Monday, 15 June 2020
Treasury Laws Amendment (2019 Measures No. 3) Bill 2019; Consideration of Senate Message
That the amendments be disagreed to.
The government does not support this last-minute amendment to an unrelated bill prior to the government's response to the relevant Senate committee's report being considered. Accordingly, the coalition does not accept this amendment.
We're calling on all members of this House to support the amendments. They're considered amendments, and they are important amendments. For the life of me, I don't know why the government hasn't explained why they won't be supporting them. Let me go to the details. The Senate, when it considered this bill on Friday, moved a series of amendments which would remove an anomaly in the corporations legislation that enables approximately 1,000 large proprietary companies to avoid the obligation of reporting and providing those reports to the Australian Securities and Investments Commission. This is a carry-over from the original incorporations arrangements dating back to the mid-1990s. At the time that the grandfathered arrangements were put in place, it was actually a Liberal member in the other place who pointed out these should be a short-term arrangement, and that there should be a review conducted by the Australian Securities and Investments Commission. It was the expectation of all members that these exclusions would be removed from the law over time.
When this matter was debated in the other place, the minister was invited on a number of occasions to explain to the Senate and to the Australian people the public interest case for this exemption. Not on one occasion but on several occasions it was put squarely to the minister to explain what the public interest case is for these exemptions. It was pointed out that, of the long list of companies that are covered by this exemption, quite a number of them are donors to the Liberal Party. I don't say that that is the reason that the government is today so adamantly resisting these amendments. But it does raise a question about why the government does not accept what on the face of it is a very sensible amendment.
It's not just the Labor Party and it's not just the crossbenchers who have thrown their support behind these amendments. In fact, in the Senate Standing Committee on Economics inquiry into tax avoidance and minimisation, the Australian Securities and Investments Commission itself has recommended that these amendments should be removed. In its submission to that inquiry, No. 32, ASIC pointed out that these amendments really had no further work to do, and that they in fact created an inequity between certain forms of incorporated businesses. There is an important point here. When public companies produce reports on their financial arrangements and lodge them with the Australian Securities and Investments Commission, not only does it make that information available to the public at large but it also enables the Australian Securities and Investments Commission and the Australian Taxation Office to ensure that all affairs are in order in relation to taxation payments. A lack of financial transparency is one of the mechanisms by which large corporates in this country are able to avoid paying tax. So, if the minister and the government are opposing these amendments, it's important that they explain why. They should explain to the Australian people why it is more important to continue an outdated protection for around 1,000 large proprietary companies, many of whom are political donors. Why is it more important that those companies continue to enjoy that exclusion from the reporting requirements?
If they vote against these provisions today, they are saying quite clearly that those other provisions of the bill which go to providing relief to financial advisers are less important to members of the Liberal Party—that it is less important to members of the Liberal Party to provide the relief in relation to professional qualifications than it is for them to continue to protect the interests and the lack of transparency for these large proprietary companies. It's up to members of the Liberal Party to make the case as to why this should continue. They've failed to do it to date.
The Treasury Laws Amendment (2019 Measures No. 3) Bill 2019 is a sensible amendment. It will increase transparency and consistency in our corporations law. The amendment, of course, removes the exemption that allows certain proprietary companies to avoid lodging financial reports with ASIC under our corporations law. This is a regime that was put in place in 1995, and it was only ever meant to be a temporary regime. It wasn't meant to be a lasting legacy around transparency and accountability in our corporations law. It does provide an exemption to some of the wealthiest individuals in the country who run private proprietary companies so they can avoid that transparency and accountability. Any company established since 1995 is required to lodge their financial reports with ASIC.
When Labor was last in government we established the new transparency and accountability regime relating to proprietary companies and their taxation affairs, and that was established to ensure that all Australians had an indication and the facts about the amount of tax and the turnover of very large companies that were avoiding transparency and accountability because they simply weren't required to report on an annual basis what their turnover and their taxation arrangements were. We put that regime in place and we attempted to remove the exemption for the companies that we're talking about here—that is, those that had a turnover of more than $100 million per annum. That would have increased transparency and accountability around the taxation affairs of those companies. More Australians would have known how much tax some of those companies were paying.
Some of this regime has survived. Some of it was watered down by the coalition government when they teamed up with the Greens to reduce the number of companies that were covered by that particular provision. It's quite interesting reading, when those figures come out on an annual basis, because they uncover the fact that there are quite a number of large proprietary companies in this country that have multibillion-dollar turnovers but pay no tax at all in Australia. Australian society is not benefitting from the wealth that's generated for these proprietary companies in our community. When the coalition was elected, as I mentioned, they reversed some of the changes that were made by the Labor Party and they did it on the basis of some outrageous claims, one of those being that there would be an increase in kidnappings if this particular provision remained in our corporations law.
We all know the term 'astroturfing'. In politics it's a term that refers to creating a false impression that there's a groundswell of community support for a particular issue, and when we look behind it we see that it's being driven by certain MPs and certain individuals who stand to benefit from the particular issue being pushed. A great example of astroturfing, if you were to look up the word in the dictionary, should be the coalition's response to Labor's laws on transparency and accountability around taxation, because their claims about kidnapping and the other evils that would come from this particular law if it remained in place simply weren't there. It was a made up campaign by those opposite who were seeking particularly to support big businesses in this country that were avoiding their obligations to report the amount of tax that they pay.
The average Australian worker can't do that. The average Australian worker who goes to work on a daily basis, works hard and pays their PAYG tax can't avoid that transparency; they can't avoid having to pay their fair share of tax in this country. Why should big proprietary companies do so? That's why this amendment is a sensible amendment. It adds transparency and accountability to Australia's taxation system for some of the biggest corporate players in this country. That's why all MPs should be voting for that increased transparency and accountability.
I wish to speak briefly on this amendment that originated from my Centre Alliance colleague Senator Rex Patrick. I think Senator Patrick must be commended for identifying this longstanding inequity in our tax system that has created and then protected a privileged class of exceptionally wealthy Australians and their private companies. These private companies are benefiting from an unfair loophole that allows them, and only them, the special privilege of not having to lodge reports with the government regulator, the Australian Securities and Investments Commission. This creates an unfair two-tier system where transparency and accountability are applied to most but are absent for a special select few. The ASIC is on the record: it supports the removal of this exemption. A fundamental aspect of the rule of law and, indeed, democracy is that we should all be treated equally before the law. It is such a fundamental principle that it finds its origins in Solon's laws in ancient Athenian democracy in the sixth century BC. And yet, in this place, we're allowing a two-tier system. It's time for the government to prove that they stand for democratic equality before the law and not for special deals for mates. I can't think of a single reason why any member on the other side of the chamber would not vote for this amendment. So I call on the House to support the amended bill from the Senate.
Louis Brandeis famously said that sunlight is the best disinfectant, and the issue we're facing here is squarely an issue of sunlight. As the member for Mayo has highlighted, it's also an issue of consistency. Why should a company that was formed before 1995 be treated differently to a company formed after 1995? The coalition likes to talk about new businesses and about the importance of level playing fields. Well, this is the very antithesis of that. This is advantaging older businesses and it's tilting the playing field towards them. Why should 1,500 firms that were established before 1995 have access to a different transparency regime than every other private firm? It makes no sense whatsoever and it is a bizarre quirk of history.
As the member for Whitlam and the member for Kingsford Smith have outlined, the grandfathering provision was put in place in 1995. It was intended to be temporary. But the next year the Howard government won office and made a temporary grandfathering measure permanent. We're now 25 years on. The grandfather has become a great-grandfather, and it is time to get rid of it. Labor supported the removal of this grandfathering provision in 2015 when former Senator Ricky Muir, backed by Nick Xenophon, moved it. I note in passing that at the time the Greens did not support that measure in the Senate. In 2018 the Greens had had a change of heart and moved for the abolition of this exemption. Labor, again, consistently supported it.
I note, as other members have said, that ASIC supports the removal of this exemption. How could they not? It is a simple matter of consistency. The private companies on this list are not tiddlywink firms; some of them are significant entities. As a Guardian report from 2018 highlighted, a sixth of them are government contractors or political donors. It is only right that they should be subject to the same reporting regimes that a new firm has to sign up for. As a matter of consistency and basic ethics, it makes no sense whatsoever to allow these firms to hide under the cloak of darkness. Firms can't even get themselves off this list if they want to. Former Prime Minister Malcolm Turnbull reportedly attempted to get one of his companies off the list of 1,500 and was unable to do so. It is a bizarre anomaly, intended to exist for a few years in the 1990s, which persists on the books of our tax laws today.
Labor's stance in favour of transparency on this issue is consistent with our fighting for tax transparency across the board. As the member for Kingsford Smith has noted, it was Labor who put in place tax transparency for Australian firms, saying that firms with a turnover of over $100 million should be required to disclose through the ATO total income, taxable income and tax paid. But that was wound back for two-thirds of private companies by a dodgy deal between the Liberals and the Greens that took two-thirds of the large private firms out of the tax transparency net. The Liberals have made some bizarre claims over the years about the impact of transparency, suggesting that it would cause kidnap risk—suggesting that it would somehow cause a flight away from private firms. I haven't seen any evidence that that has come to pass with the firms that have been disclosed. That is why Labor took to the last election a policy to restore the $100 million threshold for private firms.
We also took to the last election policies to make country-by-country reporting public; to offer US-style rewards for whistleblowers who report entities evading tax to the tax office; to require that if a firm is doing business in a tax haven it disclose that matter to its investors as a material tax risk; and that a firm that wants a government contract should disclose, through the tendering process, its country of tax domicile, so we can ensure that firms that are located in tax havens disclose that to the Australian public. We required public reporting of AUSTRAC data showing aggregated cash flows sent to overseas jurisdictions, including tax havens, and that the dodgy phoenix directors be named and charged. Labor stands for tax transparency.
Thank you for the opportunity to speak today in support of this very sensible amendment. Before speaking specifically on the amendment, can I make a couple of observations about the Treasury Laws Amendment (2019 Measures No. 3) Bill 2019. This is yet another bill in relation to taxation that we face in this place that is not particularly objectionable but that is incredibly narrow, unambitious and just not good enough for the circumstances that we face.
As earlier speakers on this side—the shadow Assistant Treasurer, the member for Kingsford Smith and the member for Fenner— have pointed out, there are many significant issues that no bills that we face in this place deal with. Not only is this bill a bill which fails to deal with an inconsistent exclusion—I'll get to that when I talk about the amendment—but this is a bill that's failed to deal with broader issues of transparency. As the member for Fenner just pointed out and the member for Kingsford Smith pointed out, there are issues to do with international taxation that we should be looking at in this place. Base erosion and profit shifting is a major issue for the Australian economy and all advanced economies. These are issues that we should be debating in this place, but instead we get bill after bill after bill which corrects semicolons, and it's not good enough. The people of Australia and the economy of Australia deserve better.
The OECD and the G20 have set up a major program with 135 participating countries developing 15 actions—a major suite of policies to deal with base erosion and profit shifting. We don't discuss any of that in this place in relation to specific bills—substantive bills—that are put forward. Instead, we deal with minor technical amendment after minor technical amendment. We're happy to support those going through if tweaking the tax bills are necessary, but what we also need to see in addition to fixing up minor technical issues with taxation legislation are substantive framework issues to improve the tax base, to improve the efficiency of our tax system. Let's look at the specific amendment that Rex Patrick has put forward and that I will also speak in support of. Rex Patrick's amendment removes an exemption that allows certain proprietary companies to avoid lodging financial reports with ASIC.
I love the fact that those opposite aren't speaking at all on the substance of this. The only contribution in Hansardon this debate from those opposite will be correcting the reference to the senator. That's fine; I will refer to the senator by his name.
Mr Howarth interjecting—
I look forward to seeing the strong defence from the assistant minister opposite on why this exemption should continue. I look forward to seeing a very strong defence from him on that.
As the shadow Assistant Treasurer pointed out, there is a strong onus on those opposite to explain why this exemption should continue. It is an exemption that doesn't make any sense. It is an exemption that was only meant to be temporary, but it's 25 years later and we are still discussing it.
As earlier speakers on this side have pointed out, in government we proposed getting rid of companies with turnovers of more than $100 million from this list. The coalition in concert with the Greens overturned that change on the basis that it could lead to kidnapping or other unintended consequences. Well, if that is a genuine argument in favour of the exemption, one has to wonder why it applies to only a subset of companies that managed to somehow fall into this exemption prior to 1995 but not those after. Presumably kidnappers are somehow aware of when companies fell into or out of this exemption. This is a group of kidnappers who are extremely familiar with corporation regulations and have easy access to ASIC records. It is a bizarre argument.
Frankly, it is a two-tiered system that no longer works. The member for Mayo pointed out that where you have a two-tiered system there has to be a very good reason for it. Surely the presumption in our tax laws, as in any laws, should be that everyone is treated equally. This is an exemption that was only meant to be temporary. It is an exemption that should be removed. It is an exemption that is resulting in a whole raft of companies not being subject to the transparency that companies as a whole are. Transparency, it has been shown, is one of the key regulatory mechanisms that underpin the effectiveness of regulating our financial services sector. The banking royal commission, which we had called for 28 times before it finally arrived, showed that. It is time that the law reflects the benefits of transparency by removing this exemption.