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

I am pleased to rise and speak on Tax Laws Amendment (Small Business Measures No. 3) Bill 2015. I would like to start with the three schedules and the three things this bill actually does. The first thing the bill does is to provide a discount on the tax rate for unincorporated small businesses. We have seen what this government has done in understanding the importance of small business; we have lowered the corporate tax rate from 30 per cent down to 28½ per cent. But we recognise that many small businesses—in fact, the majority of small businesses—are not incorporated, and that therefore they would not get the benefit of that reduction in the tax rate. So we have passed that on with a five per cent discount on the tax liabilities on small businesses, capped at $1,000 per taxpayer per year—so that those unincorporated small businesses can get the benefit of that tax rate reduction. We have put this in the budget at a cost of $1.8 billion, but I would like to make a prediction: that this reduction in the corporate tax rate, after time, will not cost the budget one single cent. In fact, I believe it will result in greater taxation revenues flowing into the Treasury.

The reason I say that is that we simply have to look at our history. Think back to when our corporate taxation rates were in the high 40 per cent range. Then under the Hawke government they were lowered, and under the Howard-Costello government they were lowered. Every single time we lowered those corporate tax rates, from the high 40 per cent range to their current rate of 30 per cent, guess what happened. We actually had more taxation revenue, not just in overall terms but also as a percentage of GDP, flowing into the government coffers. So the lower the corporate tax rate was, the more money we actually had flowing into government revenue. The reason is simple: incentives count. The economy is not a fixed pie, as many on the other side of the chamber seem to think. They think that the pie is fixed and you slice it up and then you are just arguing about what proportion of the pie people get. We can grow the pie and we can shrink the pie. One of the best ways to grow that pie is to encourage people to have a go in business. That is what reducing the corporate tax rate does: it attracts investment. In our economic history, that has happened every time, and I believe it will happen again this time. Time will tell.

The second thing about this bill is that it brings an immediate deductibility of professional expenses. Previously, when a business was starting up it could only depreciate some of their start-up expenses over five years. They may have accounting costs and set-up costs. Those costs can run into the hundreds of thousands of dollars, even for a small business. They could only write that off and depreciate that over five years. We are saying that small business can now depreciate those costs up-front in year 1. Why is this important? It is important because it gives incentives to start businesses. That is what we need in this economy, to create and grow jobs. Those start-up businesses—those businesses that do not exist today but will be started in the years to come—will drive the prosperity of this country going forward. So we have to do everything we possibly can to encourage as many businesses as we can to start up, to experiment, to innovate and to try new ideas. We have to realise that many of them will not succeed. In fact, most of them will fail. But that is to be expected. Just a few of those—a tiny fraction—will strike gold. They will come up with the innovations, the new business ideas, the new methods and the new technologies that will drive this economy forward. Therefore, everything this government can do to encourage people and make it easier for people to start up a small business and have a go increases the prosperity of future Australians. That is what this bill does.

The third thing the bill does is provide a fringe benefit tax exemption for portable electronic devices for small businesses—a small but important step to define what is not taxable for fringe benefits purposes. These are three simple but important measures to encourage the small business community of our country.

It is interesting, when I look at the speakers list, that there are very few Labor members speaking on this bill. But there is some commentary by a former Labor leader, the former member for Werriwa, one Mark Latham. He criticised all of the coalition's provisions in perhaps one of the most delusional, error-ridden, misguided, ignorant and, I would say, embarrassing pieces that I have ever read. Mark Latham wrote, 'Big is best.' This is how the former member for Werriwa describes small business people:

… a pack of blank-faced losers serving up kebabs and pizza slices in greasy food halls and shopping malls.

That is what the former Labor member for Werriwa thinks about small business. He goes on:

Small businesses, in effect, are the garden gnomes of the modern economy – purely ornamental and totally dispensable.

That is the attitude that we saw during the past six years of government when this Labor mob was running the show. They thought small business was ornamental and dispensable. How else could you explain that in the six years that the Labor Party was running this country no fewer than 519,000 people in small business—citizens of this country—lost their jobs? We could fill the MCG more than five times over with the number of people employed in small business at the start 2007 who became unemployed because of the policies of the Labor government and its disdain for small business.

I would like to add that the current boundaries of the seat that I represent here in the parliament, the seat of Hughes, overlap with where the former member for Werriwa represented. In fact, when I have been out doorknocking I have had people tell me that the only other politician they had seen doorknocking was the former member for Werriwa, Mark Latham. But they added that they had chased him out with a broomstick. The former member for Werriwa, Mark Latham, gives his reasons as to why big is best. He cites the Big Banana, the Big Pineapple and the Big Peanut. I think that says it all—that the former member for Werriwa thinks the Big Peanut is an example of why big is best.

This delusion that big is best is a real danger to our economy. We have seen this mistake, this ideological failure—this fallacy that big is best—in the former socialist economies behind the Iron Curtain where they thought if you have giant economies of scale, you have big industries and you make everything big, that you simply become more efficient and can outproduce the West. History tells us that that failed. What becomes efficient is innovation. Small business drives innovation. That is what Mark Latham and many on the Labor side of politics today simply do not realise. It also happened in the Chinese economy. The reason why the Chinese economy is so successful today is that they realised that big is not best.

I come from a background in the furniture, lighting and homewares industry. I can remember in the 1980s there were many giant factories where the Chinese communist government thought the way to go, the way to be efficient was to have these giant factories, run by the government. But, as we see, bureaucracy takes over, innovation gets stifled. The Chinese worked out that the true way to progress is to have thousands and thousands of small and medium sized factories, all competing against each other. We often say, 'Made in China,' thinking that it is just one or two factories that produce everything. It is the complete opposite. The Chinese have been successful because they understand that you do not allow your industries to become overly concentrated and that you have thousands and thousands of players in every industry sector.

With respect to the delusion that 'big is best,' we could perhaps take a few lessons from nature. Island gigantism is a feature we see in nature on remote islands where animals there tend to grow oversize, compared to similar species on the mainland. We have seen examples—the elephant bird of Madagascar; the moa of New Zealand, which is like a giant emu; the giant gecko of New Zealand; the giant rabbits of the Mediterranean island; and of course the famed dodo bird. These animals living on remote islands, shielded from competition, simply grew and became oversized. When there was a change in the environment, when other civilisations settled on those islands and there was more movement of ships, overgrown species simply could not compete and they became extinct. This country is in danger, whereby sectors of our economy will fall into that situation of island gigantism. If we look at industry after industry in this country we see dangerous levels of concentration that are harming our economy and innovation and are threatening our future prosperity. This is not because of the idea that big is best, it is not because of the way things are; it is because of decades of deliberate policies of government.

I will go through a few things. We need a level playing field between small and big business so that competition is there to keep those larger companies on their toes. That is what small business does.

Look at bank fees and charges in Australia. Over the last 15 to 20 years we have seen the margin on loans that the banks charge, the profitability of the loans to small business from the big end of town banks—the four larger banks—increase, increase and increase every year. Going back, there used to be very little difference between the margins on loans to small business and loans to big business. There is now quite a substantial margin where we know the banks make a lot more profit from charging small business.

We all talk about the importance of the rule of law. But in a legal dispute between a small business and a large business, our rule of law has broken down. The small business can lose in that dispute, even though they have right on their side and the law on their side, because they cannot afford the legal fees because of the way we set up the legal system. We have seen it with retail rents where we have had government regulation to protect and shield the large retails from competition. That has resulted in the most distorted market that you could possibly see where a large retailer would be paying between 2½ and five per cent of their turnover in rent but a small retailer, selling dollar for dollar the same product, would be forced to pay 20 to 25 per cent of their turnover in retail rent, for no other reason than the fact they are small.

We have also seen this in our competition laws where we have failed by allowing the evils of anticompetitive price discrimination to white-ant the free market, to give favour to the larger corporations. We need to turn this around. That is what this bill does. We need to level the playing field between small business and big business, to ensure that those small businesses have that opportunity. We want to give new migrants to this country a chance. Migrants in the past have come to this country, set up businesses and made a success of themselves. We need to pass that on to the new migrants of this country, arriving today, to ensure that they have the same opportunities that past migrants have had. That is what this bill is all about. It is one of our steps to strengthen the small business community, to give them a greater opportunity to compete and to give them greater incentive to have a go. I commend this bill to the House.

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