Andrew Leigh (Fenner, Australian Labor Party, Shadow Assistant Treasurer) Share this | Hansard source

I move:

That all words after ''That'' be omitted with a view to substituting the following words:

''The House declines to give this bill a second reading and calls on the Government to explain why it is desperate to legislate additional tax concessions for large businesses while pursuing a $50 billion tax cut for big banks and multinationals.''

Last week, gross debt crashed through half a trillion dollars. For the first time in Australian history, the amount of gross debt on issue exceeds $500 billion. This is an extraordinary thing given that this is a government lead by a man who once described projected gross government debt of $300 billion as being frightening, gigantic and an almost inconceivable level of debt. He was then describing debt projections. If we take debt projections today, the government budget papers put them not at $500 million but at $725 billion in 2027-28—and only then peaking because that is when the numbers stop. We have from this government extraordinary hypocrisy on debt. Projected debt is now twice what it was when the member for Wentworth described the debt projections as frightening, gigantic and almost inconceivable. Indeed, if they were driving debt trucks around then, they would need debt road trains today to depict the true level of debt being racked up under this government.

This government is not racking up debt because the global economy is going to hell in handbasket. There is no doubt, of course, that Australia took on debt during the global financial crisis, as, indeed, most developed countries did. We did so to put in place a response package which, as my friend and colleague the member for Rankin has pointed out, was described by Joseph Stiglitz as probably the best-designed stimulus package of any other advanced industrial countries in size, design, timing and how it was spent. But, as the member for Rankin has noted recently in an article for Crikey, IMF forecasts for the year ahead are relatively healthy on a global level—3.5 per cent for this year, 3.6 per cent for 2018—and so there is no excuse for the fact that gross debt is now increasing more rapidly under the Liberals than it did under the Rudd and Gillard governments. Under the Rudd and Gillard governments, gross debt grew by $226 billion in 69 months. Under the Abbott-Turnbull government, almost as much, $220 billion, was added in 44 months—as the member for Rankin points out: in less than two-thirds of the time.

The rate at which gross debt is growing is now $55 million a day quicker under the Liberals than it was under Labor. Indeed, were I to use my full time, then there would be another million dollars of gross debt added to the Australian credit card over and above the rate at which that was increasing during the global financial crisis—that is how fast debt is increasing under this government. They used to talk about debt and deficit disasters and talk about their superior economic management, but you do not hear much talk of that now, because of the rapid rate at which debt is increasing. That is why we, on this side of the House, have had to make some tough and responsible calls when it comes to tax measures. That is why we, on this side of the House, oppose the government's $65 billion tax cut to big business.

Now, it is certainly true that in the past there have been Labor governments that have supported the company tax cut but, given the debt position that Australia now finds itself in, it would not be responsible for Labor to support a measure of that kind. It is why Labor has taken the tough decision to say that we support extending the current tax rate for top income earners. If you listen to those opposite, they would have you believe that the earth will stop spinning if we continue taxing those earning over $180,000—which, of course, includes everyone in this House—at the rate at which they have been taxed for the last two years. Labor does not believe that; Labor believes a 49.5 per cent top marginal tax rate was appropriate for the last two years and, with debt increasing so rapidly, continues to be appropriate today.

That brings me to the bill that we are debating today. This bill has revenue implications, and that is why Labor will not be supporting schedule 2 of the bill. We have said that we will support schedule 1, which has a small but unquantifiable cost, but schedule 2, costing $80 million over the forward estimates, will not be supported by Labor. In good fiscal times—if we had the rivers of gold that flowed during the Howard and Costello years, in which there were a series of fiscally profligate decisions made by the Liberals—maybe you could give an argument for supporting this. Labor believes we have to carefully scrutinise any widening of corporate tax concessions. Treasury were unable to offer guidance on the medium-term fiscal impact of this measure. Stakeholders consulted felt the changes were benign, but Treasury, despite our requests, has not published in full the submissions that were made to it through the consultation process. In the absence of a compelling policy case, Labor's view is that fiscal considerations should take precedence. We do this with some regret, but it is necessary for us to make these tough fiscal calls.

I go now to a little of the detail of the schedules for this bill. Schedule 1 deals with the fact that currently a company is entitled to use past year losses to reduce taxable income, provided the company maintained the same majority ownership from the time the loss was made until the time it is utilised. This is called the continuity of ownership test. In the event that majority ownership has changed, past year losses may still be accessed, provided the company passes the same business test. But this test has been interpreted very narrowly. It has been held that 'same' does not mean 'similar', which means the test is quite restrictive and, potentially, one that stifles innovation. The measure originates from the Labor-commissioned 2012 Business Tax Working Group. It was raised again in submissions to the Re:think tax discussion paper. Treasury expect this measure will primarily benefit small and medium-sized enterprises seeking to expand or diversify by bringing in new equity partners.

Schedule 2—which, as I have said, Labor will not be supporting—gives taxpayers the choice to self-assess the effective life of certain intangible depreciating assets rather than using the statutory effective life, in working out decline in value. The effective life of an asset is used to calculate the decline in value of the intangible asset, and this bill applies to assets such as patents, copyrights and licences, and only applies to assets the taxpayer starts to hold on or after 1 July 2016. The argument that has been made for this in submissions to the Re:think tax discussion paper is the way in which such intangible assets are depreciated in Britain and the United States. But Labor does not feel that a sufficiently strong policy case has been made for the measures in schedule 2. Were the government to split the bill, Labor would be pleased to support what is currently schedule 1, but we cannot support schedule 2.

As I have said, the government has overseen Australian debt passing half a trillion dollars for the first time. We on this side of the House have a series of constructive measures that would deal with this. I have mentioned already our view that the top tax rate should continue at 49.5 per cent. As the shadow Treasurer noted in his MPI speech, there is no reason that the harsh measures in the 2014 budget which affect payments to low-income earners should be permanent while the tax cut to high-income earners should be temporary. Labor has also announced that we would cap deductions for managing tax affairs. This reflects the fact that in 2014-15 there were 48 people who earned more than $1 million but paid zero tax, and that 19 of these people claimed an average of $1.1 million in deductions for the use of their lawyers and tax advisers. According to our estimates, there are some 90,000 people who would be affected by capping 'managing tax affairs' deductions to $3,000 under a Shorten government. This is a deduction principally used by those at the top of the distribution. They will continue to be able to spend what they wish on lawyers and tax advisers, but only the first $3,000 of what they spend will be tax-deductible.

Labor has announced a package of measures to crack down on tax havens, which we know are one of the reasons why Australia is bleeding revenue to overseas jurisdictions. Tax havens have been estimated to hold $7.5 trillion of the world's financial wealth and to cost the global economy $200 billion in lost taxes every year. Labor's eight-point plan to tackle tax havens will add to the budget bottom line. Labor has also announced that we will pursue the closing of debt-deduction loopholes in a multinational tax policy. The government refuses to close debt-deduction loopholes, costed by the Parliamentary Budget Office at nearly $6 billion over the medium term at the last election. Labor continues to be committed to closing multinational tax loopholes—something which the government stubbornly refuses to get on board with.

Labor has also announced that we are committed to tax fairness through providing additional resources to the tax office, where it needs those resources. We will crack down on dodgy directors, to ensure fairness in business and to ensure that taxpayers are not done out of revenue due to directors being able to burn one company and start another in so-called phoenix operations. According to one expert, it is so easy you can almost register your dog as a company director. That is why Labor has called for a Director Identification Number, a straightforward measure that ensures that we see less phoenixing activity. That is, of course, good for businesses and workers, but it is good for tax revenue is well, because when dodgy directors trash their businesses and take the assets it is taxpayers who miss out.

Labor is not simply criticising the government for trying to blow holes in our tax net. We are also coming up with constructive solutions in order to tackle the unprecedented debt blow-out that we have seen under this government. It is absolutely vital that this government gets debt under control. But you do not do that through measures that widen tax loopholes, and a strong public policy case has not been made for such measures. Labor will support schedule 1 of this bill and oppose schedule 2. The bill is not split; we will oppose the bill in its entirety.

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