Ms MACKLIN (Jagajaga) (10:09): I present the explanatory memorandum to this bill and I move:

That this bill be now read a second time.

The Social Security (Administration) Amendment (Consumer Lease Exclusion) Bill 2015 is a private senator's bill introduced in the other place by my colleague Senator Doug Cameron. I want to thank Senator Cameron for his hard work in bringing this bill to the parliament and for his commitment to vulnerable and disadvantaged people, because this bill is all abut protecting vulnerable and disadvantaged Australians. Labor will not stand by while low-income, vulnerable Australians are exploited or taken advantage of. Nothing goes to the core of our role in this parliament more than ensuring that vulnerable people are protected. I do hope that the government will join us and support this bill today, because it will, in a small but significant way, ensure that vulnerable people cannot be taken advantage of, cannot be exploited.

Let me explain how the bill will work. Centrepay is a free service through which Centrelink clients may pay recurring bills and make other payments by a debit from their welfare payment. It is a useful service when used appropriately. However, in recent years it has become clear that Centrepay is being used as a tool by some companies to exploit low-income and vulnerable people. Consumer leases are defined under the National Credit Code as contracts for the lease of goods under which the hire is for domestic or household purposes. Under consumer leases the hirer does not have a right to purchase the rented goods, and the amount paid by the consumer is more than the value of goods, often by a very large amount. Consumer advocates and financial counsellors regularly encounter significant numbers of Centrelink clients who are under financial stress as a result of entering into one or more consumer leases for household goods. The problem is widespread but particularly acute in Indigenous communities. Of course, those with the lowest incomes or assets are at most risk.

For some time now the Consumer Action Law Centre, ACOSS and Financial Counselling Australia have been campaigning to have consumer leases excluded from Centrepay because of the financial harm caused to financially vulnerable Centrelink clients. It is clear that this is a big problem. The Micah Centre observed in 2007 that consumer leases are not genuine leases but 'loans in lease clothing'. The reality is that consumer leases are fringe credit products offered in the main to financially excluded consumers in the subprime end of the financial services market. Many of the businesses offering consumer leases also operate in the payday lending market and similarly cause significant financial harm to the most financially vulnerable people in the community.

Yet movement by the government has been slow. In May this year the then Minister for Human Services announced that consumer leases that are not regulated by the National Credit Code will be excluded from Centrepay. To the extent that the announced change will exclude any consumer leases from Centrepay, the number is likely to be negligible. In an ASX announcement in response to the minister's announcement, Thorn Group stated that its Radio Rentals business would be unaffected by the change. This is just not good enough. We must do more.

Centrepay is used by over 600,000 Centrelink clients on whose behalf nearly two million deductions are made each month. The annual value of all deductions is nearly $2 billion. Thirty per cent of Centrepay users are disability support pensioners, a further 20 per cent are Newstart recipients and 16 per cent are in receipt of parenting payments. Other users include aged pensioners. And of course none of these people are rich. They struggle to make ends meet as it is. While utility bills still account for a third of Centrepay deductions, household goods leases now account for 14 per cent of all deductions, and their share of Centrepay deductions is growing.

In a March 2015 investor report on Thorn Group, the parent company of Radio Rentals, Credit Suisse found that over $200 million a year is deducted from the Centrelink payments of almost 120,000 clients to pay for consumer leases. The concern is that these leases end up stripping people of more and more of their income. According to the Financial Rights Legal Centre, many of the clients end up paying 5 to 10 times the original value of the appliance by the time their agreement ends, a view confirmed by ASIC Deputy Chair Peter Kell, who noted:

Of particular concern is that the most financially vulnerable consumers in Australia are paying the highest lease prices for basic household goods. For two year leases, half the Centrelink recipients in our study paid more than five times the retail price of the goods …

leaving them without assets and with less income.

Importantly, there is a better way.

Good Shepherd Microfinance, through its No Interest Loans Scheme (NILS) in partnership with NAB, aims to assist large numbers of people who are financially excluded to move away from crisis and hardship and towards financial stability, mainstream economic participation and financial resilience.

As they are a non-profit financial products, the No Interest Loans Scheme loans can be paid off through Centrepay.

Good Shepherd Microfinance offers no interest loans of up to $1,200 to people on low incomes for the purchase of essential household goods.

The data shows the potential benefits of such an approach.

In 2012-13, 22,349 NILS loans valued at $20.8 million were approved.

Ninety-two per cent of borrowers live below the poverty line and 22 per cent were Aboriginal and Torres Strait Islander people.

An evaluation of the NILS loans by the Centre for Social Impact at the University of New South Wales found that around half of NILS borrowers experienced an overall improvement in their financial capacity as a result of taking out a NILS loan, while another quarter achieved a more stable financial position than before they took out the loan.

So there is a different model that we can look to, because the evidence is compelling.

Centrepay and the vulnerable Australians that rely on it are being exploited by consumer leasing companies.

Fortunately, Labor is taking action today.

Senator Cameron has introduced this bill for one reason, to ensure that vulnerable Australians are protected.

This bill will ensure that Centrepay should be prospectively closed to consumer leasing companies, for the same reasons it is closed to payday lenders.

This means low-income people—people on income support—will be protected from predatory behaviour by companies offering consumer leases.

I commend the bill to the House.

Debate adjourned.

Mr CHRISTENSEN (Dawson—The Nationals Deputy Whip) (10:18): I move:

That this bill be now read a second time.

Australian culture dictates everyone deserves a fair go and that cultural belief is reflected in anti-discrimination legislation.

But what is happening now in the mining communities of Central and North Queensland is anything but a fair go.

The 100 per cent fly-in fly-out workforce practices at Daunia and Caval Ridge mines have devastated local communities.

Highly skilled and experienced local workers are locked out of local employment opportunities because they live too close to work.

For example, a search for Mackay and the Coalfields jobs on Seek this morning reveals a number of jobs available, such as this advertisement for a production superintendent, which is great news if you have all the right skills and experience, as long as you do not live anywhere near the work site because the ad stipulates: 'To be eligible to apply for this role you must reside within 100 kilometres of the Brisbane Airport'.

Such a secure lock-out of local workers has had a devastating effect on the regional economy, especially in towns like Moranbah and nearby centres like Mackay.

Firstly, we witnessed a spike in unemployment.

Secondly, we witnessed the fallout of that unemployment—depression, despair, family breakdown, suicide and then desertion.

In Mackay, where homes were once virtually unobtainable—you could not get one for love or money—this morning there are more than 1,200 vacant homes for rent, not to mention the empty homes not advertised or not for rent.

The resource industry downturn has been exacerbated by these 100 per cent fly-in fly-out operations—a situation that should never have been allowed in the first place.

Unfortunately, the Bligh Labor government in Queensland either failed to consider potential future scenarios—or just did not care—when they approved 100 per cent fly-in fly-out operations at Daunia and Caval Ridge mines.

It was also unfortunate that the Newman government failed to take action to counter this discrimination.

But worse was to come, because despite promising to end 100 per cent fly-in fly-out practices, the Palaszczuk Labor government has broken that promise.

Before the Queensland 2015 election, Labor's policy document on this issue specifically said it would end existing 100 per cent fly-in fly-out operations near regional communities within 100 days of government—no doubt attracting plenty of votes from the most affected regions.

But, more than 300 days after the election, they have walked away from that promise.

This bill seeks to restore the fair go for local workers by using the existing framework that is designed to ensure everyone has a fair go.

This bill will amend the Fair Work Act to specifically say that employers cannot discriminate against potential job applicants on the basis of where they live, other than in cases where living locally is an essential component of being able to perform the job.

The act already prevents discrimination on other grounds, such as gender, race and religion.

This bill is both simple and effective. It uses the same framework that has proven to be effective against other forms of discrimination.

This framework allows the flexibility to use FIFO where needed. When the resource industry recovers, workers may need to be sourced from elsewhere—but locals can never be specifically excluded.

This bill would not have been necessary had the employer shared our cultural ideal of a fair go.

BMA, which operate Daunia and Caval Ridge mines, were given approval by the previous Labor government to use 100 per cent FIFO, but that does not mean they have to use it.

If BMA wanted to share the ideal of a fair go, they would remove any requirement about where a worker must live from their recruitment ads.

They would also reconsider their policy of casualising the workforce, which goes hand-in-hand with FIFO.

The simple knowledge that locals are allowed to apply for local jobs would immediately inject some much needed confidence into local economies.

North Queenslanders and Central Queenslanders are a resilient bunch, capable of rising to any challenge.

They have the skills and experience to drive our national economy forward.

All they ask is that they get a fair go.

The SPEAKER: Is the motion seconded?

Ms LANDRY (Capricornia) (10:23): I second the motion. In Central Queensland there is an alarming issue at foot of which every MP should take serious note. As my colleague the member for Dawson has noted, workers living in the Capricornia coal belt, our nation's biggest coal production area, are being shut out of local jobs because of where they live. The blame lies fairly and squarely with the Australian Labor Party, backed by the powerful CFMEU. In Queensland, the Labor Party introduced a policy of allowing 100 per cent fly-in fly-out workers on two critical coalmines in Capricornia. Job advertisements for 100 per cent FIFO positions declare that applicants must live within 100 kilometres of Brisbane Airport or Cairns in order to obtain work west of Rockhampton and Mackay. That means any local worker trying to support their family at Moranbah, Dysart, Nebo and other Capricornia towns are not allowed to apply for jobs there, even though the mine may be as little as 15 minutes drive up the road.

This Labor Party law smacks of discrimination. It has the hallmarks of an apartheid system based on the postcode of where you live. If apartheid rules were not good enough for South Africa then they cannot be good enough for Central Queensland workers. Labor's policy means we have suitable, skilled people living next door to a worksite who are outlawed from applying for a job there. The impact of Labor's 100 per cent FIFO rule is hurting the survival of our local towns. If people cannot get work and live in local communities, they simply leave. The consequence is that small business suffers, schools lose resources and other community services begin to dwindle. In short, our small mining towns are dying. The bill that we as LNP MPs present to the House today will help these communities.

Our bill aims to amend the Fair Work Act, prohibiting discrimination based on the location of your home. We support the motion to amend the Fair Work Act 2009 with amendment 351A, titled 'Discrimination based where a person lives'. It states:

An employer must not take adverse action against a person who is an employee, or prospective employee … because of where the person lives.

Last week the Queensland Labor government ended its inquiry into the 100 per cent FIFO policy. Queensland Labor is a state government that does not want to man up to the fact that it was Queensland Labor that introduced this despicable law in the first place under former premier Anna Bligh. The recent inquiry was led by union activist and MP Jim Pearce and overseen by several Labor Party mayors in Central Queensland. It suggested that 100 per cent FIFO is not accepted by anyone in regional Queensland. But they cannot unwind the mess their own party created because it is enshrined in contract legalities.

Ironically, the Queensland review recommended changing the antidiscrimination act so mining companies cannot refuse to employ workers based on where they live. It is ironic because I told the CFMEU and Jim Pearce that that is what the federal representatives were already actively seeking to do. When I spoke at a community forum on jobs and the impact of 100 per cent FIFO on Mackay, hosted by the CFMEU and Jim Pearce, I told them that I and the member for Dawson were already drawing up such a bill. Our bill today aims to make it illegal for companies to lock people out of jobs based on their home location. This bold private member's bill seeks to amend the nation's Fair Work Act 2009 to prohibit discrimination against workers based on where they live. This bill's intention is to ensure that Central Queenslanders can apply for Central Queensland jobs in our coalmining sector without discrimination.

I commend the bill to the House and I urge this parliament to stand up for what is right to safeguard families, small business, services and a person's right to at least apply for local jobs in our inland regional coal towns.

The DEPUTY SPEAKER ( Mr Broadbent ): The time allotted for this debate has expired. The debate is adjourned and the resumption of the debate will be made an order of the day for the next sitting.

The DEPUTY SPEAKER ( Mr Craig Kelly ) (12:01): The Speaker has received a message from the Senate informing the House that the Senate has agreed to a resolution referring the matter of the regulatory framework governing the financing of electoral activities undertaken by political parties and other participants in the political process to the Joint Standing Committee on Electoral Matters for inquiry and report.

The message read as follows—

a) how many of the recommendations made by the Joint Standing Committee on Electoral Matters in its 2011 report (the report) on its inquiry into the funding of political parties and election campaigns were accepted by government, and how many have been implemented;

(b) what factors, if any, are contributing to any delays in implementing the accepted recommendations of the report;

(c) how much was spent on the last election in 2013 by:

(i) political parties or associated entities,

(ii) third parties,

(iii) candidates, and

(iv) Senate groups;

(d) what proportion of the expenditure at the last election in 2013 was provided by private sources, including:

(i) what amounts were acquired from each source,

(ii) the circumstances of the donation or contribution,

(iii) whether third parties were involved in the donations or contributions, and

(iv) what influence those sources had on the political process;

(e) the current level of public funding provided to:

(i) political parties or associated entities,

(ii) third parties,

(iii) candidates, and

(iv) Senate groups;

(f) how public funds are allocated to electoral activities, and whether the current levels of such funds should be increased or decreased or allocated differently;

(g) whether the status of the political donations as tax deductions should be maintained;

(h) whether any comparable democracies:

(i) regulate electoral contributions from private donors, or particular classes of private donors, or

(ii) have absolute limits on private funding on electoral activities, and, if so, what policy objectives underlie the regulation and whether those objectives are achieved;

(i) how the regulation of electoral funding is achieved in comparative democracies, and whether it is applicable in the Commonwealth sphere; and

(j) any other related matter.

Mr HARTSUYKER (Cowper—Minister for Vocational Education and Skills and Deputy Leader of the House) (12:02): Under the Education Services for Overseas Students Amendment (Streamlining Regulation) Bill 2015, the Tuition Protection Service will be strengthened by enhancing the powers of its director. The TPS ensures international student's investments in their education is protected. These bills will amend the legislation to ensure that the TPS operates more efficiently and has a more direct role in supporting the quality and integrity of international education. Powers will now be vested directly in the TPS director to allow him or her to issue production notices. The TPS director will also be able to make a recommendation to an ESOS agency about the enforcement action that should be taken against an educational institution. These changes are about supporting quality, unambiguously to allow the regulators to take action quickly against poor practices in international education.

In conclusion, the changes to the ESOS Act will significantly reduce complexity and cut red tape without compromising Australia's strong student protections and our reputation as a world-class destination for international students. Extensive consultation on these reforms has reiterated the strong support from the international education sector and the benefits that will flow to providers and students. I thank the international education sector for their genuine and constructive commitment to improving the ESOS framework. Claims by the opposition and the National Tertiary Education Union that the government's legislative changes will water down international students' protections are wrong. The member for Kingston, in her speech, recognised that the measures have the support of many parts of the sector and will reduce unnecessary red tape. I would like to thank members who spoke on the measures in support of the government's plan, which will lead to a better and stronger international education sector and enhance the reputation of our country as a destination for students.

Question agreed to, Mr Wilkie dissenting.

Bill read a second time.

Mr HARTSUYKER (Cowper—Minister for Vocational Education and Skills and Deputy Leader of the House) (12:05): by leave—I move:

That this bill be now read a third time.

Question agreed to.

Bill read a third time.

Mr HARTSUYKER (Cowper—Minister for Vocational Education and Skills and Deputy Leader of the House) (12:06): by leave—I move:

That this bill be now read a third time.

Question agreed to.

Bill read a third time.

Dr LEIGH (Fraser) (12:06): I move the second reading amendment which has been circulated in my name:

That all the words after "That" be omitted with a view to substituting the following words:

"while not declining to give the bill a second reading, the House notes that its revenue impact is unquantified, and calls on the Government to adopt Labor's fully-costed multinational tax package to raise $7.2 billion over the next decade".

Labor's position is to support the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. Labor has been calling for more action on multinational taxation for over two years and we will not be standing in the way of significant action on multinational taxation—or even insignificant action, which may well be what this bill being debated before the House is. We are taking a constructive position on this and we are willing to work with those opposite. We hope that, in return, the hand of constructive bipartisanship might be returned, and the government might look seriously at Labor's $7.2 billion package tackling a different set of loopholes from those addressed in this bill.

The bill contains four schedules. Schedule 1 introduces a new concept into tax law, the notion of a 'significant global entity', which will potentially capture up to 1,000 companies with annual income of over A$1 billion. Schedule 2 amends the existing anti-avoidance provision to counter instances where multinational firms use artificial arrangements to avoid paying corporate tax in Australia. Schedule 3 doubles the maximum penalties for firms involved in tax avoidance and profit-shifting scams. Those stronger penalties will not apply where the taxpayer has a reasonably arguable position. Schedule 4 implements the OECD's action plan on transfer-pricing documentation and country-by-country reporting.

Labor notes that this multinational tax bill takes an untested approach to corporate tax. There is no precedent for this approach anywhere in the world, and indeed not even the Australian Treasury can say how much revenue it will bring in. It remains to be seen if this bill will protect even one dollar of Australian tax. The bill has its genesis in an initial thought bubble from the member for North Sydney. Last year the British government announced it would adopt a diverted profits tax, commonly known as the 'Google tax', and the member for North Sydney latched onto that approach. When it was pointed out that Australia already has anti-avoidance laws and that there are significant limitations with the British approach, including the fact that it may well breach a whole raft of European union and international tax treaties, the member for North Sydney dropped that idea. It remains to be seen whether the British 'Google tax' is enforceable or effective. There has not been one single case brought under it so far.

Following that flipping and flopping over the question of an Australian 'Google tax', the member for North Sydney released an exposure draft of this bill. That exposure draft, though, was heavily criticised by various outside groups. The Law Council of Australia stated, 'The bill should not be enacted in its current form.' So what we are debating today is the third attempt by the Abbott-Turnbull government to come up with a viable plan to tackle multinational tax avoidance—from the thought bubble of the 'Google tax', to the exposure draft, to the current bill. The new Treasurer must be hoping this is third time lucky. He cannot, unfortunately, say how much revenue will be protected by this package, because the Treasury has been unable to cost it.

If one looks at Budget Paper No. 2, page 14, there should be revenue estimates sitting next to this bill, but there are not; there are a set of asterisks. Just a handful of asterisks represent the revenue that should be added to the budget bottom line by a good multinational tax package. One can see the situation immediately by just imagining what would happen if the boot were on the other foot, if I were walking in here today and announcing on behalf of Bill Shorten's Labor opposition a tough multinational tax plan from Labor that would raise an unspecified amount of revenue. Commentators would rightly laugh at such a package, and that is the approach that many commentators ought to take in the case of the government's package. We will give the government the benefit of the doubt. We will pass this bill, because we believe that protecting Australia's revenue base is too important to let politics get in the way.

I should note that, while we were in opposition, the other side of the chamber did not give Labor the same constructive bipartisanship support in our efforts to stop multinational profit-shifting and crack down on tax avoidance loopholes. When we brought forward the Tax Laws Amendment (Countering Tax Avoidance and Multinational Profit Shifting) Bill 2013, which plugged loopholes in Australia's transfer-pricing rules and anti-avoidance rules, members opposite voted against it. When we introduced the Tax Laws Amendment (Cross-Border Transfer Pricing) Bill (No. 1) 2012, which cracked down on companies overvaluing assets in offshore jurisdictions, the coalition members voted against it. When we amended the Taxation Administration Act to bring better tax transparency and ensure huge companies are held accountable for their contribution to Australia, members opposite voted against it. And, what is worse, last Thursday the government rammed through the Senate changes that have gutted Australia's tax transparency laws, taking around half of the affected companies out of the tax transparency net, pushing the dial towards secrecy and away from transparency. It is the wrong approach at a time when we need more sunlight, not less. The Abbott-Turnbull government has put a cloak of secrecy over the tax affairs of private companies earning more than $100 million a year. It has now ensured that Australians cannot have an open and informed discussion about how much tax big private companies really pay.

Labor introduced tax transparency in 2013 because we know that scrutiny and openness help make sure that everyone pays their fair share. Without transparency, dodgy dealings can flourish in the dark. We had evidence that around a fifth of those companies who are affected, who have been taken out of the tax transparency net, paid no tax last year. Labor has consistently fought the government's efforts to gut tax transparency. No party has argued longer or louder to keep transparency in place and make all companies with total income over $100 million publish what they pay. We took the lead in addressing multinational tax avoidance when we were in office and we have continued to take that lead from opposition. We remain the only political party in this parliament which has a carefully costed plan that adds significant revenue to the budget bottom line in the area of multinational tax avoidance. That plan was announced in March this year—the first time since the early 1990s that an opposition has put forward a costed, significant revenue package in the first half of the parliamentary term. We have consistently argued that our package delivered in concert with the full implementation of the OECD's multinational base erosion and profit-shifting action plan would get our tax rules right for the future.

Labor's plan has several parts. First, we propose revising the current thin capitalisation rules to reduce the amount of debt that companies can claim deductions for in Australia. Companies will no longer be able to automatically claim deductions, up to a 60 per cent debt-to-assets ratio, for their Australian operations. Second, we propose to better align Australia's rules on hybrid entities and instruments with tax laws in other countries. Hybrid instruments are often classified differently around the world. Some jurisdictions treat the assets as equity, others as debt.

Standardising the rules reduces the opportunity for companies to double-dip and claim tax exemptions in one country and tax deductions in another. I am yet to meet a tax expert who thinks it reasonable that while tax advisers can look at how an international jurisdiction treats a hybrid instrument the ATO has not been able to do the same thing. While pursuing those reforms, Labor will invest new resources in the Australian Taxation Office. After big budget cuts under the Abbott government Labor will ensure that the tax office has the resources it needs to identify and investigate multinational profit shifting.

The thing about Labor's changes is they can be implemented alongside the changes in this bill. That is because this bill fails to address the practice of companies loading debt into Australia to artificially inflate their tax deductions. Even as the government is cracking down on GST compliance for small businesses they are turning a blind eye to how some of the world's biggest firms are using deductions. We do know, from things like the PwC Lux Leaks, that some big companies are transferring money into their Australian arms and dressing it up as a loan, even though it is really just shifting resources from one pocket to another. In paying back those artificial loans companies are, effectively, sending the profits offshore by pocketing a tax deduction in Australia.

We know that the problem of debt deductions is a real one, and that is the problem that Labor's package zeros in on. At the present, there are three debt-deduction rules but only one of those debt-deduction rules has good economic rigour behind it. Labor's proposal is to remove the two debt-deduction rules that lack sound economic grounding and keep the one that has it. It is a worldwide gearing ratio approach, which allows companies to claim deductions against the average amount of debt they owe to banks around the world.

The worldwide gearing ratio is simple, in concept. If a company owes a lot of debt to the banks it can claim a lot of tax deductions but, if it does not owe the banks a cent, if all its debts are opaque internal loans at high-interest cost to offshore subsidiaries, then, no longer can a claim be the basis for debt deductions in Australia. We have to remember that every time we support a tax loophole that is a higher amount of tax other taxpayers need to pay. Importantly, the worldwide gearing ratio is already in the Australian tax law, so no-one can argue that what Labor is proposing is untested or unproven. Accountants for any large firm have, surely, already tested their firm's position against the three debt-deduction rules, so they will know their position under the worldwide gearing ratio.

I was surprised that under the member for Warringah and the member for North Sydney our $7 billion multinational tax plan was rejected out of hand. The cries of doom and disaster rang hollow to the many Australians who are unable to set up offshore entities in which they are able to claim debt deductions. I would urge the member for Wentworth and the member for Cook not to make the mistake of their predecessors, to look seriously at the Labor tax plan and to work constructively so that we can add to the budget bottom line, as this bill does not.

Australia needs a tax system that rewards the productive, the innovative, the resilient, the clever and the competitive. We do not need a tax system that rewards those willing to push the envelope the furthest. Loopholes in our tax system function a bit like the old-fashioned tariffs in the era of protection all round. McEwenism was grounded in special-interest pleading. The result was that others had to pay more. That is the way a tax system with loopholes operates.

Because Australia is an importer of capital, it needs investment from overseas. I spoke in the last sittings of parliament about the benefits of foreign investment for the Australian economy. We need firms to invest in Australia because they think Australia is a good deal, not because they think they can get a tax advantage from the Australian government. We need a plan that leverages the ingenuity of the Australian workforce to the strength of Australia's institutions and the quality of Australia's infrastructure. Our plan for winning investment from the world should be grounded on our fundamentals, not on having a tax boondoggle for big companies that lacks sound economic rationale. While the government attacks Labor's tax policy, it is attacking the only multinational tax plan that has been proposed, in this parliament, that will add to the budget bottom line.

We cannot let this bill mark the end of the government's efforts on multinational tax. In recent weeks the OECD handed down its final set of deliverables for its base erosion and profit-shifting action plan. This plan has been more than two years in the making and lays out a comprehensive 15-point agenda to close the loopholes that have opened up in the tax net due to changing technology and an increasingly global business environment.

The 15 items in the action plan tackle everything from the taxation of intangible goods to hybrid instrument rules and the creation of a multilateral tax instrument to allow more rapid coordination of rules between OECD countries in the future. Australia is making progress in some of these areas—for example, in the effort to extend the GST to digital downloads, which was supported by both Labor and Liberal state and territory governments. But there is still a lot of work to do.

The Treasurer now has the OECD's blueprint and, with it, the chance to take positive, practical steps to fix more of the loopholes in our tax system. Yes, Australia should move with the OECD but now that the OECD's plan is on the table there should not be excuses and delays. Billions of dollars in tax revenue are at stake and Labor's plan tackles those loopholes in a constructive way, which is consistent with the principles of the OECD.

At next month's summit in Turkey, G20 leaders will decide on a time line for implementing the plan. The Prime Minister should push for its rapid and complete implementation and stand firm against efforts to water it down or delay it. If the Prime Minister comes home from Turkey with anything less than a clear commitment and time table for delivering the OECD's tax plan, it will show that nothing has changed in the Abbott-Turnbull government and that it remains a government that is tough with the weak but weak when it comes to the strong.

With this bill, Labor is demonstrating our willingness to work constructively with the government to tighten Australia's tax net. We would like to see the government do the same by focusing on Labor's tax package. If they would like briefings on any detail of Labor's tax package, our door is open. I am happy to sit down with members opposite to talk about how to make our tax system fairer and to make sure that we do not have loopholes and boondoggles left open in the tax net. For all their complaints about debt and deficits, we have seen the doubling of the budget deficit under this government. We have seen net debt projected to peak at around 13 per cent in the Pre-Election Economic and Fiscal Outlook; it is now projected to go to 18 per cent under this government.

If the Abbott-Turnbull government is really serious about closing the gap between taxation and spending, then they will work constructively with Labor. They will work constructively and engage with our tax plan, and add $7 billion to the budget bottom line over the next decade. I hope that the government will take up this offer, contribute to the budget bottom line with more than fine rhetoric and contribute real dollars.

The DEPUTY SPEAKER ( Mr Craig Kelly ): Is the amendment seconded?

Mr Brendan O'Connor: I second the amendment.

The DEPUTY SPEAKER: The original question was that this bill be now read a second time. To this, the honourable member for Fraser has moved as an amendment that all words after 'That' be omitted with a view to substituting other words. The question now is that the amendment be agreed to.

Mr NIKOLIC (Bass) (12:24): I always listen with interest when the member for Fraser is speaking; but at the end of his contribution I heard him speak about debt and deficit, which is dangerous ground for the members opposite, given that when we came to government debt was on a trajectory to $667 billion a day, our country was borrowing hundreds of millions of dollars each week more than it was earning in revenue and we had spent the legacy that had been bestowed by the Howard government at the end of 2007.

Nevertheless, I appreciate the opportunity to contribute to the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. That is because the issue of multinational tax avoidance is one that hurts every country regardless of its size or the nature of its economy. Without fair and appropriate tax revenue, no government can progress its agenda or provide the wide array of services that matter most to its people and which are amongst the hallmarks of a civilised society. These services include health, education, employment services, social security, research and development funding, defence and national security. Each of these, and a myriad of others, are both vital and expensive. Inevitably, too, they occupy the heartland of tax and tax related reform.

In Australia's case, the issue of fair tax revenue is made even more important, even acutely so, by declining revenue from the most recent resources boom. Over the last decade or so, this boom has provided strong, reliable income for many Australian companies, delivering significant tax revenue to government. It is vitally important that a fair share of tax is paid on income earned.

Let me be very clear about this: those who, by whatever means, seek to avoid their taxation responsibilities are an unacceptable drain on our society. Those engaging in such behaviour are all too often short sighted. This is because, in an often futile effort to advantage themselves, they inevitably short change their own future opportunities and, on the balance of probabilities, will likely be caught anyway by a raft of increasingly sophisticated measures, technologies and ever tightening legislation, of which this bill represents a current case in point. When—rather than if—such individuals or organisations are identified, they will be appropriately dealt with by our laws. A wide range of penalties may be imposed, including those of a financial and punitive nature.

But let me start with a rhetorical question of sorts: where does this bill sit in the hierarchy of modern tax reform? It is, of course, not the be-all and end-all of tax control, legislation and/or reform, nor will it be the last such reform to warrant wide consideration, discussion and action in this House and in the Senate. But, nevertheless, it does constitute an important step in compelling large profit-making entities in Australia and further afield to pay their way and to contribute fairly to the betterment of the lives of all Australians.

I would like to provide a grassroots view of this matter, which strikes to the heart of why this bill is important, the extent of the community feeling it arouses and the way in which it reflects and may even assuage strong community sentiment. Each of us in this House is privileged to represent a unique part of the Australian federation. While each of our electorates is very different, I would hazard to say that they do have at least three things in common. This is the common ground of financial livelihood, a reality felt keenly in and across each and every Australian electorate from north to south and east to west.

First, each of our electorates is populated by a majority of people who might well describe themselves as being average, everyday Australians. They would also likely say that they are doing their level best to improve their family's lot in life. This means keeping the most of what they earn to expend on their cost of living. Second, many of these Australians tell me that alleviating cost-of-living pressure is their key concern. I hear this all the time in calls, emails, survey responses and other encounters. It is a very strong message that everything seems to be getting more expensive everywhere. Third, again to a person, most would refer to their tax burden as being too high, particularly for those being paid average wages. The system of tax must address the conduct of those individuals and companies who try to avoid paying their fair share of tax. If anyone doubts these observations, come and join me in Launceston, Scottsdale, George Town or any number of beautiful places in my electorate of Bass, and we can start a discussion along these lines. These views will be put often and often very forcefully.

This then is the overarching intent and point of this bill. It seeks to inject greater fairness back into the system, so that those who can most afford it are no longer afforded the dubious luxury of evading their tax responsibilities. To put it another way, it means that the future tax base will not be disproportionately borne by the mass of those who can least afford to do so. This is putting the fair fiscal go back into what it means to be an Australian.

To those who might say that this reform is late in coming, I would simply say that the issue of tax reform, like most other public policy or even life itself for that matter, remains a continual and often dynamic work in progress. To this end, this bill represents a constructive reform for all Australians. By its passage, it will exert a material impact on the schools, hospitals and other public facilities and infrastructure of the 21st century for all Australians.

In introducing further facets to this bill, the government has in fact employed a pragmatic carrot-and-stick approach. The carrot derives from the enhanced clarity which will be afforded through the introduction of new OECD standards on transfer pricing documentation and country-by-country reporting. Of course, the stick relates to the introduction of larger penalties for profit shifting and tax avoidance. Without the dual and complementary elements of this carrot-and-stick approach, it is unlikely that the desired rate of compliance would be achieved.

Allow me now to make a few additional observations about each of these carrot-and-stick measures. The issue of country-by-country reporting is a key plank in reducing and even closing existing opportunity for large multinationals operating in Australia to evade their tax responsibilities to this Commonwealth. The key weapon being used here is that of clarity, borne of the future lawful requirement for relevant high-earning multinationals to report annually by way of a statement to the tax commissioner with key information sufficient to enable that statutory officeholder to carry out transfer-pricing risk assessments. This information will likely include some or all of the following three key elements: first, a country-by-country report containing information on the location of the economic activity undertaken by that multinational group; secondly, a master file which provides a high-level description of the multinational group's business operations; and, thirdly, a local file describing the Australian entity's, operations and cross-border related party transactions.

The absence of such annual information until now has in effect supported the ability of large entities to evade, at least in part, their fiscal responsibilities to Australia and its overall common good. In turn, the combination of both the omission of such a reporting requirement together with the natural tendency of large corporates of every kind and nationality to seek to maximise profit has cost Australia and its people significant revenue flow, shifting the tax burden elsewhere. In retrospect, such financial losses are significant, regrettable and even amoral. Accordingly, closing the administrative reporting shortfall that allowed them to occur in the first place does this government and this parliament much credit.

The government's adoption of the OECD's country-by-country reporting standards, starting after 1 January 2016, requires multinational companies to provide the ATO with a much more comprehensive picture of their worldwide operations, including subsidiaries wherever they are located. The new transfer-pricing documents will show the revenue, profit, tax paid and the numbers of employees in each country the multinational operates in. The ATO can then use this information to assess the risk more effectively.

In addition to the future regime of the reporting just described, the other edge of this government's weapon against such revenue loss is punitive in nature; it enforces compliance. These amendments double the maximum administrative penalties for large companies that are found to have entered or to have engaged in tax avoidance or profit-shifting schemes. These increased penalties apply only to companies with annual global revenue exceeding $1 billion and that do not adopt a tax position that is reasonably arguable. Judgements about whether or not a multinational has a reasonably arguable position about a related party transaction turns on factors like whether the transaction is a genuine arm's length price and whether appropriate processes were followed.

It is worth nothing that multinationals with revenue over $1 billion covers around 90 per cent of all multinationals' revenue in Australia which will be subject to the stronger anti-avoidance rule. This will capture artificial or contrived arrangements that are designed to avoid a taxable presence in Australia. We expect this new rule will apply to approximately 30 large multinationals. It is anticipated that significant diverted profits will be brought back into the Australian tax net. In so doing, the government, through this bill, seeks only to be fair and to achieve an equitable state of balance. This is a balance between the need to curb multinational tax avoidance whilst also continuing to encourage multinational business activity in Australia. Future business activity by multinationals will continue in so many ways to stimulate and support our economy, including, not least, the provision of employment opportunities, which are themselves the source of individual tax revenue.

It is worth noting that, in addition to the government's multinational tax avoidance agenda, we are also moving on other fronts to boost compliance. That includes efforts to ensure a level playing field for domestic suppliers of intangible services like movie downloads, which the member for Fraser mentioned, where we are applying the GST to digital services sold into Australia from offshore. This is expected to raise $350 million over the forward estimates—all of which goes to the states. This measure complements the work being done through the OECD and the introduction of similar rules in a range of countries, including Japan, South Korea and EU member states.

I also highlight the announcement in this year's budget that $128 million will be allocated to establish a new interagency task force to tackle serious financial crime. Agencies involved in this effort include the Australian Crime Commission, the Australian Federal Police, ASIC and the ATO.

In conclusion, allow me to reiterate to the House the importance of this bill, which is aimed largely at securing the lifeblood of Commonwealth expenditure for the future wellbeing and benefit of all Australians. This lifeblood is in fact the 'common wealth' of the Commonwealth of Australia. As such, it is only right and proper that every reasonable and prudent step be taken to garner and protect it now and in the future. I commend the bill to the House.

Mr KELVIN THOMSON (Wills) (12:37): I am pleased to speak to support the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015 and also the amendment moved by Dr Leigh. The Labor opposition supports this bill. Before any government puts the tax bite on students, pensioners or the unemployed, it should make sure that multinational corporations are paying their fair share of tax.

The Tax Justice Network have revealed a lot of detail about this issue. For example, they have revealed how Volcafe, the world's second largest raw coffee trader, with a market share of 13 per cent, managed to minimise the tax it paid through the use of the tax haven of Jersey in the English Channel. It would buy coffee from small cooperatives in developing countries at the world market price and then sell the coffee beans to its own subsidiary, Cofina, at a similar price. In that way it made next to no profit in the developing countries and paid almost no tax to the governments of the developing countries it operated in, cheating them out of much-needed tax revenue. Cofina then sold the coffee beans to the final customers, such as Nestle or Starbucks. The money from the sale flowed into Jersey, where Cofina paid no tax on it. In 1998 Cofina sold US$408 million worth of coffee yet only made a gross profit of US$27 million. It was a post-box company with only one or two administrative staff. The coffee beans themselves travelled directly from the developing country to the final customer in the developed world. They never passed through Jersey. The company documents showed that the firm went out of its way to keep everything top secret, with Volcafe employees told to identify themselves as Cofina staff even though they were not.

This demonstrates the way in which this is a worldwide problem. I met with representatives of the Micah Challenge in Canberra in June last year and again just last week as part of their Voices for Justice campaign. I was briefed about the problems of tax evasion by multinational corporations, which deprived developing countries, on a significant scale, of vital revenue for poverty reduction and sustainable human development. Christian Aid has pointed out that, since 2008, developing countries have lost more than US$160 billion through multinational corporate tax evasion. This amount is actually bigger than the amount that these countries receive in aid, which amounted to US$120 billion in 2009. I want to congratulate Micah Challenge on their commitments to the world's poor and their ongoing commitment in raising these issues.

One of the main ways tax evasion occurs is through transfer pricing, which is when goods and services are sold between subsidiaries of the same parent company. These goods and services include things like intellectual property rights, management services, branding and insurance. The sales take place within the same multinational company. As long as the subsidiaries of the company charge each other a fair market price—known as an arm's length price—such transactions are perfectly legitimate. Tax is paid where it should be: the place where the business is actually taking place. However, by artificially altering the price, a company can increase its costs in a location with high taxes and transfer revenue to a location with low taxes—often a tax haven. This is known as transfer mispricing.

With 60 per cent of the world's trade now taking place within rather than between multinational corporations, there are substantial opportunities to manipulate transactions to reduce tax. This is especially the case for things like brands and management services. To detect if a company is distorting the price of a particular good, you can compare it with the normal price of the good traded between two unrelated companies. But, when it comes to things like branding rights and management services, it is much harder to determine if the price being charged is a fair one. It has been estimated that Australia lost 1.1 billion euros through transfer mispricing to the EU between 2005 and 2007 and US$1½ billion in tax revenue through transfer mispricing to the US in the same period.

This is not just happening in Australia; it is happening right around the world. In 2007 Bangladesh lost an estimated US$172 million in tax revenue as a result of trade mispricing of transactions with the EU and the US. Most of these losses occurred in the knitting and crocheting apparel industry. The Bangladesh government had invested technical and financial resources to facilitate the growth of this industry, yet lost out on much-needed tax revenue. Micah Challenge believes that the government should require all multinational corporations registered in Australia to provide a worldwide combined report, including a country-by-country breakdown of their assets and their tax paid, and that we should have the G20 adopt this country-by-country reporting as standard.

The issue of multinational profit shifting is about fairly sharing the revenue burden. When a handful of big businesses shift their profits offshore, it hits the federal budget's bottom line and, when a small number of big firms do the wrong thing, it is the great majority of businesses, large and small, the self-employed and the pay-as-you-go taxpayers who end up paying more than they should. We do not need that kind of harmful economic activity which encourages firms to focus their energies on getting their accountants to play with loopholes that might allow debt-shifting within organisations, not in order to improve the productive capacity of the economy but in order to find the next loophole in the tax system.

We need to pay attention to the problem of financial inequality, which has been rising in recent times. A report in June last year called Advance Australia Fair? What to do about growing inequality in Australia, written by Bob Douglas, Sharon Friel, Richard Denniss and David Morawetz, found:

In the wake of a declining resources boom, there is a growing gulf between those in the top range and those in the lower ranges of wealth and income distributions.

That report warned that:

Inequality is increasing rapidly in Australia … and poses dangers to community wellbeing, health, social stability, sustainable growth and long-term prosperity.

Given that, we should not be giving away money to firms with multibillion dollar profits while taking money away from those who can least afford it. Australia's egalitarian values demand that we have a smarter approach on multinational profit-shifting.

The union United Voice, in collaboration with the Tax Justice Network Australia, released in September last year a groundbreaking report Who pays for our common wealth? Tax practices of the ASX 200. It revealed that 29 per cent of Australia's 200 largest listed companies pay an effective corporate tax rate of 10 per cent or less and that 14 per cent have an effective tax rate of zero per cent. This translates into an estimated loss in annual revenue of $8.4 billion, which is a matter of very considerable concern.

In 2013, 57 per cent of ASX 200 companies disclosed subsidiaries in tax havens. This figure could be higher as reporting is not mandatory. As Dr Mark Zirnsak, from the Tax Justice Network Australia, says:

The frequent use of subsidiaries in secrecy jurisdictions in combination with the shifting of debt and profits is resulting in lost tax revenue in Australia and overseas where it should be paying for essential services to help lift people out of poverty. Last financial year a massive $47 billion flowed from Australia to secrecy jurisdictions.

An internal Australian Taxation Office memo obtained under freedom of information and reported by Heath Aston in The Age in April said 10 companies had channelled a combined total of over $31 billion from Australia to Singapore in the 2011-212 financial year. An energy company operating in Australia transferred more than $11 billion to the low-tax jurisdiction of Singapore in that year. In the same year, an estimated $60 billion in so-called 'related party' transactions went from Australia to tax havens. Energy companies have established marketing hubs in Singapore, but their principal purpose appears to be as a destination to shift profits in order to pay less tax.

BHP and Rio Tinto reported $2.6 billion a year in profits in their Singapore marketing hubs, where tax rates are as low as 2½ per cent. These arrangements save the two companies more than $750 million a year in Australian tax. In 2005, the Singapore government registered a new company called BHP Billiton AG Singapore Branch and granted it Pioneer Service Company status, meaning it pays no income tax at all until 2020. Rio Tinto set up a string of Singapore companies in 2007 which were given development and expansion incentive status by the Singapore government, meaning they would only pay five per cent tax until 2022. It is deeply ironic that this blatant tax avoidance was going on at the very time the mining industry spending over $20 million, including $17 million from the Minerals Council, on advertising campaigning against Labor's Resources Super Profits Tax and making claims about how much tax they paid.

Large multinational companies have also used other devices to avoid Australian tax. Chevron Oil has been raising debt in the US at two per cent and lending the money to their Australian arm at nine per cent, with the interest payments cutting its Australian taxable income. US tech giant Apple has an Irish marketing arm, Apple Sales International, which takes ownership of Apple products manufactured in China while they are on the boat to Australia and Europe, adding a huge mark-up and reselling them to local Apple retailers before they reach port. It is a rort and we should not allow it.

The 2014-15 federal budget eliminated some 3,000 jobs in the Australian Taxation Office. Things like this greatly reduce the tax office's capacity to fight tax evasion by wealthy individuals and multinational corporations. Regrettably, what happens is that the employees who accept redundancies and leave are the ones the ATO can least afford to lose. Even worse, some accept private sector offers which see them put their skills an experience into increasing the budget deficit rather than reducing it. We should tackle debt shifting, close tax loopholes and resource the tax office properly to tackle artificial and contrived business structures. The tax office could help its own caused by revealing details of the worst corporate practitioners of tax avoidance. Taxpayer privacy for individuals is of course legitimate, but large corporations cannot make those same claims with a straight face. They are required to report much of their financial affairs to their shareholders and to the market already.

Michael West, writing in The Age, has drawn attention to the low visibility of the financial statements of foreign multinationals operating in Australia. He says that viewing the statements of a foreign multinational is expensive and not very informative. He says:

While proper audit procedures are in place in the sphere of ASX companies, there is a widespread failure of the audit profession and regulators in the foreign multinational space: accounts which don't stack up, myriad failures of disclosure, and a slew of failures to adhere to Australian accounting standards—and therefore the Corporations Act.

We need to have greater scrutiny in this area. We need to make sure that parliamentary committees like the Senate Economics References Committee hear from the real decision makers and make them account for their decisions. I think our parliamentary committees should make a point of explaining and examining the real decision makers.

A Labor government will shut down loopholes which allow big multinational companies to send profits overseas, ensuring that they pay their fair share of tax. According to the Parliamentary Budget Office, our plan will bring at least $1.9 billion back to Australia in tax from big multinationals over the next four years and raise $7.2 billion over 10 years as these tax loopholes are closed. This is the sort of approach we need. We need improved transparency and data matching, and we need a genuine commitment to tackling tax.

It is regrettable that the government has walked away from some of the tax transparency legislation which Labor passed in 2013. Without greater transparency, Australians will never know whether major corporations are paying their fair share of tax and, at a time when the government is talking about hitting low-income Australians by jacking up the GST, it is right to look closely at whether all taxpayers are making a fair contribution. Gutting tax transparency is the wrong move. Labor is supporting this multinational tax bill through the parliament. We believe that tackling tax avoidance and protecting Australia's revenue base should be above politics. Under the former Prime Minister and the former Treasurer, the Liberals rejected our $7.2 billion multinational tax plan out of hand. They pursued tax transparency rollback, because it is popular with their mates, rather than for any sound public policy reason.

I hope that the new Prime Minister and the new Treasurer do not make these same mistakes. With this bill we are demonstrating our willingness to work constructively with the government to tighten Australia's tax net. By way of response, I hope that the government does the same by taking up our $7.2 billion tax package and abandoning their attempts to gut Australia's tax transparency laws.

Mr HUTCHINSON (Lyons) (12:52): I rise in support of the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. Indeed, this was Australia's legacy in the presidency of the G20, in 2014. Australia led progress on the OECD's base erosion and profit-shifting action plan for ensuring multinationals do pay their fair share of tax. It was under former Treasury Hockey's leadership that the G20 delivered the first tranche of recommendations to address multinational tax avoidance. Of all the issues raised by members of parliament from time to time, in terms of multi-partisanship, of broad and wide-ranging support, I think this is absolutely morally the right thing for government to be doing. It is an important issue in the eyes of many people right across our country, including in my electorate of Lyons, that corporates, particularly multinationals, pay their share of tax. As has been highlighted here today, mums and dads, families, individuals and small businesses all pay their share and have much less capacity to be able to put in place sometimes very complex arrangements to avoid paying what should rightly be paid. There is a range of different taxes, from income tax, to company tax, to the GST and to various state based taxes. It is right and proper that multinationals profiting in Australia are paying their fair share of taxes.

In this country we already have some of the strongest taxation integrity rules in the world, but we as a government are determined to make these rules stronger. That is why with this bill we are delivering on an election promise to set regulations in place to combat multinational tax avoidance.

What is also proper about this bill is that it enables a discussion to take place—one that often comes up from below the surface—about whether or not some multinationals avoid paying taxes on profits made in Australia to take place. If that is the case, it is simply right and proper that we do something about it. The public expects us to do that, because it undermines the public's faith in the tax system and leaves families and small businesses to unfairly carry the taxation burden.

Some multinationals are artificially structuring to avoid paying tax in our country, by booking offshore their revenue from Australian sales and profits. This means that they have an unfair advantage when it comes to Australian based businesses, often family businesses, sometimes small businesses and certainly Australian based corporates, with whom they are competing on an uneven playing field.

The new multinational anti-avoidance law will allow the Commissioner of Taxation to treat these large multinationals as though they have a taxable presence in Australia and are subject to Australian tax of profits generated locally. I think this is the right thing and a good thing for our country.

Country by country reporting is also part of this package, which will increase penalties—in fact it will double them—for those engaging in tax avoidance and profit shifting. The reporting will include identifying tax paid in every country in which they operate. Information is then shared with other tax authorities, and vice versa.

The government is also consulting on rules targeting hybrid mismatches, as well as taking action on harmful tax practices and treaty abuse rules. A voluntary transparency code that will be introduced by May next year will enhance public confidence in the taxation system and will provide better community understanding of the tax affairs of large companies, particularly multinationals. The Australian Taxation Office will have unprecedented resources to deal with international tax avoidance, with the government providing an extra $87.6 million to the ATO over three years to investigate tax avoidance, and act where appropriate.

The program so far has raised more than $400 million in tax liabilities, and it is estimated it will raise more than $1 billion in total. The tax office has identified around 30 companies to whom this law would likely apply. The revenue these big multinationals are earning in Australia is expected to be in the billions of dollars. They are being targeted because it is these companies that, through offshore activities, have the greatest opportunity to avoid paying tax, and they represent the highest risk to Australia's tax base.

The new law should not have an impact on Australian based businesses, because they are already taxed here in Australia and there are appropriate mechanisms by which they are checked, and the checks and balances apply to the payment of the appropriate amount of tax that is due.

This law focuses, absolutely and unapologetically, on foreign multinationals who are avoiding Australian taxation by booking their revenue overseas. The government has been working closely with academics, tax professionals and the business community for the past two years on the OECD's profit-shifting agenda. This new law was also released for public consultation on budget night. We have consulted with stakeholders such as business, tax practitioners and the Australian Taxation Office to develop the legislation to ensure that the law will not have unintended consequences. This is aimed at targeting only the most complex schemes. Multinationals who are not artificially structuring to avoid paying taxes will not be impacted. Multinationals with annual global revenue of over $1 billion will need to consider whether they fall within this new law. Stronger penalties will apply, as I mentioned before, to those corporate entities that are found to be in breach of this rule. In fact, the penalties will be doubled for tax avoidance from profit-shifting schemes. It has been shown that deterrence is recognised as a key measure in tackling tax avoidance.

As I touched on, we made commitments in the 2015 budget. This legislation delivers on those but builds even more strongly on those things committed within the budget this year. In particular, the system will be broadened so that all significant global entities with revenues above $1 billion—estimated to be over 1,000 companies—will need to consider these rules. It means that, if you are structuring with a principal purpose of avoiding tax, the ATO will have the tools to catch you and ensure you pay your fair share. By removing the no- or low-tax requirement and relying solely on a principal purpose test, we are sending a clear message that, if you are deliberately and artificially avoiding paying Australian tax, this is simply unacceptable. Removing the 'no or low' requirement will also provide additional certainty and 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.

Mums and dads, families and hardworking Australians in small business, this legislation is for you. This is about responding to what the community clearly has demanded of us as a government—and, as a local member, I can certainly say that this issue is raised with me wherever I go around my electorate. It is right that we pay a fair share of tax. It is the role of government to fund a whole range of different services, and the priorities of government lie in delivering a welfare system that is a safety net for those Australians who have found themselves in hard times and are unable to support themselves. It is about paying for our infrastructure. It is about paying for our health system and our education system.

A question has been asked of me in recent times: how much revenue is this expected to raise? It is very difficult to estimate that. The revenue that these large multinationals are earning in Australia is expected to be in the billions of dollars, but, as to exactly what the taxation revenue from this measure will be, that will come to pass in time. I have touched before on who will be affected by the new law. The ATO has around 30 multinational companies in mind that could be targeted by this new law. It should not have an impact on Australian based businesses, because they are already taxed within this country. Another question that is asked quite frequently is: will the new law impact negatively on investment by multinationals in Australia? I think we all understand in this place how important foreign investment is to Australia. It has been thus since 1788. We have a big country with a small population, and the importation of capital into this country has benefited our nation and benefited the creation of jobs and opportunities for many Australians. The answer to the question is no. The risk that the targeted multinationals would scale back their Australian operations to minimise tax consequences is low. One other question, I guess, that should be addressed is: does this measure override any other bilateral tax treaties that we have in place? Again, the answer is no.

It is well-considered legislation—and, again, I pay due credit to former Treasurer Hockey and the work that he did in leading the discussion with the other members of the G20 during Australia's time in the role of president. We were able to achieve a result here that I think most Australians will see as a very positive step in the right direction in addressing tax avoidance by multinationals making profits in Australia.

Mr BANDT (Melbourne) (13:06): If we want to have good schools and good hospitals in this country and a safety net that means people get a good income to retire on when they reach retirement age or are looked after if they fall through the cracks and find themselves falling on hard times through no fault of their own, government needs to raise the revenue for it. We also know that, increasingly, the government is not raising the revenue to fund those things. The coalition government's response to that is, firstly, to go out and talk about cutting some of those services—cutting education and cutting the pension. Its second response is to say, 'Perhaps we do need a bit more revenue, but let's ask everyday Australians to pay for it.' Their reaction, in their first budget, was to say, 'Let's address the growing revenue crisis by making people pay more'—to go and see the doctor, for example—or, 'Let's remove some other concessions that people might enjoy in this country.' That was their first response.

Quite rightly, this parliament and the Australian people stood up to them and said that not only was that not what they were elected on but also that they were breaking a fundamental point of principle in Australia, which is that we are an egalitarian country. Part of that means asking those who can most afford it to pay more tax so that we can continue to have those services. What became apparent then was that multinational companies who are operating here in Australia are not paying their fair share of tax. But it was not the government's first inclination to seek to remedy that. No: the government's first inclination was to turn on everyday Australians. The government has been dragged kicking and screaming to understanding that the only way we will secure the revenue base in this country will be by doing a number of things, including making multinational companies pay their fair share of tax.

Having been brought to that point, the government is wavering with this bill; the government is equivocating. What they are not doing with this bill it tackling one of the core problems in the legislation at the moment. We know that the general anti-avoidance tax provisions in our tax code are famously difficult to prosecute. The ATO has to be able to prove that a transaction was entered into for the dominant purpose of avoiding tax. How will the ATO be able to approve that without spending millions of dollars in courts? As we found out through the Senate inquiry, which I will talk a bit about in a moment, our big miners are setting up Singapore marketing hubs, for example. Miners will be able to argue that they set up these hubs to be closer to customers and because of the favourable business environment—nothing to do with being able to pay much less tax in Singapore. So, there is a hole in our legislation at the moment that makes it very, very difficult to prove that multinational companies are trying to get out of paying their fair share of tax in Australia, and this bill does nothing to address that.

There is another way in which this bill fails, and the government is clearly on notice about this. Thanks to the work of the likes of the Tax Justice Network, of Micah Challenge and of a number of journalists who have been drawing attention to the behaviour of multinational companies here in Australia, we know that one thing that could be done to help make companies pay their fair share of tax is to be prepared to name and shame companies if they do the wrong thing. People in Australia have a right to know how much tax multinational companies are paying in this country and to have them outed and named if they are not paying the fair amount. The best way to dissuade companies from tax avoidance is to threaten reputational risk to prominent companies, who cannot afford to have their brand tarnished.

Opening financial details to public scrutiny of these big companies should be a strategic priority of this government and this parliament. With an international agreement to develop a uniform approach to tax avoidance, strong transparency changes are unilateral measures that Australia can take straight away without disrupting these multilateral discussions, while also showing that Australia is serious about confronting this global blight on governments. A strong suite of financial disclosure measures would be far more effective and less costly to the government than these proposed general anti-avoidance measures or the existing ones, which, as I have said, are notoriously difficult to prosecute.

Public dissemination of a company's financial accounts carries with it a severe reputational risk to many globally significant firms. Public exposure of tax arrangements in the UK has seen companies like Starbucks and amazon announce that they will commence paying tax on UK sales, after the public outcry. Similarly, during the Senate inquiry that is the reason the government has been dragged into this—a Senate inquiry initiated by the Greens—Glencore announced that it would close its marketing hubs so that transactions can incur a tax in Australia. If we really do believe, as the economists tell us, that you need good information to be able to make good investment decisions, then efficient protection of the public interest and public revenue requires the removal of this information asymmetry where the corporations know exactly what is going on but the public does not. That means, through legislation and through the tax office, being prepared to let people in Australia know exactly how much tax these companies are paying.

What became clear during the Greens-initiated Senate inquiry was that the Public Service, the Senate and the general public have largely been kept ignorant about the depth and breadth of aggressive tax minimisation by globally linked companies. The significant public interest and outcry that we have heard around the inquiry and that we have read about in the papers can be largely attributed to the fact that there is not enough information available for people to know what is going on and how much tax is being paid by the companies that are operating here. Investigative financial journalism has a very important role to play in translating this information to the public. We have been grateful as an Australian people for the work done by journalists such as Michael West, Neil Chenoweth and Nassim Khadem.

But one thing needs to be made clear. When you think of the big multinational companies that operate in Australia, some of them are media companies. And when you think about our reliance on journalists at the moment, you have to also take into account something the Senate inquiry learnt during its hearings, which is that the ATO's most at-risk company for tax evasion was News Corporation. If they are on the ATO's watch list, then we cannot just leave it up to journalists to find out what is going on by these companies that are operating here; we cannot just leave it up to journalists. We have to empower the tax office, through legislation and through resources, to have all that information themselves and then make it available to the public. That way, it will be trusted and people will be able to vote with their feet and with their dollars on whether to support a company. Then we might see behaviour such as that in the UK and the US, where large multinational companies, in order to continue their social licence to operate here in Australia, decide to pay tax in Australia. As long as we do not know what they are getting away with, they will continue to get away with it. Sadly, we have seen the government move the other way last week with their rich mates amendment bill that they passed to ensure that private companies, who are making enormous amounts of money here in Australia, do not have to disclose their affairs.

The government told us that there were concerns about people who operate some of these large companies being kidnapped, and that is why they could not tell us the information. What became apparent during the Senate inquiry was that the committee sought information from the Treasury and the Australian Taxation Office as to whether that advice had ever been provided. No evidence was provided to the Senate inquiry that the threats of kidnapping were based on information provided by any government agency. It was made up by the government to protect its mates, and that is why the government in this legislation, similarly, with large public companies is not being frank with the Australian people and saying, 'We will make large multinational companies tell you how much tax they are paying in Australia.'

The problem is that by carving out these kinds of exemptions, as we have seen with private companies and as this bill allows to continue to happen with public companies, there is a chance that that is in fact going to assist further tax minimisation.

The Uniting Church of Australia Synod of Victoria and Tasmania's submission to the estimate inquiry said:

... a document obtained from the Australian Taxation Office (ATO) under freedom of information has revealed that the private companies linked to Australian high wealth individuals have average profit margins lower than the other categories of companies … in the group that the legislation applies to. Almost half of these companies are foreign-headquartered and two-thirds have some form of international related party dealings.

They account for most of all international related party dealings reported to the ATO, despite being only 21% of the businesses caught under the tax transparency measures of the Tax Laws Amendment (2013 Measures No. 2) Act. It is possible that the lower average profit is simply due to this category of companies performing worse on average than other categories of businesses. However, there is the possibility that the lower average reported profitability is due to aggressive tax practices.

In other words, when you do not tell people what is going on and you allow certain groups of people to keep large companies—not individuals—operating here to keep their tax affairs private, you provide an incentive for them to do things that most Australians do not have access to and most would find abhorrent. That is why, instead of going the way the government is going, we need to pass laws that allow us to name and shame these companies so that, if a multinational coffee company is not paying tax in Australia, people know and can threaten to go somewhere else and make them pay tax here in Australia.

One of the other things that ought to be looked at, if the government is serious about tackling this, is the publish what you pay bill. This is a bill that the Greens currently have before the parliament which would establish mandatory reporting requirements for payments made by Australian based extractive companies to foreign governments. It would require that companies disclose these payments on a country-by-country and project-by-project basis. We know that companies are operating and making payments to governments often with questionable human rights records, labour standards and environmental standards. Again, this is another area where we need transparency because, if Australians know what companies are doing under their name, then they are going to be much more likely to bring pressure to bear on those companies.

The opposition has announced a separate measure around debt loading as a tax avoidance mechanism. Like the government's approach, it goes some way to addressing the problem but it will not go far enough until we name and shame these companies. The opposition's policy to tighten thin capitalisation rules, which limits the amount of debt deductions that can be claimed to the ratio of Australian equity in each company, is insufficient because it would be powerless against companies like Apple, which buys its products off itself at a price marginally below the retail price so its profits are artificially tiny. It is not about debt; it is about their pricing. That has to be tackled and it would not be tackled by the opposition's bill.

The opposition's proposal also would not capture our big mining companies that are using Singapore marketing hubs so that the sales are booked to those businesses instead of here in Australia. The only reason that companies like Glencore even said to the Senate inquiry that they were prepared to do it was that we called the Senate inquiry in the first place. We called them to front up and explain publicly what was going on. When public pressure is brought to bear and people are able to look down the lists and realise that multinational companies are paying tax rates sometimes of less than 10 per cent—sometimes in single figures—then Australians will say, 'Something is wrong here. 'Don't ask me to pay more to see the doctor, unless you're going to crack down on those multinationals. Don't tell me that we've got to take $80 billion out of money going to states, schools and hospitals while you are letting multinationals get away with paying tax rates in a number of per cent that you can count on one hand.'

Until we tighten that up, we are not going to see the egalitarian spirit of Australia reflected in our tax system. This government is being dragged kicking and screaming to do something about it. It is a bill worth supporting, because it makes a bad situation slightly better. Until we make it easier for the tax office to prosecute these companies and we out, name and shame these companies, this problem is only going to continue.

Mr WHITELEY (Braddon—Government Whip) (13:20): I rise today to speak on the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. As Australia competes on the global economic stage, it is absolutely essential that we take steps to ensure companies pay their fair share of tax. The government strongly believes that profits made in Australia should be taxed in Australia. That is why we are taking steps in this bill to implement three budget measures announced in May this year.

Currently, some multinational companies operating in our nation are avoiding paying the correct level of taxation through employing complex profit-shifting schemes. This not only leads to substantial amounts of forgone taxation but also substantially disadvantages our local and small businesses, families and individual enterprises who all pay their fair share.

Today this government is rectifying that disadvantage through strengthening tax compliance measures on multinational corporations with a global turnover of more than $1 billion. Businesses across my electorate of Braddon already compete on the global stage, and I am proud to be part of a government that is levelling the playing field when it comes to paying tax.

The coalition's multinational anti-avoidance law will stop multinationals using complex schemes to avoid paying tax in Australia through booking their revenue overseas. We are empowering our Commissioner of Taxation to treat those multinationals as taxable here in Australia. Our country-by-country reporting implements recommendations from the G20 and will ensure transparency in multinationals' income and tax paid in each country they operate in, greatly enhancing our capacity to chase foregone revenue. Concurrently we are doubling the penalties applying to large companies engaging in tax avoidance or profit shifting. This government remain committed to delivering a fair share of tax back to the Australian people and are delivering on that commitment today.

The coalition government are leading the fight against multinational tax avoidance. It is an issue we pursued as president of the G20 last year. We fought to get it on the agenda of the G20 and are now delivering on our rhetoric in this space. Australia led the global response to tax avoidance and we continue to do so in this bill. This bill is consistent with this government's overall approach to this issue. In 2014 this government, under the previous Treasurer, strengthened our defences against multinational tax avoidance. We have already tightened our thin capitalisation rules, which will substantially limit the scope for multinationals to claim excessive debt reduction. We are also allocating unprecedented resources to the Australian tax office. We have provided an additional $87.6 million to the ATO over three years to investigate international tax avoidance; the program is estimated to have raised $1.1 billion.

Our side of politics is often accused of being run by big business. I echo the recent words of the Prime Minister in categorically refuting that claim. This bill stands testament to the unshakable commitment of the coalition to the Australian business sector. We govern with regard for the national interest, not the interest of some exterior body pulling the strings. That is why we have delivered free trade agreements with Japan, Korea and China. That is why we have delivered the Trans-Pacific Partnership. We are creating growth and jobs through freer markets. Yet, whilst on this side of the chamber we realise the importance of freer markers, we also have the national interest squarely in mind.

This multinational tax avoidance bill delivers on our commitment to the Australian people. It is this government and only this government that can achieve both a broadening and deepening of our market access whilst also setting the economic frameworks that will deliver effective taxation into the 21st century and beyond.

I think it is important to outline how this bill will result in better outcomes for the Australian people. I believe it best achieved in assessing how this legislation will operate once enacted. The coalition is committed to simpler taxes and that is why the process is so simple under this legislation. Under the multinational anti-avoidance law we first establish that a company is a foreign company. We then assess if it has a global revenue of over $1 billion. We then establish if Australian sales have been booked overseas and assess if the principal purpose of the scheme was to avoid tax. If it is found that a foreign large company has been engaging in tax avoidance, they will pay the income tax on profit that should have been booked in Australia, pay interest on unpaid taxes and pay a further 100 per cent of the Australian tax avoided in penalties.

This is a serious solution to a serious problem and will deliver foregone revenue for the Australian taxpayer. This government is taking a responsible and measured stance on multinational tax avoidance in this bill. I am proud to stand against unfair tax avoidance by large multinational companies. I welcome the benefits this bill will bring to Australia and our citizens, and I commend this bill to the House.

Mr CRAIG KELLY (Hughes) (13:26): I am pleased to speak on the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. I would like to start by picking up on a few comments by the member for Fraser, the shadow Assistant Treasurer, when he talked about what Labor believes is the importance of having private companies declare their taxation records and make them public. That simply shows why those who sit on the other side of this chamber are completely unfit for office. They do not understand business. They do not understand the risks that entrepreneurs take to create jobs and to spread wealth in this country.

Firstly, the other side propose a threshold of a $100 million turnover and that once you reach that turnover, even if you are a private company, you have to you make all your taxation records open to the public. Why a $100 million threshold? Why not $95 million, $90 million or $50 million? What guarantee can the Labor Party give that they would not lower that threshold and make all private companies disclose their records?

Think of a company that has a turnover of $90 million. What a disincentive it would be for that company to go out there and expand their sales, expand their market and create new jobs if they knew that once they hit that magic turnover mark of $100 million they would have to make all their taxation records public. It is correct that a public company makes its records public. That is because the public can invest, buy and trade in those shares. That is why the taxation information, sales and profitability of that company need to be public. That is why private companies remain private—so that there taxation records remain between themselves and the taxation department.

The other reason why such records need to be kept confidential is negotiations—something that people on the other side do not understand. If you are firm negotiating with a Coles or Woolworths, the aim of that negotiation for those big buyers is to try to screw as much rebate and margin as they can from you. If you are company that has had to make your profitability records public, that information will be known to the person you are negotiating with. It will put you at a tremendous competitive disadvantage in those negotiations. It would be the same circumstance if you were making an offer to buy a home and the seller of the home was able to get hold of your tax returns to know what your salary was the previous year.

The DEPUTY SPEAKER ( Mr Goodenough ): It being 1.30 pm the debate is interrupted in accordance with standing order 43. The debate may be resumed at a later hour.

Mr TAYLOR (Hume) (15:18): On behalf of the Joint Standing Committee on Treaties, I present the following reports: Report 154, incorporating dissenting report: treaty tabled on 17 June 2015; and Report 155: treaties tabled on 11 and 12 August 2015.

In accordance with standing order 39(e) the reports were made parliamentary papers.

Mr TAYLOR: by leave—Report 154 contains the committee's review of the China-Australia Free Trade Agreement and report 155 covers two treaty actions: Australia's denunciation of the Convention Relating to International Exhibitions and Protocol of Signature, Paris, 22 November 1928; and Australia's ratification of the Asian Infrastructure Investment Bank articles of agreement, Beijing, 29 June 2015.

The China-Australia free trade agreement has generated significant public attention. China is currently Australia's largest trading partner, with two-way trade worth $160 billion in 2013-14. One hundred and seven billion dollars of this trade is exports, and that number is going up fast. Our exporters stand to gain greatly from reduced export costs from this agreement, just as we expect businesses and households to pay less for our $52 billion of imports. Together with the trade agreements with Korea and Japan, ChAFTA will open up the major Asian markets to Australia's consumers and industry.

ChAFTA has been described as a watershed—a transformative agreement—and it is expected to deliver significant commercial benefits to a wide range of sectors. The committee found that many industries, including dairy, beef, wine and fishing, are expected to benefit substantially from its implementation. Our service industries, too, are set to capitalise on the opportunities presented by China's growing middle class and its ageing population. The committee is acutely aware that Australia is losing market share in the burgeoning Chinese economy because of China's existing free trade agreements. Some of these FTAs are with Australia's biggest and most important competitors such as New Zealand, Chile and ASEAN. The negotiation of an FTA with China appears the most realistic option to combat Australia's growing competitive disadvantage while getting ahead of other competitors like the US, Europe and Canada.

The labour provisions in ChAFTA have been the subject of much debate. The core issues involve Australia's immigration framework for temporary workers. This is an area of law where the detail really matters, and the committee was presented with often diametrically opposed views. Adding to the confusion, a number of separate issues tended to be conflated, both in the public perception and in the evidence to the committee. No-one is disputing the need to give priority to Australian workers and to be absolutely confident that foreign workers have the required skills to do a nominated job. The real question is whether the current framework achieves this, even with the overlay of ChAFTA.

After careful consideration, the committee is satisfied that the safeguards within Australia's existing immigration and employment frameworks will mitigate all concerns raised. The current framework ensures that companies that are sponsoring foreign workers demonstrate genuine labour shortages and that workers have the requisite skills to do the nominated job. It also ensures that foreign workers are subject to Australian wages and conditions. The additional layers of red tape that some are calling for are unnecessary and will simply make Australian businesses less competitive and less productive at a time when we need a competitive business sector.

The committee believes that the current safeguards are effective within the investment facilitation agreements or otherwise. However, we do make the proviso that the government organisations that are responsible for ensuring compliance must be adequately resourced. The committee wants to ensure that the full benefit of ChAFTA is realised by Australian businesses and industry. Our existing free trade agreements are underutilised, with only 19 per cent of Australian exporters making use of them. To achieve the promised economic growth and beyond, which we believe is possible, more steps must be taken to increase uptake. To this end we have recommended that work on alleviating non-tariff barriers be prioritised and accelerated. We also recommend that increased effort be made to educate and support Australian businesses and industry to understand and access free trade agreements. The committee supports ratification of the China-Australia Free Trade Agreement.

Turning to report 155, the committee also inquired into the Asian Infrastructure Investment Bank Articles of Agreement. The primary purpose of the Asian Infrastructure Investment Bank is to address the need for infrastructure funding across our region. A multi-trillion-dollar shortfall for infrastructure spending in Asia is expected in the coming years. New infrastructure will drive growth and jobs, providing opportunities for Australian trade and business. If Australia becomes a founding member of the AIIB it will be able to influence key decisions and policies as the bank becomes established. The committee supports Australia's ratification of the treaty actions in this report and recommends that binding treaty action be taken.

Before I conclude I would like to thank the committee members and the previous chair, Mr Wyatt Roy, for their engagement and hard work during these inquiries. On behalf of the committee I commend these two reports to the House. I move:

That the House take note of report 154: Treaty tabled on 17 June 2015

Mr KELVIN THOMSON (Wills) (15:25): I seek leave to make a statement in connection with the tabling of the report.

Leave granted.

Mr KELVIN THOMSON: Essential features of the Australian way of life—work for all who want it and a fair day's work for a fair day's pay—are today threatened as never before, and young people in particular confront an axis of financial evil: insecure work, housing unaffordability and student debt. One of the key causes of this threat is the proliferation of temporary migrant worker programs, which barely existed just 15 years ago but have mushroomed in the past 15 years to the point where we now have over a million people in Australia on temporary visas that give them work rights. While the downside of these programs has never been higher, this government is in the business of surrendering forever our democratic ability to regulate and reduce them. It is my strong conviction that trade agreements should be about tariffs and quotas; they should not be setting our migration policy, our policy on health and safety, our food labelling policy and so on. This is both the right and the obligation of democratically elected governments.

It has not been easy to get to the core of the China free trade deal. Misinformation from its advocates is everywhere. First we were told that the China FTA does not change existing protocols about labour market testing. That is rubbish. This FTA puts an immediate end to labour market testing for engineers, nurses, electricians, motor mechanics and a total of 215 occupations that are currently subject to labour market testing. It also puts a permanent end to labour market testing for a further 400 occupations. Then we were told that the China FTA is the same as other FTAs that have been signed, so it would be racist and xenophobic not to sign this one. But the China FTA is not the same as other FTAs. In the Chile FTA the definition of contractual service suppliers refers to 'high-level technical or professional qualifications, skills and experience'. This was watered down in subsequent deals to persons with 'trade, technical or professional skills and experience', with the words 'high-level' and 'qualifications' being omitted. The ASEAN and Malaysian FTAs, which Labor signed in government, provided labour market testing exemptions in the 457 visa program for very limited categories of foreign nationals. The China deal gives labour market testing exemptions to all Chinese nationals in the 457 program.

And there is more. The initial period of entry for contractual service suppliers in the Japan and Korea FTAs is one year. It is four years for the China FTA. The China deal has no labour market testing for Chinese 'installers and servicers' in the 400 visa program; other deals do not. The China deal has a memorandum of understanding on investment facilitation arrangements; other deals do not. The China deal has an investor state dispute settlement provision; the Chile deal does not, and the Japan deal does not. The China deal has no labour rights chapter; the China deal has no environment chapter. The China deal has a side letter that removes mandatory skills assessment for 10 skilled trades, including electricians, motor mechanics and carpenters; other deals do not. The China deal has a memorandum of understanding that provides young Chinese with 5,000 work and holiday visas each year; other deals do not—there is no reciprocal arrangement for young Australians to work and holiday in China. Rather than genuinely debate these serious concerns, the government seeks to shut down debate by throwing around offensive and inaccurate jibes like 'racist' and 'xenophobic'. The unions who have raised these concerns are much more multiracial and multicultural than this government will ever be.

The one lame argument we hear when we expose the truth that labour market testing is being removed is that labour market testing is not important and that temporary migrant worker programs are protected from exploitation by minimum salary requirements. But every second day we hear a tale of exploitation of temporary migrant workers which shows these requirements are worthless. Migrant workers get ripped off all day, every day, uphill and down dale. Now that Labor proposes to lift the Temporary Skilled Migration Income Threshold, the Australian Chamber of Commerce and Industry comes out and says, 'No, we don't agree to that!'

Each new trade deal undermines workers' positions and rights a little more than the one which preceded it. And make no mistake: if this deal is ratified without the protections which Labor has suggested, it will create a precedent for other countries such as India. Traditional allies like the US and the UK will not tolerate China and others getting labour market testing exempt 457 visas when their nationals do not get the same privileges—nor will other Asian countries. The discrimination line will be used to extend 457 labour market testing exemptions right around the world, and labour market testing will fizzle out and die.

So trade agreements are being used as a battering ram against the working pay and conditions of Australian workers, and greedy employers and agribusinesses are complicit in this attack. If the new Prime Minister is genuinely different from his 'Dr No' predecessor and genuine about a new era of glasnost and perestroika, he will agree to accept the measured and reasonable safeguards which Labor leader Bill Shorten has proposed. If he does not, the China agreement should not proceed.

The DEPUTY SPEAKER ( Ms AE Burke ): In accordance with standing order 39(c), the debate is adjourned. The resumption of the debate will be made an order of the day for the next sitting.

Mr TAYLOR (Hume) (15:32): I move:

That the order of the day be referred to the Federation Chamber for debate.

Question agreed to.

The DEPUTY SPEAKER ( Ms AE Burke ) (15:32): The question is that the amendment be agreed to.

Mr CRAIG KELLY (Hughes) (15:32): Thank you, Madam Acting Deputy Speaker; it is good to see you back in the chair. Before question time and 90-second statements, I was commenting on the points in this debate raised by the member for Fraser where he indicated that it was Labor's position to force private companies to make their tax affairs public. It appears the member for Fraser has a complete misunderstanding of the difference between public and private companies.

Public companies make their taxation records, their sales and their profitability public because the average man on the street can buy and trade their shares on the stock market. So how profitable those companies are at any particular time is a very important factor that needs to be disclosed to the market so there is full transparency and people can invest or not invest in those companies.

However, private companies are not trying to raise capital from the public. Therefore the only people who need to know about their personal tax affairs—and a fundamental principle of our system of government and Australian society is that they can keep their affairs private—are the tax office and them. That should be a fundamental requirement of our system. It is quite disturbing that members of the Labor Party think that they want to force private companies to disclose their private taxation records to the public.

There are a few reasons why this is such a bad idea. Firstly, think of a company with a $90 million turnover. The member for Fraser suggested that a $100 million turnover should be the threshold for a private company to disclose their records. Take a company with an $80 million or $90 million turnover: if they get to that $100 million mark, all of a sudden, the records that they keep as private must be disclosed to the public. This becomes a disincentive for those companies to go out, invest, take risks, innovate and create new jobs. What absurdity and what nonsense—how could anyone suggest that that is in the interests of the Australian economy? That is what the member for Fraser suggests.

Secondly, another thing the member for Fraser clearly does not understand is negotiations between companies and sales. If you are a company and you are negotiating with a Coles or a Woolworths, the very last thing you want them to know is your turnover and profitability. We have very many highly concentrated markets here in Australia where there is a complete imbalance of bargaining and marketing power in these negotiations. If you were to enable these very large multinational companies to be able to determine the profitability and sales of medium sized Australian companies, you would be putting those companies at a serious disadvantage.

A similar scenario is: if you are negotiating to rent or purchase a house and the person that you are buying or renting that house from has access to your taxation records to know what you income and expenses were last year, no-one would think that that would be fair. However, that is exactly the policy that the Labor Party wants to impose on medium sized Australian companies.

Back to the specifics of the bill: it is very important that we have a taxation system that is competitively neutral between local companies and companies that deal overseas. Companies that have substantial transactions overseas can organise their affairs where they can artificially load up debt in their Australian subsidiary or overcharge their Australian arm for goods and services purchased or imported from overseas. Likewise, they can undercharge on goods that are being exported. That is why it is very important that we have good surveillance by the Australian Taxation Office of large multinational companies that have this ability—so they are paying their fair share of tax.

I have also been hearing criticism from the Labor Party on this proposal. Profit shifting by companies that deal in different jurisdictions is nothing new, so I ask: what have the Labor Party done about this? What did they do in the six years they were in government? They complain about what we are doing and say it is not going far enough, but they had six years in government to do whatever they wanted on this issue, yet they did nothing. It is the coalition that is taking the lead.

Another thing is that I often hear members of the Labor Party say, 'If only we could get all these evil multinational companies to pay their fair share of tax there would be no need for us to take any tough measures.' We currently have a debt and deficit problem in this nation. After the Labor Party's six-year spending spree, the interest bill this country has to pay is more than $1 billion every month. That is the interest on the spending spree in the six years of the previous Labor government. That money has to come from somewhere. That is $1 billion every month.

There are no costing estimates of what this bill will raise, but we have heard the Taxation Office estimate it will be in the hundreds of millions of dollars. Let's say that it is $100 million that is raised in additional taxes paid by multinational companies, which would be fantastic. To put it in some context: that would pay the interest on Labor's debt for 72 hours. If it raised $100 million, it would pay 72 hours of interest on the reckless spending spree of the six years of the previous Labor government. That puts in some context the task we have of trying to balance the budget and return to some type of surplus.

The other issue when we talk about our tax system and multinational companies is that we need to have an internationally competitive tax system. The fact is that we currently do not. If we as a look at personal tax rates we can see that the top rate of personal marginal tax in this country is now 47c in the dollar, plus the Medicare levy. We are approaching the point where, once you hit that marginal tax rate, 50c in the dollar goes to the government and 50c goes in your pocket. Compare that to New Zealand where it is just 33c, Singapore where it is only 20c or Hong Kong where it is just 15c.

In maintaining this taxation system, especially as there is more globalisation, more Australians travelling overseas, more Australian companies doing business overseas and more opportunities for Australians overseas than ever before, we risk many of our talented Australians taking their ideas and entrepreneurial skills offshore where there is greater reward for their efforts and risk-taking. This is why we must be very careful with our taxation system.

Then there is the issue of our corporate rate of taxation. The 30 per cent rate of corporate tax we have is currently still one of the highest in the world. We need to aim to reduce our taxation rate. When I say 'reduce our taxation rate', I do not mean we should reduce the amount of tax flowing to the government. I believe it is possible to reduce the corporate rate of tax and increase the number of dollars flowing into the Taxation Office. Why do I say that? It is because history has shown that every time we have done that in the past that is exactly what has happened.

Over the last 40 years, every single time we have lowered the corporate rate of tax—from close to 50 per cent down to 40-something per cent, to 36 per cent, to 33 per cent and then to 30 per cent—we have not got less tax; we have got more. We have got more as a percentage of GDP. I believe that we are currently in the same position. I believe that if we reduce the rate of corporate tax in this nation we will see more tax dollars flowing into government revenue. It does not matter what side of the chamber we sit on or what our ideology is, we agree that it would be good if the government could get more taxation to pay for the things that we need. If we can do that by having lower tax rates that is what we should be aiming at.

The specifics of this bill is simply that it is aimed to stop multinationals using many of the complex tax schemes to avoid paying tax in Australia by booking their revenue overseas. We are doubling the penalties applying to large companies engaging in tax avoidance and profit shifting. This applies to only about 30 large multinational companies that have a global turnover of $1 billion. One of the provisions will require them to report their revenue and profits in all countries. The coalition are taking good, sensible steps to look at the issue of multinational tax avoidance after nothing at all was done in the six years of the previous Labor government. With that, I commend this bill to the House.

Ms MacTIERNAN (Perth) (15:43): I want to respond to a number of the comments that have been made today by the previous speaker and to a series of speeches that I have heard in this place not just in relation to this bill. Last week, the same issues came up in the discussions on social security legislation, legislation about our education system and fees for our education system. I think that when I listen to the contributions of the members opposite, I really do—

A government member interjecting—

Ms MacTIERNAN: Sorry?

The DEPUTY SPEAKER ( Ms AE Burke ): The member for Perth has the call and will not respond to interjections.

Ms MacTIERNAN: I was trying to be good natured. I am interested in having a debate. As I have been listening over the last week to these contributions, what struck me was how profoundly unaware members were of alternative models and visions of where our economy is going and, indeed, the sorts of ways in which we might divide up the community pie.

The Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015 that is before us today is legislation that we do support. It is a modest measure to reduce tax evasion by multinational companies. We have noted that the government has been unable to give us any sort of estimate beyond an asterisk as to what, indeed, this might collect. Today we had the Treasurer being optimistic, talking about hundreds of millions of dollars. It will be really great, fine and good if we get hundreds of millions, but we are dealing with a problem where, in fact, we need to raise billions more dollars in revenue. We need to do that for a very good reason, and a number of measures that have been put forward by this side of the House have been rejected out of hand by the government.

I just want to reflect on one matter, and that is the growing inequality not just across the Western world but, indeed, across our country. Inequality is happening globally, and I think we have talked about this in the past. There was a period coinciding with the end of that very radicalising experience of World War I and going right up until the 1980s where we saw the historic inequalities in the spread of income and wealth in society changing. Over that period, basically from 1920 to 1980, we saw an economic democratisation take place where the share of the overall return of an economy that went to wages versus that which went to profit changed. What we have been seeing since 1980—and, indeed, what I believe is now accelerating—is a reversal of that.

In fact, what we are seeing is societies, including our own, becoming more and more unequal in the way in which they reward effort. The reward you get out of profit is now increasing compared to the reward that you get out of labour and, in relation to the various types of labour, that reward is becoming more and more distorted. I will give you a couple of key facts. Over the past generation—in the last 30 years or so—Australia's top one per cent income share of wealth has doubled and the top 0.1 per cent income share has tripled. From 1975 to 2014, real wages have grown by a mere $7,000 for the bottom one-tenth and by $47,000 for the top one-tenth. If we look at actual wealth, I think that we will see that it is not just income, that this is actually compounded in terms of the spread of wealth.

This is a question of fairness, but it is also an economic question. Is this what is going to deliver us a strong and stable society into the future? I do urge members on the other side to look at the work of Nobel Prize-winning author Joseph Stiglitz. His work The Price of Inequality really shows that we do not only risk destabilising our democratic institutions by this growing sense of unfairness that we are seeing emerging around the world and that it is not just the radicals in the Occupy movement who are aware of this. People are becoming increasingly aware of this growing inequality and increasingly disillusioned that the political class appears to be unable and unwilling to do anything about this.

What we are seeking to do is try to balance the budget to get us out of the problems that fundamentally came from the global financial crisis, a crisis which emerged primarily because of the greed of large corporations. They created an absolute crisis. By and large, the people that were at the heart of that crisis have gone on to even greater benefit, and communities like ours and those across Europe and North America are now trying to deal with this catastrophe that has been created by those who pursued a philosophy of greed and the unbridled pursuit of wealth.

We are now being told that we have to cut really important things like investment in education. I have heard member after member get up on the other side and say, 'There's no such thing as a free education. Someone has to pay for it.' Someone does have to pay for it. But what we are saying is that the proposition that university education should be largely the responsibility of government or that technical and further education should largely be the responsible of government is not at all an unreasonable proposition.

We note that in some of these most successful economies—such as in the Scandinavian economies—they provide free tertiary and technical education. They do not find it absolutely preposterous that the bulk of that should fall upon the tax revenue, because they have a more sophisticated understanding of who is actually benefiting out of the system and how we create the social stability that we need for economies to prosper. I think this is an increasing problem that we have on the conservative side of politics—that they seem to profoundly misunderstand the nature of the social contract.

We have billionaires in this country who believe that somehow or other their innate value and their innate genius have been the things that have turned them into billionaires, rather than this being the result of a particular structure that we have in our society. The Gina Rineharts of this world in fact rely very much on there being a particular value placed on a mineral for them to be able to generate the sorts of vast profits that they do. But there is nothing logical or in any way self-evident about the fact that a CEO of a bank, for example, should get $15 million, while an ordinary working person in that bank might get $50,000. These things are not self-evident. There are structures that have emerged that have enabled people to generate vast wealth.

It is really important to understand the trend line here. The trend line is taking us to more and more inequality, and that inequality feeds further inequality, because the people with this ever-increasing wealth are able to buy political influence, either directly or indirectly, and to mould media opinion. Just look at Rupert Murdoch. The reason why Rupert Murdoch wanted to run all of those red tops was not that he was particularly interested in exposing the private lives of people but rather that this gave him the mechanism for controlling. The fear that he generated within the political class ensured that he had a very high level of control over the decisions of government, to ensure that his particular interests were advantaged.

We need to get on top of the fact that we have to do something more about this growing inequality. I have heard members talking about the top taxation rate. The top taxation rate is somewhat farcical if we do not know what people are in fact paying in tax. Many of the people who may notionally fall within income brackets that require them to pay substantial amounts of tax actually are not doing that because they have the availability of tax havens—be it the Cayman Islands or elsewhere—and top tax advice that enables them to avoid or to minimise their tax, to a point where the ratio of tax that they are paying bears very, very little relationship to what people think should be paid by those people. Hence the Buffett principle was that there be an absolute limit on the amount of deductions that one could call upon, so that there would be a guaranteed minimum level of taxation paid.

We are going to have to deal with these things. I agree with welfare reform. I think that there are a lot of unintended consequences that come out of creating a welfare system that can foster intergenerational dependence. But there is an incredibly strong argument here that we are cutting back our social safety nets while at the same time operating a protection racket that has seen the top 10 per cent, the top one per cent, the top 0.1 per cent, of our communities getting richer and richer.

I note that Stiglitz says here:

… if we were serious about deficit reduction, we could easily raise trillions of dollars over the next ten years simply by (a) raising taxes on people in the top—because they get so much of the nation's economic pie, even small increases in tax rates raises substantial revenues …

He goes on and advocates a number of provisions like this. So I just urge the members opposite to think a bit more broadly, to think a bit more deeply, about these matters and to reflect on these profound changes in economic structures that are coming across the world. I have referred in the past to Thomas Piketty's book Capital in the Twenty-First Century. He points out that, across the globe, we are now pretty much back at the position that we were in in the 1890s, in the Belle Epoque, in terms of inequality. If we want to prosper as a society, if we want see this broad commitment to our democracy, if we want to see our economy thrive and have a deeply engaged, stable community, then we need to address these issues. We have got to get beyond the very cliched representations that we have been seeing from the government members over the last week. We support this legislation, but in no way does this go anywhere near far enough in addressing the massive issue of how we get a decent tax response from the wealthiest in our community.

Mrs PRENTICE (Ryan) (15:58): I rise to offer my support for the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. I am always pleased to support legislation that fulfils three key criteria: firstly, it is necessary; secondly, it is considered; and, thirdly, it is proportionate to the problem it seeks to resolve. This bill ticks all three boxes. It is in keeping with the government's broad and determined commitment to ensure that companies that earn income in Australia and benefit from the Australian economy pay their fair share of tax here. It is a simple principle but, for reasons that I will outline, it is increasingly difficult to administer in the modern, global, connected community.

This is fundamental question of fairness and equity. Companies that earn income in Australia should pay their fair share of tax in Australia. Most are happy to comply with their obligation, in this regard. Small- and medium-sized Australian businesses or businesses with a significant bricks-and-mortar presence in Australia do not, generally, have the ability to significantly reclassify revenue for the purposes of tax avoidance. Small- and medium-sized companies do not fall within the scope of this bill. Instead, it specifically targets revenues earned by large multinational corporations, companies that conduct business in Australia and overseas.

With advances in technology, in recent decades, the geographical location of a company and where it does business has become blurred. For example, 30 years ago it would have been rare for customer service and support to be provided by an overseas call centre. Twenty years ago it was rare for an Australian, living in Australia, to purchase retail goods from an overseas retailer. Ten years ago we could not have envisaged using mobile apps based overseas to book car journeys or private accommodation in Australia.

The increasingly globalised and digitalised economy is a net benefit for relatively small, modern, open, trade oriented countries, such as Australia. The downside is that these market conditions make it easier for companies to use convoluted accounting tricks to minimise their tax obligations in relatively high corporate-tax jurisdictions, such as Australia. By way of example, in recent months the political lexicon has been treated to a profit-shifting measure known exotically as the 'double Irish Dutch sandwich'. I will spare the House the complexities of this arrangement but, suffice to say, it is a method by which multinational corporations engage in channelling profits from Australia and elsewhere through a variety of Irish and Dutch subsidiaries. The profits then end up in a tax haven beyond the reach of the Australian Taxation Office.

This sort of creative accounting by multinational corporations fails the fairness test. It allows them to dramatically reduce their overall corporate tax rate, which denies revenue to the Australian government to fund necessary services for Australians. This means that more of the burden of taxation must be borne by other companies and individual taxpayers. It also gives multinationals operating in Australia an unfair competitive advantage over smaller competitors that either lack the multinational reach to engage in similar practices or are unable or unwilling to do so.

The coalition government made a clear commitment to address tax avoidance as part of the 2015-16 budget. This bill delivers on that commitment. Schedule 1 to the bill defines the bill's scope. It targets large foreign multinationals. The bill defines these as 'significant global entities' with a global turnover of more than $1 billion dollars per annum. The Australian Taxation Office has identified about 30 companies that are targeted by this law. In total, about 100 companies may need to review compliance with the new laws.

Schedule 2 to the bill introduces the multinational anti-avoidance law. This law will take effect on 1 January 2016 and will target artificial or contrived arrangements to avoid the attribution of business profits to Australia—arrangements such as the double Irish Dutch sandwich earlier described. Multinationals found to be avoiding Australian tax under the new anti-avoidance laws will not only have to pay back the tax they owe but also will face additional penalties of up to 100 per cent of the value of the tax owed.

Schedule 3 to the bill doubles the penalties for tax avoidance and profit shifting. Schedule 4 to the bill implements Australia's commitment to country-by-country reporting under the Organisation for Economic Cooperation and Development's action plan for base erosion-and profit-shifting.

This has been a multilateral effort, over several years, to achieve a coordinated approach to monitoring and reporting transfer pricing. The extent of transfer pricing undertaken, across national boundaries, by multinationals is not fully understood by governments, which limits effective monitoring. With the implementation of these new documentation standards, governments will have more visibility over transfer-pricing practices, which will aid enforcement and improve compliance.

As has been the case, previously, the ATO will retain a policy that rewards proactive disclosure and will look favourably upon companies that take positive steps towards complying with the new laws. The former Treasurer noted, in introducing this bill, that the tax office has already been contacted by some companies seeking information about how they might restructure their activities to improve compliance. This is a good sign that the proposed changes are well targeted and will achieve the intended effect.

The contents of this bill will not come as a surprise to industry and other stakeholders. Exposure drafts covering the contents of this bill have been released publicly and stakeholder comments invited. Feedback from the consultations has been taken into account and is reflected in the contents of the final bill. This bill is just the next step in the coalition government's ongoing reforms of Australia's taxation system. The government is pursuing tax reform to make our system more competitive and efficient and to reduce its complexity.

Already, we have introduced a suite of small-business-friendly measures, including tax cuts, extensions to tax write-offs and other initiatives to reduce red tape for small businesses. We have also secured in-principle agreement from the states and territories to apply the GST to products purchased online from overseas—another initiative that will level the playing field for small- and medium-sized businesses in Australia.

In closing, I reiterate that this bill should be supported because it is necessary, it is considered and it is proportionate. That it ticks all three boxes is a credit to the former Treasurer, the member for North Sydney, who has long been a champion for reform of taxation relating to multinational entities. If this legislation is to form part of his legacy then it is a fine legacy, indeed. I commend the bill to the House.

Mr THISTLETHWAITE (Kingsford Smith) (16:07): The nation faces some significant economic challenges. One of those significant challenges is restoring fiscal balance to the way the economy grows and the way that the nation grows. We have a large and growing budget deficit. The levels of debt that this Liberal government has undertaken have increased since it came to government. Many Australians would not understand this or know this, but this government has in fact made the budget deficit worse.

Over the course of the last two years, the Liberal coalition government has doubled the budget deficit. The deficit has gone from approximately $26 billion to $52 billion. There has also been an increase in the level of debt. They are figures that most Australians would not be aware of, but they are facts. The levels of debt the government has introduced need to be paid for and they will be paid for by future generations of Australians if we do not restore some balance and an even keel to the fiscal position of the nation. We need a sensible approach to restoring sustainability and balance to the budget. That requires governments to make savings and also to look to measures to raise additional revenue to fund important social services, in particular those safety net services that many Australians rely on to be able to participate in our society.

Labor is acutely aware of this challenge. That is why, over the course of the last two years, there has been a great effort from the Labor Party—and in particular the economic team, led by Chris Bowen—to consult with Australian businesses, with Australian tax experts and with organisations that work in the field of fiscal responsibility to put together a set of policies that are responsible, that restore sustainability to the budget and are balanced and fair. These policies also promote growth within our economy, promote growth in jobs and provide additional revenue to fund programs that are vitally important—for instance, the Gonski reforms to education, which are necessary to ensure that our nation has a competitive education system, and funding programs that are providing incentives for people to take on more education, particularly at the higher education levels through university and TAFE colleges.

Labor has developed a set of policies that are balanced and fair. We have done this in a different manner to a coalition government. We have taken a different approach to those opposite. Those opposite—in the first budget and the following budget of the Abbott government—attacked pensioners, attacked the sick by attempting to introduce a co-payment for visits to the doctor and attacked students by attempting to introduce $100,000 university degrees. In many respects, those opposite attacked the most vulnerable in our community. They attacked the people who, really, we should be giving the incentives to and a leg up so that they can prosper, establish businesses and grow our economy into the future.

Not only have they attacked the most vulnerable in our community but they have also given tax breaks and tax savings to some of the most profitable and wealthy businesses and individuals in our economy. A classic example of this is removing the minerals resource rent tax, allowing the biggest mining companies in the world a tax break whilst putting a tax increase on the lowest paid women in the country—those earning less than $38,000 a year—by removing the low income superannuation contribution. That has been the philosophy of this government when it comes to looking at restoring fiscal balance to our budget. That is the point: there is no balance. It is unfair and is unbalanced.

That is why Labor undertook this process of consultation, working with experts and looking to areas within our economy where additional revenue can be raised while still promoting growth and promoting jobs. We did that through two policies. One tackles superannuation tax concessions by taxing those who have more than $1 million in their superannuation fund and are earning an income of interest based on that capital value in the superannuation fund. Anyone earning more than $75,000 per year as income off their superannuation balance—so we are not talking about reducing the actual capital balance in the superannuation fund, but about earning that income of that—will have to pay a little bit more tax. That is because the experts say that superannuation tax concessions are going to consume the budget and they are going to overwhelm, particularly, the amount of expenditure that we afford to the age pension.

We have also looked at this issue of multinational tax avoidance. We have come up with a policy that is balanced and fair. It looks to raise $7.2 billion of additional revenue by asking some of the most wealthy multinational companies—which earn super profits in Australia off their operations but pay very little tax in Australia—to pay a little bit more tax. When you have average employee Australian taxpayers paying an effective rate of tax of 21 per cent, as workers and as employees, and multinational big businesses paying less than 10 per cent effective rates of tax, then there is an imbalance in the system. The government needs to rectify that.

But the government has not done that and it has been up to Labor to develop a policy which does just that: it raises $7.2 billion worth of additional revenue to ensure that we can fund those important educational programs and other programs. Labor believes when it comes to multinational profit shifting and corporate tax avoidance that really enough is enough and the time has come for real action, particularly given the deteriorating state of the budget and the increase in the deficit that is being undertaken by the Abbott-Turnbull government.

Whilst it is difficult to accurately determine the true scale of corporate tax dodging, it has been brought to light in particular in recent years, leaving many in the community rightfully outraged. Earlier this year, we saw that the Senate inquiry into corporate tax avoidance highlighted the size of the problem when it revealed that the nine largest global pharmaceutical companies—which made $8 billion in sales in 2014 in Australia and received $3.5 billion in subsidies from Australian taxpayers through the Pharmaceutical Benefits Scheme—had paid collectively just $85 million in income taxes. That is one per cent of their revenue. Now most Australian PAYG taxpayers, workers and employees would love to pay just one per cent of their earnings as income tax but they do not; they pay a lot more. The average Australian wage earner pays a standard 21 per cent of their income in taxes, and small businesses and small corporated businesses in Australia pay 30 per cent. It is clear just how unbalanced the taxation system is and why there is a need for reform.

Other examples include: Apple, which paid just $80 million in Australian tax in 2013-14 despite earning local revenue of over $6 billion; James Hardie, which, despite average annual profits of over $200 million, operates at a net taxable loss in Australia allowing it to claim tax deductions on annual payments to the compensation fund for victims of asbestos products; and Glencore, which, depending on who you believe, either paid zero dollars or $400 million on local revenue of $15 billion.

In its submission to the tax inquiry, the Australian Tax Office reported that, of Australia's $300 billion in cross-border trade, more than $150 billion was made up of companies transferring money from their Australian operations to international jurisdictions, many of which featured very low tax rates. We believe that, when it comes to tax, Australians and Australian companies should pay their fair share. That is why in March this year Labor released the policy I mentioned earlier, which will raise $7.2 billion for measures to stop multinational profit shifting out of Australia. I contrast that to this policy and the bill that is being debated here. Under this bill here, the government cannot say how much revenue will be raised by this suite of measures. In fact, when you look at the budget papers, on the revenue side for this particular measure, there is an asterix. It is unacceptable that the government do not know how much a particular measure is going to raise. It really does highlight the fact that in many respects their hearts are not in it when it comes to restoring balance to the budget.

Our approach is multi-faceted and seeks to ensure tax deductions are based on a company's entire global operations, not just their operations here in Australia. It will stop the issue of shifting profits overseas and will stop a company claiming that the profit that they make here that they send to another division of that company in another country as a loan cannot be used for income purposes and therefore cannot be taxed. We are not just looking at what they do in Australia but at what they do internationally. We will also standardise our tax law with other countries so that companies cannot double dip. We will improve compliance with the Australian Taxation Office by: providing effective funding to ensure that the tax office has the necessary means, the staff and the personnel to crack down on these avoidance schemes; and we will start third-party reporting and data-matching early to improve compliance.

We have repeatedly called on the government to adopt a bipartisan approach to this issue. We got out early on this particular measure and said in the lead up to the last budget: here is a way you can raise $7.2 billion of additional revenue; it sits well within the OECD guidelines for base erosion and profit shifting; and it could have been adopted on multipartisan approach. We could have said that this parliament is serious about tackling this issue but, no, the government has said they will not even look at the measure. A cooperative approach would have plugged the holes through which Australia is losing millions and billions of dollars in forgone tax revenues and would have been particularly beneficial given that, as I said, the deficit is getting worse and debt is increasing under this government.

Of course Labor has worked for a number of years now to ensure large firms pay their tax bills. In 2013 Labor passed laws requiring the Australian Taxation Office to publish information about the income tax paid by companies earning more than $100 million. This law applied to around 2,000 companies. But again we have seen this particular Liberal government remove some of that scrutiny, remove some of that transparency that Labor put into the system. The government now wants to exempt about 800 of those companies to allow them to keep their tax affairs confidential. They argue that private firms should not be held to the same standards as public companies.

The government has introduced this bill despite the fact that it was uncovered, through a freedom-of-information request, that there had not been one complaint received by the Treasurer or Prime Minister's office about the law that Labor introduced to improve taxation transparency and to ensure that these companies publish their taxation records. This just proves that this is a completely ideological approach that this government is taking, which is not in the best interests of Australians, which does not restore fairness and balance to our taxation system and that is why it deserves condemnation for the approach that it is taking. Nonetheless, Labor takes a constructive approach to these issues and that is why we have offered support for the government in the passage of this bill.

The bill does introduce significant new concepts to our taxation law—the notion of a global entity. It seeks to clamp down on multinational firms using artificial arrangements to avoid paying to corporate tax in Australia, it does double the penalty for firms of involved in tax avoidance schemes and it implements some of the OECD's action plan for transfer price documentation and country-by-country reporting. However, as I said, the government still does not know how much revenue this measure will raise. When it comes to ensuring we restore balance to our taxation system, the government should be working with Labor on the proposals that we have put forward.

Mr HAWKE (Mitchell—Assistant Minister to the Treasurer) (16:22): I rise to support the government's Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. It is a great bill that shows the government is committed to ensuring Australians have a fair and sustainable taxation system.

I was pleased to see that the member for Kingsford Smith got the memo from the member for Fraser that the opposition is indeed supporting the government's measures, as they recognise that these will add extra integrity to the Australian tax system, and indeed will provide for more revenue and ensure that there is not tax evasion by multinational companies in Australia. I do want to take up the member for Kingsford Smith on a couple of the points that he made, because I think it is important in the context of this debate to understand why it is that the government has not put a figure on the revenue to date. Not only is that the expert advice from the ATO; the approach of the government has been to have the ATO working with the multinational companies and working with the government to ensure this legislation has been drafted correctly and ensure that we meet our international obligations under BEPS with the OECD on base erosion. All of that process has meant that we will not make fanciful claims about the amounts of revenue that the government is seeking to get from these changes to this law. I think it is fanciful for the opposition to say it would be $7.1 billion, given that they will not release any of the assumptions made or the modelling relied on to make that claim.

So it is just like it was with the MRRT, and I was stunned to hear the member for Kingsford Smith mention the dreaded MRRT, the minerals resource rent tax—a tax that was implemented by Labor in government that did not actually raise any revenue—as an example of anything that Labor would be putting forward. Really that shameful episode ought to be put back in the drawer and never mentioned or heard of again. This parliament and this country would be better off if we never heard about the MRRT, that foolish proposal, ever again.

It does go to show that they may not have learnt the lessons here: that you do not make overinflated and hyperventilating claims about the amount of revenue you are going to book in the budget. The budget line item in relation to this measure, which comes into place on 1 January 2016, does not have a figure attached to it at this point in time because that is the expert advice—that it is very difficult to assess exactly how much revenue will be raised by the measures that are proposed in this bill. That does not mean we should not proceed with them. That does not mean that we should not listen to all sides of the debate here. The government has said on many occasions: if the Labor Party has amendments that they wish to put up in relation to this legislation, they should put them forward. The government has said that, if there are loopholes that Labor believes it can help close that will deliver revenue, and if there are shortfalls in the tax system, we are prepared to consider those sorts of proposals. So I do think it is odd for the opposition to say that they will book $7.1 billion in revenue without being willing to say: 'Here are the assumptions; here is the modelling; here is exactly how we believe it can be done.' I think everybody who would consider this matter, given that they would not release those figures, would come to the same conclusion—that you really could not claim anything like that, and you really could not claim that of course you could produce that revenue. And I think that is the case. I think when you hear members of the opposition talking about terms like 'super profits' again—and we heard that return to the Rudd era: 'super profits'—you kind of get the sense that they are missing the point about the significance of these measures to combat multinational tax avoidance that we have here.

There are several schedules here that I think are relevant to this debate. We have the multinational anti-avoidance law in schedule 2. In schedule 3, we have stronger penalties, importantly, penalties being a significant part of the government's agenda in relation to combating multinational tax avoidance. In schedule 4 we have country-by-country reporting, which of course is critical when you consider what the OECD is doing in relation to base erosion; that reporting is absolutely vital for different tax jurisdictions to share and to consult with each other on to ensure that tax is booked in at least one jurisdiction.

The schedules that the government has put forward in this bill make sense. They are good measures. So it is welcome that the member for Fraser and the opposition have come on board because, working with the OECD, it is essential that immediate action is required so that the Australian tax system is fit for purpose—fit to deal with the most egregious tax avoidance arrangements, recognising some of those things.

So, while I accept some of what the member for Kingsford Smith says about the rate of multinational tax avoidance and while we want to make these changes to ensure that more tax is paid here in Australia where profits are booked, he did of course then move on to a typical Labor agenda of conflating the income tax system with the company tax system and tried to convey to people that the PAYG system is somehow related to the rates of company tax and that there is some one per cent or something he was talking about, versus the effective 21 per cent of income tax providers.

I think it is important to remind people at this juncture that we are not a competitive tax jurisdiction internationally at this point. We are not competitive on income tax levels. But we are also not competitive on company tax rates, and this is a dual problem. While it is very important to bring down the rates of tax for income pay-as-you-go earners, it is also important to clearly articulate in debates such as this on multinational tax avoidance that we are talking about the design of our laws for a new phenomenon in world history—that is, the multinational and the international nature of the jurisdictions, given the digital age and the new era that we live in. I am talking about company tax which is just as high and just as anticompetitive for Australian companies as it ever has been—in fact, 30 cents in the dollar is a very uncompetitive rate, given all of the comparable economies in our region, and, indeed, that is why the government has moved to lower the small business tax rate to 28.5c, and that is a welcome step by all my colleagues in ensuring the company tax burden is reduced, because, by reducing the rate of company tax and the company tax burden on small businesses, we will create more jobs, more prosperity and of course deliver a stronger growth in our economy, which will deliver more revenue.

But in particular this bill is about producing more revenue from multinational tax avoidance, and I want to commend the former Treasurer and our current Treasurer for the work that has been done here that is ahead of what has been happening in the OECD, but also in sync with what is happening in the OECD, and I think it is important to remember that the measures in this bill will only apply to large multinationals with annual global revenue of more than $1 billion. That is why I think the member for Kingsford Smith fails when he talks about super profits—he is talking about companies that are under $1 billion—and says that somehow they are super profitable or that we should be doing more in this space, when we have a very high rate of company tax.

It is not responsible for a national government in this time, in this era, in the climate that we find ourselves in, in the competitive nature of that digital age that we live in, to be talking about super profits and tax. We know that global growth is on a trend downwards. We know that China's growth is on a trend downwards. We know that we have to compete not just for foreign investment; we have to compete for brains, for people and for people wanting to establish their businesses—for start-ups and venture capital. That is why the Prime Minister is so focused on running the economy and the government of the 21st century. It does require laws such as this—multinational tax avoidance laws—but it also requires an understanding that high rates of tax, uncompetitive rates of tax, both company tax and individual tax, make our economy less attractive to that international flow of capital, that international flow of ideas and that international flow of people and brains that Australia must be in the hunt for if we are to replace the loss of revenue in commodity prices and in particular in iron ore. That is why I welcome the measures.

I think it is important to talk a little bit about what we are doing in schedule 2 with the multinational antiavoidance law. For significant global entities with revenues above $1 billion—and it is estimated that about 1,000 companies will need to consider these rules—our approach has been to have the ATO working with each of the multinational companies to ensure that we can bring in the revenue. We do not necessarily take the stick approach in full swing to these companies without allowing for a change in the law and allowing them to comply with the new law, recognising that with most of the arrangements there has been a failure in legislation and a failure of parliaments to legislate fast enough for a changing and emerging economy rather than illegal behaviour. That is something that emerged from the Senate inquiry in this area. If you are considering this matter, it is important to understand that the stronger penalties regime will of course mean that the government does have a stick in relation to this and we are significantly strengthening the stance against tax avoidance in the legislation. The bill doubles the maximum administrative penalties that can be applied by the Commissioner of Taxation to large companies that enter into tax avoidance and profit-shifting schemes. It will deter multinationals from entering into contrived tax avoidance and profit-shifting schemes. Deterrence is a key element, as we have recognised in the past, in the fight against tax avoidance behaviour.

You might also know that the government has made changes to the thin capitalisation rules, understanding that the nature of the economy is changing and those thin capitalisation rules reflect a pretty deep understanding by the government of the nature of modern arrangements and structures. Combined with those measures, you will see the resources that are dedicated to tax minimisation and opportunities to avoid tax through the offshore activities and larger potential gains that were there. The stronger penalties will help deter any major taxpayers from taking aggressive tax positions, given the government's approach.

Recognising that tax is a very complex area, particularly in Australia, if there is a reasonably arguable position then they will not be affected. That is an important part of the government maintaining confidence in our economy and the way our laws are designed and constructed. There are those who have sought to do the right thing, have obtained the right professional advice and can reasonably argue their position in a multinational context, understanding that the world and the economy are different than they were even five years ago. It is a recognition that tax law does not always provide certain tax outcomes—something that we have failed to grasp from the opposition time and time again.

Returning to my earlier points, I am glad to hear that the opposition will be supporting the government on these measures. That is welcome. As I said earlier and as I think the Assistant Treasurer said earlier today, we welcome any idea that the opposition might have for an amendment or a tax loophole that could be closed. We will consider those ideas in the context that they are put forward. If they are positively framed, if the opposition genuinely believes there is opportunity for billions of dollars of revenue to be recovered in a legitimate way from multinationals, then the government certainly wants to hear about it and will work with the opposition in that regard.

It is, however, a misnomer for the government to repeat the mantra that there is a figure of $7.2 billion available to the government when they will not release any of the assumptions or any of the modelling and will not discuss how they arrived at that figure. We have heard this all before when Labor has talked about the revenue that they can make from a tax. The member for Kingsford Smith spoke about the minerals resource rent tax—the single greatest example of tax design failure, arguably in world history, not just in Australian history. It is the single greatest failure in tax design by the Australian Labor Party—a new tax on a 'super-profitable mining sector', in their words, that did not raise a single cent in revenue. It is obviously a tax design failure. So we certainly will not listen to the architects of the minerals resource rent tax in designing our bill to combat multinational tax avoidance, but we will accept any idea and will consider it carefully in the context that it is put forward. That is a good approach from the Turnbull government.

This is a serious issue and the Australian government has moved in a serious way to ensure that we have fair and sustainable tax system. We have some of the strongest integrity rules in the world and we have changed some of those rules in relation to critical areas, like thin capitalisation. We know that some multinationals are structuring to avoid Australian tax by booking revenue from Australian sales offshore. That is why the government is adopting the measures that are in this bill and that is why the government will continue to work with the OECD and will continue to comply with the base erosion and profit-shifting program of the OECD. In particular, there is schedule 4—country-by-country reporting—which ensures that we are working and cooperating with every international tax jurisdiction, especially within the G20, to ensure that nobody is evading tax by jurisdiction-hopping. That is another worthwhile measure in this bill.

That is what it is all about: well designed tax laws that prevent tax evasion and profit-shifting offshore, recognises that Australia has a lot of work to do in the taxation space, both in the individual income tax space, where our rates uncompetitive, and in the company tax space. We still have one of the highest rates of company tax in any comparable economy in the world. That is something that we do need to look at and it is something that, over time, we need to ensure reduces so that we can be internationally competitive. In relation to this bill, I strongly recommend it to the House. I welcome the opposition's support on this important measure. This will be good for Australia and good to work with our OECD friends to ensure that tax evasion is reduced.

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.

Ms PRICE (Durack) (16:52): I am very pleased to rise today to speak on the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. The Turnbull government is building an innovative and sustainable economy for a safe and secure Australia, and this bill is an important element of that. The bill implements three 2015-16 budget measures delivered by the former Treasurer, Joe Hockey: multinational anti-avoidance law, country-by-country reporting and new transfer pricing documentation standards, and stronger penalties to combat tax avoidance and profit shifting.

If there is one thing the people of Durack loathe it is unfairness, and I would like to note the comments by the member for Makin that perhaps we should be using words like 'thieves' and crooks'. I happen to agree with him, because, as we know, currently there are some multinationals operating in Australia who are not paying their fair share of tax, and I think 'thieves and crooks' is indeed a better description for them. These measures are part of a package of domestic measures announced in the 2015-16 budget to strengthen Australia's existing laws to ensure that active multinationals in Australia pay their fair share of tax. This bill is consistent with the government's, the Liberal Party's and my values of making a fairer tax system. With multinationals avoiding paying their fair share, it has created an unfair playing field for local businesses, who, unfortunately, lack the reach of these much larger organisations. Families and small businesses in Durack are therefore forced to shoulder more of the tax burden, which undermines confidence in the tax system. I personally would like to see tax rate cuts across the board, and I look forward to seeing recommendations from the tax white paper.

The bill we are debating will allow the Commissioner of Taxation to treat these large multinationals as though they have a taxable presence in Australia and make them subject to Australian law. It applies to large multinationals with annual global revenue of $1 billion or more. This bill is expected to claw in billions of tax dollars, and the Australian Taxation Office has about 30 companies in mind that it will target under this law once it is passed. We are targeting the largest multinationals not only because it is fair but because it is these companies that have the greatest opportunities to avoid tax through offshore activities and represent the highest risk to Australia's tax base.

This bill goes to the heart of a key Liberal core value, and that is strong financial management. Despite the iron ore price more than halving and the weakening of other international economies, Australia remains on a credible path to surplus. As a new government we inherited a $48 billion deficit, but the good news is that we are set to reduce this deficit by $10 billion this year. Directly as a result of our actions, gross debt in a decade will be $110 billion lower than what we inherited two years ago.

I would like to take this opportunity to congratulate the Minister for Trade, Andrew Robb, on negotiating Australia's participation in the Trans-Pacific Partnership Agreement. The TPP, as we call it, is the largest global trade deal in the past 20 years. It will improve Australian trade across 12 different nations which together make up 40 per cent of the global economy. It will be of enormous benefit to my electorate of Durack in many industries but particularly in the cattle industry. This will be on top of the free trade agreements Minister Robb has signed with Korea and Japan since coming to office.

Additionally, if we can get the Labor Party to drop the politics and follow the advice of former Labor icons such as Bob Hawke, Kevin Rudd and Martin Ferguson, the China free trade agreement will also be passed by the end of this year, growing the important industry of agriculture, as one example—an incredibly important industry in my electorate of Durack—by an estimated $300 million. It is these deals that have led the way to the creation of 12,500 new jobs in Durack since I was elected and, very pleasingly, over 335,000 new jobs throughout Australia since this government was elected to office back in September 2013.

As I said earlier, the people of Durack loathe unfairness. There are more than 13,000 hardworking small businesses in Durack. It is simply not fair: these hardworking local small businesses do the right thing and pay their fair share of tax, unlike the large multinationals that we are discussing today, which have enjoyed an unfair advantage.

I am particularly proud that Australia has led on this global issue. As president of the G20 last year, Australia led the way on the OECD's BEPS action plan to ensure that multinational entities pay the right amount of tax. Under our country's leadership the G20 delivered the first level of an action plan to address multinational tax avoidance. Following this work, this government announced a package of domestic measures in the 2015-16 budget.

I would like to take this opportunity to put on record and fully acknowledge Joe Hockey's work with this particular matter. Mr Hockey worked hard to ensure that these multinationals operating in Australia start, at last, to pay their fair share. Pleasingly, the Turnbull government is going beyond the OECD recommendations. We are planning a voluntary transparency code by May next year. This code will enhance public confidence in the tax system and the community's understanding of the tax affairs of large companies. I am pleased to say that this government is ensuring that the ATO has unprecedented resources to deal with international tax avoidance. We are providing an additional $87.6 million to the ATO over three years to investigate international tax avoidance.

To date it is estimated that the program will raise over $1 billion in total, and I am pleased to say that this is $1 billion that is going to help to start to pay down the debt we inherited from those on the other side. Under this bill, the government will prevent multinationals from using complex schemes to avoid paying tax in the country by booking their revenue overseas. The stronger penalties measure of the tax laws amendment will double the penalties applying to large companies that are engaging in tax avoidance or profit shifting. Businesses in Durack and indeed throughout Australia will not be impacted, but for those who are operating illegally: be aware; we are coming for you. And just remember, if you are not doing anything wrong, you will have nothing to fear from this new legislation.

The government has been working closely with the business community as well as tax professionals and academics for the last two years on the OECD's profit-shifting agenda. We have consulted with stakeholders, including business, practitioners and the ATO, to develop the legislation to ensure the law will not have unintended consequences.

To those opposite, I would be surprised if you do not support this bill as I know that you too would like to crack down on multinational tax avoidance case. Let's be clear: it is this government which has an effective policy for direct action in this area.

Only the Turnbull government can cut down on large foreign multinationals not paying tax in Australia. What we have heard today during this debate is that this bill will further minimise the tax burden, already decreased by this government, especially for the hardworking businesspeople of Durack and for the rest of Australia. It will end the unfair advantage that large multinationals, who are avoiding tax, have over local businesses and create a standard of fairness not seen when the others were in charge.

As I outlined earlier, we are targeting the largest multinationals, because it is these companies that have the greatest opportunities to avoid tax and represent the highest risk to Australia's tax base. This is a very fair piece of legislation, and I commend the bill to the House.

Mr PERRETT (Moreton) (17:01): I rise to speak on the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. Benjamin Franklin said:

In this world nothing can be said to certain, except death and taxes.

With medical advances, I think death can be deferred but it is still pretty certain; however, when we come to tax, it is not quite as certain as it was in Benjamin Franklin's day.

The way business is conducted has fundamentally changed. The way we consume products has fundamentally changed. We live in a global digital society where we purchase products that can be delivered to us in digital formats. There are no cassettes in my Sony Walkman when I go for a walk; instead it is an iPod where I can access music from around the world. It is much less certain today where those products, even songs, are made or where a company's transactions are taking place. Companies have been able to take advantage of the transient nature of modern corporate business ventures to structure their corporate affairs and shift profits to low-tax or no-tax regimes—and we heard a little bit about that last week in this place.

This is a very real problem for modern governments where nation states' boundaries are much blurrier than they were 100 or even 50 years ago. Three of the five biggest companies in the world today are making revenue from trading—not something tangible like a cassette but something that we cannot see and measure: they are trading their intellectual property. Previously, these companies would have been major contributors to their country's taxation system. In our global economy, those companies are now at liberty to transfer revenue from their Australian operations to an international subsidiary located in a low-tax jurisdiction—located being a term in inverted commas. Those low-tax jurisdictions have always been around—whether it is Switzerland, Luxemburg, the Bahamas or even the Cayman Islands—and this has implications for the Australian government.

The Australian Taxation Office has reported that, from the $300 billion a year in cross-border trade, over $150 billion is channelled to very low-tax jurisdictions. This is quite simply lost revenue for Australia. Our society operates by each of us contributing through the taxation system—paying the fair amount. It is how we pay for our roads, schools, justice system and other services. The state and Commonwealth governments spend about $150 billion on health budgets a year—the Commonwealth budget is about $65 billion, about 61 per cent. So think about that: that money could go into health, and think of the good it could do.

If these multinational companies are not contributing to our taxation system but shifting revenue to low-tax havens, then the rest of us—be it private individuals, small businesses or Australian registered corporations—have to pick up the slack. This is particularly important in 2015 as we are an ageing Australia. It is the first time ever that we have two generations in retirement. It is good that we have improvements in health and we are able to live healthier lives; however, it is obviously a challenge for a system such as the pension. When the pension was established, the life expectancy of a male was 62 and there were about seven workers for every person on the pension. That ratio is going down and down and down, and it will not be long before we have two or three workers per person on the pension. That has implications for us as a nation, if we want to be a nation that recognises a fair go and offers a helping hand for people in difficult times.

Most Australians live quite simply. They work or run a business in Australia and pay their fair share of tax. For the average Australian, it is about 21 per cent of their income. If they are a wealthier Australian, we have a tax system that means they pay more. If they are a small business, they pay about 30 per cent. Of course they might have write-offs and the like. Obviously, many small businesses do not make a profit so they do not have to pay the full 30 per cent.

If we were all able to shift our income to and arrange our tax affairs in low-tax havens, Australia, as we know it, would fall apart. Support in the nation would come to an end. There would be no money for our wonderful education system that recognises need, whether it is state or private schools. Our world-class Medicare—something that is the envy of the world—would fall apart. Our judicial system, where we provide access to justice for all, would come to a screaming halt. Other important social frameworks—such as child care, that make our wonderful society what it is; the glue that holds the Australian community together—would start to fall apart

The social contract we have as Australians is to contribute our fair share—that is what makes this country prosper. There are legitimate ways to minimise our taxation burden. A common deduction that most people from time to time claim is a charitable donation, and we are a generous nation when it comes to private individuals. It is sad to see that in the context of a coalition government that has slashed $11.3 billion from the budget at a time when we should be reaching out to the world. Instead, we have a foreign minister that has overseen that obscene slashing of our foreign aid budget.

But, as private individuals, Australians are always happy to put their hands in our pockets and help out our neighbours or people around the world or even domestically who need a helping hand. We saw that when the tsunami hit our neighbours back at the start of the last decade. I am sure many people here have put their hands in their pockets—and I know the member for Kingsford Smith has done to financially help the surf lifesavers—to help the Red Cross, Oxfam or Diabetes Australia. I am sure the member for Hasluck would have done the same to help the cause of diabetes. I know he is passionate about that. I have even seen it in my electorate with local groups setting up charities to help not only locals but people around the world who are experiencing hardship. There is a common good to the government forgoing some tax revenue and allowing people to give that money to worthwhile charities.

Often constituents come in and say they want to set up a charity or a local service organisation. One of the first things I always ask them is, 'Have you looked at what is available now? Is the service you intend to provide already being undertaken by an established charity?' If it is money that the government is forgoing, as in a tax deduction, then it is important that it is spent wisely. Otherwise, the money would be better spent by the government when it is collected as tax.

As politicians we need to be ever vigilant to the constantly changing techniques being utilised to minimise tax legally. I am not talking about criminal endeavours here. Where these techniques eventually become not in the national interest, measures should be taken to make sure they are made to be in the nation's interest, perhaps even to the extent where such techniques, arrangements or loopholes become illegal. If companies are utilising Australia's great laws and protections for their own prosperity, they should contribute their fair share. They are getting the benefits of the Australian system, so they should put in their fair share.

Evidence was presented before the Senate's corporate tax inquiry that one big multinational firm may have paid as little as two per cent tax on the billions of dollars of revenue it earned. That does not pass the pub test. It is just not fair. As I said, these multinational companies benefit from the protections, safety and services offered by Australia, so they should pay their fair share of tax, as individual Australians do and as Australian businesses do, be they small or medium or one of the larger companies that stride around the world.

For instance, these multinational companies are more likely to be utilising our judicial system than most ordinary Australians yet they are contributing very little to maintaining that judicial system which, at the moment, is struggling from a lack of resources. Australia cannot afford to let these very prosperous multinational corporations avoid paying their full share of taxation. Tax reform for multinational companies is vital to close the loopholes that currently exist that allow these companies to avoid tax. As I said, we are not talking about them doing something illegal—but we have to have a focus on the national interest.

Labor supports any measures that will close such loopholes and protect revenue from taxation that should be staying in Australia and benefiting Australians. Labor announced a $7.2 billion package of measures to prevent multinationals from avoiding tax by moving their profits offshore. That package was costed by the Parliamentary Budget Office. Sadly, the Abbott government rejected the measures proposed by Labor for what could only be short-sighted political reasons.

The measures contained in this bill, while welcomed as at least something, are untested. The government has no idea how much revenue these measures will save. In fact, in the budget papers there is only an asterisk. We saw the Treasurer floundering when asked this question today. Labor has taken a bipartisan approach to this important issue and will not stand in the way of these measures. It is important that these companies contribute as they should. It is also important that all measures necessary to ensure that multinational companies pay their fair share of taxation in this country be put in place.

More measures are needed to ensure that this occurs. The government needs to be serious about this issue and not tear down the measures put in place by the Australian Labor Party in 2013. Those measures required the Australian Taxation Office to publish details of the income and tax paid by companies earning more than $100 million. When it comes to taxation, transparency is important. Public companies are obliged under the Corporations Act to make sure shareholders know what is going on. Companies earning more than $100 million should be paying their fair share of tax in Australia. If they are not, surely Australians are entitled to know that. Australians are handing over their hard-earned, fully taxed dollars to these companies on the expectation that those companies will support our Australian economy by paying their fair share also.

These transparency measures apply to only about 2,000 companies in Australia. The government wants to reduce that number by about 800 companies. One has to wonder why these companies are so keen to keep their taxation expenditure secret. The government's argument is that private companies should not be held to the same level of accountability as publicly listed corporations. In fact, publicly listed corporations already have significant reporting requirements and the measures put in place by Labor evened the playing field between private companies and publicly listed corporations. If a private company is paying very little taxation, it should be called to account; it should explain why that is the case. There are sound public policy reasons for keeping these transparency measures in place.

We heard that ridiculous claim by the now minister for mining and then Assistant Treasurer Josh Frydenberg that there were real concerns about the implications of the publication of the tax data of private companies. In The Sydney Morning Herald article by the Nassim Khadem and Gareth Hutchins on 17 March he said:

… there were safety concerns because it made those individuals potential kidnap targets.

By this logic, the BRW Rich 200 list should be closed down in the interests of safety. The article goes on to make the point:

The decision to wind back the laws comes amid intense lobbying by business groups for the laws to be scrapped …

I cannot see how Mr Frydenberg could come to that conclusion. Transparency measures are important. The measures in this bill are welcomed. The measures Labor proposes in our $7.2 billion package of measures would go further to ensure that multinational companies are fully contributing to the economic wellbeing of Australia.

It is sign of a lazy government that has already run out of ideas when they take the easy road when it comes to taxation reform. We have seen a hiking up of the GST flagged by a couple of backbenchers opposite already. This is an unimaginative, simple solution that hits the poorest hardest. If the tax is broadened to fresh food, that would particularly attack communities that are struggling with their diet. You could not avoid such a hike unless you did not consume, and we cannot all sit around and grow our own vegetables. A rise in GST would hit low-income Australians, Australians who can least afford to pay more tax. Obviously we cannot structure our arrangements to send our finances off to Luxembourg, Switzerland, the Bahamas or even the Cayman Islands. Low-income Australians do not have many avenues to minimise their taxation burden. These measures are to be commended, but they need to go further.

Mr PASIN (Barker) (17:16): I rise today to speak on the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. This bill seeks to address the challenges and the increasingly globalised market created for sovereign taxation collection. It is often said—indeed, the member for Moreton said it himself—that two things in life are certain: death and taxes. But it is becoming increasingly clear that some multinational companies are effectively avoiding the latter.

Taxes are a fundamental prerequisite for effective governance. Without tax, governments cannot fulfil their roles. Taxes have been with us since ancient Egyptian times and were formalised under the Roman Empire. These taxes initially were raised to aid the state in arming various militias and armies in defence of the state. The Greek historian Herodotus claimed taxes in Egypt provided a better standard of living, based on overall health of the people, than most other civilizations he had seen. Documentation dating back the first dynasty in Egypt, between 3000 and 2800 BC, shows evidence that pharaohs appeared before the people to collect taxes. The royal tour, called the Following of Horus, made it clear that tax revenues were due to the Pharaoh as the head of the state. Unable to handle the process themselves, pharaohs appointed ministers called viziers who acted as tax supervisors. The viziers kept records of taxes collected and ensured that the needs for labour and grains were met.

'No taxation without representation' was the cry which unified the forefathers of our close ally the United States to seize their independence from the British. Tax, indeed, has quite a long and chequered history.

Tax avoidance is a problem that has confronted authorities since taxes were first imposed by authorities. In ancient Egypt, the Pharaoh had to send auditors to ensure that people were not seeking to avoid their tax on cooking oil. In modern times, it is essential that we, too, ensure that taxes are paid. The rapid globalisation of the world economy has delivered new mechanisms for those that wish to avoid their responsibilities. This is especially true of large multinational corporations who can leverage their size and multinational structure to manipulate profits and artificially minimise those tax liabilities.

Taxes have always been a mechanism to redistribute resources to fund the governance of a given nation, and taxes are often a reflection of the values of a community. I am in agreement with Herodotus that effective taxation coupled with responsible government delivers better outcomes for all citizens. An effective taxation system is, indeed, a fundamental requirement in the governance of any nation. It is, of course, a finite and precious resource. Indeed, in the coalition we understand our obligation to apply these finite resources wisely. Whilst this government is cutting back on unnecessary spending, we must also address the issue of multinational tax avoidance. This government treats this issue with the upmost seriousness, as each and every dollar that is forgone through tax avoidance is a missed opportunity. We are opening our markets through our free trade agreements with China, Korea and Japan, alongside the recently announced Trans-Pacific Partnership. Australia is firmly situated in an enviable global position. Part of ensuring that our businesses are not disadvantaged in this new and freer market is to police multinational tax avoidance.

The coalition is committed to lower and simpler taxes. Australians understand the importance of tax, and the vast majority of taxpayers pay their fair share. Australian taxes enable our comprehensive social welfare and healthcare systems. Australian taxes deliver capabilities which ensure our national security through our potent Defence Force and our profession national security community. It is Australian taxes that deliver our world-class education system through funding for the early childhood, primary, secondary and tertiary education sectors. It is Australian taxes which enable this government to unlock the potential of each and every Australian citizen.

Australians families pay their taxes, Australian farmers pay their taxes and Australian small businesses pay their taxes. It is only fair that we ask large multinational companies to pay their fair share. Currently, large corporations simply are not doing enough, and that is why we have taken measures in this bill to enhance the government's response to this important issue. Whilst there has been much rhetoric on this issue, especially from those opposite, we are taking the necessary action to deal with this issue. This bill delivers on our commitment to deal with this issue.

At this point I would like to reflect on the member for North Sydney and his time as Treasurer. He delivered a budget in 2014 and another in 2015 and he took a leading role in this space in the G20. I spoke in my maiden speech about political courage. I would like to acknowledge the political courage of the member for North Sydney in his time as Treasurer of this nation. We see some of the dividends of that courage in this bill and in the way that he has led the globe in addressing this issue of multinational tax avoidance.

Some multinationals are artificially structuring to avoid Australian tax by booking revenue from Australian sales offshore. This means they have an unfair advantage over local businesses, families and small businesses, who have to shoulder more of the tax burden, and it undermines confidence in our overall tax system. We are committed to ensuring Australia has a fair and sustainable taxation system. That requires a steady, constant and consistent approach. Whilst we have delivered lower taxes for Australians, we must also ensure consistency in the manner in which businesses are taxed. The current system benefits big business and ultimately hurts the Australian taxpayer.

This bill implements three 2015 budget measures to level the playing field and ensure multinationals pay their fair share of tax: the multinational anti-avoidance law, to encourage entities to book their revenue in Australia when they have significant sales activity here; stronger penalties to combat tax avoidance and profit shifting, to deter taxpayers from taking aggressive tax positions; and country-by-country reporting and new transfer-pricing documentation standards, to give the Australian Taxation Office a greater ability to assess transfer-pricing risks. These measures will apply to large multinationals with annual global revenue of $1 billion or more. It is these large multinational companies that represent the highest risk to the Australian tax base.

If we do not take the action required and deliver the measures in the bill, we are missing an opportunity and letting down our citizens most grievously. This bill is utterly consistent with the government's commitment to levelling the playing field for small business. These actions will strengthen Australia's taxation system, but further effort is still required. We acknowledge that there is more work to be done in this space and we are working towards innovative and effective tax reform. Yet it is absolutely evident that we must take measures to combat multinational tax avoidance.

The multinational anti-avoidance law will allow the Commissioner of Taxation to treat these large multinationals as though they have a taxable presence in Australia and subject them to Australian tax. The package implements a new multinational anti-avoidance law from 1 January 2016, to stop multinationals artificially avoiding a taxable presence in Australia. This bill delivers on our 2015 budget commitment to target major entities with Australian activities who avoid booking profits in Australia. Whilst we made this undertaking in the budget, this bill, introduced on Wednesday, 16 September 2015, is an even stronger piece of legislation. This should highlight the government's resolve in ensuring tax is correctly calculated and paid.

The multinational anti-avoidance law will be broadened so all 'significant global entities' with revenues above $1 billion will be included. That is over 1,000 companies that will need to consider these rules. This means that, if you are structuring with a 'principal purpose' of avoiding Australian tax, the Australian tax office will have the tools to catch you and ensure that you pay your fair share. By removing the 'no or low' tax requirement and relying solely on a 'principal purpose' test, we are sending a clear message that it is not acceptable to deliberately and artificially avoid paying Australian taxes. Removing the 'no or low' requirement will also provide additional certainty and minimise disputes around whether a company operates in a 'no or low' tax jurisdiction where it is clearly structured for the purpose of avoiding tax. The new law targets the specific behaviour of around 30 companies that are believed to be artificially booking revenue in 'no or low' tax jurisdictions and avoiding Australian and foreign taxation. These companies are undertaking significant work in Australia, selling to Australians but using contrived structures to book revenue overseas and avoid paying Australian taxes. It is simply wrong for those companies to take advantage of the stability and affluence of the Australian market without paying their fair share of tax.

There is a strong moral and economic imperative to paying adequate taxation. Taxation fundamentally enables this government's capacity to govern this nation, further facilitating the prosperity of this nation. Without adequate tax revenue, government cannot govern and prosperity will be negatively influenced. It is crucial that multinationals pay their fair share. This bill and the measures within it complement the existing general anti-avoidance rule by clarifying that the specific arrangements used by multinationals selling into Australia are considered to be tax avoidance and will make it easier for the ATO to establish a case by catching arrangements that are designed to obtain both Australian and foreign tax benefits, and lowering the purpose test from 'sole or dominant purpose' to 'one of the principal purposes', making it easier to apply. This effectively delivers a better outcome for the taxpayer. This measure will allow the Commissioner of Taxation to treat these large multinationals as though they have a taxable presence in Australia and are subject to Australian tax. Multinationals will now be required to pay tax on profits from Australian activities. The legislation will also protect Australia's tax base by acting as a deterrent to companies from engaging in complex schemes.

The coalition understand the importance of responsibility. We understand the importance of delivering adequate and proportional penalties across the legislative space. The status quo is simply not good enough when it comes to large multinational companies and tax compliance. The government has taken a hard but necessary stance in strengthening penalties. It is a stance completely consistent with our values. Consistent with the government's position on tax avoidance, this bill doubles the maximum administrative penalties that can be applied by the Commissioner of Taxation to large companies that enter into tax avoidance and profit-shifting schemes. We take tax avoidance seriously and we know that these penalties will deter multinationals from entering into contrived tax avoidance and profit-shifting schemes. Deterrence is recognised as a key element in the fight against tax avoidance behaviour. It is crucial that we impose significant costs on doing the wrong thing. Currently, doing the wrong thing delivers a financial benefit to big business. It is through measures such as strengthening and doubling the penalties that we shift the cost-benefit analysis and change the status quo. Multinationals have dedicated resources for tax minimisation, greater opportunities to avoid tax through offshore activities and larger potential gains to be made if they are successful in avoiding tax. Stronger penalties are required to help deter major taxpayers from taking aggressive tax positions.

As always, this government is not seeking to punish those doing the right thing. Companies that are not engaging in illegal tax avoidance will not be affected. This government is not looking to punish those who have sought to do the right thing and obtain professional advice that can be considered reasonable. This government is committed to a safe, secure and prosperous Australia. This bill delivers on that commitment. Through claiming forgone revenue we strengthen our revenue base and secure it against disruption caused by the globalised economy. This bill levels the playing field and ensures that big business multinational companies are paying their fair share. This bill takes steps toward bringing our tax system into the 21st century.

Ms CHESTERS (Bendigo) (17:30): I note the words of Dave Arthur, a security guard from Melbourne who came to parliament not that long ago to talk about this very issue. He and his union, United Voice, were talking about the issue because the government at the time were not. They commissioned the report Who Pays for Our Common Wealth? Tax Practices of the ASX 200 into what is going on with the top 200 companies in Australia. Dave's words feature in the report and are something many in this place would agree with, yet it has taken the government over two years to act. He said:

Australian people aren't stupid. If you show them the facts and figures, that we’re losing so much money because of loopholes in the tax system … I think the Australian people will come around. We’re not after jet planes for ourselves; we’re not after penthouses or anything like that. All we’re asking for is the money that rightfully should go to the government that can be then spent on the community.

Dave Arthur is earning just above the minimum wage as a security officer in Melbourne. He, like other hardworking people of Australia, particularly those who are paying their fair share of tax and are on small to medium incomes, agree that it is time we had action on this issue.

This report that Dave helped write, through the comments he made and through the work of United Voice, exposed this issue. It is great to see that the government has caught up with United Voice and its members and I congratulate Dave and others for speaking out. I know it is not common for a union to speak out about tax avoidance. It is great that they have caught the attention of this government and that the government is now taking their concerns seriously.

The report's executive summary highlights 200 of Australia's largest listed companies on the ASX and what they are currently paying compared to what average Australians are paying. It shows that some of the multinationals, such as Apple and Google, are paying less of a percentage in tax than some United Voice members pay. It found that cleaners of Westfield's shopping centres pay more in income tax, as a percentage of their income, than Westfield itself pays the government in tax. This is a demonstration of the loopholes in our system. If anybody has met Westfield's cleaners, including cleaners of the Westfield Doncaster shopping centre, you would know they work very hard, happy to pay their fair share of tax. But, as they highlight in this report, it is about time Westfield also paid its fair share of tax.

The Australian budget is more dependent on corporate tax than other OECD countries. In fact, it is the second most dependent after Norway. After personal income tax, company tax is the second largest source of federal government revenue in Australia. Tackling corporate tax avoidance is an urgent priority; Australia does not have a spending problem, it has a revenue problem and it must be fixed. That is why the report commissioned by the union—and reports since—highlight how much, in the way of revenue, this country is missing out on. It is because we have not tackled this critical area of tax reform.

The report found that approximately $8.4 billion in corporate tax is being avoided, every single year, because of loopholes that have not been closed. Other key findings include: nearly one-third have an average ETR of 10 per cent or less; 57 per cent of the disclosures have been subsidiaries in secrecy jurisdictions; a combination of 1,075 disclosed subsidiaries registered in secrecy jurisdictions; and 60 per cent reported debit levels exceeded 75 per cent of equity, suggesting that the higher levels of debt may be artificial to lower taxable profits. This report was done to highlight the loopholes and what is going on with the top 200 Australian listed companies.

Let us talk about some of the case studies on who is avoiding paying their fair share of tax. Apple paid just over $80 million in Australian tax, in 2013-14, despite earning local revenue of over $6 billion. By comparison, the Australian retailer Harvey Norman paid $89 million in tax compared to $1.5 billion in revenue. That is the problem we have. Harvey Norman pays more tax than Apple despite the fact that their revenue is very different.

James Hardie, a construction firm:

… operates at a net taxable loss in Australia despite average annual profits of over $200 million. In the past two years the company has paid out almost $600 million in dividends to its shareholders, and its CEO is currently paid over $12 million. It operates at a loss because it claims tax deductions on annual payments to the compensation fund for victims of its asbestos products.

Let's just reiterate how this company is avoiding paying its fair share to the Commonwealth: it operates at a loss, because it claims tax deductions on annual payments for the compensation of victims of its asbestos products. Is that fair? Many in Australia, including good, hardworking people like Dave Arthur would argue that it is not. Let's just go back to the beginning of that case study as well. It is paying $600 million in dividends to shareholders and it is currently paying its CEO $12 million, yet it is operating at a net taxable loss. The only people not getting their fair share from the profits of James Hardie are the Australian taxpayers—the Australian people—and therefore this government

Case study No. 3, Glencore:

A 2014 Fairfax Media investigation alleged the mining giant had paid no tax in Australia over the past three years despite earning revenue of $15 billion, by using a complex series of intra-company loans. Glencore disputed this account by claiming that it had, in fact, paid $400 million in tax on this revenue.

So who is right? Yes, there needs to be transparency, we need to make sure that we can investigate this and we need to expose what is going on within these multinationals. These multinationals have a lot of incentives to lower their tax bill and have the resources available to them to investigate the best way to do it. This is why the role of government is so critical when it comes to tax reform. It is up to the government to set the rules and to make the rules as tight as they can so that companies who have the resources cannot avoid paying their fair share of tax in this country.

Some of the recommendations in the United Voice report that I first mentioned include:

Greater transparency on the purpose and function of subsidiaries in secrecy jurisdictions.

We need to know how much money exists and how much money is being hidden so that we can know how much is the fair share that they should be paying. Another recommendation that I support is:

Voluntary reporting of revenue, profits, staff levels and taxes paid in each jurisdiction until such a measure is implemented by law…

They are calling on people to do it until we set the laws in this place. They say:

Some companies, particularly in the mining sector, have already taken steps towards increasing disclosure.

But not all of them will and they only will if we make them. That is the role of government. They say we need to ensure that companies are:

Avoiding setting up subsidiaries in secrecy jurisdictions.

Again, these are tax dollars that the Australian people and taxpayers should be getting.

Remembering back to the early days—and I know this government loves to harp on about the mining tax—the core principles of the mining tax were because Australian people were saying, 'We aren't getting our fair share of our resources. Where's our fair share of our resources?' This sits with the Australian people to say it is not fair. This is another way that we are trying to make these big mining companies pay their fair share of tax. For anybody that you bump into in a regional area, it sits with them and it annoys them that they are paying their fair taxes—and they have the ATO constantly offering to do audits, helping them, and they are the ones having to pay their tax—yet we have big multinationals that are not paying their fair share.

Taken together, the four schedules that have been proposed in this legislation before us today do make some progress towards combating multinational tax avoidance; however, they do not deal with the issue of debit deductions, which is the primary focus of Labor's multinational tax package. This bill focuses on companies that artificially avoid booking revenue in Australia so that they do not have to pay tax on their profits. That is an important issue to tackle and we hope this bill will force companies to restructure their operations so that profits made here stay here. That is a critical thing that Australian people want to see: profits made here must stay here so that our government can then use those resources to help fund our schools, to help fund our hospitals and to help build the infrastructure that this country needs.

This bill, however, does nothing to stop companies from using debit reductions to send money offshore, whereas Labor's proposal does. It goes to the heart of what Dave Arthur and the United Voice report were calling for. Companies can easily transfer money between their subsidiaries to dress it up as a loan even though it is just transferring money from one pocket to the other. This is where the government's bill fails; it fails to tackle these issues. If the government was serious about this issue and if they supported the Labor proposal that we put forward, then in essence there would be an extra $7.2 billion that would come into the revenue for this country and for this Commonwealth that could be spent on government programs.

If this government was committed to ensuring that major corporations paid their fair share of tax, then what they would do is make sure that they move on transparency and that they introduce better transparency rules into the legislation that is before us—yet we have not seen real action on this issue. If the government was serious about making sure that they would get the fairest share for Australians, then they would adopt Labor's package, which would see an extra $7.2 billion coming in for our government.

This is an important issue. I would like to commend the work of people like Dave Arthur, a security officer, who stood up, raised this issue and got this parliament talking about the importance of making sure that multinationals pay their fair share of tax. Ordinary working people like Dave Arthur expect this government to have robust and rigid tax laws in this country to make sure that everybody pays their fair share. It is how we ensure that our country does not continue to have a revenue problem.

I know this government likes to talk up having a spending problem, but the fact remains that it is actually a revenue problem. By taking real and serious action on multinational tax, making them pay their fair share, we can start to address some of those tax loopholes that exist. Just because a company has the means to know how to avoid tax does not mean they should get away with it. It is up to all of us in this room to make sure that the legislation before the House is not just window-dressing, that it is not just to silence people like Dave Arthur and all the other constituents concerned about this issue. If the government is serious about real tax reform it will vote up the amendment that has been moved today to make sure this legislation will address the real issue that we have in this country—a revenue issue—and to make sure that all companies, multinational or local, pay their fair share in tax.

Mr SUKKAR (Deakin) (17:45): I listened intently to the member for Bendigo's contribution to the debate on the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. I think if I had a dollar for every time she said 'fair share' and I donated it to the ATO, we actually would not have a revenue problem anymore. That was the incessant cry from that side of the chamber.

I am not going to go through in detail, like every speaker previous to me, the specific provisions in this bill. I want to speak a bit more broadly. Tackling tax avoidance, however it is formed, has been a role for government since time immemorial, and it will continue to be. Like any tax law, there will be taxpayers who try to find the most advantageous way to interpret or to structure their affairs within those rules. There will also be cases where taxpayers deliberately contrive arrangements to get around those rules. That is ultimately what we are talking about here when discussing combating multinational tax avoidance.

The Labor Party have all of a sudden discovered tax avoidance because it enables them to address one major problem. They have no savings measures, they have not released the costings on their so-called changes to multinational tax avoidance, and they can pluck this $7 billion figure out of the air and it fixes a few other issues for them. While in government, the Labor Party never spoke about multinational tax avoidance, even though our tax base was being eroded by an ever-changing economy. All of a sudden, in opposition, they discovered multinational tax avoidance. But for six years we saw nothing from them.

Inevitably our economy has moved from the old anvil industries of manufacturing. We still have good advanced manufacturing in this country. But, increasingly, our economy will be based on high-tech R&D, intellectual property. That poses a major problem for our tax system. A hundred years ago when we were manufacturing widgets, they may have been manufactured in one country and sold in another. It was very easy to ascribe the profit margin to a particular item, because it was manufactured in one country and it was marketed and sold in another. It was relatively simple. What are the inputs that go into the manufacture? What is the skill, the time and effort that goes into the manufacture? Whatever we ascribe to that, that is the profit attributable to that jurisdiction. What is the profit attributable to the jurisdiction in which that particular item is sold, where it is marketed, where the contractual arrangements are entered into? What are the profits we ascribe to that part? It was always in some senses a difficult task for governments, but the laws were in pretty good shape in determining what profit we would attribute to one jurisdiction and what profit we would attribute to the other.

That changes and becomes a lot more difficult when we involve multiple jurisdictions that may have many tens of inputs that come into one final product and, more importantly, where the inherent value in that product is not in the physical product itself. The member for Bendigo mentioned Apple and Google. Nearly all of us have an iPhone. We pay a fortune for them; they are expensive but they are extraordinarily valuable, and that is why we buy them. The cost attributable to the physical material of that phone is only a miniscule proportion of its actual cost, because the value of that phone is in its intellectual property in its components—how it works, the amount of time and value that people put in to developing that technology. That is where it becomes a lot more difficult for our tax system. Where do we attribute that value? Therefore, which jurisdiction has a right to claim that taxable amount?

While that was increasingly occurring when the former Labor government were in office, they did absolutely nothing and said nothing, but then, in opposition, they had a conversion on the road to Damascus. All of a sudden we hear them carping about combating multinational tax avoidance. If combating multinational tax avoidance were just the low-hanging fruit that the Labor Party suggests it is, every Western jurisdiction and First World economy would not be having this problem. It is extraordinarily difficult. That is why I commend the former Treasurer for his work with the G20—because one jurisdiction on its own cannot and should not purport to be able to fix this problem. Inevitably, we have to work with comparable jurisdictions to ensure that there is not anywhere that these multinationals, who operate across many, many jurisdictions, can hide or shelter income inappropriately.

There are inherent incentives for any economy—and we saw it in the last decade or so—to attract investment by trying to put in place extraordinarily attractive tax rates or extraordinarily attractive tax incentives. Whenever you have that inevitable contest between countries, there will be corporates, multinationals, that seek to get the best outcome. What we are doing through this legislation is attacking those companies that contrive structures purely for the tax advantage.

If, for example, you are a multinational company that operates in 100 jurisdictions—and it makes sense for you to do so because of your particular industry, for the particular service or product you are providing—it might make complete sense for you to be in Timbuktu or you name it and you will not be attacked by these rules. But what we will get to are the contrived arrangements, with companies trying to utilise double-tax treaties for their own advantage. That is when it gets really tough, because the reality is that historically we have had competition between jurisdictions. For every extra dollar that the Australian Taxation Office laid claim to, that was one dollar less that another jurisdiction got. So there was inevitable tension between nations.

But it is not a zero sum game. Unfortunately, what has happened in recent years is that income has been sheltered from both jurisdictions. Take the case of arrangements with, say, a US multinational that sells products into Australia. They might contrive a structure by utilising European tax treaties, which means that not only does Australia not get the tax that should be attributable to the profits but the US does not either. So we actually now have a real incentive. That is why I commend the former Treasurer for really leading the charge at the G20 to bring these first-world economies with robust tax systems together to actually try to address these issues.

Let us remember that we do have an extraordinarily robust tax system. But, as I said at the beginning of my contribution, tax laws are not set and forget. The minute you come up with one law there will be a creative way to structure your investment differently, to get a different tax outcome for that taxpayer. So governments must be nimble.

Today is not the end of it. Last year we did a great job in reducing the debt that was allowable under the thin capitalisation rules. That was one piece of the puzzle. Today we are debating this bill—and I am glad that we have bipartisan support—which has a range of measures to combat multinational tax avoidance. These will not be the panacea at all. It would be disingenuous for anyone to say that they would be. But I am very confident that these rules will have a material impact, most importantly, on the future behaviour of multinationals that have income over $1 billion and that are operating in, in many cases, in tens of jurisdictions.

Again, I say that I am very pleased that Labor has had the conversion on the road to Damascus. It is now supporting this legislation, although if I were a person in the gallery listening to the contributions from those in Labor, I would walk out of parliament and say, 'I'm sure they must be voting against that legislation. I'm sure they must be voting against it because I just heard 15 minutes from the member for Bendigo about how little we've done and how disappointed she is with this so-called inaction.'

Well, she might want to look at what was done for six years under the Labor Party. Our tax system and our tax base were being eroded and they were asleep at the wheel. It is very easy to discover these problems in opposition. I am very proud to be part of a government that is actually trying to address these things in a methodical and sensible way. Let's remember why we have to be methodical, consultative and sensible—it is not just for the relationships with our trading partners. In some cases, as I said, every extra dollar of tax that we put our hands on means a dollar less for someone else. But we do not want to discourage investment in this country. We want people to invest by the rules.

I say to some people in the community that, as PAYG taxpayers, we do not have the ability to structure our affairs or to reduce our tax. We get our paltry tax deductions each year on various little bibs and bobs, but by and large we do not have those opportunities, and nor should any multinational. But it is a bit like grasping sand at the beach—the tighter you hold it, the more it slips through your fingers. And so we have to be very careful here that we structure arrangements in a way where multinational companies will have certainty in their investments and, provided they have not entered into those contrived arrangements, that their structures and their investments in this country will be respected.

As I said earlier, let's remember that in a world where increasingly our wealth will be embodied in intellectual property and investment in research and development—not in hard commodities, like they were 100 years ago—it is more difficult for any jurisdiction to actually point to the point in the chain of what value is attributable to that, like in the example of the iPhone that I used earlier. In Australia we import the iPhones; they go into an iPhone store—that is where I bought mine—and they are sold for a few hundred dollars. What part of that profit is attributable to Australia? Should more be attributable here because this is where the purchase is made? Or should more be attributable to the jurisdiction which had the hundreds of highly-skilled people working for Apple to come up with all the component pieces of the iPhone? I am talking about the software here.

In my view, that is where the value is embodied in an iPhone. It is not the physical plastic or the physical metal; it is not the components on the inside. It is a bit of a lump of plastic and metal, if you ask me. But its value is in the intellectual property. That is why these rules are so important. It is so much more complex in the way that we need to do that.

But we have to strike the right balance. For years Australian taxpayers have been struggling under the weight of transfer-pricing documentation. I would not want to see any proposals put into this parliament that increased those requirements. In many cases—and I saw it in practice—it was an exercise done to tick a box with the ATO rather than trying to achieve a substantive outcome. I think, having read through this bill, that it will strike that balance.

I also think the country-by-country reporting is important as well, and I think anything that adds more accountability to these large companies will hopefully mean that they do stick to those sensible investments, to structures that make sense rather than the contrived arrangements that this legislation is trying to attack. We do not want to see companies structuring their investments into Australia in such a way as to get a benefit from either our tax system or, quite frankly, the tax systems of our trading partners. Unfortunately, if that happens, it will only end up being a race to the bottom. I congratulate the former Treasurer and the current Treasurer on this bill and I commend it to the House.

Ms RYAN (Lalor—Opposition Whip) (18:00): Those of us on this side obviously support the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. The bill was motivated by information that suggested that multinational companies worth billions of dollars were operating in this country—trading, selling, making a profit—but not paying their fair share of tax. Like most Australians, I was surprised to learn that this could be the case. This issue arose at a difficult time for the government, in the wash-up of its 2014 budget—at the height of the debate about that first budget. That budget was focused on cutting spending, with lots of rhetoric about cutting spending to pay down the debt and deficit and then, lo and behold, it is exposed by journalists that we have multinational companies in this country not paying their fair share. Like all pay all PAYG taxpayers, I was appalled. The debate quickly moved from spending and most Australians started to look to a review of revenue—to the revenue side of the country's balance sheet, if you like.

The time of the national debate following the 2014 budget was an interesting time because it brought our attention sharply to spending and what revenue we should count on. We had a government that was telling us that there was debt and deficit after they had doubled the deficit, and they have now become the highest taxing government since John Howard was Prime Minister. This exposure of the fact that multinationals were not paying their fair share in this country really did sharpen that debate, and the brouhaha caused by the multinational tax avoidance practices has left many Australians very interested in the international tax system—much more interested than they would have been in the past. It falls to this chamber to ensure that transparency in taxation is what the Australian public gets every time we debate taxation. The question of who is paying their fair share is left simmering in the minds of the public. The situation was not helped by the case studies that came out of the Senate inquiry, with the Lux leaks—documents released in 2014 showed that over 300 firms had been involved in routing money through Luxembourg and other low-tax jurisdictions to minimise their Australian tax bills. Firms named in media reports included AMP, Macquarie Group and Lend Lease. The amount of tax avoided through these schemes potentially reaches into billions of dollars.

This raises the question of transparency. This government has just passed legislation to limit transparency around millionaires and the details of the tax they are paying. I want to speak on this bill today because I want to speak for the people of Lalor; I want to represent them here by saying that what they want is transparency. They want to know when companies are not paying appropriate tax. The only thing the man in the street can do about it is hear the name of that company and determine that they do not want to do business with them. It is important that through this process, through the Senate inquiry, we have heard some of those names—and some of those names are household names, as I have just said. There are discussions about iPhones and which piece of them should be paid tax on in this country. The people of Lalor believe that Australia is more than a marketplace for big business—they believe it is a community. Of course every one of us who pays tax knows that we are making a contribution not just to the country but to the community. At the very core, Australians believe that everybody should pay their fair share.

Australians also understand that the tax they pay, whether it be personal tax or company tax, should go to running the country—that our taxes pay for our roads, rail and other transport, for schools, for the justice system that we rely upon, for the public service, for defence and for the universities that train our next generation. Our taxes pay for infrastructure like the NBN, and the simplest test that most Australians would apply to the question of multinationals making a contribution in this country is pretty simple—do these companies utilise these nationally-provided systems?

If we go through them, of course they do. Do they utilise our roads, our rail, our transport systems? Of course they do. Do they get value from our school system? Of course they do. If they are employing Australians, then they are relying on that school system to deliver them quality students who become quality workers. Do they rely on the justice system? Most definitely. If multinationals have an issue, they have redress through our court system. In fact, many people would argue they make better use of it than most of the Australian citizenry. Do they make use of the Public Service? Of course they do. Do they make use of our universities? Of course they do.

All of the things that our taxes go towards paying for, the multinationals have access to and make use of, so it is absolutely reasonable that they be expected to pay their fair share for doing business in this country. I do not think there is one person in Australia who does not believe that should be the case. So, in terms of this piece of legislation and what it might do to ensure that, obviously this side supports it. But, in the spirit of that same bipartisanship, we would ask that those opposite take into consideration the measures that we have put forward in our policy to stop multinational tax avoidance, and introduce legislation that would ensure those loopholes are closed.

In Australia, the average taxpayer, the average wage earner, pays tax to the tune of 21 per cent of their income, and small businesses pay 30 per cent in corporate tax. It is absolutely unreasonable that, by comparison, multinational corporations, through the way they have been able to use both the tax system in Australia and tax systems in other countries, have paid less than that. In fact, the Senate Economics References Committee's recent inquiry into corporate tax avoidance heard evidence that one big multinational firm may have paid as little as two per cent tax on billions of dollars in revenue. If the average Australian wage earner paid tax at that rate instead of at the standard 21 per cent, they would be paying almost $15,000 a year less. So it is perfectly reasonable that we ask those multinationals to pay their fair share in this country. Without strong action to tackle multinational profit-shifting and corporate tax avoidance, Australia will continue to lose millions or even billions of dollars in forgone tax revenue. With government debt continuing to rise under the coalition, we cannot afford to let tax revenue drain away offshore.

That brings us back to this chamber, where we hear day in, day out about spending from a government that has demonstrated for the last two years that it is prepared to break the social compact with the Australian public and to punish the disadvantaged, and suggests that all the issues with our national accounts come down to spending, when clearly here we can see that there are revenue issues. We see a government that is prepared to do some things to change that balance but not enough to come to a bipartisan agreement with Labor in terms of the introduction of our policy.

Labor are taking forward a positive policy on multinational tax avoidance and we are asking for a bipartisan approach to this important issue, and it is in that spirit that the government should adopt our $7.2 billion tax package and tackle all the loopholes that let companies send their profits offshore. This is a reasonable thing to ask—a very reasonable thing to ask. We also note that it is costed, at $7.2 billion, while those opposite are bringing in this legislation and the budget papers indicate what it will save or what it will accrue with a few asterisks. Today in question time the Treasurer said that it is hundreds of millions of dollars. I take little comfort in a Treasurer who talks in terms of hundreds of millions of dollars rather than a specific figure while we are actually debating this legislation in the parliament. So I was aghast in question time today, after the question was asked, that we did not get an answer that provided a clear costing.

Nonetheless, we will support this legislation. We will support this multinational tax avoidance bill through the parliament because we believe tackling tax avoidance and protecting Australia's revenue base should be above politics. We are disappointed that the $7.2 billion multinational tax avoidance plan that we have as policy has not been adopted, but we are hopeful that, rather than have Australians taken for mugs, the government will come on board and implement that as well.

I finish by saying that the question of transparency is at the heart of this for the Australian people. We should not be relying on journalists to determine where we have missed picking up revenue from multinational companies doing business in this country. This government should act to ensure transparency around tax arrangements so that Australians can feel confident that, when they hear about spending, they have a government that is equally committed to ensuring the revenue streams that Australians are entitled to.

It is critical that this legislation be passed quickly and acted upon quickly, and I would also suggest it is critical that those changes be monitored. As we have heard throughout today's debate, tax is complex—earlier, someone likened it to shifting sands or trying to hold sand in your hand—so it is important that the Australian Taxation Office remain nimble and alert, and watch the way the tax system is used by multinationals, so that we can continue to change the laws as required and ensure that revenue stream for Australians.

I make one further comment, which is that, if those opposite argue that for six years the Labor government did nothing to stop this occurring, it belies their own assessment that these things occur because multinational corporations are changing so quickly because the way our markets work is changing so quickly.

It is important that we work together in a bipartisan way so that we remain agile and so that the tax office is given the appropriate resourcing to ensure that it is delivering to the Australian public all tax revenue that is due to this country.

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.

Mr CHAMPION (Wakefield) (18:23): Deputy Speaker Kelly, I heard your contribution on this debate earlier on. I will resist the temptation to reflect on it. I would not want to anger the Deputy Speaker in any way. It is interesting that we are talking about these matters. I got married in Gibraltar about a year ago, and Gibraltar is a very, very lovely place.

Government members interjecting—

Mr CHAMPION: It is a wonderful place to go to. It was, of course, a noted military base during the Second World War, as I know the member for Batman would be very, very interested to hear. My honourable friend opposite, the member for Riverina, says that Fiona was a very lucky woman to marry me there in Gibraltar.

The interesting thing about Gibraltar is that it has been accused of being a tax haven, and one of the election policies that the Labour Party in Britain had was to force Britain's overseas territories, such as Gibraltar, to declare, for transparency purposes, all of the companies that are listed there as shell companies for taxation purposes. It is interesting that a place as lovely as Gibraltar—and I cannot recommend it enough both as a place to get married and also a place to visit—

Mr Feeney: I think that Spain wants it back.

Mr CHAMPION: With all due respect to my Spanish friends, as the member for Batman helps me out there—but it is a really wonderful place but a place where there is this tax haven issue. I guess that that is why this bill is before the House and the opposition's amendment is before the House. When we were in government, we were pretty much the only people talking about this. I remember the Assistant Treasurer—the former member for Lindsay, out Penrith way—David Bradbury, being really a lone voice, in many ways, taking on this issue and talking about it. His work goes on, as he is now working with the OECD.

We know that workers, on average, pay about 21 per cent tax; we know that small businesses pay around 30 per cent tax. All of the workers and the small businesses that I meet in my electorate want to do their fair share, because they live and work in the community. Often they do more than their fair share. They go out and do civic works. Many small businesses donate their time and money to good causes in the electorate. You see these Australians wanting to give back to the local schools and to the local hospitals to make sure that this is a strong country. I do not think that it is unreasonable to expect that those multinational companies, whether they be Australian or internationally based, do the same thing—that they do not just pay what they miserly reduce out of the system, but that they pay their fair share. There have been many, many examples given. Apple has been a notable example. They have $6 billion worth of revenue, and they are paying $40 million of tax or something like that—about the same amount as Harvey Norman. You think to yourself that that clearly does not make sense, and you know that there is something wrong when that can occur.

During the mining tax debate—we have had that debate many times in this chamber, so I will not till salted ground—we had mining companies out there, through the Minerals Council of Australia, bragging about the contribution that they make in terms of taxation, yet we find that they are often engaging in taxation arrangements that would make you blush. The reason why they have been so aggrieved, behind the scenes, about the economics committee of the other place, led ably by Senator Dastyari, and the reason why there are so many complaints about the good senator is that he is doing a good job. He is revealing to Australians some of the egregious practices that have been going on for decades.

We only have to look to James Hardie to know that that is true. There was a company that made a terribly toxic product, the consequences of which we are seeing even today and which we will go on seeing for years. I think what happened with asbestos is a matter of bipartisan condemnation. Of course, what happened with James Hardie is that they went to the Netherlands seeking not just to evade their liabilities but also to find a more allowable taxation culture. To give you the extent of the problem, the Taxation Office thinks that about half of the $300 billion a year that is transferred in and out of the country—some $115 billion—might be subject to these arrangements. So you can see an extraordinary amount of money sloshing through an economy that is internationalised, and we want it to be internationalised. We want these companies to come here and we want them to make a profit, but we also want them to pay their fair share of tax.

The government has done some good things in this bill. I think my predecessor in this debate has talked about, and probably the member for Hindmarsh, who follows me, will talk about the descriptions of the measures in the bill, the significant global entity provisions aimed at some of these big entities and the multinational avoidance law allowing the taxation office to see through complex taxation arrangements that are set up as a shell game—pea and thimble trick—in order to reduce taxation. The penalties are doubled, which is a good thing, and country-by-country reporting of course is a critical part of the OECD's action plan on base erosion and profit shifting. We think they are useful things to do so we are supporting the bill.

But we also want the government to adopt Labor's plan to raise about $7 billion worth of taxation off of multinationals to close down some of the loopholes around interest deduction. We all know that, with the intangible nature of the digital economy, payments between Australian subsidiaries and the international parent company have been allowed to grow exponentially and unreasonably because of the values associated with licensing, intellectual property and the like. We want them to do a very simple thing—that is, come to the table. We are supporting them; they could support us. The Australian taxpayer and the Australian community would be the victor. They would be the ones to get better schools, better hospitals. Of course every dollar not paid by a multinational—and we only want them to pay their fair share—is a dollar less that the average pay-as-you-earn taxpayer has to pay or the small business has to pay or it is one more brick in a school or hospital that we want to see.

To conclude—I will not delay the House's time any longer—we want to visit places like Gibraltar and, I guess, Ugland House, if you are tempted to go there, in the Cayman Islands because of their intrinsic beauty and maybe their lax marriage laws—I do not know; Gibraltar is a great price to elope to. As I said before, I recommend it to anyone. We want them renowned for their marriage laws and not for being tax havens. Again, we want these places not to be famous for being the recipients of all of this money sloshing around the world. We want that money to work as it normally would.. It is important that companies make profits but it is also important that companies pay a fair share of tax office off of that, not just simply for this country but for every country around the world, so that we can progress the cause of humanity.

Mr WILLIAMS (Hindmarsh) (18:33): Before the member for Wakefield disappears, I look forward to the ongoing dialogue he has with the officials of Gibraltar. I will be most interested in how that relationship goes and I am sure they will appreciate his promotion of their fine part of the world.

We are here today to discuss and debate the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. We are committed to making sure that multinationals pay their fair share of tax. We are committed to ensuring Australia has a sustainable taxation system in particular. We already have some of the strongest integrity rules in the world but we know that some multinationals are artificially structuring their operations to avoid Australian tax by booking revenue from Australian sales offshore. We have heard plenty of examples of this over the last year or so through the media and other forums. The coalition government is continually on the search for ways to ensure that Australian individuals and companies pay their fair share of tax, probably even before the late Kerry Packer went to a parliamentary hearing and made his famous statement that Australian individuals and companies have been trying and will continue to try and minimise their tax.

This year, the ATO has stated that there are over 4,600 high-worth individuals. The ATO is again targeting those who try and cheat the system, as they do, and the government is very happy to support the tax office in this. The ATO is also chasing explanations from people who have had large one-off or unusual transactions or a history of aggressive tax planning and lifestyles not supported by after-tax income. The tax and revenue committee talks to the ATO about these matters and know it is committed to pursuing these with all its resources.

Speaking of something done in recent years, there is also Project Wickenby, a cross-agency task force that plays a role in the government's fight against tax evasion and avoidance. It was established in 2006 by the Howard government to protect the integrity of Australia's financial and regulatory systems. The task force consists of eight federal agencies and became necessary because of the scale of the tax avoidance. As an example of the success of the government and the ATO, just last financial year there were some 33 convictions for tax crime and, importantly, some $10 million was recovered. The most significant of those was a Queenslander sentenced to seven years jail with a repatriation order of over $1 million. So the government is serious about this. We have taken some action, had some success and will continue to have more success as time goes on.

As I mentioned before, there has been a great deal of press about multinational corporations minimising their tax. Companies like Apple and Ikea have been in the spotlight among others. This is not a problem unique to Australia. Governments around the world that are challenged by the new economy, the digital economy, international operations, the use of the internet and intellectual property laws, we find that they can restructure their corporate and financial activities. Great Britain are onto this as well; they have come up with a diverted profits tax to counteract contrived arrangements used by large groups—typically, multinational enterprises—that had resulted in the erosion of their tax base in the United Kingdom. With this bill, the government is taking another step to ensure that multinationals that have activity in Australia pay tax in Australia, and we understand from the tax office that this amount will be hundreds of millions of dollars, so it is not insignificant.

The multinational anti-avoidance law will allow the Commissioner of Taxation to treat large multinationals as though they have a taxable presence in Australia and are subject to Australian tax. The government is determined to maintain the integrity of the system, and we have led the fight in this. This is not something we have just looked at over the last few months. We did this last year at the G20 where Australia was President. We have led the global response, and other countries have responded, quite rightly. Last year the government strengthened the already robust defences against tax avoidance by tightening our thin capitalisation rules, limiting the scope for multinationals to claim excessive debt deductions. This measure is only one part of a package.

This same bill will also implement country-by-country reporting, which was a recommendation of the OECD and the G20, and increase penalties for those engaging in tax avoidance and profit-shifting. If we have a look at the resources that the government is providing to the ATO, they are considerable—around $90 million to the ATO over three years. I also know that they have targeted at least 30 multinationals, and I think that number has increased just recently. To date, the program has raised over $400 million—a considerable amount—in tax liabilities and is estimated to raise $1.1 billion in total.

So there are significant things that are being undertaken. We will work closely with academics, tax professionals and the business community in ensuring the OECD's profit-shifting agenda is carried out as well. It is one of these things on which international collaboration is important in getting a result. That is because, as I said before, every country faces these problems, so we are not alone in this area. It is consistent with work being progressed by the OECD, importantly, on the Action Plan on Base Erosion and Profit Shifting that will be finalised later this year, and the government will consider what steps need to be taken to strengthen Australian laws at this time. The OECD has expressly asked countries to look at their domestic laws; we are doing so, and we are strengthening our anti-avoidance laws.

In closing, this law will affect entities with annual global revenue of $1 billion or more, so it is very targeted. The G20 countries have all agreed that the country-by-country report will only be shared between tax administrators. So we are taking a lead internationally and taking correct action in Australia so that multinationals pay their fair share of tax. So the federal government is taking action. The ATO is delivering and we look forward to results to help increase the sustainability of our tax system.

Ms BUTLER (Griffith) (18:40): If multinationals do not pay their fair share of tax, that means that Australian businesses and households bear more of the tax burden, have reduced services or both. That is why global firms earning billions of dollars in revenue in Australia should give back to our community. Our roads, our schools, our justice system and the other public services that are publicly funded go towards making this country a great place to do business—and we are a great place to do business. We are a low-corruption country. We are a very modern and progressive country. We are a country that is prosperous. And part of the reason for that is that we do have robust publicly-funded public services and infrastructure.

That infrastructure and those public services cost money. Multinational firms should not be able to avoid contributing to those costs via fair taxation just like everyone else does—just like domestic businesses do and just like households do in Australia. Someone earning the average Australian wage pays about 21 per cent in tax. A small business pays the corporate rate, if they are incorporated, of 30 per cent on their profits, but in the past few years there have been increasingly regular reports about huge companies paying just a fraction of that.

Deputy Speaker Wicks, as you know, the Senate's recent corporate tax inquiry heard evidence that one big multinational firm may have paid as little as two per cent tax on billions of dollars in revenue. If the average Australian wage earner paid tax at that rate instead of the standard 21 per cent, they would be paying almost $15,000 less a year. Wage earners pay their tax. They do not get a choice about whether to pay their tax. Wage earners generally cannot afford sophisticated tax avoidance measures. We pay our tax. Everyone in this place should be paying their tax—and I can only assume that they are. But multinationals, it seems, are doing what they can to avoid paying fair taxation through the use of things like tax havens—places like Ireland, for example, and Luxembourg and others.

In its submission to the tax inquiry, the Australian tax office reported that more than half of Australia's cross-border trade, over $300 billion a year, is made up of companies transferring money from their Australian operations to their international arms. Over $115 billion of this revenue was channelled to very low tax jurisdictions. For example, documents leaked last year showed that over 300 Australian firms had been involved in routing money through Luxembourg and other low tax jurisdictions to minimise their tax bills. Firms named in media reports included AMP, Macquarie Group and Lend Lease. The amount of tax avoided through those schemes potentially reaches into billions of dollars.

I, like many people across the world, was very concerned about what was happening in Luxembourg and also was concerned about the ability for people to blow whistle in Luxembourg about tax evasion—because of course tax evasion does not just affect Australians. Tax evasion is not something that just affects developed countries. Tax evasion also affects developing countries, and there are some estimates that suggest that the value of tax evasion globally actually exceeds the amount of aid paid out globally. Of course, if we had tax justice and if we had transparency around the world, and if everyone paid their fair share of tax in all jurisdictions, then that would take some of the pressure off aid and would help developing countries with their economic development. I think everyone in this place would agree that it would be a positive for our globe if in fact developing countries were able to develop more quickly and provide for their own economic prosperity, thus taking pressure off the rest of the globe.

Another example of a case study of multinational tax evasion is of course Apple. Apple paid just $80.3 million in Australian tax in the 2013-14 financial year, despite earning local revenue of over $6 billion. By comparison, the Australian retailer Harvey Norman paid $89 million in tax on revenue of $1.5 billion—more tax on just a quarter of the revenue. It is not a level playing field and it is not fair on domestic companies who are trying to do the right thing in Australia.

Another example is James Hardie. The construction firm operates on a net taxable loss in Australia despite average annual profits of over $200 million. In the past two years, the company has paid almost $600 million in dividends to its shareholders and its CEO is currently paid over $12 million, but it operates at a loss because it claims tax deductions on annual payments to its compensation fund for victims of its asbestos products. In other words, Australian taxpayers are subsidising James Hardie's compensation to asbestos victims. The final example is Glencore. A 2014 Fairfax Media investigation alleged that the mining giant had paid no tax in Australia over the past three years despite earning revenue of $15 billion by using a complex series of intracorporate group loans. Glencore disputed this account by claiming that it had in fact paid $400 million in tax on this revenue.

Of course, those sorts of revelations undermine public confidence, not just in whether corporations are paying their fair share of tax but in the corporate tax system as a whole. Of course, the consequence for the revenue is that, if people think that other people are getting away with not paying their tax, if they think that it is okay not to pay tax and if there becomes a societal norm that says that it is acceptable to seek to avoid and minimise taxation, then that of course discourages voluntary compliance in the wider community. Why would anyone pay the right amount of tax if they thought no-one else is paying the right amount of tax? You would have significant difficulty in the cultural norm around taxpayer compliance.

Deputy Speaker Wicks, you would be aware that the Taxation Commissioner and his leadership team in the Australian Taxation Office are moving to transform the Australian Taxation Office to the sort of office that engages well with taxpayers, seeks to engender a spirit of voluntary compliance and avoids more coercive ways of seeking compliance unless absolutely necessary. It is better for everyone if people voluntarily and willingly pay their taxes in the appropriate way and in the appropriate share, but, as I said, if people think that big companies are getting away with paying little or no tax on the amount of money that they are making in Australia, then that is counterproductive to the move towards voluntary and willing compliance.

Without strong action to tackle multinational profit shifting and corporate tax avoidance, Australia will continue to lose millions or even billions of dollars in forgone tax revenue. With government debt continuing to rise under the coalition, we cannot afford to let tax revenue drain away offshore. Tax reform for multinational companies is a priority today because of globalisation and the digitisation of the world economy. Today, three of the five biggest companies in the world are companies that make their money primarily on the basis of intellectual property. This has greatly complicated the task for traditional tax regimes. They assume a firm has a permanent establishment in a physical place where its product is made. None of that applies in a digital business and this has greatly increased the scope for firms to profit-shift to low-tax or no-tax regimes, regardless of where their profit is really produced. Our tax laws have to keep up with changes and close the loopholes that allow larger firms and globalised businesses to avoid tax.

This multinational tax bill takes an untested approach to closing some of those loopholes. There are no precedents for this approach around the world. Not even Treasury can say how much revenue it will bring in. The Treasurer today in question time was also unable to say how much revenue it will bring in. It remains to be seen if the bill will protect even one extra dollar of Australian tax. If you look at the budget papers and turn to the page featuring this measure, you will see that there is no revenue amount; there is just a set of asterisks where there should be revenue estimates, because the government does not know how much this tax evasion bill is purportedly going to raise. The government cannot tell us. As I said, the Treasurer was completely unable in question time today to tell us. If we had turned up with a tax and said, 'We've got no idea how much this is going to raise,' people would have laughed at us and rightly so.

Mr McCormack: Does the minerals resource rent tax ring a bell?

Ms BUTLER: Instead, we are entitled to be laughing at the coalition's multinational tax evasion package that raises asterisks.

Mr McCormack: How much money did that raise?

Ms BUTLER: In fact, I do not know if you have ever tried to take an asterisk or any other punctuation mark to the bank, Assistant Minister, but I do not think that one of the banks is going to give you much in return for the punctuation marks that you truck down to the teller at the local branch, and why would they? It is ridiculous. Fancy turning up with a federal budget and saying, 'We've got a revenue measure here. We've got no idea what it's going to raise, but this is the centrepiece of our multinational tax evasion policy.' It is just embarrassing. We were the president of the G20 in 2014.

Mr McCormack interjecting—

Ms BUTLER: The G20 agenda was about cracking down on base erosion and profit shifting, as the assistant minister is well aware. As the president, you would think that we would have been at the forefront, at the vanguard of multinational tax evasion policy, cracking down on base erosion and profit shifting—

Mr McCormack interjecting—

Ms BUTLER: but, as the assistant minister knows, we were not even amongst the early adopter countries for the common reporting standard. How embarrassing for Australia that so many countries around the world signed up as early adopters of the CRS and what were we doing? We were saying, 'We're not sure about that,' dragging the chain and kicking the can down the road, just as this government likes to do on all sorts of difficult policy issues. Just look at what they are doing on marriage equality. That is all a bit too hard for this term, isn't it? We are not going to have a free vote on that, are we? 'We're not going to have a free vote on marriage equality. We're not going to bother getting that done now,' and so it was with the common reporting standard in the year that we were the president of the G20, when one of the major parts of its agenda was dealing with base erosion and profit shifting. One of the major parts of the G20's agenda was cracking down on multinational tax evasion, not just for the benefit of the developed countries and the G20 but for the benefit of the entire world. Those developing countries are missing out on their entitlement, their fair share of taxation revenue, and as a consequence they are relying more on aid than they ought to.

The idea that you are just going to raise some asterisks as revenue is ridiculous and it stands in stark contrast to Labor's multinational tax evasion policy. As the assistant minister is well aware, in March this year we announced a PBO costed, carefully considered $7.2 billion package of measures to stop multinational companies shifting their profits out of Australia and avoiding paying their fair share of tax. I have never said our policy was the last word on tackling multinational tax—of course not. We know that work is being done across the world, in the G20, in the OECD, to tackle what is a global phenomenon of base erosion and profit shifting. We have regularly called on the government to adopt our measures alongside their own.

The bill before us focuses on companies that artificially avoid booking revenue in Australia so that they do not have to pay tax on the profits. That is an important issue to tackle and we hope that this bill will force companies to restructure their operations so that profits made here stay here.

Mr McCormack interjecting—

Ms BUTLER: I don't think it is funny. The assistant minister at the table seems to think it is a funny bill. I don't think it is a funny bill. I think it is important.

Mr McCormack interjecting—

Dr Chalmers interjecting—

Ms BUTLER: The assistant minister is very fortunate that my friend the shadow minister for superannuation is leaping to his defence. The shadow minister is a kind man and certainly very kind to the assistant minister.

We do need to make sure that companies are paying their fair share of tax. It should not be left to Australian companies and Australian households to bear a burden because multinationals are shifting their profits elsewhere. So this is an important bill. We do hope this bill will force companies to restructure their operations so that profits made here will stay here.

But this bill does nothing to stop companies using debt deductions to send money offshore, unlike our policy. Companies can easily transfer money between their subsidiaries and holding companies and dress it up as a loan, even though it is just a transfer of money from one pocket to another. Just like other business expenses, interest costs on loans are tax deductible. These artificial loans become a way for companies to shift their profits into tax havens at the expense of the bottom line here in Australia. This is a loophole that we need to close.

We are not going to stand in the way of this attempt by the government to tighten Australia's tax net, no matter how small or insufficient or unknown it may be, in terms of revenue to be raised. We are taking a positive and bipartisan approach to this important issue. In that same spirit, the government should adopt our $7.2 billion tax package and tackle all the loopholes that let companies send their profits offshore.

If this government is committed to ensuring that major corporations pay their fair share of tax, they also need to drop their push to gut Australia's tax transparency laws. Transparency is one of the most effective tools we have available to combat profit shifting and tax avoidance. In 2013 we passed laws requiring the Australian Taxation Office to publish information about the income and tax paid by companies earning more than $100 million. Unfortunately, this government has mounted an attack on those laws.

Having said that, we are supporting this multinational tax bill through the parliament, because we believe tackling tax avoidance and protecting Australia's revenue base should be above politics. Under the former Prime Minister, the member for Warringah, and the former Treasurer, the member for North Sydney, there was just a blunt rejection of our package. It was very negative. It was typical, unfortunately, of this coalition's track record. It was just a political refusal. They did not want to talk about our idea, just because it was our idea. I hope that this government will take a different approach. I have to say that it would be beneficial and in the national interest if, instead of just rejecting things out of hand, the government actually considered the policies and ideas that we raise, and I look forward to a much more constructive and fruitful set of discussions on this and all other issues into the future.

Ms MARINO (Forrest—Chief Government Whip) (18:55): I rise to support the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015. I cannot ignore the comments by the member for Griffith. They were quite embarrassing when you consider it. She spoke about a range of issues around this policy but totally ignored the absolute failure of the Minerals Resource Rent Tax. When discussing what could or could not be earnt, we know that Labor not only made some incredible projections with the mining tax, which basically did not raise anywhere near what Labor said it would. Not only that, they actually spent the money before they got it. Therein lies one of the challenges that face this government.

The member also made reference to debt. I know what debt and deficit are, and they were left to us by Labor. Looking at what Labor left us with, I came across this quote by Dwight D Eisenhower—and this is what Labor did:

As we peer into society's future, we—you and I, and our government—must avoid the impulse to live only for today, plundering for our own ease and convenience the precious resources of tomorrow. We cannot mortgage the material assets of our grandchildren without risking the loss also of their political and spiritual heritage. We want democracy to survive for all generations to come, not to become the insolvent phantom of tomorrow.

Labor basically spent our grandchildren's inheritance. They left intergenerational debt for children in this country. That is what they left us with.

As we know, with tax there is a conflict as old as civilisation. As long as there has been both money and government, there has been a fight conducted by those who make it to keep it from the government, which both wants and needs it—perhaps these two in differing amounts. It was Einstein who said:

The hardest thing in the world to understand is the income tax.

We have heard about the tax system going back to ancient Egypt. Early taxation is also described in the Bible. It was in Genesis, I think:

But when the crop comes in, give a fifth of it to Pharaoh. The other four-fifths you may keep as seed for the fields and as food for yourselves and your households and your children.

But as long as there has been tax there has been tax avoidance. In fact, many historians have suggested that tax avoidance played a role in the collapse of major civilizations.

As we know, 70 per cent of Commonwealth revenue in Australia comes from personal and corporate income taxes. The ATO notes that 69 key taxpayers, with a turnover of more than $5 billion annually, represent 42 per cent of the entire corporate tax base, and that financial services and the mining industry represent over half of all corporate tax revenue. Our 30 per cent corporate tax rate is similar to the average corporate tax rate of that of the 10 largest economies.

As we know, there are major disrupters to Australia's tax system, as well as international tax systems—disruption caused by the exponential improvements in the reach and efficiency of the internet, as well as significantly increased globalization. All mean that we have an interconnected marketplace in which multinational companies operate.

The bill before the House today implements the government's 2015 budget commitment to combat multinational tax avoidance. This delivers on our promise to ensure that Australia is at the forefront of the international fight against tax evasion. We already have some of the strongest taxation integrity rules in the world, and we are determined to make these rules stronger still. We know that some multinationals continue to try to avoid paying tax on Australian profits. This undermines the public's faith in the tax system and leaves families and small businesses to unfairly carry the taxation burden.

Australia has been at the forefront of the global response to multinational tax avoidance. Under this government's leadership, the first of the OECD-G20's base erosion and profit-shifting recommendations were delivered. Australia is continuing to work with the OECD and G20 to promote greater integrity in the international tax system and ensure that entities pay tax where they have earned their profits. The OECD will report to the G20 finance ministers in October 2015 on the outcomes and final recommendations of its action plan on base erosion and profit shifting.

While our international efforts are important, it is vital that we take appropriate action now, as this government has done, to better protect Australia's tax base. Last year, the government took action to tighten Australia's thin capitalisation rules to limit the scope for multinationals to claim excessive debt reductions. In the 2015 budget, the government announced a package of measures that will level the playing field for local businesses and ensure that competitors pay their fair share of tax. This bill represents part of that package and implements a new multinational anti-avoidance law, stronger penalties for large companies that engage in tax avoidance and profit shifting, and country-by-country reporting to give tax authorities greater visibility of multinationals' tax structures. These three measures will apply to over 1,000 large multinationals operating in Australia with an annual global revenue of $1 billion or more. The measures are consistent with the government's commitment to deregulation and our support of small business.

Schedule 1 to this bill amends the Income Tax Assessment Act 1997 to include a standard and centralised set of concepts that can be used to determine whether an entity is a 'significant global entity'. An entity is a significant global entity for a period if it has annual global income of A$1 billion or more. It may be a significant global entity as well if it is a member of a group of entities that are consolidated for accounting purposes as a single group and the global parent entity of the group has an annual global income for the period of A$1 billion or more. A global parent entity is one that is not controlled by another entity according to accounting principles or, where accounting principles do not apply in relation to the entity, commercially accepted principles related to accounting. A global parent entity will usually be a member of a group of entities where the global parent is the one that is not controlled by any of the others. Subsidiaries of the global parent may be located in other jurisdictions. However, it is possible for a global parent entity to be a single entity that does not control any others. So, if a global parent entity is a member of a group that are consolidated for accounting purposes as a single group, the global parent's annual global income for a period is the total of the annual income amounts of the consolidated group as shown in the total or disclosed in parts in its latest global financial statement for that period.

Schedule 2 of this bill implements a new multinational anti-avoidance law from 1 January next year. This will stop multinationals artificially avoiding a taxable presence in Australia, delivering on our 2015 budget commitment to target major entities with significant Australian activities that avoid booking profits in Australia. The tax office estimates that around 30 large multinationals are engaging in commercial activities in Australia but use contrived structures to book billions of dollars of revenue overseas and avoid Australian tax. The new multinational anti-avoidance law will allow the Commissioner of Taxation to force those companies to pay tax in Australia on profits from economic activities undertaken here. This is the right and fair thing to do, as Australian taxpayers and small businesses would say. We have strengthened the law by removing the condition for multinationals to operate in a no-tax or low-tax jurisdiction. All significant global entities with revenues over $1 billion that book their revenue offshore will need to consider these rules and may need to review their structures. This simplifies the law and makes it easier for the tax office to apply, removing the need to prove an additional requirement. As a result, if a multinational has a structure with a principal purpose of avoiding tax, the tax office will have the tools to catch it and ensure it pays its fair share.

By removing the no-tax or low-tax condition and relying solely on a principal purpose test, the government is sending a very clear message that, if a company deliberately and artificially avoids paying tax in Australia, this is not acceptable. This rule will complement our existing anti-avoidance rules for multinationals by clarifying that the specific arrangements used by multinationals selling into Australia are considered to be tax avoidance. This new measure will make it easier for the ATO to establish a case by catching arrangements that are designed to obtain both Australian and foreign tax benefits, and by lowering the purpose test from 'sole or dominant purpose' to 'one of the principal purposes'. This new measure will force entities to book their revenue here, in Australia, where they have significant sales activity. Where a tax avoidance scheme is identified, the Commissioner of Taxation will be able to apply the tax rules as if the multinational had booked the profit from Australian sales in Australia. The company will have to pay the tax they owe on these profits, plus interest, and double the existing maximum penalties for tax avoidance and profit-shifting schemes. This new measure will protect our tax base by acting as a deterrent to companies to engaging in complex schemes. Companies that pay their fair share of tax will no longer be at a competitive disadvantage.

Schedule 3 to this bill doubles the penalties for large companies that enter into tax avoidance or profit-shifting schemes. The maximum penalty applicable will be 120 per cent of the amount of tax avoided under the scheme. Schedule 4 implements country-by-country reporting from 1 January 2016. Australia is leading the way, and we expect the country-by-country measures to be implemented by other jurisdictions around the world. Country-by-country reporting will require large multinationals to report to the Australian Taxation Office their income and tax paid in every country in which they operate. This will be exchanged between tax authorities to assist in the assessment of transfer pricing risk and targeting of audit inquiries.

Consistent with the OECD s guidance, this schedule will also require two more reports to help manage transfer-pricing risk. Companies will be required to lodge a master file, which will require detailed information on the multinational's organisational structure and financial activities. Companies will also be required to lodge a local file, which will focus on specific information on transactions between the reporting entity and related entities in other countries. This will include the entity's detailed analysis of the transfer pricing determinations they have made.

The government's measures are well-considered and balanced and will effectively strengthen our tax system to ensure that it is fair and sustainable. The government will report to G20 finance ministers in October 2015 on the outcomes and final recommendations of our tax avoidance agenda. This government will continue to take the lead in the OECD and the G20, and the final recommendations will provide a strong platform for even further action towards strengthening the integrity of our tax system and making sure that those entities that earn profits in Australia pay tax in Australia.

Dr GILLESPIE (Lyne) (19:08): I rise to speak on the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015, and I commend it to the House. Everyone has heard of the 'Who's on first, What's on second and I Don't Know's on third' routine of the famous Abbott and Costello, which has been seen on YouTube by millions of people. Before YouTube, I saw it when I was a child, and even then I understood: that is humour. But when you look at this bill, that is what comes to mind—when you hear of the double Irish-Dutch sandwich, the mechanism by which multinational tax corporations have avoided tax by shifting money between corporate identities that bear no relationship to where products are made or sold. But it has been a legal way of avoiding tax, which, as one prominent Australian outlined at an inquiry many years ago, is Australia's national pastime.

But really the things you have heard about tax avoidance in Australia look quite mickey mouse when you see some of the tricks that very clever accountants and tax lawyers have been up to in avoiding tax, not only in Australia but around the world. And because of this very issue the OECD has been very active, and we have been leading the pack. But as well as the double Irish-Dutch sandwich, there is the use of hybrid securities and various forms of thin capitalisation whereby, in essence, equity in a company is dressed up as massive debt, which then generates a massive interest payment that then goes offshore to the parent company via various other entities in other countries and, funnily enough, it might even end up in a low-taxing or no-taxing country.

There is frequent use of intellectual property fees, whereby a company operating in Australia is charged a massive IP fee which, coincidentally, matches the amount of income or profit that the local Australian identity is due to pay. Hence they avoid paying tax in Australia, and the tax is then transferred as a fee to another entity in another country, and it might do the merry-go-round as well, in the sandwich formation, and again end up in a low- or no-tax-paying entity and/or country. The old chestnut is trading hubs, whereby a product made in Australia or produced in Australia is sold for a low-profit fee but the same product, without any value adding or value creation, is resold in and out of a trading hub in another destination, or a low-tax, no-tax destination.

These are all legitimate manoeuvres, but the whole aim of the exercise is to have Australian companies that generate their profits in Australia pay tax on those profits in Australia. It is ultimately morally imperative and justifiable to have a system in place that achieves just that. We are not being mean, tricky or nasty; we are just applying common sense, because this very issue occupies the minds of many treasurers, not just the Australian Treasurer. The OECD and the G20 have had many meetings on many occasions, quite recently, and Australia has been at the forefront. The former Treasurer, the member for North Sydney, led this agenda at the G20 meeting and its subsequent meetings. The aim of the exercise is to raise money through the Australian company tax rate on profits that are made here.

Transfer pricing, trading hubs, IP fees, thin capitalisation and other forms of hybrid securities—there are a few other little tricks that they employ. It is a bit like 'Who's on first, What's on second and I Don't Know's on third' all over again. That is, you can be an entity and be resident in two countries, and when you go to pay tax in one country you say, 'No, we'll pay it over there', but then when you go over to the other country you do not pay it there, and you might even move it around. All these manoeuvres need to be addressed by multiple nations. We cannot just jump on board and do things by ourselves.

That is the whole idea of the base erosion and profit shifting conventions the OECD is employing, which they have brought to bear, and we are leading the pack. Recently, 30 multinational companies have been observed by the Australian tax office. If they are earning more than A$1 billion in revenue, they are being observed to make sure that they do not employ structures that have a principal, sole or dominant purpose for avoiding tax being paid on their profits in Australia.

With this bill, tax rules will be applied if they fail that test—or what might better be described as passing that test. If they have set up structures that have a principal, sole or dominant purpose for avoiding tax on profits on products or services made in Australia, tax rules will be applied. The tax will be levied in Australia, and there will be an interest payment and/or a fine of up to 120 per cent.

You would be surprised to hear that the lot of these things were not enforced. They make so much common sense. In the world of legislation, a complex issue often takes hours to get your head around, but this is a pretty straightforward issue. I do not think there is much objection on either side of the House or in the community—this passes the pub test, the sniff test and barbecue conversations. People are in universal agreement: that is, people should pay their fair share of tax.

I do not think we will have any objections to these rules being applied, having these treaties in place with enforcement of country-by country-reporting transparency and a common reporting standard across all these countries. Having them enforced in Australia is existentially and financially a very sound thing for the Australian tax office to do.

I am surprised we have not had a common reporting standard before. If you have all these rules in various entities in various countries, I am surprised that people have not ventured down this avenue before. It seems like the logical thing to do so that there is one rule for all. I am sure the Australian tax office will be pleased to achieve these simple, straightforward measures as $1.1 billion is a lot of money that could be applied to reducing our debt, balancing our books, providing services like Medicare or pharmaceutical benefits, providing equipment for our Defence Forces or building parts of the Pacific Highway.

One of the first things you have to do as a government is defend your nation. Two, you have to supply security for the nation. You have lots of other commitments in Australia. In Australia, we have a massive social security safety net, which takes over $140 billion of our tax revenue. What we are hoping to do is not overtax people; just make sure that these corporate or private entities using these manoeuvres are compliant with a tax regime, particularly, a tax regime in Australia when they are operating in Australia. So $1.1 billion raised from this is the estimate, but it may be much more and that would be great. It is a lot better to get some tax than a lot of nothing, which is what happened in the past.

Coming back to where I started: I hope this is the end of the double Irish-Dutch sandwich, the subway of tax accounting. We want fair and reasonable taxes paid in this country. If transparency and simple uniform procedures are achieved around the world, it would be a great thing for all countries but, in particular, Australia leading the way is a very good outcome and something that we can be proud of. I commend this bill to the House.

Mr McCORMACK (Riverina—Assistant Minister to the Deputy Prime Minister) (19:19): The Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015 implements three 2015-16 budget measures: the multinational anti-avoidance law; country-by-country reporting and new transfer pricing documentation standards; and stiffer penalties to combat tax avoidance and profit shifting.

Whilst I have been listening intently to my colleagues and those opposite on this bill, I must say it was an excellent contribution, as always, by the member for Lyne. I have been reading a couple of documents: one, The

Financial Review's Smart Invest or November 2015 publication talks about the search for growth, where to find it and how to get on board; and the State of Regional Australia 2015—an inaugural report in which Mike Mrdak, the Secretary to the Department of Infrastructure and Regional Development, in his foreword says:

An evidence based understanding of a region’s performance should underpin community development initiatives, policy settings and investment strategies which can enable a region to prosper and harness the opportunities associated with its own unique advantages.

This got me thinking about my own unique electorate—the Riverina—and the opportunities that could be harnessed, are being harnessed and will be harnessed in the future. Those opportunities are enhanced when everybody—taxpayers, businesses—is paying their fair share of tax. In the Riverina, I would like to think that everyone who is earning an income, be it a taxpayer or indeed a company, is paying their fair share of tax.

This legislation goes to the heart of those multinational corporations which are not paying their fair share of tax. Before I discuss the substance of the bill, I will just talk about a few of the contributions made, particularly, by those opposite. The member for Wakefield, in his speech, talked about the revenue that could be raised from this bill being one less dollar that Australian taxpayers and businesses have to pay. That is not correct. It is not one less dollar that Australian taxpayers and businesses will have to pay; it is one more dollar that we will collect, that should be being collected and that should have always been collected. It is not one less dollar that is going to have to be paid; it is one more dollar that will be paid.

The Minister for Immigration and Border Protection last Wednesday, 14 October, asked how many members opposite had been involved in a small business and just one put up their hand—the member for Melbourne Ports. I appreciate that the member for Parramatta may well have been involved in a small business in her past before she came to this place, but this goes to the heart of the matter. When the same question was asked of the coalition, just about everybody put their hand up. We understand business. We understand the need for tax collection. We understand the need for equitable distribution of that tax which is collected. But the member for Wakefield just does not get it. He said that Senator Dastyari is doing a good job in this space. I can tell you that the good senator is running around at the moment claiming that he understands the Murray-Darling Basin—that is far from the truth.

This particular bill is important. Australia has been a world leader in ensuring that we get on top of multinationals avoiding paying their tax. The key driver of this was the member for North Sydney, the former Treasurer, who led the way during Australia's presidency of the G20. Last year at a doorstop interview on 9 December, he was asked: 'Do you think it's a risk that Australian companies that are operating overseas in other jurisdictions could face a backlash from other agencies or countries that are not as proactive on base erosion and profit shifting?' He talked about this being a challenge. He said that there were large number of Australian companies that operated overseas and emphasised that that is why we need to work collectively and globally to address this. We did that at the G20. We started the process off. Australia's reputation on the international stage is very good. It follows our excellent presidency of G20. The head of the International Monetary Fund, Christine Lagarde, spoke very highly of the work of the member for North Sydney, Joe Hockey, in heading G20.

The member for North Sydney spoke in an interview with David Speers of Sky News three days after that initial interview on 9 December. On 12 December he said in answer to a question about the Google tax of measures to tackle multinationals which do not pay what they ought to in Australia:

It has got to be coordinated global response and this is why the previous Government failed. They had announcements that they never legislated and they never had any coordinated global action. We are determined to work with other countries. We have used the leadership of the G20 this year to get that coordinated global action. We have got a number of fronts that we are dealing with. Firstly, we are working with the OECD on what is known as the Base Erosion and Profit Shifting Plan. We are half way through that, which means there are common rules around the world, particularly in tax havens that ensure that people do start to pay their fair share of tax.

The good work done by the member for North Sydney was certainly front and centre of the G20 in Istanbul, Turkey, which I attended on 9 and 10 February. In session 6 on international tax—

Mr Bowen: Did you go?

Mr McCORMACK: I did go, actually, Member for McMahon. I did go. I attended that. You were not yet in the chamber when I was speaking earlier about the excellent reputation that the member for North Sydney forged as far as our G20 presidency was concerned and the high elevation that he gave Australia's G20 presidency.

The Turkish G20 presidency priority for 2015 included a section on international tax that stated:

We will be monitoring the implementation of the 2014 deliverables of the Base Erosion and Profit Shifting (BEPS) Project. We will also work to ensure a smooth transition to the 2015 deliverables of the BEPS project to secure progress in this field. To enhance inclusiveness of the international tax system improvements, we will continue to incorporate the developing country perspective to the G20 tax agenda, with an increased emphasis on bilateral and multilateral cooperation between tax authorities.

As I said, Australia's reputation at G20 was highly regarded and certainly Turkey was continuing on the good work started by the member for North Sydney and that is now being adopted by the member for Cook, the now Treasurer. That is because this is important.

We have heard during this debate Labor talking about how much this would make. If we look at the second reading amendment that Labor has put forward, it says:

… "while not declining to give the bill a second reading, the House notes that its revenue impact is unquantified, and calls on the Government to adopt Labor’s fully-costed multinational tax package to raise $7.2 billion over the next decade".

We know about Labor's ability to get it so wrong when it comes to estimating how much money might be raised by a particular project. We know that under the Labor government when it was in power the original resource superprofits tax announced by Kevin Rudd and the member for Lilley was estimated to raise $49.5 billion from 2012-13 to 2016-17. The revised mining tax announced by the former member for Lalor, Julia Gillard, and the member for Lilley was originally estimated to raise $26.5 billion over the same period.

Net revenue from the mining tax in the 2014-15 budget was expected to raise over $300 million in total, but we know how wrong Labor got it. The fact is that Labor then spent the money they did not have in typical ALP fashion. They spent it on a whole range of projects and drove our good economic situation that they inherited in 2007 into something that just went from bad to worse. I admit that we did have a global financial crisis. I admit that that knocked our expected revenues about. But we did not need Labor to then run around and spend money that we never had a hope of raising. That was just typical of Labor, spending money it did not have, spending money we never had a hope of raising and tearing the forward estimates asunder.

This is an important piece of legislation. It is good that Labor is actually getting on board with us, despite the amendment. These measures are part of a package of domestic measures announced in the 2015-16 budget to bolster Australia's existing laws to ensure that multinationals pay their fair share of tax. We know that a fairer tax system is one in which all taxpayers meet their tax obligations, and that is why we are committed to addressing tax avoidance by multinationals. If a company makes a profit in Australia, it needs to pay tax in Australia. We do not want individuals and small businesses unfairly carrying the tax burden, for all the reasons that I spoke about earlier. We need to ensure that regional Australia maximises its opportunities. We need to ensure that we are able to roll out and can continue to roll out the infrastructure plans and policies of this government, because we are a road and rail government. We are a government that is investing in ports. We are a government that is investing in valuable infrastructure, ensuring that we protect, preserve and support regional Australia.

In the 2015 budget, the government announced a package of actions to further strengthen Australia's tax laws and level the playing field for domestic business. We are introducing a multinational anti-avoidance law right here tonight to stop multinationals using complex schemes to avoid paying tax in this country by booking revenue overseas. We are also closing the digital tax loophole to ensure that the goods and services tax applies to digital products and services that are downloaded in Australia, and that is important as well. We are also introducing new OECD country-by-country reporting requirements to strengthen the Australian Taxation Office's capabilities to identify profit shifting. Country-by-country reporting will ensure that multinational companies with global revenue exceeding $1 billion need to annually report to tax authorities the amount of revenue, profit, income tax and economic activity that they are generating for each jurisdiction in which they do business.

We need to make sure that there are suitable penalties for large companies engaging in tax avoidance and profit shifting. We need to make sure that there is deterrence for those companies to make sure that they do not try to risk it. This is important legislation. It is good that Labor is getting on board with this legislation, because it is important that we get that revenue base and that we ensure that our base is not continually eroded by those tax avoiders who should be paying their fair share. I commend the legislation to the House.

Mr MORRISON (Cook—Treasurer) (19:34): Firstly, I want to thank all those members who have contributed to this debate on the Tax Laws Amendment (Combating Multinational Tax Avoidance) Bill 2015 and I want to thank the opposition for their support for the bill. The government will not be supporting the amendment to the second reading, and I will come to those matters shortly.

Multinationals need to pay their fair share of tax in Australia. We all agree with that. That is an important principle. It is one that is being pursued through multilateral forums. For some years Australia has been in the vanguard of that approach. It has led that approach, and the former Treasurer, who introduced this bill to the House, was the principal driver of that agenda for the government. I acknowledge his contribution in bringing this bill before the House because it brought to a head the matters that he had been championing through the G20 and other forums.

This bill implements the government's 2015-16 budget measures to combat multinational tax avoidance. These measures will force multinational companies with significant activities in Australia to pay their fair share of tax. This is what it does, this is what this bill is, and that is why it is a bill worthy of support. This will level the playing field for taxpayers and ensure that families and small businesses are no longer unfairly carrying a greater tax burden because those large multinational companies are not carrying theirs.

The new, broader multinational anti-avoidance law will target, at this stage, 80 large multinationals that the ATO has identified as having significant activities in Australia and as potentially using contrived structures to book billions of dollars of Australian sales overseas to avoid Australian tax. Before this bill was introduced there were only 30 such companies that were actually working with the ATO. Now that these measures are being put in place, this has more than doubled the net that the tax office has been able to put out in terms of ensuring multinational organisations will be paying their fair share of tax. So it has already had a significant impact and it is yet to pass this place. The Commissioner of Taxation will be able to force them to pay tax on profits from economic activities undertaken here in Australia. Multinationals will no longer be able to justify contrived schemes to avoid paying tax.

This rule will strengthen our anti-avoidance rules for multinationals by catching arrangements that are designed to obtain both Australian and foreign tax benefits to stop companies claiming they are only seeking to avoid foreign tax and by lowering the purpose test from sole or dominant purpose to one of the principal purpose, making it easier to apply. This means that they will now pay tax on profits from their Australian activities. That is the objective, and that is what this bill is designed to address and will address. Penalties for large companies that enter into tax avoidance or profit-shifting schemes will be doubled from 1 July 2015. These are measures with teeth.

Country-by-country reporting, a key recommendation of the BEPS process that has been worked through by the OECD, will be required, where large multinationals will need to report additional information to the ATO about what tax they are paying and where. This is a significant improvement in transparency and will help the ATO undertake targeted assessments of transfer-pricing risk. While we have not put a figure in the budget—and I note that that is one of the issues raised in the opposition's second reading amendment—I have been advised by the Commissioner of Taxation that the amount of revenue to be raised is in the hundreds of millions of dollars.

Contrary to the unfounded accusations of those opposite, this approach is actually consistent with responsible budget practice in respect of measures that are not readily quantifiable. I note that the opposition took this approach when they amended part IVA of the Income Tax Assessment Act 1936 in the 2012-13 budget, when they amended the transfer-pricing rules in 2013 and when they introduced the petroleum resource rent tax in 1987. In each instance, those opposite, when they were in government, put no revenue in the budget. That is a standard practice for these types of measures, and the government is following the same practice. But those in opposition are seeking to score, I think, quite cheap political points about this, when at the end of the day the government is following exactly the same practice that those opposite followed when they were in government.

Another thing they did when they were in government was, when they first published the mining tax measure, in the 2010-11 budget, they put a revenue figure in. They were very proud about the revenue figure. They budgeted for $12 billion of revenue over the first two years of its operation. Twelve billion dollars was going to come from the mining tax measure outlined in the 2010-11 budget. But they did not just put the revenue in; they booked the spending off the back of the revenue as well. They irresponsibly locked in billions of dollars of spending against revenue that vanished before their eyes. This government does not operate like that. This government actually carefully considers these measures. We do not get ahead of ourselves and look for the grand big press conference where they stand there and thump the table and say, 'This will raise X billion dollars.' They tried that and they got themselves into awful trouble, and this government has had to unpick these things since we came to office. The actual revenue was not $12 billion from the mining tax. Before the measure was repealed, it had raised a mere $200 million, creating a significant budget shortfall.

We are not going to repeat the folly of those opposite when it comes to these very important measures. The government is taking a strong and balanced approach to dealing with multinational tax avoidance. These measures are not about plugging a budget hole but are about achieving meaningful behavioural change around corporate tax avoidance. I want to commend the Commissioner of Taxation on the positive approach he is taking with these multinational companies domiciled in Australia. They are engaging. They are working the issues through. With the advancement of the broader multilateral approach to this issue, multinationals are recognising that it is time to bring it to account—it is time that they will have to pay tax where they earn the revenue—and they are working with tax authorities, particularly working here with our tax authorities, to ensure that these matters are resolved.

The opposition have proposed a number of measures which they claim will deal with multinational tax avoidance. That is principally by limiting interest deductions by applying worldwide gearing ratios to all multinationals. This is a very blunt instrument for the opposition to apply, and I would encourage them to think through the implications of what they are putting forward. Unlike the government's actions, these proposed changes to the thin cap rules will deter investment and cost Australian jobs. That is not just the view of the government; that is the advice I have received—that they will actually deter investment and cost Australian jobs. Investors who are principally equity funded would be particularly affected. Investors such as large pension and infrastructure funds, who invest in critical sectors such as infrastructure and are typically debt funded at the project level, would be unfairly impacted and disincentivised from investing into Australia because of the very blunt approach that the opposition are proposing, as opposed to the bespoke approach which the government is actually following, where you look at the actual project, the actual investment and the actual nature of the business activities being pursued by that company and then you tailor the tax treatment to reflect what they are actually doing.

The opposition do not do that. They just want to apply a blanket, broad based rule which takes no account of the sensitivities and nature of the investments and will, frankly, scare pension funds and others off from investing in Australian infrastructure and scare off the jobs that come with them. I do not know why they are so wedded to this particular proposal, when the measures that the government is already following deal with exactly the same issues that they are raising around thin cap rules around the world. We are leading the world on these issues. Why would they seek a point of difference on this? The only point of difference is: what the opposition are proposing to do will actually deter projects and investments and jobs. This would clearly adversely impact the legitimate activities of many multinational companies headquartered in Australia and could actually drive them offshore from where they are currently located here in Australia. Their policy on multinational tax avoiders does not really go to the heart of the issue either. The policy primarily targets debt deductions while ignoring the fact that the government has already taken action to significantly tighten Australia's defences in this area, as I just mentioned. As such, the opposition's policy does not focus on areas where there is the greatest potential to address profit shifting by multinational companies.

Our encouragement is: stay focused on the ball. You have got to follow the ball, not the man. Playing the man is what the opposition are trying to do. They played the man very much here in this very chamber the other day, raising questions about this issue and drawing links to the Cayman Islands and the Prime Minister. They are playing the man, not the ball. The ball is: ensuring that we are going after the tax revenue of multinational companies, which is what our measures do. Those opposite want to play the man. They want to play the politics of envy and they want to play the politics of xenophobia when it comes to foreign investment. They can do that, but it demonstrates that they are not being part of a constructive agenda. I recognise that they are going to support the measures in this bill—as they should, because they are good measures and they will do the job—but I would encourage them to stop their process of playing the man rather than playing the ball when it comes to the issues of tax and broader economic policy in this country.

The government's measures as outlined in this bill are well considered and balanced and will, effectively, strengthen our taxation system to ensure it is fair and sustainable. We are closing the digital tax loophole also to ensure that the goods and services tax applies to digital products and services that are downloaded in Australia, and this government has taken action to tighten Australia's thin-cap rules to limit the scope for multinationals to claim excessive debt reductions.

We have asked the Board of Taxation to work with businesses to develop a voluntary code for greater disclosure by companies of their tax information. I met with the chair of the Board of Taxation today to discuss these very measures. As G20 president in 2014, the former Treasurer led the global response to tax avoidance by multinational companies. Under Australia's leadership, the first of the OECD G20's base erosion and profit shifting, also known as BEPS recommendations, were delivered last year. The OECD finalised last week its report to G20 finance ministers on the outcomes and final recommendations of the BEPS action plan.

The multinational anti-avoidance law, which is being debated here in this House this week, is entirely consistent with the final OECD report and recommendations, and the final recommendations provide a strong platform for further action to strengthen the integrity of our tax system and ensure it is fair and sustainable. We will continue to take the lead in the OECD and G20 to restore fairness in the international tax system and ensure entities pay tax where they have earned their profits. I commend the bill to the House.

The DEPUTY SPEAKER ( Mr Irons ) (19:46): The original question was that this bill be now read a second time. To this the honourable member for Fraser has moved as an amendment that all words after ‘That’ be omitted with a view to substituting other words. The question now is that the amendment be agreed to.

Question negatived.

Original question agreed to.

Bill read a second time.

Mr McCORMACK (Riverina—Assistant Minister to the Deputy Prime Minister) (19:47):

by leave—I move:

That this bill be now read a third time.

Question agreed to.

Bill read a third time.

Mr BOWEN (McMahon) (19:49): This bill represents the latest instalment of the Liberal and National parties' long-running war with superannuation and long-running war with industry superannuation, in particular. This is not a bill that will receive the support of the opposition.

The Liberal Party and the National Party have never believed in Australia's compulsory universal superannuation system. They opposed it at its inception, they opposed it continually, they have opposed every addition to it and they have, particularly, been opposed to industry superannuation. What we see here is a continuation of that prejudice from the Liberal and National governments. This is a process that began under Prime Minister Abbott and, like in so many other areas, has continued untouched, uninterrupted, under the Turnbull administration.

What we have here is a solution in search of a problem and a very bad solution—a botched solution—at that. What is the malfeasance that we are trying to fix here? What is the problem we see in industry superannuation? Is it that there is some sort of systemic problem the government has identified that they have rushed urgently to fix? Is it that the government has identified that industry super is underperforming compared to the rest of the superannuation sector? Have they found conflicts of interest rampant, throughout, in the industry superannuation system?

If they have done that, they are invited to present some evidence to the House. They are invited to present some case for their actions. They will not be able to, because none exists. Industry superannuation has been performing well for its investors. Industry superannuation has been providing good returns for its members. What we are seeing, on the contrary, is the Liberal and National parties old-style divide-and-conquer prejudice against industry super.

This is some sort of problem for the Liberal and National parties that they never seem to have been able to overcome. Industry super employers and unions—working together for the best interests of the members of the industry super funds—is something that just does not compute with those opposite. They cannot quite process that this is something that would work in a cooperative fashion. As a result of the way industry funds have operated over the last several decades, many working Australians have better retirement incomes than they would if superannuation did not exist and if they were not members of industry superannuation funds. Of the top 50 performing superannuation funds over 10 years, 19 are industry funds. Of the bottom 50, only seven are industry funds. Of the top 10 funds over 10 years, none are retail funds. Retail funds and the retail sector play a very important role in our superannuation system, but industry funds are not the issue that should be this government's urgent priority when it comes to structural and institutional reform.

I note that this is a recommendation of the Murray inquiry. I note that and I freely knowledge that, but I also point this out: the government is yet to respond to the Murray inquiry. The response to the Murray inquiry, we are told, is being delivered tomorrow and this legislation is in the House tonight. Of all the recommendations in the Murray inquiry and of all the things that the Murray inquiry has decided to recommend, there is one that this government has decided to implement—one that they have picked out and said, 'This is most urgent for us, not all the other recommendations of the Murray inquiry.'

I have been at pains not to make a political football of the Murray inquiry and to provide bipartisan support wherever possible to the Murray inquiry, but we have got government addicted to playing cheap and dirty politics and we have got a government addicted to saying, 'We're not going to accept that bipartisan support. What we're going to do is cherry pick the Murray inquiry and we're going to play good, old-fashioned wedge politics.' That is what this government is addicted to. We were used to that under previous arrangements and we are told that everything is changed and everything is better now that we have a new Prime Minister. Well, nothing has changed. This Prime Minister has changed not one jot when it comes to this government's actions. He is proceeding with this old style, divide and conquer, prejudiced approach to policy.

We have seen this in the government's approach to financial services regulation across the board. What was the government's first priority when they came to office, when it came to financial services regulation? What did they rush to do first? It was to unwind the previous government's Future of Financial Advice reforms. Those reforms were a solution for real problem. They were a solution for a problem that had been identified, which was people being ripped off by poor and conflicted advice. The Labor government stepped in and provided appropriate and well-calibrated regulation to minimise the chances of that happening again. This was regulation in response to scandals—not just one scandal and not just two scandals but continual scandals and rip-offs of good, hardworking Australians. It was legislated painstakingly by the previous Labor government because there was a problem to fix.

Where there was a problem, the Liberal and National parties came to office and rushed to undo the solution. They took reforms to both houses of parliament to unwind the Future of Financial Advice reforms. They urgently prioritised it and, for a time, they succeeded. Thank goodness, the Senate—after the strong representations from the Labor Party—eventually reversed their approval of the government's watering down of the Future of Financial Advice reforms and insisted that they be reinserted. But here, again, we have the government playing the same old games. Here we have them now rushing to pick one Murray inquiry recommendation for a problem which does not exist. Where is the problem in industry fund regulation that the government has identified that this proposed legislation is designed to fixed? It is not poor returns and it is not conflicts of interest.

The other point is this: not only is this a solution in search of a problem but it is also a botched solution in search of a problem. This is very poorly drafted legislation. This is legislation which goes much further than what the government claims is its intent. They claimed that their intent is a third—so a third are independent for directors of industry super funds. In fact, it is a third that are independent and the rest is open slather. The longstanding requirement that 50 per cent of the representatives of industry funds be employers and 50 per cent be employee representatives is no longer extant in this legislation. Instead, there is a requirement that a third be independent and the rest are open slather. Employer representatives could be removed and union representatives could be removed in their entirety. Either the government is trying to do more than they are saying they are trying to achieve or, in fact, they have been incompetent as they set out to do this.

Instead of trying to divide superannuation between industry funds and the rest, and instead of trying to divide the superannuation sector and concentrate on the things which some elements of the superannuation sector disagree with each other on, the government could instead be concentrating on strengthening superannuation. They could be concentrating on taking the superannuation guarantee from nine per cent to 12 per cent. In fact, they have done the opposite; they have frozen it at 9.5 per cent. They could be actually tried to strengthen superannuation for low-income earners by actually giving low-income earners a tax concession to their superannuation, which was in place under the previous government and which this government—to the eternal discredit—has abolished. That is, the low-income superannuation contribution.

That is because this government does not believe that low-income earners deserve any tax concessions to their superannuation. They certainly believe in very generous tax concessions for high-income earners and they very clearly believe that high-income earners deserve very, very generous concessions. But what they cannot stand is the fact that low-income earners get any tax concessions. They could not stand for it and they abolished it. Here we have that same sort of old, cheap prejudice, which is driving this change—I will not call it a reform, because it is not—to see the longstanding fifty-fifty model of representation for industry super being abolished under this legislation.

If there was a one-size-fits-all regulation for corporate governance—and if it was appropriate—the Labor Party would be prepared to consider it. But, of course, no such thing exists. What we see is that industry super funds are being overly regulated by a government which tells us that they believe in getting rid of red tape, not having too much regulation and being an anti-red-tape government. But here we have them prescribing that a third of directors should be independent when funds already have that capacity. They can already appoint independent directors if they think it is in the best interests of the fund.

What is important is not whether a director is necessarily independent. It is the skills that director brings, the expertise they bring and the experience they bring. The fact of the matter is that there is already significant regulatory oversight of superannuation funds. The government might have us believe otherwise, but that is not the case. APRA has the power to set and supervise compliance and enforce credential standards so that funds meet the financial promises they make to beneficiaries. APRA funds are required to continuously report on the composition of their boards and whether boards and individual directors have the required mix of expertise and skills. Boards are also required to conduct ongoing performance reviews, manage conflicts of interest and make sure directors are fit and proper.

Many of these requirements were only introduced in July 2013 but this government just could not help itself. Instead of just seeing how those reforms play out, seeing whether they meet the objectives set out for them by the previous government, no, they go down the old-fashioned route that they have engaged in since the early 1990s of opposing superannuation and opposing industry superannuation in particular. There has never been an industry super fund that a Liberal National Party MP did not see and want to damage and to punish. And we see that long-standing process continued in this legislation.

I again invite the government to provide one piece of evidence that there is a problem with industry funds which needs to be fixed and fixed by this legislation. Show us the evidence that industry funds are underperforming. Show us the evidence that there are systemic conflicts of interest in industry funds. They will not be able to do so because no such evidence exists. This government, which claims to have an evidence based approach to policy, simply cannot have such an evidence base because this evidence does not exist.

The fact of the matter is that there will be costs imposed on funds as a result of this imposed overregulation, this heavy-handed regulation, this red tape that is imposed on industry funds by this interventionist government, who seek to impose their will on the trustees of industry super funds, who think they know better from Canberra than the employer representatives who are experienced and well qualified, and the employee representatives with their member's best interests at heart who are also well experienced a well qualified. This government thinks they know better than all of those. They know better than all the industry super fund trustees that have done such a good job for their members over the years that industry super has existed.

I do not mind saying industry super has done very well for many millions of members including many members of this House over the years and that has continued so I have full confidence in the particular directors of many of the industry funds both employer representatives and employee representatives. I see very little case for this overly heavy-handed form of regulation, which is hard to reconcile with this government's alleged zeal to reduce red tape—because they only do that when it suits them. They only do that when it suits their prejudices. I hesitate to call it an ideology because an ideology implies some sort of coherent set of logical parameters to their thought process and I do not see any evidence of that. I just see prejudice when it comes to this government's approach to superannuation, prejudice against lower-income earners and against industry funds. Such is this government's hatred of trade unions that they are prepared to say that they will overly regulate industry funds because they happen to have union representation on them as well as employer representation on them. And that just shows was what is wrong with this government's approach.

We have seen the danger of a one-size-fits-all approach. It has been highlighted by many commentators in this debate and in other debates. The danger of a one-size-fits-all approach when it comes to governance systems and structures which are overly prescriptive was highlighted as long ago as in the HIH royal commission by Justice Owen. In that commission he pointed out that it can be very dangerous to impose governance systems or structures that are overly prescriptive and are one-size-fits-all. The fact of the matter is that is exactly what this government is doing. As David Whitely, chief executive of Industry Super Australia, has said in relation to this, 'It is a solution in search of a problem … It is not because of any systemic performance within the sector.' The fact of the matter is that Mr Whitely in this regard is right. Ian Ramsay, Professor at Melbourne University, is right when he says skills, expertise and experience were more relevant criteria than independence per se. Peter Swan, Professor at University of New South Wales, was right when he said what is important is independence from management, not the owners—the owners being the members of the fund.

There are matters of independence of directors which governments can and should from time to time consider, not singling out industry funds but looking at the independence from management. The separation of management and directors right across the superannuation sector is something which is worthy of debate in this House, but of course we do not see that from this government. They always go the cheap and easy route, which, in this case, involves an attack on industry super because that is a very obvious play for this government to embark on. If this Prime Minister was fair dinkum, he would change the approach. If this Prime Minister was fair dinkum, he would actually go back and say, 'Well, let's have an evidence based approach. Let's take the Murray inquiry as a whole. Let's respond to it in one go.'

The opposition are being fair dinkum. The opposition are not playing politics on the Murray inquiry. We will not abuse that but of course this government has not done that because they cannot find it within their wit to do any better than what they have delivered to the Australian people for the last two years, and what a very poor government that has been indeed.

Mr JOHN COBB (Calare) (20:05): I rise to support the Superannuation Legislation Amendment (Trustee Governance) Bill 2015 and the bringing in of measures to improve the governance of the superannuation industry. Obviously superannuation has become one of the biggest money funds in Australia—probably is the biggest by far. It does need improving, it does need modernising and it does need to be more efficient. We just heard the shadow Treasurer say it was so perfect but it quite obviously was not. What the government is doing is meeting a need to improve the governance, to improve the efficiency and to make it a competitive industry. We have a responsibility to ensure that superannuation boards have the most experienced members and those with the right expertise to get the best outcomes for fund members. I must stress this amendment is not singling out any one sector; in fact, the changes equally apply to corporate industry public sector and retail funds. The modernisation of superannuation is necessary considering superannuation is already the second-largest asset held in Australian households. There is currently $2 trillion in super and this is projected to grow to $9 trillion by 2040. This increase is no surprise, with Australia's ageing population; in fact, it would be a worry if there were not this increase. By 2055 the number of Australians aged 65 and over is expected to double. It does require the government to ensure that the industry is going to be capable of meeting these needs and be well run in the meantime. In this case, action has been well overdue, as the current requirements are outdated and no longer reflect the size and the structure of that industry.

The changes come in response to independent reviews of the superannuation system. The Cooper review and the Financial System Inquiry recommended that superannuation trustee boards include a higher number of independent directors. The proposed changes will require all superannuation funds to have a minimum of one-third independent directors on their trustee board and an independent chair. An independent director is a person who is not a substantial shareholder of the super funds trustee or who does not have a material business relationship with the licensee and has not had one for the past three years. This definition has been broadened to take into account a person's wider personal circumstances. APRA will enforce the changes and hold the ability to determine if a person is independent. This will enable APRA to respond to situations where a person's circumstances or their capacity to exercise independent judgement is clear, but for reasons such as timing, restructures, mergers and acquisitions. This gives trustees a three-year period to make the necessary changes from the time the legislation receives royal assent.

The purpose of these changes is to ensure that Australians have the best people governing their retirement savings. The current system does not mean independent directors will provide boards with an external perspective, and it is quite obvious to all advisors that this needs to happen. Independent directors will be able to provide a check on management and conflicts of interest, and will act as a safeguard to related party interests being put ahead of member interests.

The new governance arrangements will replace existing requirements of equal representation of employer representatives and member representatives on the boards of standard employer-sponsored superannuation funds of five or more members. The 2014 Financial System Inquiry final report recommended these changes to ensure efficiency and best practice. Given the diversity of fund membership—and I think this is the whole point of this—it is more important for directors to be skilled, to be independent and to be accountable than to be representative. Their job is to make the members money, not to be representatives of the members. I think there is a not-so-subtle difference there. These changes will promote strong governance through the power of an objective source. The bill does not restrict the composition of the remaining two-thirds of board members. Boards can continue to structure themselves in a manner they believe will serve the best interests of their members.

After a lot of consultation—I know they came to see me—these proposed changes have been welcomed by various members of the industry. CHOICE echoes the government's sentiment—that having higher standards of governance will mean consumers have a secure retirement. Suncorp believes it will ultimately benefit customers as it supports competition, while the Association of Superannuation Funds says it reflects community expectations and is a positive outcome for the whole industry.

I will stress that at the moment the current system is lagging behind, and industry realignment is necessary. It is important that superannuation boards are not exempt—I stress: not exempt—from standards reflected in corporate governance principles that apply to all successful companies. It brings it into line with domestic and international best practice. The current system is largely out of step—it is based on history rather than need, and that is: the need and the interests of those who have funds within the funds system—with other corporate sectors including listed companies, banks and general insurers. All of these at a very minimum recommend a majority of independent directors with an independent chair.

There is no intention for this to be and nor is it an attack on industry funds. In actual fact, quite a number have already moved to a model that is similar to what is being proposed here today, while others have taken a constructive approach towards the changes—unlike the opposition, who seem to think that what they do cannot be fixed. Well, it can certainly be improved, and that is what is happening.

The bill delivers on the government's superannuation election commitment to align governance in superannuation more closely with corporate governance principles applicable to ASX-listed companies. The current model does not allow for accountability or transparency—in fact, it prohibits this and allows for decisions to be made that may not be in the best interests of members. The changes will ensure a stronger superannuation system to support the future retirement of Australians.

Mr THISTLETHWAITE (Kingsford Smith) (20:13): Quite simply, the effect of the Superannuation Legislation Amendment (Trustee Governance) Bill 2015 and the coalition government's approach to superannuation retirement incomes is that Australians will save less for their retirement. That is the crux of the matter of this bill and the suite of other reforms that have been introduced by the Abbott-Turnbull governments to ensure that the incentives for Australians to save more for their retirement are removed, and the effect will be that they will have less in their superannuation accounts than they otherwise would have under a Labor government. Quite simply, this is dumb policy. In an environment where there are big questions about Australia's fiscal sustainability, and an environment where we have an ageing population putting more pressure on our aged-care services and more pressure on the age pension budget, to be cutting back on the amount that we are encouraging Australians to save for their retirements is simply dumb politics, and it represents this government's obsession with their ideological views being put before the interests of Australians and the Australian economy. It completely demonstrates how out of touch the Abbott-Turnbull government is.

In 2013, the Financial Services Council did the most comprehensive study and qualitative analysis of Australians' views of superannuation. It was the largest survey that has been conducted of Australians about their views of our superannuation system. The results are quite interesting. They show that a whopping 83 per cent of Australians support an increase in compulsory superannuation contributions from nine to 12 per cent. Of course, this was Labor's plan when we were in government. Labor developed a plan to ensure that Australians save more and that we take pressure off the age pension, off the aged-care system, by encouraging Australians to save more by increasing the compulsory level of superannuation contributions from nine to 12 per cent. It was a staged increase; it was not an immediate increase. It would have been completed by 2020.

What was this government's approach to that very positive policy that would have resulted in Australians having more money in their superannuation balances by 2020? The Abbott and Turnbull governments and those opposite all voted to stop that scheme going ahead. They voted to halt the increase in superannuation from nine to 12 per cent. They say they have put it on hold, but, to the Australians out there who may be listening or watching: that is complete garbage. If you think that the government is going to increase superannuation from nine to 12 per cent at any time into the future, you have rocks in your head. The government have form on those sorts of issues. Which was the last Australian government that also put a halt to compulsory superannuation contribution increases? That would be the Howard government. They encouraged Australians to save less and the Abbott-Turnbull government took up the cudgels when they came to office, once again demonstrating how out of touch they are.

The most common type of fund that Australians support and place most of their superannuation contributions into is an industry fund—a super fund that is managed cooperatively by workers and employers. The Financial Services Council survey demonstrated that 59 per cent of Australians have their superannuation savings invested in an industry fund. Why is that? Why would most Australians have their superannuation in an industry fund? There is one simple answer to that question: they are the best performing funds. They are also the ones with the lowest fees and are managed cooperatively by people who understand their circumstances—most notably fellow workers and employers from that particular industry or that particular business. They have served our economy and workers well. The result of the encouragement of industry funds in Australia has resulted in $2 trillion being invested in Australia's superannuation system, the fourth-largest pool throughout the world of investment saving funds. For workers who may lack particular expertise in managing retirement incomes and managing investment funds, it has provided access to the best quality advice at very reasonable cost. That has proved very effective for the management of workers' retirement incomes, but it is also very effective for Australia's economy because, as I said, it has built up a very large pool of investment funds, which of course can be used, subject to trustee obligations under particular funds, as a source of investment funds for other projects throughout the country—most notably infrastructure, which is productivity-enhancing and ensures that our economy is growing. We know that industry funds are the best performing funds, we know that they are the cheapest and we know that most Australians have their retirement savings in an industry fund.

What did the mob over there do when industry funds performed so well? What did the Abbott-Turnbull government do? They introduced legislation such as this that seeks to tear that system down. They seek to meddle in the management of the most successful and best performing funds and the cheapest sector in the superannuation industry. That is the subject of this bill. That is why they are doing what they are doing with this bill. They are changing the governance of the most successful sector of the superannuation industry. Under this bill, registered superannuation entities must have a minimum of one-third independent directors and an independent chair on their board. That is something that the coalition has been pushing for many years. It is an ideological push that could harm the performance of superannuation funds and affect the retirement incomes of thousands and thousands of Australian workers. It represents, once again, the Abbott-Turnbull government putting their ideological interests ahead of the interests of Australian workers and, indeed, ahead of the interests of the health and growth of the Australian economy.

The question that needs to be asked is: why is this needed? Why has the government come up with this reform? Why is this needed when industry funds are the best performing? Why is this needed when industry funds have the lowest fees? Why is this needed when industry funds have the best returns? Recently, independent expert advice proved that, in terms of returns for members and investors, industry funds returned on average 10.2 per cent growth compared to retail funds of 9.6 per cent growth. They are also some of the safest funds in the world when it comes to the management of members' funds. There is no justification whatsoever for these reforms. At the heart of this is an ideological obsession with the fact that the coalition have never been comfortable with the notion of workers managing their own retirement incomes. They have had an ideological bent against it from the moment Paul Keating established the compulsory superannuation system in this country. It is sad and it demonstrates how out of touch the government really are. In many respects it just shows that this bill is unnecessary, because in 2013 the then Labor government introduced new governance obligations for industry superannuation funds. Those obligations require all funds, using an independent third party, to regularly evaluate the effectiveness of their board and directors, to manage and disclose conflicts of interest, to ensure all directors are fit, proper and capable of making decisions expected of them, and to regularly review their board renewal processes. APRA, the industry watchdog has robust enforcement powers and has admitted that these reforms that were introduced by Labor in 2013 are yet to be bedded down. They are still in the process of putting these reforms into action.

So there is no justification for these reforms. This bill represents a heavy-handed intervention and a 'one size fits all' approach, regardless of the superannuation fund's business model and the circumstances of its membership. It does not exactly fit with the traditional Liberal philosophy of not intervening in a market, particularly in a market where the funds that are being invested are performing very well and getting great returns for the members, and are safe.

The bill also ignores some of the major issues that exist in Australia with respect to funds management. I can recall as a senator in the past sitting on Senate committees that looked into the collapse of investment funds in Australia—investment funds such as Trio Capital, Opes Prime and others—where many workers who established their own self-managed super funds on the advice of so-called independent financial advisers lost all of their savings, with no recourse at all for any compensation or actions that recovered that lost capital, because they were outside of the industry superannuation fund system and they did not have the protection of the Superannuation Industry (Supervision) Act.

Those self-managed super funds and that poor financial advice resulted in thousands of Australians losing their retirement income. I can recall going to Wollongong and taking evidence from many of the people who lost much of their retirement savings in Trio Capital. Many of these people had worked in the coal mines or steel mills around Wollongong for their whole life and were just at the end of their working life. They received advice from so-called independent financial advisers to re-mortgage their homes so that they could invest in these schemes. So, not only did they lose their retirement savings but they lost their kids' inheritance as well. Once again, there was no recompense because they were outside of the system.

This was an issue Labor was well aware of when we were in government. That is why we instituted the Future of Financial Advice reforms. It was to tackle some of these problems of poor advice to vulnerable people. Again, what was the response of the Abbott/Turnbull government? When they came to government they sought to water down the Future of Financial Advice reforms, particularly the 'best interests' rule for ensuring that financial advisers were acting in the best interests of their clients.

That is a real issue that is still ongoing in Australia. One would think that if the coalition government were in touch they would look at it. But, once again, they have ignored it. We have had these big scandals in a number of the big banks throughout Australia in respect of their wealth management practices and the advice that has been given to individuals through their banking and finance advice services. Again, the government has ignored many of the recommendations of some of the inquiries into these issues, and instead has sought to attack the best-performing and safest aspect of the wealth management and retirement incomes investment advice system.

Finally, I want to deal with the issue of the gender gap. At the moment the average superannuation payout an Australian woman will receive when they retire is $112,600. The average for a man is $198,000. There is a massive difference in Australia at the moment in the retirement incomes of men and women. In Australia, 35 per cent of women have no superannuation at all. Furthermore, 55 per cent of women will retire with less than $25,000 in their superannuation fund.

So, what does this Liberal government do when it comes to looking at this issue of the gender imbalance in retirement savings in this country? They seek to legislate to make the problem worse. They seek to get rid of the policies that were meant to address this issue, in the low-income superannuation contribution. Low-income earners have a disincentive to save. It is built into the taxation system. The taxation system ensures that if you are a low-income worker—someone typically on less than $38,000—you will pay more tax on your superannuation that you will, effectively, on your marginal rate for earnings. That is a disincentive to working people. So, Labor introduced an effective tax credit to ensure the disincentive was removed. This government has scrapped that tax credit: they have gotten rid of the low-income superannuation contribution.

Effectively, what they have done is put a tax increase on three and a half million of the lowest paid workers in the country, two million of whom are women. So what we are going to see is women and low-income workers save less for their retirement, putting more pressure on the budget in the future and more pressure on the aged care system. It is dumb politics and that is why this bill must be opposed.

Mrs PRENTICE (Ryan) (20:28): I rise to support the Superannuation Legislation Amendment (Trustee Governance) Bill 2015. The bill delivers on an election commitment to improve governance in the superannuation industry. It updates laws enacted at an earlier time in the evolution of Australia's superannuation system, when the industry was far newer and far smaller than it is today.

These days, the superannuation industry has more than $2 trillion in assets under management, a figure equivalent to 120 per cent of Australia's GDP. As the former minister noted in introducing the bill, this figure is expected to grow to $9 trillion by 2040. It is an industry in which most of us have a stake. For many Australians, their superannuation fund is their largest single investment outside the family home. This bill affords the protection of a governance regime that will better safeguard the superannuation accounts of all Australians. In light of the current size and anticipated future growth of the industry, it is both reasonable and necessary to bring governance requirements for all superannuation funds up to best-practice standards and, importantly, in line with those expected of corporate superannuation funds and Australian Stock Exchange listed companies.

This bill does just that. It modernises board requirements to ensure that super fund boards represent the broad range of skill sets required to manage a sophisticated investment vehicle. At present, corporate and industry super funds are required to have equal numbers of employers and employees or member representatives. However, the number of independent directors is currently limited to one in the absence of Australian Prudential Regulation Authority one-off approval. This bill will ease limitations on the number of independent directors and will instead require superannuation trustee boards to have a minimum of one-third independent directors as well as an independent chair. This is not an unreasonable requirement. Indeed, other corporate sectors such as listed companies, banks and general insurers all require, as a minimum, a majority of independent directors with an independent chairman. It is also international best practice in many countries overseas. No one particular sector of the industry is targeted by this bill, as the changes apply equally to all corporate, industry, public sector and retail funds.

The origins of this bill can be traced back several years to the recommendations of the 2010 Cooper review, commissioned by the former government. That review recommended that superannuation trustee boards include a higher number of independent directors. The findings of the Cooper review were reflected in the more recent financial system inquiry, which came to similar conclusions. The superannuation industry has had several years to consider the merits of this proposal.

Positive feedback for the reforms has come from a diverse range of organisations and industry bodies such as Choice, National Seniors Australia, the Association of Financial Advisers, the Association of Superannuation Funds of Australia, the Financial Services Council, the Australian Chamber of Commerce and Industry, the Australian Institute of Company Directors, the Business Council of Australia, chartered accountants, the Council of Small Business Australia and the Governance Institute. Industry players themselves have also been supportive, including BT Financial Group, Qantas Super, First State Super, LGsuper, Mercer, Suncorp, Sunsuper, UniSuper and VicSuper—to name just a few.

It is clear that the proposed reforms have support from a broad cross-section of the industry and from organisations representing interest groups that would be affected by this change to the industry. Indeed, in some respects this bill merely represents government catching up with a position that the industry has already embraced and is moving towards. Industry super funds such as Catholic Super, First State Super, Hostplus, Prime Super, UniSuper and VicSuper are already moving constructively towards incorporating the changes. In doing so, there is broad recognition that improving corporate governance is a goal worth pursuing. Irrespective of performance, independent of any consideration of investor return, super funds are recognising that their board structures need to evolve. They recognise that everyday investors need to have full confidence that the board has their best interests at heart and has the skill and capacity to act in their interests.

I note with interest that other commentators have recognised the need for change. Members opposite may be interested in the comments of former Australian Workers' Union boss Paul Howes, who noted:

Equal representation has been a success but the evolution of the super industry is important and I can't see anything negative in having more independents on boards.

We know from experience that the parliamentary Labor Party has a long record of heeding the words of Mr Howes. In fact, I remember a certain evening back in 2010 when a mere appearance by Mr Howes in a late-night ABC interview was enough to bring down a Labor administration. To those opposite, I urge them to heed his words again. This time, I can assure them they will not live to regret it. Mr Howes's support serves to further highlight the point that unions have nothing to fear from these reforms.

Industry super funds with a commitment to good corporate governance have nothing to fear from these reforms. The reforms contained in this bill protect the interests of everyday Australians with superannuation accounts. They will improve confidence in the corporate governance arrangements of superannuation funds, and they bring Australian superannuation funds in line with national and international best practice. This bill is worthy of the support of all members in this place and I encourage them to get behind it. I commend this bill to the House.

Mr SUKKAR (Deakin) (20:35): It is wonderful to be able to speak in favour of the Superannuation Legislation Amendment (Trustee Governance) Bill 2015 tonight. We have heard a lot of contributions from those opposite and it is quite embarrassing, really, that what should be an uncontroversial change to our superannuation arrangements is being vehemently opposed by those opposite because it does not accord with the wishes of their union paymasters. All we want to do is improve the governance arrangements for super fund boards to ensure that they meet the highest standards of governance. With $2 trillion under management, rising to $9 trillion under management, why wouldn't we want the highest governance arrangements applying to those funds?

The amendments in this bill, as highlighted by previous speakers, are not about singling out any one sector. The changes apply equally to corporate, industry, public sector and retail funds. The changes will not apply, though, to self-managed super funds. As I said, superannuation represents $2 trillion and is the largest asset held by Australian households. In our view, the appropriate provision of independent directors on trustee boards is a vital step towards strengthening the super system. In our view, independent directors bring to a board a dispassionate perspective, enabling the board to benefit from a diversity of views and of course providing a check on management recommendations and conflicts of interest. Therefore, the presence of a greater number of independents on super fund boards will increase the accountability of management and strengthen the oversight of funds, helping to ensure that related party interests are not put ahead of members' interests.

The new governance arrangements in schedule 1 will replace the existing requirements in part 9 of the SI(S) Act that require equal representation of employer representatives and member representatives on the boards of standard employer sponsored superannuation funds of five or more members. In this respect, the previous government's 2010 super system review, the Cooper review, recommended that the SI(S) Act be amended so that equal representation should no longer be mandatory. In addition, the Cooper review noted that the presence of independent directors on boards is best practice in corporate governance. The Cooper review examined equal representation and found that:

… changes in the industry over time and certain implementation practices mean that equal representation no longer seems to achieve its original ... objective.

The 2014 financial system inquiry's final report concluded that independent directors on all superannuation trustee boards promote good governance by bringing an objective perspective to issues the board considers and holding other directors accountable for their conduct. In addition, independent directors allow for an increased accountability of decisions made by other directors who may have conflicting interests.

This bill delivers, therefore, on the government's superannuation governance election commitment to align governance in superannuation more closely with the corporate governance principles that we all accept and that are applicable to ASX listed companies, for example. The bill does not restrict the composition of the remaining two thirds of board members. The government considers that it is appropriate to leave its boards to structure themselves in a manner they believe will serve their members' best interests. Relevantly, to support the reforms, the bill provides APRA with the power to make determinations as to whether a person is independent or not. This will enable APRA to respond to situations in which a person's circumstances and his or her capacity to exercise independent judgement is clear but, for reasons of perhaps timing, restructures and mergers and acquisitions, that has changed.

The amendments will take effect from the date of this bill receiving royal assent, with a three-year transition period to allow existing super fund boards to comply with the new requirements. Any new fund licensed by APRA after the date of royal assent will need to comply with the new requirements from the time they are licensed.

A number of stakeholder groups support these proposed changes. As I said at the beginning, these should be uncontroversial, and I would think they should receive support on both sides of the House. For example, the Association of Superannuation Funds of Australia said:

The government's release of draft legislation, which will require boards of superannuation funds to be comprised of at least one-third independent directors … is a positive outcome for superannuation.

That is the Association of Superannuation Funds of Australia. They also said:

As a minimum, there must be the flexibility to appoint directors who have the right skills, experience and knowledge, as well as cultural fit.

Also, the Council of Small Business Australia said:

The fact that the directors are, in the great majority, chosen firstly on where they work rather than what skills and experience they have creates question marks around whether the best model of governance is in place. This proposed change creates improved transparency and an opportunity for the boards to improve their approach to collecting funds and dealing with people in the supply chain.

It is therefore our view that these changes, if they are good enough for governance arrangements for our top ASX listed companies and good enough governance arrangements for all listed companies around the world, then they should be good enough for our superannuation industry. It does not stop any fund from appointing directors with relevant experience who are the best people to be entrusted with the decisions to properly invest Australians' superannuation savings.

I repeat: with our superannuation savings pool reaching $9 trillion, there is no room for errors. The government has to take an abundance of caution in ensuring that the composition of all our boards has the best interests of their members at heart but, more importantly—because I am sure they do have the best interests of their members at heart—that there is the requisite balance of skills on those boards to make the best investment decisions. With a pool of savings that large, it is incumbent on government to ensure that Australians are getting the best return for their retirement. I therefore will not repeat the contributions of those who have gone before me, and I commend the bill to the House.

Dr CHALMERS (Rankin) (20:44): Thank you for this opportunity to speak on the Superannuation Legislation Amendment (Trustee Governance) Bill 2015. Superannuation is a subject that I have long held an interest in, and I am pleased now to be able to represent this policy area from our side of the House.

The government tries to claim that this bill is about improving the performance and accountability of superannuation funds, but in actual fact the bill represents nothing more than a change to our superannuation system, which is badly motivated, ideologically driven and unwarranted.

I have personally the greatest respect for the retail funds and the banks, but it is an observable fact that the industry super funds are among the most successful and highest-performing funds in the sector year on year. I think it is important when we debate these important issues that we do not descend into two warring tribes—the retail funds on one side; the industry funds on the other—replicated in this House and in the other chamber. It is important that we deal in the facts.

I am just as interested in the academic and independent analysis of this situation as I am in either side of the argument. I am interested in Ian Ramsay from Melbourne university who said:

Skills, expertise, and experience were more relevant criteria than 'independence' per se.

I am interested in Sam Wylie from the Melbourne Business School who said:

The industry fund sector as a whole has been well governed and has delivered tremendous value to its members .

I am interested in what Fiona Reynolds had to say from the Australian Institute of Superannuation Trustees. She said:

We think there should be flexibility in the system that allows you to appoint independents if you want, but you are not forced to.

The sad reality here is that the government is attacking a model that works. It is seeking to dismantle industry super funds' successful representative model of governance, which has seen them have higher returns for their members who retire more comfortably as a result—and that is the most important thing. In other words, as my colleague the member for McMahon said, they are proposing a solution to a problem that does not exist.

This ideological crusade was started by the member for Kooyong in his time as Assistant Treasurer, and it has been disappointing to see the new Assistant Treasurer continue in this way. Labor will support policies that make our superannuation system stronger, fairer and more sustainable. This bill will achieve none of those goals. For this reason, as my colleagues have indicated, we will be opposing this bill in its entirety. We call on other members—particularly, those on the crossbench in the other place—to support the representative model for industry super funds as well, because it works.

Members here know that Australia's superannuation system is the envy of the world—not just a proud Labor achievement but a proud national achievement. The total assets of Australian superannuation funds, as my colleague on the other side of the House mentioned, are more than $2 trillion as at the end of June this year. This was a 9.9 per cent increase on the same time last year.

Millions of Australians will rely on these funds to fully or partially finance their retirements. This fact alone is enough for us to take the issue of superannuation governance very seriously. We must ensure that our superannuation funds continue to perform and provide for Australian people as they entire retirement.

That is why we already have very strong regulatory oversight of superannuation funds by APRA. APRA has the power to set and enforce prudential standards for superannuation funds. They have set minimum foundations for good governance of superannuation entities, requirements for super funds to make sure that directors are fit and proper and manage conflicts of interest effectively.

The existing prudential standards are relatively new, having come into effect from July 2013. Importantly, super funds are required to continuously report on the composition of their boards, and whether boards and directors have the required mix of expertise and skills—something that both sides can agree is important. These regulatory requirements are what APRA has determined to be appropriate for superannuation funds to ensure good governance, and we strongly support their efforts and these measures.

Most industry super funds go above and beyond APRA's regulatory measures. In addition, the Superannuation Industry (Supervision) Act 1993 requires super funds to have equal representation of employer and employee groups among their trustees, or to have a policy committee comprising equal numbers of employer and member representatives. That is the so-called representative model.

Many analysts point to the representative model of super fund governance as one of the key factors of the success of our superannuation system. Funds with representative directors perform substantially better than retail funds, as I have said. That is a fact that cannot be disputed by anyone in this debate. By the numbers, the average performance of industry funds for the year was 10.2 per cent compared to 9.6 per cent for retail funds. Industry funds are also more likely to change asset allocations more often and put more money into unlisted investments like infrastructure—another welcome practice.

According to APRA, in March this year industry funds had six per cent of their funds in unlisted equity, seven per cent in infrastructure and seven per cent in unlisted property. In comparison, retail funds had three per cent in unlisted equity, one per cent in infrastructure and two per cent in unlisted property.

One of the main reasons given for this disparity is that representative industry funds' trustees are more likely to feel obliged to their members to get the best possible returns. The representative model has been proven a success for Australian industry funds, and there has been no cause to make substantial changes to the model.

The government has proposed changes which will radically change the face of the Australian superannuation system. There are a few key components of the government's amendments. Others have dealt with them in detail; I will mention them briefly: one-third of super boards must fit their definition of an 'independent director'; the chair must be independent; the equal representation requirement has been entirely removed; and they have introduced an 'if not, why not' disclosure of majority independent directors.

As I said, we will be opposing all of these amendments to the act for these five reasons: one, there is no evidence in favour of independent directors; two, the current representative model is working well, as I said; three, there are governance safeguards in place already; four, the proposed changes are overly prescriptive; and, five, the amendments will cost millions of dollars for fund members.

When it comes to no evidence for independence, the government has not been able to stack up the claim that maintaining independent directors on not-for-profit superannuation funds would improve fund performance. A study looking at the governance and performance of APRA-regulated funds found no evidence that board independence and chairman independence affect that performance.

Empirical research on American public pension funds indicates that the proportion of outside trustees on the board has no significant relationship with funds' excess outperformance. The government have just asserted that independent directors are better. They have made an ideological case but not a case based on fact or observation or in the best interests of the members of the funds, which should be our main concern. They have not provided evidence in their speeches or in the explanatory memorandum that these changes are necessary.

That is because, as I said before, the representative model is working. This is a solution to a problem that does not exist. Of Chant West's top 10 performing superannuation funds for the last financial year, eight of them were not-for-profit funds. These are under attack. The Grattan Institute found that not-for-profit funds have lower fees and higher returns across a variety of investment options. There is so much evidence of this. The McKell Institute found a direct relationship between the representative boards—the model that is being attacked—and higher returns. Why would we legislate to ban a model that is working for the Australian people?

There are already substantial safeguards and regulations in place in the hands of the good people at APRA. Superannuation fund members are already protected by a system of APRA regulation. APRA have the power to intervene where they do not believe that a super fund has the ability or willingness to rectify serious weaknesses. They have the power to suspend or remove a director of a superannuation fund. There is just no reason to mandate a fixed regulatory structure when APRA already have the power to intervene when there are issues.

These changes are overly prescriptive. They do not take into account the differences between superannuation funds. They do not give superannuation funds the ability to determine the ways that best fit their model and their members. Super funds are not all the same. They should not necessarily be treated in the same way either.

Governance experts around the world agree that there are a complex set of factors that determine what makes up a good board. In 2012, the Productivity Commission said in their report on default superannuation funds in modern awards that there is 'a lack of compelling evidence to suggest that any one model of board structure should be viewed as clearly preferable in all cases'. Those opposite come in here and quote the PC to us all the time. This is the Productivity Commission saying that there is no evidence that one type of board structure is better than another in all cases.

On top of that, a whole lot of qualified and experienced people could be disqualified from being independent directors under the government's model. For instance, directors would be unable to serve on the boards of wholly owned subsidiaries of super funds, even where the subsidiary is established only to serve the interests of the fund and for the profit of members. No employee or employee representatives will be able to serve as a chair of a board at all, even when they are the most qualified and suitable person for the job. That is not just a thing about employee representatives but about employers as well. They will be disqualified, even if they are the best for the job. This bill seeks to make radical changes to the superannuation legislation which deprive APRA and individual funds the right to determine the suitability of boards.

Finally, the changes will be costly. The amendments to the superannuation legislation will be costly for governments but also for the individual members of a superannuation fund. The explanatory memorandum to the bill suggests that these measures will cost government $8.5 million in start-up costs and a further $12.3 million in ongoing costs annually. These costs understate the real impact that the amendments will have on the broader superannuation sector. Immediately after this legislation is in force there will be costs associated with finding new directors, including search costs, due diligence, induction and training. Industry data has also found that the premium for independent chairs, which is something like $41,000 on average, is 70 per cent higher than for representative chairs, averaging something like $24,000. These salary costs could be even higher, with some professional directors currently on the boards of retail funds being paid in excess of $100,000.

Industry Super Australia has calculated that the director churn resulting from the government's new rules for super boards, if they get up, could be up to S168 million. These costs will have to be borne by fund members, meaning the changes will cost the retirement funds of average Australians. Average Australians out there in Middle Australia should not have to pay higher fees on their super because of this government's ideological bent against representative super funds.

As I said, this side of the House will be opposing the Superannuation Legislation Amendment (Trustee Governance) Bill 2015. The representative model used by industry super funds today is part of what makes them the largest and most successful funds around the world and in a superannuation system that is, as I said, the envy of the world. It was an economic policy creation and innovation of the Australian people that was proudly made by the Australian Labor Party, which represented them at the time and represents them now. We are proud of this creation. We should be looking for ways to make it stronger, fairer and more sustainable, not conducting this kind of ideological crusade that says that anything that involves employee and employer organisations working together is somehow bad.

This legislation is badly motivated and poorly designed. We want to make policy. We want to work with anyone who wants to work with us to make the superannuation system better and not with people who want to divide and diminish it, with the ultimate costs being worn by the Australian people. The bill fails to acknowledge the real differences between super funds and their ability to determine their own governance procedures in the interest of members, under the watchful eye of APRA. Labor is taking the view on this issue, 'If it ain't broke, don't fix it.'

Mr Fletcher interjecting—

Dr CHALMERS: The cranky member for Bradfield sits at the table and makes our arguments for us, as so many others on that side have made our arguments for us. Every time he looks up from his comics and opens his mouth he reveals what this is. It is just a cranky, ideological crusade by a government that are a leopard that has not changed its spots. They are still the same as they were before their leadership changed hands. They still have the same policy to diminish super in this country and to use the Australian government in the House of Representatives to conduct this ideological crusade. My message to the government is that the ideological crusade that they are pursuing should be ditched. They should own up to the evidence that the representative super model is working and does not need to be changed. (Time expired)

Debate interrupted.