Tony Zappia (Makin, Australian Labor Party, Shadow Parliamentary Secretary for Manufacturing) Share this | Hansard source

I am pleased to follow the member for Kingsford Smith in speaking on the Tax and Superannuation Laws Amendment (2016 Measures No. 1) Bill 2016. This legislation highlights the difficulty of administering a fair tax system in a globalised world in which everyone is connected by the internet. The legislation has three schedules to it. Schedules 1 and 2 relate to proposed changes to GST policy in the country. In particular, schedule 1 seeks to ensure that digital products and intangible goods and services supplied to Australian consumers by overseas businesses are subject to the same GST as applies to suppliers within Australia. Schedule 2 relates to the treatment of GST with respect to cross-border supplies that involve nonresident companies. The internet has opened up world markets to everyone and online shopping for goods and services is now widespread. If time permits, I will come back to that a bit later on.

This legislation is presented as legislation that seeks to create a level playing field to overcome an existing unfairness arising from the current application of the GST. I have previously raised questions about a level playing field and how Australian entities are disadvantaged when competing with international counterparts. The legislation is also about tax revenue raising. I suspect that that is the prime objective of it. Both ensuring a level playing field and having a fair tax system are legitimate arguments for change; however, the level playing field argument should not be limited to services, as appears to be the intent with this legislation. Why has the government taken an interest in an uneven playing field on this occasion? Most likely because the government is missing out on GST tax revenue. However, when the victim of an uneven playing field is private enterprise then the government seems to show little concern. The free marketeers response is that if you cannot survive then get out.

Australia's high standard of living is increasingly being made possible by Australia's willingness to buy goods and services provided by people working under conditions that Australians would never accept for themselves. Claims that we are helping developing countries out of poverty by buying their cheap products may have some merit but are also an excuse for turning a blind eye to unethical conditions—likewise with claims about improved competitiveness.

Recent decisions by the government to allow foreign flagged vessels to operate within Australian waters will of course result in lower shipping costs because the vessels used are poorly maintained, are registered in low-tax jurisdictions and pay slave labour rates, with workers having little or no rights and the ship operators having little regard for environmental safeguards. Yet that is exactly what the Turnbull government did when it provided temporary licences to foreign flagged vessels to replace the MV Portland and CSL Melbourne. The Australian government is, however, also foolishly ignoring the fact that the shipping operators, to my knowledge, pay no tax to the Australian government and the employees on board the vessels pay no Australian income tax for work carried out within and for the Australian economy.

Let me turn to other products or services—whether it is a call centre operating from within a developing country or a product manufactured overseas—where there are no industrial relations protections, no environmental standards and lower government taxes. Australian entities complying with all of their industrial and environmental obligations simply cannot compete where there is no level playing field. The concept of free trade between countries has merit only if a level playing field exists, but that is not the case. Tariffs, government subsidies and other bureaucratic barriers are commonly used to protect local markets in other countries.

Those who argue that tariff protection stifles innovation and modernisation fail to acknowledge that tariffs may equally be used to create a level playing field against goods or services provided or produced without adequate human or environmental safeguards. That is why we have in this country antidumping laws and that is why other countries have antidumping laws. Those laws allow the government to impose duties—in other words, tariffs—on imports found to be dumped onto their markets. It is a common practice used around the world and the antidumping laws were brought in for good reason—to create a level playing field.

Indeed, we are now having debates about Australia's antidumping laws. I note that they have been changed in recent months, and I accept that they have been changed for the better. There is still, nevertheless, a real problem in being able to properly administer the intent of those antidumping laws. Only this week I and several of my colleagues met with some of the steelmakers of this country. They are in a situation where they find it almost impossible to compete with overseas steel imports on two grounds: one, because the cost of producing steel overseas is much cheaper because, as I referred to earlier, the industrial relations conditions that apply and the wages and so on make it much cheaper to produce overseas and, two, because the products do not comply with Australian standards. How we can manage and monitor that is extremely difficult but the reality is that our producers are not competing on a level playing field and that comes at the expense of industry in this country that not only pays taxes but also employs hundreds of people who in turn pay weekly income tax. We have seen again in recent weeks the difficulty that Arrium Steel in Whyalla is facing. Some 600 employees have already been laid off as a result of the difficulty that that steel company has in competing with the overseas imports.

There is another matter I will refer to. The government is currently attempting to enter into the WTO Agreement on Government Procurement. My view is that the application to become a member to the WTO government procurement agreement should not be rushed and should be carefully considered. In a submission to the government on this very matter last year the Australian Forest Products Association noted the uneven playing field that Australian paper suppliers were operating in and the inconsistency across government departments in the paper that they purchased. It seems to me absurd that a consistent procurement policy approach does not even exist across all federal government departments, let alone the three levels of government. The submission by the Australian Forest Products Association highlighted that six out of 22 federal government departments procured Australian-made paper and the other 16 bought their paper from offshore, mainly from Germany, Austria or Indonesia. If six departments can justify buying the Australian-made paper, why cannot the other 16 and, indeed, why cannot all levels of government?

I also note that, when faced with an election, the government rolls out a string of spending projects, often specifically brought forward for the purpose of boosting the local jobs that can be created from those projects and in turn injecting money into the local economy. There were plenty such announcements made in recent days related to the defence white paper. Indeed, only yesterday we heard of one particular electorate perhaps benefiting to the tune of $1 billion as a result of procurements that will take place in that electorate. So clearly the government understands that government procurement can be a very effective lever, but it chooses to apply that principle only when it is facing an election or when it is under pressure.

The strategic use of government procurement is well understood. It can be used as an effective economic lever, and many other countries have done so where they have very clear government procurement policies which support their local industries and in turn their local communities. One of the issues that concerns me is that when we enter into agreements with other countries, whether it is the procurement agreement that I was referring to earlier or free trade agreements, I do not know to what extent we write into those agreements that the products and services we will get from those countries must comply with the standards that we expect here in Australia. But, even if we do write that in, the reality is that we have no way of policing whether that is the case. We do not even test most of the products that come into this country to ensure that they comply with the standards that they claim to comply with, let alone have any ability to ensure that the workers who make those products are working in conditions that we would find appropriate. So writing in standards might sound good, and it might appease some people, but the reality is that they become meaningless. That applies to this legislation as well, and again I will come back to that in just a moment.

The world is not a level playing field. Not only should the government intervene in order to protect its own tax base, as it is doing with this legislation; but the government should equally intervene to ensure that all Australian businesses can genuinely compete on an international level playing field. The fact is, if they cannot, they have two options: they can either close down or relocate to an offshore country, as many of them have done. When they do that, again our tax base goes down. The people they employ will not pay tax and the company will not pay tax here in Australia. So it is not in Australia's long-term interests to force companies that are currently based here to move offshore. The reality is that it is Australian businesses that sustain our economy, that pay taxes and that employ people. Every time one of them leaves this country, the nation is worse off for it.

In 2014-15, some $54 billion was raised in GST in Australia. This legislation seeks to increase that by another $150 million in the year 2017-18 and then $200 million in 2018-19. I point out that, whilst that might be an appropriate ambition, there are other areas where we could similarly be looking to increase the GST in this country. One of the matters that I refer to is the online gambling that is occurring in Australia. My understanding is that two out of every three online gambling dollars is estimated to go offshore. I do not know what the exact figures are, but the estimates are that in excess of $1 billion is now spent each year on offshore gambling. Again, that is money going offshore to gambling operators who pay no tax whatsoever, let alone contribute anything to the Australian economy. I am aware that is an issue that is being discussed broadly around the community, but those are the kinds of loopholes and areas where we should also be looking if we want to close down the tax loopholes in this country and if we genuinely want to lift the tax base.

I now turn to this legislation as it currently stands. Whilst the intent of the legislation is something that we on this side of the House have no problem with, it raises a real question, and that is: how do we ensure that the intent of this legislation is complied with? How do we ensure that we have good enforcement measures in place? Other speakers on Labor's side have pointed that out. The reality is we cannot ensure that and there is no assurance provided within this legislation that gives me any confidence that, even if we enact it, we will be able to implement it in an effective way. It seems pointless to implement legislation that may ultimately cost us more than it is going to return to government.

There just may be a better way of dealing with the matter that we are trying to address. As Labor has proposed, this legislation should be referred to the Senate Economics Legislation Committee for consideration for that very reason. Ultimately, creating a level playing field for all players within the Australian market should be an objective of this parliament. Everyone should be treated equally. Doing that, however, is not as easy as it sounds. Perhaps, just perhaps, we can come up with a better form of legislation once the Senate committee has had a look at it.

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