Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Hansard source

I have a strong sense of deja vu. I have just heard the Treasurer talk about a coming tax summit—in the Treasurer's opinion, 'the most important gathering of tax experts and advocates since at least the mid 1980s'. I recall we had a big tax review not that long ago—in fact, just two years ago: $10 million, 1,500 submissions and a panel consisting of five experts. The report was 1,332 pages, with 138 recommendations. Does this sound familiar? It is. It was the Henry tax review. At the time, the Treasurer said:

It is the most comprehensive inquiry into our tax system in over 50 years.

The more things change, the more they stay the same.

This new tax summit was originally to be held before 30 June this year to satisfy a written agreement with the Independents. It is now being held four months late. The Independents should be perturbed by the failure of the government to deliver its commitments on time. The Treasurer says he is personally looking forward to meeting with almost 200 representatives. No-one from the opposition has received an invitation. Perhaps the invite is still in the mail! However, the government does know how to look after its own kind. Thirteen official places have been set aside for the trade union movement. How can the Treasurer stand before the parliament and say that he wants to hear everybody's ideas? Truth be told, he does not want anyone to really notice that the summit is even going on.

The Treasurer has run through what he sees as his important reforms in tax. Let us look at some of these. The Treasurer claims that he is rewarding work by trebling the tax-free threshold for personal income from $6,000 to $18,200. The Treasurer should check his facts before making such bold claims. The Treasurer is not trebling the tax-free threshold at all. The current effective tax-free threshold is $16,000 due to the impact of the low-income tax offset. So, when you combine this with the other changes being made as part of the compensation package for the carbon tax, the government claws back much of this benefit. There are changes to the marginal tax brackets and marginal tax rates, along with a reduction in the low-income tax offset from $1,500 to $445 in 2012-13 and then $300 in 2015-16. The real reason the Treasurer is distorting this particular issue is because, by the government's own admission, they have left themselves a tiny 20c per week margin of error for the price impact of their carbon tax on average households. The carbon tax will cost households $9.90 a week and compensation will be barely enough at $10.10 a week. They know it sounds better to tell voters that they have tripled the tax-free threshold rather than to answer questions on the real impact on their standard of living as a result of the carbon tax. Today the Treasurer has also claimed credit for $47 billion of personal tax cuts. These tax cuts were previously announced by the coalition—they were funded by us and handed out by them. The coalition delivered these income tax cuts to the Australian people as a result of rigorous fiscal discipline and budget restraint, not through introducing new taxes.

The Treasurer also claimed today to be boosting retirement savings by taking the superannuation guarantee levy to 12 per cent. Can I say that the coalition strongly supports superannuation. It is a key pillar of a system which, along with the aged pension and incentives for voluntary saving, is helping all Australians prepare for a more comfortable life after work. In fact, we were the ones that implemented an increase in the compulsory superannuation contribution from six per cent to nine per cent in our earliest years of government. However, we do not support the proposed increase in compulsory super from nine per cent to 12 per cent. There are several reasons. First, this increase in the superannuation guarantee will be funded by the mining tax. The coalition is opposed to the mining tax. We cannot make promises that cannot be paid for. We will rescind this tax in government and we will unwind the expenditure linked to it. This is fiscally prudent. It would be irresponsible to keep the expenditure without the supporting revenue. Second, I note that the then Secretary of Treasury, Dr Ken Henry, concluded in his review of taxation that the current compulsory super contribution rate should remain at nine per cent. He made the point that increasing the superannuation guarantee beyond nine per cent would most heavily impact on low- and middle-income earners. The additional burden of the payment would not be borne by business but rather would be funded by reducing the growth in take-home pay. More of a worker's income would be put aside rather than paid today. The result of Labor's policy would be to cut take-home pay by three per cent. This is an awfully big ask at a time when families are struggling under higher costs of living, what could be higher interest rates, and new and increased Labor taxes. The Treasurer has emphasised that he has implemented 32 reforms that deliver on ideas in the tax review. It is odd that he has ignored the recommendations—indeed, he has explicitly gone against them—in relation to superannuation. And finally, today the Treasurer has also claimed credit for a policy that belonged to his alliance partners, the Greens—that is, changes to the fringe benefits tax treatment of cars. There is a telling slip of the tongue, or slip of the pen, in the Treasurer's statement. He admits:

Average prices for our resources exports have increased by around 200 per cent since the end of 2003—

and—

The mining boom is an overwhelming positive for Australia.

Well, it is the truth; but what is strange is that, to this point, the Treasurer has argued that the current mining boom is not a patch on that experienced under the coalition. In his speech on a tale of two booms the Treasury said:

During mining boom mark I, revenues were boosted by a sharply rising terms of trade—

and—

Mining boom mark II will have all the pressures of the first boom, without the surge in revenues.

I think it is time for the Treasurer to end the excuses. Mining boom mark II is alive and well and is the biggest for several generations. It does not get any bigger than this, perhaps. If the Treasurer cannot deliver a budget surplus in this environment he never will.

The government's idea of tax reform is to introduce new taxes. To date, Labor has introduced or increased 19 taxes, including the prospect of significant new taxes on mining and carbon. Not one tax has been abolished. The government has used these taxes to give the appearance that it is being generous with tax cuts and other assistance for households. The carbon tax is a classic case of the government's sleight of hand. The new carbon tax will raise $7.7 billion in the first year at $23 per tonne, escalating to $9.2 billion by 2014-15. This burden will fall on all households, as Professor Garnaut has said in his report, as will the additional burden of cost increases above and beyond the amount of tax raised—that is from shifting to higher cost forms of power generation and transport. To quote the final Garnaut report:

Australian households will ultimately bear the full cost of the carbon price.

Only part of the tax will be paid back to households in compensation and the rest will be paid in industry assistance and to meet our international obligations. So households in aggregate will be substantially worse off, and this heat will rise and year after year as the tax goes up. And yet the government wants households to believe they will be generously compensated through tax cuts and direct assistance. The carbon tax is a Labor con.

The Treasurer identifies some areas for attention at the tax summit. One is state taxes—he is always happy to have a review of someone else's taxes. He has a bit of a crack at the states, suggesting they are not doing their bit, and that the summit provides a forum for the states to take responsibility for their taxes. I would expect that they would do that every day. I think a history lesson for the Treasurer on state-federal relations might be in order.

State governments do not raise sufficient revenue to fund their expenditure. Even after the introduction of the GST, the states have not been fully self-sufficient in funding. This imbalance is addressed through revenue transfers from the Commonwealth to the states. This imbalance goes back to Federation, when the six colonies handed over their powers to collect customs and excise to the Commonwealth. As these taxes had been the states' major source of revenue, this transfer of powers created an immediate need for the states to be adequately resourced by the Commonwealth to meet their spending commitments. The introduction of the GST in July 2000 was intended to provide the states with greater self-sufficiency in revenue.

The issue of self-sufficiency has boiled up again recently, with the Commonwealth government reaping much of the benefit of the mining boom through increased company taxes, and perhaps soon a new mining tax, but with the states left with the spending and infrastructure demands associated with the boom. This poses the rather obvious question, which is: why would the state governments take the political pain of negotiating environmental and other political issues associated with new mines when they won't receive the revenue?

Two of the states, Western Australia and New South Wales, have recently attempted to become more self-sufficient by raising their mining royalties. Unfortunately, all they have received from the Treasurer in response is threats to dock their federal transfers. So he has in fact penalised the states for increasing their royalty from the mining boom in the same way that he want to do with his own mining tax. So much for him encouraging the states to get their affairs in order!

When it comes to tax reform, the coalition does have runs on the board. Our experience with the introduction of the GST provides a useful lesson in implementing tax reform. The coalition campaigned long and hard for the introduction of the GST before the October 1998 election—and, boy, I remember that! It was a tough campaign and the coalition lost some bark, but we believed the introduction of a broad based consumption tax was a necessary reform, and we took it to the people. The coalition had the courage to take the GST to an election. Labor is refusing to do the same with the carbon tax.

The GST reforms provided the basis for a more efficient taxation system by eliminating a whole host of small and inefficient state taxes, such as financial institutions duty, bank account debits tax, stamp duty on marketable securities, conveyancing duties on business property, bed taxes and so on. Many of these were taxes paid by individuals, so removing them simplified the overall tax burden on everyday Australians. Most importantly, the GST was introduced at a time when a half decade of fiscal prudence by the coalition had provided sufficient room for reductions in personal income taxes and generous compensation to low-income groups. The overall financial standing of households was improved. After these changes were completed, 80 per cent of Australian taxpayers paid a top marginal tax rate of no more than 30c in the dollar.

Some key lessons emerged from this experience. The first was that reform is meaningless unless it leads to a simplification of the system. The number of taxes should be reduced. The second is that taxpayers have to be better off from the reforms. It is not enough for the changes to be fiscally neutral. The revenue raised from a new tax has to be fully offset, and more, by cutting other taxes, and there needs to be additional compensation from the budget so that the financial standing of taxpayers is clearly improved—that is, that they are properly compensated for the pain of significant change.

As the Leader of the Opposition has already announced, the coalition remains committed to real tax reform while restoring the integrity of our nation's finances. The first step in achieving this is to do everything we can to stop the carbon tax and the mining tax. The second step is to continue to press for cuts in government spending, which is why we continue to highlight the waste and mismanagement of this government. In government the coalition will pursue lower taxes for households and businesses which will be funded through targeted reductions in government spending. This will reduce cost of living pressures and the cost burden of business. It will help ease upward pressure on interest rates because we will not be stimulating the economy with deficit fuelled expenditure. These measures together will help to restore growth in productivity, which has stalled under the dead hand of Labor. There are, however, two comments by the Treasurer with which I heartily agree: any change to the tax system needs to be funded and we cannot all give ourselves a tax cut and expect somebody else to pay for it. It is a shame his actions in funding personal and business tax cuts from the carbon and mining tax revenues do not match his rhetoric. There is only one sustainable way of delivering real tax reform and that is to cut spending and return the budget to surplus. There is one more thing on which I agree with the Treasurer, and that is that there is much to be discussed at the forthcoming tax summit. I urge the government not to let the opportunity go to waste. I fear that it will be just a taxpayer funded talkfest seeking third-party endorsement of Labor's carbon and mining tax proposals and their big-taxing, big-spending ways.

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