Wayne Swan (Lilley, Australian Labor Party, Treasurer) Share this | Hansard source

Last week the government convened a forum of almost 200 people to discuss the next steps in tax reform. By any measure, the tax forum was a great success. I am proud of the forward-looking discussion which occurred here last week and which confounded all of the critics and all of the cynics. We drew together representatives from across the country—we heard views from the boardroom, from the factory floor and from the kitchen table. No topic was off limits, and the conversation covered a broad range of ideas just as I had called for a month ago in this very parliament. We did not agree—it would have been pointless if we did—but we did find some very important common ground across long-standing political and ideological divides. The government will progress a number of the issues which came out of the forum as part of a second wave of tax reform.

The tax forum was not the start of a tax reform process; tax reform has been a central part of this government's economic agenda. We came to government after years of Liberal neglect of tax reform. Australians had seen largesse bankrolled by the windfall gains of repeated revenue upgrades from mining boom mark 1, but they had not seen anything approaching tax reform for many years. So we commissioned the Australia's Future Tax System Review to reinvigorate the tax reform debate, to give it some direction and to give it purpose. We gave the review an ambitious scope: taxes and transfers across all levels of government.

After receiving the tax review, we set about a broad and ambitious agenda of tax reform. The Prime Minister and I have spoken at length about our patchwork economy. Some sectors are booming—for example, the mining sector expects to invest $82 billion in this financial year alone—but other sectors struggle with the high Australian dollar, cautious consumers and increased competition for labour and resources. Our first wave of reform was a response to the pressures of a patchwork economy. We adopted the central thrusts of the tax review: firstly, to get a better return for Australia's non-renewable resources through a profits based tax; secondly, to cut business tax, helping struggling firms with a company tax cut and a billion-dollar tax break for small business; thirdly, to save some of the gains to prepare for an ageing population by boosting superannuation and making concessions fairer; and, fourthly, we tripled the tax-free threshold from $6,000 to $18,200.

But we are doing much more than this with something like 32 reforms that deliver on ideas in the tax review. We are boosting workforce participation through a suite of budget reforms which were widely welcomed and which included the phasing out of the antiquated dependent spouse tax offset and reforming transfer payments. We are simplifying personal tax with a standard deduction for work related expenses. We are fixing the FBT treatment of cars. We are revamping the R&D tax incentive to boost innovation. We are modernising the governance of the system. The list goes on and on. We are doing all this at the same time as keeping tax as a share of GDP below the level we inherited. This year, tax is expected to be 21.8 per cent of GDP. That is substantially lower than the 23.5 per cent we inherited and much lower than the all-time record of 24.1 per cent set by those opposite in 2004-05 and 2005-06. I know from experience that tax reform is never finished. It is a journey rather than a final destination. So we held a forum to talk about the next steps in tax reform, to discuss how to build on our existing tax agenda. As I said earlier, it was a great success. We heard from business big and small, we heard from community groups and we heard from unions. We heard from experts, we heard from tax professionals and we heard from our universities. We heard from people at the front line, we heard from small business and local accountants.

I would like to thank all of the participants in the tax reform for the goodwill that they brought to the table in the parliament last week. We did not always agree but we did find some very important common ground. An overriding theme was that responding to our patchwork economy is a priority. We agreed that parts of our economy are under significant pressure and there are a variety of different ideas on how to respond. For example, participants had different views about across-the-board company tax cuts. But there was also some very important consensus—for example, around more targeted measures like improving the tax treatment of losses—and there was some consensus about the best way to develop these ideas through a collaborative working group.

At the end of the forum I announced that we would bring together a business tax working group to be chaired by Chris Jordan. Its first job will be to look at losses and how to fund any changes within the business tax system. Its second job will be to look at longer-term ideas, like a deduction for equity, and compare them to alternatives like changing the company tax rate.

Another area where we forged a consensus was the vexed topic of inefficient state taxes. After roughly seven years in the Treasury portfolio I have not before encountered such a mature acknowledgement of the deficiencies of many of our state taxes. I see this acknowledgement, coming from state treasurers from both sides of the political aisle, as something of a breakthrough. Equally encouraging was the acknowledgement that the solutions lie not in the lazy option of jacking up the GST in a way which hits low-income Australians hardest. Coming out of the forum, the states—led by Queensland and New South Wales—will develop a plan for harmonisation and further steps in state tax reform. I am very proud that we helped such a productive discussion occur and of course we are happy to help facilitate change as we press ahead.

The third broad consensus was about improving the interaction of the tax and transfer payment system. We are already making major progress here, including tripling the tax-free threshold to $18,000 on 1 July next year. This will reward hard work, especially for secondary income earners. It also means that up to one million extra people will be spared the inconvenience and expense of lodging a tax return. At the end of the forum I announced that our priority for personal tax is to go further and to get to $21,000 for the tax-free threshold when the country can afford it.

These were some of the key outcomes but there were lots of other ideas that we will also take forward. We had a discussion about reform of not-for-profit concessions and about the rules governing superannuation annuities. A new tax study institute will be a centre for research excellence into the tax and transfer payment system. Many other ideas were also raised at the forum—too many to go into today. Some of these might work, some of them might not, but I expect and hope they will be the subject of much community discussion in the months and years ahead.

The tax forum showed just how constructive and positive the policy discussion can be in Australia when everyone comes together with goodwill and the cynics and wreckers are ignored. I just wish the discussion in this place could be as constructive and positive as it was in the tax forum last week. The challenge for this opposition is to throw its knee-jerk negativity out the window, throw its destructiveness aside and outline some ideas for the future of the country.

I think that they should look to the example of all of the forum participants. They really did rise to the challenge and that was very encouraging. What they were interested in was the national interest, not some selfish political interest that we see from those on the opposite side of the parliament. All we see are the empty slogans. They say things like they stand for lower taxes, when their policy is higher taxes on companies, higher taxes on small businesses and lower taxes for very profitable mining companies. That is their current position. They say they stand for simpler taxes, when they opposed the instant asset write-off for small business—a huge tax cut for 2.7 million small businesses. They opposed that, they opposed the standard deduction and they opposed the tripling of the tax-free threshold. It is absolutely incredible. They say they stand for fairer taxes when they want to abolish the instant asset write-off, a huge boon to small business, and when they want to take away an addition to the super savings of 3.5 million low-paid workers. They have an agenda which will hurt working people in this country and damage our economy for the long term.

I am an optimist. I look forward to hearing the opposition's ideas today about how they are going to fund and reform the tax system, given how negative they have been. But for our part, what we will do is continue to put in place policies which will build retirement savings for the future and promote workforce participation. We have a plan—unlike those opposite, who have no ideas whatsoever. (Time expired)

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