Tax Laws Amendment (Tougher Penalties for Country-by-Country Reporting) Bill 2016
HOUSE OF REPRESENTATIVES
MONDAY, 29 FEBRUARY 2016
Dr LEIGH (Fraser) (10:38): I move:
That this bill be now read a second time.
Picture a glorious summer's evening at the SCG: the stadium lights are blazing, the dusk is settling in, and family and friends are abuzz at the prospect of a close finish to a match that is hanging in the balance. Suddenly a naked man runs out on the pitch, screaming in front of thousands. The security detail finally tackles him after a minute of cavorting.
Incidents such as these are not uncommon. One happened late last year at a Big Bash Twenty20 match, prompting Ricky Ponting in the commentary box to say: 'Let's hope that is a $6,000 fine at least. It's disgraceful; we don't like seeing that. Some people probably do, but it's a bad look for the game.' He was certainly right that the look was bad—for the streaker as well as for the game—but unfortunately Mr. Ponting's quite reasonable minimum fine threshold was above what the real streaker would receive. The penalty for invading the pitch at the Sydney Cricket Ground is $5,500.
Perhaps in the larger scheme of things, a streaker is a public nuisance, but the harm is—let us face it—fairly brief.
The issue of multinational tax avoidance, on the other hand, is a significantly more serious one. I would venture to suggest that Australians are more outraged by multinational tax avoidance than they are by a streaker at the SCG. This is largely thanks to the work of former Treasurer Swan and David Bradbury and the work of Senators Dastyari and Ketter.
One way in which we crack down on multinational tax avoidance is through country-by-country reporting, which helps tax authorities understand what global firms are really up to, where their money is going and how much tax they pay.
But, as it turns out, the maximum fine for breaching country-by-country reporting laws is $5,400—less than the fine for streaking at the Sydney Cricket Ground.
The right thing to do for country-by-country reporting is to ensure that the penalties are raised. Country-by-country reporting applies to firms with revenue of $1 billion or more. They are classified as 'significant global entities' and are subject to more stringent anti-avoidance rules.
Country-by-country reporting is part of the countering-base-erosion-and-profit-shifting (BEPS) plank of the OECD's work. Australia committed to that plank last year through the tax laws amendment (combating multinational profit shifting) bill 2015.
When billion-dollar firms put in their tax returns, they have to provide the Commissioner of Taxation their country-by-country reports.
Should they fail to do so, the Taxation Administration Act 1953 says the company is liable for one penalty unit per 28-day period, up to a maximum of five penalty units. For companies with revenues above $20 million, which would be all of these firms, the base amount of the penalty unit is multiplied by five. So, if it is a $180 penalty unit, we are talking about firms that are subject to a maximum fine of $5,400.
This is 1/185,000th of one of these firms' global revenue. It is 0.00054 per cent of their annual revenue. It is just not good enough.
This bill inserts a new clause in the act that applies specifically to significant global entities. It gives the Commissioner of Taxation more power, setting penalties at 125 penalty units for every 28-day period, up to a maximum of 1,500 penalty units. That raises the penalties to $22,500 per 28 days and a maximum of $270,000, reached after 308 days. That is a penalty 50 times higher than the government has presently in legislation.
We recognise that even for some firms a fine of $270,000 may not be enough to get them to do the right thing, so this bill includes another provision. That provision gives the Commissioner of Taxation power to launch an audit of the company's affairs if they continue to refuse to lodge country-by-country reports after the maximum fine has been reached. That provides another incentive for multinational firms to do the right thing, as some currently do.
Because the provisions apply only to companies defined as significant global entities, there is no risk in this bill of smaller businesses being caught up in this increased penalty regime.
It sends a clear message to big firms: do not think you can get away with paying the fine and doing the wrong thing. We will come after you. We will levy a significant penalty and an audit if you do the wrong thing.
Last week we saw in the Senate the government agree to Labor amendments which provided more tax transparency for multinationals. The government actually, for once, did the right thing and supported Labor's sensible multinational tax amendments. If it has its head screwed on right, the government will do the same with this private member's bill.
Let us remember: the current fine for a multinational who fails to lodge country-by-country accounts is less than the fine for pushing in line at a Gold Coast arts centre.
If the Treasurer thinks that billion-dollar firms who are uncooperative with our tax laws deserve a lighter slap on the wrist than someone who pushes into line on the Gold Coast then he ought to rethink his position.
As Tax Commissioner Chris Jordan recently told the Senate: 'Our Australian tax system is under fire from the actions of multinationals and large companies seeking to abuse it.'
We need a well-resourced tax office. But, since the Abbott-Turnbull government came to office, they have cut 4,700 jobs from the tax office—part of the excessive job cuts we have seen right across the Public Service. There have been around 17,000 job losses, well in excess of the 12,000 public sector job losses that were promised before the coalition came to office.
Labor in government introduced the Tax Laws Amendment (Countering Tax Avoidance and Multinational Profit Shifting) Bill 2013, which plugged loopholes in our transfer pricing rules and anti-avoidance provisions. The coalition voted against that bill. Labor made amendments to the Tax Administration Act, requiring the tax office to publish information about firms with revenues of over $100 million listing their taxable income, total income and tax paid. It was no surprise that the coalition voted against that bill in 2013 and did a dodgy deal with the Greens on the last day of the parliamentary sittings in order to raise the reporting threshold for big private companies. Labor's measure would have seen 900 large private firms in the transparency spotlight. The Liberal-Greens deal knocked out two-thirds of those firms.
Labor in government passed the Tax Laws Amendment (Cross-Border Transfer Pricing) Bill (No. 1) 2012. Spoiler alert: the Liberal-National coalition voted against that bill, which cracked down on companies that overvalue assets in international transactions.
Ms Claydon interjecting—
Dr LEIGH: Yes really, member for Newcastle; it is shocking. Between 2012 and 2014, according to the Commissioner of Taxation, better information sharing with other countries yielded $730 million in additional tax. It was a Labor government that signed 28 bilateral information-sharing agreements and it is a Labor opposition that continues to lead on multinational tax avoidance.
The coalition only belatedly signed up Australia to the Common Reporting Standard. Joe Hockey had to be dragged kicking and screaming on that one. Where Australia could have been a leader as part of the early adopter group of nations, we were instead a laggard in allowing tax authorities to automatically exchange information about company and individual bank accounts. When the Tax Laws Amendment (Implementation of the Common Reporting Standard) Bill 2015 eventually came up again in parliament, Labor applied pressure on the government to beef it up. Labor's amendments allow the tax office to begin sharing information with other authorities soon.
Labor has a fully costed multinational tax plan on the table ready to go should the government decides it wants real action on multinational profit shifting. That would add $7.2 billion to the budget bottom line without hurting growth and without hurting equity. It demonstrates our commitment to good tax reform.
Labor is committed to increasing ATO compliance by properly resourcing the office; an early start to third-party data-matching; amending the current thin capitalisation rules; reducing debt deductions for multinational firms; better aligning Australia's rules on hybrid entities and instruments with tax laws in other countries; and stopping multinationals from double dipping.
The pattern is clear. The coalition squibs or dithers on multinational tax avoidance. Labor is always fighting for multinational tax rules that work. This bill today increases fiftyfold the maximum penalty for not complying with country-by-country reporting standards, it gives the Commissioner of Taxation new powers to audit firms who continue to withhold reportable information and it provides the Prime Minister and the Treasurer with an opportunity that gone wanting in the nearly six months since they toppled the previous Prime Minister promising economic leadership: a chance to do something serious on tax reform. Should they choose not to join us, their policies on multinational tax remain as naked and content-free as a streaker at the Sydney Cricket Ground.