Thursday, 14 May 2020
Treasury Laws Amendment (2020 Measures No. 1) Bill 2020; Second Reading
The original question was that this bill be now read a second time. To this the honourable member for Whitlam has moved an amendment that all words after 'That' be omitted with a view to substituting other words. The immediate question is that the words proposed omitted stand part of the question.
The opportunity cost of multinational tax avoidance in Australia is an issue that reaches into the lives of every Australian. This bill and the Tax Avoidance Taskforce demonstrates that multinational tax avoidance in Australia is an issue that is on the government's radar—or that it is aware of it—but so far hasn't seen much action.
The importance of combating tax avoidance cannot be understated. The 2016 revelation of the Panama papers was a shock to the system for those around the world engaging in shady tax avoidance practices. The 11.5 million leaked documents galvanised governmental action around the world. Australia's response, such as a tax avoidance task force, was broadly successful in achieving its stated aims. This bill builds on the task force aims. The bill schedules that there are obvious benefits to redefining the nature of a significant global entity at schedule 1. We can pass this bill and the wording of an amendment will change, but dishonest actors will continue to shelter Australian money in offshore tax havens, and multinational corporations will continue paying little to no tax. The central revelation of the Panama Papers was the scale of the problem we face. Tax havens and avoidance have become a feature of the global economy. We can do more than tweak definitions.
A key avoidance technique particularly impacting Australia is transfer mispricing. Two companies which are owned by the same multinational group transfer goods and entities between each other at a predetermined price. It's estimated that roughly a third of international trade occurs in this way. Wealth crosses national borders at a substantially reduced tax rate. The transferred wealth often becomes sheltered in offshore tax havens. Estimates from 2018 advise that the figure housed in tax havens is US$8.7 trillion, starving developed and developing countries alike of between US$500 billion to US$600 billion in valuable public spending each year. This has implications. The money's not being invested or capitalised on in any way; it's simply sitting there, benefitting nothing and, more importantly, no-one.
I asked the question: What is the true cost of tax avoidance? What are the costs to the citizens of Warringah? What are the costs to the citizens and governments of Australia? And what are the costs to the world at large? The costs are many. Every year small businesses in Warringah pay their fair share in tax. From the Salty Rooster on Queenscliff Beach to Janos Kiss Hair in Cremorne, much loved Mosman businesses, back with a new lease of life, these honest businesses are asked to contribute roughly 27.5 per cent in tax, whilst a major telecommunication company involved in the Panama Papers paid zero per cent. Every year the Australian government loses federal revenue from tax-avoiding corporate groups. The tax gap, the amount estimated which the ATO would receive if large corporate entities were legally compliant, is worth $109 billion. One-third of these companies fail to pay a cent. Every year the capacity for developing nations to invest in their people is undermined by tax-avoidant behaviour, and these governments tend to rely more on corporate tax revenue.
What are the solutions? The international tax system was put together under the League of Nations a century ago. It's time for change. I'm encouraged to see the OECD's proposals for resolving the challenges of an increasingly digitised and globalised economy, but under their proposed framework multinational enterprises would pay a minimum level of tax whilst simultaneously providing no incentive for corporations to profit shift away from low-tax jurisdictions. Multilateral cooperation will be vital in solving this issue and returning wealth that was produced in Australia back to Australians. I call on the Australian government to advance this international debate.
It's going to be crucial for us, if we're to fund the services that Australians need and expect and rely on, to make multinationals pay their fair share of tax. I think there's universal agreement on that, if there hasn't always been universal action. There is certainly a widespread view amongst the Australian people that multinationals are getting away without paying any tax through different structuring of their arrangements across various jurisdictions, transfer pricing et cetera. We've all heard the lingo, but the effect of it is that, even though some multinationals do huge amounts of business here in Australia, they often end up paying little or next to no tax. So there is agreement on that. Certainly, there is agreement on that from the Greens' point of view. We have been amongst the fiercest pushing for multinationals to pay their fair share of tax. That is going to be needed in order to fund services that Australians expect.
One of the concerns is that there is an increasing linking of this by the government to the need, they say, to urgently pay down debt that has been incurred as a result of the response to the coronavirus crisis. And the opposition, in their second reading amendment, point to the question of weakening our economy. It's to those questions in connection with this bill and in connection with that amendment that I want to speak specifically. After years of campaigning against public debt and deficits, the Liberal Party has now delivered the biggest deficit in Australian history. They might feel ashamed, and I'm sure the shadow Treasurer will do his best to make them feel ashamed, because Labor seems to have taken all the wrong lessons from the last few years and are doing their best impression of an austerity obsessed Tony Abbott right now. But they shouldn't be and nor should the government.
Debt and deficits are not good or bad per se. They are a vehicle we can use to improve the quality of peoples' lives. We can use them to get people who want work into a job. We can improve our flagging productivity, and we can use them to build the infrastructure we need to protect us from the climate emergency. Public debt to invest in our future is absolutely critical to the wellbeing of our people, especially young people, who have been hit the hardest by the shutdown. But, if both the Liberal and Labor parties continue down this path of demonising debt and deficits, we will only end up in one place: austerity, and that means harsh budget cuts under the auspices of so-called tightening the belt. And what this means in real life for real people is more misery.
We saw it in the aftermath of the Great Depression, and we saw it as recently as the UK response to the GFC by their Conservatives that led to another 800,000 children living in poverty. History has told us clearly that cutting back on public spending after an economic crisis prolongs and deepens the recession and makes any recovery harder than it should be. If our two parties of government, as they call themselves, keep demonising public debt and deficits, then what austerity will guarantee for our country is economic stagnation, a rising cost of living, cuts to social security and public services, falling incomes and even higher unemployment. We can't cut our way out of this crisis. We have to invest to recover. Yes, we should tighten the loopholes to make sure multinationals pay their fair share of tax—absolutely—but now is also the time to use the cheapest money available in history to build a new future, create jobs and clean up our economy. Hypothetically, even if Australia tripled its net debt it would still be below countries like the US, UK and France. We are nowhere near crisis levels of debt, as some are telling us. Instead, this is our chance to use debt to transform our society and create a cleaner economy and a fairer society. If we can remake our society to protect us from a virus, we can remake it to look after people and our environment. If we choose to invest more now, we can build a better future. What this pandemic and the response to the economic crisis has shown is that the government is able to respond to any big problems we face, so long as they listen to the scientists and the experts and we mobilise the collective resources of society for the common good.
The government has rapidly expanded our public debt to respond to this crisis, but what happens next is just as important. We can't simply cut and save our way out of an economic crisis and hope that big corporations will pick up where government has failed, even if we do make some of them pay their fair share of tax, as this bill is proposing. Because, at the same time as we have these measures, there is talk from the government about lowering company taxes. Lowering company taxes, slashing public spending and eroding workers' rights will only further entrench disadvantage. If the government and opposition genuinely care about what legacy and what burden we are leaving to the next generation, let's ensure that the choices we make now are in the interests of young people, not the government's big corporate donors.
After World War II, government debt hit a record of over 120 per cent of GDP. Yet, it was paid off, effectively, within a decade—just a decade—because it was used to grow the economy and get people into secure work. We can achieve the same results here now if we borrow to invest to grow a clean, fair, caring economy. Expanding public debt in this time of crisis is central to good economic management. If we make the right investments, then by combining government borrowing at record low interest rates, with a better tax system, where the polluters and multinationals pay their fair share of tax, we can increase productivity and wealth and naturally bring the budget back to balance without the need for austerity measures or rushing to pay down the cheapest debt in history.
We owe it to the next generation to take this investment path. Let's not forget that young people were hard hit by the GFC and underemployment remained persistently high for years, even as the general population recovered. Before the coronavirus crisis started, nearly one in three young people in this country either had no job or not enough hours of work. The coronavirus crisis is set to make this much worse. Youth underemployment could be as high as 20 per cent coming on top of years of high youth unemployment and underemployment following the GFC. Right now, we either risk losing a generation to economic devastation and the climate crisis, or we can all recover by investing in a way that leaves no-one behind.
The government has a choice. It can build a better future for all of us through a Green New Deal, with better TAFEs, universities and schools; a well-resourced public health system; a manufacturing revival of green steel and battery storage; and a high-quality universal public service and public infrastructure. All these improvements to our lives require jobs, and lots of them. We get the CSIRO, or other Australian manufacturers, to make the vaccine when it's developed, so that we don't have to rely on Donald Trump or another country prioritising their own distribution. We financially compensate carers, create 40,000 construction jobs and 4,000 apprenticeships to fill the public housing gaps, and create jobs in our regions, especially bushfire-hit regions, through programs of environmental restoration. We can clean up our local habitat and waterways, so that all our lakes and rivers are swimmable. Restoring the health of our country creates lots of jobs—the crucial jobs that the private sector will not provide—which is why the government must step in to lead the way out of this crisis.
We should not be afraid of debt, because, if we use it wisely, we will grow that clean economy and that caring and creative society, and be in a much stronger position in a few years time to pay off that debt than if we just pretend, as the Liberals are proposing, that we can cut our way back to success, or if we listen to Labor and believe that debt and deficits are things to be demonised. This is the choice: a Green New Deal or austerity and misery. It seems that the government and Labor are lining up to stand together on the wrong side of this choice, but the Greens will continue to fight for recovery over austerity and investment over cuts.
In summing up, as I've outlined previously, the government's committed to strengthening the integrity of our tax system and to improving the efficiency and effectiveness of our super system. The measures in this bill will build on those two commitments. Schedule 1 to the bill amends the definition of a 'significant global entity' to ensure that multinationals can't structure to avoid our multinational tax integrity rules, which remain some of the strongest in the world. SGE, or significant global entity, is a concept to define, generally speaking, a group of entities interrelated by a control relationship that could enable non-arm's-length dealings of special interest to tax authorities around the world, including, of course, the Australian tax office. Many of the significant actions undertaken by the government to tackle multinational tax avoidance in recent years rely on this definition. This measure will ensure members of large business groups, headed by propriety companies, trusts, partnerships, investment entities and individuals are subject to these stringent integrity rules.
In addition, schedule 2 to the bill will make permanent the current temporary CGT relief for merging superannuation funds from 1 July 2020. This will facilitate and encourage, or certainly remove one of the barriers to, superannuation fund managers merging, ultimately benefiting the members of those underperforming super funds. This tax relief is important in giving superannuation fund trustees certainty to undertake longer-term planning and merger negotiations. Of course, without this measure inefficient funds may be unable to merge or to exit the industry, likely resulting in members of those funds ultimately having lower incomes in their retirement.
Full details of the measures are contained in the explanatory memorandum. I commend the bill 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. So, the immediate question is that the words proposed to be omitted stand part of the question.