Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2019

31 July 2019

An address to the Australian Parliament.





Labor will be supporting the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2019. For the 92 years since he said it, people have been quoting US Supreme Court Justice Oliver Wendell Holmes Jr when he said that taxes are what we pay for a civilised society. This is as true today as it was 92 years ago. But the difference, of course, is that the structure of the global economy is almost unrecognisable today compared to when that well-known and often quoted remark was made. Today the global economy is more interconnected than ever before. For the first time in human history, companies themselves are mobile, with only very limited concepts of a fixed base of operations.

As we know through the work of the Australian tax office, and through the good work of the OECD and various other international organisations, aggressive tax practices and tax evasion by both individuals and companies have become rampant across the world. The OECD estimates that governments worldwide are missing out on anything between four and 10 per cent of global corporate income tax revenue every year. In US dollars, that is about $100 billion to $240 billion each year. In Australian dollars, it is something like $145 billion to $348 billion every year. That is a remarkable leakage in the revenue base of this country.

This is crucially important because the price of a civilised society, as Justice Holmes spoke about, doesn't fall just because a company or an individual shifts a dollar offshore, it just has to be paid by somebody else. It is paid by the small business owner. It is paid by the shelf packer at Woolworths, who works an eight-hour day or longer. It is paid by the cleaners, the kitchen hands, the brickies and the teachers of this country. For every dollar that is avoided by a multinational corporation, a dollar has to be paid by somebody else if we are to maintain the level of services that people in our society have a reasonable expectation of. It is be paid by somebody else when a company dodges its tax responsibilities to a nation like ours.

This is a range of follow-on effects, two of which I would particularly like to highlight in my contribution today. The first is that it squeezes government revenue. This means the government cannot adequately invest in the infrastructure, health services, education services and social security that our economy needs to ensure that we continue to prosper. The second one is that it erodes people's faith in our institutions. Over the last five years or so, we have seen a glimpse of how that leads to the broken politics that we are observing right around the world. So Labor is very supportive of action to crack down on multinational tax evasion, and we do welcome these bills in that light. But we shouldn't kid ourselves that the passage of this legislation means we have done all that can be done on multinational tax avoidance. I think it is true that one of the best ways we can help fix the mess that the Liberals have made of the budget and the economy is to make sure that multinationals do pay their fair share of tax.

It is worth reminding colleagues in the House that, under those opposite, net debt has more than doubled, gross debts is at record highs, the economy is growing at its slowest pace in the 10 years since the GFC, and the Reserve Bank is having to do all the heavy lifting by cutting interest rates to record lows. This underperformance, this mismanagement, is because of a whole range of factors, particularly when it comes to the budget itself. One of the factors in net debt more than doubling under those opposite over the past six years is that they have failed to crack down sufficiently on multinationals who aren't paying their fair share of tax here in Australia.

When it comes to cracking down on multinational tax evasion or avoidance, I think the problem is that it's true the hearts of those opposite are just not really in it. They say the things that are necessary to get them through and they do the minimum that they can, but, at the end of the day, I think it is true that, if their hearts were in this and they genuinely wanted to make multinationals pay their fair share of tax, they'd be doing more than what they're doing in this legislation before us today.

They were relatively silent on it during the election, and they're not doing enough on it now. They don't understand that closing down tax loopholes means that more money stays in Australia to fund schools, hospitals and the productivity-enhancing investments that we need when the economy is floundering, as it is—productivity going backwards in the last four quarters is such a big part of that story. So I think this bill goes some way to addressing the issues that have been there for some time, but it doesn't go far enough.

There are three measures in the bill: The first one is to tighten the thin capitalisation rules, the second is to ensure offshore sellers of hotel accommodation in Australia calculate their GST in the same way as local sellers do, and the third is that it removes the luxury car tax on reimported cars refurbished overseas.

I think it's important to remind the House that a similar bill lapsed at the dissolution of the House before the last election, but it had two other measures in it: it had changes to the R&D tax incentive, and it had some amendments to the definition of 'significant global entity'. We are advised that the significant global entity amendment was removed for technical reasons but, I think much more significantly, the R&D tax incentives were removed after a government-controlled Senate inquiry last term recommended that the government itself should not proceed down the path that it was attempting to legislate. That's a pretty big deal—that government members on a committee that they controlled knocked over the government's own proposals on the R&D incentive. That is a significant and humiliating development, even by the low standards of the Morrison, Turnbull and Abbott governments.

Cracking down on multinational tax avoidance is fundamentally about fairness, but it is also one of the important ways that we address the mess that has been made, whether it be the doubling of the debt or the failure to invest in productivity and growth in our economy. As I said, net debt has more than doubled and gross debt is at record highs. What's not often appreciated is that both kinds of debt, net debt and gross debt, are growing faster per month on the Liberals' watch than they were under the previous Labor government, and Labor, of course, had the global financial crisis to contend with.

The state of the economy more broadly is just as concerning as the state of net and gross debt in this country. We do have the slowest economic growth that we've had in this country for the 10 years since the global financial crisis. Australia is now in a per capita recession—the longest one since the 1982 recession. The national economy has fallen from the eighth fastest growing in the OECD in 2013 to the 20th fastest growing today. We've got stagnant wages that are growing eight times slower than profits; rising underemployment and youth unemployment; slowing employment growth; five years of weak productivity growth—productivity growth has actually fallen every quarter for the past year; weak household spending; falling consumer confidence; weak business conditions; a sluggish retail sector; business investment at the lowest level since the 1990s recession; and living standards, as we saw yesterday in the release of the HILDA data, that are growing slower under the Liberals than they were growing under Labor. They've actually gone backwards when it comes to incomes. This is an extraordinary list of economic data. Really, it's a report card on those opposite and the last six years of economic mismanagement.

We do have below-average growth from a below-average government and, because of that, the Reserve Bank has had to do all the heavy lifting. It's now got interest rates at one per cent, a third of what they were during the global financial crisis—quite remarkable. Joe Hockey was wondering around saying that interest rates at three per cent were at emergency levels. Now we have interest rates at a third of that, because the economy is underperforming so badly and the Reserve Bank is not getting the assistance that it needs on fiscal policy from this government.

Now, I think it's true that the failures that I just ran through, which is quite a stunning set of facts—not opinions, but facts—are not all a result of a failure to deal with multinational tax avoidance, but a failure to deal with multinational tax avoidance is a part of the problem. It's a problem for the budget and our society because it's about being able to fund essential services. It's a problem for our economy because every dollar of tax that isn't paid here is a dollar that could have been spent on services, repairing the budget, or investing in productivity to get the economy growing strongly again and in a sustainable way.

It beggars belief, despite the interjections of the minister at the table, that those opposite aren't doing more about multinational tax avoidance. They have refused to act for some time now. Remember, and I think the Australian community remembers, that the main policy the government had when it comes to multinational tax—and it will be back at some point—was to give an $80 billion tax cut to multinationals and the four big banks. Much of that would have been sprayed around overseas in the form of executive bonuses and share buybacks and the like. That's been their main contribution to tax. They have actually tried to make multinationals pay less tax here in Australia. We think, and the Australian community thinks, that multinationals should pay more tax here in Australia.

Now, whatever else one might say about the policy offerings, or the opinions that people have about various competing policy offerings in this place, I think any objective analysis would show that Labor has been serious about cracking down on multinational tax loopholes and making sure that companies pay their fair share. During the election campaign we announced a tax haven crackdown. We went to the election with 19 measures to crack down on loopholes and tax havens: tightening debt reductions; closing public reporting loopholes; increasing capacity for the ATO; public reporting of AUSTRAC data; whistleblower protections—the list went on and on. That's what a serious attempt to crack down on multinational tax avoidance actually looks like.

As I said at the very out set of this contribution, we will support this bill, but we don't think it goes far enough. We think that if the government were serious about dealing with this important issue then they would have gone further. They need look no further than the policy proposals that we worked up. If they pick up and run with any of the proposals that we worked up over the years and put them forward then we'd vote for them, and we could get the Australian people the tax revenue needed to fund their services, to repair the budget, which has deteriorated badly, and to invest in productivity so that we can help turn this floundering economy around.