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Monday, 19 October 2015
Page: 11591


Mr ZAPPIA (Makin) (16:37): I support the position outlined earlier today by the member for Fraser, on behalf of Labor, on the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. The issue of tax avoidance by multinationals—transnationals—is a matter that I have raised previously in this place. Indeed, it is a matter that I have some serious concerns about.

Whilst we on this side of the House will support this legislation I made the point, to reiterate the point made by other speakers from this side of the House, that we see this as a tokenistic effort being made by the government in order to appease voters about a matter that most people I speak with feel very angry about. Last week we saw the government reverse the tax payment disclosure laws that Labor had put into place, which meant that any entity that earnt over $100 million would have to have the amount of tax they paid disclosed. That clearly indicates to me, and to people I speak with outside of this place, that this government is clearly on the side of big business and it is there to protect big business in whatever way it can. It is also clear to me that while this legislation may go some way towards reining in the amount of tax that is being avoided by companies, it goes nowhere near far enough.

Can I say to the member for Mitchell, who spoke just a moment ago, that with respect to the $7.2 billion that was part of the package that Labor announced it would introduce to stop multinational companies from shifting their profits out of Australia—and in turn $7.2 billion would be returned to the Australian government in the years ahead—those figures were costed by the Parliamentary Budget Office. Even if members opposite want to question the figures, the real question is: why do they want to question and oppose the initiatives that Labor would have put in place? In other words, even if you do not believe how much tax is likely to be collected, isn't the real question that needs to be addressed when responding to Labor's proposal one of whether the measures are fair and reasonable and should be implemented—and time will tell how much money they will raise—rather than simply saying, 'Because we don't trust your figures, we won't even consider your measures'?

According to an article written by Peter Martin in The Sydney Morning Herald on 30 April this year, there were 55 people in Australia who earnt over $1 million in the year 2012-13 and paid no income tax. Their combined earnings were almost $130 million. Forty of those people paid a combined amount of $42.5 million in costs for managing their tax affairs. It begs the question as to whether it would have been better for them to have simply paid their fair share of tax than to manage their tax affairs. But, be that as it may, they were prepared to spend a huge amount of money in order to minimise or avoid paying tax.

In 2011-12 the figure was even higher, with 75 people each earning over $1 million—and they had combined earnings of $195 million between them—paying no income tax. It is no wonder that people in the community feel angry with the government for not doing something about that, when the truth is that people in ordinary homes around Australia pay their fair share of tax while others are not paying their fair share of tax. Indeed, the only people who do pay their full rate of tax up-front and on time are lower-income wage earners, who have their tax deducted from wages each pay period, and that tax is then remitted straight to the Australian Taxation Office. They have no opportunity to minimise or avoid paying their fair share of tax, through either negative gearing investments, questionable business expenses, transfer pricing schemes, asset depreciation or any number of other lawful means used to minimise tax.

Avoiding or minimising tax would be one of the most attractive and easy ways of building wealth, because few investments that I can think of provide a return of 20 per cent, or 30 per cent or at times even perhaps 40 per cent, which is the rate that most tax might be applied at. So, when you are getting those rates of return, effectively, on your money by avoiding tax, it quickly makes sense as to why it has become a major industry not just here in Australia but around the world. Tax avoidance is legal, but if it occurs through manipulation—or, as it is more kindly referred to, 'through the use of loopholes'—it is unethical and should be made illegal. When dealing with multinationals operating in a world where countries have very different tax rates, very different tax laws and very different tax enforcement regimes, the use of loopholes is made easier, more justifiable and more difficult to track or control.

The world appears to be increasingly influenced by the agenda of multinationals. As the influence of multinationals spreads across more countries, more of the global wealth is owned by fewer entities. I note that one per cent of the people of the world own 48 per cent of global wealth. I also note that 80 of the richest people in the world doubled their wealth between the years 2009 and 2014, and those 80 people have the same amount of wealth as the bottom 50 per cent of the entire world's population. It certainly highlights the growing inequity that is occurring throughout the world, and it is only made possible through countries not closing tax loopholes that currently exist, and through multinationals using the global system for their benefit. It is also contributing to government budget problems in so many countries, including Australia. I suspect that if all Australian companies and all Australian taxpayers paid their fair share of tax we would not have the current government debt we have.

Last week when we were debating the shipping legislation, I did a bit of research into where most ships are registered and who owns them. I found out that, when it comes to the deadweight tonnage of ships, Greek entities are the largest and most dominant owners of global shipping in the world. But their ships are all registered and flagged in low-cost tax jurisdictions, including the Marshall Islands and Malta. I imagine that the finances of those fleet owners are also centred in those jurisdictions or other low-tax, low-cost countries. I do not know how much tax Greek shipping owners contribute to the Greek government, but I suspect that, if they all paid their fair share of tax, the Greek economy, which has been at the centre of global discussion and debate, would not be in the difficulty that it currently is in.

The issue of transfer pricing by international companies has long concerned me. This is the practice by which international entities manipulate their accounts and business affairs so as to ensure that all the profit is made in the lowest tax jurisdiction. This should be described not simply as tax loopholes but, quite frankly, as tax fraud. In fact, it is interesting to note how the language used in tax avoidance is softened to create the impression that the law is at fault, not the tax avoider. Perpetrators are even applauded as being smart business operators rather than referred to as crooks and scoundrels, cheating on society and their fellow citizens. The tax that they do not pay—the tax that they avoid—is shouldered by the low-income people of the world, who do not have the ability, as I said earlier, to employ shrewd accountants and lawyers or to put their money in international financial schemes that, in turn, reduce their tax liability. They simply pay their tax every week or every fortnight, whenever their payday is, directly to the ATO before they even receive the money.

When I spoke about this matter last in this place, it was about a year ago. I want to quote one of the passages from the speech I made then because I believe it applies equally now. I said at the time:

Tax Justice Network, a UK-based global non-government social justice organisation, estimates that between $21 trillion and $32 trillion—

I repeat that: between $21 trillion and $32 trillion—

is hidden by the world's wealthiest people in around 70 global tax havens. The tax that would be paid on the earning of that money is estimated at between US$190 billion and US$280 billion annually. Unethical multinationals and wealthy individuals use transfer pricing to rort the tax system, and then stash away funds in secretive bank accounts within low-tax regimes.

That goes to the heart of this issue. It is occurring right now across the world, and I am sure that there are entities and individuals within Australia that are part of these global tax avoidance schemes. And it is only made possible because of countries that are not prepared to disclose the incomes of the people who invest their money there and, in fact, that maintain a very high level of secrecy about who invests in their countries. That is what has to be stopped. I note that the matter was raised at the G20 conference last year. Hopefully, we will start to see some global breakthrough with respect to all of this—because the truth is: it is not just Australia that is being affected; it is the rest of the world as well. If all companies paid their fair share of tax, I have no doubt that the global debt that is being created around the world and the debt position of most governments of the world would be far, far lower. More importantly, whilst the money is being stashed away, it means that governments do not have the funds to provide the social support systems that they would like to provide in each of their own countries.

My concern is also that, even if we do reach agreement with some countries, unless there is agreement reached between Australia and all countries which provide tax havens or financial havens for people who want to stash their money in those countries, we will still not be able to get to the bottom of this problem because, whilst there are opportunities for people to avoid tax, they will find them and they will use them. This is not a case of closing the loopholes in one particular country and that solving the problem; we will only solve the problem if we are able to do it across the world. The issue of investing in some of the 70 countries that I referred to where people have been investing their money is also not necessarily fixed simply because those countries are prepared to disclose the amount of income to Australia of, say, an Australian national who has invested there. Whilst countries maintain secrecy, again, we do not know just how many other accounts are held by Australians in those countries under names that will never be disclosed.

Lastly, I want to make this point: one of the justifications for using those countries has been that, by doing so, they avoid what is referred to as double taxation. My view is that, if people were genuine about wanting to pay their fair share of tax and act ethically, investing through an Australian based entity here in Australia would also avoid double taxation. They would only ever be taxed once if their money was invested through an Australian firm. That is what I would like to see occur.

I said at the outset that this is a matter that makes people very angry, and rightly so. People see that pressure is being put on them and their family budget each and every week by the Australian government—and, in particular, by the current coalition government—using the argument that the government needs to restore the budget position and get the budget back into the black. They also see that most of the pressure is on them and most of the money that will restore the budget appears to be coming from them when there are other people in this country, and multinationals who operate from this country, who, every year, make millions and millions of dollars and yet pay very little tax, if any tax at all. It is wrong. Quite frankly, it is a fraud and it ought to be stopped.