Chris Ketter (Queensland, Australian Labor Party) Share this | Hansard source

I rise to make a contribution in respect of the need for multinational companies to pay tax. I think it is good that this matter has been brought to the chamber for discussion today. It is, of course, something that many Australians feel very strongly about. As I get around in the state, very often people will talk to me about a range of issues, but they will generally raise this concern that they have about gigantic companies operating in Australia and making significant profits but then the Australian community not getting the benefit of the fair share of taxation that flows from that.

In the chamber today, I note that Senator Dastyari is here. As the former chair of the Senate Economics References Committee, he has done some extremely good work. I also acknowledge former Senator Milne for her efforts in shining a light on this issue. So we can be proud of the efforts of this Senate in addressing this issue and in attempting to do the work that the community expects of us in highlighting the problems associated with multinational tax avoidance.

But I must say that, in a desperate effort to distract attention away from its $50 billion tax cut to large companies, including the big banks, this government is pretending that it is serious about reducing multinational profit shifting. As chair of the Senate Economics References Committee, I have spent a great deal of time wading through large amounts of information and published reports that need to be looked at. Despite my best efforts and the efforts of the Labor Party and others in this place, and the efforts of some of Australia's most prestigious journalists, the government continues to have a soft touch when it comes to multinational tax avoidance. As usual with this government, you have to follow the numbers and not the spin. The coalition's attempts to tackle multinational tax avoidance, such as the diverted profits tax, will raise just $200 million over the forward estimates. When it was announced in the 2016 budget, Labor signalled that we would support the diverted profits tax, and we welcome any coalition attempts to close loopholes, no matter how small.

To his credit, the Treasurer, in a mad scramble, just scraped in on his own deadline for releasing the diverted profits tax draft legislation before the end of last year. After all, in mid-November Treasury officials had told the Senate estimates that the legislation was yet to be drafted, but since then the government has done some tweaks, most of them behind closed doors. In the lead-up to the 2016 budget, the government appears to have backgrounded journalists about possible changes to the safe harbour thin capitalisation provisions for multinational debt deductions—namely, a lowering of the current 60 per cent threshold to 50 per cent, which appears to have been pulled at the last moment. In stark contrast, Labor went to the 2016 election with a plan to close debt deduction loopholes exploited by multinational companies. Our reforms would deliver $1.6 billion over the forward estimates and $5.9 billion over the decade.

If the government were serious about getting tough on multinationals, they would do something about the one in three big companies that pay no tax. The most recent 2014-15 tax office tax transparency data shows that more than one in three large firms pay no tax. This includes 109 companies that paid no tax despite reporting more than $1 billion in total income. This transparency data report, covering 1,904 companies in total, is only available thanks to Labor's tax transparency laws, which passed the parliament in 2013 over the objections of the coalition. The Liberals and Nationals voted against those laws at the time. A little while later, they voted with the Greens to water down Australia's tax transparency laws, taking two-thirds of private companies out of the reporting net. Comparing the most recent figures for the tax year 2014-15 with data for the 2013-14 tax year shows that the share of large firms paying no tax has stayed unchanged, at 36 per cent in both years. This points to the coalition's failure to crack down on multinational tax avoidance. Labor led the way on tackling multinational tax avoidance under the Gillard government, in the face of blanket opposition from the coalition, while the coalition government has had to be dragged into action.

Over 3,000 Australian Taxation Office jobs were slashed under the Abbott-Turnbull government, undermining enforcement ability and losing institutional knowledge. Back in 2015, coalition MPs cheered when former Prime Minister Tony Abbott told parliament:

So far the only idea they—

the Labor Party—

have come up with is to spend $100 million on the ATO to raise $1 billion. Well, next time they will be telling us to spend $1 billion on the ATO to raise $10 billion. That is the problem. All they can think of is spending more and taxing more.

Yet in the 2016 budget the government did precisely that, claiming that a $679 million investment will raise more than five times as much, $3.7 billion. If this is true, it must also be the case that the government's savage cuts to the tax office, axing over 3,000 jobs, have cost revenue over the past few years. Promising to restore some of the tax office's funding in this budget is an admission of failure, not a new crackdown on multinationals.

The difference between Labor and Liberal could not be starker. We will put people first, while the 2016 budget has shown that Mr Turnbull and the Liberal Party will look after high-income earners and multinationals. The government has seriously mismanaged the budget. The recent mid-year budget update has confirmed Mr Turnbull's and Mr Morrison's economic plan is in tatters, leaving Australia's gold-plated AAA credit rating at real risk. The figures confirm that debt and deficits are continuing to blow out at the same time as the economy is shrinking and full-time jobs are disappearing. Net debt has blown out to an estimated $317 billion since the Liberals took office, up from $184 billion when they took office. Deficits over the forward estimates have blown out by another $10 billion. Since the first budget, the budget deficit for 2017 has blown out tenfold from $2.8 billion to $28.7 billion. The projected surplus in 2020-21 has shrunk and is now wafer thin, leaving us in the danger zone when it comes to the AAA credit rating—a weakening economy that has delivered more than $30 billion in revenue write-downs.

Yet the government refuses to drop its $50 billion tax handout to big business. Mr Turnbull's great big economic plan has been exposed for the laugh-out-loud farce that it is. Their own modelling suggests that a company tax cut, funded by higher personal income taxes, will raise household income by just 0.1 per cent in the mid-2030s. Household income gain of 0.1 per cent is equivalent to about one month's income growth. Whilst handing over an easy $50 billion to large companies, Mr Turnbull is smashing household budgets today through his cuts to Medicare, schools and family payments. The Turnbull government's company tax handout could also put Australia's AAA credit rating at risk, which could smash family budgets by putting up mortgage payments.

There is a complex web of tax avoidance amongst many of the major corporations and we need to deal with that. One look at it is not enough; we will always need to be vigilant and always need to be on top of corporate tax. Here we have Mr Turnbull cutting penalty rates and offering up a tax cut to some of the biggest corporations in the world when they are not paying their fair share of tax at the moment.

The evasiveness of multinational company executives who fronted the corporate tax avoidance inquiry, particularly from the pharmaceutical and tech industries, left the impression that they have something to hide. I think the effective level of tax of some of the pharmaceutical companies was of the lowest order amongst the multinational companies. It is clear that some multinationals will go to extreme, even absurd, lengths to conceal their tax minimisation practices. The audacity of certain multinationals in refusing to comply with legitimate and reasonable requests for information leaves me with reason to suspect that the current framework for tackling multinational tax avoidance needs significant improvement. The unwillingness of many multinationals to openly discuss their tax arrangements underscores the need to establish mechanisms to increase transparency. Effectively, companies that do not have standardised pricing across the jurisdictions can charge whatever the market will bear and then back out the profits through transfer pricing. Allowing multinationals, in effect, to arbitrarily attribute value between countries provides them with opportunities to price gouge Australian consumers while, at the same time, reducing the tax liabilities of their Australian subsidiaries.

Perhaps the most reckless parts of the government's inability to combat multinational tax avoidance are their false attempts at true reform. I would strongly encourage the government to adopt Labor's broad selection of reforms, as outlined in our policy agenda.