Peter Khalil: I also rise to speak in support of the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2019. This amendment bill only goes a very small way to addressing what is still a huge challenge for our country. Since the multinational tax avoidance law took effect in 2016, we have seen some improvements—that’s true. The special Tax Avoidance Taskforce run by the ATO has recouped round $8 billion from multinational corporations, and the ATO has noted that the tax gap is showing an improvement more generally. The ATO has also stated that a behavioural change is underway, with multinationals now more careful with the amount of tax they pay. ‘More careful’ is an interesting phrase. But is that enough? Is it enough just to be more careful? Is it enough for multinationals to just be careful with respect to navigating our tax system?
The fact remains that, as of the latest ATO corporate tax transparency report, which was handed down in December 2018, for 2016-17, as the previous speaker mentioned, one-third of large companies operating in Australia and making a profit paid no tax on profit at all. There are some utterly damning statistics in this report. Here are just a few: Chevron paid zero tax on profit after making $2.2 billion in taxable income in 2016-17; Exxon Mobil made $18.6 million profit and paid zero tax on profit; and Fuji Xerox Australia made $1.1 billion in taxable income and paid zero tax on profit.
The fact remains that companies use a range of tactics and strategies to lower their taxable income in Australia and shirk what we think should be their responsibility to contribute to our society—something which this law has not been fully able to combat. In 2018, Uber reported an Australian revenue of $935.3 million, with a gross profit of $785.6 million. Uber claimed, however, $691 million as service fees, which cut tax payable down to $8.5 million. At least $499 million out of that $691 million was sent to other related parties in the Netherlands. And this was after Uber claimed, in their words, ‘We are meeting all of our tax obligations in Australia.’ Other examples, like IKEA and McDonald’s, pay billions in franchise fees to drastically reduce their taxable income. IKEA’s accounts also show that they are loaded with debt to their offshore parent company—$578.7 million to be exact. That’s another tactic to minimise tax.
You have the big tech companies, Facebook and Google, which are paying more tax in Australia thanks to the multinational anti-avoidance law, but they are still offshoring much of their revenue to avoid the bulk of their responsibilities on tax here in Australia. We know that these tech giants will book advertising for clients here in Australia overseas so that the revenue appears not to be generated here in Australia, even though these ads are for local Australian clients and businesses. In 2018, Google earned $4.3 billion in Australia and Facebook earned around $500 million in Australia, mostly from advertising. Yet they did not pay their fair share of tax last year. Google paid—wait for it—$26.5 million in tax in Australia and Facebook paid only $11.8 million. Maybe that sounds like a lot to some people—it certainly is to people in my electorate—but that’s actually a tax rate for Google of less than one per cent in Australia. It’s 0.6 per cent, to be exact. How did they do this? Well, Google paid about $2 billion out of the $4.3 billion earned in Australia back to its parent entity in the United States. For Facebook, it’s not much better. Their rate of tax in 2018 was just 2.36 per cent. If you’re an average punter on the street this would be shocking to you, but it is also absolutely unacceptable. It just shows how much work needs to be done in this area.
So, while Labor supports this amendment and any effort that the government makes to crack down on multinational tax avoidance, we need to do more. Clearly, companies are still finding ways to avoid their tax responsibilities in Australia. As I said, if your average punters, ordinary Australians, are paying their fair share of tax, why shouldn’t these companies and multinationals? Your average punter is paying 30c in the dollar, the dollar that they’ve worked so hard to get. Whether they work in a servo on a nightshift or are a cleaner, nurse, teacher or landscape gardener, they’re sweating out there to earn that dollar and they’re paying 30c or 37c—whatever it might be—in the dollar. It’s not too much to ask that some of the biggest companies in the world pay their fair share in Australia, the country where they’re making this profit.
Australians deserve a government that does everything it can to make sure that the large companies are paying that fair share. Australians should be able to have confidence in their tax system and the principle that everyone, from individuals to large corporations, both Australian and foreign owned, are contributing and giving back to the society from which they make that profit. Evasion and avoidance are not victimless activities. These activities actually undermine the rule of law and the primary purpose of our tax system—that is, it belongs to and should benefit the people of Australia. The whole community suffers when some members, individuals or corporate entities, wrongfully or artfully dodge making their fair contribution to the upkeep of a decent, civilised society.
Australia should be looking to the international community’s efforts in tackling this problem. Over the last five years, there have been a number of significant international initiatives that have developed proposals and recommendations designed to support a collaborative approach to reduce multinational tax avoidance. The most notable of these is the Organisation for Economic Co-operation and Development’s base erosion and profit shifting project—BEPS for short. The BEPS project represents an unparalleled effort by OECD countries and G20 countries to restore confidence in the international tax system. More than 60 countries worked together to deliver a comprehensive package of action items in just two years. It represents the first substantial renovation of the international tax standards in almost a century.
Of that 15-point action plan of recommendations, Australia has committed to only eight of them, excluding possibly the most important, which is bringing the international tax system in line with changes in the digital era. France is leading in this area. It has moved independently of the EU to create a three per cent tax on large tech companies’ local income rather than the profits they make. French officials expect that the annual tax for these companies will amount to about 500 million euros or $563 million.
While President Trump is disapproving of this recent French tax, it does combat a sore spot seen internationally and domestically in Australia: avoidance of tax by paying taxes in EU countries where they have their headquarters, not where they make their sales. Often they have offices in Ireland or Luxembourg where they have extremely low tax rates. The UK, Spain, Japan and Singapore are all planning similar tax schemes of their own to tackle this problem. Once again, Australia is behind the eight ball in regard to international efforts in this area.
We on this side took a plan to crack down on multinational tax loopholes and make multinational corporations pay their fair share to the last election. We had policies to target companies that use low- or no-tax havens to offshore funds and a range of other accounting strategies that they use to lower their taxable income in Australia. Some of this included tightening debt deductions, closing public reporting of country-by-country reports, increased capacity for the ATO, public reporting of AUSTRAC data, closing loopholes for certain trusts that make payments to nonresidents to artificially get a tax rate below the 30 per cent company rate, and whistleblower protections.
We took all of this to the last election because we know that every dollar that a company pays in tax in Australia is a direct contribution to Australia and our society. It is a contribution to our kids’ education, to our health care, to protecting our natural environment, to looking after our older Australians in their retirement, and to the NDIS. Every dollar that is lost through the tax avoidance that we’ve seen, through these tactics that these big companies use, effectively leaves us worse off as a society.
As shadow minister Jim Chalmers said in his speech earlier this evening, it beggars belief that this government is not doing more to address this problem. It doesn’t make sense. It doesn’t add up, because it’s up to the government to ensure that they’re doing everything they can to close down these loopholes that are still being utilised, quite expertly, and still being exploited by many of these multinational companies. I want to know why they’re not doing more. We’re supportive of this amendment, as small as it is, but why aren’t they doing more? It is clearly a problem. The statistics are in everyone’s face. We can see it: billions of dollars in profit with zero tax paid or very minimal tax paid—0.6 per cent, two per cent. Go and explain that to someone in my electorate who works night shift and has to pay 30c or 37c in the dollar. Why are they paying that percentage for every dollar they make, and these multinationals that are making enormous profits in this country are walking off only having to pay two per cent or 0.6 per cent? There is just no fairness in it at all.
Unfortunately, even with this law that we are debating—operating since 2016—we are still losing money through offshoring and through loopholes that this government hasn’t bothered to try to close down. So this bill does go some way to addressing the issue—it certainly does; and we support that small measure. But much, much more needs to be done before these companies start paying their fair share to Australia.