Jim Chalmers (Rankin, Australian Labor Party, Shadow Parliamentary Secretary to the Leader of the Opposition) Share this | Hansard source

To those who have joined us in the gallery, who have maybe come from all corners of the country and perhaps waited in line for their big chance to listen to a speech in the chamber, I apologise that you had to listen to the member for Bowman in your one visit to this place. Much of what he said was rubbish.

Like the member for Bowman, my colleague the member for Bendigo and others, I rise to speak today on the Tax and Superannuation Laws Amendment (2014 Measures No. 4) Bill and the Tax and Superannuation Laws Amendment (2014 Measures No. 5) Bill 2014. Characteristic of these kinds of pieces of legislation, they are taken together into a bit of a grab bag of measures, but together they make a number of changes to the legal framework underpinning the tax and superannuation system, including, for the sake of completeness: enacting the tightening of the thin capitalisation rules announced by the previous Labor government; enacting reforms to the exemption of foreign non-portfolio dividends, again as announced by the previous government; abolishing the mature age worker tax offset; abolishing the seafarer tax offset; reducing the research and development tax offset; and a number of other mechanical changes to the tax and super laws, including what I think is a fairly obvious stunt, which is changing the way that tax receipts are presented to individuals. I will consider these policies individually shortly, but it is first worth touching on the government's general approach to taxation and budget repair.

The May budget showed that the government have pretty twisted priorities when it comes to fixing what they call the budget emergency. That is effectively a con, but they do have a fairly unusual and unfair way of going about repairing the budget as we go forward. The biggest problem we have with the budget, as we have said in this place time and time again and as my community is certainly telling me—I am sure the member for Lingiari has had the same experience; I am sure everyone in this House has had people come up to them and tell them this—is that this budget is grossly unfair. That is why people have rejected it in such overwhelming numbers. It is unfair because it targets people on low and fixed and middle incomes. It asks the most vulnerable in our community to do the heaviest lifting, and that is why those opposite have had no success whatsoever in finding community support for it.

My community is Rankin, south of Brisbane, comprising a big chunk of Logan City and some surrounding Brisbane suburbs. The Courier-Mail did an analysis to find the hardest hit community in Queensland and, unfortunately, it is my community of Rankin. It is the hardest hit by the combination of pension cuts, cuts to family payments, cuts to tax breaks for low-income people, the GP tax, the petrol tax and more. This would be bad enough on its own, but what really rubbed salt in the wound for a lot of people in my area is that, at the same time that the government is taking money from people on low and middle and fixed incomes, it says it has enough money to give $50,000 to some of the wealthiest people in our community just to have a baby. It has found money to give superannuation tax cuts to the 20,000 wealthiest people in the superannuation system. It is also reopening $1.1 billion in tax loopholes that multinational companies rely on—and we will get into that in a bit more detail in a moment.

You can see that one of the reasons this budget is such a stinker in the community—not just in my community but right around the country—is that it asks the vulnerable to do the heavy lifting, and it gives new entitlements. We are supposed to be ending the 'age of entitlement', in the Treasurer's words. He gives new entitlements to some of the wealthiest people in our community.

We have heard a lot of bluff and bluster, by the Treasurer, out of the G20 finance ministers meeting about tackling profit shifting and base erosion. All are words, he said, we can sign up to. It is important that we tackle this issue. The Labor government—which I worked for, for a time—did take some steps. They were part of this G20 OECD agenda about base erosion and profit shifting, and we agree this is a substantial problem that needs to be tackled. The unfortunate thing is that the Treasurer's words are far from the reality of the government's actions.

The two measures introduced in this package that we are debating were announced by Labor. They are, unfortunately, a drop in the ocean compared to the full suite of measures needed to properly combat multinational profit shifting. It is a big problem. We have had numerous examples in the mainstream media of companies that are making billions of dollars here in Australia and paying a negligible amount of tax. That is as a result of some of the substantial loopholes and practices that have developed over time. What they are doing is not illegal, but it is doing real damage to our bottom line, and there are big holes in our revenue system when companies can take advantage of us in this fashion.

The previous Labor government closed-up loopholes worth about $5.3 billion. In the 2013-14 budget alone we were taking substantial steps to ensure that companies which made money here from our citizens were also paying the right amount of tax, or more tax, a just level of tax, here in Australia. There was a lot more work to do at the international level as well. Particularly disappointing was that when the Abbott government came into office one of the first things they did—at the same time as they were saying there was a budget emergency—was reopen two loopholes worth $1.1 billion to the Australian people, which allowed multinational companies to engage in the sorts of practices Labor was cracking down on.

This shows that the government is not serious about making multinationals pay their fair share of tax. We get all the flowery words and bluff and bluster from the Treasurer, all the grandstanding at the G20 level, but we do not get the action here at home. If they were serious about it, they would not have reopened those two loopholes on the biggest multinational companies in the world. The government is going ahead, thankfully, with two of Labor's profit-shifting measures in this legislation, including a change in the debt-limit settings, as they apply to the thin-capitalisation rules. Once again, this is only one aspect of Labor's intended thin-capitalisation reforms, but it is better than nothing.

Thin capitalisation, as other speakers have tried to explain, refers to a tax-minimisation strategy employed by multinational companies operating here in Australia. Under this strategy, companies allocate a disproportionately large amount of debt to their Australian operations to claim excessive debt deductions here in Australia, thereby reducing their taxable income. Because the Australian operations may be funded by excessive debt, compared to the capital raised in Australia, a company employing this strategy is said to be 'thinly capitalised'.

Multinationals have an incentive to place large amounts of debt on their Australian arms because generous deductions for interest can offset their tax in Australia, where deductions are more valuable than in low-tax jurisdictions or tax havens. Thin-capitalisation rules operate by disallowing a proportion of otherwise-deductible debt related expenses where the debt in Australia exceeds certain limits of debt as a proportion of equity.

Since these rules were introduced in 2001, during the days of the Howard-Costello government, data analysis has shown that the allowable gearing ratios were far too generous and much higher than the general gearing level of corporates with independent financing arrangements. This legislation implements Labor's recommendation in the 2013-14 budget that the maximum statutory debt limit for general entities be halved from 3:1 to 1.5:1, and from 20:1 to 15:1 for non-bank financial entities. On top of this, to reduce compliance costs for small business, this legislation implements Labor's recommendation to raise the de minimis—or minimum—threshold for thin-capitalisation limits from $250,000 to $2 million of debt deductions, ensuring that well-meaning small businesses are not caught up in the net.

These changes, along with related amendments to the exemption for foreign non-portfolio dividends as they interact with the thin-capitalisation rules, are worth more than $750 million to the budget bottom line. These still pale in comparison to the full suite of reforms that Labor would have introduced had it got up in September last year. The total cost of the squibbed multinational profit-shifting reform has been estimated at $1.1 billion, which, as the Member for Fraser has observed, is more than enough to fund a new regional hospital. We support the thin-capitalisation rules in this bill but we must observe that there is a huge lost opportunity here. This is why I support the second reading amendment moved by our side of the House.

The next issue in this package of legislation is the abolition of the mature age worker tax offset, or what people call the MAWTO. The MAWTO is a $500 concessional tax offset that is intended to provide an incentive to mature-age workers to remain in the workforce. It is a very noble objective. In principle, and given the ageing of our population and all the challenges that brings, it is crucial that we have effective measures to encourage mature-age employment. They have to be effective and they have to be cost effective.

It is something that Labor governments have a strong track record on, this idea of encouraging older Australians to stick around in the workforce, be that part-time or otherwise. We did introduce a range of measures, including the Productivity Ageing package, which provided additional training and financial incentives for employers hiring older Australians. It is also why the last Labor government funded the Blueprint for anageing Australia report, spearheaded by a really great Australian, Everald Compton. His report was unfortunately defunded by the Abbott government in November last year.

Characteristically of Everald, he found another way to provide this important advice to do this important work. He does not quit easily, Everald. He is a good friend of both sides of this parliament. I want to congratulate Per Capita, one of the progressive think tanks in Australia, for finding the opportunity to engage Everald so that he could conclude and complete his important work. Everald launched his report a few Wednesdays ago at the National Press Club.

In his report, Everald and the panel had several prescient recommendations, including having a government minister for ageing—something that Labor had throughout its most recent term in government, but which was notably excluded by the Abbott government. Everald's panel also had the right idea when it comes to engaging mature workers in employment for longer. His idea is that vocational education and training to re-skill and transition older workers is the key. We need not just wage subsidies and tax offsets like the one we are debating today, but real, genuine lifelong learning so that the skills that older Australians have in the workforce remain relevant and that the workers remain competitive, have the ability and resilience to adapt, and that we have dynamism that is necessary for the modern Australian workforce.

The MAWTO at present is not well understood and is not sufficient incentive for mature Australians to re-enter employment. That is why the former government commenced the phase-out of the MAWTO in the 2012-13 budget, limiting it to taxpayers born before 1 July 1957. The idea is that this money, worth $760-or-so million over the forward estimates period, can be better spent on targeted programs to return mature people to employment.

We also need to consider these types of measures in the context a broader suite of things. It pains me to say that we are making these decisions in the context of the retirement incomes system being attacked through the slow-down of the increase in the contribution. Other funding for seniors concessions has been scrapped and there have been pretty draconian cuts to the pension.

The next issue in this package of bills is the seafarers tax offset and the reduction of the R&D tax offset. I will be a bit briefer with these. Labor will not support the abolition of the seafarers tax offset or the reduction of the R&D tax offset. We believe in the Australian shipping industry and we want opportunities for Australian seafarers employed or engaged on overseas voyages. Australia has the fourth largest shipping task in the world, and companies in the industry are strongly supportive of this offset.

Labor will continue to advocate for the shipping industry, rather than support the coalition approach of walking away from practical action to save jobs and defend Australian skills. In a similar vein, we will not be supporting the reduction of the R&D tax offset either, which has been justified with reference to the reduction in the company tax rate. In government, Labor reformed the R&D tax incentive to make it an offset rather than a credit, for exactly this purpose—to decouple the R&D tax incentive from the corporate tax rate.

I could go on about those measures but I will not, because I want to touch briefly, in the time remaining, on what I think is a stunt over the tax receipt. It is worth mentioning this obvious distracting stunt contained in this legislation. It is something that the government announced on a slow news day when there was nothing else that they could think of. The government will require the Taxation Office to issue receipts that have been described by other speakers. Labor will always welcome genuine measures to improve transparency, but this particular measure is a partisan thing. It is something that they hoped—unsuccessfully—would distract from the rest of their budget.

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