House debates

Thursday, 30 November 2023


Treasury Laws Amendment (Tax Accountability and Fairness) Bill 2023; Second Reading

11:28 am

Photo of Keith PittKeith Pitt (Hinkler, National Party) Share this | | Hansard source

The Treasury Laws Amendment (Tax Accountability and Fairness) Bill 2023 is a complex bill, but I'll be focusing my remarks on the PRRT, the petroleum resource rent tax, deductions cap. In terms of the complexity—to give the House a bit of an indication—here's just one section of the proposal:

A person to whom the deductions cap applies will be taken to have a taxable profit of 10 per cent of their assessable receipts derived in relation to the project and the year of tax, with PRRT being payable on this amount of deemed taxable profit. That person will be taken to incur augmented denied deductable expenditure on the first day of the next financial year.

It has always been a very complex methodology.

On our side of politics, we stand for lower taxes. To me that is a value of our party. It is not a guide. It is not something that we should throw away loosely or carelessly. It is of value, in my view, and that value is one that I'll stand up for in this circumstance. I'll be opposing the government's original proposal on that basis and for a range of other reasons, which I'm about to outline. Fundamentally, this is a proposal about an additional $2.4 billion worth of tax to be garnered by the Labor government from the offshore industry. This is an industry which is under attack by this government. It is outrageous: the things that they say compared to the things that they do.

To give you an example, for the mining and resources sector, according to the ninth annual Corporate tax transparency report, the tax payable by the mining and energy companies amounted to $42.4 billion in 2021-22—in one year alone.

It was a staggering 50.6 per cent of all corporate tax collected in Australia during that period. Some may say that's a one-off, but it's not. To give you an indication over a period of time, between 2012-13 and 2021-22, according to the Royalty and company tax payments report by EY, the sector paid a staggering $295 billion. But apparently, according to those opposite, that's not enough.

The industry is getting penalised from every single direction, and, in my view, this will be the feather that potentially breaks the camel's back. It is quite incredible. Let's look at some of the things that this government has done that directly impact the feasibility, the profitability and the availability of the essential resources that this country not only needs but relies on for taxes and royalties to pay for the roads, schools and hospitals that this country requires and in fact our citizens deserve. Here's the first one: the safeguard mechanism will ratchet up by five per cent every year to 2030. That sounds like an interesting sort of description—'safeguard mechanism'—but what it does is it guarantees an increase in costs, and, at some point between now and when this policy comes to fruition in its entirety, these businesses will become unprofitable, particularly if they're in the cement industry. We've already seen the aluminium industry say that it resulted in a writedown of over a billion dollars of their aluminium assets and their production assets, and we see an attack on offshore through this change in PRRT and also the safeguard mechanism.

Because of that safeguard mechanism, every board, in my view, is working out at what point their business becomes unprofitable, at what point they can't meet these requirements and at what point they're going to have make very, very difficult decisions. It's not only those decisions but also final investment decisions already made in an industry where it can take up to 10 years in terms of lead time through to production. Once again, this Labor government is moving the goalposts. They've moved the goalposts on the safeguard mechanism, and now they're proposing to move the goalposts on taxes that affect offshore through the PRRT. What will they do with that money? Here's one expenditure: they give nearly $10 million to the Environmental Defenders Office, who many here may not have heard of, and then they give them more than $2 million a year ongoing. What does the Environmental Defenders Office do with that money? It attacks offshore and mining projects, looking to stop them through the courts. So taxpayer money goes to apply lawfare against projects that employ literally tens of thousands of Australians and pays them very, very well for their technical skills and expertise.

I have two examples. The Barossa, up off the Northern Territory, was a $5 billion project. It was roughly halfway expended—it might have even been further than that—and the Environmental Defenders Office found a gentleman in the Tiwi Islands who the courts determined hadn't been consulted enough. That project got parked up. You think about what the cost impact has been not only to that company but to the shareholders, who are, in the majority, Australians. They're the Australian people. They're Australian superannuation funds. They're the ones looking for a return for their superannuation, in particular, into the future. The project is parked up because of action by the Environmental Defenders Office, which is funded by the taxpayer through the Labor government budget. So you have an attack through the safeguard mechanism and you have an attack through additional taxation on offshore assets, which have significant lead times, decision times and expenditure. The gas from the Barossa project is required to keep the Darwin LNG plant open. For the 20-year refit of the existing Darwin LNG facility, it needs backfill gas and it has to come from this project because the lead time is so long, and now it's held up in the courts.

Now we see Woodside, who took a final investment decision on Scarborough, a roughly $15 billion project. Admittedly, while I was the minister, I was very pleased about that. This is a significant investment in Western Australia, a resources state that relies on this industry for its economy, for royalties and taxation and for employment. Now they find themselves in a court battle, similarly, with someone funded through the Environmental Defenders Office to attack the project and to stop it on the basis, if I recall correctly, that there were whale songs that might be affected or impacted.

I don't understand what that means. I know that, as part of the process, before they get an approval from NOPSEMA and others, they have to have demonstrated that they've achieved consultation and they've done all that sort of work. But now we see another $15 billion project held up by a group, which is funded by the taxpayer, under this Labor government, that now wants to take more tax from this industry—not less tax, more tax—and put these projects at risk.

On top of that, they're getting the tax through what's allegedly a 'closing the loopholes' bill on industrial relations. And these decisions are already taken. To retrospectively go back to an industry which invests significant amounts of money, to see the Japanese ambassador saying that there is now a sovereign risk for investment in Australia—one of this nation's greatest partners for trade, for export and for investment—is just extraordinary. It is astounding. Does the government not understand what that means?

You need tens of billions of dollars of investment to make these projects occur. Without them, there will be a gap in production, and that gap will be in gas. And without gas, guess what? Well, you can't make kayaks, you can't make neoprene wetsuits and you certainly can't make fertiliser. This nation also relies on agriculture, which needs a fertiliser price that is competitive. Otherwise, they simply can't compete. They can't buy what's necessary, they can't deliver it and they can't grow food. If the sovereign risk is too high, if these projects fall over, if the companies decide not to continue their investment—and I know there are some people in the chamber who might think that's good outcome—why would anyone else come here and invest in the sector in this country?

If we look at some of the information put forward by the Minerals Council—and these are their numbers around global mining and investment required to reach net zero—guess what? You need US$4 trillion by 2030. You need 140 additional copper mines, 60 nickel mines, 50 lithium mines and 17 cobalt mines. I'd like to see them in Australia, but why would anyone come here and invest to then find that they have a government that will retrospectively change the rules that impacts their profitability and their ability to actually deliver these projects, that impacts their ability to hire anyone, pay them and pay the taxes? This is quite an extraordinary turn of events.

What else will we see? We'll see even more of the taxpayers' money, some of which I'm sure will go towards this appropriation, this additional taxation, from the 'Minister for Energy Secrets' who won't tell the Australian people how much that will be. Minister Bowen has proposed that the taxpayer will prop up and fund and guarantee a rate of return for intermittent wind and solar projects in this country that no-one knows about. Companies won't build them, because they're too high risk; they're unreliable and they're an unknown price. Things are moving. The cost of money has increased. Inflation is going up, interest rates are going up and the cost of construction is going up—the cost of everything is going up! But Minister Bowen's proposal is to take the taxpayers' money, of an unknown amount, and guarantee a rate of return for investors. That will be union and industry super funds. That will be international companies. They are the ones who will then build projects that currently aren't technically nor economically feasible, yet this government wants more money and more taxation to do secret deals on a return for projects that won't work, at a time when the country will need gas in the future because, quite simply, these projects take years and years to deliver.

I ask you: Would you build a house under this government? Would you sign a contract knowing that the government could come back and change their mind? Look at the impact on you as an individual, on the money that you would put forward for the next 10, 20 or 30 years, only to find that that those costs that you thought were right were wrong. They're not wrong because of an estimate or a decision that you've taken but because the government of Australia has decided that they will change the rules. They will increase taxes. They will increase green tape and red tape. They will increase costs through the safeguard mechanism. They will fund the Environmental Defenders Office. They will change industrial relations rules, which will make it even harder to deliver these projects. And for what? To what purpose? You cannot expect significant investors to come to Australia and invest in this country if the rules keep changing for projects they've already decided on.

If we look at what happened in Queensland, the LNG industry there was built in under a decade; some $50 billion was invested. That was done and started and initiated under the previous Labor government, under a Gillard led government.

As a result, we have LNG export terminals—three at Gladstone—we have significant exports out of the Northern Territory and Darwin, and we have a significant export out of Karratha and out of WA. All those plants need to ensure they have a supply of gas. If the lead time is 10 years and you make a decision now, in 10 years time you may or may not get the gas. But we can absolutely guarantee that if you change the rules to a point where they simply can't make any money and the project is not feasible, they will not build it. These companies will not build it.

No matter what else this government puts forward, they can't continue to retrospectively change the rules for investors. And who pays the bill? It is the Australian people that will pay. They are the ones that will get higher prices for gas, they are the ones who'll have higher prices and unreliable electricity, and they are the ones who are shareholders in these businesses who get less returns because more taxes are taken out. How much more does the Treasurer think he might need? Forty billion dollars in a year, more than 50 per cent of all corporate tax take, is quite astounding, and they want to attack the industry paying for the things this nation needs.

I will leave my remarks there, but I will reiterate what I said at the outset: I will be opposing Labor's proposal regardless of what discussions, negotiations or other things might happen, because it is fundamentally wrong. If we stand for lower taxes, we stand for lower taxes. It is a values decision. I would urge the government—I would implore them—to stop attacking Australia's biggest employing industry. One point two million Australians rely on the sector for a job. It is a job that pays extraordinarily well, and that is how those Australians pay their mortgages, educate their children and ensure their life is well lived and a contributor to this nation.

11:42 am

Photo of Anne StanleyAnne Stanley (Werriwa, Australian Labor Party) Share this | | Hansard source

The PwC scandal—there can be no other word for it—is of such proportions and magnitude that it is unprecedented in this country. It was a catastrophic failure on so many levels, and it highlighted and exposed huge loopholes and shortfalls in the regulatory framework. I suspect there will continue to be fallout from the scandal for years to come. The government inherited the regulatory mess from the previous government, who largely ignored some of these issues for years. Unfortunately we can't ignore it any longer. It's time to act. I'm pleased to rise and speak today to detail the significant steps that this government is taking to ensure that the concerns the scandal highlighted are addressed and the environment that allowed it to continue can't happen again.

The PwC scandal goes much further than just a breach of handling of sensitive government information. If that were all it was—as bad as that is—we would have been grateful, but the issues go much further and are much more dire. What the scandal really shows, and what it exposes, is a total disdain and disregard to our tax laws. Further, it highlights the huge barriers faced by regulators to respond and a regulatory framework that does not provide appropriate oversight in governance. If we are to rebuild trust and restore people's faith in our tax system, then we need to come down heavily on misconduct and build stronger structures and systems. The work to rebuild this trust, to restore the confidence of Australians, has already begun.

To this end, I am proud of the fact that earlier this year we introduced new legislation to strengthen the Tax Practitioners Board and increase the board's funding by $30 million to increase compliance activities. We've also directed PwC to remove any staff involved with the confidentiality breach from contract work until the outcomes of the Switkowski review are known. But more is required, and that brings us to the matter before us today.

Schedule 1of this bill addresses tax agents and others who advise their clients on how to avoid Australia's tax laws. Astonishingly, current tax promoter penalty laws have remained largely untouched since they were created and have only been applied six times. That's not good enough. Schedule 1 will increase the maximum penalty for promoters of tax schemes, expand the scope of promoted penalty laws and give the ATO more time to identify and penalise promoters.

The aim of these changes is clear. Bigger penalties will ensure promoters face the consequences of their actions and, more importantly, it will deter them from acting improperly in the first place.

Schedule 2 extends the tax whistleblowers protections, as those who report misconduct need to feel safe. Consequently, these changes extend whistleblower protections to those eligible who make disclosures to the Tax Practitioners Board, the TPB. This change responds to key recommendations of the independent review into the TPB and the Tax Agent Services Act 2009.

Schedule 3 refers to the reform of the Tax Practitioners Board. Our regulators need the right tools to identify and discipline those who break the law. Therefore, schedule 3 enables the TPB to conduct more thorough investigations and gives it more time to address complex misconduct, particularly relating to large firms such as PwC.

Schedule 4 will amend limitations in the tax secrecy laws and the Tax Administration Act 1953 that were a barrier to regulators acting in response to PwC's breach of confidence. This reform is necessary because the PwC scandal shows that regulators were limited by overly prescriptive restrictions on information sharing. These amendments will strengthen the power of regulators and boost coordination within the government to identify and pursue breaches of confidence or ethical misconduct. It will act as a deterrent to future misconduct by tax advisers.

Finally, schedule 5, which was open to public consultation from 21 August 2023 to 15 September 2023. This schedule addresses the findings of the two comprehensive reviews which were conducted into the petroleum resource rent tax, the PRRT, and whether or not it was operating as intended for the offshore liquified gas industry. To date, not a single LNG project has paid any PRRT, and most are not expected to pay any significant amounts before the 2030s. The change will ensure that offshore LNG projects make a minimum payment sooner by introducing a cap on the use of deductions from 1 July 2023. These changes will be brought forward and ensure a minimum payment of PRRT from the LNG projects. It is expected these changes will increase the Australian government's tax receipts by $2.4 billion over five years from 2022-23.

Time and again over the last 18 months or so, the government has had to address matters largely the result of the previous government's neglect or inertia. This is another one. The bill before us today represents the biggest crackdown in tax adviser misconduct in Australia's history. More importantly, it's about restoring faith and trust in the tax system, and Australians deserve nothing less. I commend the minister and his staff in the department for the work on this bill. I commend the bill to the House.

11:48 am

Photo of Zali SteggallZali Steggall (Warringah, Independent) Share this | | Hansard source

I rise to speak on the Treasury Laws Amendment (Tax Accountability and Fairness) Bill 2023 and I move:

That all words after "acknowledging" be omitted with a view to substituting the following words:

"the role of gas companies in influencing the drafting of this bill, the House declines to give the bill a second reading as it is of the opinion that:

(1) the bill should:

(a) adopt an 80 per cent deductions cap for the Petroleum Resource Rent Tax, lowered from the current 90 per cent, which would double the amount of revenue subject to the 40 per cent Petroleum Resource Rent Tax for that year and remain consistent with Treasury advice provided to the Government; and

(b) abolish the seven-year exemption to the deductions cap which supports the development of new oil and gas projects and is contrary to the Government’s claim to be committed to the Paris Agreement and keeping global warming below two degrees; and

(2) the Government must stop presenting omnibus bills of this nature to the House combining complex, disparate policy issues that require greater interrogation and consideration than is currently allowed for whilst also undermining the Government’s own credibility to present a clear, coherent policy programme".

Yet again we see the government put forward an omnibus bill intended to divert attention, wedge non-government members of this House and avoid scrutiny and accountability. The Treasury Laws Amendment (Tax Accountability and Fairness) Bill 2023 outlines very necessary reform in response to the PwC scandal, but it piggybacks in that legislation a very sneaky attempt at also bringing in the changes to the PRRT, the petroleum resource rent tax, which needs to be much stronger. The government knows that by piggybacking these two very disparate topics in one piece of legislation, we are left with the question: do you support something that is not good enough or do you take a stance against it?

The amendments that I am proposing attempt to deal with that. It's completely unacceptable for confidential government tax information to be used by advisory firms to design and promote a scheme to avoid the very tax upon which they are advising. That was the PwC scandal, and there's no doubt that the Australian people and the residents of Warringah absolutely want us in this place do something about it.

Responding swiftly to introduce reforms that increase penalties for such behaviours and broaden definitions to capture such schemes and practices have widespread support.

Schedules 1 to 4 of this bill do the following: they increase tax promoter penalties, allow more time for the ATO to take civil penalty proceedings in the Federal Court and expand application of tax promoter penalty laws. They extend whistleblower protections for those who make disclosures to the Tax Practitioners Board, boost the TPB's investigative powers, and allow the sharing of protected tax information between the Tax Practitioners Board and Treasury about suspected breaches of confidence by tax intermediaries engaging with the Commonwealth.

I welcome these reforms and note that the Senate, two weeks ago, passed further changes relating to membership of the Tax Practitioners Board. In fact, so sensible are these amendments that I'd imagine nearly every member of this House would support them, as would every Australian taxpayer who expects corporations to pay their fair share of taxes, just like they do. It's very important that the whole consultancy area is cleaned up. Having spoken in this House and strongly advocated for whistleblower protections, the provisions supporting whistleblower protections in this legislation are also very welcome. These are good reforms, and I really, really want to support them.

However, schedule 5 of this bill is an absolute disgrace. It sneaks in reform on a very different issue—how these two things can genuinely be put in the same piece of legislation is farcical—the petroleum resource rent tax, or PRRT as it's known. This is the key issue I want to talk about today. The PRRT is a tax that is meant to deliver to the Australian people money to our economy—it is rental payments for our gas resources—but it doesn't deliver much. The government would like a pat on the back for saying that they're delivering reform in this area, but what they are doing is the bare minimum and really only bringing forward revenue. It's so poorly designed that it effectively allows multinational companies reaping super profits from gas reserves to pay less than one per cent.

Schedule 5 of this bill caps deductions for LNG projects such that the LNG entity will be taken to have a taxable profit of 10 per cent of the assessable receipts derived in a year with tax being payable on this amount. The effect of the cap will be to bring forward PRRT collections for gas projects, but it won't bring in any more revenue to the government. It is a bait and switch. The PRRT, even with the government's proposed reforms in this omnibus bill, is the most lax resource rent tax system in the world—I repeat: the most lax resource rent tax system in the world—at a time of cost-of-living crisis and record profits in the gas industry.

Its failures have been highlighted in recent years, as gas companies have reaped windfall profits yet many projects have not paid any resource tax. Australia has one of the weakest resource tax regimes in the world, and you only have to listen to members of the coalition and the previous speaker to understand just why it is so weak. The blinkers that have been on in relation to this sector are quite amazing, and it has cost the Australian people.

We have one of the most generous tax regimes in relation to oil and gas companies. In contrast, Norway's resource tax system taxes 78 per cent of export profits, delivering a $2 trillion sovereign wealth fund to their economy, supporting healthcare, childcare and social measures, all without discouraging investment. You'll hear a lot of fearmongering about the effect, but the reality is that it's time for the open access, the free run, to end.

In 2023 it's estimated that oil and gas export taxes will deliver some A$145 billion to the Norwegian economy, the equivalent of a staggering $107,000 per family. In comparison, Australia is nowhere. The amendments to the PRRT introduced in this omnibus bill, while being framed as delivering more to Australians, do so very little at a time where so much more is needed. They do limit the amount of deductions that can be applied to determine the PRRT payable, and they do therefore bring forward, but not increase, money payable on that 10 per cent.

This reform brings forward $2.4 billion over the next four years, equating to some $600 million per year. This amount is trivial in comparison to the super profits that have been generated by gas companies in recent years. The government's rhetoric will seek to have Australians believe that this is good policy, and the coalition will make you think that somehow this is terribly unfair on the gas companies. The reality is that this is unfair on the Australian people.

The PRRT is meant to strike a balance of supporting Australia's revenue base by providing an equitable return to Australians from the extraction and sale of oil and gas without discouraging investment. In reality it establishes Australia as one of the most favourable jurisdictions for oil and gas companies. Many projects avoid paying PRRT year after year, often allowing companies to take gas from Australia for effectively nothing. It provides too much support, allowing favourable deduction strategies and incentives—and the deductions increase in value over time.

On the rare occasion PRRT is paid, it is then a deductible expense from the income tax of a company. That is why I wrote to the government during the consultation on the PRRT this year, proposing—and I put this forward in my motion today—that we should do two very important things: we must adopt an 80 per cent deductions cap, down from the current 90 per cent cap; and we must abolish the seven-year exemption to the deductions cap which supports the development of new oil and gas projects. Imagine if the Australian people had the benefit of a seven-year exemption before tax was payable for them. I mean, the audacity is just staggering.

Altering the deductions cap would double the amount of revenue subject to the 40 per cent petroleum resource rent tax for that year and would remain consistent with Treasury advice provided to the government. Having a lower deduction cap at 80 per cent would not negatively impact gas companies, contrary to the dire picture painted by coalition members. Even Treasury advised that the cap could be set lower. In fact their recommendation was a range, and the government elected the weakest element of the range—at 80 per cent—included in Treasury's recommendation. This was revealed under a Senate order. It was not something forthcoming from Treasury.

Tony Wood at the Grattan Institute, Jason Ward from the Centre for International Corporate Tax Accountability and Research, together with the Tax and Transfer Policy Institute, the Australia Institute and an ongoing list of supporters for broader reforms to be adopted for the PRRT—everyone came out, quite stunned, at how generous the government's proposal was. Well, I should say everyone except the gas companies. They of course welcomed it and talked about it as being fair. The former chair of the ACCC, Rod Sims, stated that it could have been three times more valuable to the Australian people, delivering some $21 billion to Australians, with a 66 per cent cap, but the government chose to adopt a 90 per cent cap, helping out gas companies and denying Australians their fair share of revenue.

This brings me to the exemptions for new gas projects, which effectively give new gas projects a 'Get Out of PPRT Free' card, with a seven-year exemption to help them recover their capital costs of establishing and drilling new oil deposits off our pristine coastline and on our beautiful land. For example, for the people of Warringah on our coast, if PEP-11 goes ahead off the coastline of New South Wales, that project will get a seven-year exemption from this cap on deductions. As I note in my private member's bill to end PEP-11—which I sincerely hope the government will support—there is just no return to the Australian people for these projects. This seven-year exemption is contrary to the government's claim to be committed to the Paris Agreement and keeping global warming below two degrees.

We know that we have huge costs ahead in meeting the increased impacts of global warming. It is going to cost the Australian people in their cost of living, in their insurance premiums, and in their safety and security; and yet, when the opportunity is there to recover the revenue for the Australian people to meet those costs from the culprits—the industries that are making this problem worse—we see a meek and small response; we see kowtowing to the gas industry.

The world is on fire. We know we are in a global boiling situation. We are meeting thresholds. We are hitting records all the time. We're in for a brutally hot summer here in Australia. We have seen records dropping in Europe nonstop.

We've seen a catastrophic failure of Antarctic ice to form over the winter. Scientists are pondering what the implications of that are going to be. There are grave concerns about that. In fact, today we'll see the annual climate statement delivered in the House, which will, I hope, paint the true picture of the challenge ahead for Australia.

I know that many small and medium-sized Australian business owners are crying out for the kind of support that the PRRT provides to big oil and gas companies. Imagine if a small SME got seven years before it had to deal with any kind of revenue or profit tax. Wouldn't it be nice for a small SME to get that kind of free ride in the system?

Many Australians are ropeable at the level of support Australia's huge multinational businesses that pay little company tax are afforded—and rightly so. How is it that we design a scheme to support huge multinational companies that take our resources, give us no corporate tax, and then pay little to no resource rent tax in return? It begs the question: why on earth are we giving the same level of support to small business? Reform to the PRRT is significant, and it must be tackled, but it is so significant that it should have its own legislation. It should not be piggybacked on legislation around consultants. Yet the government has tried to sneak in with its universally welcomed PwC integrity reforms to avoid scrutiny.

This bill does not go far enough. It seeks to perpetuate disproportionate and grossly inappropriate support for the gas industry. It is a lost opportunity for greater reform that would deliver more to the Australian people for health care, transport, child care, education, NDIS and ageing. We have so many challenges and so many demands on the budget. Proper scrutiny is warranted. I hope the Senate will not allow such a significant opportunity to bring billions of dollars to the Australian economy to slip on past without a real fight.

I have to say that, this being my second term in this place, the approach the government has taken on this is deeply disappointing. For a party that, in opposition, talked a big game on integrity, on good legislation, on taking to the election a promise around multinational tax reform, to do so now in such a sneaky way and such a weak way is deeply, deeply disappointing.

Photo of Lisa ChestersLisa Chesters (Bendigo, Australian Labor Party) Share this | | Hansard source

Is the amendment seconded?

12:02 pm

Photo of Kylea TinkKylea Tink (North Sydney, Independent) Share this | | Hansard source

I second the amendment. I want to start by thanking the member for Warringah for these amendments, for continuing to fight to hold this government to account for what it is and isn't doing and, ultimately, for doing everything she can to ensure that we are focused on increasing integrity across our society whilst advocating we do all we can to address the very real and current impacts of climate change on our environment, our society and our economy.

You see, in the first instance, this legislation seeks to ensure that the abuse of confidential information shared by the Commonwealth with those outside is made as difficult as possible and that those who abuse that privilege face appropriate consequences. These reforms are to be welcomed, and, indeed, my community of North Sydney is happy to see them come in. But this good legislation reform is then used as a fake pass, for want of a better analogy, which then sees this government introduce reform to the petroleum rent resources tax. This is where I'd like to focus the rest of my time.

The petroleum rent resources tax—or, as Australians know it, the PRRT—is broken. It's a system of taxing resources that was built for a different time and a different asset class, and yet here is this government trying to, as my grandmother would have said, put lipstick on a pig, offering this reform up to Australians as both appropriate and enough. Well, it's not enough. Not only does this proposed legislative change not come anywhere close to inspiring confidence in this government's approach; it should actually be offensive to all Australians, not the least future generations.

Others have worked out how they can transition their own economy whilst supporting other nations on their road to change through the reliable supply of the resources they need. We need look no further than the Scandinavian countries for examples on how to do this well. In particular, in Norway, they have figured out how to extract revenue from their natural resources whilst also building an extraordinary sovereign wealth fund, which will ensure that not only those who are reaping the immediate profits benefit but that future generations will have the capital they are likely to need to navigate the pressing social issues of their time.

With that precedent right in front of us, then, why would we not choose to emulate it? Foreign multinational companies are currently reaping the profits from the sales of our limited natural resources. It is not unreasonable for Australians to expect that they pay a premium for access to these limited, rapidly depleting and extremely valuable products. These companies are not doing us a favour by extracting our resources, so why is it that successive governments have continued to behave like apologists when it comes to placing real value on what is rightly ours? I am all for being a reliable trading partner, but in this instance I would rather be the David Jones food hall than Aldi.

Inflating deductions too quickly, which is the end result of this legislation, sees Australians receive little in return for their natural resources. It's not just now; it has been little in return for our natural resources for decades upon decades. In fact, the government's latest budget papers show that this government will make more money off smokers, with a tobacco tax of $3.3 billion over four years, than it will make from extracting our limited gas resources, which will only return, through the PRRT, $2.4 billion. I'll just repeat that: the government will make $3.3 billion on tobacco and only $2.4 billion on extracted gas resources. I'm not an economist but I have run plenty of businesses, and that doesn't sound like a great business dynamic to me.

While I have spent most of my time speaking on the PRRT reforms proposed in this legislation, the truth is that, as I've said before, these reforms are tacked onto the end of a bill that actually leads with reforming tax laws to crack down on tax practitioner misconduct. This is of itself an important discussion for us to have as both a society and a parliament. But, as a consequence, what we have in this piece of legislation is two very important topics rolled into one. The question must be asked: in what world does it make sense to lump these two things together in one piece of legislation? I'll tell you where it makes sense: in a world where tricky politicking and wedge politics has taken precedence over good policy. No wonder public trust in both our government and individual politicians has eroded so significantly in the last decade.

What's next? Will this government's delayed fuel efficiency legislation be bundled in with housing reform? Must we scan the education bills for traces of changes to the Migration Act? Let's be really clear about what this legislation is. This government knows that it has passed up the opportunity for fundamental reform of our resource taxation system, selling Australians short and caving in to the gas industry. To cover it up, it has bundled that missed opportunity into a bill to crack down on tax advisor misconduct, catalysed by the PwC scandal. It is a sweet treat with a rotten centre. Australians deserve better. They deserve a fair share of their resources and they deserve good policy practice, but this bill provides neither of those things.

12:09 pm

Photo of Allegra SpenderAllegra Spender (Wentworth, Independent) Share this | | Hansard source

The Treasury Laws Amendment (Tax Accountability and Fairness) Bill 2023, before the House today, deals with two very important issues. The first is the government's response to the PwC tax scandal, where a private company used government secrets to enrich itself and its clients. The second is important changes to gas taxation arrangements—legislation intended to ensure Australians get a fair share of the profits when their resources are sold overseas. These are both critical issues, and they are both completely unrelated.

How we tax resource companies and how we ensure accounting firms play by the rules are completely different issues. There is no reason they should be combined into a single bill, and yet, inexplicably, this is what the government has done. The government has not done this with other legislation before the House this week. The expansion of paid parental leave was not combined with legislating the superannuation objective. The Small Business Energy Incentive was not combined with improving animal welfare protections. Legislating the Economic Inclusion Advisory Committee was not combined with changes to the Australian Human Rights Commission, and rightly so.

These bills cover very different issues. It is therefore hard to understand the rationale behind combining the response to the PwC crisis and reforms to the PRRT. There is no clear justification for this, and indeed the minister has been unable to provide such justification when questioned on this issue. It is exactly the kind of wedge politics that people in my community are sick and tired of. They were sick and tired of it under the coalition, and they are sick and tired of it from a government that promised to do better. I support the second reading amendment moved by the member for Warringah, which calls this out for what it is.

On the substance of the bill, I want to start by talking to schedule 5 and the government's changes to the petroleum resources rent tax. With the baby-boomer generation heading into retirement, our tax system is increasingly dependent on taxing the incomes of younger working people. It's these same younger people who are feeling weighed down by the cost of housing, renting and education and the growing cost of climate change. Our current system just isn't fair to them. Between 2004 and 2016, the average wealth of a household headed by someone over the age of 65 increased by over 50 per cent, while the wealth of a household headed by someone under 35 barely moved.

Tax policy has been a major driver of this intergenerational inequality. It is one of the reasons why I've been leading an independent tax reform process, bringing together economists, business leaders, unions, social sector organisations and environmental groups in a series of roundtables. These stakeholders don't agree on everything, but there is clear consensus about the need to do better on resource taxation, in relation to our current resource exports as well as those we're likely to develop in future as we shift to a low-carbon economy. Against this backdrop, changes to the PRRT are welcome, and I'm pleased the government has heeded calls for reform from the crossbench.

The PRRT is supposed to ensure that Australians get a fair return when their oil and gas resources are sold overseas, but it doesn't work well. In the past couple of years, Australian LNG exports have boomed, increasing from $71 billion to $93 billion in the last financial year alone, as gas prices skyrocketed following Russia's invasion of Ukraine. Climate Energy Finance estimate that the gross profits of LNG exporters exceeded $63.5 billion last year. Despite these record profits and despite gas exporters being able to extract these resources for free, the Australian people have seen little return. In the 2020-21 financial year, there were 33 projects eligible for the PRRT yet only six paid any tax. Even more shockingly, despite Australia being the second-largest LNG exporter in the world, the most recent set of budget papers noted that not a single LNG project has paid any PRRT and many are not expected to pay significant amounts of PRRT until the 2030s. It is clear the Australian people are not getting their fair share, and the system is ripe for reform.

Sadly, I believe that the government has missed an opportunity for significant reform with this bill. Whilst a few projects that would never have paid the PRRT will now do so, the main impact of this legislation is to bring forward some of the revenue a few years earlier, giving the budget bottom line a boost today at the cost, potentially, of taxpayers tomorrow. And it's not that much revenue. The reforms will bring in just $600 million a year over the forward estimates, despite gas companies bringing in an additional $20 billion in revenue in the last financial year alone. That doesn't sound like a fair return for taxpayers.

And it's a missed opportunity for significant reform, because more substantial changes were possible and had broad support. The government have rejected a proposal from the crossbench in the Senate to lower the deductions cap further to 80 per cent—a move that was backed by Treasury officials. This would have brought in a further $2.6 billion over the forward estimates. They have rejected a proposal to raise the PRRT rate from 40 to 50 per cent, which would divide the profits from selling Australian resources equally between the Australian people and gas exporters. Even before the introduction of the deductions cap, this would have brought in a further $660 million over the forward estimates.

They have rejected several proposals from Senator Pocock which would close the loopholes in the current regime by ending the carve-out given to Woodside, shortening the seven-year grace period before the deduction cap applies and no longer allowing expenses incurred many years in the past to be brought forward at a massively inflated rate. They have rejected more substantial changes to the structure of the tax that were put forward by the Callaghan and Treasury reviews, such as changing transfer pricing arrangements so that PRRT is calculated based on the real value of the resource, rather than the discounted rate that is currently used. All of these sensible approaches have been rejected, and, whilst this change is better than nothing, it is a missed opportunity for more significant reform.

Before I conclude, I want to speak briefly to the remaining schedules of this bill, which deal with the government's response to the PwC tax information scandal. People in Wentworth and across the country are rightly outraged at the conduct of PwC and the complete lack of professional ethics that has been revealed through the course of the Senate inquiry. The inquiry exposed a culture where profit was prioritised above the ethical behaviour that anyone in this country would expect. When the firm was trusted with highly confidential information and was asked for assistance in cracking down on multinational tax avoidance, they betrayed that trust and put their own financial interest ahead of the Australian people. So it is absolutely right for the parliament of Australia to respond by increasing penalties for those who promote tax-dodging schemes, by improving transparency around cases of misconduct and by expanding whistleblower protection so that we can uncover this unlawful behaviour in the first place.

There is one further reform that the government should pursue in its response to the PwC scandal, and that is to ban political donations from substantial government contractors and current bidders, as is done in the majority of OECD countries. The big four accountancy firms, including PwC, have donated $4.3 million to the Labor party and the coalition over the past decade. During that time, the value of the big four's contracts from the government has increased by 400 per cent. People will make their own judgements about that relationship and about the return on investment of those political donations, but there is no doubt that it creates a perception of a cash-for-contracts arrangement. If the government is serious about cleaning up politics, this is a response to the PwC scandal that they should implement without delay.

12:18 pm

Photo of James StevensJames Stevens (Sturt, Liberal Party) Share this | | Hansard source

There are quite a few second reading amendments that have now been moved on the Treasury Laws Amendment (Tax Accountability and Fairness) Bill 2023. This wouldn't surprise anyone, but I certainly am a supporter of the amendment moved by the member for Hume, who of course made a contribution on this bill in the chamber yesterday, I think, or Tuesday—apologies if my recollection isn't completely accurate there. I don't support the other amendments.

The member for Warringah makes the same point that the member for Hume did, and I'd like to start on that: how ridiculous it is to have these two completely separate issues crammed together within the one bill. It's putting a lot of people in a position—I respect that I've got a different view to some of the Independents that have made contributions, but I think it's ludicrous that they should be expected to take a position on the bill because of one part which they hold a view on. That would mean they are torn on whether to support this bill because there other elements, which are completely separate and unrelated, that they do in fact support. That point is made by the member for Hume in his amendment and by the member for Warringah in her amendment. Whilst I don't support the member for Warringah's amendment because of other elements within it, I'll just put on the record that she's quite right, as is member for Hume, about how ludicrous and ridiculous this is. This bill should not be one bill; it should be two separate bills.

I think the important matters to do with addressing the awful PricewaterhouseCoopers scandal—which has exposed significant shortcomings in legislative arrangements to prevent people advising on, essentially, breaking the law—have unanimity within the parliament. I would hope that they would.

But then, within that, also having the changes to the tax deductibility treatment of investments in the oil and gas sector is patently ridiculous. These are two very separate matters. So I would start by very clearly saying that the government should not be doing this to the parliament. The government should not be bringing in legislation on completely different matters and expecting people to vote for or against a bill with such dramatically different propositions contained within it. The whole point of us having different pieces of legislation to debate and vote on is that we all have different perspectives and opinions on the different legislative changes that are proposed. The extension of this principle is the ludicrous concept that maybe we'll just do all legislation in one omnibus bill each week and have every single measure frankensteined together into the one proposition, which is where, in what we see in this bill, we could be heading.

Let's not forget that even when we deal with something as totemic as a budget—and I've had experience in other parliaments where the budget is done quite differently to the way we do it in this Commonwealth parliament—we see governments hand down budgets that have a vast amount of legislation associated with them that are separately put to the parliament as individual pieces of legislative change. When we have the appropriation bills come forward, parliament passes the appropriation bills, which are underpinned by a whole range of expenditure that might not subsequently be legislated. When, particularly the Senate, which governments rarely control, decides to pick and choose which of the budget measures that are in the appropriation bills they've already approved, they will indeed choose to go ahead and authorise where legislation is required. That's quite a common thing in budgets. We've got the reverse principle here, where in one bill two very separate matters are being put together, and that point is being made by the member for Hume and the member for Warringah in their amendments.

Schedules 1 to 4 are on the PwC elements—I think there are four schedules that are specific to that. I'd like to start by saying that I commend the Tax Practitioners Board—the chair is, indeed, a constituent of mine. I think they've done an excellent body of work in getting to the bottom of what has happened with the conduct of PwC. A lot of people, who were initially in a state of shock, are now surprised that that was going on in such a blase way and that we don't have an appropriate statutory regime in place to punish that sort of behaviour and conduct. So the first four schedules of this bill are doing exactly that.

It is just outrageous that people who are operating in the Australian economy and being supported by the Australian government, and where the Australian government is providing the economic circumstance for them to operate a successful business in this country, would be providing advice on effectively breaking the law and how to avoid paying your fair share of tax to the Australian government—that they would be looking at every opportunity to cheat the Australian people out of an appropriate amount of taxation that you should be paying to the government to run this country.

Every dollar of tax that is avoided and cheated out of by someone with a clever little scheme to hide away the way in which they're making money out of the Australian economy is just a greater tax burden on other Australians. I'd love for taxes to be as low as possible, and I'd love for everyone to pay as little tax as is necessary to make sure we have the fundamentals of government—a proper social safety net and all the other important services that government provides—and the security of our nation et cetera.

But I want that to be through the lowest amount of expenditure that we can make it, which therefore means I want all Australians to be able to pay as little tax as they absolutely have to.

Every dollar that we don't take out of the household budget of an Australian family is one that they get to spend in their own way. As someone coming from the free-market capitalist school—if not with a little bit of libertarianism in there as well, in my case—and the heritage of the centre right of politics in this country, it's always been our objective for government to be as small as we can make it and it's always been our fundamental principle that we think Australians are much better at spending their own money than their government is. That has been borne out in countless examples in the history of this democracy and any democracy, let alone other governments that aren't democracies.

We want taxation to be as low as possible, but it also needs to be fair. It's also vitally important that, in the decisions that we make and the policy settings that we put in place—where we say this is what the taxation arrangements need to be for individuals on income, for companies on their earnings and on capital gains and the like and what the deductions frameworks and regimes that are put in place need to be—and when we pass those laws, they capture everyone as they are intended to. If there are people out there that are saying, 'Hey, come and pay me a little bit of money to advise you on how to avoid paying tax in Australia and to break the law'—even if it's not the law they're breaking but the spirit of those tax settings we have—then that is appalling. It's morally bankrupt, and hardworking Australians and businesses are the victims of that, because the cost to government doesn't change. But, when people aren't paying the tax that they should, it results in the rest of us taxpayers paying more tax than we should. That is fundamentally wrong.

We in the coalition welcome the work of the Tax Practitioners Board and the other work that's being done to make sure that the powers are appropriate, the whistleblower protections are in place and the investigative cooperation between agencies is properly legislated so that, if a situation like the PwC scam ever comes along again, there are no loopholes or gaps in legislation and to make sure that it is well and truly, comprehensively known to be wrong, to be prosecutable and investigable. We need the corporate advisory ranks of this nation to understand full well that that sort of behaviour won't be tolerated by our government or within our economy.

I'll reconfirm in the final few moments of this debate that it is ridiculous that we're seeing the matter of responding to PwC's egregious and outrageous behaviour coupled with these changes to the PRRT and that some of those changes to deductibility to bring forth some of the revenue are being brought forward. How these two matters are related and why they should be in the same bill is absolutely ridiculous. The member for Hume, of course, made that point in his second reading amendment, and the member for Warringah has made that point.

Just to conclude, one thing I've not enjoyed but been surprised at is the number of people who have talked about how important it is for us to increase the amount of money the government earns from fossil fuels. A lot of the people that are talking about Norway and saying, 'We've got to earn more money from natural gas than the taxpayer,' are the same people that are saying they want to ban gas entirely. It's a very contradictory point from the people that are saying: 'This tax regime on gas is not high enough. We want to earn more money from gas and ban gas.' The exact same people that want to get rid of all gas also want to make even more money from the gas that they want to get rid of. I struggle to understand that point—I can't really connect the dots there—because I think you're either for or against that sector earning money from royalties for the taxpayer, encouraging an important framework of investment.

But, if you don't believe in the industry existing into the future, it is a little bit hypocritical, little bit rich, to be also saying in the same breath that we're not earning enough tax from something that you don't think we should be earning any money from it all. So some of those contributions are to me a little bit strange. Nonetheless, in the coalition we support the gas sector and want to see it continue to be part of the transition into the future. So I commend to the chamber the contribution from the member for Hume and his second reading amendment.

Debate adjourned.