Julian Hill (Bruce, Australian Labor Party) Share this | Hansard source

In parliamentary terms I am, of course, very new here and I am still figuring out the code and why things happen and so on. I remember some advice to new members from former Prime Minister Paul Keating, with whom the current government is developing an unhealthy obsession. He said to new members that, in his view, it takes at least six or seven years here before you figure out the procedures and also get that internal sense of when something is right and when something is wrong—the code, the flow.

So I have been sitting here wondering, reflecting and trying to figure out why it has taken so long to debate this bill, the Treasury Laws Amendment (Enterprise Tax Plan) Bill, to cut company tax. Its first reading was 1 September. We have passed its six-month anniversary. It is supposedly the key part, the centrepiece, of the government's urgent plan for jobs and growth. So why not keep it high on the Notice Paper, instead of having it bouncing on and off the list in dribs and drabs and meandering through over six months, and just push it through with their numbers if they actually believe it is important. So I listened and watched and the conclusion I have drawn is that of course you behave like this if you do not actually have a plan but want everyone to think you do. You would say it a thousand times over many weeks and months, hoping eventually that someone might believe it to be true, like the fictitious plan at the election for jobs and growth. For eight weeks we and the rest of Australia were subject to this 'jobs and growth' phrase repeated ad nauseam to the point of nausea by the PM and Treasurer every hour of every day and every interview everywhere: jobs and growth. Propaganda in its classical definition: statements that are often false or exaggerated and that are spread in order to help a cause, a political leader or a government.

At the centre of this scam, this sham, is this $50 billion tax giveaway. In truth, of course, there is no plan. There was a blue and yellow logo, a website and a slogan and a massive unaffordable giveaway to the big end of town, to get them over the line. In question time this week we have heard the Treasurer's refusal to back-in his own policy in the budget—the hints that they will just dump it and walk away, and probably blame 18C or something for that. It fails every test.

I want to touch on four aspects of the tests that, in my view, this proposal fails at this time—fiscally, economically, the test of fairness, and the political test. Does it make fiscal sense? Of course not. We are in deficit—tripled actually under this government's watch. They love to remind us and tell us this, as if they have not actually been the government for the last four years. It is a massive giveaway to big companies that rips an enormous hole in the budget, unless of course you are going to cut spending by the same amount. It is galling, given the lectures we have to put up with from those opposite about fiscal restraint, to see that the government has run up another $100 billion in debt and has tripled the deficit. The then Prime Minister Abbott, the now sad, dejected and somewhat demented member for Warringa, ran up spending and debt under his watch. Of course it would be nice to cut company tax. We keep getting these quotes thrown back of this. Of course it would be nice. We can understand the case put forward, but it is not affordable in the present circumstances.

In previous speeches we have heard a lot about Hawke and Keating. I think the government is becoming obsessed with and jealous of that enormous legacy that Australia today still lives off. Howard had 11 years and did the GST and then went to sleep and went on a spendathon with the mining boom. What other single piece of economic structural reform to rival the Hawke and Keating years could that side claim? Keating lowered the company tax rate from 49 per cent. I had the misfortune of having to sit here on chamber duty and listen to the contribution in the last sitting week from the member for Hughes. He talked about how Keating lowered the tax rate from 49 per cent to 39 per cent. But there are a couple of critical points that are conveniently missed. The Treasury summary to this bill says:

… company tax rate reductions had largely corresponded with base broadening measures, such as the removal of accelerated depreciation.

That is right. Not all the previous cuts were fully at the expense of the budget, or running up debt, or cutting services and investments. Some of the reductions in the headline rate that those opposite love to crow about were funded through making the tax more efficient and by broadening the base. So with the 49 per cent to 39 per cent one go in 1988, which we are still hearing about, they are pretending it is a straight cut or is somehow comparable to this giveaway to corporate Australia. It is a special kind of love that you have discovered for that great Labor man, and in that respect we welcome it. But I went back and had a look at what Keating actually said in his statement in 1988:

The Government is to cut the corporate tax rate in one step, from 49 cents to 39 cents, to give Australian companies a tax structure more than competitive with the rest of the world.

… the Government has decided to lower the company tax rate by removing some tax concessions.

That is, lowering the company tax rate by broadening the company tax base.

So instead of tax breaks only being available to select businesses, with others shouldering the burden, all companies will now enjoy a lower tax rate.

In other words, a better and fairer company tax system.

Of course, there are tax reforms that broadening the base, like capital gains tax and fringe benefits tax, which the other side opposed at the time. It was not a massive tax giveaway for little or no return and is materially different.

In a modern parallel you could say that if they were serious about proper tax reform rather than just this tax cut, which is a giveaway to multinationals and big companies, they might come in here with a proper multinational avoidance package that actually broadens the base and improves the integrity and efficiency of the tax system and offset some of this revenue that is going to be lost. It is a sham and a fig leaf.

The second test I would run it past would be the economic sense test. In my view it fails, putting aside the government's tendency to get the economics confused with the budget. The claimed dividend from this enormous tax cut is tiny at best, and even that is highly questionable. The Treasury figures, not ours, which this whole thing relies on, say there is a one per cent increase in the long-term change in GDP—that is in 10 years. So something might start to happen 10 years from now and in 20 years we might get a one per cent boost to the economy. It is not a great return for $50 billion and it is a bad choice. But, like any modelling, it is heavily dependent on the assumptions. I used to do a lot of modelling and business cases for both sides of politics. The saying in the public service goes 'crap in, crap out', in terms of a model. It relies on the assumptions. Not everyone agrees with the Treasury model anyway. The Grattan Institute suggests that it is more like 0.6 per cent and not one per cent. The Australia Institute, taking a broader view, says there is little to no evidence from Australian economic history or in overseas jurisdictions that a race to the bottom on company tax actually spurs growth, as the government claims. The Treasury concedes that its modelling assumes that any government spending cuts to fund the reduction in company tax would be from wasteful spending. Hang on! There is apparently $50 billion of wasteful spending hanging around the budget. I highly doubt that, because the task of budget repair, as everyone knows post the GFC, is difficult. The member for Lilley on his watch restrained growth in spending enormously. He introduced myriad savings measures and revenue collapsed further still. I hear the screeches from those opposite, but these are the facts. In the period where growth was over two per cent, real payments rose on average under his treasurership by only 0.4 per cent. They can deny the numbers and deny the facts, but they are the facts. That is what the historical budget papers say—by far the lowest of any modern Treasurer since John Howard was Treasurer.

The government must come clean on what exactly they propose to cut to fund this enormous tax giveaway. It is a bit like 18C—what do you propose that people can say that they cannot say now? What do you propose that we cut from the budget to fund this $50 billion tax cut? We know this trick, people know this trick: cut corporate tax now, say it is about investment, then next year there is a bigger deficit, so more cuts to basic services. It is a scam and a sham.

The third test is: is it fair? No, no, no, no, no, no and no. Inequality is at a 75-year high in this country. Oxfam pointed out in their recent report that the top one per cent now own more wealth than the bottom 70 per cent of Australians combined. The two richest Australians own more than the combined wealth of the poorest 20 per cent.

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