Treasury Laws Amendment (OECD Multilateral Instrument) Bill 2018
House of Representatives - 14 August 2018
Watch Matt's Speech here
Mr KEOGH (Burt) (17:41): It's my absolute pleasure to second the amendment and to speak to the Treasury Laws Amendment (OECD Multilateral Instrument) Bill 2018. The government's Treasury website states:
Australia is leading the global fight against multinational tax avoidance and is cracking-down on taxpayer tax evasion with a number of reforms announced as part of the 2016-17 Budget.
Well, how can that actually be possible when one in five of Australia's biggest companies have paid no tax in the last three years? Malcolm Turnbull and Scott Morrison say they've been cracking down on tax avoidance, yet we know their true tricky priority is looking after their buddies in big business. They are not only not cracking down on tax avoidance but indeed are giving them a further $80 billion tax cut. What a joke. There's no way that Australia's biggest money-makers aren't contributing to our nation's tax reserves! But unfortunately that is precisely the case. In 2015-16, 17 of the top 50 companies paid no corporate tax, leaving just 33 to shoulder that burden. Between them, they provided just under $20 billion worth of tax. Interestingly, the Prime Minister's old employer, Goldman Sachs, is among these. While it had revenues of at least $1.8 billion over the last three years, with an operating profit in each of those years, it paid zero dollars of corporate tax.
Australia is being deprived of billions in tax revenue, thanks to loopholes that the Turnbull government refuses to act on, despite Labor's alternative of tax transparency laws showing just how the people of Australia are losing. There are numerous studies and analyses that show the extent to which multinational tax avoidance prevents national governments and their citizens from receiving the funds they are due. This in turn inevitably means the tax burden falls unfairly on domestic companies and individuals, that global inequality is sharpened, and that public goods and services are not funded or delivered. We know that fair taxation is an essential element of a well-managed domestic and global economy. It is both inefficient and indeed immoral when companies play tricky, complicated games in order to avoid contributing their fair share to society—the society from which they derive their existence and indeed their profits.
We know that the introduction of public reporting of country-by-country reports, as suggested by Labor in our policy on properly assessing and taxing, could help stem the flow of missing money. The Treasurer, on the other hand, doesn't want to get his boys in big business offside and doesn't want to close these loopholes. Despite soaring corporate profits and the fact that Australia's company tax rate actually places us in the middle of the G20 pack, the only policy he has is a big-business tax cut. The government continues to talk a big game on multinational tax, yet to date it has failed to actually deliver any significant results.
The multilateral convention that we are here to discuss as part of this legislation today is a tax treaty that enables jurisdictions to quickly modify their bilateral tax agreements to give effect to internationally agreed tax integrity rules and improved dispute-resolution mechanisms. The multilateral convention is one of many action items of the OECD in the G20's base erosion and profit shifting strategies to coordinate global action against tax avoidance and minimisation strategies by multinational companies. This is indeed a global effort and global push, but one that it seems the Turnbull government doesn't want to wholly sign up to. The multilateral instrument will enable jurisdictions to swiftly modify their bilateral tax treaties to implement measures designed to better address multinational tax avoidance.
Although Australia has adopted the majority of the convention's articles, there are two major components that for some reason this government has decided not to agree to. The first is article 10, an anti-abuse rule for permanent establishments situated in third jurisdictions, which is a euphemistic way of saying tax havens. This article denies treaty benefits where an entity that is a resident of a jurisdiction party to a bilateral tax agreement derives certain income from other jurisdictions. The Tax Justice Network is opposed to this decision of government. It believes the Australian government should adopt article 10 without reservation to further deter the use of secrecy jurisdictions to avoid paying tax. The OECD notes this particular article was intended to address:
… potential abuses that may result from the transfer of shares, debt-claims, rights or property to permanent establishments set up solely for that purpose in countries that offer preferential treatment to the income from such assets.
The network is deeply disappointed this government has not adopted the article as it provides a loophole for big business to continue to avoid taxation.
The second article that this government has refused to adopt from the treaty is article 12. The intention of this article was to ensure where an intermediary habitually concludes contracts or habitually plays the principle role in concluding substantially finalised business contracts in a jurisdiction on behalf of a foreign enterprise that arrangement would be deemed to constitute a permanent establishment. A permanent establishment is a taxable presence threshold for determining whether a jurisdiction can tax business profits derived by a foreign resident enterprise. This means, potentially, a foreign enterprise can avoid local taxation of business profits by implementing arrangements that circumvent the existing treaty based definition of a permanent establishment. The Tax Justice Network, again, have told us that they are deeply disappointed that the Australian government has decided to not adopt this provision, which is a reversal of their initial position. The network believes that this article would have assisted in further curbing foreign multinational entities from seeking to artificially avoid creating a permanent establishment. This, in turn, will prevent the government from taxing these businesses profits.
Despite these obvious flaws, Labor do support the treaty action overall. But we observe that this government has done virtually nothing to address the key issue of multinational tax avoidance through the refusal to take up these two critical articles. Even from opposition, Labor has been alone in carrying forward the vital policy work and policy arguments on this vital issue of multinational tax avoidance. Back in 2015 Labor proposed a comprehensive multinational tax package that included a number of measures specifically designed to address the scourge of debt deduction loopholes. This alone would have added $5.4 billion to the budget bottom line over a decade. Elements of this proposed package included the adoption of worldwide gearing ratios to address the issue of thin capitalisation; the implementation of a publicly accessible registry of the beneficial ownership of Australian legal entities, including trusts, as per the G20 principles that Australia has adopted; and the restoration of $100 million as the tax transparency threshold in relation to the public reporting of tax data for private companies. It would also have appointed a community sector representative to the Board of Taxation and delivered increased compliance funding for the Australian Taxation Office.
Meanwhile, the Turnbull government talk a big game on multinational taxation, but they've spent more on spruiking their laws than the legislation has actually directly raised, continuing the coalition's form of neglect of this pressing reform area. In 2012 the coalition opposed Labor's tax law amendment on cross-border transfer pricing, which, after passing, was integral to the ATO's recovery of some $300 million from Chevron. There are numerous studies and analyses that show the extent to which multinational tax avoidance prevents national governments and their citizens from receiving the funds that they are fairly due. This in turn leaves the tax burden on domestic business and on individuals in each nation. This result serves only to heighten global inequality and the lack of funding available for the vital services needed in our community for our citizens, for our people. Labor regards fair taxation as an intrinsic and essential element of a well-managed domestic and global economy. It is both inefficient and, as I said before, immoral when companies are able to play the game, use the loopholes, and put their funds and run their profits through tax-avoidance centres instead of paying their fair share under the tax regime that should fairly apply in Australia.
If the government were serious about tax fairness, it would adopt Labor's plan to close loopholes and crack down on tax havens; it would tighten debt deduction loopholes used by multinational companies, which would improve the budget bottom line by billions of dollars; it would introduce public country-by-country reporting of tax information specifically about where and how much tax was paid by large corporations; and it would provide protection for whistleblowers who report tax-evading entities to the ATO. We believe these whistleblowers should be rewarded where information provided by them results in more tax being paid, allowing them to collect a share of that tax penalty. Let's make sure we get the real word on what's happening. The joint parliamentary committee report was unanimous in its view as to the changes that we should see to whistleblowing laws here in Australia and, once again, the government squibbed on its proposed changes to whistleblowing legislation.
The government needs to introduce a publicly accessible register for the beneficial ownership of Australian listed companies and trusts. This will provide transparency. It will allow anyone to find out who the real owners of our firms are and to see if they are complying with tax requirements and laws, instead of using these structures to avoid taxation. The government should introduce mandatory shareholder reporting of tax-haven exposure. Companies must disclose to shareholders as a material tax risk if a company is doing business in a tax haven, because there are real risks for the ongoing profitability of those companies where they do this contrary to what not just should be the law of this country but is the law of many others. The government should get on with appointing a community sector representative to the Board of Taxation to ensure community views are heard in tax design and review processes.
Finally, it should be introducing public reporting of AUSTRAC data and requiring the annual public release of international cashflow data. But there's more the government could and should do. They should require government tenderers to disclose their country of tax domicile. All firms tendering for government contracts worth over $200,000 could be made to state their country of domicile for tax purposes. Given we'll provide them with taxpayer dollars, it probably makes sense to know where those dollars will end up. The government can develop guidelines for tax haven investment by superannuation funds. They could require the ATO to annually provide information on the number and size of tax settlements. They could deliver more tax transparency by restoring Labor's $100 million threshold for public reporting of tax data by private companies.
We support this bill, but we note it is still deficient in the way in which the government has signed up to this treaty. Without the resources of Treasury we're not in a position to know precisely why the government declined to adopt the treaty in full but, under a Shorten Labor government, we will review that decision. We want to best understand why the government is doing what it's doing. Why is it not signing up to ensure we have the tightest of tax laws in this country, to ensure we don't have leakage, to ensure we have the revenues we need to provide the services our community badly needs and in fact deserves? We will also, as it would seem we are left to, continue to lead the debate on multinational tax avoidance, because we know that when multinationals—or indeed anyone—don't pay their fair share of tax, the rest of us are left to pick up the tab. That's not fair to the Australian taxpayer or the Australian community, and it would seem that the government is quite happy to not be fair.