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Monday, 25 June 2018
Page: 3706


Senator BROCKMAN (Western Australia) (11:19): I rise today to speak on the Taxation Administration Amendment (Corporate Tax Entity Information) Bill 2017. Here is a good reminder: in this place, when you stand up to speak on a bill, look at the speakers list and don't speak after someone who knows what they're talking about; it's always a very dangerous thing! Obviously, normally, I'm speaking after someone from the other side, so it's not much of a problem, but Senator Hume just gave an excellent summary of what the government has done to address these broad issues without overburdening the corporate sector with unnecessary reporting requirements.

What does this bill seek to do? It seeks to lower the threshold for public reporting of the corporate tax information of private companies from $200 million to $100 million. What this is going to achieve is slightly beyond me. I don't even know that the Labor senators opposite can tell us what it's actually going to achieve in practice, apart from putting an extra, burdensome requirement on private companies in the threshold range provided.

One thing that Senator Bilyk raised earlier, which I do want to address at the start, is this issue of the 732 companies she cited who pay zero company tax. I come from a farming family background. We all know there are very good reasons why companies, particularly private companies, pay no tax. There are agricultural enterprises in Western Australia who, through drought periods, do not pay tax for years and years at a time because they are not earning any assessable income. That doesn't mean they're not earning any income; it means they're not earning any assessable income. This is a fundamental point about our entire tax system which, in the rhetoric of this debate—and not just on this bill but on the company tax cuts bill and issues of wider reform to the Australian economy—is being completely lost. We have had for a very long time in this country a bipartisan approach on this: when we're talking about taxation, we're talking about assessable income. We understand that there are legitimate business deductions and that business losses can be carried forward. Without that ability business would simply not be able to survive and compete in our economy and in an international economy which is highly competitive.

It's not just the agricultural sector. Obviously when mining and oil and gas companies come to look at Australia, or are developed in Australia to undertake large projects, you're talking about the investment of literally billions of dollars up-front. Sometimes you're looking at a decade before there is one dollar of income from those projects. If you cannot carry losses forward, if you cannot deduct legitimate business expenses, then you will have a situation where nobody is willing to invest.

So citing 732 companies that pay zero tax is just misleading. It's an attempt to distort the debate to undermine the very important fact that we need a taxation system that is predictable, convenient and efficient. We need a corporate tax system and a tax system that delivers to government the revenue it needs—but only the revenue it absolutely needs—to fulfil important, essential government services.

Yes, tax compliance is a very important part of that. That's why the government has taken very strong action to ensure strong tax compliance, including that multinational companies pay the correct amount of tax. This has included a commitment from the government to ensure tax transparency rules are effective in promoting broad compliance with and public confidence in the Australian taxation laws. The government introduced the multinational anti-avoidance law and the diverted profit tax. These measures have been successful in bringing a further $7 billion a year of sales revenue into the Australian tax net. The multinational anti-avoidance law stops multinationals avoiding taxable presence in Australia. The diverted profit tax means multinationals shifting profits overseas are stopped from doing so or are limited in their ability to do so. In the 2018-19 budget, the government announced further measures in this area to strengthen the rules that limit interest deductibility to stop companies shifting profits out of Australia, including requiring companies to align the value of their assets with the value included in their financial statements and broadening the scope of large multinationals being subject to MAAL and DPT.

There are other examples of action taken by the government. There was the establishment of the Tax Avoidance Taskforce within the ATO on 1 July 2016. Obviously, it's delivering to the budget bottom line. There was the signing of the OECD multilateral instrument on 7 July 2017; doubling the penalties for multinationals avoiding tax; increasing the penalties for breaches of tax reporting obligations by multinationals; implementing the OECD recommendations for country-by-country reporting to give the ATO greater access to multinational transfer pricing information; and, finally, aligning Australia's transfer pricing rules with the latest OECD guidelines.

Why is it important? A number of the actions I've just read out are done in conjunction with the OECD. Why is that so important? It's important because, unless we have provisions that align with the major part of the world economy and our major trading partners, there is an incentive for multinational companies to look elsewhere. We want large companies to look at Australia in a positive light as a place where investing and operating is worthwhile; but, at the same time, we need those companies to pay their fair share of tax. To do so we must work on a multilateral basis, particularly through the OECD, to make sure our rules can be applied consistently and to make sure those companies do contribute.

These initiatives have ensured that multinationals have increased their compliance with the law. Since 1 July 2016, the ATO has raised $5.2 billion in tax liability from large companies. Australia is a global leader in the international fight against tax avoidance. We're taking strong leadership in the G20 and the OECD on base erosion and profit shifting. In fact, we are leaders in the Base Erosion and Profit Shifting Project through the G20. The government, together with the ATO, continues to monitor the implementation and effectiveness of tax law. Again, this is key to what we are trying to do with the economy: ensure that, whilst companies are paying the tax that they should pay under the law, we also incentivise companies to grow, invest and contribute to the economy and, therefore, to the tax base.

Growth is the best way of improving the tax base. Hopefully this week the Senate will look at moving forward on the company tax cuts put forward by the government in the enterprise tax plan. Through the enterprise tax plan we will incentivise companies to invest more in Australia, which will grow the size of the Australian economy and increase the size of the tax base over time. This isn't pie-in-the-sky economics; this is the reality of what occurs in the economy. If you reduce the burden of company tax cuts while ensuring that everyone pays the correct amount of company tax, you incentivise growth in the economy. This is essential to ensuring the jobs and wage growth of tomorrow are achieved.

We want to do this to create more successful and more profitable businesses. To my home state of Western Australia, this is obviously key. We've seen the growth, in the north, of both the mining and the oil and gas sector over the last 20 years—something that has fuelled an enormous amount of economic growth not just in Western Australia but across the nation. In Western Australia, nine out of every 10 jobs are private sector businesses. That is the reason why we do not want to inflict on the private sector unnecessary red tape burdens, as Senator Hume talked about extensively. We need to have those nine out of 10 working Western Australians protected and we also need to provide the jobs for the future that a growing economy can give. We want people to grow their businesses so they can hire more Western Australians.

If you take less money out of every business through the enterprise tax plan then those businesses will have more to invest and those businesses will grow. Over time they will invest, they will grow—and, yes, for a time, that investment will potentially lead to some companies paying zero tax, as they invest, as they carry forward losses and as they look to expand their businesses into the future.

If we get caught up in this idea that some companies sometimes pay zero tax, then we will lose sight of the bigger picture, which is that we need to see those companies investing and growing—and not just large companies, but small, family-owned companies as well. Many family-owned companies would fit easily within the thresholds provided for in the bill currently before this chamber. These are not necessarily massive entities; they are relatively small entities. Some of them employ significant numbers of the Australian workforce. They're family-owned companies that operate, for example, in the resources sector or the agricultural sector in my home state, and they need to be protected.

Getting back to the more general issue of taxation in this country, we really have to remember: we have to always, when we talk about taxation, get back to first principles. Taxation should be predictable, convenient and efficient. We should never look at taxation systems that overburden either businesses or individuals with reporting obligations. We should never allow such things as double taxation to ever rear their ugly heads again. And we must never disincentivise investment and economic activity through an overly harsh burden of tax.

On taxation, we really do see a very stark contrast between the two sides of politics at the moment. We have, on our side, a very strong commitment to reducing the burden of taxation and to only taking that taxation that government needs to provide absolutely essential services. To that end, we saw last week the passage of the personal income tax cuts, and obviously this week we've got the corporate income tax cuts up for consideration by this place. I'd urge all crossbenchers to seriously consider their position on those company tax cuts. We do want an economy that's investing and is growing jobs and wages, not one that is contracting, where we are going back to, quite frankly, the bad old days when double taxation was the norm rather than the exception.

I do harp on the double taxation issue, because I think it is a very dangerous path to go down and one that those opposite are now effectively advocating, through their position on dividend imputation, which is: they will be, once again, double taxing some people's income. I've talked in this chamber before about Glen Diggins from Albany who will be, under their policy, losing around 30 per cent of his income. He is a self-funded retiree on a very, very modest income who'll be losing around a third of his income under their current policy settings. Subsequent to raising that issue, I got communications from two other self-managed-super-fund retirees in Kalgoorlie—another regional centre in Western Australia. Their incomes were not quite as modest as Mr Diggins's. They had slightly higher super-fund balances. One of them, on an income of around $137,000, will be losing $37,000 of that income in franking credits. Another, on an income of around $83,000, will be losing $21,000. I would not put either of those in a very, very high-income category. The tax system certainly doesn't put them in a very, very high-income category. Obviously, they are comfortable in their retirement, I would hope. But losing one-third and 20 per cent of their income respectively is a significant blow to them as individuals, and we must always remember that they are people who've contributed to their own retirement, in a way that was advocated by all sides of this parliament, through the superannuation system. I think it's extraordinary that we would punish those people with a potential impost of a double taxation rate from the Labor Party if they win government next year. I think that would be an extraordinary burden to place on them.

So, again, on first principles, tax needs to be predictable; it needs to be convenient; it needs to be as efficient in its collection as possible. We need to keep costs down. We need to keep red-tape burdens to an absolute minimum. I do not think the bill currently before this house achieves anything in that regard. The government has taken clear, strong steps to bring more tax into the tax base through the multinational avoidance measures that it's put forward. I think that this bill will add nothing except put an additional red-tape burden on Australian companies.