Kevin Hogan (Page, National Party) Share this | Hansard source

I rise to speak in favour of the Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016. I think this debate is highlighting some core values and, dare I say it, some disappointing changes that have really had bipartisan agreement and support in this country for about the last 30 years. For the last 30 years in this country, starting, dare I say it, with the Hawke-Keating Labor government, there has been a belief that we have had to open up our economy to overseas competition and trading, and we have had to remain competitive with tax rates with other countries, because, increasingly, over the last 20 or 30 years the world has become increasingly globalised with interconnected trade and companies much more agile, with digital technology and improved transport, and opportunities for getting goods and services around the world happening very quickly. That means you cannot take your bat and ball and go home and play the game by yourself. You have to play the economic game, the commerce game, which we are involved in as a trading nation, with everyone else. Really, there has been bipartisan support for the last 20 or 30 years, starting with Hawke and Keating. Things like tariffs have been lowered, and they started that.

The first governments that started to really drop—not drop, but slash—company tax rates, and not just small company tax rates but big business tax rates as well, were the Hawke and Keating governments. That was continued by the Howard government in the Howard-Costello years. Through that period the coalition government also lowered our company tax rates, because we knew that we needed to remain competitive as many companies have a choice, not only where they establish themselves and where they have their tax domicile but also where they might open up and expand the goods and services they trade in and offer. This is a worldwide phenomenon. This is not a debate that is unique to Australia. I want to quote some figures that might be worth understanding and digesting, especially for those on the other side of politics. Back in the Howard days we had one of the most competitive and lowest corporate tax rates in the world. We are now the sixth highest in the OECD. We are currently just below 30 per cent, but the United Kingdom has a tax rate of 20 per cent; Canada, 26½ per cent; China, 25 per cent; Korea, 24½ per cent; the EU average is 22 per cent; the OECD average is 24 per cent; and the global average is 23 per cent. Our current tax rate is five per cent higher than the global average.

Obviously, we need to and want to remain competitive. The current term that everyone likes using—not just in economics or politics but in business enterprises, in health and in education—is 'evidence based'. What is the evidence?

Rather than just listening to, dare I say it, people on both sides, what has the evidence of lowering company taxes been? What has happened to the corporate tax rate of a country when the country or the government has lowered corporate or company taxes? There is very simplistic, jingoistic and obstructionist Labor opposition to this—it is very easy to take a jingoistic line on something. Intuitively, you might think, as Labor are saying, 'You're going to cut company tax rate so, therefore, we're going to receive less tax.' Well, that is not what the evidence suggests and that is not what this is about; this is about allowing for and creating the environment and the goalposts so that private enterprise can flourish and grow. When private enterprise is flourishing and growing, guess what? They make more money, they employ more people and the tax that you collect increases. If we started putting company tax rates up, we would not collect more tax; because you are going to shrink the size of the pool, you are actually going to collect less. When you lower company tax rates, even though, intuitively, you might think you are going to go to collect less, you are actually going to collect more, because that side of the economy is going to grow and flourish.

I am not just making this up; I am actually talking about evidence here. Let me give you an example. I go back to the Hawke-Keating days. The other side of politics will laud them as wonderful people, ex-prime ministers. This is what they did: they lowered the company tax rate by 10 percentage points. They lowered the company tax rate, for big business and for small business, by 10 percentage points. What happened? In 1987-88, they collected $8.6 billion in company tax receipts. They lowered the tax rate by 10 per cent, and what had happened by 1989-90? It had gone to $12.7 billion. We were actually collecting more tax at the lower rate than we were at the higher rate. Let me give you another example. Again, this is about evidence-based decision making. In 1999-2000, the Howard-Costello government also cut the tax rate from 36 to 30 per cent. This is another quite big adjustment—a six percentage point drop in the company tax rate. What happened then, Deputy Speaker? I know you are asking; I know you cannot wait for me to tell you. I will tell you what happened: they collected $26 billion in 1999-2000, they lowered the company tax rate by six percentage points and the tax collected went up to $35 billion.

Again, this is not about this very simplistic, jingoistic idea that tax cuts to big business is giving them money at the expense of everything else; it is exactly the opposite. We want to maintain a competitive tax rate, because then we can do what we obviously want to do. We always have to remember that every single cent that we spend on any government program, whether it be education, health, infrastructure or any other thing that we think is a good way to invest taxpayer dollars, comes from the private sector. It comes from the people who, through their own sheer hard work, their own initiative and their own idea of working in the private sector, are adding value to a good or a service. Obviously we tax that good or service from the private sector, and that enables us to pay every public servant we employ throughout this country. As I said at the start, we are actually discussing and having a debate in this place that we have not had for 30 years, because for 30 years there has been agreement on both sides of politics that if we free up the private sector, if we lower the company tax rate, the result is going be a healthier, more productive private sector and, from the figures that I have just given you, we are going be collecting more money at the lower rate than at the higher rate.

In fact, there is a very famous example from a few decades ago: Ireland. In the 80s, Ireland was broke and they had a company tax rate approaching something like 60 per cent. If you are broke and you are thinking like the Labor Party, you would say, 'I'll put the tax rate up to collect more money.' But they realised that they needed to attract more business, more initiative and more companies to operate in their country. Do you know what they did? They slashed the rate to close to 10 per cent. Do you know what they were doing within three years? They were collecting more money at a rate close to 10 than they were at 60. Again, this is evidence-based stuff that proves that, if you set the agenda, if you set the theme for the private sector to flourish, it will. In Ireland's case, what happened back in the eighties was that—operating, obviously, as close to Europe as they do—the whole Europe IT sector, as it was starting to get established and starting to grow and get critical mass, moved to Ireland and set up their businesses in Ireland. So Ireland had a whole new sector, and the other sectors and service industries associated with that, and that meant that they were collecting a lot more money. And, of course, what else did they have? They had more money as a government to put into the issues that we as a government are talking about.

This very simplistic almost dumb-it-down idea that tax cuts for business come at the expense of social infrastructure is a fallacy. It is going back to a debate that we have not had in this country for 30 years. The next time the Labor Party want to mention Hawke or Keating and the great things that they did for our country, these ex-leaders that they laud, they can remind themselves that they were the first government to start slashing company tax rates. They got it, and the Howard-Costello government after them got it and gave us one of the most competitive tax rates in the world. We had a private sector that was doing quite well, and the government was collecting more money at that lower rate than it was previously.

I think it is very important that when we are making this decision we are very conscious of these facts. We live in a global world. Whether we like it or not, we are competing with many other countries around the world. Countries compete with us in agricultural production—the things we have advantages in—in the manufacturing sector and in a whole array of areas. Countries compete with us in education, with foreign students deciding where to go to study. Tourism is a good industry for us, but we compete with other tourism destinations as well. We compete in everything. There is nothing that people cannot do or get without having a choice other than Australia.

The figures that I started my speech with, which I am about to repeat, are very salient. In the early 2000s Australia had one of the lowest corporate tax rates in the world. That was as a result not just of the Howard-Costello government but also of the Hawke-Keating government, because they got that we needed to be competitive. Australia's corporate tax rate is currently just below 30 per cent. I want to compare that to the rate in other countries. The United Kingdom has a tax rate of 20 per cent; Canada, 26½ per cent; China, 25 per cent; and Korea, 24½ per cent. The EU average is 22 per cent, the OECD average is 24 per cent and the global average is 23 per cent.

We as a government want our economy to grow so that we generate more revenue to provide essential services. We know from empirical evidence over the last 30 years that if you want to increase your tax rate you have to be competitive. You have to set an environment whereby businesses will come here and provide goods and services at a competitive tax rate; otherwise, they will not come. Counterintuitively, if you believe the Labor Party, you would just start putting tax rates up to collect more money. They are not saying that, because they know—from the empirical evidence I have just cited—that we would end up lowering the amount of tax collected, because companies would literally shut down, move elsewhere or not operate. So, as simplistic as their argument is in this discussion, I think the Hawke-Keating Labor government—the previous leaders and treasurers—have said that what they did was right in lowering company tax rates. I think Paul Keating would certainly believe that what he did was right in lowering tax rates for big business and small business to make us a more competitive country, as did the Howard-Costello government.

We are introducing a measure to maintain our competitiveness. We are not aiming to go below the OECD average or the world average tax rate. We just want to maintain a competitive rate so that our businesses can compete and flourish in today's environment.

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