Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Parliamentary Secretary for Foreign Affairs) Share this | Hansard source

I am of course speaking in support of the amendment that has been moved by the member for McMahon to the Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016. This bill does highlight this government's twisted priorities, and the twisted priorities of the Prime Minister, when it comes to the management of our economy and fiscal consolidation and reining in the budget deficit.

Here is just a brief overview of what this government is doing. First off, the Turnbull government have continued their crusade to cut billions of dollars from health. They are on a mission to increase the cost of health care for all Australians. First they tried to introduce the Medicare co-payment. That did not work. Then they tried to introduce a reduction in the rebate for diagnostic imaging. We all know they have frozen the Medicare rebate for a further three years and they have set up a privatisation task force into the Medicare system. They have also cut funding for hospitals and schools.

The then opposition made a solemn promise to the Australian people at the election in 2013 that, whether you voted for the Labor Party or the coalition, you would get the same policy on education. Then they went and broke that commitment to the Australian public in the first couple of years. That was, of course, a porky pie. We now know that the coalition, as soon as they were elected, turned around and cut $30 billion from the education budget by refusing to fund the last two years of the Gonski reforms. And while paying lip-service to Gonski's needs-based funding model, the government has simultaneously pulled the rug out from under our schools and our children.

That did not stop their path of destruction. In addition to their pursuance of an American-style healthcare system, they are also trying to introduce an American-style higher education system for universities. Deregulation of Australian universities would result in students being slugged with massive amounts of student debt as a result of their degrees increasing in cost—in many cases above $100,000. This, of course, would just further increase the pressure already heaped on young people through underemployment and housing affordability—an ongoing crisis, which this government has no policy at all to deal with.

But, rather than prioritise health and education, this government is instead intent, through this particular bill, on cutting $50 billion out of the budget by offering big business a tax cut. We are not talking about small businesses here; we are talking, over the course of the next 10 years, businesses with a turnover up to $1 billion. So they are by no means small businesses. It says so much about this Prime Minister and the government's budget position that it is dramatically deteriorating to the point where there is talk now of Australia losing its AAA credit rating and putting further pressure on businesses and, in particular, homeowners in the result of increases in interest rates. As a nation, we simply cannot afford such a massive tax cut for big business, especially when it comes at the expense of our nation's healthcare system and cuts to our children's future by impacting their education.

We have seen over the course of the last couple of weeks the government's proposals to introduce the omnibus bill and cut further social security measures, particularly pensions for single mums and for the unemployed, and paid parental leave. This bill represents this government's twisted priorities. Instead of focusing on investing in education, investing in health care, growing our economy and ensuring that the biggest companies pay their fair share of tax in this country, this government is intent on smashing the most vulnerable in our community—pensioners, the unemployed, people on single incomes, people on family payments—and giving big businesses a $50 billion tax cut through this bill. That is the wrong approach, and that is why I and my Labor colleagues are voting against this bill and supporting the amendment of the member for McMahon.

The detail of the bill contains three measures. The first is the reduction of the company tax rate to 25 per cent. The tax rate for businesses with an annual aggregate turnover of less than $10 million would be 27.5 per cent from the 2016-17 income year. The threshold would then be progressively increased so that, by the 2023-24 income year, all businesses would be at the 27.5 per cent rate. The rate itself would be lowered from the 2024-25 income year until it reaches 25 per cent in 2026-27. Again, it starts out for small businesses. The Labor Party has promised to support the tax cut to 27½ per cent for genuine small businesses, businesses with a turnover of less than $2 million per year, because they are small businesses. These are the people who struggle from week to week to earn an income; they put their life and their whole heart and soul into their businesses. They do deserve some support from the government and some relief, but this bill goes much further than that: it goes on to offer that tax cut down to 25 per cent for businesses that are earning up to $1 billion in turnover.

The bill also contains a measure to increase the unincorporated small business tax discount. This discount provides unincorporated small businesses a tax offset broadly equivalent to the small business company tax cut of 1.5 per cent. The discount is a tax offset equal to five per cent of a small business entity's basic income tax liability that relates to its total net small business income, capped at $1,000. And the bill increases the aggregate turnover threshold to access most small business tax concessions from $2 million to $10 million. The aggregated turnover threshold for access to the small business tax offset would be increased to $5 million, and the current aggregated turnover threshold of $2 million would be retained for the small business capital gains tax concessions.

The bill does represent the government's blind adherence to this notion of trickle-down economics that conservatives in Australia and in other parts of the world seem to be wedded to as their basic and main economic philosophy about how economies should be run. It is the most discredited, useless model for growing economies that has ever been. And it has been proven: nowhere in the world have reductions in taxes resulted in this trickle-down notion of greater wealth for all and growth in the economy. The classic example of that is the United States of America, where, in the 1970s and 1980s, the Reagan administration, followed up by the Bush administrations, introduced this notion of trickle-down economics by rapidly cutting taxes—income and company taxes—in the hope that it would result in greater profits for businesses, employing more people and growing incomes. It did not work. In fact, if you look at the United States today, the legacy of that is still there. It is an economy for which the middle classes have not had real income increases since the 1970s, since Reagan undertook this process of what was called Reaganomics but was trickle-down economics.

So this government's adherence to the philosophy of trickle-down economics is, once again, misguided. The government foolishly believes that massive tax cuts to multinational businesses and major corporations will boost economic activity and investment, the benefits of which will flow to the average Australian worker. It is complete rubbish, it is complete garbage and it is a discredited notion of economic advancement.

The actual benefits of this modelling, of this particular proposal that we debate today, have been modelled by the Treasury. The government put out, with last year's budget, a paper based on the modelling of growth in the economy from a corporate tax cut. The benefits are insignificant. The Treasury's own modelling—the government's own modelling—indicates that GDP would improve by 0.1 per cent each year, if this tax cut were implemented. That is less than one per cent over the course of a decade. It is a rounding error, and that is the government's own modelling. Even less is added to net employment over the course of those years.

The previous speaker mentioned the Governor of the Reserve Bank and the speech he recently made as support for the corporate tax cut. But the Governor of the Reserve Bank, Dr Philip Lowe, made the very important point last week that, from a global perspective, a corporate tax cut is not actually that useful because, although you may be reducing income taxation levels in one country, you are not actually growing the pie of investment globally. It just means that investment may shift from one country to another. So this notion that this tax cut, this bill, will improve the economy and will improve employment has been rubbished by not only the Treasury modelling but experts who work in this field. If you want to improve employment outcomes, rather than cut taxes for big businesses—that, frankly, do not need it and will hardly notice it—invest in the education of our children instead, invest in adult retraining, invest in vocational education and training, and properly support TAFE and training that will actually benefit the lives of Australians.

In line with our 2016 election commitments, Labor does not support these tax cuts for big businesses. It is part of our policy. Labor's policy on tax cuts for small business is: reducing the company tax rate to 27½ per cent for businesses with a turnover of $2 million—and that threshold remains consistent with the small business definition retained by the Australian Taxation Office—and increasing the unincorporated small tax discount from five per cent to eight per cent and only for businesses with a turnover of less than $2 million, and not proceeding with the increase in the small business entity threshold. Our position, costed by the Parliamentary Budget Office, would save $4.4 billion over the forward estimates and $50.1 billion over the medium term.

In conclusion, what really gets to me and demonstrates the hypocrisy of this government and its members—all of its members, particularly the person who spoke before me—is, when the Gillard government proposed a reduction in the company tax rate from 30 per cent to 28 per cent, have a guess who voted against it? It was the then opposition leader, Tony Abbott, and all of his merry men and women of the coalition. They voted against a corporate tax cut for small businesses when it was proposed by Labor many years ago. So they come in here with this holier-than-thou notion that this is good economic policy and that Labor is playing politics. It is rank hypocrisy because they have form on this: they voted against it when it was proposed by the Gillard government for small businesses. And, unlike this government, who, in the face of a deteriorating budget bottom line, chooses to throw money at big business, Labor has its priorities firmly set on everyday Australians that need the support to go on to achieve great things. Investing in education, investing in health care, investing in renewable energy, and investing in vocational education and training are the best ways to do that. I urge everyone to vote against this bill.

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