Craig Kelly (Hughes, Liberal Party) Share this | Hansard source

I finish in continuation from last night on the Tax Laws Amendment (Temporary Budget Repair Levy) Bill 2014. In the remaining time I would like to address why the amendment moved by the member for Indi is a mistaken amendment and why it is dangerously mistaken. Firstly, going back to the specifics of this bill, it lifts our marginal tax rate, the highest rate of our marginal tax rate, on incomes above $180,000 from 45 per cent to 47 per cent. But we do this as a temporary levy—it is temporary. It will take effect from 1 July this year and end on 30 June 2017. It is important that it is temporary because, if you continue to lift marginal tax rates, you do not necessarily increase the total tax take. We live in a global society, a global economy, and we need to ensure that the marginal tax rates that we have in Australia—those highest marginal tax rates—make us as a nation internationally competitive.

If we go from 45 to 47 per cent plus the Medicare levy, plus the NDIS levy, the highest marginal tax rate in this country will now approach 49 per cent, which will make Australia have the eighth highest marginal tax rate in the world. We need to look at what our competitors in nations nearby have as their marginal tax rate. For example, across the Tasman in New Zealand, their highest marginal tax rate is only 33 per cent; in Singapore it is 20 cent; and in Hong Kong, it is 15 per cent. So if we think that we can go on forever with a marginal tax rate, the highest marginal tax rate at 49 per cent, so far above our nearest neighbours that we compete with, this is a dangerously mistaken idea.

The reason I say that is that we have to remember we could have a 100 per cent marginal tax rate and, of course, there would be no income. There is a certain point you reach when you raise the marginal tax rate when it becomes a disincentive for entrepreneurs in our society to go out there and take risks and put their own money on the line if they have to give half of that back in tax. This is why other countries across the world throughout the last several decades have actually lowered their highest rates of marginal tax, because they realise that is the best way not only to increase the total tax take but to stimulate the economy. So the proposed amendment is very poorly thought through, it would actually damage the economy in the long term and we cannot support it. But overall this is, unfortunately, a necessary measure. As a member of the government I say we cannot impoverish future generations of Australians and that is why the measure is necessary.

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