Wayne Swan (Lilley, Australian Labor Party, Treasurer) Share this | Link to this | Hansard source

Last week the government convened a forum of almost 200 people to discuss the next steps in tax reform. By any measure, the tax forum was a great success. I am proud of the forward-looking discussion which occurred here last week and which confounded all of the critics and all of the cynics. We drew together representatives from across the country—we heard views from the boardroom, from the factory floor and from the kitchen table. No topic was off limits, and the conversation covered a broad range of ideas just as I had called for a month ago in this very parliament. We did not agree—it would have been pointless if we did—but we did find some very important common ground across long-standing political and ideological divides. The government will progress a number of the issues which came out of the forum as part of a second wave of tax reform.

The tax forum was not the start of a tax reform process; tax reform has been a central part of this government's economic agenda. We came to government after years of Liberal neglect of tax reform. Australians had seen largesse bankrolled by the windfall gains of repeated revenue upgrades from mining boom mark 1, but they had not seen anything approaching tax reform for many years. So we commissioned the Australia's Future Tax System Review to reinvigorate the tax reform debate, to give it some direction and to give it purpose. We gave the review an ambitious scope: taxes and transfers across all levels of government.

After receiving the tax review, we set about a broad and ambitious agenda of tax reform. The Prime Minister and I have spoken at length about our patchwork economy. Some sectors are booming—for example, the mining sector expects to invest $82 billion in this financial year alone—but other sectors struggle with the high Australian dollar, cautious consumers and increased competition for labour and resources. Our first wave of reform was a response to the pressures of a patchwork economy. We adopted the central thrusts of the tax review: firstly, to get a better return for Australia's non-renewable resources through a profits based tax; secondly, to cut business tax, helping struggling firms with a company tax cut and a billion-dollar tax break for small business; thirdly, to save some of the gains to prepare for an ageing population by boosting superannuation and making concessions fairer; and, fourthly, we tripled the tax-free threshold from $6,000 to $18,200.

But we are doing much more than this with something like 32 reforms that deliver on ideas in the tax review. We are boosting workforce participation through a suite of budget reforms which were widely welcomed and which included the phasing out of the antiquated dependent spouse tax offset and reforming transfer payments. We are simplifying personal tax with a standard deduction for work related expenses. We are fixing the FBT treatment of cars. We are revamping the R&D tax incentive to boost innovation. We are modernising the governance of the system. The list goes on and on. We are doing all this at the same time as keeping tax as a share of GDP below the level we inherited. This year, tax is expected to be 21.8 per cent of GDP. That is substantially lower than the 23.5 per cent we inherited and much lower than the all-time record of 24.1 per cent set by those opposite in 2004-05 and 2005-06. I know from experience that tax reform is never finished. It is a journey rather than a final destination. So we held a forum to talk about the next steps in tax reform, to discuss how to build on our existing tax agenda. As I said earlier, it was a great success. We heard from business big and small, we heard from community groups and we heard from unions. We heard from experts, we heard from tax professionals and we heard from our universities. We heard from people at the front line, we heard from small business and local accountants.

I would like to thank all of the participants in the tax reform for the goodwill that they brought to the table in the parliament last week. We did not always agree but we did find some very important common ground. An overriding theme was that responding to our patchwork economy is a priority. We agreed that parts of our economy are under significant pressure and there are a variety of different ideas on how to respond. For example, participants had different views about across-the-board company tax cuts. But there was also some very important consensus—for example, around more targeted measures like improving the tax treatment of losses—and there was some consensus about the best way to develop these ideas through a collaborative working group.

At the end of the forum I announced that we would bring together a business tax working group to be chaired by Chris Jordan. Its first job will be to look at losses and how to fund any changes within the business tax system. Its second job will be to look at longer-term ideas, like a deduction for equity, and compare them to alternatives like changing the company tax rate.

Another area where we forged a consensus was the vexed topic of inefficient state taxes. After roughly seven years in the Treasury portfolio I have not before encountered such a mature acknowledgement of the deficiencies of many of our state taxes. I see this acknowledgement, coming from state treasurers from both sides of the political aisle, as something of a breakthrough. Equally encouraging was the acknowledgement that the solutions lie not in the lazy option of jacking up the GST in a way which hits low-income Australians hardest. Coming out of the forum, the states—led by Queensland and New South Wales—will develop a plan for harmonisation and further steps in state tax reform. I am very proud that we helped such a productive discussion occur and of course we are happy to help facilitate change as we press ahead.

The third broad consensus was about improving the interaction of the tax and transfer payment system. We are already making major progress here, including tripling the tax-free threshold to $18,000 on 1 July next year. This will reward hard work, especially for secondary income earners. It also means that up to one million extra people will be spared the inconvenience and expense of lodging a tax return. At the end of the forum I announced that our priority for personal tax is to go further and to get to $21,000 for the tax-free threshold when the country can afford it.

These were some of the key outcomes but there were lots of other ideas that we will also take forward. We had a discussion about reform of not-for-profit concessions and about the rules governing superannuation annuities. A new tax study institute will be a centre for research excellence into the tax and transfer payment system. Many other ideas were also raised at the forum—too many to go into today. Some of these might work, some of them might not, but I expect and hope they will be the subject of much community discussion in the months and years ahead.

The tax forum showed just how constructive and positive the policy discussion can be in Australia when everyone comes together with goodwill and the cynics and wreckers are ignored. I just wish the discussion in this place could be as constructive and positive as it was in the tax forum last week. The challenge for this opposition is to throw its knee-jerk negativity out the window, throw its destructiveness aside and outline some ideas for the future of the country.

I think that they should look to the example of all of the forum participants. They really did rise to the challenge and that was very encouraging. What they were interested in was the national interest, not some selfish political interest that we see from those on the opposite side of the parliament. All we see are the empty slogans. They say things like they stand for lower taxes, when their policy is higher taxes on companies, higher taxes on small businesses and lower taxes for very profitable mining companies. That is their current position. They say they stand for simpler taxes, when they opposed the instant asset write-off for small business—a huge tax cut for 2.7 million small businesses. They opposed that, they opposed the standard deduction and they opposed the tripling of the tax-free threshold. It is absolutely incredible. They say they stand for fairer taxes when they want to abolish the instant asset write-off, a huge boon to small business, and when they want to take away an addition to the super savings of 3.5 million low-paid workers. They have an agenda which will hurt working people in this country and damage our economy for the long term.

I am an optimist. I look forward to hearing the opposition's ideas today about how they are going to fund and reform the tax system, given how negative they have been. But for our part, what we will do is continue to put in place policies which will build retirement savings for the future and promote workforce participation. We have a plan—unlike those opposite, who have no ideas whatsoever. (Time expired)

Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

More huff and puff from the Treasurer—it is good to have a summit forum, discussion group, working group, whatever it may be called—and they are celebrating the fact that there was lots of constructive discussion and no outcome. As the Treasurer leaves the chamber, so too has he left behind 200 people that assembled last fortnight, in Canberra, at a tax summit that was forced upon him by the member for Lyne. That was a great win for the member for Lyne. He got the government to hold a tax summit that did nothing. So let us just go back over the history of this, the government's process on tax reform.

It began with the 2020 summit. We all remember that. The then Prime Minister, the member for Griffith, was sitting on the floor taking copious notes, engaging people in discussions. One of the recommendations was to have a full review of the tax system. He said it was an 'exciting initiative aimed at harnessing the best ideas for building a modern Australia ready for the challenges of the 21st century'. The 2020 summit had over 1,000 delegates, received over 8,800 submissions, produced 962 ideas and nine were accepted—962 ideas and nine were accepted—and it cost $2 million to hold. So that was about $200,000 per idea adopted and, if I recollect correctly, one of the recommendations made was to hold the summit again in a few years time so really there were eight recommendations from the tax summit. One of them was to have a full review of the tax system, so the government then commissioned Dr Ken Henry to head a review of the tax system. As I have said previously, it is an error of judgment to have a public servant head an independent review because once that review is delivered the public servant, because they have obligations to serve the government of the day, cannot be advocate for the recommendations of that review. That is one of the reasons why the government was so comfortable in neglecting to implement most of the recommendations of Dr Henry, and I am sure Dr Henry would regret that he was the chairman of that review. It is because the government does not know how to govern. When we were in government, whether it be the Wallis review into banking or a range of other reviews, we had members of the private sector head those reviews so that they in turn would keep the government honest when it came to implementation.

This government commissioned the Henry tax review in its first budget back in 2008, the Henry tax review took two years to complete, cost over $10 million, received 1,500 submissions, had five panel experts, produced a report of 1,332 pages, came up with 138 recommendations and the government accepted 2½. The government accepted 2½ recommendations—that was their total response to Dr Henry. The government claims that it has now implemented 32 of the recommendations. We are struggling to find where those 32 recommendations have been accepted and fully implemented, but this is a government that is focused on spin.

The government had no intention at all of proceeding with anything other than a revenue-raising measure in relation to mining out of the Henry tax review, but the member for Lyne, to his great credit, forced the government into having a tax summit. The Treasurer, in his own befuddled mind, could not work out whether it was a summit or a forum. Whatever the case—whether it was a forum, a discussion, a working group, a summit or whatever you call it—it was about tax and he invited 200 delegates to come along. It illustrates the spin of the government that he did not ask us to come along. He did not ask us and, when he was embarrassed by the media about the fact that he asked everyone on earth except Her Majesty's opposition, he claimed that he invited us. That is just deceit from the Treasurer, nothing short of that. We open our mail on our side of the House and there was no invitation to this grand wedding. But that is their call and, of course, the member for Lyne did not say the opposition should be there—no, because, as we have just seen, the member for Lyne is party to so many of the tax increases and new taxes that this government is a proponent of.

So 200 delegates assembled here in Canberra, it cost a million dollars of taxpayers' money to hold with two days of talk on tax and what do we actually factually have to show for it? 'Good news! A working group is being established to report to the government this November with a final report in March next year. It is a working group—as if there have not been enough summits, there have not been enough reviews and there have not been enough panels of experts—'so good news, Australia: you're going to get a new working group.' Every one out in workerland must be cheering about that! But, wait, there's more: an announcement that the government would like to hear everyone's views on whether it should set up an advisory board to provide the Australian Taxation Office with an independent, external source of advice and counsel on organisational matters. So the government's great landmark tax reform is they want to hear the views of the public. Even after the 2020 summit, the Henry tax review and this new summit or forum, one of the key recommendations is to have a further consideration of public views.

There is the announcement of a million dollars in funding per year to create an independent tax studies institute, as if there is no-one in Australia that is a self-proclaimed expert on taxation and as if there is no university in Australia that has part of the department of commerce or department of economics in the university with tax experts in—'No, we'll spend another million dollars on a tax institute.' The piece de resistance, the one that was the greatest con of even some of the people at the summit and even some of the journalists outside of it, was that the government said some time in the future they have an intention when the fiscal position is right to increase the tax-free threshold to $21,000.

As soon as I heard that announcement as to a tax summit, I thought to myself I had heard that before. I went back to 2007 when Kevin Rudd, as opposition leader, said 'we have an intention to reduce the number of marginal tax rates from four to three and to have a top tax rate on of 40 per cent'. I thought, hang on, that was Kevin 07 and he was more likely to keep his word than Julia 2010—we know that. But, no, this is serious: 'We've got an intention when the fiscal position is right to increase the tax-free threshold to $21,000'. So let us set the record straight. This government has introduced or increased 19 taxes since it was elected. They cannot name one tax that they have abolished, not one. If there is a problem in any way in any place and they cannot regulate it, they tax it. There is a problem with teenage alcohol consumption, so there is an alcopops tax. There is a problem with people smoking too much, so there is a massive increase in the ciggies tax. There is a problem with the Australian motor vehicle industry, so they increase the taxes on motor vehicles—and, oh, what a mistake that was right before the financial crisis but, no, they did not back down. There is a problem with carbon dioxide emissions, so tax it—'That's what you should do: tax it!' There is a problem with miners earning too much money, so tax them—'Go for it!' And they wonder why they are sitting on a below 30 per cent primary vote. You do wonder, don't you. There is a flood in Queensland. Tax it; that is what you have to do! Tax everyone for the flood in Queensland, even though the $1.8 billion being raised by the flood levy is inconsequential compared to the $4½ billion hole on the carbon tax that the government does not want to talk about. But of course this is a government addicted to spin, the same spin that says, now that he has got his carbon tax through, how good it is to have budget neutrality on the carbon tax—a $4½ billion carbon hole. Crikey, what a joke this mob is.

I am disappointed that the member for Lyne and others have attached themselves to you, because quite frankly I think there is genuine desire in Australia to have tax reform. But do you know what tax reform is? Reducing the number of taxes. Do you know what tax reform is? Simplifying the taxation system. Do you know what tax reform is? Reducing the tax burden on everyday working Australians. That is what tax reform is. It is not about increasing taxes and it is not about introducing taxes—all of the lazy approaches that the Labor Party and some of the Independents choose to side with. That is bad governance. That is not smaller government. That is not reform. That is a government addicted to spending and a government that has no solution to the tax challenges of modern Australia.

Robert Oakeshott (Lyne, Independent) Share this | Link to this | Hansard source

I certainly welcome the parliamentary debate on the back of the Tax Forum in what I hope is a quest, as per the final words of the member for North Sydney, for comprehensive tax reform in Australia. For that to happen I hope we have a comprehensive parliamentary debate, but I have to say that, from the first two speakers so far in this debate, we can juxtapose what happens in this chamber—as to part of the problem of tax reform—and compare it with what happened in what was a detailed, thorough and much more mature debate at the Tax Forum last week.

I did not rise to correct the record on comments made by the member for North Sydney but I have to, because he made direct reference to the fact that I have not mentioned that the opposition should have been at the Tax Forum. I have done so, quite publicly, and also in my speech to the Tax Forum. In fact, I have my speech here and I will directly quote what I said. I said: 'It is disappointing, for example, that the potential next government are not here today. They should be, but at the same time we should be buoyed by comments that they welcome an independent office of tax simplification. I think in their absence they have, either by accident or design, just put the first offer of this forum on the table for government to accept and I will be doing what I can to see that happen.' That is to correct the record on what was just said by the member for North Sydney.

As well, on the comment in regard to the tax research institute and the $1 million per annum that came out of the forum, it is incorrect to say that that is not linked to the university sector. That is very much part of what the tax research institute is doing—to try and put a divide between the very good work done by people in the university sector now and this money and greater research in tax in some very necessary areas. These areas were exemplified in the Tax Forum in the debate around negative gearing, for example, where all the arguments about the rights and wrongs of its impact on housing affordability had merits. The tax research work and money will help the best and brightest minds in academia to assist in some of those detailed issues, as per the example of negative gearing.

The third issue I need to correct is the campaign to somehow position lifting the tax-free threshold as bad. What we have just had as a vote in this chamber today is a significant win in the lifting of the tax-free threshold from $6,000 to $18,200—$19,400, I think, in 2015—with the aspiration that came out of last week of lifting that to $21,000 and the target from the Australia's Future Tax System Review report, which mentioned $25,000 as the goal. These are good and sensible steps for very low-income earners in Australia and for the great challenge that we have in regard to the casualisation of the workforce, returning mothers to the workforce, the whole interrelation between the tax and transfer system, participation rates of the long-term unemployed, and any blocks there are in current policy in decisions made by individuals in returning to the workforce. This is good and sensible work that is being done right now, so I am somewhat surprised by the campaign that seems to be emerging from the opposition, including by what I saw from the motions at the National Party conference in Port Macquarie. The National Party looks to be opposed to lifting the tax-free threshold to $25,000 at all, which surprises me a lot.

The need for a parliamentary debate to put some of the positions from all the public policy leaders in regard to some of these issues is important. I hope that the debate that flows within the parliamentary chamber can at least come close to the maturity and the detail of the debate that took place last week. I hope that is a challenge that all MPs take up as this debate unfolds. I certainly invite input from as many MPs as possible, and all ideas on the table for comprehensive tax reform will be welcome.

I will put a motion to the House next week to continue to push for the road map from government for comprehensive tax reform. I think we do have unsustainable tax settings in Australia. This is not the curse of one political party or the other; this is something that has happened over a long period of time from many governments. We have seen the Sara Lee cake of tax upon tax added to the system, offset on offset, concession on concession, all without any removal or any campaign between local, state and federal governments to simplify the tax system, make it more efficient and reduce the number of taxes, which was the underlying theme in the Australia's future tax system report, done and led by Ken Henry. The underlying theme that seems to have been missed by all governments is that we have got 10 efficient taxes collecting 90 per cent of the tax base in Australia and we have 115 doing 10 per cent of the work—arguably the nuisance taxes, the inefficient taxes and the ones that are ripe for the picking if we can build a system as part of comprehensive tax reform to reduce those taxes and lift the burden on Australian community life. That is our challenge. It is not owned by one political party or the other and—particularly in the 43rd parliament, where anyone can get to the number of 76 on the floor of this chamber—all ideas should be welcome.

So if a private members bill comes from the opposition, for example, for an independent office of tax simplification, I will do what I can to advocate it. That is the challenge for the member for North Sydney and the coalition to consider. If there are any ideas around tax swapping, where Liberal state premiers and state treasurers are engaged alongside Labor state premiers—as we saw come out of the tax forum, where we saw the Queensland Labor Treasurer and the new New South Wales Liberal Treasurer agree to a process of working on the state tax reform plan through to the end of 2012 on harmonisation on some of the key, inefficient bad taxes that are run at state level; and additional steps, which in my view is hopefully code for looking at options such as minimisation elimination or all the ideas around tax swapping. The one that is floating around at the moment as an example is with the National Disability Insurance Scheme picked up by the Commonwealth entering disability back into the Commonwealth transfer system. There is an opportunity there for a tax swap for service opportunity, where the states could arguably start to look at some of the bad taxes that they all agree are bad taxes for stamp duties on property, insurance taxes and the like. They now have an opportunity through this state tax reform plan to look at those and negotiate with other levels of government as to getting more efficiency in the tax system.

What do we mean by 'efficiency'? With some of those bad taxes at a state level, such as insurance taxes and stamp duties on property we burn somewhere between 50c and 67c in the dollar of the tax raised in the actual process of collection. That is nuts! That is completely inefficient in collection and adds to the burden of tax life in Australia unnecessarily. So if we make it as simple as disregarding whether it is a local, state or Commonwealth tax and we rank them on their efficiency or inefficiency, and we do all we can within public policy to work our way through eliminating and minimising the inefficient and maximising the efficient, it is a pretty simple exercise on paper. The problem is the partisan nature of debate in Australia today, which seems to be only to look at two years in advance when a core part of our business as MPs of all political persuasions is to at least look 20 years in advance. Yet we do not seem to be able to look beyond two years. We do not seem to be able to look past the partisan in public policy consideration. Obviously vested interests have an awful lot of say in a lot of the debate, as we have seen this morning and as we are going to see with the introduction of another Henry recommendation, the mining tax.

I welcome the parliamentary debate. I hope it is a mature one. I hope many people participate and I hope the goal of comprehensive tax reform can be achieved. (Time expired)

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

Order! The time for statements on tax reform in the House has concluded. There will be an opportunity for all other members to make statements on tax reform later today in the Main Committee.