Monday, 15 June 2020
Treasury Laws Amendment (2019 Measures No. 3) Bill 2019; Consideration of House of Representatives Message
I just want to remind the Senate exactly what this amendment that was rejected in the House is about. That is, that there are 1,119 companies that are exempt from having to lodge company returns with ASIC. That creates an opaqueness about these particular companies. It is a provision that was put into the Corporations Act back in 1995 as a temporary measure. It's been a 25-year temporary measure. There are issues in relation to tax transparency in respect of this because, in the words of ASIC in their committee report, they raised the concern that this creates an environment that could encourage aggressive tax minimisation. It's important that we deal with that. We also don't want to have in Australia a class of companies that have very, very special privileges—a separate group of companies, with people like Kerry Stokes, Lindsay Fox and Anthony Pratt, who are the proprietors of these companies, having a special privilege that no other business has. After new businesses start up, once they gets to a size where they are required to lodge reports they don't get this exemption. We need to deal with this. It was passed by the Senate. It went back to the House. It's been rejected because the government want to protect their mates. They want to protect their very wealthy mates who provide them with political donations. The time has come for that to stop.
Thank you, Senator Patrick. Can I just remind the chamber that this is an amendment put forward by Senator Patrick that has nothing to do with the substantive part of the bill. The other schedules in the bill are time-critical, and we would like to get it passed. I would also remind the chamber that Senator Patrick has attached exactly the same amendment to another bill that is being debated later this week.
The Greens will be supporting this amendment, like we supported the amendment last week. It is like what we proposed nearly two years ago; indeed, the Greens have brought a very similar amendment to this chamber on two occasions. There is no reason at all for these grandfathering exemptions to be in place. Just to give the chamber a very brief reminder: last week, the minister couldn't give any reason at all for the public policy basis of exempting some of the wealthiest individuals and biggest companies in this country from providing annual reports to the Australian Securities and Investments Commission. There is no justification for grandfathering. This was done by the Labor Party, by the Keating government, over 20 years ago, and it was locked in by Mr John Howard. It's an anomaly of the past. It has no place at all in present-day transparency around financial matters.
I think this needs to be asked; curiosity always kills the cat when it comes to political donations in this place. How many of those over 1,000 companies have been political donators to the Liberal Party over the last 25 years? Could you please tell me how many are still donating to the Liberal Party today?
Thank you, Senator Lambie. That very same question was asked by Senator Patrick in the debate that we had on this bill just a few days ago. I will give you the same answer I gave him then: I can't tell you that, because it's not something I would know. Donations are a matter for the Liberal Party and the National Party organisations. As you would know well, donations are declared to the AEC in accordance with section 314AB(1) of the Commonwealth Electoral Act, and that register is publicly available on the AEC website.
Since it was asked last week, do you not think you would have had answers ready, because you probably would have known this bill was coming back here anyway, so that you could at least answer it this time so that the Australian people can see what is going on here? We can smell it a mile away. This has to do with political donations.
I should probably again add to the answer that I gave you before and gave Senator Patrick just last week when this bill was originally debated, when we debated not just this amendment but also the substantive component of the bill—which I again reiterate is in fact time-critical. Donations themselves are a matter for the Liberal Party and National Party organisations. As you and Senator Patrick and the Greens know, donations are declared and always have been declared—and always will be declared—to the AEC in accordance with section 314AB(1) of the Commonwealth Electoral Act 1918. That register is publicly available on the AEC website. You can visit that website, should you choose to, where the full register of donations is publicly available. The URL of that website is www.transparency.aec.gov.au. In fact, I think Senator Patrick has a list of those donors and a list from the AEC website. He can show them to you and you can compare the pair, so to speak.
What I would say, Senator Lambie, is that, as you would well know, if the aim of the game here is to ensure that tax avoidance is minimised you should know that Australia is in fact a global leader in the international fight against tax avoidance. This government has in fact implemented more than a dozen measures in just the last four years alone to address this very issue. Government measures since 2016 include a multinational tax avoidance law—you would know it better as the MAAL—and a diverted profits tax, the DPT, both of which have doubled the penalties for tax avoidance and established the ATO Tax Avoidance Taskforce. That task force, which was created on 1 July 2016, has enforced existing laws, but it also supports the government's new tax avoidance measures. It specifically targets multinational enterprises, large public and private groups and also wealthy individuals. From 1 July 2016 right through to 31 March this year, the ATO, through these measures, has in fact raised $16.9 billion in tax liabilities against large public groups, multinational corporations and privately owned and wealthy groups. This generated cash collections of $9.9 billion, and $8.8 billion of the liabilities and $5.1 billion of the collections are attributable specifically to that task force. In fact, in the 2019-20 budget the government announced more than $1 billion of additional funding to extend that task force, to expand its activities, because it has done such a tremendous job. The expansion of its funding and its activities is expected to raise tax liabilities of around $4.6 billion over the forward estimates period.
In the 2018-19 budget, this government announced further measures, which included strengthening the rules that limited interest deductibility, in order 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. It also broadened the scope of large multinationals that were subject to the multinational tax avoidance law, the MAAL.
As has been clearly demonstrated here, Australia has been very vigilant in adopting the actions recommended by the OECD and the G20 Base Erosion and Profit Shifting Project, the BEPS project, including country-by-country reporting—something that has been asked about numerous times at Senate estimates—hybrid mismatch rules, anti-treaty-abuse rules, strengthening the transfer-pricing rules and signing a multilateral instrument. Australia has gone beyond the BEPS recommendations by implementing the multinational anti-avoidance legislation, the diverted profits tax, doubling the penalties for multinationals that seek to avoid tax, imposing tax conditions on foreign investors, strengthening thin capitalisation laws, and establishing the Tax Avoidance Taskforce. As you would know, Senator Patrick, enhanced whistleblower protections have also been enacted to limit disincentives for individuals to report tax misconduct to the ATO.
On top of that, Australia has enhanced its tax laws in a number of other areas to protect the integrity of our tax bases. In fact, since 1 July 2017 the GST has applied to digital products and services imported by Australians, and since 1 July 2018 the GST has applied to low-value imported goods, a piece of legislation I remember very well. To expand a little further, in the 2018-19 budget measures—the thin capitalisation measures, which I know were something that the Greens were particularly interested in—the government announced that it would require entities to rely on their financial statements for thin capitalisation purposes. This removed the ability for entities to use a higher value or to recognise assets that cannot be recognised under the accounting standards. This measure was enacted on 13 September 2019 as part of the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Act 2019, one that I know Senator Whish-Wilson spoke on very passionately indeed.
In the 2018-19 budget we also amended the definition of 'significant global entity', the SGE. The government announced in the 2018-19 budget that it would broaden the definition of a 'significant global entity', thereby expanding the scope of entities subject to the diverted profits tax and the multinational anti-avoidance legislation, and administrative and tax avoidance penalties were increased as part of the same legislation. This measure applies from income years commenced on or after 1 July 2019, so we will only start seeing the effects of that kicking in at the end of this financial year. The measure was enacted on 25 May 2020, with the Treasury Laws Amendment (2020 Measures No. 1) Act 2020. These initiatives have shown measureable results. The multinational anti-avoidance law, the MAAL, addresses artificial arrangements designed to avoid a taxable presence in Australia. The government's successful implementation of the MAAL has seen many, many large businesses restructure their operations in order to be compliant with the law. The multinational anti-avoidance legislation has now seen over $7 billion in taxable sales being returned to Australia. In addition, $654 million in additional GST has been paid in the 2019-20 year to date—to 31 March 2020—as a result of some global entities restructuring in response to the multinational anti-avoidance legislation.
The estimated business-to-consumer net GST is approximately $57 million from this legislation alone—the multinational anti-avoidance legislation—but the diverted profits tax, the DPT, is estimated to raise over $100 million per year, from the 2018-19 budget, in additional tax from large multinationals that are seeking to avoid tax. And, Senator Lambie in particular, you should know that, on 18 December 2019, the ATO announced that it had settled a tax dispute specifically with Google, with a payment of $481.5 million on top of Google's previous tax payments. This brought the increased cash collections from e-commerce taxpayers to around $1.25 billion a year. The ATO has credited the operations of the multinational anti-avoidance legislation and the Tax Avoidance Taskforce with returning those Australian sourced sales by digital firms to Australia's tax base. On 15 May 2020, several media organisations reported that, among other things, Google's financial accounts revealed that it incurred an additional $50 million in back taxes in 2019. This raised Google's total tax paid in 2019 to around $99 million. Google's 2019 calendar year Australian pre-tax profit was reported to be around $134 million. There is more that I can tell you but, unfortunately, my time has nearly run out. I would suggest that the Morrison government's commitment to ensuring companies pay their fair share of tax, to ensuring integrity, to ensuring transparency, has been demonstrated over and over again.