I rise to speak in support of the Treasury Laws Amendment (Making Multinationals Pay Their Fair Share—Integrity and Transparency) Bill 2023, a bill that will deliver fair outcomes in our taxation system by holding large multinational corporate groups to account on their taxation arrangements in Australia. I would like to start by thanking the Assistant Minister for Competition, Charities and Treasury, the member for Fenner, Andrew Leigh, for all his hard work and commitment to bringing fairness to our taxation system by championing the need to level the playing field for Australian businesses and increase transparency.
Boosting fairness and transparency when it comes to the tax arrangements of multinational corporations was a key issue the Albanese government during the 2022 election campaign. Ensuring multinationals pay their fair share of tax is not only good policy at home; it also demonstrates Australia's commitment to the global momentum towards ensuring that corporations pay their fair share of tax across national jurisdictions and borders in which they operate. We on this side of the House understand that multinationals need to pay their fair share of tax and that, when they don't and they obfuscate that obligation, it hurts all Australians. Multinational tax avoidance means that we have less money for the resources to fund our schools and our hospitals and less money for the NDIS, social security system and other government services that support our communities.
Multinational tax avoidance is bad for local small businesses too because they ultimately find themselves competing on a tilted playing field against the large multinationals, which are using tax dodges that aren't available to the small businesses. This bill is a critical step in restoring that balance and transparency in our tax system when it comes to multinationals, especially in the wake of the recent PwC leaking scandal. The Albanese government is determined to restore faith and integrity to our system.
Schedule 1 to this bill prioritises disclosure and aims to hold large corporate groups to account by requiring them to be more transparent about their corporate structures and whether they are operating with opaque tax arrangements such as through subsidiaries located in low-tax jurisdictions. As part of this, the companies concerned will be required to disclose this information as part of their annual financial report, a practice that is in line with international approaches and measures already in place in jurisdictions such the United Kingdom. This disclosure will essentially become a fourth element of a company's annual financial support, a document which currently comprises a company's financial statements, notes to those statements and the director's report. This additional disclosure will improve information flow from companies by requiring information from their subsidiaries. This measure will likely be applied to large corporate groups that have set up complex corporate structures in the form of multiple subsidiaries. Approximately 470 large corporates with revenue exceeding $250 million are likely to have multiple subsidiaries. In turn, this disclosure information is critical in supporting enhanced economic analysis and will help to inform whether tax laws are operating as intended in collecting the right amount of revenue.
Schedule 2 of the bill is focused on ensuring that multinationals pay their fair share of tax in Australia and in turn on helping level the playing field for Australian businesses. The bill proposes to achieve this by amending Australia's interest limitation or thin capitalisation rules. In a nutshell, these reforms will essentially limit the scope of a multinational's debt deductions and address profit-shifting risks associated with the operations of multinational enterprises.
The thin capitalisation rule amendments proposed in this measure will take a direct approach to limiting debt related deductions by restricting the level of deductible interest expense to an entity's earnings, and this approach reflects the OECD's best-practice guidance. These changes will bring Australia into line with other comparable jurisdictions, such as the UK, the US, Canada and most EU countries. Each of these countries has their own nuanced version of the rules. This bill has been designed to balance tax integrity with other considerations, such as continuing to ensure Australia is an attractive destination for investment.
The Albanese government has approached this key reform with absolute diligence. These amendments were first announced in April 2022 as part of our government's election commitment platform. This bill will deliver a fairer operating environment for small- and medium-sized businesses in my electorate of Canberra and around the country and will aim to create a set of rules that are consistent across the board. In this way business across Australia can be assured that our government is serious about fairness in the tax system and creating a fair and balanced competitive environment.
This bill is an important start when it comes to making multinationals pay their fair share of tax in Australia and making sure our local small- and medium-sized enterprises aren't unfairly disadvantaged because they don't have access to sophisticated profit- and tax-shifting arrangements across national borders. We all know that multinational tax avoidance won't be fixed overnight, but this bill is a big step in the right direction.
The magnitude of this issue is why the Albanese government has moved so decisively. To illustrate the depth of the challenge ahead, at the moment we have two-fifths of multinational profits booked through tax havens and some $100 billion of Australian money sitting in tax havens—places like the Bahamas and Panama, jurisdictions known for their very low tax rates and where, on one estimate, four-fifths of the money is there in breach of other countries' tax laws. These tax havens aren't just employed as tax avoidance mechanisms; they are identified places and locations where terrorists, kidnappers, crime syndicates and drug lords store their money, so taking action to crack down on tax havens and multinational tax avoidance is not just good economic and tax policy but also important as a national security and safety measure.
After a decade of neglect and disinterest on this issue from those opposite, Australians can finally breathe a sigh of relief that they now have a good government that is committed to addressing this issue and is taking a more forward-leaning approach than our predecessors did. I know that this is something that my constituents here in the Canberra community are passionate about—seeing multinationals paying their fair share so that we have that money to pay for the services that all Australians need.
The record of the coalition on multinational tax avoidance speaks for itself. They dithered and failed to deliver any real reform on the issue during their last period in office, tinkering at the edges but never delivering reform on the side of Australian taxpayers and small businesses when it came to tackling the issue head on. I'm proud to be a member of the Albanese Labor government that stands by the core principle of fairness on the issue of multinational tax avoidance. Our government won't stand for a situation that allows multinational companies to get away with brazen arrangements that see profits that ought to be taxed in Australia transferred offshore.
Everything that the Albanese government does to address the multinational tax base is focused on ensuring that we can deliver the best public services to Australians. This also includes recognition that in a competitive economy we want businesses to be competing on making and delivering great products and services, looking after their workers and undertaking research and development, not competing with one another to find the next shady scheme that will see them conceal profits in a tax haven. Labor has a strong track record when it comes to fairness in public policy, and this bill to make multinationals pay their fair share builds on that tradition.
