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

9 September 2019

Senator Patrick: 

I rise to speak on the Treasury Laws Amendment (Making Sure Multinationals Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2019. If the projections in the explanatory memorandum are correct, this bill will allow Australia to secure an additional $255 million in taxes over the forward estimates—which is positive, but merely a drop in the ocean in the bigger picture. Tax avoidance is a major issue, costing consolidated revenue billions of dollars each year, and that's billions of dollars that can't be spent on doing good across society. This bill is heading in the right direction, but more can and needs to be done. The effectiveness of mechanisms and activities of foreign owned multinationals to reduce their tax payments in Australia is quite staggering. If you were to believe some of their financials you would be convinced that they are in fact non-profit organisations but continue to operate here purely because they enjoy the business. And we know that's not correct.

Drawing on numbers from the tax transparency data that is now provided by the tax office, for the periods from 2013-14 through to 2016-17, I'll elaborate on the magnitude of the problem. Madam Deputy President, let me just talk to you about five companies on this list. ExxonMobil had income over four years of $33 billion. How much tax do you reckon they paid? Zero. Not one cent of tax was paid on $33 billion of revenue. EnergyAustralia—$30 billion in income, zero tax paid. Virgin Australia—$17.9 billion in income, zero tax paid. Vodafone—$15.1 billion in income, zero tax paid. Santos—$14.9 billion in income, zero tax paid. That is a total income of more than $111 billion and not one cent of tax was paid over the four years during which the income was generated.

The name EnergyAustralia sort of conjures up the idea that this is a grassroots Australian company, but it's actually owned by a company in the British Virgin Islands, a well-known tax haven. Last year, EnergyAustralia reported an income of $6.3 billion. But, unfortunately, their costs were such that in the end there was no taxable income. Of course, this could have been just a bad year, and this could be an anomaly; however, it's not. In fact, for the past four years EnergyAustralia has not paid any tax, despite the company having a total income over that period of $30 billion and a reported taxable income of $52 million. Now, I understand that companies have bad years. But when you've got four years in a row where a company is making billions and billions of dollars and not paying a cent of tax, something is wrong.

The government, particularly through the Department of Defence as a customer, have a substantial ability to exert influence on defence companies. The government can establish the contracts, they have direct access in many cases to the financial records of these companies through their projects, and they have the ultimate choice in utilising suppliers that do the right thing. Yet, looking at the top five defence companies in terms of income, while they are maybe not as bad as the top five companies overall, from tax records we can see that their total income was roughly $14.5 billion but they paid only $287 million in tax—not even two per cent of income. To make matters worse, in reviewing AusTender records you can find cases where the Department of Defence is signing contracts directly with companies registered in tax havens. The Department of Defence has a contract with a value of almost $500 million with Intelsat LLC of 90 Pitts Bay Road, Pembroke, Hamilton, Bermuda.

On the one hand we're trying to clean up tax avoidance and ensure multinationals are paying their fair share of tax, and on the other we have a government department signing contracts with companies registered in tax havens. This is not a situation where the company has some elaborate corporate structure and is using creative loans and licensing vehicles to avoid or at least minimise their tax. These are companies where the government is simply shipping the money to the tax haven. It makes no sense. You can't be serious about tax avoidance if you're allowing those sorts of things to happen. This is despite Australia having been one of the first countries to implement the OECD's country-by-country reporting established in the Common Reporting Standard, which came into effect in July 2017. That standard was going to 'combat tax evasion by exposing taxpayers with hidden offshore investments'. It appears we're making little tangible progress. Despite the introduction of tax transparency laws, tax evasion remains a significant issue that we are yet to address.

It's entirely appropriate for companies to make a profit. That's a reasonable thing for them to do. But it's also very reasonable for those companies, when they do make a profit, to pay tax when they're conducting business in this country. When foreign companies come here and set up daughter companies, they enjoy the benefits of our social system. They enjoy the education that brings them competent and well-educated workers. They enjoy the fact that, when their workers are sick, they can go to a hospital. They enjoy the infrastructure: the roads that lead up to their workshops, the traffic lights and all of the things that make our society function. They enjoy the fact that our defence forces are making us safe at home and that our intelligence services are keeping a watch on events. All of that costs money. You can't simply come to this country and operate a business and get all those things for free. That's a significant problem that we have. I have looked at the tax transparency data that is provided by the tax office. When you look at all of the people who are paying tax, I can tell you that there are not many multinationals in there. They seem to be very aggressive in their tax practices.

Going back to this bill, the three schedules of this bill cover the tightening of thin capitalisation rules for multinational entities, the requiring of offshore online hotel booking providers to include hotel room bookings in calculating their business turnover for the purposes of GST and the removal of the luxury car tax on reimported cars sent overseas for refurbishment. The thin capitalisation has the greatest impact, however, with an estimated $240 million over the forward estimates, but it's not groundbreaking. It's quite insignificant in the big scheme of things. If we consider the top five companies and assume that their profit is just one per cent, the same as the current cash rate, there would be an additional $330 million in tax collected. At three per cent, it would be approximately a billion dollars. And that's just the top five companies.

So Centre Alliance will support this bill, but we need to be doing a lot more. We need to be dealing with these companies that come to Australia, enjoy all of our benefits and pay no tax. I am happy to inform the Senate that it's a task that I'm going to be taking on in this parliament. I am going to be calling out the names of every company that is operating in this country that is not paying tax at some stage. I'll be questioning ministers in question time as to why we're dealing with some of these companies. I'll be questioning secretaries at estimates to try to understand why they are engaging with companies that pay no tax. I think that's a reasonable question to ask, and I'm going to be very, very receptive of any answers that come from ministers and secretaries when I ask those questions, because it's not fair on Australian taxpayers. I think it was Senator Brockman who made the point that, for every company that's not paying tax but enjoying a benefit, the burden shifts to other players. So this is an important bill and we will support it, but a lot more needs to be done.

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