2 August 2023
I rise to speak on the Treasury Laws Amendment (Making Multinationals Pay Their Fair Share—Integrity and Transparency) Bill 2023. While Australians are enduring what's been described as the worst cost-of-living crisis for a significant time, multinational corporations continue to get away with industrial-scale tax avoidance. The Making Multinationals Pay Their Fair Share—Integrity and Transparency Bill makes a promising start on targeting large corporations by limiting the amount of debt deductions multinational entities can claim in an income year. The bill ensures that debt deductions are linked to an entity's economic activity and taxable income in Australia, which I commend. I'm encouraged by the commitment this bill makes to integrity, especially given that it is in line with international approaches to enhance corporate tax transparency. However, while I support any measure that increases transparency and integrity, this bill only scratches the surface when it comes to stitching up the myriad loopholes that currently exist in our tax system.
The Australian Taxation Office transparency report released in November last year revealed that 32 per cent of large and medium corporate entities, including mining, energy and water companies paid no tax at all in 2020-21. I'm just reminding everybody that that is one-third of large-to-medium corporations. Chevron paid just $30 in income tax, despite having a total income of some $9.1 billion. Loopholes in our tax system are allowing multinationals to extract billions of dollars from the Australian public. With the recent revelations concerning PWC and other major accounting firms, it's clear that our tax system has been exploited by multinationals for many years at the expense of hardworking, taxpaying Australians. Just repeating, the Australian Taxation Office's annual tax transparency report revealed the amount of tax paid by some 2,468 large-to-medium corporation entities, and it showed that no tax was paid by nearly one-third. More than half of the mining, energy and water companies included in the report paid by no income tax in 2020-21.
I'll just stop for a moment, because we know those companies are making record profits from Australian resources. They include companies like Adani Mining Pty Ltd, one AGL entity, Alcoa Australian Holdings, Ampol, Anglo American Australia, ExxonMobil Australia, two Glencore entities, Peabody Australia holding companies, Santos, two Shell Energy entities, Whitehaven Coal, Woodside Petroleum and Yancoal Australia. Remembering that at the moment we are having a debate, for example, as to why the Australian taxpayer is funding $1.5 billion towards the key infrastructure cost for yet another gas development. These large multinationals turn around and take the handout of public money to pay for infrastructure but then do not contribute back into the system. Every year, the Australian public is denied billions of dollars in tax revenue because of multinational tax avoidance. Why does this matter to everyone? That is money that could be spent on schools, hospitals, affordable housing and, in particular, climate change mitigation and transition which so many of these fossil fuel companies are in fact accelerating and making worse.
Whilst I commend the government for the bill, the bill does not address major tax avoidance schemes. The bill does not address situations like the one that occurred in 2017, when the Australian entity of multinational oil and gas giant, Chevron, was caught engaging in a transfer pricing scheme. Chevron's Australian entity borrowed at an interest rate of nine per cent from an entity it created in the US state of Delaware called Chevron Funding Corporation. That corporation was borrowing at just 1.2 per cent while lending at nine per cent to the Australian entity. This artificially inflated Chevron's expenses in Australia, thereby transferring profits to the tax haven state of Delaware.
The Australian Tax Office won a landmark case against Chevron, claiming that the scheme had denied the Australian public roughly $340 million in tax revenue. Using unusually high interest expenses paid to overseas subsidiaries is not the only way multinationals seek to game the Australian tax system. In July last year, Rio Tinto settled a dispute with the Australian Tax Office for some $991 million for its use of offshore marketing hubs and overstated borrowing costs to transfer profits offshore to avoid paying taxes in Australia. I find it rather ironic when I hear so many in this place go to bat for these fossil fuel companies, these big multinationals, when they are vowing to contribute back to the very substance of the community they're so happy to take from.
Multinational oil and gas companies essentially pay so little tax but receive so much funding and subsidies from the public purse. Last year, a report from the Australian Institute found that multinational oil and gas giants Chevron and ExxonMobil paid zero income tax over a seven-year period despite a combined total income of $100 billion. I find that obscene. When I think of the consequences that we as a society are going to have to pay—the transition, the adaptation and the preparation—I think not only have we been pillaged but, on top of that, the Australian people are going to be left to foot the bill. When thinking of that total income of $100 billion with zero tax when individual nurses are paying more tax than some of the nation's largest oil and gas companies, it's blatantly clear that our tax system has a problem and is broken.
There are a number of ways in which multinationals avoid paying taxes in Australia. It's when we step back and look at the strength of the other tax systems around the world that we realise how badly Australians are being fleeced. This is really important because we have incredible challenges ahead of us. We have big transition costs. We have a cost-of-living crisis. We have everyday Australians struggling. We have people in this place quibbling over small increases to support the most vulnerable in our community. We are actually not providing sufficient support. We are keeping people below the poverty rate. Yet, we have these loopholes remaining. It begs the question: is it because of our lobbying practices? Because these multinationals have voices and access to government in a way that so many others do not. We know that that has allowed this system to continue for way too long.
The comparisons with high integrity tax systems are important. For example, Norway has a highly effective tax regime. It has been taxing the export profits of its oil and gas sector at 78 per cent since the 1990s. Through this tax, Norway has built its sovereign wealth fund, which is now worth around $2 trillion, or around $1.5 million for every Norwegian family of four. Just stop and think about that for a moment. What have both major parties been doing for the last 20 years around so much wealth in Australia? We have just dug it up and shipped it out, and we have not made sure that the Australian people for generations into the future have the kind of wealth fund that should be there for them.
While Norway has been taxing its oil and gas export profits at 78 per cent for the past three decades—three decades, that's 30 years!—tax revenue from Australia's oil and gas sector has been in consistent decline.
In 1997, corporate tax paid on oil and gas export profits in Australia was 16 per cent of total revenue, but in 2020 it had dropped to just one per cent. Over the nine-year period from 2012 to 2020 the Australian oil and gas sector reported expenses to the Australian Taxation Office equalling a staggering 90 per cent of total revenue. That compares to an expense-to-revenue ratio in Norway of just 21 per cent. In Norway they claim expenses of 21 per cent. In Australia they are claiming 90 per cent to limit any kind of tax liability. It beggars belief that those numbers don't have the Australian government calling time and saying, 'Hang on a minute; we are not doing the right thing by the Australian people.'
The high oil and gas expense ratio in Australia either represents a woefully inefficient industry or an extremely effective campaign of financial engineering to exploit loopholes in our tax system and, I would argue, incredibly effective lobbying to both sides of this place. Australia needs to put in place some serious reform. The petroleum resource rent tax is a classic example. Here we are on the threshold of yet another opportunity where Prime Minister Albanese is going to need to stare down the question: do I do the right thing by the Australian people or do I continue paying lip service and doing what the gas industry wants? Further to broad multinational tax reform, we desperately need to fix the broken PRRT. After it was introduced in the early 1990s, the PRRT made up 19 per cent of total oil and gas revenue. Thanks to decades of lobbying, that has been whittled away to just one per cent of total oil and gas sector revenue. Australians are being fleeced on the sale of natural resources that ultimately belong to them and should be wealth building for generations of the future. In here I look at children in the gallery. They put their trust and faith in this place to ensure that we have laws that will take care of their future, and we are failing dismally because lobbyists and big corporate interests are coming before the interests of people.
The call is very clearly on the government when it is looking at the reform of the petroleum resource rent tax, which we know is coming: why are you ignoring the recommendation from Treasury, which actually collects a more significant amount of revenue, compared to the one the lobbyists and gas companies have been pushing? It's going to be a real test for the Albanese the government. On whose side do they stand? Do they stand on the side of securing generational equity, revenue for future generations, or do they stand on the side of the gas lobbyists?
Whilst this bill is a step in the right direction to limit profit shifting, much more needs to be done to rein in multinational tax avoidance. I commend the intention of this bill to turn the tide on multinational tax avoidance; however, it addresses just the tip of the iceberg. We need to get real in this place. If the government of Prime Minister Albanese wants to be seen as turning over a new leaf and doing things differently, let's call a spade a spade: if you genuinely want to reform, you need to do more than address just the tip of the iceberg. I will be looking with interest at the proposal the government bring forward when it comes to the petroleum resource rent tax. Are they going to be on the side of generational equity, ensuring gas companies pay their fair share of royalties, or are they going to be on the side of the gas lobbyists from the gas companies? The Treasurer, the Prime Minister—everyone in this government—will have that important question to answer to the Australian people.
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