Senate Report - Labor’s Multinational Tax Bill

The Senate Economics Committee has today released its report on Labor’s Multinational Tax Bill.

It is clear that Labor has failed to properly engage with business on these complex tax policy changes.

Labor’s tax bill is a joke. As currently drafted, it will undercut investment and jobs in Australia, and make the country less competitive.

Alongside thin capitalisation changes, Labor wants to introduce previously unseen debt deduction creation rules.

These rules are drafted so broadly, they will capture legitimate domestic financial arrangements. The debt creation rules could effectively mean the 30% ratio limit on debt deductions would be de facto lower.

The Committee heard how these rules will increase the cost of capital investment in Australia and would make mortgages more expensive.

Concerningly, these proposed debt creation rules will also be retrospective. This will burden businesses, who will have no time to alter their financial structures to ensure they remain compliant.

There was no consultation on these debt deduction creation measures, and they should therefore be scrapped from the bill.

Furthermore, Labor’s thin capitalisation changes contain countless drafting issues. Clearly, these changes have been devised without regard to commonly used non-consolidated tax structures including trusts.

Predictably, Labor have included a carve-out in these rules for superannuation funds on the basis that it would "inappropriately restrict their ability to borrow".

Yet, Labor has failed to provide any rationale as to why other entities such as managed investment trusts are not provided similar exemptions, given they would face similar restrictions.  Labor is prioritising their vested interests over Australia’s economic prosperity.

The Coalition supports further action on tax evasion but this is not the way to do it.

We will move to heavily amend the bill in the Senate to protect investment and jobs in Australia.

This government is anti-business, and the bill reflects Labor’s poor record on engaging stakeholders on sensitive policy changes.

When it comes to important policy decisions and complex legislative changes, this is a government solely for vested interests.