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Thursday, 10 May 2018
Page: 3739


Mr THISTLETHWAITE (Kingsford Smith) (16:21): The Treasury Laws Amendment (Tax Integrity and Other Measures) Bill 2018 contains four tax integrity measures. Schedule 1 goes to toughening the multinational anti-avoidance law; schedule 2 goes to improving the integrity of small business capital gains tax concessions; schedule 3 is about fintech and venture capital amendments; and, finally, schedule 4 goes to tax exemption for payments made under the Defence Force Ombudsman Scheme. Labor supports schedules 1 and 4.

I move:

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

"whilst not declining to give the bill a second reading, the House notes the Coalition Government's failure to ensure tax integrity by improving tax haven transparency".

The DEPUTY SPEAKER ( Mr Hogan ): Is the amendment seconded?

Ms Chesters: I second the amendment and reserve my right to speak.

Mr THISTLETHWAITE: In terms of schedule 1, regarding toughening the multinational anti-avoidance law, the bill amends the Income Tax Assessment Act to ensure that the multinational anti-avoidance law applies appropriately to artificial and contrived arrangements involving trusts and partnerships entered into by multinational entities to avoid the taxation of business profits in Australia. We note that the schedule implements a technical integrity measure underpinning the multinational anti-avoidance law.

The Turnbull government has regularly made much of statements that Labor voted against the multinational anti-avoidance law, but this is simply not true. In this House, Labor supported that bill and, in the Senate, Labor voted against a government-Greens amendment. Yes, that's right: the government teamed up with the Greens to water down the tax transparency law and reporting requirements for large companies. The effect of that amendment—which was ultimately successful through the Greens and the coalition government—was to reduce the number of Australian companies who were required to report their tax arrangements each year. Some of those big companies were raking in revenue close to $16 billion but were paying no tax. The government wanted to reduce the number of those companies that were required to report every year, and guess what? The Greens teamed up with them and allowed that to occur. Labor ultimately facilitated the passage of the multinational anti-avoidance law in both houses, but we did that over protestations about reducing the exposure and the scrutiny that was allowed by that law by reducing the number of companies subject to it.

The fact is that the Turnbull government have been a light touch and have had a hands-off approach when it comes to big business and those at the top end of town, and we've seen this over the past couple of years with their approach to the banking industry. The fact is that for 600 days they avoided and actively opposed a royal commission into the banking sector in Australia. Labor's been proven right, once again, in the evidence that's come out of that inquiry—there was systemic and substantial rorting by this industry, undermining Australians' finances, and it needed to be looked at, and that's what's occurring at the moment. We welcome the fact that the commissioner's doing a fantastic job, and we await the outcomes of his interim report in September and ultimately a final report in February next year. This is a reflection of this government's ideological emphasis: checks and balances on government power but no consideration given to the checks and balances on the power of big businesses and the wealthy to avoid their community obligations, particularly when it comes to paying their fair share of tax.

The fact is that the Turnbull government, from the top down, including the extreme free-market fringe, are more concerned with so-called red tape and the banks' cost of doing business than with appropriately regulating them. They see tax and the collection of tax revenue as the biggest cost of doing business. They call it a tax grab. But we know, of course, that one in five of Australia's biggest companies have paid no tax for at least the past three years. That's no taxation revenue that could have been used for funding important social resources like health, education and infrastructure. Over a series of decades what we've seen is a number of these corporations being very adept at using accounting practices to make loans to subsidiaries in other countries, to transfer funds to subsidiaries in other countries where there is a lower corporate tax rate, and to avoid paying their fair share of tax in Australia. It was only when Labor began to highlight this—and, indeed, when these practices were highlighted through international bodies such as the International Monetary Fund and the OECD—that we began to get action from this government. This is despite tax transparency laws that show just how much the people of Australia are losing through this light-touch approach to collecting their fair share of taxation. Yet the Prime Minister and the Treasurer have still given priority to big business over reining in some of that taxation revenue to ensure we have a fairer budget balance from the corporate sector. We all know that, in the budget that was released just a couple of days ago, there remains the $80 billion tax cut for the biggest businesses in this country. Don't worry about actually getting what's owed to the Australian people. This government, as part of the trickle-down economics philosophy, is more intent on providing a tax cut to the big end of town.

Over the course of the past week some very interesting research has been released in the United States about the effect of the first round of corporate tax cuts in America, and—surprise, surprise!—what that research has uncovered is where that first round of corporate tax cuts went. Guess where the benefits of those corporate tax cuts went? Well, they didn't go into the pay packets of the workers of those corporations, I can tell you that; they went into profits and to the shareholders through increased dividends. It's clear, based on studies like that and a litany of others throughout the world, that this trickle-down approach to economics of cutting taxes for corporations in the wish and the hope that they will pass them on to their workers and employ more people is complete rubbish. It doesn't happen. These studies that have been released in the United States prove that. Cutting penalty rates for workers who work on weekends in the hospitality industry only makes things worse. These are the reasons why people's real incomes have not been increasing in Australia over the last decade, why families are feeling the pinch and why workers are feeling the pinch and feeling left behind by this government.

Many of these matters involve deliberate tax evasion, often through the use of overseas tax havens or complex corporate structures to avoid detection and recovery. Tax havens have been estimated to hold $7.5 trillion of the world's financial wealth, costing the global economy $200 billion in lost taxes every year. The strategy of choice used by those deliberately evading their fair share of tax is a clear and present threat to Australia's taxation base. When tax revenue gets lost to tax havens, Australians ultimately have to pay higher taxes or suffer cuts to those vital services and shared social resources that I referred to earlier, particularly health, education and infrastructure.

In 2017, Labor announced a comprehensive tax haven transparency package. The policy includes tax domicile disclosure for government procurement tenders, whistleblower protections and even rewards for reporting of tax haven exposure to shareholders, and public reporting of just how much tax is paid in jurisdictions where these firms operate. Yet this light-touch, hands-off government has been backtracking on a beneficial ownership registry—another Labor policy that we announced in 2017. This registry would help identify the ultimate owners that sit behind some of these shell companies. It's about improving the transparency that is there with regard to the operation of these companies and, ultimately, being able to hold someone accountable when they do use these tricky taxation and accounting measures to transfer profits overseas to avoid paying tax.

This government also commissioned an unrelated secret Board of Taxation review on the 2016-17 budget measures and the OECD proposals for mandatory disclosure of taxation information. Of course, we only know that because of Senate estimates. The report was released only days ago because Senators Ketter and McAllister were able to get that via the Senate estimates process. The government didn't even want to release this report and what was actually going on in terms of some of the taxation transparency measures in the Australian economy.

The fact is that the Treasurer doesn't want to close a lot of these loopholes. Of course, we heard absolutely nothing from him about cracking down on tax havens in this budget. We know that the introduction of public reporting of country-by-country reports, as suggested by Labor, could help stem the flow of missing money that should be flowing to the Australian people. Corporate profits are soaring and, while Australia's company tax rate places us in the middle of the G20 pack in terms of competitiveness and the actual rate of taxation for corporations, the only policy that this government has had in this area is to cut corporate taxes and to give those companies a big advantage.

Labor knows what needs to be done—and, if we're elected, we're willing to do it—to crack down on multinational tax avoidance. We have announced a plan to close those loopholes and attack the deliberate use of tax havens, first, by tightening debt deduction loopholes used by multinational companies to improve their budget by billions over the medium term.

The second element of our plan is introducing the public reporting of country-by-country reports. We need to see the high-level tax information about where and how much tax was paid by large corporations.

Third is providing protection for whistleblowers who report on those entities evading tax to the Australian Taxation Office. Where a whistleblower's information results in more tax being paid, we should allow them to collect a share of the tax penalty with a reward of up to $250,000.

Fourth is introducing a publicly accessible registry of the beneficial ownership of Australian listed companies and trusts. This approach will allow the public to find out just who really owns companies and who is behind these corporate and accounting practices of setting up different shell companies to avoid the scrutiny of the public. It's clear that shareholders shouldn't be able to use complex structures and sham ownership arrangements to avoid complying with corporate transparency rules.

Fifth is introducing mandatory shareholder reporting of tax haven exposure. Companies must disclose to their shareholders, as a material tax risk, if the company is doing business in some of these tax havens. Unfortunately, that is not occurring at the moment.

Sixth is appointing a community sector representative to boards of taxation to ensure the community sector's voice is heard in tax design and review processes.

Seventh is introducing public reporting of Australian Transaction Reports and Analysis Centre, or AUSTRAC, data and requiring the annual public release of international cash flow data.

Eighth is requiring government tenders to disclose their country of tax domicile.

Ninth is developing guidelines for investment by superannuation funds. This should be done by the Australian Taxation Office in collaboration with the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority.

The final element of our plan requires the Australian tax office's annual report to provide information on the number and size of tax settlements.

I want to make some comments in respect of schedule 2 of the bill, which goes to improving the integrity of small-business capital gains tax concessions. These changes include additional conditions that must be satisfied to apply the small-business CGT concessions to capital gains. The amendments implement the measure announced in the 2017-18 budget as 'Tax integrity package—improving small business capital gains tax concessions' and apply to CGT events that occur on or after 1 July 2017.

However, we note that the original 2017-18 budget proposal is vague in its details. Many tax professionals and stakeholders have said that it would not be until the release of the exposure draft legislation that those affected would become aware of just how they were going to be affected by this legislation. These stakeholders make the reasonable claim that, due to a lack of detail, taxpayers who have conducted their tax affairs in good faith could be caught by changes that go beyond what was flagged in the previous budget. They argue that, to help prevent adverse consequences for taxpayers who have been acting in good faith but couldn't reasonably be expected to foresee the detailed amendments finally unveiled in the exposure draft, the implementation date should be changed from 1 July 2017, as per the original budget announcement, to 8 February 2018. That's the exposure draft release date. In light of those stakeholder concerns, Labor supports the start date being 8 February 2018, as proposed by the tax professionals community.

In terms of schedule 3, which goes to fin-tech and venture capital amendments, these amendments in income tax law and the Venture Capital Act ensure that venture capital tax concessions are available for investments in fin-tech businesses. This schedule partially implements a 2016-17 budget measure, the National Innovation and Science Agenda, as it expands the new arrangements for venture capital limited partnerships.

Labor notes that the main observation following consultation with key stakeholders was the timing of the concessions proposed in this measure. They still leave some uncertainty about the long-term eligibility for concessions in the commercialisation process. This has led to some uncertainty about whether investment decisions will actually be improved. Labor, again, has requested that the minister instigate a look at the impact of investment on the venture capital concession provisions overall, including the measures in this bill, to ensure that they are operating as intended. To provide an added layer of certainty, the amendments should allow Innovation and Science Australia to make public and private findings on assessments.

In conclusion, once again, Labor support the tax integrity measures in this bill, but we are somewhat sceptical about and somewhat dismayed by this government's light-handed approach when it comes to tackling tax avoidance in Australia. This particular coalition government has been very sloppy in its approach to key stakeholders on important tax matters—namely, those that go to the notions of transparency and accountability by corporations when it comes to taxation, how much they're paying and where they're paying it. Labor have laid out a clear plan of improved measures that would bring greater transparency and accountability to this industry. We commend that approach to the government and we hope that it sincerely looks at adopting some of those amendments.