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Monday, 19 October 2015
Page: 11612


Mr JOHN COBB (Calare) (18:14): I rise today to speak about the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. This bill is about ensuring multinationals and probably a few others that have activity in Australia pay tax in Australia and are on the some playing field as the Australian businesses which they compete with. We live in a global world and so obviously companies that operate right across the theatre take advantage of the tax laws where they are most conducive to them paying least tax—not all, probably not even most but certainly some, and some of the very big ones as well.

I guess the downside of a global world, global trading and companies operating out of multiple countries is that they are able to do this. While I hope the amendment legislation which we are talking about this evening goes a long way towards dealing with some of those issues, it certainly will not deal with them all. I believe that only cooperation between most of the major trading countries in the world will be able to deal with it in a fully meaningful way. I know that the former Treasurer did talk—and I am quite sure the current Treasurer, Mr Morrison, will also be talking—with his counterparts overseas, because whether it is the G8 or the G20 or whoever, they do have to have common laws to deal with the problem fairly.

Currently, some multinationals are avoiding paying up through artificially structuring to avoid Australian tax by booking revenue from Australian sales offshore. It obviously gives them an unfair advantage over our local business, families and small business who are shouldering more of the tax burden. This undermines confidence in the system whether or not they are exporters. While Australia has some of the strongest integrity rules in the world, certainly more needs to be done. As the previous speaker, the member Lalor, said: this is not a problem about politics; it is problem about trade and business.

The coalition government is determined to maintain the integrity and fairness of the Australian tax system. Multinational tax avoidance is unacceptable and we are committed to leading the fight against it. In 2014 the government strengthened our already robust defences against tax avoidance by tightening our thin capitalisation rules and limiting the scope for multinationals to claim excessive debt deductions. The legislation that we are debating tonight now builds on those changes, with it implementing three 2015 budget measures to level the playing field.    The first is the multinational anti-avoidance law to encourage entities to book their revenue in Australia when they have significant sales activity here. This piece of legislation has been further strengthened from that announced at budget. It has been broadened so all global entities with revenue above $1 billion—which is estimated to be over 1,000 companies—will need to consider these rules. The Australian Taxation Office will now have the tools to catch out those structuring with a principal purpose of avoiding tax, ensuring they do pay their fair share. The removal of the 'no or low' tax requirement and relying on the 'principal purpose' test sends a clear message: tax avoidance is unacceptable. It will further minimise disputes around whether a company operates in a 'no or low' tax jurisdiction where it is clearly structured for a purpose of avoiding tax. These changes specifically target around 30 companies that are believed to be artificially booking revenue in 'no or low' jurisdictions to avoid Australian taxation. This will also protect our country's tax base by acting as a deterrent to companies from engaging in complex schemes.

These changes ensure that people avoiding will be held accountable, with this bill doubling the maximum administrative penalties. The introduction of stronger penalties will not only hold companies to account but act as a deterrent to multinationals from entering into contrived tax avoidance and profit-shifting schemes. Deterrence is an effective measure and response to tax avoidance behaviour. Those who are doing the right thing will not be impacted under these changes. Those who have sought to do the right thing and obtained professional advice that can be considered reasonably arguable will not be affected. This recognises that tax law does not always provide certain outcomes—and I am sure we have all seen that.

The measure will require multinationals to report to the ATO on income and tax paid in every country in which they operate. This was one of the key recommendations of the G20 action plan. As I said earlier, this has to be an international solution as well as an international problem. We expect these measures to be implemented broadly by other jurisdictions, but we, Australia, look to lead the way. These amendments will see entities provide a statement to the Commissioner of Taxation through a three-tiered approach, including a country-by country report containing key information on the location of the economic activity undertaken by the multinational group of which the reporting entity is a part. A master file is a high-level description of multinational group's global business, and a local file is an analysis of the reporting Australian entity's operations and cross-border related party transactions. This marks the first time the veil will be lifted on major multinationals. For the first time, we will be able to have an understanding of aggressive taxpayer behaviour beyond our shores.

Multinationals doing the right thing have nothing to be worried about. However, those avoiding will now be scrutinised and penalised. This legislation will not impact negatively on investment by multinationals. Rather, it will make sure they are playing by the rules. The government has a responsibility to Australian companies to make sure it is a fair marketplace and they are not being forced to bear a tax burden that multinationals avoid. Our government is sending a clear message: it is unacceptable to enter into tax avoidance and profit shift schemes. Australia will now not be taken advantage of, and multinationals must comply.

Australia is particularly vulnerable, I think, because we are such a big trading nation. It is what we do best. Whether it is agriculture, whether it is mining or whatever it is, trade, obviously, is the way in which opportunity arises for a multinational company or a big family company—it does not just have to be a multinational company. The way in which they operate is, obviously, on the basis of trade. We are one of the big trading nations, per capita, in the world. We might not be the biggest producer, but we are a very big trader. That is why we are more susceptible than, probably, most countries to tax avoidance by large companies. I commend the bill.