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Monday, 19 October 2015
Page: 11533


Mr HUTCHINSON (Lyons) (12:52): I rise in support of the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. Indeed, this was Australia's legacy in the presidency of the G20, in 2014. Australia led progress on the OECD's base erosion and profit-shifting action plan for ensuring multinationals do pay their fair share of tax. It was under former Treasury Hockey's leadership that the G20 delivered the first tranche of recommendations to address multinational tax avoidance. Of all the issues raised by members of parliament from time to time, in terms of multi-partisanship, of broad and wide-ranging support, I think this is absolutely morally the right thing for government to be doing. It is an important issue in the eyes of many people right across our country, including in my electorate of Lyons, that corporates, particularly multinationals, pay their share of tax. As has been highlighted here today, mums and dads, families, individuals and small businesses all pay their share and have much less capacity to be able to put in place sometimes very complex arrangements to avoid paying what should rightly be paid. There is a range of different taxes, from income tax, to company tax, to the GST and to various state based taxes. It is right and proper that multinationals profiting in Australia are paying their fair share of taxes.

In this country we already have some of the strongest taxation integrity rules in the world, but we as a government are determined to make these rules stronger. That is why with this bill we are delivering on an election promise to set regulations in place to combat multinational tax avoidance.

What is also proper about this bill is that it enables a discussion to take place—one that often comes up from below the surface—about whether or not some multinationals avoid paying taxes on profits made in Australia to take place. If that is the case, it is simply right and proper that we do something about it. The public expects us to do that, because it undermines the public's faith in the tax system and leaves families and small businesses to unfairly carry the taxation burden.

Some multinationals are artificially structuring to avoid paying tax in our country, by booking offshore their revenue from Australian sales and profits. This means that they have an unfair advantage when it comes to Australian based businesses, often family businesses, sometimes small businesses and certainly Australian based corporates, with whom they are competing on an uneven playing field.

The new multinational anti-avoidance law will allow the Commissioner of Taxation to treat these large multinationals as though they have a taxable presence in Australia and are subject to Australian tax of profits generated locally. I think this is the right thing and a good thing for our country.

Country by country reporting is also part of this package, which will increase penalties—in fact it will double them—for those engaging in tax avoidance and profit shifting. The reporting will include identifying tax paid in every country in which they operate. Information is then shared with other tax authorities, and vice versa.

The government is also consulting on rules targeting hybrid mismatches, as well as taking action on harmful tax practices and treaty abuse rules. A voluntary transparency code that will be introduced by May next year will enhance public confidence in the taxation system and will provide better community understanding of the tax affairs of large companies, particularly multinationals. The Australian Taxation Office will have unprecedented resources to deal with international tax avoidance, with the government providing an extra $87.6 million to the ATO over three years to investigate tax avoidance, and act where appropriate.

The program so far has raised more than $400 million in tax liabilities, and it is estimated it will raise more than $1 billion in total. The tax office has identified around 30 companies to whom this law would likely apply. The revenue these big multinationals are earning in Australia is expected to be in the billions of dollars. They are being targeted because it is these companies that, through offshore activities, have the greatest opportunity to avoid paying tax, and they represent the highest risk to Australia's tax base.

The new law should not have an impact on Australian based businesses, because they are already taxed here in Australia and there are appropriate mechanisms by which they are checked, and the checks and balances apply to the payment of the appropriate amount of tax that is due.

This law focuses, absolutely and unapologetically, on foreign multinationals who are avoiding Australian taxation by booking their revenue overseas. The government has been working closely with academics, tax professionals and the business community for the past two years on the OECD's profit-shifting agenda. This new law was also released for public consultation on budget night. We have consulted with stakeholders such as business, tax practitioners and the Australian Taxation Office to develop the legislation to ensure that the law will not have unintended consequences. This is aimed at targeting only the most complex schemes. Multinationals who are not artificially structuring to avoid paying taxes will not be impacted. Multinationals with annual global revenue of over $1 billion will need to consider whether they fall within this new law. Stronger penalties will apply, as I mentioned before, to those corporate entities that are found to be in breach of this rule. In fact, the penalties will be doubled for tax avoidance from profit-shifting schemes. It has been shown that deterrence is recognised as a key measure in tackling tax avoidance.

As I touched on, we made commitments in the 2015 budget. This legislation delivers on those but builds even more strongly on those things committed within the budget this year. In particular, the system will be broadened so that all significant global entities with revenues above $1 billion—estimated to be over 1,000 companies—will need to consider these rules. It means that, if you are structuring with a principal purpose of avoiding tax, the ATO will have the tools to catch you and ensure you pay your fair share. By removing the no- or low-tax requirement and relying solely on a principal purpose test, we are sending a clear message that, if you are deliberately and artificially avoiding paying Australian tax, this is simply unacceptable. Removing the 'no or low' requirement will also provide additional certainty and minimise disputes around whether a company operates in a no- or low-tax jurisdiction where it is clearly structured for a purpose of avoiding tax.

Mums and dads, families and hardworking Australians in small business, this legislation is for you. This is about responding to what the community clearly has demanded of us as a government—and, as a local member, I can certainly say that this issue is raised with me wherever I go around my electorate. It is right that we pay a fair share of tax. It is the role of government to fund a whole range of different services, and the priorities of government lie in delivering a welfare system that is a safety net for those Australians who have found themselves in hard times and are unable to support themselves. It is about paying for our infrastructure. It is about paying for our health system and our education system.

A question has been asked of me in recent times: how much revenue is this expected to raise? It is very difficult to estimate that. The revenue that these large multinationals are earning in Australia is expected to be in the billions of dollars, but, as to exactly what the taxation revenue from this measure will be, that will come to pass in time. I have touched before on who will be affected by the new law. The ATO has around 30 multinational companies in mind that could be targeted by this new law. It should not have an impact on Australian based businesses, because they are already taxed within this country. Another question that is asked quite frequently is: will the new law impact negatively on investment by multinationals in Australia? I think we all understand in this place how important foreign investment is to Australia. It has been thus since 1788. We have a big country with a small population, and the importation of capital into this country has benefited our nation and benefited the creation of jobs and opportunities for many Australians. The answer to the question is no. The risk that the targeted multinationals would scale back their Australian operations to minimise tax consequences is low. One other question, I guess, that should be addressed is: does this measure override any other bilateral tax treaties that we have in place? Again, the answer is no.

It is well-considered legislation—and, again, I pay due credit to former Treasurer Hockey and the work that he did in leading the discussion with the other members of the G20 during Australia's time in the role of president. We were able to achieve a result here that I think most Australians will see as a very positive step in the right direction in addressing tax avoidance by multinationals making profits in Australia.