Allegra Spender (Wentworth, Independent) Share this | Link to this | Hansard source

by leave—I move amendments (1) to (5), as circulated in may name, together:

(1) Schedule 2, item 14, page 9 (table item 2A), omit the table item.

(2) Schedule 2, item 17, page 10 (lines 1 to 6), omit the item.

(3) Schedule 2, item 18, page 10 (line 9), omit ", 820-E or 820-EAA", substitute "or 820-E".

(4) Schedule 2, item 76, page 38 (line 22) to page 43 (line 25), omit Subdivision 820-EAA.

(5) Schedule 2, item 143, page 62 (lines 1 to 5), omit the item.

As I flagged in my speech to the second reading debate, I fully support the principle of the bill and the government improving the integrity of the tax system. I certainly support the integrity of the Assistant Minister for Competition, Charities and Treasury in what he is trying to achieve, and I support the principles of what the government is trying to achieve here. However, when I speak to businesses, they tell me they want one thing from government policy—or, actually, two: (1) they want it to be evidence based and (2) they want certainty and stability so that they can make good decisions. My concern is that there are still issues with the drafting of certain sections of the bill which create potential uncertainty, and I am seeking that those parts of the bill be reviewed and receive proper consultation before they proceed through this House.

The problem with the bill is that it introduces complex changes to tax law which have not been subject to consultation and potentially are unworkable. I appreciate that many parts of the bill have been well consulted on, and I commend the assistant minister and other ministers for this work. However, the specific part of the bill which I have a concern with was not part of exposure draft legislation and, because it is technical tax legislation, it is absolutely important that, when we come to these sorts of technical changes, there is public consultation in advance of the bill coming to the House so that any particular issues can be addressed.

The challenge that a number of members of the business and tax community have raised is that, while trying to prevent tax loopholes and multinationals shifting tax away from Australia, which are of deep concern to me—and, frankly, I've been quite outspoken on the need to close tax loopholes, including for multinationals, in areas such as the petroleum resource rent tax framework—potentially there are legitimate business activities that would be captured by this legislation. We should get into the detail and debate what is and isn't included, to make sure that whatever is put forward to the House and the Senate is appropriately targeted at finding that balance between integrity and workability and is appropriate for supporting legitimate business activities.

The changes are also partly retrospective, and that is also of concern to the business community. I've discussed these issues with the minister and I can see that there are different views on this, but I think the fundamental challenge is that there are some technical issues with this bill and those should be resolved before we pass it. The deep reason for that is that, if a bill goes through the House now but is going to be amended—and I certainly hope it will be amended before it passes the Senate—there will be a period of uncertainty where businesses do not know what they should be doing and what rules might apply to them or not. That stops businesses getting on with the work that they need to get on with. The greatest uncertainty is when there's a bill in the House and we don't know if it's going to change. A principal objection is, basically, that we need really good consultation, particularly on technical details, so business has certainty around its investment decisions and the things that it should work into. And that consultation should be done before the bill comes to the House because business uncertainty increases if it doesn't happen.

So my amendments, simply put, say, 'Why don't you move forward with the parts of the bill for which there's broad agreement and there has been really broad consultation; and why don't you hold up the part of the bill which was not part of the exposure draft and has not had the same level of consultation, come back in another period and introduce fundamentally strong legislation which has been through the appropriate exposure drafts and consultation, where, even if people do disagree, there is actually certainty from the community about what is going to be put forward both in the House and in the Senate.'

I want to make sure that my words and my amendments can't be characterised as trying to stand up for multinational tax avoidance, because, frankly, quite the opposite is true. I've been a strong proponent of addressing multinational tax avoidance, but if you're going to change tax policy we should make sure there are exposure drafts that businesses can have legitimate engagement with. Then we can pass these through the House and through the Senate.

Andrew Leigh (Fenner, Australian Labor Party, Assistant Minister for Competition, Charities and Treasury) Share this | Link to this | Hansard source

The government won't be supporting the member for Wentworth's amendment, as I foreshadowed in my earlier remarks. As I've said, I have a great deal of respect for the member for Wentworth, for her passion for tax reform and for her interest in better policy. This dates back to her first speech to the parliament and her remarks about the importance of a tax system that improves productivity in Australia. I regard her as a member of the highest integrity, somebody who has a keen interest in public policy and in good economic reform.

The government is not supporting this measure because, by removing the proposed debt deduction creation rules from the bill, it would remove an important integrity feature of the bill. This side of the House has a keen commitment to multinational tax integrity. That was represented in the 26 government speakers who spoke in favour of this bill. Twenty-six of my colleagues took the time to prepare and present remarks about the importance of closing multinational tax loopholes. They spoke about the importance of revenue for the communities they serve, of adequate revenue to fund health, education, community services and infrastructure. They spoke about the issue of fairness, about the importance of achieving a level playing field, and they spoke about their frustration, that multinational firms shouldn't get a tax benefit from artificial debt.

The strengthened thin capitalisation rules play an important role in ensuring deductions are directly linked to earnings and legitimate commercial activity. Engineering excessive debt deductions is one of the easiest ways of shifting profits out of Australia and into a low tax jurisdiction. If the member for Wentworth's amendment were carried, it would have the effect of allowing artificial debt deduction creation schemes to continue operating, meaning less tax revenue to fund vital services.

Australia supports the OECD's action plan on base erosion and profit shifting, and these measures are entirely consistent with that OECD work. The government has worked extensively with stakeholders. We have signalled, on the initial tabling of the bill on 22 June 2023, the importance for the government of balancing tax integrity with supporting genuine commercial activity.

As I outlined earlier, that consultation has seen 17 meetings by Treasury, 54 written submissions to the exposure draft. Those who were asked to be public, published on Treasury's website. There has been extensive consultation by the government on this measure, which we took to the last election, having announced it in April 2022. This measure is not being rushed. The consultations haven't been forgotten. We have engaged with stakeholders, with industry, with civil society and with experts.

We understand that there will be multinational firms currently using artificial devices to deduct debts in low tax jurisdictions or via low tax jurisdictions who would prefer not to pay more tax, but if we don't close this loophole then millions of dollars of revenue will be lost. The revenue cost of the member for Wentworth's amendment runs into the millions of dollars. Those millions of dollars will, effectively, have to come out of the pockets of regular Australian taxpayers, of ordinary businesses and households. All will be borne in the form of higher national debt or inferior services.

The government's commitment to multinational tax integrity is steadfast. We do this through our engagement with international partners, which are all moving in the same direction. Let's make no mistake. Right now, there are stakeholders in other countries arguing for a slowdown, but those countries are moving ahead on these important tax integrity measures. Australia should move ahead too with the global consensus on closing multinational tax loopholes.

I thank the opposition for their announcement that they will not be supporting the member for Wentworth's amendment.

Question negatived.

Bill agreed to.