Peter Hendy (Eden-Monaro, Liberal Party) Share this | Hansard source

I note that the Treasury Legislation Amendment (Repeal Day) Bill 2014 has four main components. This bill amends various laws relating to taxation, superannuation and shareholdings in certain financial sector companies to implement a range of improvements to Australian laws.

Schedule 1 to this bill will repeal the payslip reporting provisions in the Superannuation Industry (Supervision) Act 1993 that would have increased the regulatory burden on employers beyond that currently imposed under the Fair Work legislation. Removing these provisions will reduce unnecessary duplication in the law, and provide certainty to employers so they do not need to prepare for costly upgrades to their payslip reporting software.

Schedule 2 to this bill simplifies the taxation laws by consolidating duplicated taxation administration provisions contained in various taxation acts into a single set of provisions in the Taxation Administration Act 1953.

Schedule 3 to this bill amends the Financial Sector (Shareholdings) Act 1998 so that persons who do not hold a direct controlling interest in a financial sector company will no longer be deemed to have a stake in that financial sector company as a consequence of their associate's direct controlling interest.

Schedule 4 to this bill addresses the fact that currently the definition of 'Australia' for taxation purposes is complex, overly detailed and expressed differently in different parts of taxation laws, despite the fact that the laws are intended to achieve a simple and largely equivalent result. This will involve amending various tax laws, taking another step towards achieving a single income tax assessment act for Australia. The government is glad these changes can be made.

In the Australian Chamber of Commerce and Industry, an organisation for which I was once proudly the CEO, pre-election survey for 2013 a number of questions were asked about taxation and superannuation administration. As the survey noted:

A total of 1,700 businesses were surveyed, across every state and territory, representing different business sizes and across all industries ...

As such, the survey has 1,096 small businesses, 478 medium-sized businesses and 126 large businesses.

Given the majority of businesses responding to the survey had between 1 and 49 employees, it clearly represents the voice of SMEs.

What the survey found was most illuminating. It stated:

Businesses were asked to select which taxes and levies were of most concern in the current environment.

More than three-quarters of businesses expressed major and moderate concerns with Company Tax (79.7 per cent), Compulsory Superannuation Levy (75.3 per cent) and Personal Income Tax (78.1 per cent).

Further, it reported:

More than one-half of businesses indicated that they have major concerns with the Overall Complexity of the Taxation System (56.5 per cent) and Frequency of Changes to Tax Laws and Rules (52.7 per cent).

Almost 75 per cent of businesses also expressed major and moderate concerns with Complying with the Superannuation System (70.2 per cent).

It is also evident that businesses are more concerned about the accumulated administrative and compliance burden of the Australian taxation system as a whole than complying with individual taxes.

So the government is getting on and tackling the job. This bill is a part of the coalition government's repeal day legislation. The government is getting on with doing what we said we would: cutting $1 billion in red and green tape each year. Since the 2013 election, the government has more than doubled that target, announcing over 400 measures across the whole of government and a net reduction of over $2.1 billion in compliance costs.

On the 2014 spring repeal day on 29 October, quite recently, the government continue this work by removing nearly 1,000 pieces and over 7,200 pages of legislation and regulation. The spring repeal day continues the work of the first repeal day in March, where the government removed over 10,000 pieces and 50,000 pages of legislation and regulation and over $700 million of compliance costs.

Going forward, the government will continue to designate two parliamentary sitting days each year as repeal days to repeal costly and unnecessary legislation and regulation. The coalition's approach will result in more efficient government and more productive business and not-for-profit sectors. This will improve our nation's competitiveness, helping to create more jobs while lowering household costs.

In contrast, Labor introduced more than 21,000 additional regulations, stifling investment and job creation, despite Kevin Rudd promising a 'one regulation in, one regulation out' policy. Let me say that again: in little more than 5½ years, Labor introduced more than 21,000 additional regulations. This is despite Kevin Rudd's 2007 promise of a 'one regulation in, one regulation out' policy, and the then small business minister, Craig Emerson, saying in 2008 that Labor would 'take a giant pair of scissors to the red tape that is strangling small business.' Under Labor, there were nearly 100 examples of non-compliant and Prime Ministerial exempt regulatory impact statements. These included some of Labor's most significant legislative changes, such as the mining tax, the NBN, the Future of Financial Advice laws, and changes to the Fair Work Act. These measures all escaped detailed regulatory impact scrutiny following exemptions granted by Prime Ministers Rudd and Gillard.

The Borthwick-Milliner review, commissioned by Labor and reporting last year, found:

… widespread lack of acceptance of, and commitment by, ministers and agencies to the regulatory impact assessment process.

Bad regulation and too much regulation hurts productivity, deters investment and innovation, and costs jobs. After essentially being steady for a decade, total factor productivity fell in 2013. In 2014, Australia ranked 124 out of 148 countries for 'burden of government regulation' in the World Economic Forum Global Competitiveness Index. While we improved four spots on last year, we are still immediately behind Colombia and Spain and just in front of Iran. Indeed, the Productivity Commission has estimated that regulation compliance costs could amount to as much as four per cent of Australia's GDP.

Let me now turn to wider issues related to taxation. I note again that this is a bill 'for an act to amend law relating to taxation'. So I would also like to say a few words about the recent taxation debate and the upcoming taxation white paper. The Prime Minister has launched a taxation debate centred on repairing the financial problems of the Australian Federation. They are problems begging to be fixed but will need maximum skills to achieve. I fully support the push for reform and I know you do too, Deputy Speaker Porter.

Obviously, all state premiers will need to be on board for wholesale reform to occur. The government is in the process of producing two parallel white papers—that is, government policy positions on reform of the Federation and on tax reform. In that context the Prime Minister said in a speech at Tenterfield on 25 October:

The Commonwealth would be ready to work with states on a range of tax reforms that could permanently improve the states' tax base, including changes to the indirect tax base with compensating reductions in income tax.

It is assumed that, when he spoke about an indirect tax option, he was clearly referring to the GST. But what is also clear is that the Prime Minister talked of considering a range of tax reforms. I have previously written about and spoken in parliament about the prospects of raising the GST and the difficulties that will be confronted by such an endeavour.

Today I want to explore a different option for reform that has been considered previously but which, in recent times, has been too readily discarded. Many commentators dismiss it out of hand. However, it is an option that has in the past had substantial support in both economic and political terms. I think it should be given serious consideration in the preparation of the government's taxation white paper. I am speaking about an income-tax-sharing agreement between the federal and state governments. The basic problem that needs to be addressed is clearly stated in the government's September issues paper on federation reform that notes that the states' revenue base is inadequate to fund their spending growth responsibilities in areas such as health and education. Demand is outstripping supply.

A brief history of income tax is relevant. Up until 1942, states levied income taxes. Then, due to World War II's funding demands, it was mutually agreed to hand the tax to the federal government. After the emergency passed, the federal government refused to hand it back. That is, until 1977, when then Prime Minister Malcolm Fraser proposed a new federalism policy and passed legislation to allow state income tax surcharges or, for that matter, rebates, to help states meet their funding needs. Unfortunately, then New South Wales Premier Wran waged a short-sighted scare campaign on the issue, alleging this would lead to double taxation and the option was never taken up.

However, 14 years later, Prime Minister Bob Hawke was inching towards reintroducing such a policy through a series of Special Premier's Conferences when, in 1991, he lost a leadership ballot to Paul Keating. Hawke had set up a working party on tax powers that reported on 4 October 1991 and noted one option for reform was the introduction of a state income tax surcharge. In response, all state and territory leaders at the time signed a communique, on 8 November 1991, calling for its implementation. They sought a six per cent surcharge in a broadly revenue neutral package of reforms, whereby the federal government would reduce income tax and also payments to the states. It was recommended by experts and was politically doable.

However, the new Prime Minister Keating was personally against the proposal and it died there and then. Subsequently, an income tax surcharge was recommended by the 1996 National Audit Commissionand, importantly, an income tax surcharge was recently recommended by the National Commission of Audit in its February 2014 report.

Many so-called experts will complain that reordering the intergovernmental share of income tax revenue would do nothing to fix the relative balance between the direct, for example, income taxes, and the indirect, for example, GST taxes. The argument they are referring to, recently repeated by the departing Treasury department head Martin Parkinson, is that less reliance on income taxes is more efficient, as it reduces the negative impact of high marginal rates on people's incentive to work. There is truth in that.

However, when you think about it, most taxes, including GST, are paid out of your earned income, so it is not apparent that this is an overwhelmingly decisive argument. And, to make it clear, the income-tax-sharing option that I believe should be debated is not designed to raise more total revenue but to substitute federal taxes with state taxes, thus not increasing the overall reliance on income taxes. Indeed, in my opinion, any possible economic efficiency benefits from reform would be lost if all that we are doing is locking in the deleterious effects of further increases in the overall tax burden.

Another economic benefit claimed for what is often called a 'tax mix switch' is that GST, as a consumption tax, on balance, encourages further saving. Again, Australia does not at present suffer from a household savings problem, with indexes at near historical highs. In conclusion, I put forward an income-tax sharing proposal as yet another option for debate.

It would not be a perfect solution but, as with other options, should at least be considered in the white paper process. In conclusion, I strongly support this bill and also offer my two cents worth on other taxation matters.

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