I recently spoke on the matter of multinational tax avoidance during the adjournment debate, and I rise today to do so again. All countries need strong measures and strong cooperation to ensure that multinational companies pay their fair share of tax. When multinationals do not pay their fair share, it falls to others to pick up the tab. The tax burden shifts to ordinary workers and small business owners, and it creates an uneven playing field where small businesses are competing with large multinationals who gain a competitive advantage by paying less tax. This is fundamentally unfair.
During my adjournment speech I mentioned the campaign being run by the Tax Justice Network to eliminate multinational tax avoidance. I gave an example of a poor worker in Zambia who paid more absolute tax than a multinational company in the same country and the same industry. Australia owes it to everyday Australians who pay their fair share of tax to effectively combat multinational tax avoidance. But we also owe it to the world’s poor to be part of the global effort against multinational tax avoidance.
I mentioned the Tax Justice Network earlier. Recently they released a report which showed that the ASX 200 companies—the top 200 companies in Australia—had an effective tax rate of 23 per cent. This is despite Australia having a corporate tax rate of 30 per cent. Had these companies paid an effective rate of 30 per cent, they would have provided Australia with an extra $8.4 billion in corporate tax revenue every year. The 23 per cent rate was the total across all the ASX 200 companies. In fact, a third of these companies were paying 10 per cent or less in corporate tax and 14 per cent of these companies paid no tax at all. The report also found that 57 per cent of those companies had subsidiaries in what is labelled ‘secrecy jurisdictions’ or jurisdictions with low financial transparency.
We live in an increasingly globalised and digital world, where commercial transactions are taking place across national borders in larger and larger volumes. Multinational companies use clever and complex schemes to shift their profits from high-taxing to low-taxing jurisdictions to minimise the amount of tax they pay. So, when it comes to combating multinational tax avoidance, we need to be ahead of the game. We need to be moving forward, not backward. And we need to ensure that profits earned in Australia are taxed in Australia. We owe it to all the Australian workers and small businesses who, unlike multinational companies, have no choice but to pay tax in Australia on all of their taxable income.
Labor has a proud record of combating multinational tax avoidance; introducing reforms in government which prevented $5 billion in revenue being moved offshore. Sadly, the Abbott government are refusing to fully implement these measures, a decision which is costing the budget $1.1 billion. In other words, instead of building on Labor’s reforms, this government are actually moving backwards.
One of the measures the government are trying to dump is Labor’s tax transparency reforms. Labor in government introduced measures which required companies earning over $100 million a year to disclose their total income, taxable, income and tax paid. However, the Abbott government want to repeal this measure. The government are also not proceeding with reforms announced by Labor to tighten the offshore banking unit regime, nor is it proceeding with the changes to reporting for multiple entry consolidated groups. The government are continuing the poor record on multinational tax avoidance that they had in opposition, where they voted against the previous Labor government’s legislation to plug loopholes in Australia’s transfer pricing rules and anti-avoidance provisions, and to crack down on companies overvaluing assets in international transactions.
While going backwards on multinational tax integrity, the Abbott government are also making savage cuts to the Australian Taxation Office, which will make it more difficult to pursue multinational companies for tax compliance. The government announced in this year’s budget that they are cutting 4,700 staff from the tax office, leaving them underpowered to investigate the tax compliance of large multinational companies. The ATO announced in March this year that they are investigating 86 major international firms for allegedly shifting their profits offshore. The Commissioner of Taxation has said that every dollar invested in ATO staff generates between one and six dollars of revenue. Remarkably, the Abbott government’s budget cuts to the ATO will therefore end up costing Australia more revenue than they save.
The upcoming G20 meeting in Brisbane, and Australia’s presidency of the G20, has the potential to be an opportunity for Australia to take a leadership role on multinational tax avoidance. Instead, we have a Treasurer who is boasting that Australia is moving towards better financial transparency by committing to a 2017 start date for the common reporting standard on banking information. This is in contrast to nations like the United Kingdom, Argentina, France, Germany, India, Italy and Mexico, who are early adopters of the standard. In fact, Mr Hockey’s timetable puts Australia behind 40 other countries. Mr Hockey, the Treasurer, is all bluff and bluster about seriously addressing multinational tax avoidance. If he is serious about the problem then he needs to tell the Australian people not only what his plans are but also how much revenue they will add to the bottom line. So far the only changes the government has made to Australia’s multinational tax regime which affect the budget bottom line are ones which have resulted in less—not more—revenue. As I said before, together these measures add up to $1.1 billion in revenue. It is absolutely galling that a government which uses a ‘budget emergency’ to justify slugging everyday Australians $7 every time they visit their GP, to justify cutting pensions and family payments and to justify forcing job seekers to live on nothing but fresh air for six months, would let multinational companies off paying their fair share of tax to the tune of $1.1 billion.
If there is a real budget emergency, then why would this government not proceed with Labor’s sensible reforms to make multinational companies pay their fair share of tax? Why would they forgo over a billion dollars in revenue? Is this the ‘great global leadership’ to which Senator Cormann was referring during question time today? The answer is simple—there is no budget emergency. We had this confirmed just two weeks ago by 63 of Australia’s leading economists.
The coalition’s actions since coming to government deny their rhetoric about a budget emergency. After all, this is the party which decried debt and deficit in opposition, yet soon after coming to government they doubled the deficit and substantially blew out the timetable for achieving a budget surplus. If Australia is truly experiencing a budget emergency, surely it makes sense to tighten the rules to clamp down on multinational tax avoidance, not to relax them.
The manufactured budget emergency is just an excuse, a cover, for the Abbott government’s real agenda. That agenda is to help the big end of town at the expense of struggling Australians. Of course they will deny it, but the evidence speaks volumes. At the same time as this government’s cruel and unfair budget makes savage cuts to vital government services and to assistance for small businesses and struggling Australians, the government is doling out gifts and tax breaks to the big end of town. This is the government which is giving a tax break to billionaire miners, this is the government which is writing out $50,000 cheques to millionaire mums, this is the government which is giving generous tax breaks to 15,000 of Australia’s wealthiest superannuation account holders, and, as we have heard in this debate, this is the government which is giving multinational companies a $1.1 billion tax break instead of working to make them pay their fair share of tax.
These are the actions of a government which has its priorities all wrong, a government which would rather cut income from pensioners and families and tax sick Australians than make sure some of Australia’s largest companies pay their fair share of tax. These are the actions of a government which puts the interests of its wealthy mates in big business ahead of struggling small business owners and vulnerable Australians. It is time for this government to get serious about multinational tax avoidance and work to close tax loopholes, not relax them. As I said, when multinationals do not pay their fair share, it falls to others to pick up the tab. The tax burden shifts to ordinary workers and to small business owners. It creates a very unlevel playing field when small businesses are competing with large multinationals who gain a competitive advantage by paying less tax. It is high time this government got serious about multinational tax avoidance.