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Tuesday, 10 November 2015
Page: 8172


Senator CORMANN (Western AustraliaMinister for Finance and Deputy Leader of the Government in the Senate) (18:07): Firstly, I would like to thank all those senators who have contributed to this debate. The government welcomes the report from the Senate Economics Legislation Committee into this bill, as we welcome the Senate Economics References Committee's interim report. We thank all those senators for their hard work in examining the issue of corporate tax avoidance.

The key theme of the interim report is the need for more transparency in the tax affairs of multinationals. The government, of course, recognises that transparency is a powerful tool against corporate tax avoidance, which is why in the 2015-16 budget the government announced the development of the code for the voluntary disclosure of tax information by large corporates. The Board of Taxation is leading this work. If there is a need for more public disclosure or reporting to the ATO, the government will act. However, the committee's interim report fails to recognise the strong action that this government has already taken to combat multinational tax avoidance.

The government is focusing on areas where there is the most potential to tackle tax avoidance. Last year we took action to tighten Australia's thin-capitalisation rules, to limit the scope for multinationals to claim excessive debt deductions. This bill will implement the government's 2015-16 budget measures to combat multinational tax avoidance. These measures will force multinational companies with significant activities in Australia to pay their fair share of tax, and it will level the playing field for all taxpayers. The new multinational anti-avoidance law will ensure the Commissioner of Taxation can force multinationals that have significant activities in Australia to pay tax on profits from economic activities undertaken here in Australia.

The multinationals will no longer be able to justify using contrived schemes to avoid paying tax. This rule will strengthen our anti-avoidance rules by multinationals by catching arrangements that are designed to obtain both Australian and foreign tax benefits to stop companies claiming that they are only seeking to avoid foreign tax and will also seek to strengthen these arrangements by lowering the purpose test from a sole or dominant purpose to that of one of principal purposes and making it easier to apply. Instead of having a sole or dominant purpose, we will now apply one of the principal purposes test.

Where a scheme is captured, the Commissioner of Taxation will be able to look through the contrived scheme and apply the tax rules as if the multinational had booked the profit from Australian sales here in Australia. The Commissioner of Taxation will be able to see through the contrived scheme effectively and apply the law as if the contrived scheme had not been put in place. This means that they will pay tax on profits from their Australian activities. Penalties for large companies that enter into tax avoidance or profit shifting schemes will be doubled from 1 July 2015 and country-by-country reporting will require large multinationals to report additional information to the ATO. This is a significant improvement in transparency and will help the ATO undertake targeted assessments of transfer-pricing risk.

The Senate Economics Legislation Committee's report into this bill recommends a post-implementation review into the measures of the bill after three years. The government is, of course, constantly reviewing our tax laws. The ATO is also well placed to monitor the effectiveness of these laws, and companies have already approached the ATO to consider their company's structures as a result of these impending laws.

The government is taking a strong and balanced approach to dealing with multinational tax avoidance and we are closing the digital tax loophole to ensure the goods and services tax applies to digital products and services which are downloaded in Australia. As G20 president in 2014, Australia led the global response to tax avoidance by multinational companies. We recognise that there is more work to be done to combat tax avoidance. The OECD's final recommendations in its Action Plan on Base Erosion and Profit Shifting will go to the G20 leaders' summit next week and this will provide a strong platform for further action on tax avoidance by multinational companies as part of a concerted and coordinated international effort. We will continue to take the lead in the OECD and G20 to restore fairness in the international tax system and to ensure entities pay tax where they have earned their profits. I commend this bill to the Senate.

The DEPUTY PRESIDENT: The question is that the bill be now read a second time.

Question agreed to.

Bill read a second time.