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Monday, 2 March 2015
Page: 1624


Mr BOWEN (McMahon) (14:06): My question is to the Prime Minister. Labor has today proposed using a worldwide gearing ratio for calculating deductions multinational corporations can claim on their Australian tax. The OECD says this type of approach has 'the greatest potential to tackle base erosion and profit shifting'. Prime Minister, will the government work with Labor to ensure that multinationals pay their fair share of tax?

Opposition members interjecting

The SPEAKER: There will be silence on my left.

Mr HOCKEY (North SydneyThe Treasurer) (14:07): I was wondering where Labor was getting all its information, and I was thinking to myself: where would they have gone to write a policy?—because obviously they did not do it themselves. The member for McMahon, who is not known to be an expert on tax, as we all know, in his press conference said, 'What we've done is adjusted new advice, international best practice, and of course we went to our former Assistant Treasurer, who was working with the OECD in Paris.' That would be the former Assistant Treasurer who put a note out to his electorate saying that the budget was in surplus, on time as promised.

But hang on: I do not want to be too tough on the member for McMahon, because he did accuse us, he did say that it is important not to have policy on the run. I embrace this newfound commitment to tax reform from Labor, having got the mining tax wrong, having got the carbon tax wrong, and having got thin-capitalisation rules wrong previously. I welcome Labor's newfound embrace of taxation reform. The member for McMahon says, 'Will you work with us?' Of course we will work with you; absolutely. And I would say this to the member for McMahon: please give us all the working papers on this proposal, because I asked the Treasury, before I came here, 'What does this mean?' And the advice of Treasury was that the proposal in relation to thin capitalisation will cost Australian jobs. That was the advice of the Treasury.

Now, why would the Treasury say that it will cost Australian jobs? I will tell you why. Because what happens at the moment, which the opposition does not understand, is that shareholders expect on their equity investments a better return than the cost of debt. Equity actually costs more than debt. And Labor is saying that it wants to penalise international companies that lend to their Australian operations to expand their operations. They want to penalise those companies that have used borrowings to expand their operations in Australia, and they want them to put up more capital. Well, I will tell you what. That will cost jobs. That will cost jobs at Unilever. That will cost jobs at Shell. That will cost jobs at McDonald's. That will cost jobs at IBM. That will cost Australian jobs, because if you make it more expensive for international businesses to operate in Australia, they will simply reduce their operations, as we have seen with car manufacturing companies.

Ms Owens interjecting

The SPEAKER: The member for Parramatta!

Mr HOCKEY: We want to get the balance right, but we want to protect jobs in Australia. Labor is having another thought bubble writ large.