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Monday, 1 September 2014
Page: 9334


Mr JOHN COBB (Calare) (19:00): The International Tax Agreements Amendment Bill 2014 is about integrity—the integrity of Australia's tax system—but it is also about fairness. I do not disagree with most of what I have heard this evening. The tax treaty between Australia and Switzerland, which is one of the oldest unamended tax treaties, will be updated to permit the exchange of taxpayer information for the prevention of tax evasion. It does not take a lot of common sense to realise that if you do not share information with the other countries you deal with you have absolutely very little hope of getting to the bottom of what it is a global company in particular is doing with its books.

The new Swiss treaty will enable the Australian Taxation Office to seek, for the first time, taxpayer information from Swiss tax authorities for the purpose of addressing tax evasion. This includes Swiss bank information. The inclusion of these rules will provide a significant deterrent to taxpayers who may have sought to take advantage of Swiss bank secrecy laws. The revenue cost of the new treaty is minimal and will be offset by the revenue gains arising from enhanced tax system integrity through the establishment of effective exchange of information arrangements with Switzerland.

Tax evasion is a significant issue for Australia internationally and domestically. As recently reported, the ABS estimates up to $225 billion each year is being used on the black market and effectively evades the tax system. These are the cash-in-hand jobs that may seem harmless but collectively they are making Australia's taxpayers who do meet their obligations contribute much more to fill the gap by those making use of the black market, as it were. In response, the ATO has indicated that it will be targeting businesses that operate in the cash-only black economy—I hope it is more successful than it has been in the past—including but not limited to builders, restaurants, cleaners, et cetera.

Tax treaties are the mechanism by which Australia can participate in the global economy and cooperate with tax authorities in overseas countries largely through the sharing of information, as we have said. We now have 44 bilateral tax treaties and, as I mentioned, the treaty with Switzerland is one of the oldest, dating back 34 years. The new Swiss treaty will update the existing bilateral tax arrangements to align them with current Australian and international tax policy settings.

The treaty is expected to encourage trade and investment, which will further enhance economic relations between Australia and Switzerland. Switzerland was Australia's fifth largest source of foreign direct investment, at A$23 billion—and I will talk about this later—and sixth largest investor overall, at A$49 billion, in 2012. Australian total investment in Switzerland amounted to A$27½ billion two years ago. The Swiss treaty is expected to reduce taxation barriers to bilateral trade and investment, primarily by reducing source country taxes on cross-border payments of dividends, interest and royalties.

I mentioned integrity earlier. This amendment shows the government is committed to ensuring that the integrity of our taxation system is maintained and has already taken action to ensure that multinationals do pay the appropriate amount of tax in Australia. The government has endorsed key elements of the former government's integrity package, taking into account potential harmful impacts on genuine business activities, which, in my experience of taxation offices, they quite often say you have to watch.

These measures address profit shifting by preventing the excessive allocation of debt to the Australian operations of multinationals. The issue is one which Australia and other G20 nations need to work together on to ensure that companies pay fair tax in the country in which they produce and not where they can shift the profits. We also need to ensure our country is getting a fair deal in these treaties.

As previously mentioned, the G20 is looking at this, and the OECD are working to have something to bring back to those countries by December 2015. It is essential that they do. Our country is currently enjoying large investment. I do not think there has ever been more investment in Australia. There has also been good investment and we have always needed it, but there is a question mark about agricultural investment—in land and agribusiness. We have a lot of investment in mining and various things.

I believe that most investment in Australia is for investment, but there are some who invest in Australia because they want the product rather than the profit it might generate. So they have to be seen and they have to pay tax—not necessarily where they want to realise the profit. It is not that hard in this multinational world that we live in for them to realise the profit in the country of lowest taxation—which almost certainly will not be us. It may be a country that is not a member of the G20 which, desperate to have jobs and one thing and another, will have low taxation just to attract a certain level of business. If a global company can realise its profit in that country rather than where they generate what they are growing or producing—whether it is in agriculture or mining—we have to be able to ensure that we have a system that allows us to get what is our fair share. The fairness we are talking about is fairness to the Australian taxpayer. As I mentioned earlier, domestically, the black tax side of things means that those of us who do meet our obligations pay far more than we should have to because, as I said, there are over $200 million a year that is missing.

This bill, which deals with our treaty with Switzerland, is probably an example of what we have to do around the world. December 2015, when the OECD report back to all those member countries with what they think should be done, cannot come soon enough. I have no problem with investment in Australia. I do have a problem if the companies that invest here do not pay the tax they should, and I think this really is something that everybody should be mindful of. It is one thing for someone to invest here; it is another thing to ensure that they pay what they should. As I said earlier, there is a lot of interest today about people from overseas investing in Australia housing and investing in Australian agriculture. The one that concerns me is agribusiness—because, if you lose the agribusiness, you lose control of the product that it deals in. I have no doubt that most of those people are investing because they want to diversify their portfolio from overseas and Australia is seen as a safe place to do that—and I certainly I hope that it is. I welcome their investment in that sense. But, if they want to take the product out, they must pay what is due in Australia on the profit that is generated, even if it is not actually realised here. I hope in the future that is what happens.