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Monday, 1 September 2014
Page: 9331


Mr ZAPPIA (Makin) (18:45): I speak in support of the amendment moved by the opposition in respect of the International Tax Agreements Amendment Bill 2014. This bill gives effect to a revised tax treaty between Australia and Switzerland, as other speakers have pointed out—a treaty that was signed in July 2013 and that effectively replaces the existing agreement which came into force in 1981. I particularly note that the revised treaty will strengthen administrative assistance between Australia and Swiss authorities by allowing the exchange of information, including information held by banks and other financial institutions in order to address tax evasion. I expect that the exchange of information will also be of assistance in pursuing criminal and terrorist activities, where large sums of money are required and transferred around the world. I suspect that, indirectly, the benefits of this agreement will cover more than just tax evasion. However, I will focus my remarks on the issue of tax evasion and how the exchange of information, in conjunction with other measures, can make an important difference in preventing tax avoidance and tax evasion in a globalised economy.

Tax payments can be a major financial outlay by business and so it is not surprising that, just as any business would seek to reduce their overheads and the business costs, they will also seek to reduce their tax obligations. It is not uncommon that taxpayers, both individuals and entities, use clever accounting methods to minimise or even avoid paying their fair share of taxes. Closing tax loopholes is difficult to do when it occurs within Australia or within any single jurisdiction, but it is much more difficult to do when dealing with entities that operate across more than one jurisdiction. It is difficult to follow the money trail but even more so where different tax regimes and tax rates apply between different countries. It makes perfect sense for a taxpayer operating across more than one jurisdiction to organise their affairs so that profits are made and declared in the lowest taxing jurisdiction—it may not always be ethical but, if it is legal, it makes sense. That is what has been happening. Over the years several high profile cases of tax avoidance have been the subject of media reports here in Australia. It is a problem that is faced by all countries around the world and one that is regrettably growing. Indeed, it is now the subject of international attention and of attention by human rights groups and justice advocates around the world.

The member for Rankin referred to the Micah Challenge earlier on in his remarks on this bill. Earlier this year I also met with representatives from Micah Challenge who were in Canberra to raise awareness about their Shine the Light campaign. Micah Challenge is a non-government Christian organisation that draws attention to global poverty, injustice and human suffering around the world whilst simultaneously campaigning strongly in support of the Millennium Development Goals. In recent years their advocacy has been invaluable in securing additional aid funding. Not surprisingly the young people I met with were disappointed that aid funding had been cut by the Abbott government by $7.6 billion over the next five years in the 2014-15 federal budget. The decision by the Abbott government to cut aid funding not only breaks previous promises and expectations created by the Prime Minister, but is another example of the Abbott government's callous policies where the most disadvantaged are hit even harder. The government's claim that aid funding has been poorly administered, even if true, should be not an excuse for cutting funding but rather a reason for better management of it. Just as lame is the Abbott government's rhetoric that it has a budget crisis to manage. There is indeed a budget deficit, but there is no budget crisis. And unlike Conservative UK Prime Minister David Cameron, who said the government will not 'balance the books on the backs of the poorest people in the world', Prime Minister Abbott shows no such empathy.

I refer to these cuts because they relate directly to this bill. In anticipation of the funding cuts, Micah Challenge has offered an alternative funding source for global aid. Indeed, the funding source would not only enable Australia to meet the millennium development goals but also go a long way towards cutting Australia's budget deficit. Micah Challenge are referring to the additional tax revenue that could be generated by closing down tax dodging and even corruption in global tax evasion. This is what Micah Challenge wants to shine the light on. Tax Justice Network, a UK-based global non-government social justice organisation, estimates that between $21 trillion and $32 trillion is hidden by the world's wealthiest people in around 70 global tax havens. The tax that would be paid on the earning of that money is estimated at between US$190 billion and US$280 billion annually. Unethical multinationals and wealthy individuals use transfer pricing to rort the tax system, and then stash away funds in secretive bank accounts within low-tax regimes. Indeed, I note that one of those low-tax regimes is Switzerland, so I am pleased we are entering this revised agreement with them.

There are no uniform tax obligations around the world in the same way as we have trade obligations through the World Trade Organization, and taxation competitiveness between countries further encourages transfer pricing and other tax avoidance practices. The tax evaded is estimated to be in excess of the amount expended annually on global aid. I repeat that: the tax evaded is in excess of the amount expended annually on global aid. If we were able, throughout the world, to simply collect the tax that is evaded—this is not increasing taxes but collecting the taxes that should rightfully be paid—there would be no need for global aid, because it would be funded from that source. These tax rorts also occur in very impoverished countries, and this is one side of this issue I find hard to deal with. The very countries to whom the aid is given are also affected by tax losses that they incur because of tax evasion by multinationals or individuals. The amount of tax losses those very countries incur quite often exceeds the amount they in turn receive annually through global aid budgets from other countries around the world. Again, if we were able to close down the tax evasion that occurs within many of the developing countries, there would be no need for additional global aid from Australia or other countries, because the money would be there from their own sources. I think it highlights the callous attitude of some multinationals that are prepared to avoid paying their fair share of tax to those very developing countries where the need is so great.

Australia is not immune from those very tax losses. Much, if not all, of the tax evasion and rorting of tax systems can, over time, be stopped if there exists an international will to do so. And it does require an international will, because we operate in a global economy. As Micah Challenge rightly point out, Australia is now in a unique position to show some leadership on this issue. As chair of the G20 summit in Brisbane in November, Australia should place the issue on the agenda and initiate international action. I note that other speakers have said that we will be doing that, and I commend the government for doing so. I hope that it is not simply a talkfest of some kind but rather that G20 leaders make a genuine attempt to do something about this, because quite frankly it affects all of their countries as well. It is in the interest of their national economies. At a time when so many other countries are also struggling to pay for the needs of their own people, it seems to me that this is one matter that should be dealt with, because it will resolve the problems of so many countries. Hopefully, the pressure on governments as a result of the global economic recession that we have had will be such that they will now want to do something and act in a very constructive way at the G20 meeting.

I accept, and I think we all accept, that not all jurisdictions will cooperate. Some jurisdictions will do whatever they can to remain part of the tax havens and the tax avoidance industry. Some countries, it seems to me, almost survive from this very immoral industry. But there are also some countries that are showing leadership, and we should applaud and support them.

Amongst the many actions that could be taken, Micah Challenge is calling for Australia not only to seek agreement to raise the matter at the G20 meeting but also to seek agreement on three critical matters. I will refer to those very briefly. Firstly, they want the G20 to reach agreement on the automatic exchange of information between all tax authorities. While some intergovernmental agreements already exist, including with Australia, they do not exist with all countries. Secondly, there needs to be beneficial ownership disclosure through a public register that lists the true owners and beneficiaries of companies, trusts and foundations. This would make it much easier for authorities to follow the money trail. Currently, no such register exists in Australia. Thirdly, there must be country-by-country reporting for multinational corporations. This is what Micah Challenge are asking Australia to take a lead on. I understand that the US and the European Union have already taken the lead in country-by-country reporting requirements, but Australia is still lagging behind.

These measures may be seen as moderate steps against a tax avoidance industry that is rife throughout the world, because regardless of what laws are in place tax accountants and lawyers will always find ways around them. It is the super-rich and the multinationals that control huge sums of money who benefit from international tax avoidance schemes and secretive tax havens. They are also the people who can afford the best lawyers and best accountants in the world, yet they are also the people who can most afford to pay more tax. By not paying their fair share of tax, they add to the tax burden of low-income people, small businesses and others who have no opportunity to avoid or evade tax.

Micah Challenge's aim is to shine a light on and expose those engaging in tax-dodging and corruption. I applaud them for doing so. If we can do so, we will in turn reduce the opportunities for tax avoidance. As I said, it is not about making profit makers pay more tax; it is not a tax-increasing measure. Rather, it is about making them pay their fair share of tax. The G20 meeting is a terrific opportunity for Australia to show some genuine leadership on this.

Lastly, I make the comment that this is a problem for Australia regardless of what happens at the G20 meeting. I note that in another report the Australian Taxation Office has identified some 86 companies that it considers may be engaged in substantial transfer pricing. I would be very surprised if transfer pricing or profit shifting is limited only to those 86 companies, but I understand the difficulties in trying to trace and follow the money trail. I applaud the ATO for at least making an effort to do so.

As the Tax Justice Network has reported, collectively, we are talking about billions if not trillions of dollars around the world. So I will applaud any measures that we can take, whether small or large, here in Australia to close down the opportunities for those people that want to avoid paying their fair share of tax.

I am disappointed that the government has decided not to proceed with some of the measures that we were hoping to introduce in the last parliament under Labor, measures that would have perhaps raised $1.1 billion of additional measures. Nevertheless, this is a step in the right direction. I support the general thrust and I support the amendment moved by our side of parliament.