House of Representatives

Tax and Superannuation Laws Amendment (Better Targeting the Income Tax Transparency Laws) Bill 2015

Second Reading Speech

Mr Frydenberg (Assistant Treasurer)

I move:

That this bill be now read a second time.

The Tax and Superannuation Laws Amendment (Better Targeting of the Income Tax Transparency Laws) Bill 2015 will ensure that the release of information by the Commissioner of Taxation under the income tax public disclosure laws does not jeopardise the privacy, personal security and market environments of Australian owned private companies.

The government is committed to combating tax avoidance and we are implementing well-considered and balanced measures.

As G20 president in 2014, Australia led the global response to tax avoidance by multinational companies and ensured that it remained at the top of the international agenda. Under Australia's leadership, the first of the OECD/G20's base erosion and profit-shifting recommendations were delivered last year.

The budget continued the government's strong international leadership by actioning the 2014 OECD/G20 base erosion and profit-shifting recommendations on country-by-country reporting, anti-hybrid rules, harmful tax practices, and treaty abuse rules.

Australia will implement the OECD's country-by-country reporting from 1 January 2016. We are one of the first countries to commit to implementing it.

Country-by-country reporting to tax administrations will require large multinationals to report annually for each jurisdiction in which they do business the amount of revenue, profit, income tax and economic activity. For the first time tax administrations will get a global picture of multinationals' operations. This is a significant step in improving transparency for tax administrations.

The government has asked the board of tax to commence consultation on the implementation of the OECD's antihybrid rules.

Australia has no harmful tax practices, but the ATO has already commenced exchanging information with other tax administrations on preferential tax regimes. This will help the ATO identify secret tax deals provided to multinationals by other countries that may contribute tax avoidance in Australia.

On treaty abuse, the government is acting now to incorporate the OECD's recommendations into Australia's treaty practice, so that multinationals do not exploit treaties to avoid tax.

The government is also going further and faster than these BEPS recommendations.

The government released exposure draft legislation for the new Multinational Anti-Avoidance Law to stop multinationals artificially avoiding a taxable presence in Australia and force them to pay tax in Australia on profits from economic activities undertaken here. The legislation will be introduced shortly.

The government will also double penalties for large companies that use tax avoidance and profit-shifting schemes.

We will close the tax loophole that currently means digital products and services imported by consumers are not subject to GST. Foreign providers will now be required to charge GST in the same way as domestic providers.

The government has asked the Board of Taxation to work with businesses to develop a voluntary code for greater disclosure by companies of their tax information. I expect that the Board of Taxation will look at ways to provide more information to help inform the public about companies' tax information.

The budget also announced that Australia will sign a multilateral international agreement to enable Common Reporting Standard information to be exchanged between tax administrations. This agreement was signed on 3 June.

The Common Reporting Standard will combat tax evasion by exposing taxpayers with hidden offshore investments.

The government has committed to implementing the Common Reporting Standard from 2017 and signing the Multilateral Competent Authority Agreement is a further step towards implementation.

These are all well-considered and balanced measures.

Labor's income tax public disclosure laws require the Commissioner of Taxation to publish the name and the Australian business number, total income, taxable income and tax payable of companies with total income of $100 million or more.

In opposition we opposed Labor's legislation because it got the balance wrong.

These laws abrogate the fundamental right to confidentiality. The information to be disclosed, already in the hands of the Australian Taxation Office, will not help the ATO in assessing additional tax.

Public disclosure of the information as Labor has legislated will not better inform the public and will not enhance the quality of debate and will provide a confusing picture.

Submissions on the measure before it was introduced by Labor highlighted the risk that disclosing the tax affairs of closely held companies will effectively disclose the tax affairs of the companies' owners. They also highlighted the risk of making public, the commercial-in-confidence information of private companies.

The concerns about Labor's laws were also raised when this government consulted on exposure draft legislation to carve out Australian owned private companies.

The concerns were not heeded by Labor.

We have taken them seriously.

For closely held Australian owned private companies, the publication of company tax affairs would effectively reveal the owners' private financial affairs.

In Japan, public disclosure of corporate tax information was required from 1950 until 2004. This disclosure was abolished in 2005 due to the information:

... being utilized in various ways inconsistent with its initial aim, and there are various reports of the disclosure being a factor in causing crimes and harassment ...

The government will not trivialise or ignore the reputational or personal safety concerns from making public the confidential information of private companies.

The government's amendment will continue to ensure that publicly listed companies and foreign owned private companies would continue to have information published, but it will ensure a balanced approach to the public disclosure of companies' tax affairs.