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Monday, 19 October 2015
Page: 11618


Ms BUTLER (Griffith) (18:40): If multinationals do not pay their fair share of tax, that means that Australian businesses and households bear more of the tax burden, have reduced services or both. That is why global firms earning billions of dollars in revenue in Australia should give back to our community. Our roads, our schools, our justice system and the other public services that are publicly funded go towards making this country a great place to do business—and we are a great place to do business. We are a low-corruption country. We are a very modern and progressive country. We are a country that is prosperous. And part of the reason for that is that we do have robust publicly-funded public services and infrastructure.

That infrastructure and those public services cost money. Multinational firms should not be able to avoid contributing to those costs via fair taxation just like everyone else does—just like domestic businesses do and just like households do in Australia. Someone earning the average Australian wage pays about 21 per cent in tax. A small business pays the corporate rate, if they are incorporated, of 30 per cent on their profits, but in the past few years there have been increasingly regular reports about huge companies paying just a fraction of that.

Deputy Speaker Wicks, as you know, the Senate's recent corporate tax inquiry heard evidence that one big multinational firm may have paid as little as two per cent tax on billions of dollars in revenue. If the average Australian wage earner paid tax at that rate instead of the standard 21 per cent, they would be paying almost $15,000 less a year. Wage earners pay their tax. They do not get a choice about whether to pay their tax. Wage earners generally cannot afford sophisticated tax avoidance measures. We pay our tax. Everyone in this place should be paying their tax—and I can only assume that they are. But multinationals, it seems, are doing what they can to avoid paying fair taxation through the use of things like tax havens—places like Ireland, for example, and Luxembourg and others.

In its submission to the tax inquiry, the Australian tax office reported that more than half of Australia's cross-border trade, over $300 billion a year, is made up of companies transferring money from their Australian operations to their international arms. Over $115 billion of this revenue was channelled to very low tax jurisdictions. For example, documents leaked last year showed that over 300 Australian firms had been involved in routing money through Luxembourg and other low tax jurisdictions to minimise their tax bills. Firms named in media reports included AMP, Macquarie Group and Lend Lease. The amount of tax avoided through those schemes potentially reaches into billions of dollars.

I, like many people across the world, was very concerned about what was happening in Luxembourg and also was concerned about the ability for people to blow whistle in Luxembourg about tax evasion—because of course tax evasion does not just affect Australians. Tax evasion is not something that just affects developed countries. Tax evasion also affects developing countries, and there are some estimates that suggest that the value of tax evasion globally actually exceeds the amount of aid paid out globally. Of course, if we had tax justice and if we had transparency around the world, and if everyone paid their fair share of tax in all jurisdictions, then that would take some of the pressure off aid and would help developing countries with their economic development. I think everyone in this place would agree that it would be a positive for our globe if in fact developing countries were able to develop more quickly and provide for their own economic prosperity, thus taking pressure off the rest of the globe.

Another example of a case study of multinational tax evasion is of course Apple. Apple paid just $80.3 million in Australian tax in the 2013-14 financial year, despite earning local revenue of over $6 billion. By comparison, the Australian retailer Harvey Norman paid $89 million in tax on revenue of $1.5 billion—more tax on just a quarter of the revenue. It is not a level playing field and it is not fair on domestic companies who are trying to do the right thing in Australia.

Another example is James Hardie. The construction firm operates on a net taxable loss in Australia despite average annual profits of over $200 million. In the past two years, the company has paid almost $600 million in dividends to its shareholders and its CEO is currently paid over $12 million, but it operates at a loss because it claims tax deductions on annual payments to its compensation fund for victims of its asbestos products. In other words, Australian taxpayers are subsidising James Hardie's compensation to asbestos victims. The final example is Glencore. A 2014 Fairfax Media investigation alleged that 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 intracorporate group loans. Glencore disputed this account by claiming that it had in fact paid $400 million in tax on this revenue.

Of course, those sorts of revelations undermine public confidence, not just in whether corporations are paying their fair share of tax but in the corporate tax system as a whole. Of course, the consequence for the revenue is that, if people think that other people are getting away with not paying their tax, if they think that it is okay not to pay tax and if there becomes a societal norm that says that it is acceptable to seek to avoid and minimise taxation, then that of course discourages voluntary compliance in the wider community. Why would anyone pay the right amount of tax if they thought no-one else is paying the right amount of tax? You would have significant difficulty in the cultural norm around taxpayer compliance.

Deputy Speaker Wicks, you would be aware that the Taxation Commissioner and his leadership team in the Australian Taxation Office are moving to transform the Australian Taxation Office to the sort of office that engages well with taxpayers, seeks to engender a spirit of voluntary compliance and avoids more coercive ways of seeking compliance unless absolutely necessary. It is better for everyone if people voluntarily and willingly pay their taxes in the appropriate way and in the appropriate share, but, as I said, if people think that big companies are getting away with paying little or no tax on the amount of money that they are making in Australia, then that is counterproductive to the move towards voluntary and willing compliance.

Without strong action to tackle multinational profit shifting and corporate tax avoidance, Australia will continue to lose millions or even billions of dollars in forgone tax revenue. With government debt continuing to rise under the coalition, we cannot afford to let tax revenue drain away offshore. Tax reform for multinational companies is a priority today because of globalisation and the digitisation of the world economy. Today, three of the five biggest companies in the world are companies that make their money primarily on the basis of intellectual property. This has greatly complicated the task for traditional tax regimes. They assume a firm has a permanent establishment in a physical place where its product is made. None of that applies in a digital business and this has greatly increased the scope for firms to profit-shift to low-tax or no-tax regimes, regardless of where their profit is really produced. Our tax laws have to keep up with changes and close the loopholes that allow larger firms and globalised businesses to avoid tax.

This multinational tax bill takes an untested approach to closing some of those loopholes. There are no precedents for this approach around the world. Not even Treasury can say how much revenue it will bring in. The Treasurer today in question time was also unable to say how much revenue it will bring in. It remains to be seen if the bill will protect even one extra dollar of Australian tax. If you look at the budget papers and turn to the page featuring this measure, you will see that there is no revenue amount; there is just a set of asterisks where there should be revenue estimates, because the government does not know how much this tax evasion bill is purportedly going to raise. The government cannot tell us. As I said, the Treasurer was completely unable in question time today to tell us. If we had turned up with a tax and said, 'We've got no idea how much this is going to raise,' people would have laughed at us and rightly so.

Mr McCormack: Does the minerals resource rent tax ring a bell?

Ms BUTLER: Instead, we are entitled to be laughing at the coalition's multinational tax evasion package that raises asterisks.

Mr McCormack: How much money did that raise?

Ms BUTLER: In fact, I do not know if you have ever tried to take an asterisk or any other punctuation mark to the bank, Assistant Minister, but I do not think that one of the banks is going to give you much in return for the punctuation marks that you truck down to the teller at the local branch, and why would they? It is ridiculous. Fancy turning up with a federal budget and saying, 'We've got a revenue measure here. We've got no idea what it's going to raise, but this is the centrepiece of our multinational tax evasion policy.' It is just embarrassing. We were the president of the G20 in 2014.

Mr McCormack interjecting

Ms BUTLER: The G20 agenda was about cracking down on base erosion and profit shifting, as the assistant minister is well aware. As the president, you would think that we would have been at the forefront, at the vanguard of multinational tax evasion policy, cracking down on base erosion and profit shifting—

Mr McCormack interjecting

Ms BUTLER: but, as the assistant minister knows, we were not even amongst the early adopter countries for the common reporting standard. How embarrassing for Australia that so many countries around the world signed up as early adopters of the CRS and what were we doing? We were saying, 'We're not sure about that,' dragging the chain and kicking the can down the road, just as this government likes to do on all sorts of difficult policy issues. Just look at what they are doing on marriage equality. That is all a bit too hard for this term, isn't it? We are not going to have a free vote on that, are we? 'We're not going to have a free vote on marriage equality. We're not going to bother getting that done now,' and so it was with the common reporting standard in the year that we were the president of the G20, when one of the major parts of its agenda was dealing with base erosion and profit shifting. One of the major parts of the G20's agenda was cracking down on multinational tax evasion, not just for the benefit of the developed countries and the G20 but for the benefit of the entire world. Those developing countries are missing out on their entitlement, their fair share of taxation revenue, and as a consequence they are relying more on aid than they ought to.

The idea that you are just going to raise some asterisks as revenue is ridiculous and it stands in stark contrast to Labor's multinational tax evasion policy. As the assistant minister is well aware, in March this year we announced a PBO costed, carefully considered $7.2 billion package of measures to stop multinational companies shifting their profits out of Australia and avoiding paying their fair share of tax. I have never said our policy was the last word on tackling multinational tax—of course not. We know that work is being done across the world, in the G20, in the OECD, to tackle what is a global phenomenon of base erosion and profit shifting. We have regularly called on the government to adopt our measures alongside their own.

The bill before us focuses on companies that artificially avoid booking revenue in Australia so that they do not have to pay tax on the profits. That is an important issue to tackle and we hope that this bill will force companies to restructure their operations so that profits made here stay here.

Mr McCormack interjecting

Ms BUTLER: I don't think it is funny. The assistant minister at the table seems to think it is a funny bill. I don't think it is a funny bill. I think it is important.

Mr McCormack interjecting

Dr Chalmers interjecting

Ms BUTLER: The assistant minister is very fortunate that my friend the shadow minister for superannuation is leaping to his defence. The shadow minister is a kind man and certainly very kind to the assistant minister.

We do need to make sure that companies are paying their fair share of tax. It should not be left to Australian companies and Australian households to bear a burden because multinationals are shifting their profits elsewhere. So this is an important bill. We do hope this bill will force companies to restructure their operations so that profits made here will stay here.

But this bill does nothing to stop companies using debt deductions to send money offshore, unlike our policy. Companies can easily transfer money between their subsidiaries and holding companies and dress it up as a loan, even though it is just a transfer of money from one pocket to another. Just like other business expenses, interest costs on loans are tax deductible. These artificial loans become a way for companies to shift their profits into tax havens at the expense of the bottom line here in Australia. This is a loophole that we need to close.

We are not going to stand in the way of this attempt by the government to tighten Australia's tax net, no matter how small or insufficient or unknown it may be, in terms of revenue to be raised. We are taking a positive and bipartisan approach to this important issue. In that same spirit, the government should adopt our $7.2 billion tax package and tackle all the loopholes that let companies send their profits offshore.

If this government is committed to ensuring that major corporations pay their fair share of tax, they also need to drop their push to gut Australia's tax transparency laws. Transparency is one of the most effective tools we have available to combat profit shifting and tax avoidance. In 2013 we passed laws requiring the Australian Taxation Office to publish information about the income and tax paid by companies earning more than $100 million. Unfortunately, this government has mounted an attack on those laws.

Having said that, we are supporting this multinational tax bill through the parliament, because we believe tackling tax avoidance and protecting Australia's revenue base should be above politics. Under the former Prime Minister, the member for Warringah, and the former Treasurer, the member for North Sydney, there was just a blunt rejection of our package. It was very negative. It was typical, unfortunately, of this coalition's track record. It was just a political refusal. They did not want to talk about our idea, just because it was our idea. I hope that this government will take a different approach. I have to say that it would be beneficial and in the national interest if, instead of just rejecting things out of hand, the government actually considered the policies and ideas that we raise, and I look forward to a much more constructive and fruitful set of discussions on this and all other issues into the future.