Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

Mr Speaker has received letters from the honourable member for Casey and the honourable member for Lyne proposing that definite matters of public importance be submitted to the House for discussion today. As required by standing order 46(d) I have selected the matter which, in my opinion, is the most urgent and important; that is, that proposed by the honourable member for Casey, namely:

The chaos and confusion resulting from the Government’s bungled budget night announcement which has seen employee share schemes suspended across the country.

I call upon those members who approve of the proposed discussion to rise in their places.

More than the number of members required by the standing orders having risen in their places—

Tony Smith (Casey, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

I commend you, Madam Deputy Speaker, on your choice. It has been two weeks of chaos and confusion since the budget—two weeks of utter debilitation for employee share ownership schemes across Australia. Two weeks ago, on budget night, the Assistant Treasurer made an announcement that snap-froze every employee share scheme around Australia, and for two weeks the government have ducked, weaved and done everything possible except take responsibility for the chaos they have caused.

This debacle is a window into this Labor government through which we see many things. We see the true Labor Party hatred of workers having shares in the companies they work in. We see the lack of attention to detail and we see the ducking and the covering up whenever something goes wrong. This Assistant Treasurer presided first over Fuelwatch. Then he presided over GroceryWatch. Now he is presiding over this employee share scheme fiasco. This Assistant Treasurer—the fool of Fuelwatch and the goose of GroceryWatch—is now the shocker of employee share ownership schemes. And for two weeks he has done nothing.

On budget night the Treasurer and the Assistant Treasurer announced that they were ending deferral on tax for employee share ownership schemes and limiting the existing concession. Within two days it was obvious that this announcement had had a catastrophic effect right across the business world in Australia. By Thursday of budget week it was obvious to the Assistant Treasurer—share plans frozen after tax changes. And, as day after day went by, the Assistant Treasurer stopped and did nothing.

The Minister for Finance and Deregulation, Lindsay Tanner, said everyone participating in the share schemes was somehow rorting their tax. But in the budget announcement and in the budget papers themselves there was precious little detail. All that was announced was that the deferral was being abolished and the concession limited to $60,000 of income. The effect this announcement had, as I said, was the suspension of share schemes across many businesses. The effect was that those on every level of income had their share scheme suspended. The effect was, with suspended share schemes, no-one was getting access to employee shares.

Knowing that this chaos had been caused, the reaction from ministers, up to the Prime Minister, was, first of all, to do nothing. Let’s go through some of the exact advice the Assistant Treasurer got in the days following the budget. The Managing Director of Computershare, Geoff Price, said:

All the share plans we operate are likely to be suspended until there’s some clarity …

He also said:

They—

the government—

just don’t seem to get it …

…            …            …

How can the Government say they support share schemes when their proposed changes will tax the legitimate tax-qualifying plans out of existence?

                  …              …              …

The proposed changes simply render the vast majority of plans uneconomic …

The Woolworths finance director echoed these concerns when he said:

… the government hasn’t thought through the changes to employee share ownership. It has effectively frozen employee share schemes. Many small and medium-sized businesses depend on equity ownership because they simply don’t have the cash.

In the face of this, the response was bluff and bluster, as we have seen so much with these ministers opposite. For two weeks we have had nothing but bluff and bluster. It is as if they are provided with their lines. It is almost like they are tape-recorded, like the tape is inserted into the minister like some sort of automated telephone answering service. We had the same thing from the finance minister and the Prime Minister in the week after budget week, with the headline: ‘PM stonewalls on employee shares’. We had day after day of chaos, and the government’s response was to do absolutely nothing.

It is amazing that the government and the minister opposite could make this announcement in the first place without seeing what damage would be done. This is the big question for the Assistant Treasurer: did the Assistant Treasurer intend to shut down share schemes across Australia? Was that the intention of the budget announcement—we know that has been the effect, but we do not know if it was the intention, because he has not said anything in the last two weeks—or was it simply a rolled gold stuff-up?

They might have asked themselves why the deferral existed in the first place. That would be a reasonable question for an Assistant Treasurer to ask. The deferral exists so that, if you are on $50,000 and you are provided with some shares which you cannot touch for a number of years, you pay the tax when the shares are in a position where you can actually sell them or use them. Without a deferral, you would have to pay that tax upfront. That is the effect of the budget announcement. So the Assistant Treasurer’s decision is now that workers on every level of income—and let’s leave aside this class rhetoric they resort to at every opportunity, whenever they are in trouble—have no deferral, and the minute they are provided with shares in name that they cannot access for a number of years they are required to pay the tax upfront. You can just imagine it in the workplace: ‘We’re issuing you with some shares that you can’t touch for a number of years but you need to pay the tax now. I hope you’re happy. Go down to the bank and get a loan to pay the tax.’

Another question they might have asked is, ‘Why does no other country in the world do this?’ That might have been a good question. Apart from, ‘Why does the deferral exist in the first place,’ they could have asked, ‘Why don’t other countries do this?’ But these were questions that absolutely eluded the Assistant Treasurer—and the Treasurer, of course, who presided over this with him. It may well be the case that I am being terribly unfair to the Assistant Treasurer. I like to consider all possibilities. It may well be that this was the Treasurer’s decision and the Assistant Treasurer found out about it very late in the piece, after the budget papers were printed. He might say so in his response. It is quite possible that is the case, but we have not heard that.

In two weeks we have seen companies right across Australia criticising this announcement. With chaos all around, with share schemes suspended all over the country, the government’s response was to pretend it was not happening. Then, finally, after some in the union movement joined the chorus of complaint, pointing out that the changes were a disaster—when the Assistant Treasurer, the Treasurer, the Prime Minister and the finance minister were the only four people living in this country who thought this was a good decision—they decided to start to consult. Their first instinct was to cover it up, to use class war rhetoric. Only after being dragged kicking and screaming did they finally decide to consult.

So on Sunday afternoon we had an announcement from the Assistant Treasurer that there would be, in his words, a consultation which put everything on the table. There was some language at the start of his announcement saying that concerns had been raised but, when you read the announcement, it says everything is on the table. Then, on Monday morning, we had the Treasurer conceding on the AM program that mistakes had been made.

Mistakes have been made by the Treasurer and the Assistant Treasurer. Share schemes across Australia are frozen. Those on the other side know this. Those on the backbench on the other side know this too. They know that this is wide ranging. They know that this affects every employee at every income level. They know that, if share schemes stay frozen, there will not be much to tax. And they know, because they are hearing it from their union members, that this is an absolute disaster. What we are now seeing, two weeks after the budget, is a U-turn taking place in slow motion. There is still some way to go, but this U-turn is taking place in slow motion.

The government have said it has tax avoidance concerns. Budget Paper No. 2, which outlines the measure in less than a page, at about five paragraphs, does not give any detail on those. As companies have said, if there is a problem with collection of tax, by all means deal with that. If the problem is that employees four and five years down the track are neglecting to pay tax, deal with that. Companies are also telling anyone who will listen that they happily provide all details of all employees to the tax office. Many companies have been doing that for some years. But, no, what we had was a decision by the government that there were some termites, and the solution was to bulldoze the entire house. That was the government’s solution. And they did it on budget night. They knew about it the day after the budget. The Financial Review put it on its front page two days after the budget and had it on its front page for six of the next seven days—but, still, absolutely no response.

As I said at the outset, this debacle is a window into the Labor government on so many levels. It exposes their lack of understanding and their economic incompetence. It exposes their lack of focus on the detail. It exposes their salivating attitude to doing anything they can to trample on aspiration in Australia without thinking about the consequences. And the very people they have hurt the most are the people least able to pay tax upfront. Hello! They are low-income earners. They are the least able to pay tax upfront. You do not have to listen to me, and I know you will not listen to the business community, but you can listen to some unionists. I know you have a separate phone in your office, but everyone is saying it—apart from you. It is the red phone; pick it up! Everyone is saying it: you have created a coalition of business and unions against your catastrophic announcement.

This is a window onto not only the absolute lack of focus on detail but also the preoccupation with stunts of this government. As the Prime Minister stood there in his fluorescent yellow vest on the Monday after the budget, decrying employee share schemes as tax rorts, it was pretty obvious, as we left Canberra on budget week, that the Prime Minister’s office packed up his papers ready for him to go on his budget tour and made sure they had the priorities for him: the florescent vest, the hard hat—don’t forget the hairdryer, but don’t worry about the budget papers! That is what is quite obvious. All right, the Prime Minister has discovered his hard hat. If he goes to Bunnings he will discover you can buy one with a torch on it, so you will be able to have night-time doorstops. This is the sort of focus you get from those opposite.

Two weeks later, the minister was finally dragged kicking and screaming. Perhaps he was arguing behind the scenes; I don’t know. It would be a good democratic duty if he shared it with the House. Perhaps he was arguing behind the scenes. Perhaps he had that fixed looked on his face saying, ‘Swannie, this is a disaster; what have you done?’ Perhaps he did. I don’t know. If he did he could share it with us and we would not tell a soul! But these last two weeks have shown the incompetence of those opposite. And there is a way to go yet. The U-turn has a way to go and the Assistant Treasurer is still slowly on the move.

Chris Bowen (Prospect, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

I am glad to have this opportunity to discuss this in the House. It is an opportunity I thought might come a little earlier. I thought the opposition were so cranky about this that sometime in the last two weeks I might have got a question, and I would have been able to answer it. I would have been able to put some of these things on the record. I was sitting there, on my spot down the end of the front bench, waiting and hoping for a question from the member for Casey. Alas, I waited in the forlorn hope that he would somehow get a question through the tactics committee. I thought he might get one up on Monday. Then I thought I might get one on Tuesday. If the opposition really were angry about this, if the opposition really understood and cared about this, they would at some point have asked me a question in question time, but there was nothing—until Wednesday, two weeks after the budget, we get an MPI. At least now we have the opportunity to put some of the issues on the table, to put on the table some of the background and the context to the government’s position.

There is an important obligation on every government, regardless of its party, to protect the tax base and to ensure that everybody is paying their fair share of tax. It is important that, while we continue to support employee share ownership and all the schemes that can have good benefits in the workplace—and I think that would have bipartisan support—we also ensure that they cannot be manipulated in a way that facilitates tax evasion. It would be irresponsible for the government to ignore the advice of the Australian Taxation Office and the Treasury that there are serious compliance issues with the tax treatment of employee share ownership schemes.

A number of groups have been in discussions with the government and made public comments about the government’s measures. Most of these groups—not all, but the majority—have acknowledged the government’s concerns. They have said, ‘Yes, we think there is a real problem here.’ Some of them have said: ‘This should have been fixed a long time ago. Yes, there are real integrity issues. Yes, it is good that you are dealing with them. Can we have a talk with you about the way you deal with them?’ The sensible and practical thing for the government to do is to listen to those concerns and to say to those groups: ‘We won’t walk away for a second from the objective of ensuring that everybody pays their fair share of tax. We won’t walk away from that at all. But we are more than happy to sit down with you and talk through the detail and see if there are ways that your concerns can be assuaged, see if we can deal with your issues in such a way that meets the government’s objectives but puts your mind at rest.’

So we have had, over recent years, a very serious loss of tax revenue from people being paid some of their salary in shares, deferring a tax on that income and either never declaring it or cutting their tax in half by declaring it only as capital gains and not as income. I thought I might share with the House a couple of case studies. Obviously I cannot go into individuals’ details. That would be most inappropriate. But here are a couple of case studies from the ATO. I stress that these are just snapshots of a couple of cases. One person acquired options in the 2004 income year. The taxpayer did not elect to be taxed upfront, instead preferring to defer any tax liability to a future time. In the 2005 income year the taxpayer exercised some of the options and immediately sold the shares from that exercise. The taxpayer did not include any discount from the exercise of the options in their tax return for that year. Instead, the taxpayer incorrectly included a capital gain in their tax return for the 2005 income year and applied the discount. An ATO audit found that the extra tax payable from that one individual was over half a million dollars.

Here is another one. One taxpayer acquired options in the 2002, 2003 and 2005 income years. The taxpayer deferred, as the law allows, any tax liability to a future time. And, in the 2004 and 2005 income years, the taxpayer exercised some of the options but did not include any of the discounts from the exercise of the options in the tax returns and did not pay any tax on those discounts. In the 2005 income year the taxpayer ceased employment and exercised all the remaining options. Again, the taxpayer failed to pay the tax owing. A tax office audit revealed that the additional tax payable for this individual was over $440,000.

These are just two case studies showing the House the extent of the potential tax loss. That is $1 million from two people. I share with the House this fact: eight per cent of the 1,300 taxpayers examined under tax office programs focusing on wealthy Australians had tax shortfalls relating to employee share schemes. The tax office advice to the government is that the loss to revenue is very significant indeed and over the forward estimates period could well add up to many hundreds of millions of dollars.

We have a real integrity issue here. It is an issue that the government would be negligent to ignore. But, at the same time, we are supporters of employee share ownership schemes. Without walking away from the central tenets of the measure—the central objectives of the measure—we have recognised that there might be ways that these could be better addressed. There might ways that, by working with the industry, we could deal with some of the genuine concerns that have been raised. This is far from the shadow minister’s characterisation that we have arrogantly refused to listen, that we have arrogantly shut down the debate and that we have refused to acknowledge that there are any issues. Quite the contrary—we have said publicly on several occasions that we are happy to work with the sector to try and work through their concerns.

The alternative would be to refuse to recognise that perhaps the measure might be improved. The alternative would be to arrogantly barrel on and say: ‘We are not listening. No changes. You can forget about.’ Or it would be to arrogantly refuse to meet with the industry or with the sector and to allow the uncertainty to drag on for months. I have a feeling that that is perhaps what the Liberal Party would have done in the same situation. How do I know that? It is because they have form on this.

In October 2007 my predecessor in the role of Assistant Treasurer, the honourable member for Dickson, made an announcement. He announced major changes to the tax treatment of scrip for scrip takeovers. The member for Lindsay would remember it well. The then Assistant Treasurer announced these changes, and his objectives, I must say, were good. He was cracking down on tax evasion. I would give him my 100 per cent support—there was no question that his motives were welcome. But he made a mistake. The laws were poorly crafted. There were unintended consequences from the member for Dickson’s measure.

The operation of capital markets in Australia was fundamentally changed. Takeovers, which are important for economic efficiency, stopped in their tracks. Expert commentators said that up to $28 billion worth of takeovers were scrapped because of the member for Dickson’s mistake. Now, we all make mistakes. I am not critical of the member for Dickson for that. He was trying to stop tax evasion, and he had my support in trying to stop tax evasion.

But what did he do? Did he acknowledge that maybe it could have been done better? Did he acknowledge that perhaps there had been an error? Did he acknowledge that they had rushed in and made mistakes? No, he arrogantly refused to acknowledge that and they barrelled on. And what did they do? Frankly, they left it to me to fix. They waited for the election. The new government had to come in and I had to work through a better law with the industry, with the Treasury and with all affected sectors to achieve the objectives that the member for Dickson was correctly trying to achieve but had bungled. He had got it wrong. As I say, my criticism is not of the member for Dickson for getting it wrong. I do not criticise him for trying. My criticism is that he arrogantly refused to acknowledge that perhaps it could have been done better. My criticism is that he allowed months of uncertainty and that he stopped takeovers for months—$28 billion worth of takeovers because of the member for Dickson’s bungled policy.

If we are going to have a fair dinkum debate, let us have a look at these two case studies. In both case studies, the government is trying to crack down on tax evasion. They are very laudable efforts. In both case studies, the government is saying, ‘We want to make sure everybody is paying their fair share of tax.’ In case study No. 1, the member for Dickson’s exercise, there are unintended consequences arising and mistakes are being made. And he is arrogantly refusing to recognise it and sit down and work through the issues with industry. He is arrogantly refusing to acknowledge that perhaps it could have been done better. In case study No. 2, we have this government saying, on the advice of the ATO: ‘We have a serious integrity issue here. We have to make sure that people are paying their fair share of tax. We have to ensure that workers who don’t have access to employee share ownership schemes aren’t subsidising those who do.’ That is what this government did.

We have sat down with industry in meeting after meeting over the last week or so and said: ‘Okay, tell us your concerns. We will work through them with you. Perhaps we could change the way we implement the measure. Perhaps we can do some finetuning. Perhaps we can adjust. Perhaps what we can do is achieve our objectives in a slightly different way.’ And we do not mind admitting that perhaps we could calibrate this measure better. That is the difference between the Liberal approach and the Labor approach. That is the difference between doing things the right way and the wrong way. So let’s not have lectures from those opposite about not understanding business or not understanding that things need to be fixed when there are unintended consequences. Let’s not have the member for Casey saying that this just shows that the Labor Party does not know how business works, because the opposite is the case.

What this case study and the member for Dickson’s case study show is that we are more than happy to sit down with business and work through issues. The member for Casey called the Labor Party’s approach the ‘hatred’ of employee share ownership schemes. He said, ‘You hate these things and you do not understand how business works.’ There are a few little problems there in the member for Casey’s narrative. It was the Keating government that established employee share ownership schemes. It was the Keating government and, in fairness, the Howard government—

Tony Smith (Casey, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

And you that killed it.

Chris Bowen (Prospect, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

Let those opposite continue—but it was the Keating government that recognised the productivity benefits of employee share ownership schemes. I am sure the member for Casey has done his research and checked the record and checked what I said in opposition and he will have seen my support for employee share ownership schemes. He will also have seen the Treasurer’s support for employee share ownership schemes. And he will know that there are senior figures in this government who strongly support employee share ownership schemes but happen to believe that everybody should have to pay their fair share of tax as well. The two things are not mutually exclusive.

If this government was so anti-business, if this government did not understand how business works, why is it that there are so many measures in this budget that are supported by business? Why is it that business has come out and endorsed this budget and its particular measures so well? Why is it that business has welcomed our changes to the treatment of off-market share buybacks, for example? It is not something you are going to read about on the front page of the Daily Telegraph, but it is an important reform. It is something that business has been calling for.

Then there are our abolition of the foreign investment fund regime and the rewriting of the controlled foreign company, or CFC, regime. Why is it that business had called for the previous government, the so-called business-friendly previous government, to do these things for years and was ignored? It has taken this government to act on these things. They might have been getting around to it. Maybe another 10 or 15 years in office and they might have got to it—fair call. But we have done it in our second budget.

Our measures in relation to the foreign investment fund and the controlled foreign company regime will save business $80 million a year in compliance costs. This is a government which understands business; this is a government which works with business and works through the issues. These are issues that people have been raising for years and they are things that it has fallen upon us to do. If the opposition really supported business they would start listening to business and get behind the Australian Business Investment Partnership. That is what they would do. It is another sign of the opposition being completely out of touch with the needs of business.

Part of my job, part of the job of the Minister for Finance and Deregulation and part of the job of the Treasurer is to engage with business. I would suspect that there is not a boardroom in Sydney, Melbourne or Brisbane that has not had the Treasurer, the finance minister or me in it over the last 18 months. We engage with business. And let me tell you this: what they say in the boardrooms of Australia is that the Leader of the Opposition is not a popular camper because he is taking a cheap and populist approach to the crisis facing the Australian economy. The Leader of the Opposition is opposing the government’s every measure. Around the boardrooms of Australia they say, ‘Malcolm knows better.’ They say: ‘The Leader of the Opposition should understand how business works, and we suspect he does. So why would the Leader of the Opposition oppose something as sensible and necessary as the Australian Business Investment Partnership?’ They say this in the boardrooms around Australia all the time. And the reason is—and business knows it—he is not the Leader of the Opposition; he is the leader of the opportunists. He will take every opportunity to make a cheap political attack on this government and not do what is right in the national interest. He will not get behind this government’s efforts to support Australia through this worst global financial crisis. That is why the business community have written off the Leader of the Opposition as a waste of time. That is why the business community says, ‘Maybe we would be better with the member for North Sydney or the member for Higgins leading the opposition, because this guy just does not get it.’

That is why the business community looks to Labor for engagement; that is why the business community looks to this government to get us through this crisis; and that is why they see the current Leader of the Opposition as nothing better than a hypocrite and opportunist.

Scott Morrison (Cook, Liberal Party, Shadow Minister for Housing and Local Government) Share this | Link to this | Hansard source

I am reminded of that commercial with Pro Hart where he made an enormous mess on the carpet and the cleaner who came into the room and saw this enormous mess said, ‘Oh, Mr Hart, what a mess!’ Mr Hart thought it was art and many people would think it was art. The one thing that is different between that analogy and what we see with the government is that, when they do all these things, they think they have created a great artwork in government. But what we know, time and time again, is that once they have come to office and splashed the paint around and rolled around on the carpet with government money the Australian public will turn up and walk in and say to this Prime Minister, ‘Oh, Mr Rudd, what a mess!’ And it will be up to the coalition once again to turn up and continue the story of Australian politics, which is that every time Labor get in they create such a fiscal mess that the Australian public turn to the coalition and say, ‘It is time for you to clean up their mess again.’

This issue is a very big deal. Between 600,000 and one million employees participate in these schemes. My own electorate of Cook has the highest employment of Qantas employees, and Qantas offers 34,000 employees these types of schemes. Of the top 500 listed companies, 450 offer these types of schemes, and for small business it is an important tool to facilitate transition and succession arrangements and to transfer ownership to employees, which is not something this government has an enthusiasm for.

What we have seen with this measure is the same as we have seen with many measures in this budget. The approach here is purely ideological. They simply do not understand this issue—they do not get this issue—and they are not passionate about it. It is not something that they want to see encouraged in the Australian workplace. They highlight, through the budget, this political doctrine of attacking those they simply do not like and do not want to encourage. They attach to them all of these pernicious phrases. They call the doctors who want to help people with fertility treatment ‘overcharging doctors’ and they engage in doctor bashing. Here they describe the people who want to engage in share ownership schemes as tax burglars, which we just heard the Assistant Treasurer say in this place. He said the people who want to engage in these things are tax burglars. They apply these pernicious terms to them to try to impugn their motive as some sort of unholy one and to try to justify their ideological war and their lack of enthusiasm for things that actually make a difference in the workplace.

The requirement to pay, as the shadow minister at the dispatch box clearly said, the tax upfront is without question a discouragement. It is a disincentive to the establishment and take-up of these schemes. I believe the government knows this. They know that by putting in these measures the take-up of these schemes will be discouraged. As Rahm Emanuel said and as the member for Higgins said in his speech the other night, ‘Never waste a crisis.’ That is what we have seen from this government all the way through this economic crisis. It has been an opportunity for them to repackage social agendas and social spending agendas as economic stimuluses. That is what we are seeing with their rather unholy approach to this issue.

We simply need to look no further than the Deputy Prime Minister and the Minister for Small Business, Independent Contractors and the Service Economy. Back in 2000 they were part of a House of Representatives inquiry into these types of schemes. They signed themselves up to a report which said that there is no clear and objective evidence for the claimed productivity pay-off from such schemes. The Assistant Treasurer said before that there are some people in the government who support these types of things. Clearly not the Deputy Prime Minister. Clearly not the minister for small business. They do not believe it. They simply do not buy it. They are not interested in supporting it. That is what we see in these measures here before us.

It is another step in Labor’s attempt to reregulate our economy. They are looking to reregulate our economy. This poses an enormous threat to the recovery of the Australian economy when it comes out of recession, which will hopefully be sooner rather than later, but that is hard to believe under this government. Labor’s forecasts, as put out both in their budget papers and in the plethora of other information they have been talking about which are not in the budget papers, are putting forward a scenario of miracle growth to get us out of debt and deficit. But even their early-year forecasts rely critically on comparisons between the current economic situation and situations in the early 1990s and the early 1980s to justify the growth forecasts they have in their budget papers.

It was also noted the other night—and I made this point myself in my own budget reply speech—that it is quite clear that the recession in the early 1990s was far worse, at least on the forecast provided by this government, than the recession we are going through here. The government likes to talk about the global recession when it is talking about these measures, but when it comes to talking about the Australian recession it is a lot more quiet. I quote the member for Higgins from the other night:

… we are told this is the greatest downturn since the Great Depression and yet, on the other hand, the budget forecasts a contraction of half a per cent of GDP. In the year to June 1983, in that recession, there was a contraction of 3.4 per cent. In the recession to June 1991, there was a contraction of 1.5 per cent, so the government is in fact forecasting a much milder recession than 1991 or 1983.

He went on to say—and this is absolutely true:

The only thing that will be greater coming out of this recession is the budget deficit, because in neither of those recessions did the budget deficit ever blow out to five per cent of GDP.

The other thing I would say is this. As we seek to climb out of this recession the other thing that was different in the nineties and in the eighties was that at least the economy was trying to grow into an open field, or at least a more open field. We had a situation where there had been economic reforms that had been put in place prior to that, economic reforms which shadowed in comparison to those introduced by the Howard government, but at least our economy was trying to grow into a more liberally regulated economy. What we are seeing under this government is a tightening. What we are seeing from this government is a reregulation, whether it is in the labour market, the financial markets, here in terms of employee arrangements or any of these things. What we are seeing is that this government wants to take forecasts from the early 1990s and the early 1980s, and it wants to bind up the economy. It is going to bind it up with its proposed CPRS, the emissions trading scheme. They will not tell us what the impact of that scheme will be on their growth forecasts. They will not tell us what the impact of that will be on the debt and their ability to repay the debt. They are saying they want us to regrow in a more regulated, tightened, structured economy which does not allow for things like employee share ownership schemes, where people cannot invest in the productivity of their business and seek to gain the advantage of putting in the sweat equity as employees and have the opportunity to share in the prosperity that comes from that. This is something this government simply does not believe in. So our economy will have to try and grow again in the bog that this government is creating with the policies that it is putting on our economy as we speak, and this is a classic measure.

This is a rushed and bungled measure. We have seen plenty of rushed and bungled measures from this government, such as the unlimited bank guarantee which froze the savings of 270,000 Australians and tied up liquidity all around the country. It took ages for the government to come to terms with this. Here is yet another rushed and bungled attempt. Here also in this place we on this side of the House are having this imposition: ‘Just sign up to the CPRS. We know you understand that this is a deeply flawed scheme that will put massive costs on the Australian economy and export emissions and export jobs, but sign up to it. We want this thing there so the Prime Minister can sign his application form to be Secretary-General of the UN by taking his pretty little CPRS to his meeting in Copenhagen.’ So he is going to try and rush and bungle that through, and this is another measure which shows they have rushed and bungled.

This is not a government that has got too many things right. They do not get too many things right. Maybe that is why they cannot get support on too many things. If they took the time to get a few more things right then maybe we would be able to support a few more things. But on this occasion they have shown once again that when they do just throw it out there they get it hopelessly wrong. The shadow Assistant Treasurer said quite clearly, ‘This situation is like saying there are termites in the house and so the answer is to knock it down.’ Their answer now is given after you have got home and found they have knocked down your house. Then they say: ‘Would you like to talk about it? Would you like to talk about the fact that we have knocked your house down? Is there anything you’d like to share about how we can improve?’ Maybe not knocking our house down in the first place would have been a good move. This is a rushed and bungled measure. This is an unfair measure and it is a desperate measure from a government addicted to debt. (Time expired)

David Bradbury (Lindsay, Australian Labor Party) Share this | Link to this | Hansard source

I thought it was a little bit rich when I saw the reference in the matter of public importance from the member for Casey to ‘chaos and confusion’—hallmarks of the Liberal Party post John Howard. We have seen the operation of that mob over there in this parliament. It has been chaos and confusion. We have seen it not just in their response to the budget; we have seen it on a number of specific bills. When the Nation-building Funds Bill came before the Senate, we could not quite work out what happened, because the opposition did not all turn up to vote. There were those who turned up to vote who voted for it, there were those who turned up to vote who voted against it and then there were those who apparently were stuck in the toilet! But the reality was that there was no unity. There was chaos and confusion. Some might even suggest that they are the two warring factions within the Liberal Party—chaos and confusion. It sounds a little bit like Get Smart except there is no control, I can tell you—it is chaos and confusion.

Those on the other side come forward and try to portray this as an attack on employee share ownership plans. That could not be further from the truth. This government is committed, as previous Labor governments have been committed, to having a strong employee share ownership scheme sector in place. That is something that we support and that we wish to continue to support. But we also feel very strongly about maintaining integrity in our tax system. I would have thought that those on the other side perhaps chose to ignore some of these lurks and loopholes. I have to say that when there is a lurk and a loophole the Liberal Party is not far away.

When we look at the operation of these employee share ownership schemes for those at the higher end of the income scale—I am talking above $1 million, and I will look at some of those figures in a minute—and at the massive tax concessions or, in many cases, the massive amounts of tax that were not paid or that were avoided, I would have thought it would be a matter of public importance for us to shine a spotlight on that. I would have though that we should try to act on behalf of all those taxpayers who look to us to recover revenue where it is due and payable, to stand up and recover revenue from those who are trying to avoid their obligations and, in some cases, as a result of confusion, are simply unable to meet their obligations.

I think it is worth noting from the outset that one in 20 people earning under $100,000 are in an employee share ownership scheme. For those earning above $100,000 it is one in six. So by anyone’s calculation this is not the overwhelming majority of the workforce—far from it. When the member for Casey says that this plan attacks the very people that need the most help, then I simply make the point: one in 20 people earning under $100,000 have access to an employee share ownership plan. If there is a tax exemption or tax concession available to one in 20, then it begs the question of equity for the remaining 19 in 20. But these measures are directed at the avoidance end of the spectrum. They are directed towards the issues that the ATO has raised. I note that the ATO has said that about eight per cent of the 1,300 executives who earn more than $1 million a year fail to disclose an average of $180,000 in income. That was from share schemes. We are talking about $18 million being defrauded from the taxpayer, whether it be in the form of avoidance or confusion. The ATO has estimated that up to $100 million of revenue has been lost as a result of avoidance.

The member for Casey asked many questions but the one question that needs to be asked is: if this sort of revenue leakage has been occurring for some years now, why was it that those on the other side, when they had the opportunity in government, did not stand up for hardworking taxpayers, who pay their fair share, and try to recover some of these funds? Not only did they not stand up for those hardworking taxpayers when they were in government; they now want to stand against them in opposition. I think it says a lot about the perspective that they bring to these issues.

Let me look at one particular example. Let’s consider the case of an executive—and I know that those on the other side do not want to focus on executives in this debate, the cheerleaders of the golden handshake brigade. Let’s take an example of an executive who accepts a position in an Australian company and, as part of his remuneration package, receives 500,000 shares in the company. Those shares are provided to the executive at no cost but are valued on the market at 50c each. Let’s pick that figure. The executive then elects to defer paying tax on the shares. He does not include the discount—that is, the $250,000—in his income in the year in which he acquires them. Five years after acquiring the shares he decides to move overseas. He later ceases his employment and he would be required to include his income for the year and the discount plus any accrued gains on the shares. What happens if that executive is no longer in the country? It is not unusual for that to occur.

The problem with deferral is that it is very difficult at that subsequent point to effect enforcement, and that is one of the major problems with the current scheme. It may not be a consideration for many people that have shares in employee share ownership plans but it is a major consideration for those people at the top end of town who, either through avoidance or confusion, are not paying their fair share. This is a measure that is directed towards ensuring that those people pay their fair share. I would have thought that, if ever there were a time for us to be really taking some hard decisions in relation to clawing back revenue leakages from those that are not paying their fair share, it would be in the current climate, with the $210 billion worth of tax revenues that have just evaporated as a result of the global recession and the slowdown in commodity prices. I would have thought that now was the time to be acting. Those on the other side stand up and talk about debt but they are not proposing anything and they have not proposed anything that would get the budget any closer to being in surplus than it is at the moment. They deny the fact that the $210 billion worth of revenue that is lost would be lost whether they were in government or not. That is the reality.

You would have thought that the Leader of the Opposition in his in reply address to the budget would have given the global economic recession a guernsey, but it did not even get a mention. There has been a lot of talk about what was in the budget speech, but there has not been enough focus on what was not in the budget in reply speech. It did not even mention the global economic recession. Those on the other side are pretty fond of selectively quoting parts of the budget papers. One thing that you will not hear them quote is that on page 1-6 of the budget overview in Budget Paper No. 1 it says:

The world economy is expected to contract by 1½ per cent in 2009—the first annual contraction in six decades.

This will be the first annual contraction in global growth in 60 years. I would have thought that that is an extraordinary circumstance.

Those on the other side, and the member for Cook is first and foremost among them, come forward and want to tell us that things are not nearly as bad here as they are elsewhere and do not require the decisive action that this government has taken to try and cushion our economy against the impact of the global recession.

Tony Smith (Casey, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

Every time you say ‘decisive’, you get a pat on the back.

David Bradbury (Lindsay, Australian Labor Party) Share this | Link to this | Hansard source

I will take that interjection from the member for Casey. I heard his comments earlier about the hard hats. They are very sensitive on that side about hard hats. I did not see them wearing hard hats very often when they were in government, because they did not build anything; they did not believe in building the nation; nation building was not their priority. They get sensitive about the hard hats.

Just yesterday there was a bit of a kerfuffle about the hard hat. The member for Canning says that he was not the one who brought the hard hat in, but that it was the member for La Trobe. I will take his word for that. I was astonished that they had a hard hat nearby. They never needed one in their 12 years in office, because they did not build anything; they did not invest in the nation. But then it became a little bit clearer to me why he had such ready access to the hard hat: he needed it yesterday morning in the joint party room meeting—in fact, I think that they were standard issue.

Talk about division; talk about chaos and confusion. They do not know whether they are Arthur or Martha; whether they are greener or browner than the Labor Party when it comes to the CPRS. They do not know whether they support it or not. They have a leader who has said that he was the voice of reason—the voice of progress—in the cabinet. But now he is a stick in the mud; he is an obstacle; he is the speed hump that is blocking any progress on that front.

Stuart Robert (Fadden, Liberal Party) Share this | Link to this | Hansard source

These are truly dark days for the great Australian dream. There was a time in this country when Australia per capita had more share ownership than any other nation on the face of the planet. Australians were encouraged to have a stake in the companies in which they worked. The heart of that was the employee share scheme. Whether you bought in, whether you bought shares, whether you bought options, whether you paid for them, whether you received them, whether they were part of remuneration or whether they were an incentive, those schemes were all about providing an opportunity for ownership; for partnership. They meant that you did not have to just be an employee but could be an owner in the company in which you worked. Then along came that nervous little man, the Treasurer, and his dodgy sidekick, the Assistant Treasurer, looking to scoop $200 million over the forward estimates by removing the ability to defer tax on acquiring shares through a share scheme and putting a $60,000 limit on it.

I do not know what is worse: moving to impose a cap of $60,000 and then affecting all shareholders or the hide of the statement in Budget Paper No. 2 in part 1 in the section on revenue measures for Treasury—and I know that the Treasurer gets lost when we talk about his budget. The paper says:

This ensures that the concessions encourage a better take-up and availability of employee share arrangements by low and middle-income employees.

The budget papers say that the whole point of this measure is to encourage low-income employees to take it up. But if they did nothing it would still encourage low- and middle-income employees to take it up. It does not change anything if you are earning under $60,000; it provides no incentive or disincentive; nothing changes. Yet the Treasurer came out and said:

There is no doubt that the arrangements that have been in place deliver massive benefits to some executives on very high remuneration. It was time for that to be reformed and that’s what we’ve done.

The budget paper says that this is about an incentive for low- and middle-income earners yet the Treasurer says that this is about punishing and closing a loophole for high-income earners. The question is: what is the measure about? It absolutely and utterly seems to be the case that there is no consistency.

If indeed the budget papers are correct and this is about an incentive, why is it that so many of our companies are closing down their employee share schemes? At Australia’s top 100 companies, about 600,000 Australians are involved in share plans. Woolworths has more than 40,000 people plans; there are 100,000 in Wesfarmers. Ninety per cent of the member companies of the Australian Mines and Metals Association have employee share schemes. Seventy-five per cent of shop-floor employees at Alcoa are members of such plans. And what has been the response of the corporations of this country to this government’s measure? Close down, scrap, defer and hold plans.

I asked the Assistant Treasurer, who seems to have disappeared from the House, these questions. How does so many of the nation’s plans suspending and shutting down encourage better take up and availability? If they are all being shut down—if no companies in the nation bar a few are offering a share plan and the opportunity to buy into the wealth of the nation and to take a stake in your own company and your own future—then, in the name of all that is sacred, how can you possibly meet your stated intent of improving take up and access by low- and middle-income employees? It is simply and utterly a farce. It is no wonder that this government is running and ducking for cover.

Or is there a more sinister motive? Is it not really about the $60,000 and trying to hide large tax earners? Could it be a direct attack on the aspiration of Australians? Is it the desire for everyone to live in ticky-tacky houses that all look the same, because that is what pure socialism wants? Should everyone just be the same, with a massive redistribution of wealth? Is that the real intent hidden behind the vagary of the budget papers? I will leave that to the ballot box and for Australians to determine. This measure, though, is a farce and the companies of this nation have judged and condemned it as such.

Chris Hayes (Werriwa, Australian Labor Party) Share this | Link to this | Hansard source

After listening to this debate, I have to wonder about the opposition’s tactics and the reason they have waited for two weeks. They have waited some two weeks since the budget to bring this matter before us today. Let us face it; they cannot say anything about the CPRS. They cannot say anything about schools; all the ones who want money for their schools are walking out of the room at the moment. They are not going to talk about black spot funding, or, in Wilson’s case, level crossings up in his electorate. They are not going to talk about roads or support of local government. So what do they want to talk about? They want to talk about tax schemes. Comrade Smith wants to talk about workers’ rights, but if he were genuine about workers’ rights this bloke would not have voted for Work Choices on however many occasions—was it six or seven times they voted for Work Choices?—to strip away workers’ rights. Let us make no bones about that.

What we are trying to do is set up taxation arrangements so that under these schemes people are called upon to pay their fair share of tax. That is spreading the burden across all those who work. If you look at employee share ownership schemes, you will see that only one in 20 workers at the moment are in one of those schemes. But that does not mean that we do not need to review it.

The opposition are now picking on an issue some two weeks after the budget. It has certainly been covered in the newspapers over the last two weeks, but they waited. In addition, we are in a situation where the Assistant Treasurer has already put in train a consultation process with all the stakeholders to address these issues. We are not going to compromise on people paying their fair share of tax. What we are going to do, however, is look at what is fair, with a view to providing a positive set of arrangements that will encourage employee share ownership. I have worked for organisations that have sponsored such schemes over many, many years. I think it does encourage loyalty and participation and provides motivation when employees share in the company’s profits. Those things are all true.

Not once have those opposite indicated what the ATO have said so far, that it is the people at the higher end of the schemes who are involved in tax abuse or the confusion that has caused this amount of tax losses. What the ATO is saying at the moment is that in excess of hundreds of millions of dollars of tax revenue have likely been squandered as a consequence of these schemes. I would have thought it was in the interest of everyone in this chamber and of the people they represent in their electorates to ensure that we protect the integrity of our tax base. Surely we should not simply go about our business, allowing the highest income earners a means to defer their tax increases or, alternatively, to pay half of what they would have been required to pay in tax by declaring it a capital gain.

That is not what we intend to do. We do intend to move to protect the integrity of the tax system and we do intend to do so in such a way that it is done in consultation with all stakeholders, the industries concerned and also the various groups out there who actually sponsor these schemes. I am sure Comrade Smith will not have been lobbied by too many unions to date, but there are those who have actually taken the time to talk to a number of the trade unions out there, such as the Australian Workers Union, and work out what they are asking for. Sure, they do want that review to take place—and we are committed to that review—but they say that the fundamentally unfair aspect of this arrangement is that the higher income earners rorted the scheme. I do not think that it is inappropriate at this stage for us to move to review that aspect of it with a view to tightening it up so people pay their fair share of tax.

I do not know about your electorates, but in my case 98 per cent of the electorate of Werriwa earn under $100,000. They are the people that I want to make sure are not disproportionately affected by tax arrangements. They need to see that we are making the effort for their benefit, to ensure that everyone is called upon to pay their fair share of tax. And, if we abide by that principle, we are in a position to protect the integrity of our tax system. Apart from the consultation process the government is entering into—

Bruce Scott (Maranoa, National Party) Share this | Link to this | Hansard source

Order! The discussion is now concluded.