Additional Comments

Re OECD Tax Measures BEPS and International Solar Alliance – Agreement

OECD Tax Measures BEPS

There are numerous studies and analyses that show the extent to which multinational tax avoidance prevents national governments and their citizens from receiving the funds they are due. This in turn inevitably means the tax burden falls unfairly on domestic companies and individuals, that global inequality is sharpened, and that public goods and services are not funded and delivered.
Labor regards fair taxation as an intrinsic and essential element of a well-managed domestic and global economy. It is both inefficient and immoral when companies play tricky, complicated games in order to avoid contributing their share to the society from which they derive their existence and their profits.
As this Report notes, the OECD has estimated the annual tax revenue loss by OECD member states through base erosion and profit shifting as being in the region of $100 – $240 billion. Australian Tax Office (ATO) data show that around 1 in 4 large companies pay no tax in Australia.
It is disappointing that the ability of this Committee to properly understand and assess the impact of the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting is constrained by inexplicably vague information provided in evidence from Treasury.
On the question of the predicted revenue impact of the treaty action, Treasury could only say that was “unquantifiable but revenue positive”. The question was put about whether there was a broad estimate or some guidance on the extent of the expected revenue. Treasury’s response: “The simple answer is no.”
On the question of whether modelling by Treasury, undertaken in consultation with the Australian Tax Office, included case studies of relevant multinational entities, the answer was that an assessment of certain entities “was generally considered” – but again there was no evidence provided to the Committee, even in the broadest terms, of what this analysis revealed.
It was also made clear that assessment of the revenue impact of treaty action occurred without recourse to any external advice, expertise, or modelling.
Labor members of the Committee nevertheless support the treaty action, but observe that the Abbott/Turnbull government has done virtually nothing to address the issue of multinational tax avoidance.
This continues the Coalition’s neglect of this pressing reform imperative. In 2012, the Coalition opposed Labor’s Tax Laws Amendment (Cross-Border Transfer Pricing) Bill (No. 1) which was subsequently integral to the ATO’s recovery of $300 million from Chevron.
Even from Opposition, Labor has alone carried the vital policy work and policy argument on this issue, proposing a comprehensive Multinational Tax Package in 2015 that includes a number of measures specifically designed to address the scourge of debt deduction loopholes, which in combination would add $5.4 billion to the Budget bottom line over a decade. The elements of the package are:
Adoption of Worldwide Gearing Ratio (to address Thin Capitalisation).
Implement a publicly accessible registry of the beneficial ownership of Australian legal entities (including trusts), as per the G20 principles that Australia has adopted.
Restore $100M tax transparency threshold in relation to the public reporting of tax data for private companies.
Appoint a community sector representative on Board of Taxation.
Delivered increased compliance funding for the ATO.
Australia’s participation in international agreements to harmonise a more rigorous approach to multinational tax avoidance is welcome, but such action will make relatively little difference without a much greater commitment to domestic reform.

International Solar Alliance – Agreement

Labor members of the Committee support the treaty action in relation to the Framework Agreement on the establishment of the International Solar Alliance.
It has to be said, however, that the government’s interest in this treaty action stands in stark contrast to its policy and program vandalism in relation to renewable energy, including its lack of support for solar power and technology. The truth is that without a radical return to sensible policy settings, Australia’s participation in the International Solar Alliance will mean very little to our national circumstances, and we will persist in the abdication of what should be Australia’s natural role and responsibility as a global leader in renewable energy.
While the Department of the Environment and Energy has stated:
Australia is a world leader in the solar sector, with the highest average solar radiation per square metre of any continent in the world. Joining the ISA would provide us with an opportunity to promote our expertise and experience internationally and would also have the capacity to attract investment and project partners into Australia and enhance domestic industry.
The Abbott/Turnbull government’s approach has amounted to the active and apparently purposeful dampening of an otherwise burgeoning solar energy sector.
To make this plain, consider the fact that in 2013-14, while global investment in renewable energy rose by 16 per cent; investment in large scale renewables in Australia fell by 88 per cent.
Through this policy and program neglect, Australia has plummeted from its position in 2013 as the 11th most attractive renewable energy investment jurisdiction to its current position of 39th, and carbon emissions have risen.
The implications of this policy inflicted self-harm are twofold: (1) it will prevent Australia from taking advantage of our world-leading natural solar resources at a time when comparative advantages are being established in this key 21st Century industry; and (2) it will mean Australia does not create and share the capacity to massively reduce carbon emissions as part of the global effort to address dangerous and costly climate change.
Indeed, according to the government's own data, the current policy settings are projected to deliver zero emission reductions by 2030 on 2005 levels.
Under the recently announced National Energy Guarantee (NEG), the renewable share of electricity generation is expected to only reach 36 per cent by 2030, which translates to only 0.5 per cent growth, year on year, throughout the next decade.
By comparison, the existing Renewable Energy Target (RET) will increase the share of renewable power by 6.5 per cent over the next three years (from 17 to 23.5 per cent).
That retardation of the renewable energy sector in Australia is simply astounding. In 2016 there was around 750 MW of rooftop PV installed around Australia. Yet in order to meet the energy profile limits within the government’s NEG there will be no additional solar photovoltaic capacity introduced (including through rooftop solar) until 2028.
While the global renewable energy industry is booming – attracting hundreds of billions of dollars of investment and creating 9.8 million jobs – the latest release of renewable employment data by the Australian Bureau of Statistics shows the Turnbull Government’s war on renewable energy has meant 2,150 renewable jobs were lost in the last year alone.
At more than 16 per cent, that is a record annual fall in renewable energy employment, and beats the previous record of 14 per cent set in Prime Minister Abbott’s first year in office.
It brings to 5720 the total number of renewable jobs lost under the Abbott-Turnbull Government – the equivalent of closing 3.5 car manufacturing plants the size of the Holden operation in South Australia. All together it represents a loss of 1 in every 3 renewable jobs since this government was elected, or a 33 per cent fall in total renewable employment.
At the same time, global renewable energy jobs have grown by almost 45 per cent. If Australia had simply kept pace with global growth since the 2013 we would have 24,400 renewable energy jobs; not the 11,150 as reported by the ABS. In reality, Australia’s natural gifts when it comes to solar, wind, and wave/tide resources, in combination with our appetite and capacity for innovation, ought to have delivered world-leading growth in renewable energy production and employment.
Until the steeply retrograde policies of the Coalition government are abandoned and reversed, the joining of international solar alliances and the signing of international climate change agreements will not change the fact that Australia’s performance is poor and worsening when it comes to growing renewable energy and reducing carbon emissions.
Michael Danby MP
Josh Wilson MP
Senator Jenny McAllister
Susan Templeman MP

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