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Monday, 19 October 2015
Page: 11596


Mr PERRETT (Moreton) (17:01): I rise to speak on the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. Benjamin Franklin said:

In this world nothing can be said to certain, except death and taxes.

With medical advances, I think death can be deferred but it is still pretty certain; however, when we come to tax, it is not quite as certain as it was in Benjamin Franklin's day.

The way business is conducted has fundamentally changed. The way we consume products has fundamentally changed. We live in a global digital society where we purchase products that can be delivered to us in digital formats. There are no cassettes in my Sony Walkman when I go for a walk; instead it is an iPod where I can access music from around the world. It is much less certain today where those products, even songs, are made or where a company's transactions are taking place. Companies have been able to take advantage of the transient nature of modern corporate business ventures to structure their corporate affairs and shift profits to low-tax or no-tax regimes—and we heard a little bit about that last week in this place.

This is a very real problem for modern governments where nation states' boundaries are much blurrier than they were 100 or even 50 years ago. Three of the five biggest companies in the world today are making revenue from trading—not something tangible like a cassette but something that we cannot see and measure: they are trading their intellectual property. Previously, these companies would have been major contributors to their country's taxation system. In our global economy, those companies are now at liberty to transfer revenue from their Australian operations to an international subsidiary located in a low-tax jurisdiction—located being a term in inverted commas. Those low-tax jurisdictions have always been around—whether it is Switzerland, Luxemburg, the Bahamas or even the Cayman Islands—and this has implications for the Australian government.

The Australian Taxation Office has reported that, from the $300 billion a year in cross-border trade, over $150 billion is channelled to very low-tax jurisdictions. This is quite simply lost revenue for Australia. Our society operates by each of us contributing through the taxation system—paying the fair amount. It is how we pay for our roads, schools, justice system and other services. The state and Commonwealth governments spend about $150 billion on health budgets a year—the Commonwealth budget is about $65 billion, about 61 per cent. So think about that: that money could go into health, and think of the good it could do.

If these multinational companies are not contributing to our taxation system but shifting revenue to low-tax havens, then the rest of us—be it private individuals, small businesses or Australian registered corporations—have to pick up the slack. This is particularly important in 2015 as we are an ageing Australia. It is the first time ever that we have two generations in retirement. It is good that we have improvements in health and we are able to live healthier lives; however, it is obviously a challenge for a system such as the pension. When the pension was established, the life expectancy of a male was 62 and there were about seven workers for every person on the pension. That ratio is going down and down and down, and it will not be long before we have two or three workers per person on the pension. That has implications for us as a nation, if we want to be a nation that recognises a fair go and offers a helping hand for people in difficult times.

Most Australians live quite simply. They work or run a business in Australia and pay their fair share of tax. For the average Australian, it is about 21 per cent of their income. If they are a wealthier Australian, we have a tax system that means they pay more. If they are a small business, they pay about 30 per cent. Of course they might have write-offs and the like. Obviously, many small businesses do not make a profit so they do not have to pay the full 30 per cent.

If we were all able to shift our income to and arrange our tax affairs in low-tax havens, Australia, as we know it, would fall apart. Support in the nation would come to an end. There would be no money for our wonderful education system that recognises need, whether it is state or private schools. Our world-class Medicare—something that is the envy of the world—would fall apart. Our judicial system, where we provide access to justice for all, would come to a screaming halt. Other important social frameworks—such as child care, that make our wonderful society what it is; the glue that holds the Australian community together—would start to fall apart

The social contract we have as Australians is to contribute our fair share—that is what makes this country prosper. There are legitimate ways to minimise our taxation burden. A common deduction that most people from time to time claim is a charitable donation, and we are a generous nation when it comes to private individuals. It is sad to see that in the context of a coalition government that has slashed $11.3 billion from the budget at a time when we should be reaching out to the world. Instead, we have a foreign minister that has overseen that obscene slashing of our foreign aid budget.

But, as private individuals, Australians are always happy to put their hands in our pockets and help out our neighbours or people around the world or even domestically who need a helping hand. We saw that when the tsunami hit our neighbours back at the start of the last decade. I am sure many people here have put their hands in their pockets—and I know the member for Kingsford Smith has done to financially help the surf lifesavers—to help the Red Cross, Oxfam or Diabetes Australia. I am sure the member for Hasluck would have done the same to help the cause of diabetes. I know he is passionate about that. I have even seen it in my electorate with local groups setting up charities to help not only locals but people around the world who are experiencing hardship. There is a common good to the government forgoing some tax revenue and allowing people to give that money to worthwhile charities.

Often constituents come in and say they want to set up a charity or a local service organisation. One of the first things I always ask them is, 'Have you looked at what is available now? Is the service you intend to provide already being undertaken by an established charity?' If it is money that the government is forgoing, as in a tax deduction, then it is important that it is spent wisely. Otherwise, the money would be better spent by the government when it is collected as tax.

As politicians we need to be ever vigilant to the constantly changing techniques being utilised to minimise tax legally. I am not talking about criminal endeavours here. Where these techniques eventually become not in the national interest, measures should be taken to make sure they are made to be in the nation's interest, perhaps even to the extent where such techniques, arrangements or loopholes become illegal. If companies are utilising Australia's great laws and protections for their own prosperity, they should contribute their fair share. They are getting the benefits of the Australian system, so they should put in their fair share.

Evidence was presented before the Senate's corporate tax inquiry that one big multinational firm may have paid as little as two per cent tax on the billions of dollars of revenue it earned. That does not pass the pub test. It is just not fair. As I said, these multinational companies benefit from the protections, safety and services offered by Australia, so they should pay their fair share of tax, as individual Australians do and as Australian businesses do, be they small or medium or one of the larger companies that stride around the world.

For instance, these multinational companies are more likely to be utilising our judicial system than most ordinary Australians yet they are contributing very little to maintaining that judicial system which, at the moment, is struggling from a lack of resources. Australia cannot afford to let these very prosperous multinational corporations avoid paying their full share of taxation. Tax reform for multinational companies is vital to close the loopholes that currently exist that allow these companies to avoid tax. As I said, we are not talking about them doing something illegal—but we have to have a focus on the national interest.

Labor supports any measures that will close such loopholes and protect revenue from taxation that should be staying in Australia and benefiting Australians. Labor announced a $7.2 billion package of measures to prevent multinationals from avoiding tax by moving their profits offshore. That package was costed by the Parliamentary Budget Office. Sadly, the Abbott government rejected the measures proposed by Labor for what could only be short-sighted political reasons.

The measures contained in this bill, while welcomed as at least something, are untested. The government has no idea how much revenue these measures will save. In fact, in the budget papers there is only an asterisk. We saw the Treasurer floundering when asked this question today. Labor has taken a bipartisan approach to this important issue and will not stand in the way of these measures. It is important that these companies contribute as they should. It is also important that all measures necessary to ensure that multinational companies pay their fair share of taxation in this country be put in place.

More measures are needed to ensure that this occurs. The government needs to be serious about this issue and not tear down the measures put in place by the Australian Labor Party in 2013. Those measures required the Australian Taxation Office to publish details of the income and tax paid by companies earning more than $100 million. When it comes to taxation, transparency is important. Public companies are obliged under the Corporations Act to make sure shareholders know what is going on. Companies earning more than $100 million should be paying their fair share of tax in Australia. If they are not, surely Australians are entitled to know that. Australians are handing over their hard-earned, fully taxed dollars to these companies on the expectation that those companies will support our Australian economy by paying their fair share also.

These transparency measures apply to only about 2,000 companies in Australia. The government wants to reduce that number by about 800 companies. One has to wonder why these companies are so keen to keep their taxation expenditure secret. The government's argument is that private companies should not be held to the same level of accountability as publicly listed corporations. In fact, publicly listed corporations already have significant reporting requirements and the measures put in place by Labor evened the playing field between private companies and publicly listed corporations. If a private company is paying very little taxation, it should be called to account; it should explain why that is the case. There are sound public policy reasons for keeping these transparency measures in place.

We heard that ridiculous claim by the now minister for mining and then Assistant Treasurer Josh Frydenberg that there were real concerns about the implications of the publication of the tax data of private companies. In The Sydney Morning Herald article by the Nassim Khadem and Gareth Hutchins on 17 March he said:

… there were safety concerns because it made those individuals potential kidnap targets.

By this logic, the BRW Rich 200 list should be closed down in the interests of safety. The article goes on to make the point:

The decision to wind back the laws comes amid intense lobbying by business groups for the laws to be scrapped …

I cannot see how Mr Frydenberg could come to that conclusion. Transparency measures are important. The measures in this bill are welcomed. The measures Labor proposes in our $7.2 billion package of measures would go further to ensure that multinational companies are fully contributing to the economic wellbeing of Australia.

It is sign of a lazy government that has already run out of ideas when they take the easy road when it comes to taxation reform. We have seen a hiking up of the GST flagged by a couple of backbenchers opposite already. This is an unimaginative, simple solution that hits the poorest hardest. If the tax is broadened to fresh food, that would particularly attack communities that are struggling with their diet. You could not avoid such a hike unless you did not consume, and we cannot all sit around and grow our own vegetables. A rise in GST would hit low-income Australians, Australians who can least afford to pay more tax. Obviously we cannot structure our arrangements to send our finances off to Luxembourg, Switzerland, the Bahamas or even the Cayman Islands. Low-income Australians do not have many avenues to minimise their taxation burden. These measures are to be commended, but they need to go further.