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Thursday, 14 March 2013
Page: 2163

Mr BILLSON (Dunkley) (13:09): Well, there you have it; there was the defence of this extraordinarily poorly handled legislative process. The member for Throsby has come up with 'the diary defence': the fact that the government has proven itself to be unwilling or incapable of engaging with the many organisations that have made considered and thoughtful submissions on this bill and the fact that it chose one date that did not happen to work for some of the committee members. That's it—the diary defence. It is Labor's only defence to an appalling abuse of parliamentary process, to an uncosted and untested impact on the enterprising Australians who create wealth and opportunity. All we get from the member for Throsby is the diary defence: 'Oh, we would like to have had this conversation, but we chose a date and some people couldn't make it so we abandoned the hearing.' What utter nonsense.

This kind of shambolic, dysfunctional poor excuse for governance that we see under this pathetic Labor government has just been demonstrated writ large here. Here we have substantial changes to tax laws that will impact not just, as the member for Throsby would have you believe, on the evil big end of town involved in all sorts of rorts and the like. This impacts much wider than that. It impacts on SMEs across the country. It is a range of provisions that have not been tested for their justification in terms of the problem they seek to solve, nor for their construct in terms of whether they are effective at all, nor for their calibration. The question is whether this is nothing more than a last-minute election grab for power by a government desperate to look like it is doing something at a time that it presides over the most appalling deterioration in the Commonwealth's finances. It is hard to draw any other conclusion.

I listened carefully and courteously to the member for Throsby. His attack on the very valid points and criticisms and measured remarks of the shadow Treasurer was to say that somehow the coalition is defending rorts. Is everything so base politic to you guys? Does it not matter to you that the public policy formation process should be more inclusive and should value the input of those who live and work with this every day? Or do you just want the headline of the title of this bill? I think that is really what this is about. I do not think government members have turned their mind to any of the actual content of this legislation. No, they are just happy that they have a piece of legislation before the parliament talking about countering tax avoidance and multinational profit shifting and they have not bothered to apprise themselves as to what the actual mechanisms are, or their consequences for enterprises in this country. When will you guys get tired of your constant assault on small business? It is quite remarkable.

I hear a government member interjecting that it is all about multinationals, but perhaps if he could quote himself he might have then recognised the merit of the argument. The submissions provided by tax authorities, by accounting firms and by business advisers one after another pointed to the deficiencies in these provisions as they have been drafted. The fact is that the government has refused to allow an engaging hearing process. The word 'hearing' has as much meaning as question time: you do not get any answers and you do not even get a hearing to be heard and have your concerns addressed and have the arguments weighed against what is being asserted in the documents foisted on this parliament. No, under this Gillard Labor government we do not have that.

It is the same with the government's media reforms. They just jam it through and any tactic will do. And we see this again with this legislation. There have been no opportunities for people who have taken the time to work through this process and engage themselves in this formulation of widely reaching laws. For a start, they just deserve basic courtesies. The Australian business community gets enough of it when the tax office is telling it how it should run its business. It is not that they have done something wrong. It is just a little inconvenient that you are an independent contractor. We insist that you are an employee, because that is easier for us, and we will refuse to give you an ABN because we reckon you are not really an independent contractor. Yet the law is clear. They should apply the law—a novel idea—but no, they have to go the jihad on SMEs.

Here is another example of it. The tax office has not had a great record on some of its cases on anti-avoidance measures. The shadow Treasurer outlined that there is a one-in-two diminishing rate of success. The member for Fraser, having a learned mind, would turn his thinking to just why that success rate is the way it is. Would he immediately think the law is not up to the task or might he actually look at the cases? Might he actually feel that the interpretations being imposed by the tax office are inconsistent with the way the law is drafted? Maybe there was not any anti-avoidance at all. They could have looked at those internal case selections and had some external people look at them, to reality check the cases that they have pursued, rather than self-support each other's assessment within the ATO. If you got a dispassionate assessment of it, then you might get a different outcome. But they say, 'No, we're in and we're going to change the law. Let's change the law.'

This change of the law actually contemplates posing a retrospective tax question: what if this transaction had been done another way? If the tax office want to get into that business, they should go into business and make those judgments. But, in the meantime, they should apply the law—I know that is a novel idea! We have seen how this works in other examples. We saw how this worked under the sober and thoughtful warning of the Inspector-General of Taxation. The member for Fraser might recall that the Inspector-General of Taxation himself was concerned about the way the tax office went about its business.

There was the example of some whistleblowing from a former ATO staff member about formal targets to punch through objections to audit decisions and wave other ones through irrespective of their merits. It was widely reported, but what was of more concern was that late last year the Inspector-General of Taxation's report found that more than 5,800 small businesses had been targeted by the ATO. They were forced into simply paying default tax assessments because they could not afford to fight or correct the ATO's false assertions. There was the institution designed to be fair and consistent in applying the law going after these little guys because they could not push back.

We saw a more of it in MYEFO. Do you know what was extraordinary in MYEFO, Mr Deputy Speaker? I looked through that document to see whether the government would maybe finally get the idea that, after reducing the number of people employed in small business by a quarter of a million over the last five years—despite population growth and your Treasurer saying there has been trend economic growth—there has been a substantial contraction in SMEs. I am hearing all these stories that the information you give only has to be slightly off and the ATO will go after you and how they were so active in insolvencies that they ran out of administrative filing fees and that is why insolvency rates were at record highs.

I looked in MYEFO to see whether there was a little bit of encouragement or support for small businesses. Do you know that the only small-business positive comment in that document was about what the Chinese government was doing to support Chinese small businesses? In MYEFO, the government was comforting itself that the slowdown in the economy in China would not be as great as some had predicted because the Chinese government was doing things to support small business. That was the only positive comment. Do you know what the other mention of small business was in MYEFO? It was the announcement of another $380 million to continue this jihad on small business, knowing that small businesses have no capacity to fight back. The tax office is after you, there is a behemoth in the room and the small businesses—as found by the Inspector-General of Taxation—too often have to pay go-away money.

We see this here in these measures. In schedule 1, under the anti-avoidance provisions, it is quite remarkable because there is a nice round $1 billion dropped on the table. That is what the effect is going to be: a nice, sweet $1 billion. There has been concern raised by any number of eminent organisations, including Certified Practising Accountants Australia, who do terrific analytical, evidence based work on these concerns, the Tax Institute, the Corporate Tax Association of Australia and the Institute of Chartered Accountants in Australia. All of these organisations have said there are some problems with the way in which these provisions operate, because they assume some alternative theory about commercial transactions that are then imputed into the tax thinking and therefore might produce a different outcome.

That is not to say that someone has been behaving motivated by tax mischief or tax opportunity. This is actually: 'Maybe, we could reconstruct this process and see if the transaction could be executed in another way.' That might spit out a different tax outcome. There might be a perfectly legitimate business justification about why the transaction went the way it did. But does that then leave people open to further action of a retrospective nature under these expanded general anti-avoidance provisions? There are has been no effort to calibrate how they deal with anti-avoidance, but they look all the world like they are just dealing with a poor success rate on litigation.

When these bodies seek to get guidance on that and to interact, as happens in a hearing, on the calibration and justification, they get nowhere. There is no opportunity to do that. It was interesting, wasn't it, that even in that truncated, poor excuse for a committee hearing exercise—which has brought great shame onto this parliament—the Treasury's submission was a belated attachment. It was an afterthought. They tried to get behind the policy justification, which should come out of Treasury, to see how the particular instruments are being advocated and crafted in the interests of the tax office's conduct. There is no chance to have that conversation at all. That is what is the great shame about this process.

You then move onto schedule 2, which was quite interesting. You heard the member for Throsby talking about the evils of transfer pricing and what that can do to the tax take in Australia. Do you know that, in the explanatory memorandum, schedule 2 does not raise a dime? Do you not find it the slightest bit interesting that we have got a nice, round $1 billion figure for anti-avoidance but, when it comes to this horrendous evil and the reaching over to the OECD for their work—and it is all sweet—it does not raise a dime, according to the explanatory memorandum? Doesn't that make an interesting conversation?

So powerful are these provisions that they are getting jammed through the parliament because our tax base is at risk. We hear these erudite presentations from government members about transfer pricing—it is eroding tax bases and impeding developing countries for having doctors—and how it is fantastic, but when you look at the detail it does not raise a dime. So what is it?

Dr Leigh: It's protecting revenue.

Mr BILLSON: The interjection is that it is protecting revenue. It does not raise a dime, yet so urgent is this potent and powerful measure that the parliament is not afforded the courtesy of a hearing about it. You just have to jam it through. When you look at its impact on small business, submission after submission points to an overriding concern about this legislation creating extraordinary additional compliance costs for taxpayers and also uncertainty about what taxpayers need to do and what they need to do differently to ensure that they are complying with these revised transfer pricing tests.

The government comes in here and talks about the evil of these behemoth multinationals, ignoring the fact that there is no safe harbour for small business. There is no carve-out; there is none of the wisdom reflected in the United Kingdom law. I quote from the ICAA's excellent submission, where they say:

In our view, in a proper balancing of compliance costs against revenue risks, it is essential that some taxpayers are completely carved out of the transfer pricing rules. This is on the basis that below a certain point it is just not cost effective or practical to impose transfer pricing guidelines. The UK has recognised this in its transfer pricing rules which provide that SMEs are exempt from the transfer pricing rules. An SME under this definition is one that has less than 250 employees and either:

turnover of less than â¬50m; or

assets with a balance sheet total of less than â¬43m.

We note that this approach of completely carving SME taxpayers out of the transfer pricing rules need not however, prevent the ATO from still being able to gather information—

and use its extraordinary toolkit that is available now—

to address any concerns it has around related party dealings by SMEs.

They make the following point:

… the Institute believes that penalties should not be imposed for any adjustment made under Subdivisions 815-B to 815-E on a SME taxpayer that has made reasonable efforts to comply with the legislation—

should be taken into account. Where has that wise counsel gone? The de minimis thresholds of $10,000 and $20,000 proposed here are far too low to achieve their intended purpose. To go after those behemoths that the government likes to say this is about, why are those thresholds so low? The proposition is to raise the threshold to $5 million to have their intended effect, but then we think, 'This is not supposed to raise a dime.' It is a saviour of budgets. It is the headline the government is after. It is an appalling abuse of parliamentary process and it is just further evidence of this dysfunctional, divided and hopeless government. (Time expired)