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

It is a great pleasure to rise this afternoon to speak on the Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016. Firstly, the necessity of this bill should be self-evident to every single member of parliament. We must have a competitive corporate tax rate in this nation if we are going to enjoy future prosperity and job creation in this country.

Let's have a look at what a few of the experts in this area have said in recent weeks. Firstly, the Governor of the Reserve Bank, Dr Philip Lowe, a fortnight ago at the A50 Australian Economic Forum, said:

… there is no shortage of things that could be done to lift our performance.

He continued:

… it is a competitive world out there, and other countries see these opportunities too.

He went on:

… we need to make sure that our tax system is internationally competitive. One example of this complication is in the area of corporate tax, where there is a form of international tax competition going on in an effort to attract foreign investment. Like other countries, we face the challenge of responding to this …

The Governor of the Reserve Bank is exactly right.

We are seeing around the world countries reducing their rate of corporate tax. The UK is reducing its rate to 20 per cent. The US, under President Trump, has stated that the US corporate tax rate will be reduced to 15 per cent. Our cousins across the Tasman, the New Zealanders, have recently reduced their corporate tax rate from 30 per cent to 28 per cent. Likewise, we see Hong Kong and Singapore at 15 per cent and 17 per cent. A 30 per cent corporate tax rate in 2018 going on to 2026 will make our nation uncompetitive when it comes to attracting capital and to getting people to invest.

But it is not only the Governor of the Reserve Bank. Yesterday, Treasury Secretary John Fraser implored parliament to consider cutting the company tax rate, saying that it would be absolutely critical that we respond to international competition. I quote the Treasury Secretary from yesterday:

We have to recognise that we are now in a very competitive environment when it comes to corporate taxation and attracting investment—not just with our regional neighbours but countries such as the United Kingdom and, possibly, the United States.

A fortnight ago we had the former secretary Ken Henry state in a speech—a speech that was quite widely reported—that the bill that we are introducing to this parliament to reduce the corporate tax rate to 25 per cent by 2026-27 is not enough. He said that was too slow. He said a much lower tax rate:

… or some other mechanism that reduces substantially the cost to Australian businesses of equity capital sourced from abroad … achieved much more quickly than is presently under consideration by our Parliament.

Yet, we have the Labor Party and the Greens, with a couple of crossbench senators, blocking what is a sensible reform which all the economic experts say is what we need to maintain our international competitiveness. Is it any wonder that Ken Henry, in his speech last week, warned about political tactics that confuse and frighten Australians? He is talking about the tactics of the Australian Labor Party with regard to corporate taxation. Ken Henry said:

Populism supplies the munitions. And the whole spectacle—

the dreadful spectacle—

is broadcast live via multimedia, 24/7.

He said 'today's dysfunction' stands in marked contrast to earlier periods of political success. He is talking about the Australian Labor Party, which, for political reasons only, is trying to confuse and frighten the public about the need for this tax cut.

There was a time when the Labor Party did know the importance of reducing corporate tax. This is clearly detailed in the book by the current member for McMahon and the current shadow Treasurer. It is called, Hearts & minds: A blueprint for modern Labor. There is a very charming picture of the shadow Treasurer on the front page, resplendent with his orange tie. Mr Deputy Speaker, you may be interested to know that this book has a ranking on the Amazon top-seller list. When I looked, it was number 7,222,116. With a few more copies after I discuss it today, we may be able to break that seven million barrier!

The book starts off with—on page 17—a quote from Vladimir Lenin, as, often, many Labor books do. Vladimir Lenin said in 1913 that 'the Australian Labor Party does not even call itself a socialist party'. I am not sure whether the member for McMahon is complaining about the comment or not. But the key section of the book is when we go to page 63. There is an entire chapter with the heading 'Promoting growth through cutting company tax'. I will quote from it:

One of the more controversial reforms by Paul Keating as Treasurer was slashing the corporate tax rate from 49 per cent to 39 per cent in 1989.

That was singling out one of many Keating reforms. It goes on—this is the member for McMahon:

I was a fresh-faced Labor Party branch member at the time, and I recall the party as a whole being incredulous that a Labor government would cut the tax rate for 'fat-cat companies'. I remember a motion at a Young Labor conference calling for the corporate tax rate to be lifted to 60 per cent to pay for a program of social reform.

The member for McMahon goes on in his book:

But Keating knew that the corporate tax rate needed to be cut to make Australia competitive, that capital and investment would flow to tax-competitive nations and that this was an important job-creation move. Today capital is even more mobile than it was then and it is important that our corporate tax rate is competitive.

None of us could have said it better than the shadow Treasurer, the member for McMahon. But today he has completely abandoned sensible economic policy to frighten, scare and confuse the Australian public with complete and utter populism that will damage this country in the long term.

It is interesting if we go back to that Keating tax cut of 1987-88. He cut the corporate tax rate, which was then 49 per cent, to 39 per cent. That is a 10 per cent reduction—an effective rate drop of 20 per cent. Members of the Labor Party would ask the obvious question: how much did that very large reduction in the corporate tax rate cost the federal government? What was the reduction in money coming into the Treasury from corporate tax as a result of Paul Keating's tax cut? I will tell you. You would expect maybe a 20 per cent reduction in the tax revenue, maybe a 15 per cent reduction. Actually, the exact opposite happened. The next year, 1988-89, at the lower rate of tax, we got 16 per cent more government revenue. The following year we got 26 per cent more and the following year nine per cent more. So, four years after Paul Keating reduced the rate of corporate tax, we got an extra 60 per cent in government revenue from corporate tax.

That is not the only example. What happened when Treasurer Peter Costello reduced the corporate tax rate from 36 per cent to 30 per cent? Again, as the educated socialists would ask themselves: how much did this cost in government revenue? Surely at a lower rate of corporate tax you would get less revenue. But again exactly the opposite happened. In 1999-2000, at a 36 per cent corporate tax rate, we were getting $23.9 billion in corporate tax revenue, but at the lower rate in 2001-02 we were getting 13 per cent more—$27 billion. In the next year, 2002-03, it increased again, by 23 per cent. In fact, five years after Treasurer Costello lowered the corporate tax rate we were not getting less tax; we were getting 80 per cent more corporate tax revenue.

This is not unique to Australia. Exactly the same thing has recently happened in New Zealand. In their 2010 budget, John Key lowered New Zealand's corporate tax rate from 30 per cent to 28 per cent. Again, if you follow the line of the Labor Party, this would have cost the New Zealand economy. They would have had to pay for that lower tax rate. What happened? Exactly the same thing. In 2011 there was only a small increase—2.7 per cent—but in the following year they saw company tax receipts increase by 24.9 per cent, then six per cent, then 2.7 per cent, then 11 per cent, then five per cent. Year after year, corporate tax revenue, at the lower rate, increased faster than their GDP. By the time they got to 2016, the New Zealand Treasury was getting 59 per cent more in corporate tax receipts, at the lower rate, than they had been getting at the higher rate.

Canada is another example of the same thing. In Canada they lowered their corporate tax rates in 2010 at the federal level from 18 per cent to 15 per cent and also at the state level. So, combined, there was a reduction from around 30 per cent to 27½ per cent, depending on the different Canadian states. Again, what happened? How much taxation revenue did that cost the Canadian government? Again, the answer is not a single cent. In fact, five years after the tax rate cut, they were getting 38 per cent more taxation revenue.

Why does this happen? This happens exactly as set out and mentioned by the former member for McMahon in his book. He understands that it is a Labor thing to reduce company tax because it promotes investment, it creates jobs and it drives growth. That is exactly what we need to do in this country. Labor members are out there misleading the public by pretending that, if you give a corporate tax rate cut to companies in Australia, that means you take the money away from somewhere else, which is a complete and utter fallacy. It is a deception, but it is a statement that we will hear repeated by Labor members over and over in this debate, because they do not understand how our economy runs.

If we have a lower tax rate, we encourage more investment, we get more jobs, we get more growth in the economy and, as the history of our country, of New Zealand, Canada and just about everywhere else has shown, when they lower the corporate rate of tax they end up, after a period of time, with a bigger economy and more taxation revenue. As we go into the decade ahead we need to make sure that we have a competitive nation in all respects. We already have electricity prices double the rate in the USA, and three or four times the rate in Canada. If we want to pay higher wages in the future, we cannot have uncompetitive international rates of tax and uncompetitive electricity prices. I implore members of the Labor opposition— (Time expired)

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