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Monday, 19 October 2015
Page: 11603


Ms CHESTERS (Bendigo) (17:30): I note the words of Dave Arthur, a security guard from Melbourne who came to parliament not that long ago to talk about this very issue. He and his union, United Voice, were talking about the issue because the government at the time were not. They commissioned the report Who Pays for Our Common Wealth? Tax Practices of the ASX 200 into what is going on with the top 200 companies in Australia. Dave's words feature in the report and are something many in this place would agree with, yet it has taken the government over two years to act. He said:

Australian people aren't stupid. If you show them the facts and figures, that we’re losing so much money because of loopholes in the tax system … I think the Australian people will come around. We’re not after jet planes for ourselves; we’re not after penthouses or anything like that. All we’re asking for is the money that rightfully should go to the government that can be then spent on the community.

Dave Arthur is earning just above the minimum wage as a security officer in Melbourne. He, like other hardworking people of Australia, particularly those who are paying their fair share of tax and are on small to medium incomes, agree that it is time we had action on this issue.

This report that Dave helped write, through the comments he made and through the work of United Voice, exposed this issue. It is great to see that the government has caught up with United Voice and its members and I congratulate Dave and others for speaking out. I know it is not common for a union to speak out about tax avoidance. It is great that they have caught the attention of this government and that the government is now taking their concerns seriously.

The report's executive summary highlights 200 of Australia's largest listed companies on the ASX and what they are currently paying compared to what average Australians are paying. It shows that some of the multinationals, such as Apple and Google, are paying less of a percentage in tax than some United Voice members pay. It found that cleaners of Westfield's shopping centres pay more in income tax, as a percentage of their income, than Westfield itself pays the government in tax. This is a demonstration of the loopholes in our system. If anybody has met Westfield's cleaners, including cleaners of the Westfield Doncaster shopping centre, you would know they work very hard, happy to pay their fair share of tax. But, as they highlight in this report, it is about time Westfield also paid its fair share of tax.

The Australian budget is more dependent on corporate tax than other OECD countries. In fact, it is the second most dependent after Norway. After personal income tax, company tax is the second largest source of federal government revenue in Australia. Tackling corporate tax avoidance is an urgent priority; Australia does not have a spending problem, it has a revenue problem and it must be fixed. That is why the report commissioned by the union—and reports since—highlight how much, in the way of revenue, this country is missing out on. It is because we have not tackled this critical area of tax reform.

The report found that approximately $8.4 billion in corporate tax is being avoided, every single year, because of loopholes that have not been closed. Other key findings include: nearly one-third have an average ETR of 10 per cent or less; 57 per cent of the disclosures have been subsidiaries in secrecy jurisdictions; a combination of 1,075 disclosed subsidiaries registered in secrecy jurisdictions; and 60 per cent reported debit levels exceeded 75 per cent of equity, suggesting that the higher levels of debt may be artificial to lower taxable profits. This report was done to highlight the loopholes and what is going on with the top 200 Australian listed companies.

Let us talk about some of the case studies on who is avoiding paying their fair share of tax. Apple paid just over $80 million in Australian tax, in 2013-14, despite earning local revenue of over $6 billion. By comparison, the Australian retailer Harvey Norman paid $89 million in tax compared to $1.5 billion in revenue. That is the problem we have. Harvey Norman pays more tax than Apple despite the fact that their revenue is very different.

James Hardie, a construction firm:

… operates at a net taxable loss in Australia despite average annual profits of over $200 million. In the past two years the company has paid out almost $600 million in dividends to its shareholders, and its CEO is currently paid over $12 million. It operates at a loss because it claims tax deductions on annual payments to the compensation fund for victims of its asbestos products.

Let's just reiterate how this company is avoiding paying its fair share to the Commonwealth: it operates at a loss, because it claims tax deductions on annual payments for the compensation of victims of its asbestos products. Is that fair? Many in Australia, including good, hardworking people like Dave Arthur would argue that it is not. Let's just go back to the beginning of that case study as well. It is paying $600 million in dividends to shareholders and it is currently paying its CEO $12 million, yet it is operating at a net taxable loss. The only people not getting their fair share from the profits of James Hardie are the Australian taxpayers—the Australian people—and therefore this government

Case study No. 3, Glencore:

A 2014 Fairfax Media investigation alleged the mining giant had paid no tax in Australia over the past three years despite earning revenue of $15 billion, by using a complex series of intra-company loans. Glencore disputed this account by claiming that it had, in fact, paid $400 million in tax on this revenue.

So who is right? Yes, there needs to be transparency, we need to make sure that we can investigate this and we need to expose what is going on within these multinationals. These multinationals have a lot of incentives to lower their tax bill and have the resources available to them to investigate the best way to do it. This is why the role of government is so critical when it comes to tax reform. It is up to the government to set the rules and to make the rules as tight as they can so that companies who have the resources cannot avoid paying their fair share of tax in this country.

Some of the recommendations in the United Voice report that I first mentioned include:

Greater transparency on the purpose and function of subsidiaries in secrecy jurisdictions.

We need to know how much money exists and how much money is being hidden so that we can know how much is the fair share that they should be paying. Another recommendation that I support is:

Voluntary reporting of revenue, profits, staff levels and taxes paid in each jurisdiction until such a measure is implemented by law…

They are calling on people to do it until we set the laws in this place. They say:

Some companies, particularly in the mining sector, have already taken steps towards increasing disclosure.

But not all of them will and they only will if we make them. That is the role of government. They say we need to ensure that companies are:

Avoiding setting up subsidiaries in secrecy jurisdictions.

Again, these are tax dollars that the Australian people and taxpayers should be getting.

Remembering back to the early days—and I know this government loves to harp on about the mining tax—the core principles of the mining tax were because Australian people were saying, 'We aren't getting our fair share of our resources. Where's our fair share of our resources?' This sits with the Australian people to say it is not fair. This is another way that we are trying to make these big mining companies pay their fair share of tax. For anybody that you bump into in a regional area, it sits with them and it annoys them that they are paying their fair taxes—and they have the ATO constantly offering to do audits, helping them, and they are the ones having to pay their tax—yet we have big multinationals that are not paying their fair share.

Taken together, the four schedules that have been proposed in this legislation before us today do make some progress towards combating multinational tax avoidance; however, they do not deal with the issue of debit deductions, which is the primary focus of Labor's multinational tax package. This bill focuses on companies that artificially avoid booking revenue in Australia so that they do not have to pay tax on their profits. That is an important issue to tackle and we hope this bill will force companies to restructure their operations so that profits made here stay here. That is a critical thing that Australian people want to see: profits made here must stay here so that our government can then use those resources to help fund our schools, to help fund our hospitals and to help build the infrastructure that this country needs.

This bill, however, does nothing to stop companies from using debit reductions to send money offshore, whereas Labor's proposal does. It goes to the heart of what Dave Arthur and the United Voice report were calling for. Companies can easily transfer money between their subsidiaries to dress it up as a loan even though it is just transferring money from one pocket to the other. This is where the government's bill fails; it fails to tackle these issues. If the government was serious about this issue and if they supported the Labor proposal that we put forward, then in essence there would be an extra $7.2 billion that would come into the revenue for this country and for this Commonwealth that could be spent on government programs.

If this government was committed to ensuring that major corporations paid their fair share of tax, then what they would do is make sure that they move on transparency and that they introduce better transparency rules into the legislation that is before us—yet we have not seen real action on this issue. If the government was serious about making sure that they would get the fairest share for Australians, then they would adopt Labor's package, which would see an extra $7.2 billion coming in for our government.

This is an important issue. I would like to commend the work of people like Dave Arthur, a security officer, who stood up, raised this issue and got this parliament talking about the importance of making sure that multinationals pay their fair share of tax. Ordinary working people like Dave Arthur expect this government to have robust and rigid tax laws in this country to make sure that everybody pays their fair share. It is how we ensure that our country does not continue to have a revenue problem.

I know this government likes to talk up having a spending problem, but the fact remains that it is actually a revenue problem. By taking real and serious action on multinational tax, making them pay their fair share, we can start to address some of those tax loopholes that exist. Just because a company has the means to know how to avoid tax does not mean they should get away with it. It is up to all of us in this room to make sure that the legislation before the House is not just window-dressing, that it is not just to silence people like Dave Arthur and all the other constituents concerned about this issue. If the government is serious about real tax reform it will vote up the amendment that has been moved today to make sure this legislation will address the real issue that we have in this country—a revenue issue—and to make sure that all companies, multinational or local, pay their fair share in tax.