where is it? On issue after issue, seven long, seven inert, seven wasted years are reflected in the bills that come here and that are wholly inadequate. So, yes, we'll support this bill—it's a step in the right direction—but this is a massive issue that deserves so much more.
Finally, on the amendment, as the shadow Assistant Treasurer alluded to, the issue of moving to 12 per cent is in and of itself a first-order issue. It is critical that this parliament gets behind the increase to 12 per cent. In a society where people are living longer and longer, in a society where people are under increasing financial stresses, it is absolutely imperative that we put in place a regulatory environment where people's living standards in retirement are protected. As a number of commentators have suggested, we are probably now entering a period where interest rates are going to be at historic lows for a very long time. We are seeing central banks around the world foreshadowing historic low interest rates for years, and, of course, this is going to have an impact on returns right up and down the risk schedule. So we can't make assumptions about equity returns. We can't make assumptions about the returns of asset classes that perhaps we could have a decade or two ago. That's why it's critical that this government puts in place a long-term strategy that protects people's retirement income, given that many people who are investing now might face, in retirements that are longer than ever, very low returns in the lead-up to their retirement and during their retirement. So it is absolutely critical that, in that environment, we increase the rate of saving from 9½ to 12 per cent. This should have been done long ago, but now it is absolutely imperative.
It is critical that we not only pass this bill but that we pass the amendment to it so that we provide a signal to the sector that the promises that all the major parties took to the last election are going to be fulfilled. In conclusion, this is yet another bill that will get through this place, but it's yet another bill that reflects a missed opportunity.
I will not detain the House long. I found the member for Fraser's speech both compelling and interesting. I would argue that the Smithsonian—
I commend the bill to the House and I hope that it passes unamended.
I'm pleased to make a few brief remarks on the bill, particularly in support of the amendment moved by the shadow Assistant Treasurer, the member for Whitlam. The amendment really goes to the heart of a really important debate. It's important on two levels. It's obviously important in terms of its economic impact, in terms of supporting our superannuation system and supporting the retirement incomes of Australian workers. But as the member for Whitlam made clear in his contribution, it also goes fundamentally to the question of trust—the question of trust which has been eroded in this place. The second reading amendment gives members opposite an opportunity to vote in this place in accordance with the promises they made to the Australian people at the last election.
I am pleased that this bill has been brought on for debate, and I hope it was brought on following the debate that we had in this place over the proposal that this debate be postponed. Of course the debate should not have been postponed. Of course we should have brought it on. We have seen in this chamber this week a very, very thin legislative agenda, even by the standards of this government. This is a government without a plan and fundamentally a government without a program. The parliament is sitting four out of five weeks at the moment, yet the legislative agenda barely would suffice for one sitting week. This is a government with no plan for the Australian economy, which is evidenced by how slowly this has moved.
That is why it was so concerning that it was proposed that this bill, this modest but not insignificant reform, was not to be proceeded with. It was really concerning to members on this side. We heard a very effective contribution from the Manager of Opposition Business, who put very clearly before the House that we should have this debate now. I'm pleased that the minister formerly at the table was persuaded by that contribution.
There are 13 billion reasons why we should have this debate now. All of us in this place know that we have to take our obligations to secure revenue to fund the business of government very seriously. I'm very pleased that the shadow Assistant Treasurer is here, because he has been leading this debate in this place. For seven years this government has been asleep at the wheel. When the former government was in power, the former member for Lindsay, the former Assistant Treasurer, led the way and continues to lead the way internationally on these critical questions, making sure that we take seriously those companies that are not contributing to Australia and that are abusing their social licence to operate without contributing to our Commonwealth.
We know there are significant revenue pressures. We on this side of the House know that there are things that government could and should be doing. These require revenue and they also require us to look very seriously at those who are not paying the tax that they should be paying. If the minister thinks that's not the case, he will have an opportunity to contribute to this debate. Again, there are 13 billion reasons why we should be proceeding with this legislation now—$13 billion that should come into our revenue, that should be put to good use.
Fundamentally this is a moral question, at two levels. In terms of the bill itself, it is moving one step further towards cracking down on tax avoidance. That's a good thing. It's a good moral thing as well as a good economic thing. But also, in terms of the second reading amendment, this gives government members an opportunity to be true to the commitments they made to their electorates at the last election. I urge every government member to support the second reading amendment and progress the legislation.
I am of course supporting the very sensible amendment that has been moved by the member for Whitlam which criticises this government's approach to multinational tax transparency. It also calls on the government to commit to the staged increase in superannuation that is vitally important, particularly for low-paid workers in this country.
In terms of the Treasury Laws Amendment (2020 Measures No. 1) Bill 2020, we're supporting the substance of the bill, and schedule 1 relates to significant global entities and expands the definition of a 'significant global entity' in the Income Tax Assessment Act. This will expand reporting requirements to ensure that certain entities currently not captured by the definition are covered by certain reporting requirements and other multinational tax avoidance laws, but it also modifies the rules around country-by-country reporting to ensure Australia complies with Australia's international commitments as part of the OECD's base erosion and profit-shifting action plan. There's been a lot of international attention recently about the BEPS program and ensuring that we're doing all we can to provide as much data as possible to crack down on tax avoidance through international channels. The OECD has set up a process that Australia has signed up to that requires us to meet certain commitments in terms of legislative frameworks to ensure that we participate in those international strategies. This bill achieves that.
So Labor supports the measures extending the definition of global entities and moving to meet our international commitments, but we believe that this measure simply doesn't go far enough. The government is still letting a large number of multinational corporations get away with paying too little tax and get away with not disclosing that to the Australian people. Data that's been issued by the Australian tax office shows that 710 out of the 2,214 companies examined failed to pay any tax in the 2017-18 tax year. The companies that paid no tax included 102 companies that were reporting more than a billion dollars in total income. For most Australians, it is inconceivable that a company can have a billion dollars in income in a particular year yet pay no tax to support social security and other programs throughout this country, particularly when they're deriving that profit and that income from their operations in Australia.
Of course we understand that there are certain rules related to deductions and the ability to use those deductions—particularly capital outlays for major projects. But it's quite evident when you look at the tax transparency data and when you look at the information that's supplied by some of these companies about their operations in Australia that there's more to it than that. A lot of them are using tax havens in other countries, offering loans to subsidiaries and moving income into other jurisdictions to avoid paying corporate tax here in Australia, and that's simply not good enough. It's certainly not being a good corporate citizen. It doesn't meet the expectations of the Australian people. In many respects they are letting down their own Australian employees, who rely on taxation revenue to fund important social services: the roads that they drive on to get to work in the morning, the parks that their kids enjoy playing sports in on weekends and other important infrastructure that's funded through our taxation system.
While the average Australian worker pays 25 per cent of their income in tax, large corporate entities and companies earning over a billion dollars average tax payments of only two per cent of total income. Clearly, there is an imbalance there in the way the taxation system is working. The only reason we know a lot about this is and that one-third of large companies fail to pay any tax is the rules and the laws that Labor put in place when we were in government. These were laws that passed the parliament in 2013 about tax transparency and requiring those larger Australian corporations to report on an annual basis the amount of tax that they're actually paying. I think it's worth noting that those opposite opposed that legislation. They opposed that legislation around tax transparency in allowing the Australian public to know exactly what's going on when it comes to the amount of tax that's being paid by large corporate entities in this country.
Worse still, not only did they oppose it when they were in opposition but, once the legislation was brought in by the Labor Party in government, they then sought to undermine it and water it down. They were successful in doing that because guess what? They teamed up with the Greens. They're often criticising the Greens, but when it comes to political expediency they'll jump into bed with the Greens at a drop of a hat, just to make sure that they get what they want. That's what they did here. They jumped into bed with the Greens to water down tax transparency laws in this country.
Shame on those opposite! All it's meant is that the Australian people—Australia's hardworking taxpayers—don't know what's going on in a large number of corporations because those large corporations aren't required to report their revenue and their taxation obligations under that act. This is after they voted against Labor's 2012 tax laws, which were directly responsible for BHP being forced to pay a $529 million tax bill in 2018. Now think about all of the services that $529 million funds for Australians—yet those opposite voted against some of those laws that required those large corporations to pay those bills. The coalition is failing small businesses and Australian workers who are struggling to compete while international companies get away with paying very little or no tax at all. We need a government that gets serious about multinational tax and giving concessions to multinationals and that is focused on ensuring that money made in Australia isn't siphoned off overseas.
The other aspect of this bill that I'd like to comment on is schedule 2, permanent tax relief for merging superannuation funds. That amends various acts to make permanent certain forms of tax relief for merging superannuation funds that are currently temporary. The temporary tax relief measures were originally introduced by Labor in 2008 to help with superannuation and its efficiency, and making these concessions permanent was a recommendation of the Productivity Commission in their 2019 report into superannuation. This measure will make mergers between superannuation funds simpler. Labor supports extending tax relief for merging superannuation funds. Expanding will give fund trustees certainty when planning merger activity and will provide wider benefits to fund members and the superannuation system through increased funds scale and efficiencies.
We're also calling on the government to give members and trustees certainty about their retirement incomes into the future by meeting their commitment and by meeting the legislation to increase the superannuation guarantee to 12 per cent. Labor has a very proud track record of boosting the compulsory retirement savings of workers in this country, particularly low-income workers who would retire without adequate retirement incomes to fund their retirement if it weren't for the reforms that were introduced by Labor and Labor's commitment to increasing that compulsory rate of superannuation to ensure that retirement incomes keep pace with the cost of living and the cost of increasing incomes in the rest of the economy.
We all know that there is a rabble and a group within the coalition that have sought, at every occasion, to undermine that compulsory increase in superannuation savings. It will result in workers retiring with less in their superannuation balances, particularly low-paid workers and those who take breaks from the workforce, which unfortunately are typically women in Australia. What they try to do is undermine the retirement incomes of low-paid workers and women in this country, and for us on this side that's not on. That's not on because it means that, ultimately, those people retire with inadequate balances in their superannuation funds and they have to rely on the age pension to get by into the future to a greater degree than they otherwise would have. That puts an impost on the Australian budget moving into the future and, of course, means that it's harder for us to fund the necessary social services and other programs—particularly things like infrastructure programs—to grow our economy.
The fighting continues within the government between members and senators who like to attack the superannuation system and its key pillars, particularly a pillar like this. But this is more than a few rogue backbenchers; it's a reflection of the Liberal Party's ideology, in that they've always been opposed to the notion of universal superannuation. The retirement income review should not be used as a stalking horse for further delays of the legislated increase to 12 per cent.
Too many Australians retire without adequate income savings, which is why our super system needs to be strengthened and protected, not undermined by the coalition. Labor is committed to the legislated superannuation guarantee rise, and we call on the government to do the same, to provide that certainty for Australian workers—particularly at this time of anxiety and uncertainty about the government's track record on economic management, particularly in the context of a slowing economy—by providing a guarantee for that legislated increase and compulsory increases into the future.
The original timetable has already been delayed—it's been delayed twice—costing workers who are retiring today between $60,000 and $100,000 in their superannuation balance. Freezing the legislated increase won't lead to pay rises, as those opposite have sought to argue. Our world-class super system means that we have a $3 trillion pool of savings. This not only creates a retirement nest egg for Australians but also means investment in infrastructure and businesses, generating wealth, creating jobs and ensuring Australians own more of their economic activity in this country.
In conclusion, we support these measures but, in our view, they don't go far enough, particularly the measures related to tax transparency and laws in respect of that. Again, we call on the government to make sure that they meet their commitments to Australians when it comes to increasing compulsory retirement savings through the legislated increase in the superannuation guarantee.
I rise to speak on the Treasury Laws Amendment (2020 Measures No. 1) Bill 2020. The problem of multinational profit-shifting is a massive one. Globally it has been estimated that some $600 billion of profits are shifted to tax havens. That is around two-fifths of all multinational profits being shifted to tax havens. Tax havens affect Australia's tax base. They siphon taxable profits away from jurisdictions like Australia, and the effect is that Australians either have to pay higher personal income taxes or else suffer from a lower quality of services.
Tax havens aren't always illegal but they're frequently immoral, and the users of tax havens include an awful lot of crooks. Tax havens are used by the North Korean regime for money laundering. They're used by extortionists. They're used by drug runners. Mexican drug cartels have been known to stash money in tax havens. So, if you're operating out of a tax haven, you're likely rubbing shoulders with some pretty unsavoury characters.
Aggressive tax planning erodes public confidence in the tax system. When taxpayers see others minimising their tax through the aggressive use of tax havens, they're less likely to do the right thing. One of the reasons that's we have relatively good tax compliance in Australia is a notion that people are playing by the rules. As that starts to break down, the tax base is at threat.
Gabriel Zucman, an economist at the University of California Berkeley, has estimated that around four-fifths of the money in offshore bank accounts is there in breach of other countries' tax laws. Counterfeiters, those using forced labour, and al-Qaeda financiers have even routed their payments through tax havens. It has been estimated that there are even environmental vandals in tax havens. Following the Panama Papers, a study in the journal nature ecology & evolution found that 70 per cent of fishing vessels implicated in illegal, unreported and unregulated catches had at some point been registered in a jurisdiction like Panama or Belize.
Tax havens increase inequality. Offshore wealth held in tax havens by Australians has been estimated at six per cent of GDP, according to Gabriel Zucman's work from 2013. Update that to the present day and it would mean that over $100 billion of Australians' assets are currently sitting in tax havens. This is money not just of the wealthy but of the super wealthy. One study which matched data from high-profile leaks to tax statistics estimated that half the money in tax havens was held by the top one-10,000th of the population. We're not talking about the one per cent. We're not talking about the 0.1 per cent. We are talking about the top 0.01 per cent holding half the wealth in tax havens. That makes sense when you know about the sorts of vehicles we're considering. If you need a minimum million dollar investment, you'll need to be a multimillionaire to be investing in these sorts of vehicles. When you take offshore wealth into account, estimates of inequality turn out to be a whole lot higher.
The residents of tax havens themselves don't necessarily benefit from these arrangements, so, if you take a country like Bermuda or the British Virgin Islands, many of the citizens live in poverty. It's akin to the resource curse. People have talked about the finance curse, where places like Bermuda fail to see the benefits for their citizens from being a tax haven. The International Monetary Fund has found that these sorts of negative spillovers can particularly hurt developing countries.
I'd commend to the House an important initiative that the OECD has been pursuing, Tax Inspectors Without Borders, modelled on the much better known Doctors Without Borders, Medecins Sans Frontieres. Tax Inspectors Without Borders is a joint initiative of the OECD and the UN Development Program. Working in countries like Africa, Asia, Latin America and the Caribbean, it sees tax inspectors work alongside finance ministries in those countries to get the tax that's appropriately due to residents of that country. It's been estimated that for every dollar spent on Tax Inspectors Without Borders there's an additional $100 in revenue to those developing countries. That is an extraordinary payback. I'd encourage the government, through its foreign aid program—limited as it now is—to consider investing more Australian resources in Tax Inspectors Without Borders. It would be an appropriate thing for the government to do in order to deal with some of these challenges that tax havens pose to those in developing countries.
Tax havens should be a top priority for this government. Since 2013 there's been a joint initiative of the OECD and the G20 called the Base Erosion and Profit Shifting Project. Australia used to be on the steering committee for that. We no longer are. We have stepped from the front seat into the back seat. That's a pity, because it means that we're unable to influence this important conversation and to be leaders on multinational tax avoidance, as occurred during Labor's last term in office. We were at the vanguard of pushing some of these important measures, but, since the coalition's come to office, Australia has been a laggard on dealing with multinational tax avoidance.
The coalition promised to put in place a register of beneficial ownership and then backflipped, killed the idea. They voted against Labor's measures to close multinational tax loopholes when they were in office, and then, despite us supporting their multinational anti-avoidance law, set about lying to the Australian people suggesting that Labor had not supported that law. It's simply not true. Labor has supported the modest multinational tax avoidance measures the coalition's put in place, but we would like to see them go further. An estimate from Gabriel Zucman and co-authors is up to $16 billion of additional revenue could be flowing to tax havens as a result of the failure to properly crackdown on tax havens.
Other countries are looking at alternatives such as digital taxation. Other countries are moving more quickly on the public reporting of country-by-country reports. Other countries have better registers of beneficial ownership, providing accurate information as to who really owns Australians' firms. Other countries have whistleblower protection laws, qui tam laws, which have been in place in Britain and the United States for many years. They have better rules around government tenders, ensuring those who are tendering for government contracts disclose their country of tax domicile. Other countries have significantly greater tax transparency than Australia does.
As the member for Kingsford Smith pointed out earlier, Labor's laws that would have seen reporting of taxable income and tax paid by firms over $100 million were wound back by the coalition in office with a dodgy deal with the Australian Greens. When the threshold went from $100 million to $200 million two-thirds of private firms were taken out of the tax transparency net. We were told before those laws came into place that they would create a kidnap risk. A variety of questionable excuses were used. I have seen no evidence since those laws came into effect that any of those scare campaigns were anything other than vested interests trying to look after their mates. So it would be perfectly appropriate in an era in which Australians are hankering after more tax transparency for this information to be expanded and for the threshold to be brought down from $200 million to $100 million.
This tax transparency information has taught Australians the true extent of tax paid in Australia. We can see a significant number of Australian firms, as the member for Whitlam has noted, not paying any tax, including some of Australia's largest firms. The Luxembourg leaks, the Panama papers and the banking royal commission should have taught us that tax transparency is of the utmost importance and that, if you're going to have faith in the system, you need significant expansion of tax transparency.
The coalition has misstated to the Australian people its own record on tax transparency. The moment of greatest chutzpah came when the Prime Minister tried to claim credit for a $300 million tax judgement against Chevron, despite the fact that that judgement was only allowed because of Labor's laws, which he had voted against. He and his colleagues voted against closing a multinational tax avoidance loophole, which was then used to add $300 million to the budget bottom line, and he patted himself on the back for it. What he really should have done was go to the Australian people and say: 'I'm sorry. I got it wrong.' Frankly, the Prime Minister should be saying he's sorry a whole lot more often, on everything from sports rorts to the fact that people can't buy those back-in-black coffee mugs from the Liberal Party website any longer. But the Prime Minister is not really one for apologies, and he wasn't one for apologising for having wrongly voted against Labor's measures to close multinational tax avoidance loopholes.
We've seen from the coalition advertisements patting themselves on the back for getting tough on multinational tax avoidance, while at the same time slashing compliance staff in the tax office. The tax office has lost some 4,000 staff since the coalition came to office in 2013. It has lost a huge number of its staff, and the coalition are then calling on the tax office, like they're calling on so many Public Service agencies, to do more with less. We know that, when you cut tax office staff, you cut into the revenue base, because the projection for additional tax office staff is that they more than pay for themselves in ensuring that multinational companies do the right thing. We have a coalition government that is much more a mateocracy than a meritocracy that is looking after multinational tax avoidance loopholes.
I'll take that interjection from the minister. The minister needs to turn the Hansard and refresh himself with the fact that Labor never voted against the coalition's multinational antiavoidance laws. It is simply a lie put about by the Liberal Party to try to distract from the fact that they, indeed, did vote against Labor's loophole closing. They wrongly claimed that our loophole closing was retrospective. We said that their laws were inadequate, but we would vote for them all the same because modest measures were better than nothing.
We saw the Treasurer, when he had his former resources portfolio, make speeches to large mining conferences in which he proudly said to the multinational firms there that he was opposed to closing multinational tax loopholes, that he would fight to keep those loopholes open. So when they're with their well-connected insiders they're always happy to fight for loopholes. When they're advertising to the Australian people they pretend they're serious about tax havens. They simply are not.