Monday, 25 June 2018
Taxation Administration Amendment (Corporate Tax Entity Information) Bill 2017; In Committee
by leave—As I flagged in my second reading speech, I have two amendments to move. I move:
Amdt 8304 revised - Taxation Administration Amendment (Corporate Tax Entity Information) Bill 2017
(1) Schedule 1, item 1, page 3 (line 9) omit "$100 million", substitute "$50 million".
Amdt 8303 - Taxation Administration Amendment (Corporate Tax Entity Information) Bill 2017
(1) Page 3 (after line 14), at the end of the Bill, add:
Schedule 2—Financial reporting obligations
Part 1—Repeal of instrument
ASIC Corporations (Exempt Proprietary Companies) Instrument 2015/840
1 The whole of the instrument
Repeal the instrument.
Part 2—Grandfathered exemption
Corporations Act 2001
2 Subsection 1408(6) (table item 7)
Repeal the table item.
(1) This item applies to a company if, immediately before the commencement of this item, the company was exempted from complying with subsection 319(1) of the Corporations Act 2001 by the ASIC Corporations (Exempt Proprietary Companies) Instrument 2015/840.
(2) Despite the amendments made by Parts 1 and 2, that exemption continues to apply to the company in relation to the 2017-18 financial year.
I've already outlined briefly what they are, but I'll do so again. The first amendment on sheet 8304 revised substitutes $50 million for $100 million. This is the threshold at which we want to see disclosure from both private and public companies. Very briefly, the private senator's bill from Labor is to reduce the current disclosure levels from $200 million to $100 million. We'd like to see that go a step further by reducing it to $50 million.
Can I just say to the coalition senators who got up in this chamber today and said that there's no reason we should be disclosing the tax affairs of some of the most wealthy individuals in this country and some of the biggest private and public companies in this country: in 2015, you supported a Greens amendment to introduce tax transparency into law in this Senate, which passed into law. They supported disclosure of over 218 companies with thresholds the size of $200 million, so why can't they support $100 million or $50 million?
They've said in here today that they won't support this on a fundamental principle, yet they did support this fundamental principle. Let's be very clear about this. They can't come in here and use all these excuses. Senator Hume said, 'It's red tape.' I've already explained that it's not red tape for business. They already have reporting requirements to the ATO privately. There's no red tape involved in having a set of accounts being made publicly available for companies earning over $100 million or $50 million. There's no red tape involved at all. What a totally spurious argument.
Then they tried the old kidnapping clause, that somehow if individuals and companies make their information available then that commercial-in-confidence information, that sensitive information, is somehow going to put them at risk. We thoroughly debunked that in this place. There was no evidence to support that at all. I will have more to say in a minute around getting rid of the grandfathering clause.
They also said that somehow the disclosure of this information is going to be misinterpreted by people, because the fact a company pays no tax is not necessarily illegal. That's not an argument I'm going to have with them. I don't see an issue at all with that. If a company pays no tax and there are legitimate reasons for it, then fine. This is about disclosure. Anyone who understands tax—and the kinds of people who will access these accounts do understand what they're looking at—will be able to see this company's had deductions for depreciation, amortisation, capital investment and all the other stuff that we could talk for hours on. That's not the issue here, and it's not an argument to vote against tax transparency. This is simply to provide a set of accounts that can be publicly accessed by all stakeholders so that we can actually see not only companies doing the right thing, but also that our regulators are doing their job to make sure that companies pay their fair share of tax.
This is a public good piece of legislation for everyone. Let's be really clear about that. It's not going to add to red tape. It's not going to put at risk individuals in these companies, because somehow they're disclosing their private affairs. The government's already supported tax transparency for companies over $200 million. They can't provide any decent reasons why they won't support the $100 million threshold or the Greens' $50 million threshold. It's the same fundamental principle, so let's not hear any more about that.
In relation to the grandfathering clause, which the Greens have introduced in an amendment to on sheet 8303—financial reporting obligations are under schedule 2, and the grandfathering exemption is part 2 of that sheet under the Corporations Act 2001. As I said, this is an archaic throwback to Mr Paul Keating's government in 1995, that basically cut a deal to allow 1,500 high net worth individuals to not provide their annual statements to ASIC. There can be no reason for this if we're having a debate around tax transparency. The Greens support removing it. I understand that Labor will too, and I certainly hope the crossbench come on board with this. The same spurious arguments being made by the Liberal Party about lack of disclosure will not hold. This is something that I think all Australians want to see. I commend both these amendments to the chamber.
I want to ask the proponents of the amendments about reducing thresholds for private Australian companies to $50 million. How many additional companies will that involve? What sort of information is hoped will be gained in the difference between $50 million and $100 million—or $200 million even? Could you elaborate on that? I think your amendments indicate that the threshold for others wouldn't change, but I am interested in what additional information you might be able to achieve by going to $50 million.
I appreciate that this would apply in the case of the thresholds set by the government, but in my speech—I'm not sure if you were here or listened—I mentioned that at a Senate inquiry in, I think, 2015, there was some information given about the reasons that some companies didn't show a taxable income. Broadly speaking, they were reinvesting the money in promoting their business and therefore they had no taxable income for that year. On the difference between $50 million and $100 million, I am wondering if the fact that there is reinvestment of some of the profits in that category—in that quantum between $50 million and $100 million—is taken into account or whether that will impact at all on what you hope to achieve from reducing the threshold to $50 million?
So 2,000 or 3,000 companies out of a total of many thousands of companies in Australia. It does impose an additional burden on them. Is the information that's going to be obtained going to be commensurate with the additional cost of providing that information, particularly when you don't really know what the answer to the question is? I think you said it might be 1,000 or that it might be more or it might be less. I am just wondering what the purpose of all this is if we don't quite know what it's going to achieve?
Temporary Chair, it appears that I am not going to get an answer to that. With respect to the mover of the amendments, that suggests that perhaps the only reason that these amendments are being moved is that they are different to the Labor Party's amendments, which are amendments that the government clearly wouldn't support. If there isn't a reason for these amendments, one would wonder why the Greens political party are pursuing the issue.
I would have thought that the Greens political party might have been focusing their attention on understanding just how important it is that we have a competitive tax system for all corporations, including foreign corporations who want to invest in Australia. That investment in Australia, obviously, creates jobs—principally for Australians. As I've often said in this chamber, I'm not very bright. If a company has an opportunity to invest in Australia and make a certain amount of profit and then pay 30 per cent tax or to invest anywhere else—America France, Singapore—and make the same profit but then only pay half the tax, you don't have to be a Rhodes scholar in economics to work out where they're going to go. Many of these other places have a competitive advantage with labour costs and regulatory costs. The several advantages we have are dissipated if the tax rate we charge on profits is so much more. That's what I would hope the Greens may be concentrating on rather than lowering the thresholds in this amendment below those in the Labor Party's amendment for reasons which, as I say, don't seem to be apparent and which, unfortunately, the promoter can't change. So I again ask the same questions of the mover of the amendment—that is, the Greens political party. While I'm on my feet, I would also ask Senator Cameron: is the opposition being consistent? I know this was at one stage $100 million. It was changed back and then this is a change back again. Is there consistency in your proposed amendment to this bill?
The government won't be supporting these amendments from the Greens. I would like to make a couple of points on them that I didn't get to make in the preliminary stage. I will make a couple of broader comments. It seems we've now got a bidding war between the Greens and the Labor Party. The Labor Party said, 'We need to change the threshold from $200 million to $100 million.' The Greens then said, 'We can do better than that; we can lower it to $50 million.' And then Labor said, 'Sure, why not?' It's more than just ad hoc. It is: 'We're more virtuous than you when it comes to bashing Australian companies.' That bidding war has been going on for a long time between Labor and the Greens. No doubt, if the Labor Party were to come back next, they might say, '$25 million,' and the Greens would say, 'We can do better—$10 million, $5 million, $1 million, $500,000, $100,000? Do we have $50?' This is where it's headed.
There are a number of reasons why we won't be supporting that amendment. But I wanted to make it clear in opposing this amendment that only this coalition government has actually taken action in this space. The Labor Party not only did nothing when they were in government for six years; they also opposed action and voted against action on multinational tax avoidance during our time in government. So if it were up to the Labor Party the billions of dollars that have been recovered from multinationals would not have been recovered from multinationals, who have sought to avoid tax—because the Labor Party voted against it, and they used a fig leaf of $200 million versus a $100 million threshold.
So let's look at what has been done. Our action on multinational tax avoidance includes a commitment to ensuring tax transparency rules are effective in promoting broad compliance with and public confidence in Australia's tax laws. The government introduced a multinational anti-avoidance law and the diverted profits, tax which Labor opposed. These measures have been successful in bringing a further $7 billion a year in sales revenue into Australia's tax net. The multinational anti-avoidance law stops multinationals avoiding a taxable presence in Australia. The diverted profits tax prevents multinationals shifting profits overseas.
I make the point again that the Labor Party opposed these efforts. They did nothing while they were in government and then, in opposition, they decided they were going to vote against holding companies to proper account. In addition, I make the point that in the 2018-19 budget the government announced further measures to strengthen the rules that limit interest deductibility to stop companies shifting profits out of Australia, including requiring companies to align the value of their assets with the value included in their financial statements and broadening the scope of large multinationals that were subject to the MAAL and the DPT.
Examples of other strong actions taken by the government include the establishment of a Tax Avoidance Taskforce within the ATO on 1 July 2016. The ATO Tax Avoidance Taskforce scrutinises the tax affairs of multinational enterprises, large public and private groups and wealthy individuals operating in Australia. Its role is to ensure these entities pay the right amount of tax according to law. Achieving these measures will increase the trust and confidence of the Australian community and other stakeholders in the ATO's effectiveness and the integrity of the tax system.
In addition, there was the signing the OECD multilateral instrument on 7 June 2017. The multilateral instrument is a multilateral treaty that will allow jurisdictions to swiftly modify their bilateral tax treaties to implement measures designed to better address multinational tax avoidance. These measures were developed as part of the OECD/G20 Base Erosion and Profit Shifting Project. Currently Australia is one of 78 signatories to the convention, and another six jurisdictions have expressed their intent to sign the convention.
We're also doubling the penalties for multinationals avoiding tax—specifically, the penalties for large multinationals when they make false or misleading statements to the ATO. This will make penalties more commensurate with the turnover of large multinationals and provide greater incentive for them to lodge tax documents on time and to take reasonable care when making statements to the ATO. We're increasing penalties for breaches of tax-reporting obligations by multinationals. We're increasing the maximum penalty by 100 times for large multinationals where they fail to lodge tax documents on time. This means that the maximum administrative penalty for significant global entities that fail to comply with their tax-reporting obligations will increase to $525,000.
We're implementing OECD recommendations for country-by country-reporting to give the ATO greater access to multinational transfer-pricing information. Country-by-country reporting is part of a wide range of international measures aimed at combating tax avoidance through more comprehensive exchanges of information between countries, aligning Australia's transfer-pricing rules with the latest OECD guidelines. These initiatives have ensured that multinationals comply with the law. Since 1 July 2016, the ATO has raised $5.2 billion in tax liabilities from large companies. Australia is a global leader in the international fight against tax avoidance. We're taking strong international leadership on the G20/OECD Base Erosion and Profit Shifting Project, and the government, together with the ATO, continues to monitor the implementation and effectiveness of the tax laws.
I will just come back to a couple of points to finish. We won't be supporting these amendments. As I have said, there is now this odd bidding war where the Labor Party believed earlier today that $100 million was the right number, and now it apparently believes that $50 million is fine, and soon it'll be $25 million or lower. The point I return to is this: it is only the coalition government that has taken strong action in this area. The Labor Party had six years and did absolutely nothing in this space. When we have sought to take action on multinational tax avoidance we haven't been able to get the support of the Labor Party. They have actually voted against it. For those listening, just understand: the Labor Party have voted against taking action on multinational tax avoidance.
We believe in two fundamentals when it comes to our tax system: making our tax base is lower across the board—that's why we want to lower taxes across the board for companies; we believe that will enable us to be globally competitive because it will grow jobs and grow our economy—but, in lowering those taxes, that everyone should pay their fair share. We believe that this is not a voluntary contribution. You lower taxes across the board and encourage and incentivise investment, jobs and growth; but whether you're a multinational company or an Australian based company you pay your fair share of tax, you pay the amount of tax that you should be paying under our taxation laws.
We have taken the strong action. The Labor Party, of course, have opposed that strong action. But we're not going to engage in this bidding war that the Labor Party and the Greens are engaging in with these amendments. As a result, we'll be opposing these amendments.
That the question be put.
The CHAIR: I remind senators that this is a closure motion, so the question is that the question that the amendments moved by Senator Whish-Wilson be agreed to is put.