Ms PAYNE (Canberra) (17:02): Integrity is at the heart of everything that this Labor government seeks to achieve, and the Assistant Minister for Competition, Charities and Treasury, Dr Andrew Leigh, has been a champion for integrity throughout our tax system since he was appointed. Now we're taking on the next challenge: multinational companies not paying their fair share of tax. We are acting on a commitment that Labor took to the 2022 election. This included supporting the OECD G20 two-pillar solution, a multilateral solution representing the most significant reform to the international corporate tax system in a century. Reforming the international tax system is no easy feat, but we join with our global community to ensure that global firms are paying their fair share of tax and not exploiting unintentional loopholes across jurisdictions.
Australia has long been a champion of the global 15 per cent minimum tax, and we are now in the first group of nations to implement the global minimum tax and domestic minimum tax of 15 per cent. From this year, this tax will apply to multinational enterprises with an annual global revenue of at least 750 million euros, which is approximately A$1.2 billion or greater. The global minimum tax will ensure large multinational enterprises pay a minimum level of tax on income arising in each jurisdiction where they operate. This will support global momentum towards a fairer international tax system by putting a floor on tax competition and levelling the playing field between large multinational enterprises and Australian businesses.
The global minimum tax is a crucial step in the ongoing efforts to ensure integrity and fairness across the system.
The global minimum tax will reduce the tax rate differential between Australia and low-tax countries. It will help protect Australia's corporate tax base by reducing the incentive to shift profits abroad. It will make Australia a more attractive place to invest. And it will boost economic growth. Putting in place the global minimum corporate tax will allow us to apply a top-up tax on large multinational groups operating in Australia where their overseas income is taxed below 15 per cent. Under the domestic minimum tax, it will give us additional taxing rights on the low-taxed Australian income of large multinational groups.
Implementing a domestic minimum tax complements the global minimum tax and ensures that Australia collects revenue from locals under taxation. Australia's legislation will be peer reviewed by the OECD to ensure it produces outcomes consistent with the Global Anti-Base Erosion Rules and is recognised by the jurisdictions. By making multinationals pay a minimum effective tax rate of 15 per cent, the OECD estimates annual global revenue gains of over $300 billion. In many cases, this revenue is being channelled away from the tax systems of developing nations, consolidating a global divide between sophisticated financial centres and resource-rich, less-developed parts of the world. Australia joins the United Kingdom, Canada, Japan, South Korea, the European Union and other jurisdictions in implementing the global minimum tax from 2024.
Our government will help ensure large multinationals pay their fair share of tax. This is the most recent in a suite of multinational tax measures delivered by the Albanese Labor government. Our government has already delivered four significant multinational tax reforms. First, our new subsidiary disclosure law will require public companies listed and unlisted to disclose information on the number of their subsidiaries in the country of tax residency. This will make the way companies structure their subsidiaries, including for tax purposes, transparent to both the government and the public.
Second, companies with tenders and government procurement processes valued above $200,000 are now required to disclose their country of tax residency as part of the Buy Australia Plan under the Fair Go Procurement Framework. This requirement to disclose their country of tax residency complements broader changes implemented by our government in taking decisive action on tax adviser misconduct, including by increasing tax promoter penalties and increasing the powers of tax regulators.
Third, in our first budget in October 2022, we boosted funding for the Australian Taxation Office's tax avoidance taskforce by $200 million a year. In this year's budget we have extended the operation of this taskforce to 2028, allowing the ATO to crack down on tax-dodging by multinational enterprises, large public and private groups and Australia's wealthiest individuals.
Finally, we've also tightened Australia's thin capitalisation rules to stop a common approach taken by multinationals to minimise their tax. Our new approach reduces the ability of taxpayers to create artificial interest-bearing debt in Australia as a way of maximising interest-related deductions and in turn reducing their overall tax bill.
Our government is also delivering five further multinational tax reforms. First, the government's bill to create a public country-by-country reporting register has been introduced to parliament, and, once it is passed, reporting requirements will apply from 1 July this year. Creating a public country-by-country reporting register will deliver a key part of the government's multinational tax integrity election commitment. It will see Australia put in place a world-leading set of disclosure laws.
Second, the government is progressing its election commitment to implement a public register of beneficial ownership, which will show who ultimately owns, controls or receives profits from a company or legal vehicle operating in Australia.
Third, we've also added to our election agenda by strengthening the way our foreign investment system reduces the risk of multinational investors avoiding tax. On 1 May this year, the Treasurer announced changes to deliver a stronger, more streamlined and more transparent approach to foreign investment. Foreign investment has a key role to play in our economy, but only when it's in the national interest. We are making sure that foreign investors pay their fair share of tax in Australia. This includes releasing updated guidance about the kinds of tax arrangements that will attract greater scrutiny, such as those that are overly complex.
Fourth, to further protect our tax system from foreign investments where investors currently have incentives to circumvent intended outcomes in our tax settings, we're strengthening the foreign resident capital gains tax regime. As part of this year's budget, the government announced it will strengthen the regime in line with the OECD standards to ensure foreign residents pay their fair share of tax in Australia.
Fifth, in this year's budget, we also announced a new royalty penalty. From 1 July 2026, the penalty will apply to significant global entities with annual revenue of over $1 billion where they avoid Australian royalty withholding tax by understating the value of royalty payments or disguising them as some other kind of transaction.
These nine measures—four that we have already delivered and five that are in progress—demonstrate the government's strong commitment to multinational tax integrity. It's important to see this in its historical and international context. The last leap forward on transparency was introduced by the Gillard government in 2012. The then Assistant Treasurer, David Bradbury, put in place the legislation that has ensured public transparency of tax payable by large corporate entities. The landmark changes allowed for the publication of the tax liabilities of large corporate entities, including multinational corporations.
Then we had almost a decade of inertia on transparency and an on-again-off-again approach to multinational tax integrity. The coalition have a chance to show, in spite of their slow-motion charge towards a fairer global tax system, that they can change pace and keep step with these plans and that they won't let passing time deliver further proxy bonuses to multinational tax cheats.
No government in Australian history has done more than the Albanese Labor government to address multinational tax dodging. No other country is doing more to improve multinational tax fairness. We've already made a significant move in increasing the transparency of tax arrangements for multinational enterprises, and we are taking it further. Our multinational tax integrity policies will address tax loopholes exploited by multinationals and improve global tax transparency. Our plan is good for taxpayers, good for competition and good for Australia.
By tightening our debt deduction laws and committing to be part of the global 15 per cent minimum corporate tax rate, we are keeping faith with the OECD's best practice on global tax integrity. Over 131 nations have signed up to this OECD plan. We promised that we'd involve industry in constructive consultations to ensure our policies didn't have an unwarranted impact on legitimate commercial arrangements, and that's what we've done. As you'd expect with these complex changes to tax laws, there has also been extensive consultation with experts and civil society.
Tax transparency is a critical part of the social contract multinationals have with the communities in which they operate. The government's focus is to encourage a behavioural change by multinationals and large corporates about how they view their tax obligations, including their decision-making around tax planning strategies. Enhanced public scrutiny on tax information will help provide the community with a better understanding of how much tax multinationals pay relative to their activities. Just as the Gillard government passed laws requiring the tax office to annually report the tax payable by our largest of firms, the Albanese government is moving to improve tax transparency.
Public companies, listed and unlisted, will now be required to disclose information on the number of their subsidiaries and their country of tax domicile. That means public companies will be required to be upfront with the public about how they're structured, including for tax purposes. This will increase transparency on their corporate structures and whether they are operating with opaque tax arrangements.
Creating a public country-by-country reporting register will deliver a key part of the government's multinational tax integrity election commitment. It will see Australia put in place a world-leading set of disclosure laws. Our government is progressing its election commitment to implement a public register of beneficial ownership, which will show who ultimately owns, controls or receives profits from a company or legal vehicle operating in Australia.
Multinational tax reform has several benefits for our economy. Economists Thomas Torslov, Ludvig Wier and Gabriel Zucman estimate that close to 40 per cent of multinational profits, around US$600 billion, are shifted to low-tax countries each year. This global profit-shifting industry causes significant damage to the revenue base of countries such as Australia. Wier and Zucman calculate that, in 2019, around 10 per cent of corporate tax income was lost as a result of global profit-shifting. They estimate that, back in 1975, this figure was less than 0.1 per cent. A race to the bottom between nation-states has seen average corporate tax rates fall from 49 per cent in 1985 to 24 per cent in 2019.
Australia relies more heavily on company tax relative to other OECD countries, even though Australia's aggregate tax burden across all levels of government is lower than the OECD average. Since company taxes comprise 19 per cent of Australia's revenue base, the accounting tricks and dodgy behaviour of multinational firms have a massive impact on Australia.
A division having been called in the House of Representatives —
Sitting suspended from 17:15 to 17:28
