Slade Brockman (WA, Liberal Party) Share this | Hansard source

I too rise to speak on this bill, the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2019. I note in starting that sometimes there comes from certain sections of the commentariat and those opposite the throwaway idea that those on this side of the chamber are somehow not as supportive of integrity in our tax system as those opposite.

I'm going to run through a little of what this government has done over the last six years in the tax integrity space. As a point of philosophy, those on this side are absolutely committed to tax integrity, because everyone who is not paying their fair share of tax is putting an unfair burden on those who are. So your mum and dad and small-business owners who are doing the right thing, who are paying their fair share of tax, are hurt. The vast majority of farmers out there and the vast majority of small and medium-sized businesses are doing the right thing and paying their fair share of tax. Those companies that aren't, obviously increase the burden on those who are paying their fair share of tax.

Those on this side of the chamber are vitally aware that ensuring the integrity of our tax system is absolutely fundamental to the operation of government but also just to fairness in our economy. People need confidence that the system is going to treat them fairly, and in that way taxes can be maintained at as low a level as possible to provide the essential services that Australians need. If everyone is paying the correct amount of tax they are required to pay then no-one is, by definition, treated unfairly. If everyone plays by the rules then we do not need to burden our society or anyone in it with an unduly high level of taxation. So tax integrity—and this bill builds on a very strong government record in this space—is vital to ensure the fairness of our economy.

As I've said, this is a government that has had a long and ongoing commitment to tax integrity. This goes back many budgets now. I wish to just run through a few measures. This bill itself makes some fairly important but narrow changes to our tax system. It builds on a series of changes, over a number of years, to improve the integrity of our tax system and make sure we collect that tax which is required to be paid under the law.

This goes back to a number of things that the government has done over the last few years. There was the Banking Executive Accountability Regime to ensure that senior executives were accountable for the decisions they had made. This was a very significant reform in Australia's financial services history. It imposed a higher standard on the behaviour of banks and their senior executives and directors. It strengthened the leadership of financial system regulators by enabling ASIC and APRA each to have second deputy chair positions. That is a fundamental basis for making sure that we create a level of integrity and transparency in the system.

The government has created a one-stop shop for dispute resolution with the establishment of the Australian Financial Complaints Authority. This enables free and fast dispute resolution to consumers. There has been an increase in the powers of APRA in relation to crisis management and non-bank lenders to ensure resilience and ongoing stability in the Australian financial system, a cap to the commissions on life insurance products, a raise to professional education and ethical standards for financial advisers, and a ban on excessive credit card charges. So we can see that we're building a strong financial system by putting in place those integrity measures that the system needs.

We've also obviously done a lot in the direct area of multinational anti-avoidance law. Multinationals, due to legislation passed in the previous parliament, are no longer able to use corporate structures with foreign trusts and partnerships to avoid the application of the multinational anti-avoidance law. That was announced in the 2018 budget and has been passed through this place. The government continues its commitment to ensure that multinational entities pay their fair share of tax. The OECD estimated that globally between a hundred billion dollars and $240 billion of corporate tax revenues are lost annually due to base erosion and profit-shifting strategies. The multinational anti-avoidance laws that we saw go through in the last parliament addressed that issue.

We've implemented measures to prevent diverted profits from reducing the taxable income of large multinationals, stopping multinationals from artificially diverting profits to offshore, lower-taxing regimes. These laws have been in place for a significant period of time, since 2016. It prevents multinationals from escaping the Australian tax system by using these artificial arrangements to move their taxable presence out of Australia to lower taxing jurisdictions. This measure has had a discernible impact on the way multinational corporations are behaving. Something like $7 billion in sales revenue has already been added to Australia's tax base as a result of these changes. Thirty-eight multinational entities have changed their compliance arrangements to bring Australian sourced sales back on shore in compliance with those laws. These include the large companies that we've talked about in this place a number of times, such as Google and Facebook. Obviously we do not want to discourage innovative business models, but we do need to make sure that the way businesses are structured returns a dividend of activity within Australia to Australia through the taxation system. This makes sure that everyone is paying their fair share of tax so no other taxpayers are overburdened.

This effort to attempt to improve multinational tax arrangements is continued in this bill. It is a highly technical bill which addresses a number of issues. Schedule 1 deals with thin capitalisation. This is about ensuring integrity in the thin cap rules. Affected taxpayers have a range of options available to justify their debt levels under the thin capitalisation rules. Impacted entities with genuine commercial debt levels can continue to use the safe harbour debt test and revalue assets in their financial statements—provided that this is consistent with the accounting standards—and use an arms-length debt test or use a worldwide gearing test. This measure applies equally to all entities subject to thin capitalisation. Where entities are not able to recognise certain assets for accounting purposes or choose not to reflect the value of their financial statements, they have the option of supporting their debt using the arms-length debt test or the worldwide gearing test. Obviously these are highly technical changes; you do need to be a tax expert to understand much of this. But it is important that we have a robust outcome that adds to the integrity of our tax system and allows taxpayers to justify any deductions they claim; in this case, debt deductions are on a genuine commercial basis. In the tax law, clarity is king. Where confusion exists is where you have the potential for avoidance beyond the law.

Schedule 2 of the bill goes to online hotel bookings. This is about treating like with like within our taxation system. Currently the turnover concession in GST law means that offshore companies are exempt from counting sales of Australian hotel accommodation when calculating their GST turnover. This means these companies often do not need to register for and charge GST on their mark-up over the wholesale price of the accommodation. This very clearly gives those offshore companies an unfair advantage over Australian businesses that are providing an identical service, as Australian sellers within this jurisdiction are required to charge GST on their mark-up. This is levelling the playing field. It is about tax integrity. It ensures the same tax treatment of Australian hotel accommodation whether that accommodation is booked through a domestic or offshore company. Offshore travel companies will be required to charge GST on the mark-up they charge on hotel bookings in the same way as Australian sellers. The revenue impact of this measure is fairly modest—$15 million over the forward estimates period, which will be within the GST so it will go straight to the states and territories. As such, this is not a revenue item; this is about ensuring the integrity of our system and ensuring that Australian businesses are operating on a level playing field with their international counterparts.

Schedule 3 removes the luxury car tax on reimported cars refurbished overseas. The risk of people using this change to avoid the luxury car tax is very low. Overseas refurbishment of cars includes additional shipping costs, insurance costs, customs duties and compliance costs associated with exportation and reimportation, which is likely to outweigh any benefits from avoiding the luxury car tax. This is only going to be used, therefore, by genuine car enthusiasts seeking specialist refurbishment overseas. This has been raised with the government a number of times, in relation to the Australia-US free trade agreement, and it has decided to proceed with this option as a way of dealing with this issue.

This government has a proud track record on stopping multinationals and any company avoiding paying their fair share of tax. To do otherwise is to unfairly burden those in society who are doing the right thing.