Trevor Evans (Brisbane, Liberal Party) Share this | Link to this | Hansard source

It gives me great pleasure to rise to speak on this government's Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016. This is about supporting small businesses and it is a key plank of the government's plan for jobs and growth, ratified and mandated by the Australian people at last year's election.

I stand here in this parliament from Australia's small business middle class, partially and significantly as a result of the economic plan that this government took to the last election and at which I was elected to pursue this exact economic plan. I thought it would be helpful to start my speech today in support of the government's enterprise tax plan bill with a couple of quotes. Firstly:

Any student of Australian business and economic history    since the mid-80s knows that part of Australia's success was derived through the reduction in the company tax rate.

That is what the Leader of the Opposition, Bill Shorten, said in March 2012 when he was in government. Another quote:

Cutting the company income tax rate increases domestic productivity and domestic investment. More capital means higher productivity and economic growth and leads to more jobs and higher wages.

That is another quote from the Leader of the Opposition in August 2011.

… for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.

That quote is not from the opposition leader; that one was Churchill. And you probably have to go back as far as Churchill to find the last Labor leader who did not aspire to cut the company tax rate. Maybe not quite as far as Churchill's time possibly but certainly back many, many decades. It was until very, very recently a bipartisan position in Australia's parliament was that we all aspired to cut Australia's corporate tax rate to keep us internationally competitive.

The current shadow Treasurer, Chris Bowen, knows it. He said:

… Keating knew that the corporate tax rate needed to be cut to make Australia competitive, that capital and investment would flow to tax-competitive nations and that this was an important job-creation move. Today capital is even more mobile than it was then and it is important that our corporate tax rate is more competitive.

And I could keep throwing quotes out there: Rudd, Gillard, Rudd again, Latham, Crean, Beazley, Keating, Hawke—and the list goes on. They all agreed. Even the member for Lilley promised to cut the corporate tax rate, although I must say that he promised it around the same time as he promised this country three surpluses, and they never quite eventuated either. The point is that some of the most eloquent arguments for this bill have been made consistently by the Labor Party for years. The Labor Party is walking away from that longstanding legacy. Why?

I think it is important for us to reflect on the motives of an opposition leader who would say one thing when he was a minister with serious responsibility and another when in opposition and digging for votes. I think it is important for us to reflect on the significance—what it really means—when one of Australia's two major political parties crab walks away from what was a longstanding bipartisan principle. They are walking away from a key plank—a bipartisan key plank—of Australia's longstanding economic plan. They are walking towards populism and the sort of class warfare that was supposed to be eradicated when the Labor Party reformed itself back in the eighties to make itself fit for office again.

I have paid very close attention to the language of Labor members opposite when they have mentioned tax recently. The catchcry is '$50 billion of handouts to big business and multinationals'. They are the words they use. I think the opposition leader rolled it out today in question time, just a few hours ago, and I think I heard the member for Rankin use those phrases in his speech just before this. It is definitely time to bust Labor's lines here. I want to break this silly phrase down word by word and expose Labor's mistruths. Consider the first word: 'handouts'. Tax cuts are not handouts. It is not a handout to let hardworking small business owners keep more of their own hard-earned money. It is not a handout. It is their own money. Secondly, it is not $50 billion. What is going on is that Labor is trying to add up the first 10 years of budget impacts, in which case the accurate figure would be around $48 billion. Hey, what is $2 billion between friends in the Labor party these days!

Can I mention in passing the despair I feel at how easily the word 'billion' rolls off the tongues of Labor politicians today. When I first started paying attention to politics about two decades ago, there would be an audible hush and amazement when government programs involved amounts of a billion dollars or more. Now, thanks to the terrible legacy bequeathed by those Rudd-Gillard-Rudd years, Labor does not even blink at the idea of a billion dollars here or $2 billion dollars there—as they are misrepresenting in this case. In fact, I fear sometimes that they have made the punters out there as numb to the significance of a billion dollars as Labor are themselves. But the point is that it is not $50 billion. That is just plain wrong. If you want to go around adding up 10 years of budgetary impacts then I would like to talk about this government's actual record recently in the space of multinational tax avoidance. The member for Rankin mentioned it. He should have been embarrassed to do so, because when they were in government they did nothing about multinational tax avoidance. The first steps that we took to address multinational tax avoidance have achieved in this year $2 billion of tax clawed back from multinational companies that would not have otherwise have paid it. Let's talk about how much that will possibly amount to over the next 10 years. It is just plain wrong.

We are proposing that small businesses and small businesses only get to keep $1.6 billion of their own money in this financial year, $2.3 billion of their own money in 2017-18, $2.5 billion in 2018-19 and $2.8 billion in 2019-20. And over 10 years, as I said, it would add up to around $48 billion, certainly not $50 billion.

Thirdly, I am very proud to say, given my background in small business, our tax cuts here are going first and foremost predominantly to small businesses. Not to big businesses or to multinationals. They are only going to small businesses this year, next year and for the whole of this term of parliament. And, yes, it is true that we want to legislate a longer-term plan to let the entire economy benefit from tax cuts. Over time we would seek to bring medium and then big businesses into the fold too—after all, that used to be the bipartisan aspiration in this place.

Let me tell you that the people of Brisbane who work or want to work in medium and big businesses deserve more hours, more jobs    and more opportunities too. And, of course, it goes without saying that over the term of this enterprise tax plan, we would like to see many of our small businesses become medium and big businesses.

But if Labor does not like that, it is easy: there are two elections between now and when any tax cuts would be passed on to big businesses.

If they are so sure of their new-found position then over the next seven years then they should make it a policy position in their next election campaign, or the one after that. And if the Australian people judged it a winner they would win an election and they would get to make the change before a single taxable dollar was kept to the benefit of any big business or multinational. They should not just get in the road of delivering these tax cuts right here and right now, which are going immediately and predominantly to small businesses.

Or alternatively—and I am speaking speculatively here—if Labor wanted to make a genuine policy contribution, I would respect that. If they think there is a case for withholding tax cuts to particular companies or industries that they hate, then they should give us a detailed policy proposal that includes their hit-list of companies. Maybe they could make a stab of justifying it on the basis of, I don't know, regulatory protections or a lack of exposure to international competition. That would at least be an attempt at real policy, rather than this. Anything more sophisticated, I suppose, than just yelling, 'Trickle-down economics!' because that phrase is actually incredibly misleading in this case. It is not trickle-down economics to give tax cuts directly to small businesses. Allowing hundreds of thousands of small business operators around the country to pay a little less tax on their own money is precisely the opposite of 'trickle-down', because it is starting with the hardworking small business owners, who are not at the top. They are the very base of our economy.

Britain has a tax cut right now of 20 per cent, with a target of 17 per cent in three years. Canada's corporate tax rate now sits at 15 per cent, Singapore taxes its businesses at 17½ per cent and the US, as we all know, is planning to reduce company tax drastically, down to 15 per cent. We have to remain competitive, and lowering our company tax rate to 25 per cent is, in all honesty, barely keeping up with the pace of the world.

I am proud to try to keep Australia competitive in a global and competitive new world. I am proud to support tax cuts for the 30,000 small businesses in Brisbane. I am proud to be fighting for a tax cut for Naples Pizzeria and Brewmasters in Grange, just down the road from my house; for Rose & Edward Espresso just down in Maygar Street in the other direction; for Soul Hair down on Days Road; and for CPR Insurance, Thai Chada, Fruition Tuition, the Grange Vet and the Wholesomeness Juice Bar nearby.

These businesses and the businesses just like them on Kedron Brook Road in Wilston will be the ones that offer the jobs we so critically need in our area, if we can support them to grow—including, I might add, jobs for the kids in Windsor and Wilston State Schools as they grow and ultimately enter the workforce in coming years. And this suburban story is repeated, street by street, suburb by suburb, right across Brisbane and all across Australia. Newmarket, Ashgrove, Alderley, Park Road, Eagle Junction, Racecourse Road, the Valley, and of course in the CBD—collectively, small businesses are the biggest source of jobs and opportunities for Australians. I have said it before in this place, and I will say it again: if every small business could be encouraged to employ a single additional worker tomorrow, our unemployment rate would be zero—zero!—meaning that the majority of young jobseekers, mature-aged Australians, Indigenous Australians and the disabled who are looking for work would find the dignity that they want and deserve.

Our Enterprise Tax Plan is one of the key planks of our economic plan. It is needed to unlock the power of our local small businesses. It is not about handouts: this is their own money. It is not $50 billion. And everything in our budget and in this term of parliament is going to small business; not a single dollar is going to medium or big businesses.

Labor is perpetrating a giant fraud here, with their use of sensationalist language, and it is just plain wrong. I am calling them out on it today. The opposition leader is damned by his own very eloquent words arguing for this policy. The shadow Treasurer is also damned by his own elegant words and the book he wrote on this topic. And Labor's position is damned by what was the consistent bipartisan position of former Labor leaders, stretching back for decades. They need to support this bill for all the reasons they so eloquently outlined before they were overtaken by populism. Thank you.

Julie Owens (Parramatta, Australian Labor Party, Shadow Parliamentary Secretary for Small Business) Share this | Link to this | Hansard source

I am pleased to stand at the dispatch box and to follow the previous speaker to talk about the Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016. I want to look at it from a number of perspectives. Firstly, what exactly the government is doing here, what they say it will do and then whether or not it will work.

I will say to the previous speaker that in addressing this bill I am actually dealing with the 10 years that are covered in the explanatory memorandum and the 10 years that were covered in the Treasurer's budget announcement last year when he got up and announced this as a 10-year plan, giving tax cuts across the range of businesses, including right up to businesses with a turnover in excess of $1 billion. That is actually in the explanatory memorandum; we are not making it up. The other side do not get to backtrack and say, 'No, it's really just one year,' because really it is not. The Treasurer stood up here and talked about a 10-year plan. So let's look at what that 10-year plan is.

In 2016 the company tax rate will be cut from 28.5 per cent to 27.5 per cent for companies with an aggregated turnover of less than $10 million. The turnover of $10 million will be progressively lifted over the period to 2022-23, with the effect that companies with a turnover of $1 billion or more will be eligible at that time for the lower 27.5 per cent tax rate. And then in 2023-24, the threshold will be removed so that all companies will be subject to the 27.5 per cent tax rate. And then it will be reduced from there it to 25 per cent over the next couple of years to 2026-27. That is in the Bills Digestit is in the explanatory memorandum. That is what we know from the Treasurer's budget speech. That is actually what they are doing.

So, by 2022-23 we will see a turnover threshold of $1 billion and then after that we will see that threshold removed altogether and the tax rate go down. Examples of companies that will affected by that in the mid years are, in the $25 to $50 million turnover range, Broncos, for example, and in the $100 million to $250 million we see Baby Bunting, Cabcharge, Hansen Technologies and Capilano Honey. Then when we get to the big end-plus, we see the banks, Wesfarmers, Woolworths, Qantas, Aristocrat Leisure et cetera—very big companies that will be enjoying the benefits of this 10-year tax plan, in the government's own words.

Now, the cost of this is quite interesting: over the 10 years it is $48.2 billion on the ramp-up to its final year, and $8 billion a year after that. It is also estimated that because the government, in spite of all of its rhetoric about paying off the debt, has actually doubled the deficit we are actually talking about $4 billion in interest during that ramp-up period as well. It is an incredibly expensive piece of policy, announced as the centrepiece of the policy, the single thing this government had that was going to drive jobs and growth—the single thing. This was it; this was the policy.

The question about jobs and growth is really interesting. It is really important, because we are not in a very good position at the moment. Company profits have surged; that is a good thing. They have surged to a record high, but at the same time wages have suffered their sharpest decline in eight years—new figures are out now—at the very time that the Turnbull government are talking about a $48.2 billion tax cut for businesses across the full spectrum over a 10-year period. The Turnbull government say that if you give businesses a tax cut they will employ more people. They say that if you give big business a tax cut, investment will go up. In spite of the previous speaker's argument, this is trickle-down economics. It is trickle-down economics to say that if you give the biggest businesses a tax cut they will employ more people. Absolutely basic, trickle-down economics is what we are seeing here. I have heard Scott Morrison talk about this—give big business a tax cut, give big business more money, it trickles down. I am going to quote another well-known economist, Will Rogers, who is roughly on the same level as Scott Morrison, our Treasurer. He was around a little bit earlier, but was a really interesting man—someone from the cowboy days. This is from 1932:

The money was all appropriated for the top in the hopes that it would trickle down to the needy. Mr. Hoover didn’t know that money trickled up. Give it to the people at the bottom and the people at the top will have it before night, anyhow.

So even Will Rogers, back in 1932, got that essentially right. If you give money to the biggest businesses, they do not necessarily employ more people. In fact, the Treasury modelling itself shows that. It shows that over 20 to 30 years we might see a 0.1 per cent increase in jobs. That is the Treasury modelling. So we are seeing a $48.2 billion tax cut with, in 20 to 30 years, an improvement in the job market of less than 0.1 per cent. It is not exactly a good demonstration of how trickle-down actually works—not at all.

They also say that if you give big business a tax cut then foreign investment will increase, and this also is a rather questionable assumption. The analysis by the Australia Institute found that 97 per cent of the applications to Australia's Foreign Investment Review Board—

David Coleman (Banks, Liberal Party) Share this | Link to this | Hansard source

A credible source!

Julie Owens (Parramatta, Australian Labor Party, Shadow Parliamentary Secretary for Small Business) Share this | Link to this | Hansard source

The member says 'a credible source'. I am waiting for the Treasury credible source—there aren't any. The Australia Institute finds that 97 per cent of the applications to Australia's Foreign Investment Review Board come from countries with lower company tax rates than Australia's—97 per cent. The company tax rates of the countries they are in are lower, yet they are coming to Australia. By value, 71 per cent of applications come from countries with lower rates. If it were true that just by lowering your tax rate business was going to flock in, then why is the money flocking in from companies that already have lower tax rates than us? The money should be going the other way, if that were true. New Zealand lowered its tax rate—it is a couple of points lower than ours—thinking that they might be able to attract Australian investment by doing so. At a recent press conference with Prime Minister Malcolm Turnbull, the New Zealand government, through Bill English, confirmed that it did not actually work. He said:

We think it is really important to signal that we want reinvestment in businesses, because that is what grows the jobs and grows the capacity.

So they lowered their rate to two points below Australia's, hoping that 'it would attract a large number of Australian businesses across the Tasman, but that hasn't quite happened.' So even New Zealand, which has tried this already, is finding that it has not worked.

We can also look at Australia's history. In the past, when Australia's company tax rates were adjusted foreign investment did not go the way that was expected. In fact, when the rate climbed back in the 1980s to 49 per cent, there was a rise in investment, not a drop. A lot of things attract companies to invest in a country other than their tax rate: the skills of their workforce and a whole range of other things to do with stability of government, for example—not something that we are seeing much of at the moment, unfortunately. There are a lot of things that attract companies to invest in countries with a full range of tax rates. The study by the Australia Institute also finds that Australia's stock of foreign investments is dominated by 13 countries. Some of those countries have higher and some have lower company tax rates. Nine of the 13 have lower tax rates than Australia's. Countries with the fastest growing investment in Australia include the United States, which has a higher tax rate than Australia. So this simplistic argument that foreign investment will flood in if you lower the tax rate from 28½ to 27½ and then in 10 years time reduce it to 25 is not supported by Australia's history or by the facts at the moment. It is just not supported at all. When we look at company tax alone in Australia, we are actually about equal fifth, but if you examine the whole implied tax take we fall to about 14th. So even the company tax rate itself is not the only issue that we need to be concerned about.

The question also is: will it create jobs? I said before that the Treasury modelling—not the Labor opposition modelling, not Labor running a scare campaign, not Labor making up facts like the previous speaker alleged, but the Treasury modelling—finds that the level of employment in 20 or 30 years time will be just 0.1 per cent higher than otherwise because of this $48.2 billion tax cut. That is not exactly a good result. It is not a very good result for $48.2 billion off the tax base. You have to remember that at the time the government is hoping to do this—if they manage to get it through the Senate—they are also cutting away at some of the poorest people in our economy. They are cutting family payments and energy supplements. They are backing a cut to take-home pay for workers in retail and hospitality. They are presiding over a reduction in the spending capacity of some of the lowest-income people in this country.

It is hard to see, even with trickle-down economics running through their veins, how cutting the spending capacity of the customers of business actually makes the business better off. How is it that you cut the spending capacity of a business's customers and that makes a business better off? It cannot. This linear notion that this government has that somehow you can cut the spending capacity of customers, wait for the business to be more profitable and then give their customers some money back does not make any sense. There is not a single business out there that would argue to cut the wages of their customers—not one. There is not one that would say, 'Yes—all those people that come into my shop on a Saturday or on a Friday afternoon, who work down at the pub—let's cut the wages at the pub. Let's give them less money to spend.' That is what this government is doing. This is a really weird concept that this government has: that you can cut the wages of the customers, provide a tax cut to the biggest businesses, most of which will go to the really big end of town—an incredible percentage of it will go overseas—and somehow that is going to make our economy stronger.

None of the figures support it. If that single figure alone about the jobs growth because of this plan says anything, it says that this does not work. A $48.2 billion tax cut to business, and in 20 to 30 years time there is going to be a 0.1 per cent increase in jobs in this country as a result of it. That really demonstrates that this absolutely will not work.

I do not think the government is going to get this through the Senate. In fact I think that the government will walk away from it. We have heard rumours that they will walk away from this signature piece, this one thing they have that is actually going to create, in their words, jobs and growth—this jobs and growth mantra—supported by this policy, which over 20 years may create 0.1 per cent increase in jobs. This is their centrepiece. This is all they have. After four years of claiming to be a government about jobs and growth, this is it. This is what they have. We hear from rumours all around this place that they are about to walk away from even this. We on this side of the House would think that that is a good thing. The figures indicate that this is not a positive thing for the economy. The facts indicate it. Experiences around the world indicate it. The fact that Australian investment does not flock to countries with lower tax rates indicates that. The fact that Australian businesses did not flock across the Tasman for a two per cent tax cut indicates that. This is absurd policy, and the sooner they walk away from it the better.

David Coleman (Banks, Liberal Party) Share this | Link to this | Hansard source

I cannot believe that in 2017 those opposite, who purport to be the alternative government of Australia, are seriously arguing that reducing the rate of tax does not affect the decisions of business about how much to invest. That is a completely absurd proposition. The principle goes back a couple of hundred years, and I would have thought it would have been a pretty settled fact in economic life: if you want someone to invest more, you reduce the cost. There is a thing called the internal rate of return, where people calculate and say, 'If I invest a given amount of money, what is my return going to be? What are the cash flows going to be from that?' Then you take into account tax in working at the after-tax rate of return.

Based on the way those opposite put it, whether the rate of tax was 30 per cent or 70 per cent or five per cent the investment would be exactly the same—exactly the same regardless of how much tax the investor was required to pay. That is an extraordinary proposition. I think they start teaching economics now, and maybe a bit of commerce, in year 5 or 6. That the purported alternative government would seriously stand before the Australian people and contest the notion that the rate of tax affects the level of investment by businesses is absolutely unbelievable. It is not surprising because, let's be honest, those opposite have never worked in the business sector in Australia. If you wanted to do a little survey of all the members of the opposition and ask who has actually run a business, it would be a very small number. What if you asked who has worked in business—a business that tries to make money in the private sector, a full-time job in the private sector? That is not a particularly high bar to reach—I think most Australians would have reached that bar, given that close to 90 per cent of them work in the private sector—but if you asked that question of those opposite, it would be a very small group. I suspect it could fit in a small minibus. That is a big part of why those opposite have no fundamental understanding of this space.

The other thing that I find extraordinary is the way they describe income tax reductions as a giveaway. What that basically says is that in their minds—it is interesting because it gives you an insight into how they think—there is this big amount of money that sits in Canberra—it is somehow created here in Canberra—and then politicians sit around and decide that they will give this much to this company or this group or whatever. Of course that is completely absurd, because government does not create any money. Government does not generate wealth. Government basically looks at the economy and says, 'Here are some sources that we can get tax from.' Of course government does need to get tax revenue to provide services et cetera. But the government says, 'We're going to require you to pay us some money. If you don't do that it is against the law, and if you continue to refuse to do that over an extended period you might go to jail.'

So, it is a pretty serious thing to impose tax. And government is not out there running the corner store or the supermarket or prospecting for gold or whatever it is. Government is basically extracting that revenue from the efforts of people who actually go out there and do stuff. And those people, in the private sector, represent close to 90 per cent of all Australian employees. So, this notion that it is a giveaway, that the government is so good to consent to give some of its money back to these companies, is just unbelievable. And it is very important in the political debate in Australia that we just call out some of these absurd things that those opposite are trying to get away with at the moment, because this is 2017; it is not 1930. We know free trade works. It is very clear. We know reduced tax means more investment. We know so many things about the way free markets work. We know business is good. We know free markets are good. We know capitalism is good—and we should not be afraid to say so.

Those opposite want to construct this kind of fantasy land where the government sits at the centre and decides how everything is going to happen, and also a world where you can just make something up and repeat it a thousand times or so and just hope that it becomes received wisdom, even though it is completely false. The so-called $50 billion giveaway of the government's money is a classic example of that.

I want to come to the details of the bill, but let us just pause and reflect a little more on those opposite, if I might. We know what they think about tax, because they have actually put out some really interesting policies that I think are particularly instructive about the way these people think about the economy. Housing affordability is very important, with the Treasurer, the member for Deakin and others working on this issue. Those opposite say, on housing affordability: just basically raise a whole bunch of taxes and everything will be okay. You raise a whole bunch of taxes, house prices will be whatever you want them to be, and it will all work out perfectly. They say, remove a basic principle of Australian taxation law that has been there for over a century, just because it seems like a good idea. And that is an extraordinary proposition.

And this is probably my favourite part of the housing affordability policy, because if a policy is about housing affordability then it should have something to do with houses, shouldn't it? It is very difficult to understand how things completely unrelated to houses could have an effect on housing. It might just be that I do not follow the great, complex logic. But the thing I am very unclear on—and I would really appreciate knowing, and maybe members opposite can help me with this—is: say you increase capital gains tax by, say, 50 per cent on a farm, maybe one that is outside Mudgee in New South Wales. Someone invests in a farm outside Mudgee. And you say, you know what? We are going to increase the tax on that by 50 per cent. How does that affect housing affordability? I am genuinely open to any sort of interjection from anyone opposite who might like to assist me on this. How does increasing capital gains tax by 50 per cent on a factory—it might be a factory in your electorate, Mr Deputy Speaker Irons. You might have some people there who are willing to put some investment into that factory. Those opposite seem to be arguing that if you increase the capital gains tax on the investment in that factory—it might be plastics, or machinery; who knows?—then that is going to improve housing affordability. That is really quite an extraordinary proposition.

The shadow Treasurer purports to be a very thoughtful, learned sort of a fellow. He should put out a statement and explain the link here between the 50 per cent increase for the factory in your electorate, Mr Deputy Speaker, or the farm in Mudgee or wherever it is and just draw that causal link between that and housing affordability. I think that is going to be hard. Do you know what I suspect? I suspect that it is not about housing affordability. I suspect that it is about a way of raising additional tax revenue. I suspect that it is about a way of getting additional tax revenue so that you can just spend more and more of the money of the people who are out there investing. I do not think that is a very good idea, and it is clearly utterly unrelated to housing affordability. As I said, I am really keen to hear more about the link between increasing taxes on farmers and factories and maybe someone who invests in a commercial property and housing affordability. I might have missed it in the policy, but I would really like to hear it.

Brendan O'Connor (Gorton, Australian Labor Party, Shadow Minister for Employment and Workplace Relations) Share this | Link to this | Hansard source

You're a policy-free zone. The government is a policy-free zone on housing.

David Coleman (Banks, Liberal Party) Share this | Link to this | Hansard source

The other one that is really interesting is this notion of big, bad companies that they talk about—the giveaways to the big, bad companies.

Brendan O'Connor (Gorton, Australian Labor Party, Shadow Minister for Employment and Workplace Relations) Share this | Link to this | Hansard source

Let's talk about banks. Member for Banks, let's talk about banks!

Steve Irons (Swan, Liberal Party) Share this | Link to this | Hansard source

Order! I remind the member for Gorton that he has already been exited from this place once today.

David Coleman (Banks, Liberal Party) Share this | Link to this | Hansard source

What those opposite say—and this is a good one as well; this is worth reflecting on for a moment—is that a big business is a business with revenue of $2 million or more, that if you have $2 million or more you should not get a tax cut. I think they think that a business with $2 million of revenue is a business that makes $2 million. But it is not, because the average business makes a very, very small operating profit margin. It might be five per cent. So, if it has a turnover of $2 million, it might be taking home $100,000 at the end of the year, which is not much more than the average wage. Those opposite say that is a big business that should not get a tax cut. Again, it would be really interesting for the shadow Treasurer to explain why a business that might be making 100 grand is a big, bad, evil corporation that should not receive any tax relief. It really is quite extraordinary. That is why it so important to reject these very shallow and superficial ideas of those opposite and to support vigorously the enterprise tax plan the Treasurer has put forward.

This is going to help Australian businesses a lot to invest more in the Australian economy. You would think that we would all want to see that. We know we are in a globally competitive world, and it is effectively a race to attract capital. We have people like Singapore, not far away, at 17 per cent; the UK going down to 20 per cent; and there are proposals for the US to go as low as 15 per cent. From the member for Parramatta's logic, it is all okay because it does not matter what the tax rate is, because business will just invest the same amount anyway. On that logic you may as well make the tax rate 70 per cent and they will just keep investing. That is clearly not such a good idea.

What you need to do is ensure that your tax rate is in fact very competitive. That is what the government and this Treasurer are focused on doing. We start with those smaller businesses of up to $10 million—there are many great businesses in that area in my electorate in Padstow, Revesby, Mortdale, Peakhurst; they are some of the key industrial centres in the Banks electorate, but of course they are all around Australia— and we then gradually provide that tax relief to all corporations, including big corporations. Because—guess what?—they also employ millions and millions of people.

According to some numbers that the ATO has put together, close to five million people work for small business. They are the biggest employer in the private sector, and it is absolutely appropriate that the tax relief starts with them. It is also the case that there are millions of people who work for medium-sized and big businesses. Those people benefit when those larger businesses invest in the Australian economy. Those opposite say that those large businesses will do exactly the same thing regardless of what their tax rate is. That is ridiculous—it is like primary school proposition. These corporations have people, some of whom are paid a lot of money, to do calculations on investment proposals, Big businesses might be looking at investing $100 million in a project and—guess what?—if they invest $100 million in a project, they employ heaps of people in the process. When they go through that process, they calculate the rate of return on that investment and that includes tax. If there is less tax, there is more investment—and that is an absolute economic fact.

Medium-sized businesses, as defined by the ATO, employ 2½ million people but more than three million people work for large businesses. The notion that large businesses are disconnected from the Australian people and that they are bad, nasty, evil corporations that should not be provided any tax incentives to further invest in our economy is absolutely ridiculous. The notions of those opposite on capital gains tax and their definition of what a small business is demonstrate an abject lack of understanding of the most basic fundamentals of the Australian economy. It would be funny if it were not so serious. These are the people pretending that they could handle levers of the Australian economy. They could not—it would be disastrous for the nation. It is so important that we get this Enterprise Tax Plan through the parliament to support Australian business.

Tim Watts (Gellibrand, Australian Labor Party) Share this | Link to this | Hansard source

With the possible exception of this government's proposal to weaken Australia's racial hatred laws as a sop to One Nation, there is no bill more reflective of the sorry state of the Turnbull government than the bill before the House today. At the last federal election the Prime Minister told Australians that he had a plan for 'jobs and growth'. This is apparently is the three-word slogan that you have when you have promised not to have three-word slogans.

Extraordinarily enough, almost 12 months later, the bill before the House is the core of this definitely not-just-a-slogan jobs and growth economic policy. It cuts its corporate tax rate from 30 per cent to 25 per cent for all corporations progressively over a 10-year period. It gives foreign multinationals and Australia's big banks a $50 billion tax cut. This unfunded $50 billion tax giveaway will allegedly, according to Treasury modelling, increase growth in Australia by one per cent in a decade's time.

This bill is no way to make economic policy and it is no way to make tax policy. Paul Keating—someone who the Prime Minister mistook himself for in this chamber earlier this week—used to say that leadership is about courage and imagination: the imagination to see the potential for change and to have the vision to see what we could achieve by doing something differently; and the courage to pursue that change to make it a reality in the face of vested interests and institutional inertia. There is no courage and there is no imagination in this bill. This bill shows no imagination, no vision, for the role that tax reform could play in kick-starting economic growth in this country. It shows no effort in thinking about how we could redesign a tax system so that it would better serve the Australian economy and no effort in thinking about the role that the tax system could play in improving allocative efficiency in the economy.

The bill ignores the outrageously profligate and distortionary impact of the operation of the capital gains tax discount and negative gearing on investment decisions in this country. It ignores outrageous superannuation concessions; it just cuts taxes for big business. It is right-wing economic policy from central casting. It is a lazy cut-and-paste job from the favourite think tanks who cut-and-paste it from their favourite ideologues without a care for the actual conditions in the Australian economy and without any effort to imagine the potential for real reform.

Take the outrageous distortionary effect that the combination of negative gearing and the capital gains tax discount is having on investment decisions in this country. Before the Howard government introduced these changes, with trademark economic irresponsibility at the turn of the millennium, barely 50 per cent of the loan portfolios of Australian banks went to housing investment. Sixteen years later more than two-thirds of Australian bank lending currently goes to housing investment, but it is not going to Australians breaking into the property market to buy their first home. First-home buyers make up just 15 per cent of housing purchases today, well below the long-term average. Instead, bank lending that might otherwise have been made to Australian businesses to create the jobs and growth promised by the Prime Minister is being thrown hand over fist into property speculation.

What is the benefit of these tax arrangements? Who benefits from them? For negative gearing, the top 20 per cent of income earners earn about half of the negative gearing benefits, according to NATSEM. The top 10 per cent capture more than the bottom 60 per cent. The benefits for the capital gains tax discount is even more inequitable with the top 10 per cent receiving nearly 70 per cent of the total subsidy. The government's own Financial System Inquiry found that 10 per cent of Australians receive 38 per cent of Australia's super tax concessions—more than the combined benefit of the bottom 70 per cent of Australians. These investment subsidies come at a significant cost to the budget, which means that other taxpayers have to pay higher taxes or accept lower quality services.

Labor's reforms of negative gearing tax subsidies have a different objective. They are aimed at shifting the incentive of the taxation system—shifting the allocative efficiency of our economy—towards the construction of new housing and not property speculation. Independent modelling by the Parliamentary Budget Office assumes that those changes will result in negatively geared investment in new dwellings almost doubling. This is a tax reform agenda that might actually kick start jobs and growth. Instead, we get the bill before the House today, and the myopia of this economic agenda is a function of this government's political weakness.

The Prime Minister and the Treasurer have already burned through all of the political capital that they accumulated when they deposed the unlamented member for Warringah. Their economic and political credibility was sacked by six months of government by thought bubble, variously floating an increase in the GST, broadening the base of the GST, state based income taxes and crackdowns on the excesses of negative gearing—all for naught.

As a result, we have been left with the weakest economic leadership team of any government since Billy McMahon. We have a Prime Minister who does not believe what he is saying, a Treasurer but no-one believes what he is saying and a Deputy Prime Minister and no-one can understand what he is saying. What we are left with is a massive tax cut for vested interests. It is the only tax policy that this Treasurer has the clout to get through the cabinet, and it is the only tax policy that this Prime Minister can be confident of getting through his party room without them wanting to knock him over. That is why they will not do negative-gearing reform. That is why they will not do reform of the capital gains tax. It is not about policy; it is because they are too scared and they are too weak.

Given that the Prime Minister promised economic leadership when he seized the top job from the member for Warringah, the current state of affairs might prompt a wry smile—it might, if the consequences were not so serious. Australia's economic situation is not strong presently. There is a need for strong economic leadership in this country today, with 34,000 full-time jobs being lost in Australia last year. Wages growth is at an all-time low—the lowest on record. Inequality is at a 75-year high and living standards are stagnating. Underemployment—the number of people in this country who want to work more but cannot get the opportunity—is at a record high, and we experienced only our fourth negative growth quarter in 25 years this year.

The MYEFO shows that deficits over the forward estimates have blown out by another $10 billion and, since the first budget, the budget deficit for 2017-18 has blown out tenfold from $2.8 billion to $28.7 billion. The projected surplus under this government in 2020-21has shrunk and is now wafer-thin, leaving us in the danger zone when it comes to the AAA credit rating that the previous Labor government bequeathed to the Abbott-Turnbull—maybe Abbott again—government. A weakened economy has also delivered more than $30 billion in revenue writedowns. But it is clear from this bill that this government has no plan for economic growth. After railing on about the importance of the AAA credit rating in opposition—after saying that we were in a budget emergency and saying how important budget repair was to keeping our AAA credit rating—what have they done instead? They are putting a larger hole in our budget with this tax cut.

You do not have to be an economist to know that this economic mismanagement will ultimately put our AAA credit rating at risk. A downgrade in our AAA credit rating would impact everyone in Australia. Mortgage holders would be slugged an extra $720 a year if we lost our AAA credit rating. The Prime Minister says that he wants to help families, but instead he is playing roulette with household budgets. Not content with taking away the penalty rates of 700,000 Australians—taking $77 a week from the take-home pay of Australians—he is also putting the AAA credit rating at risk.

The bill before the House is not even a new plan. It was announced almost 12 months ago. Why have they brought it out again now? Why is it coming only to the chamber now? It is because they have nothing else to offer. They have no answers for the problems that Australian families are facing. Imagine what this country could do with this $50 billion forgone by this bill. Imagine the schools that we could fund, the training and apprentice opportunities we could create, the productive infrastructure we could build and the investments that we could make in productive capital—human and physical—for our nation. Instead of helping young Australians buy their first home, this government wants to gift this forgone revenue straight to big businesses and to big banks.

As it stands, this bill does nothing to help balance the budget. Meanwhile, as we wait for a plan from the government, the PBO has reported that unlegislated measures are costing huge amounts of money. The impact of the government's unlegislated measures in 2020-21 will be 0.2 per cent of GDP—double that of the projected surplus. There is a projected $42.8 billion black hole in the budget.

Listening to the government's explanation for why this bill should be passed is like listening to a snake oil salesman. The Treasurer claims we need to protect the revenue base from structural weaknesses, and yet here we are giving away $50 billion in revenue cuts. The Treasurer claims that Australia's competitiveness will decline if we do not cut the company tax rate, and then there is the argument about the international competitiveness that we need to be on par with with other developed economies—they use the United States as an example. What they will not tell you, though, is that in the United States companies will also have to pay state taxes on top of the headline federal company tax cut. Comparing our headline rate against theirs is like comparing apples and oranges. The Australian people are not stupid. They will not be sold a pup. They can see when the government is trying to pull the wool over their eyes.

The Prime Minister says this tax cut will benefit Australian families. They say that this bill will result in a 1.1 per cent increase in wages—roughly a $2-a-day increase. That is not much of a consolation for the 700,000 Australians who are losing $77 a week as a result of the government's inaction in the face of cuts to penalty rates. However, what they will not tell you is that this $2-a-day increase will not come this year, will not come next year and will not come in 10 years but will arrive in 20 years time. It does not pass the pub test. They want to rip $50 billion from the Commonwealth budget—the budget that supports Medicare, schools and family payments—and for what? A $2-a-day increase in 20 years?

The Prime Minister wants to smash the federal budget, putting our AAA credit rating at risk, so that families can receive a $2-a-day increase in wages in 20 years. Can you imagine taking this to your bank manager? Can you imagine walking into your bank and saying, 'I'm looking for a loan,' and the bank manager asking, 'What do you earn? What are the details on your wages?' and you saying, 'Here's what I earned today, but the Prime Minister has promised that in 20 years I'll earn an extra $2 a day!' It simply would not cut it.

This proposed tax cut does not take into account that many big companies use complex profit-shifting mechanisms to avoid paying tax or to reduce their tax. According to the ATO, big business already pays less than the 30 per cent rate. Data shows that members of the Business Council of Australia already pay an effective tax rate of just 24.3 per cent. Treasury modelling showed that the planned tax cuts would boost economic growth by a little bit, but there is no way to compare that increase—one per cent in 10 years time—with the economic growth we could have if we invest that money in the productive capacity of the Australian economy and invest it in our education system, in the health of the Australian population and in jobs for the Australian population, including apprenticeships.

The government has provided no answers on how to deal with the revenue shortage created by this bill or on the inherent consequences that it would produce in the form of severe cuts to important social services such as Medicare to enable this tax cut for big business.

This government is out of touch with ordinary Australians. Some call the policies of the Prime Minister and his Treasurer neoliberal. I prefer to call them neo-Martian, because they are policies produced by someone on another planet, someone who has not come into contact with Australians living their lives in our community in quite some time.

The Australian Labor Party, by contrast, want to help young people buy their first home in an increasingly unaffordable housing market. We want to invest in health care. We want to invest in our schools. We want to invest in infrastructure. We want budget repair to protect our AAA credit rating, but we want budget repair that is fair.

Offering a tax cut to big business of $50 billion unfunded will not leave Australian families better off. That is why Labor will oppose this reckless tax cut. We will oppose the bill in the House and we will move amendments in the Senate to reflect the position that we have consistently had for 12 months now. We will not support the corporate tax rate going to 25 per cent. We will support the tax rate going from 28.5 per cent to 27.5 per cent for businesses earning up to $2 million. Labor will not support the increase in the small business entity threshold from $2 million to $10 million. Labor will not support the unincorporated small business tax discount going from five per cent to 16 per cent. We will support an increase to eight per cent, matching the corporate tax rate for businesses earning up to $2 million going to 27.5 per cent. If the government cared about the welfare of Australian families, they would do the same.

Now, as this legislation comes before the House, we see the final irony of the Turnbull government's economic weakness. We learn that the Turnbull government will not even commit to maintaining its support for this 10-year corporate tax cut plan at the next federal election. We learn that the Treasurer is planning to split this bill to secure the first phase of this plan. But, beyond this, the fate of this bill rests with the strength of the economic leadership of the government, and its prospects are not good.

Ben Morton (Tangney, Liberal Party) Share this | Link to this | Hansard source

The Turnbull government is committed to providing tax relief for hardworking Australians. I rise today to speak on the Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016 because this bill forms a key component of the government's reform agenda to improve Australia's tax system for businesses and to drive further investment in our economy. This bill provides incentives for Australian businesses to create jobs, reinvest their profits, grow their businesses and succeed.

This bill immediately reduces the tax rate to 27.5 per cent for 870,000 businesses with turnover of up to $10 million. These businesses employ 3.4 million Australians. Information compiled by the Australian Taxation Office shows that, in 2013-14, 98 per cent of companies would have been subject to the lower small business company tax rate at a turnover threshold of $10 million. The bill will: reduce the company tax rate for all businesses to 25 per cent by 2026-27; increase the unincorporated tax discount for small businesses from five per cent to 16 per cent by 2026-27; and increase turnover thresholds so that more businesses can access lower tax rates. This government will do everything it can to pursue policies that encourage investment, because it creates jobs. The measures in this bill go right to the coalface and make positive changes that will absolutely help small businesses and, indeed, all businesses over time.

This bill is a tax-rate reduction road map, and businesses can see very clearly the tax reform direction in which Australia is headed and can start to plan their investments. These reforms will let Australian businesses reinvest more of their earnings in employing more Australians and growing their businesses. That means all Australians will benefit, with much of the economic benefits of a lower company tax rate going to workers as higher real wages, longer hours or additional recruitment.

Australia's company tax rate is higher than that of many other advanced economies. This bill is an important step in fixing this. It will allow Australian businesses to once again be globally competitive on tax. It will assist our businesses to succeed both at home and internationally, and it will encourage businesses to remain in and even relocate to Australia. The Senate Economics Legislation Committee, in their review of this legislation, received 29 written submissions. An overwhelming majority of submissions expressed support for the bill, with one of the key endorsements being on this very point—that this bill will help make Australia's corporate tax settings more internationally competitive and encourage higher levels of foreign investment in Australia.

It is important to note that complementary measures will ensure businesses are not able to avoid paying tax and are required to pay their fair share. Government is keen to support businesses with lower taxes but will ensure those businesses which seek to pay no tax are penalised. This includes tougher rules for multinationals that shift profits offshore and enhancing the ATO's enforcement capabilities.

I will go to the specifics of this bill. Schedule 1 amends the tax rate act 1986 to reduce the company tax rate. In the 2016-17 income year, businesses with turnover below $10 million will see a tax rate of 27.5 per cent. Schedule 2 increases the small business unincorporated income tax discount to 16 per cent by 2026-27. Providing unincorporated small businesses with a reduced rate of tax improves their cash flow and enables them to keep more earnings to be reinvested into their businesses. It also ensures that small businesses benefit from a reduced rate, regardless of whether they are operating as companies, sole traders, partnerships or trusts.

Schedule 3 amends the Income Tax Assessment Act 1997 to increase the aggregated turnover threshold for access to many small business tax concessions to $10 million. It is long overdue. The aggregated turnover threshold for access to the unincorporated small business income tax discounts will be increased to $5 billion and the current aggregated turnover threshold of $2 million will be retained for the small business capital gains tax concessions.

More than 90,000 additional small businesses will be able to access a range of small business concessions. These include simplified trading stock rules, a simplified method of calculating pay-as-you-go instalments by the ATO and the option to account for GST on a cash basis and pay GST instalments as calculated by the tax office. On average, small businesses face higher costs of complying with their regulatory obligations as a proportion of their turnover and income compared to larger businesses. We need to change this, and this bill is an important start. Eligible businesses will be able to use small business concessions to reduce their tax liability and compliance costs and improve their cash flow.

Small and medium businesses are the prime drivers of jobs and growth in our economy. A tax on their business is a tax on their innovation, entrepreneurship and investment. It ends up being a tax on jobs that they create—or are prevented from creating. When they invest and grow, we all win. That is why there are so many supporters of the changes put forward in this bill. Along with the 870,000 businesses set to benefit, the Business Council of Australia, the Australian Chamber of Commerce and Industry, the Australian Industry Group and the Council of Small Business Australia have welcomed the government's focus on small business and the reforms that actually improve the bottom line for those businesses.

I have met with so many small businesses since becoming the member for Tangney—mums and dads and families; hardworking Australians employing hundreds of people in Tangney and champing at the bit to invest in and grow their businesses. As someone who comes from a family dedicated to small business and employing people, and as someone who stands in this chamber today who has actually interviewed people and given them their first jobs, I know, fundamentally, the importance of creating an opportunity for small businesses to flourish and grow. The prize for the application of a small businessperson's effort is to grow their business, employ more Australians and prosper. It should not be a higher tax rate, but that would be the case if this bill is not passed. This bill brings down taxes for Australian businesses—immediately for small and medium-sized businesses. This bill must pass this and the other place as soon as possible.

But we all know that Labor, the Leader of the Opposition and their union mates have chosen to oppose the reduction in the company tax rate. They have put populism before good policy once again. Labor and the unions hate it when people apply their own effort and succeed. The Australian Council of Trade Unions was critical of the proposed company tax changes following the 2016-17 budget, stating: 'A corporate tax cut is not a jobs plan.' But that is absolutely rubbish.

The contributions in this place from members opposite to the Social Security Legislation Amendment (Youth Jobs Path: Prepare, Trial, Hire) Bill 2016 were nothing but disgraceful. That bill is so relevant to this legislation before the House today. This government drew together feedback from businesses and the preliminary findings of the investment approach analysis to devise the innovative Prepare-Trial-Hire Program that will make a difference to young people's lives. The Youth Jobs PaTH intervenes with early investment and training to get people into work and off a path to lifelong welfare dependency. The program will increase young people's employability and provide them with real work experience to get the start they need in the workforce and will focus on making sure young jobseekers know what to expect when they get into the workforce and what is expected of them.

It is good to be joined in the chamber by the member for Swan—a good friend and someone, like many people on this side of the chamber, who has experience in running small businesses, employing people and giving people a start. He knows full well, like many people on this side of the chamber, including the member for Stirling—

Brendan O'Connor (Gorton, Australian Labor Party, Shadow Minister for Employment and Workplace Relations) Share this | Link to this | Hansard source

What about the minister?

Ben Morton (Tangney, Liberal Party) Share this | Link to this | Hansard source

and the minister!—what it is like to give people a job. Young jobseekers will participate in the intensive pre-employment skills training that will help build practical industry skills, like working in a team, presentation, effective communication, IT skills and job hunting skills. The voluntary internships of four to 12 weeks will give young jobseekers real time in businesses and they will be incentivised with an additional $200 payment per fortnight. The employers that give these young people a start will be eligible for a youth bonus wage subsidy of between $6,500 and $10,000 if they hire a young jobseeker under 25 who has been in employment services for six months or more. It is a much smarter way of leveraging what the community would otherwise spend on welfare payments.

But all those opposite could do was advocate for more handouts for no personal effort for those that sit back and feel it is their right to get a handout without any personal obligation. Those opposite should remember the words of the member for Lilley, the former Treasurer, in May 2010, shortly after the Rudd government had included a budget measure to reduce the company tax rate from 30 per cent to 28 per cent. The member for Lilley said:

Our plan will also improve the competitiveness of the entire economy. It will deliver a company tax rate cut for all companies.

…   …   …

These changes promote growth across the entire economy.

Fine words. And I encourage my Labor colleagues to take the sage advice from their elder statesman—a 'Treasurer of the Year', in fact, from memory. While we are reviewing the hypocrisy of the current campaigning of those opposite, we should heed the advice of the Leader of the Opposition, who said:

Cutting the company income tax rate increases domestic productivity and domestic investment. More capital means higher productivity and economic growth and leads to more jobs and higher wages.

But that has gone straight out of the window in the attempt to pursue populism over good policy.

The core focus of the Turnbull government remains increasing what hardworking Australians can earn. Through the Treasury Laws Amendment (Enterprise Tax Plan) Bill, this government is committed to providing tax relief for businesses. This bill improves Australia's tax system for businesses and to drive investment in our economy. It drives investment and new jobs to employ people, particularly young people. Businesses in Tangney want it, industry bodies want it, young jobseekers want it and this Liberal-National government want it because it is good for all Australians.

It is very clear since I have been in this place for a short time that there is a party and a government that is going to back hardworking aspirational Australians that want to apply their efforts to succeed. There is a government on this side of the chamber that is committed to encouraging and rewarding those people that go out there, that work hard and that give people the opportunity to do so themselves. What we have seen from the Labor Party constantly is the pursuit of populism—abandoning things that they have said before, abandoning things they know will make a big difference to employing young people in this country in order to pursue populist politics for their own political end.

This bill is an important one. As someone who has grown up in a family committed to small business and working in small business, I know what is like to give people a job. I know what it is like to interview someone. I know what is like to look at your cash flow and to work out if you can afford to give that person a chance, if you can afford to take a risk on that young person. To suggest that cutting the tax of small businesses will not lead to more jobs and more investment in our economy is absolutely absurd.

In conclusion, I would like to commend this bill to the House and I hope that the Labor Party will put aside populism and do what is good for this country.

Stephen Jones (Whitlam, Australian Labor Party, Shadow Parliamentary Secretary for Regional Development and Infrastructure) Share this | Link to this | Hansard source

I rise to speak on the Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016. I agree the challenge is for us to do what is right for the country. We have before the House, we have before the parliament and we have for the people of Australia two propositions. One is to give a $50 billion unaffordable tax cut to Australia's largest companies. The other is to improve school education funding to ensure that our kids have the resources in their schools to grow up, to get the education that will enable them to participate fully in the modern world. I cannot support an unaffordable tax cut to the biggest companies in this world and I challenge the government's proposition that this is going to benefit the Australian economy.

We have looked at the idea that this is going to add to jobs and growth and it has been found wanting on both counts. In fact, the government's own modelling has showed that the net contribution to growth of this initiative over 10 years will be less than one per cent. The benefits to the economy simply do not stack up. The costs to the budget and to the Australian people are obvious.

The member for Rankin and the government's finance spokesperson have released data this week which show the cost that this reckless initiative is going to have on the Australian economy and on the Australian budget. It has been revealed that the government has tripled the budget deficit—and we have a significant budget deficit—so we cannot afford this tax cut. It means we are going to have to borrow to fund it and we are going to have to pay interest on those borrowings somewhere in the order of $4 billion in additional interest charges. That is right. We are going to cost the budget $50 billion for the tax cut and we are going to accrue an interest bill of an additional $4 billion to give the wealthiest companies in Australia that $60 billion tax cut. If you break that down to a per capita level, that is going to cost every man, woman and child in Australia around $162 to give a $60 billion tax cut to some of Australia's wealthiest companies. We on this side simply cannot support this proposition. We will not be supporting it.

There are some propositions within this bill that Labor could support. We do believe that there is evidence that, if we give a tax cut to small businesses, it will support them and it will improve their competitiveness. But we do not support the proposition that you can redefine what a small business is to something with a turnover of $10 million. We propose a turnover of $2 million, much in keeping with what the average person in the street would understand to be a small business. Labor supports maintaining the thresholds for small business at $2 million, which is consistent with the ATO determinations. Small businesses do need support. They do not need to be squeezed out by their larger rivals reaping the rewards of the government's small business definitional change.

We learned in December through the MYEFO that deficits have blown out by another $10 billion over the forward estimates. The budget deficit for 2017-18 has blown out tenfold to $28.7 billion from $2.8 billion since the LNP's first budget. Our AAA credit rating is already under pressure and this is going to blow it out of the water. We know, because of the projected deficit, this is going to ensure it will be the nail in the coffin for the AAA credit rating, thereby ensuring that Australians are paying more interest on the debt that this government is racking up because of these unaffordable or corporate tax cuts.

I have the great privilege of representing a regional electorate. Like so many people that I represent, I understand that it is important that we do whatever we can to ensure that they have the same sorts of opportunities available to them as are enjoyed by people in the capital cities and in the big urban centres. In regional Australia, people are often making do with circumstances that our metropolitan cousins take for granted or are living in circumstances that they simply would not tolerate. It is a great shame that the Liberal and National parties that represent many regional seats have failed to represent these regional areas adequately, and this bill is another example of that. I am yet to hear the case from any member who has spoken in this debate how these tax cuts are going to be good for regional Australia. The regional MPs on the government side are virtually silent on this issue. I asked the minister, in his closing remarks, if he could inform the House and through it the nation what proportion of businesses in regional Australia will benefit from the bill that is before the House today.

I submit my own figures based on some research that I have done—very simple research—but I will yield to anyone who can provide better data. I understand that in 2015 there were just over 2.1 million businesses in Australia, and just under a third of those could be found outside our capital cities. My deep concern is that, once implemented, this will be yet another policy which disproportionately advantages those capital city economies, leaving regions and their small businesses behind. Let us not forget that a tax cut is the same as government spending because it is money that is not available for another purpose.

Let us have a look at small business income. I am going to use income from unincorporated small businesses as a proxy for small business. Looking at this income data from 2012-13 and extrapolating forward, we can see where the benefits are going to flow from this government policy. They will overwhelmingly go to big businesses and businesses that are located in the capital cities, skewing against people who are operating businesses in regional Australia. The simple fact is that businesses in regional Australia are earning less. I have had a look at the Prime Minister's electorate. Average income from an unincorporated business in the electorate of Wentworth is $61,000 per annum. The national average is a little bit closer to $23,000, but in regional electorates it is a completely different story altogether. In some areas that you will be very familiar with, Mr Deputy Speaker Coulton—the electorate of Page and the Richmond Valley—it is around $17,000 per annum. In the Clarence Valley, it is closer to $7,000 per annum. In Robertson, in Gosford, it is closer to $24,000 per annum. Down the coast from me in Gilmore on the south coast, it is a similar story—around $17,000 per annum. In that small snapshot, we can see that the benefits of this tax cut are overwhelmingly going to go to businesses that operate out of electorates like the Prime Minister's and, overwhelmingly disproportionately, not to electorates such as the one that you and I represent, where businesses are not earning the same level of income.

As I said, any tax cut is the same as government expenditure because it is money that is not available for another purpose. I have already said that this is money that could well and truly be spent in the area of education. That is, literally, the debate we are having. Today we have had people from around Australia visit us and lobby parliamentarians on the importance of additional school funding to provide higher standards of education for every child in the country, no matter where they live. These are the choices we have. We can deliver this $50 billion tax cut to, overwhelmingly, large businesses and skewed towards benefits in the capital cities, or we can provide funding for needs based education for every school in the country.

The numbers are roughly equivalent, I have to say. The government's own figures show the savings that they are booking for cancelling the final years of the Gonski school-funding formula are in the order of $30 billion. That is $30 billion that they are not going to be funding to our schools—savings that they are claiming and savings that will perhaps go to giving these big businesses a $50 billion tax cut. Most of that tax cut is going to go to overseas shareholders, by the way. It can hardly be argued that this is a benefit that is going to be captured 100 per cent within this country. That is simply not the case. I think most Australians will look at this and say: 'Well, if I've got a choice between investing in education, investing in our health and our hospital systems and investing in infrastructure which is going to truly make a difference to the productivity of regional areas, and providing a $50 billion tax cut to the big end of town, that's not a hard thing. You don't have to chew over that for too long.'

The argument is pretty simple to make. I have challenged the minister, when he sums up debate on this bill, to contradict what I have said—to contradict that simple proposition that the overwhelming benefit of this tax cut is going to go to businesses that operate in electorates like the Treasurer's or the Prime Minister's, certainly not in electorates like yours or mine, Deputy Speaker Coulton. I see the member for Wakefield is in the chamber at the moment. It certainly will not be going to businesses in his electorate. This is at a time when we know that regional disadvantage and inequality are growing. We have some choices to make in this parliament. We can advocate for policies and vote in favour of legislation which are entrenching that disadvantage, or we can advocate policies and advance legislation which mitigate that disadvantage and reduce inequality. I, for one, know the sorts of policies that each and every Labor member is going to be supporting. We will not be supporting this bill. If the government want to get any measures through that are going to provide some support to small business in this country, they will do the right thing. They will drop the unaffordable measures, and they will enter into discussions with Australian Labor about ensuring that we can deliver some benefits to small businesses at the same time as preserving our AAA credit rating and preserving some equity in the budget propositions.

There are challenges for the government. I very much doubt that this proposition is going to go much further than the distance between this House and the other place. The government have a choice as they frame the budget over the next few weeks. Will they include this measure in the budget and in the forward estimates, or will they do the right thing by Australians and drop it and move on to a more sensible proposition?

Steve Irons (Swan, Liberal Party) Share this | Link to this | Hansard source

Mr Deputy Speaker Buchholz, it is a pleasure to see you in the chair.

Scott Buchholz (Wright, Liberal Party) Share this | Link to this | Hansard source

Thank you, mate. That is a lovely compliment!

Steve Irons (Swan, Liberal Party) Share this | Link to this | Hansard source

I will just remind the member for Whitlam of something. He talked about the definition of a small business. Obviously, not many on that side of the chamber have run businesses; they think $2 million is a lot of money. Back in 1980, my small business—and it was a small business; we only had five people—was turning over $5 million as a company, as a small business. If their definition is turnover, it makes a big difference. It should be profit that marks whether it is a big business or not. There are many small businesses, as you would know, Mr Deputy Speaker Buchholz, that are turning over well over $2 million and are not making the huge profits that the Labor Party think that small businesses make. They do not make those huge profits and they should understand that.

I rise today in strong support of the Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016—a plan which is an integral part of this government's reform agenda to improve the state of Australia's tax system. It is a promise the coalition made to the Australian people in the budget—the same budget we took to the election. It was the election we won, which is proof the Australian people are supportive of this coalition government's economic plan for jobs and growth. I only hope Labor can put politics aside to ensure this important plan goes ahead, supporting greater investment and, in turn, more jobs for hardworking Australians.

As I mentioned, the enterprise tax plan is a key component to our economic plan. The enterprise tax plan benefits employees because, when businesses pay less tax, it frees up more money to pay employees more and, of course, give them more hours of work. As you know yourself, Mr Deputy Speaker Buchholz, it is all about return on investment. The more return we can make the better we can put that back into the economy and put it back into employees' pockets as well. It is known that lower taxes allow businesses to invest in themselves, allowing room for capital purchases, more equipment or more machinery and, in turn, requires them to invest in people, offering more hours and actively supporting growth and higher wages. It provides employers with the confidence for them to invest and grow their businesses. As we know on this side of the House, that effectively grows the Australian economy.

Our economy is transitioning. As a member in the great state of Western Australia, I have seen firsthand the positive impact of the investment phase of the mining boom, but now it is time for us to adjust as we transition into much broader based growth in our economy. As we do this, Australia is still growing faster than every G7 economy and our growth continues to be above the OECD average, which shows we are successfully transitioning our economy. I also remind those on the other side of the chamber that part of the slowdown in the Western Australian economy was due to two taxes they implemented: the mining tax and the carbon tax. They were both anti Western Australia taxes. To further this, it is time to give businesses the opportunity to invest, innovate and grow, and develop the support mechanisms for them to do so. To ensure we are best equipped to do this, now more than ever is the time to be supporting businesses and assisting them in their growth and, subsequently, job creation. That is why this enterprise tax plan is so important. It looks to encourage private investment. It looks to generate broader based growth for our economy.

For the benefit of the House, this bill makes a number of amendments to tax legislation to implement our budget commitment to progressively reduce company taxes over the next decade. The measures in the bill include an immediate reduction to the corporate tax rate to 27.5 per cent for the 2016-17 tax year for small businesses—that is, corporate tax entities with an aggregated turnover of less than $10 million. There are more measures in the bill and I will get to those later.

The enterprise tax plan is fully funded and, as a 10-year staggered approach, will decrease the tax rate on all companies to 25 per cent by 2026-27—a plan which is not only providing certainty to business but also avoids a concentrated short-term impact on the budget. We heard before the member for Parramatta talk about other countries that invest in Australia having higher tax rates. I would like to correct her. She stated that the USA had a higher tax rate than the Australian economy. They currently do, but they have already signalled that they are going to reduce their tax rate to 15 per cent by the end of the year. So that was another false claim by those opposite with regard to this bill. This means a lower tax rate for around 870,000 businesses employing over 3.4 million workers across Australia.

On 15 September last year, the Senate referred the provisions of the Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016—this bill—to the Senate economics legislation committee for inquiry and report. I read the Labor senators' dissenting report on the bill. After suggesting a number of amendments, the Labor senators' report notes—and I am sure you will be surprised by this:

Labor Senators also call on the Government to abandon fiscal recklessness and instead work cooperatively to continue the work of budget repair in a way that is fair.

Again for the House and for you, Mr Deputy Speaker Buchholz:

Labor Senators also call on the Government to abandon fiscal recklessness and instead work cooperatively ...

I would say that is an absolute joke coming from that side of the House when you saw the six years under the Rudd-Gillard-Rudd government. For them to talk about fiscal recklessness, they have obviously forgotten about the carbon tax, the mining tax, pink batts, the BER—all the things that drove our economy into deficit and debt. I strongly suggest that side of the House take their own advice. After the six years of fiscal recklessness seen in the Rudd-Gillard-Rudd government, they should work cooperatively with the coalition government in achieving real outcomes that contribute to our economic plan.

My electorate of Swan has close to 20,000 businesses. Within Swan we have the Kewdale-Welshpool industrial hub, the Belmont Business Park and Technology Park Bentley. Within Victoria Park, where my electorate office is located, is a cafe strip and multiple car yards. There are about 100 car yards in my electorate. In fact, I have spoken previously in this chamber about Victoria Park becoming a centre for junior sport and elite sport, with the new stadium due to be completed by early next year and an AFL training base located at Lathlain Park, to which the coalition gave $10 million for a $67 million infrastructure project. It has a long been a thriving area for small business in my electorate.

Might I mention that the coalition government also granted $6 million to the City of Belmont through the National Stronger Regions Fund, round 1, for the $12 million Belmont Business Park project. This project plays an integral role for small businesses in Swan as it aims to boost the revival of the City of Belmont's major business area by creating opportunity for the growth of a more diverse economy which will offer more job opportunities to meet the needs of the region. Also in my electorate, the Kewdale-Welshpool industrial hub is a key manufacturing area in Western Australia. It is also a premier freight and distribution centre that employs many of my local constituents. Over my nine years as local federal member of the area, I have made many connections in the Welshpool hub at the transport hub of Western Australia. In fact, I started my own business in Anvil Way off Division Street in Welshpool way back in 1988 and worked in the air-conditioning and refrigeration sector for over 25 years.

As you would know yourself, Mr Deputy Speaker Buchholz, the experience as a small-business owner can be very rewarding and very taxing. How you are going to pay the bills and how you are going to pay the wages keeps you awake at night. You put everything on the line. This is why the coalition government has an economic plan to support small businesses: to help them grow and prosper, and employ more people.

An example of a small business owner in Swan is Gem Gautam, who owns the Busy Bee Deli in Como. In October 2015 a fire destroyed the deli. Just over a year later, in November last year, Gem was able to reopen his deli. But this would not have been possible without the support of local community members and other local businesses. You see, Gem had never started from scratch before. So, he said, it took a lot of patience as he had to deal with the council, architects and tradies who helped him along the way and taught him a lot. In the local newspaper, when he re-opened his deli Gem said it was the support of the community that spurred him on to reopen the business during the 13-month period when he was unemployed. He said when renovations were going on people from the community and other businesses would knock on his door and ask when the deli would be open. He said that some of the local businesses gave him discounts, which he was thankful for.

As you can see just from that example, small businesses are an integral part of the Swan community, and all of them play a big part in driving the Australian economy. But, for too long, local business owners not only in my electorate of Swan but across the country have been forced to watch their own incomes decline and to reach into their own pockets just to keep people in work. This has meant people have kept their jobs and wages to support their families, but at a great cost to many small-business owners. For too long now, small businesses have been forced to make great sacrifices for this nation's economy.

Running small businesses seems to be a common theme on this side of the House. We have business experience. Many of my colleagues over here on the government side have real-life business experience which holds us in very good stead as we take measures like this that actively support and encourage Australian businesses. The member for Wright—you, Mr Deputy Speaker—ran a very successful trucking business in Queensland. The member for Gilmore ran a fudge-making business. Our Treasurer was a CEO and senior executive in various industry bodies and government agencies. I could go on. I know there are numerous of those. I see another member—one from the Nationals—sitting in here. The member for Flynn still runs and owns businesses. On the other side of the House, there is, I have noticed, a lack of business experience. It has been an ongoing obstacle in achieving real outcomes for Australian businesses. But what do you really expect from the Labor Party, whose experience in small business is as extensive as their understanding of how this bill will support local businesses and trigger economic growth and resources?

The Australian Chamber of Commerce and Industry announced last year it supports the government's Treasury Laws Amendment (Enterprise Tax Plan) Bill, particularly the progressive reduction in Australia's company tax rate to 25 per cent for all businesses by 2026-27. The chamber also made a submission to the Senate inquiry, which I agree with far more than I do the Labor senators' report. Treasury modelling indicates that by reducing Australia's company tax rate from 30 per cent to 25 per cent, we would be boosting Australia's national income by 0.6 to 0.7 per cent, including a 0.4 to 1.1 per cent increase in take-home pay for workers. In their submission, the chamber notes that this boost in living standards should provide support for our government's proposed company tax reforms. It includes a two-page table that provides reasonable and factual responses to many of the poor objections made by those across the other side of the House.

Similarly, the Business Council has also thrown their support behind the bill, noting, 'Australia is falling behind in the global contest for new investment,' and highlighting the need for Australia to remain competitive in, and attractive for, investment. I refer to one of the key points made in the Business Council's submission, which I think will resonate in this chamber:

Choosing not to pass this Bill in its entirety would be a decision to let Australia fall further behind other countries and give up on competitiveness and building future prosperity. It would be a decision to continue imposing self-inflicted harm on the Australian economy, workers and households. We cannot afford not to pass this Bill.

Again, they said, 'We cannot afford not to pass this bill.' These recommendations and this resounding support came from a range of industry associations and industry bodies. Yet, thoseopposite still cannot quite grasp the benefits andimportance of these measures—which, come to think of it, is quite surprising given thatin 2011 the Leader for the Opposition himself said:

Cutting the company income tax rate increases domestic productivity and domestic investment. More capital means higher productivity and economic growth and leads to more jobs and higher wages.

Has he backflipped on that? We have not heard about that, but I could not have put it better myself. In addition to this, the shadow Treasurer, the member for McMahon, in 2013 in his book Hearts & Minds wrote:

… it's a Labor thing to have the ambition of reducing company tax, because it promotes investment, creates jobs and drives growth.

It is a Labor thing. I tend to disagree with the member for McMahon because the only Labor thing we have seen in relation to this bill is cynical and opportunistic politics that now is the greatest threat to the Australian economy. But it does not stop there. In addition to this, the shadow Treasurer told the ABC's Lateline in 2014:

I'd like to see it lower over time. I think we've had 14 years of having the corporate tax rate stable. That's too long. Over time, I'd like to see it lowered.

But it gets even better. He continued:

As the alternative Treasurer, I'm telling you that I think it would be a better thing if Australia's … tax rate was more competitive …

These are statements they have made again and again, but they are all backflipping on them now.

After proposing just that, the shadow Treasurer—or the alternative Treasurer, as he likes to call himself—says he cannot support this bill. Labor is demanding that small- and medium-sized businesses pay nearly $5 billion more in tax but is refusing to support more than $6 billion in savings in our welfare system to get the budget back into balance. As they say, it is the Labor thing to want Australians to pay more tax to support a larger welfare system.

In contrast to this, our government—through this bill, the National Innovation and Science Agenda, the crackdown on multinational tax avoidance and a range of other measures—is proactive in its efforts to raise the living standards for hardworking Australians. This bill is designed to drive investment in our economy, support jobs and wages. I commend the bill to the House.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Government Members:

Government members interjecting—

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

The response from those opposite in the chamber is absolutely typical. Any time anyone on this side gets up and talks about inequality and says the P word—poverty—they laugh. That is exactly what happens—every time. What is the government's response to inequality? Cut pensions, cut the wages of 700,000 mainly low-income workers, cut Medicare, cut school funding, fight to the death to protect tax breaks for the top 10 per cent, and give away $50 billion to big companies, most of which, we know, goes offshore to multinational shareholders or the big banks.

The final test you have to run these things past, of course, is: is it politically smart? In my view it fails the fiscal test, it fails the economic test and it will worsen inequality, but it is also profoundly bad politics. It is not our job to give political observations or advice to the government. In the scheme of things, if you want to stand over there and bash yourselves over the head in the face of community sentiment, then go for it. That is great. Why not? But, in another sense, all responsible legislators—whichever party we are from—should be concerned about this, because people are not stupid. There is immense frustration in the community with members of parliament and our performance. There is a feeling that politics is not acting in the best interests of the nation or everyday Australians. There is a feeling that the system is rigged to the benefit of the rich and powerful. And we have this kind of raid on our collective wealth—taking $50 billion, as the opposition leader has said, from the national ATM and giving literally billions away. This is your analysis; it is the independent analysis: if you do this, billions of dollars of this tax cut flow straight offshore to multinational shareholders and to the big banks. What evidence is there that that giveaway creates any new investment? There is none; it proves the point.

In my view, we are being sold a con to brainwash us into thinking that this race to the bottom is somehow inevitable—roll over, cop your medicine, cut the health system, cut the schools, skim money off the people who have least. Leave the middle-income earners paying far too much income tax while corporates pay less and less. What is nirvana? We take the rate to 25, then someone else goes to 20. So we go, 'We better go to 20,' and someone else goes to 15. Is it zero? Companies should pay zero? That would be nirvana, would it? In my view it is not inevitable. Domestically, this reminds me of that silly game, that damaging game, played by Australian state governments to outbid each other with bribes to lure companies from one state to the other to set up shop. There was no net benefit, it was costly to the taxpayer, and eventually a truce was declared. Conceptually, nations can do the same. It should not be beyond the wit of the international community and the developed countries of the world to say, 'Enough. We cannot keep this race to the bottom going, so everyone gets to zero. That is a nonsense. I do not think we are at the point yet where sovereign governments are prepared to say 'enough'. They are still in the thrall of the dying neoliberal god—except Donald Trump; that is an interesting side point, but we do not have time—cut tax, cut spending, live within our means, but with no concern for having the means to live.

There is some glimmer of hope, and I will close with this example. Some people get it. They are not stupid and I do not believe that, ultimately, sensible communities will support this race to the bottom on corporate taxes. In the last month, there is the example of Switzerland, home to 24,000 multinationals. There was a proposal put to voters by the Swiss government on 12 February to reform corporate taxation arrangements. It was put to voters and was rejected by voters. Sixty per cent of voters in Switzerland, when they had it in front of them, said no. There was a case for reform, certainly, in Switzerland of state and national tax arrangements. The government and business argued that without reform foreign companies would quit the country for other places—they would go to the Cayman Islands and to tax havens. But the voters saw through the proposal. They understood that, ultimately, someone has to pay—that the tax shortfall would always be borne through other taxes, such as income taxes or a GST, maybe. That will be the next thing: 'There is a deficit. We cut company tax and we have run out of money. Let's jack up the GST.' Someone will always pay, or there will be spending cuts. So, what happened? Well, they will think through it further, and life goes on in Switzerland. In fact, the global advisory firm, EY, that left-wing radical bunch of hippies, EY's tax advisory people, published a note in late February after the result. They said:

Despite the referendum and the resulting delay of tax reform, Switzerland remains an attractive business location with its highly skilled workforce, excellent infrastructure, and the overall attractive tax environment.

Of course, this debate is premised on the myth that somehow all the companies here pay 30 per cent. The average effective tax rate is about 24 per cent, and paying tax has become optional for so many of the large multinationals. Does anyone really think that if we had a proper crack at multinational tax reform somehow Google and Apple would shut up shop and go somewhere else, that they are not going to sell things here? Australia does not have to be pushed into this race to the bottom on company tax. If we could afford it in the current fiscal situation, great. But it is about choices. It is fiscally irresponsible. It would smash the budget and mean either tax rises in other areas—consumption or income—or massive spending cuts. They are the choices. That is what will happen. It is economically irresponsible with little to no economic benefit. It would worsen inequality and it is politically dumb, as people are not stupid. We should reject it.

Stuart Robert (Fadden, Liberal Party, Minister for Human Services) Share this | Link to this | Hansard source

It is a pleasure to rise on the government's Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016. The premise behind where the government is taking this is quite simple: we want to spur investment and enterprise within Australia. We want to unlock the native elements, the native attributes, the hardworking entrepreneurialism and the skills of Australians. We want to provide an incentive for jobs and growth. It is fairly simple, as so much of economics tends to be. That is why this bill moves forward on a company tax cut; it moves forward on a Ten Year Enterprise Tax Plan; and it moves forward on small business tax relief.

There was a time when the opposition believed in these things as well. The Leader of the Opposition said in 2011:

Cutting the company income tax rate increases domestic productivity and domestic investment. More capital means higher productivity and economic growth and leads to more jobs and higher wages.

I agree with the Leader of the Opposition. I think that what he said in 2011 was wise and sensible. He was a minister. It was right. And because I think the Leader of the Opposition is right in what he said in 2011, I think we should read it again. The Leader of the Opposition, as a minister in a Labor government, believed that cutting the company tax rate increases domestic productivity and domestic investment. Of course it does. It provides more money for corporations to invest into new technology, new systems and new approaches—which of course equals productivity—and new investment in capital, people or in a multifactor sense.

The Leader of the Opposition went on to say:

More capital means higher productivity and economic growth and leads to more jobs and higher wages.

A company tax cut, in the words of the Leader of the Opposition, leads to more jobs and higher wages. Hallelujah—I'm in! Let's go! We now have a bill before the House to do exactly what the Leader of the Opposition wanted.

Let's look at what the Shadow Treasurer had to say in his book Hearts and minds. It is a wonderful book, I am sure. Let's quote from the Shadow Treasurer:

It's a Labor thing to have the ambition of reducing company tax, because it promotes investment, creates jobs and drives growth.

Jobs and growth—I thought that was our mantra. I thought jobs and growth is what we are about. I thought jobs and growth is what the Liberal and National parties took to the last election, where we won a mandate for this tax plan. It turns out that jobs and growth has been used before by the member for McMahon in his book:

It's a Labor thing to have the ambition of reducing company tax, because it promotes investment, creates jobs and drives growth.

That is what they used to believe. The problem is that things quickly change. When the Leader of the Opposition was the Minister for Financial Services and Superannuation he also said.

Any student of Australian business and economic history since the mid-80s knows that part of Australia's success was derived through the reduction in the company tax rate.

So the Leader of the Opposition is speaking again, casting the net wider now. 'Any student of Australian business and economic history'—any student. If the Leader of the Opposition is so sure of himself, that must mean everyone here—He has spoken for you, Mr Deputy Speaker, he has spoken for me, he has spoken for those opposite, on the other side: any student of Australian business and history since the eighties knows our success was derived from a reduction in the company tax rate. Well, here we are with a bill before the House to build on that success. On 13 March 2012 the Leader of the Opposition said on Sky News:

We need to be able to make life easier for Australian business, which employs two in every three Australians.

We do need to make life easier. How about we do something that leads to economic growth, more jobs and higher wages? How about we do that? In the words of the Leader of the Opposition, that looks like a company tax cut.

The Leader of the Opposition further addressed the Institute of Chartered Accountants on 6 April 2011:

The Government's tax reform agenda has a strong focus—

I can see him; it is almost Churchillian—

on ensuring that Australia remains an attractive place to invest ... Cutting the company tax rate is an important step along this road.

I agree. Let's take the step. Let's go! He continues:

This recognises the benefits to investment and growth from lower company tax rates and a trend to lower rates across the OECD over the past 30 years.

It seems that everyone on the opposition benches is talking about investment, jobs and growth linked to a company tax cut. We agree. Let's go!

Let's go on back to the Shadow Treasurer's book Hearts and minds. He wrote a chapter there promoting growth through cutting company tax. What—there is a whole chapter called that? 'Promoting growth through cutting company tax'? Let's read those wise words:

Keating knew that the corporate tax rate needed to be cut to make Australia competitive, that capital and investment would flow to tax-competitive nations and that this was an important job-creation move.

What? Cutting taxes leads to jobs?

Today capital is even more mobile than it was then and it is important that our corporate tax rate is more competitive. It's a Labor thing to have the ambition of reducing company tax …

It is a Labor thing. Referring to the company tax cut, the Shadow Treasurer goes on to say:

I'd like to see it lower over time. I think we've had 14 years of having the corporate tax rate stable. That's too long. Over time, I'd like to see it lowered.

On 4 December 2014, the Shadow Treasurer on ABC Lateline, said:

As the alternative Treasurer, I'm telling you that I think it would be a better thing if Australia's corporate tax rate was more competitive.

It goes on and on. Here we have the two most senior parts of the opposition saying the same thing at least 10 times: if you cut the company tax rate, it will lead to higher productivity, more investment, more jobs and greater growth.

We agree. In fact everyone agrees, and the Leader of the Opposition was correct when he said that any student of history and politics and student of this place also knows that this has to be done. Even the member for Bruce, who was speaking before, a member who has spent his entire life working in the public sector, on the public teat if you will, even he made the point that 'We would love to do a cut to the company tax rate, but now is not the time.' Really? So when is the time to do it? Does only Labor know when the time is? The time is now. A company tax cut leads to more jobs, higher growth, higher wages, stronger investment and greater productivity. We know it; those opposite know it; economists know it. In the words of the Leader of the Opposition, any student of this place knows it. We need to do it.

The member for Bruce would like to suggest that it is a race to the bottom, that other nations or jurisdictions are lowering their company tax rate and so are we, and we should all link hands and sing 'Kumbaya' and together make some decisions on keeping the company tax rate at a certain level. What sort of fairyland is the member for Bruce in? What sort of land of nonsense, where we can all hold hands and sing 'Kumbaya'? I remember in 1986, the International Year of Peace, 46 wars raged across the globe. The violence across our world today is greater than that, but the member for Bruce believe we can all hold hands and keep the company tax rate high together. Competition—the free enterprise—is what has fuelled our development and our growth, not some sort of public sector la la land nonsense.

So, what are we facing out there in a globalised world where companies have choices on where they can land jurisdiction-wise? The United Kingdom, for example, reduced its main corporate tax rate in stages from 30 per cent in 2008 to 20 per cent from 1 April 2015. They are 30 per cent more efficient in terms of taxation than we are. From 2008 to 2014, Canada reduced its main corporate tax rate from an average of 36.1 per cent to 26.5 per cent—there are some provincial differences—and Singapore went from 20 per cent to 17 per cent. Companies have choices. We need a more competitive tax rate if we are going to attract foreign capital. Ever since ships landed on these shores in 1788 we have needed foreign capital to grow. Australia is a great place to do business—a marvellous place. It will be a better place with a lower tax rate. Our Enterprise Tax Plan will boost the Australian economy. It will encourage employers to employ. As the shadow Treasurer and the Leader of the Opposition have said, it will lead to higher growth, more jobs and higher wages. It will give businesses the certainty that this is a fabulous place to invest in. It will give long-term investments the opportunity, through that stability, to see some real growth come along.

There is broad consensus—there always has been—amongst economists and those in business that higher rates of corporation tax undermine investment and economic growth. Even the OECD have said:

… corporate income taxes are the most harmful for growth as they discourage the activities of firms that are most important for growth: investment in capital and productivity improvements.

Now everyone from the OECD to the Leader of the Opposition to the shadow Treasurer to anyone who is a student of this place is talking about linking the company tax rate with growth and jobs. It seems that the only people right now who are not talking about that linkage are those poor, miserable souls opposite, who, for the sake of sheer politics, are saying, 'No, we don't want to help you companies become more competitive.'

According to the UK government, cutting the main rate of corporation tax from 28 per cent to 20 per cent has been a central part of their economic strategy, contributing to the economic recovery by supporting business investment and job creation. Business investment increased by 11 billion pounds, according to Oxford University, on the back of those corporate tax cuts. In 2013 the UK government published analysis modelling the long-term economic impact of the corporation tax cuts. It found that the cuts could increase GDP by between 0.6 and 1.3 per cent—extraordinary.

The numbers speak for themselves. The evidence is overwhelming, from lower-tax jurisdictions to the OECD. In fact, in years gone by, those opposite have known it, have passionately advocated for it, have tried a little bit to achieve it and, when it got hard, have walked from it.

The member for Swan, as he left, threw me a speech, with some highlighted bits. It is a cracker! The first lines are:

The four years of surpluses I announce tonight are a powerful endorsement of the strength of our economy, resilience of our people, and success of our policies.

In an uncertain and fast-changing world, we walk tall—

No, you do not walk tall! What those opposite left was a disaster. This was the appropriation speech from 2012-13, the member for Lilley speaking on 8 May 2012. All that was left were deficits in the tens and tens and tens of billions of dollars. In that speech they announced a $3.7 billion small business tax break. Where is it? Where did that tax break go? Why isn't it there? At the end of the speech the member for Lilley said:

… our multi-speed economy is putting pressure on businesses that aren't in the fast lanes.

… … …

We'll encourage companies to invest and innovate …

… … …

This will support businesses …

No, they did not! The did not do anything. They talked about it. Oh, they talked about it, and there were photo shoots and videos and standing in front of pie shops. They talked about it but never, ever delivered it.

The shadow Treasurer had an aim, an ambition—25 per cent, he wanted; that was his aim, his target. Well, now is the opportunity to actually put all the words, all the rhetoric, all the statements over so many years to the test and vote for a sensible enterprise tax plan. It makes sense. It will lead, as the numerous words of the Leader of the Opposition and the shadow Treasurer have said, to higher growth, more jobs, higher wages, greater productivity, greater investment. I encourage the House, I encourage those opposite. The government is not asking you to do anything other than what you said you would do. The government is not asking you to keep any promise or any word other than that which you promised and that which those opposite said they would keep. The government is simply asking Labor to stand up— (Time expired)

Pat Conroy (Shortland, Australian Labor Party) Share this | Link to this | Hansard source

What a ridiculous contribution from the member for Fadden, who must exist in an ahistorical vacuum in which the last four years have not occurred. I know that the last four years have not been good for the member for Fadden and I can understand why he would want to blot them out. But since his party has been in government, they have tripled the deficit and increased net debt by $100 billion. Let me repeat this: for all their cant about fiscal management, they have failed on fiscal policy. They have tripled the deficit, increase net debt by $100 billion and put us on a very dubious trajectory for a balanced budget. That is the context for this debate on company tax cuts.

Unfortunately, that has not been the only ridiculous contribution from the members opposite. My particular favourite was the revival of the discredited Laffer curve by the member for Reid, who is normally slightly more sensible. He is not one of their extremists—he has been quite good on things like 18C of the Racial Discrimination Act—but he was caught out arguing the Laffer curve, which was all very fashionable in the 1980s. It advocated that somehow you could cut taxes and that would increase revenue and pay for the tax cut. It was discredited by the Reagan tax cuts and by the Thatcher tax cuts. Quite frankly, it was beneath the member for Reid, but that is what they have been arguing for.

I will put one simple question to the government: if somehow we are facing this massive crisis of international tax competition, why do the full tax cuts not cut in sooner? We are facing almost a full decade before the tax cuts are achieved and so, if we had some competition crisis, why do they not occur earlier? The truth is: this is a rubbish plan. It is a rubbish plan based on the very dodgy fiscal situation. In the end, when we look at the alternatives this money could be used for, there are much better things that would drive economic growth in this country.

Let us leave aside the language. What do we know about the impact of this bill? We know the fiscal cost—$48 billion of cost to taxpayers in an environment where the deficit has tripled and net debt has blown out. We know that, as revealed by costings done by the Parliamentary Budget Office, we are facing $4 billion interest bill because this will be financed by debt. On top of the $48 billion cost, there will be a $4 billion interest bill. We know from Goldman Sachs, the Prime Minister's favourite merchant bank, that at least 60 per cent of the benefit will flow overseas to foreign investors—at least 60 per cent, because we have in this country a little thing called 'dividend imputation'. It means that domestic investors will not benefit from the tax cut.

We also know—because the government has not refuted it, and they have not even made the effort to put out a media release on it—that the biggest single beneficiary of this tax cut will be the US government. The US Inland Revenue Service will gain eight billion of the $48 billion because of the gap between their tax rate and ours. Basically, they tax their corporations' foreign earnings on the difference between the US tax rate and the tax rate of the home country where the profits are earned. If they reduce their tax rate, and we will see whether that happens, but if they do not, on current tax rates we will see an $8 billion contribution from the taxpayers Australia to the US government. Such is the farcical nature of this plan.

Let's look at the economic theory that this is based on: that somehow we are in a competition crisis and we desperately need to implement this plan, and we need to do it very fast, over 10 years. Somehow we need to do this because we are lagging behind on the investment attraction stakes. Let me confess to the House that there is no firm evidence, if you look at OECD growth rates, that links company tax rates with economic growth. Quite frankly, there is limited evidence about whether there is a relationship between corporate tax rates and investment attraction. Companies invest in countries for a whole of reasons—tax rates being one of them, an educated workforce being another and proximity to markets being a third. There are many reasons that tax rates are not the be all and end all of investment attraction, and every serious economist will acknowledge it.

Let's look at the government's own modelling, which is based on some incredibly heroic assumptions. It assumes that the massive fiscal black hole that this creates, the $48 billion, is either replaced with a non-distorting income tax—I cannot see this government doing it—or a $48 billion cut in government expenditure. They have not fessed up to where they are going to cut the $48 billion of government expenditure, and so it assumes that. The modelling also assumes perfect competition—another furphy that there is perfect competition in Australia. It also assumes full employment—patently untrue. It also assumes that there is zero government debt, a balanced budget and a single representative household. This is the basis of the government modelling that the government has been hiding behind—ridiculous assumption after assumption that thoroughly discredits the modelling.

Let's look at the actual outcome of this modelling. It projects that in 20 or 25 years' time there will be a 0.1 per cent increase in employment. It also assumes that the net welfare gain to households—the real impact on households—is again 0.1 per cent. We are looking at driving a $48 billion hole in the government budget for a 0.1 per cent increase in jobs and economic welfare in 20 or 25 years' time. That is beyond ridiculous, Mr Deputy Speaker, and it shows the economic incompetence of the government.

Let's also look at reputable third parties and what they have said about this tax cut. We have found that the Grattan Institute—no friend of the Labor Party—a centrist think tank—

Government Members:

Government members interjecting—

Pat Conroy (Shortland, Australian Labor Party) Share this | Link to this | Hansard source

Sorry, who happens to be on the Grattan Institute? The Prime Minister's own wife is on the board of the Grattan Institute—

Mr Falinski interjecting—

Steve Georganas (Hindmarsh, Australian Labor Party) Share this | Link to this | Hansard source

The member for Mackellar will cease interjecting. You will have your opportunity.

Pat Conroy (Shortland, Australian Labor Party) Share this | Link to this | Hansard source

I will take that interjection from the member who claims that the Prime Minister's wife is on the board of a Labor-controlled think tank. Thank you for that interjection. No-one can argue that the Grattan Institute is not centrist because they criticise plenty of Labor policies as well as government policies. They have found that this corporate tax cut will lead to a $4 billion reduction in national income. Let me repeat that: a $4 billion reduction in national income. The Victoria University's modelling confirms this: they also found a very significant drop in national income. There are real concerns about the economic impact of this tax cut, and we need to contemplate that, even if the government's modelling is true and we see capital inflow, what we will see is capital deepening. We will see an increase in the capital investment in this country if their modelling and assumptions are true, which is a big if, and we will see a reduction in labour's share of income. Labour's share of income will decline. If labour's share of income declines, what we will see is a rise in inequality. This is in a period of the highest inequality in this country in over 75 years. What they are proposing, if it works, is capital deepening leading to a reduction in labour's share of income and leading to an increase in inequality. The OECD and the IMF—hardly raging lefties—have found that increasing inequality is bad for economic growth. Increasing equality drives economic growth, so this proposal is dubious all round economically.

Let us look at the alternatives, because you cannot fund something to the tune of $48 billion in a vacuum. You cannot fund it in a vacuum. You need to look at what the alternatives are that the government could be doing with this funding. One classic example is education funding—$48 billion would be a massive boost to education funding in this country. Most serious economic commentators have said that funding education and skills training is one of the most direct ways of increasing economic growth in this country. Investing in human capital, which is what you do when you invest in education, is a great boon for an economy, so that is one way of using that $48 billion. You could use the $48 billion to tackle inequality in this country and try and reduce and reverse the 75-year-high inequality.

As I said before, the OECD and the IMF have found direct linkages between reducing inequality and economic growth, and I would submit that a $48 billion assault on increasing equality would have a much higher economic dividend than a 0.1 per cent increase in household welfare in 25 years time. You could invest it in innovation to drive more commercialisation of products in this country. You could do a range of things that would boost this country. Forty-eight billion dollars in infrastructure expenditure would unlock massive economic potential in this country—removing congestion and increasing economic productivity. I am absolutely certain that if that money was wisely invested according to Infrastructure Australia's priorities we would have an economic dividend well in excess of this boondoggle.

Let us go to the basis of this. The true political basis for this tax cut is the hopeless and desperate attempt of this government to find an economic agenda—to find a political narrative. That is because for 3½ years they have just blindly walked through the desert of this government, blindly walked through without an agenda other than cuts and attacking Labor's legacy. At the last budget they said: 'Righto, we're desperate. We need something. We have a slogan—jobs and growth—and we need to have something underneath it.' So they came up with this $48 billion of tax cuts. They jury-rigged up some modelling from Treasury based on some very dubious assumptions, and that is their central agenda. There are real question marks around whether they will even include it in the budget papers for this year. We saw in question time today that after direct questions to the Treasurer—a man more interested in bringing lumps of coal to question time than serious economic challenges in this country—he could not answer a straight question about whether or not he would be including the cost of the tax cuts in that budget. So this government, despite all their supposed commitments to jobs and growth, are already contemplating junking the central tenet of it—a central tenet based on Laffer curve rubbish; a central tenet based on supposedly falling behind, despite the fact that the tax cuts do not kick in for 10 years at their full extent. That is what we are debating in this country.

In conclusion, what do we know? We know that it will cost the budget $48 billion at a time when this government has tripled the deficit. Strip away all the verbiage of this debate and we are debating a $48 billion expenditure, which is what this is, in a context of them tripling the deficit and increasing net debt by $100 billion for an economic gain, even if it is achieved, in 20 to 25 years time. This is what we are debating in this place.

We should be having a genuine debate about how we can repair the budget, how we can invest in productivity in this country and how we can invest in infrastructure. Instead, we have this tired old debate—these tired old talking lines from previous government members and particularly the member for Fadden. Instead, we should be debating serious national issues. I am deeply disappointed that this is the best the government could do. If the government was really serious about getting this through parliament, this would have been the first bill debated. We are about seven or eight months into this government and we are now finally talking about this bill, so yet again their actions do not match their rhetoric.

I am happy to engage in this debate, I am happy to have a serious discussion about competitiveness in this country, but I would submit that investing in education, investing in our workforce, investing in infrastructure to clear the congestion that is strangling our capital cities and investing in infrastructure to open up regions such as mine in the Hunter Valley would be a much better use of taxpayers' money than this corporate tax cut. Again, $8 billion of it will go to the US Internal Revenue Service, $8 billion will go to the big four banks, 60 per cent of the benefits will flow overseas and we will pay $4 billion in interest charges. I conclude by saying that this is a sham. This government should be doing better, but yet again they demonstrate, despite all the rhetoric, that the coalition are hopeless economic managers, and there is no greater symbol of that than this bill.

Jason Falinski (Mackellar, Liberal Party) Share this | Link to this | Hansard source

I always love listening to the member for Shortland. He is a member of a party that has never found any reason to cut taxes for anyone ever—except for foreign backpackers. That is the only time the Labor Party has ever supported a tax cut in this House.

We have built a successful nation—a nation that has created a modern and dynamic economy, brought people from all over the world and created a cohesive community, one in which you can achieve whatever you aspire to. We have done this peacefully. There has never been a war on our soil. We are part of one of the greatest global networks for peace in the history of humanity. We did all of this and more as individuals working together as a community—not as a government imposing these things upon us. At the heart of this question—at the heart of this bill—is whether you believe our community is better off with an overreaching government or you believe empowering individuals and communities delivers a more prosperous and just society. We on this side have always known that there is no social justice without economic growth and that work can provide meaning and dignity in life.

Those opposite speak of companies as if they are a cancer on our society, something that must be eliminated, something that must be stopped and something that must be purged from our economy and our country. When on its fourth go the Fair Work Commission created and selected by Labor decided to reform penalty rates, what was the response from those opposite? Apparently business owners are not workers. Apparently business owners are parasites living on the toil and sweat of those working for them.

Nothing has upset people in my area more than being told that, when they work on Sundays because they have to pay their mortgages, pay rent and pay for electricity and they bring their partners, parents, cousins or uncles to work because they cannot afford to employ people on penalty rates but they cannot afford not to open, they are not workers. They have put their houses and their financial futures on the line and they are told that they are not workers. Nothing has upset them more than that.

The reality is that real wages have not been growing in this country. That is an economic reality for a lot of Australians. Not everyone has felt the positive effect of our move towards globalisation, and there are some, shining a light on the glory of the past, who wish for us to regress, to move to protectionist policies when it comes to the economy. At what a risk? At what cost? When in the history of the world has going backwards ever taken us forward? I would ask those advocating for this shift: when have policies such as free trade ever harmed our people?

Take companies like Incat Crowther in my electorate. This is a company that designs boats and has won many international contracts for the delivery of equipment to offshore oil and gas platforms. It is currently bidding with another Australian firm for a $750 million contract with the US military. These are companies that have benefited from globalisation and, in benefiting, have been able to employ more Australians and pay more tax in Australia. Going down that path of turning our backs on globalisation is a slippery slope towards economic disaster.

That does not mean that we should ignore the reality we are faced with. The mining investment boom is over. The days of a society flush with cash and blessed with high commodity prices and low interest rates are coming to an end. Simply ignoring economic reality, demanding ever higher subsidies while accepting ever lower standards, like those opposite like to do, is living in fantasy land. We need to find policies that work. If we can grow the economy, that means more jobs for Australians. More jobs for Australians means Australians can spend more money in our economy.

There are companies in my electorate, such as Dematic, that manufacture here in Australia and are employing more Australians because of the investment that they have been able to make in capital equipment. These are companies that are making a huge contribution to our economy. The more Australians they employ the more Australians who are no longer unemployed or underemployed and the more Australians who are actively contributing to our society and can support their families and communities. That is social justice.

There are Australians who temporarily fall on hard times, often through no fault of their own. There are Australians who are not able to participate in the workforce because of mental or physical impairments. There are people who simply need help and, as a community, we cannot ignore that. That is why we have a welfare system. But we also cannot ignore that money does not fall from the sky. We need to find ways to sustainably fund our welfare system. Endlessly borrowing money which our children and grandchildren will one day need to pay back is not a solution. Debt is nothing more than delayed taxation.

Ultimately, this bill aims to do just that. It is our proposal to grow the economy, to grow jobs for Australians and to sustainably fund our welfare system. In my electorate, companies such as PharmaCare have made massive improvements because of investments they have been able to make in their companies. Those investments have allowed them to employ more Australians, to grow their businesses and to ultimately pay more tax.

While at first glance it seems like reducing the corporate tax rate may mean less income for the government and so less money for social welfare, that is a short-sighted conclusion. That is why the Australian Chamber of Commerce and Industry has pointed out that the last three corporate tax cuts have already more than paid for themselves in economic growth and income.

Mr Conroy interjecting—

I see the member for Shortland is still hanging on to the delusion that the Grattan Institute is not a Labor front. I will leave him over there to do that. In the long term, cutting taxes now means companies investing more to grow so their turnovers increase and, in real terms, they end up paying more tax. That is more real dollars that can go towards funding essentials for all Australians such as schools, hospitals and disability schemes. If you take that net gain and you combine it with the increase in overseas investment we will see because of a more attractive and competitive tax rate, as well as the crackdown on profit shifting by multinationals which has already netted this government over $2 billion, I am hard pressed to find any argument against this bill.

What does this package look like in greater detail? Step 1 is a reduction of the tax rate for small businesses to 27½ per cent. We all know, as we have heard it time and time again, that small businesses are the engine room of our economy. That does not make it any less real. In my own electorate of Mackellar on the Northern Beaches, there are over 12,000 registered small businesses. That is 12,000 businesses and 12,000 workers who would directly benefit from a reduction in tax—and that is just looking at the workers who run the businesses, not the ones who work in them. What does reducing taxes really mean for a business?

I ran my own business for 11 years. I know that I was ambitious and that I wanted to grow it as much and as fast as I possibly could. I took pride in the number of Australians I employed, and I strived to employ more. If I had had to pay less tax, I can tell you with absolute certainty that I would not have let that extra capital go to waste. I would have invested it back into my business, I would have bought that extra piece of software, I would have invested in that extra inventory and I would have hired that extra person for longer. I would have sold more, I would have made more profit and I would have ended up contributing more real Australian dollars to the tax system. I am not alone in that. Companies like VisionFlex and Chroma are currently developing on-site diagnostic equipment that will save lives and reduce the cost of running our healthcare system. They will be able to do more of that if they can keep more of the money they make. And, what's more, in my business I would have taken market share from offshore multinationals who enjoy lower tax rates overseas than I do in Australia. Would I have made more money? Absolutely, but what is wrong with that? When has striving to make more money to support someone's family become a bad thing?

Now, I know that what I would have done does not necessarily apply to all Australians who run their own businesses. Some run their own businesses simply for the flexibility and lifestyle it allows them to enjoy. They have no interest in growing their businesses and will be happy to pocket the cash. But let me ask you this: how many business owners do you know who do not want to invest in that extra toaster for their cafe, employ that extra salesperson to help sell their products or invest in greater skills for their workforce so they can better compete for customers? How many small business owners do you know that do not want to grow their businesses?

We are a country of go-getters. We have ideas and we want those ideas to become reality. We believe that we can make that better product and provide that better service, and that if we work hard we will succeed. Our job as a government is to get out of the way; it is to let every Australian who makes that courageous decision to go out on their own, invest their own money, mortgage their own home and put their own job security at risk to start their own business, to do just that. Governments do not create jobs; people do.

Step 2: by 2026-27, we will extend the tax rate cuts to larger businesses and bring it down to 25 per cent for all businesses. What does that mean? In effect, exactly the same thing, but at a greater scale and over a longer period of time. Yes, in the first instance, the extra cash might go to shareholders, but, at the end of the day, what do shareholders want? They want their share value to go up. Their share value only goes up when businesses grow. Businesses only grow when they invest in their assets: their infrastructure and, most importantly, their people.

Another reality we should not hide from is that we live in a global economy. That brings both challenges and immense opportunities. Over the years, we have seen large international corporates exploit tax loopholes and profit shift their way across the globe in order to minimise their tax bill at the expense of the nations they trade in. We all know it. They know it, and we know that they know that we know it. It must stop. It is why our Prime Minister and Treasurer have taken decisive action. Under our plan—not Labor's plan—big international companies are paying their fair share of tax and contributing to the wellbeing of all Australians. What we do not want is the behaviour of a few to taint the way we see all international companies doing business in Australia. The reality is that we want those companies to come here. We want those companies to invest in Australian infrastructure and hire Australians. We want them to do their research and development in Australia. We want them to choose Australia over any other place in the world where they could decide to go. To do that, we need to be globally competitive. We must remain a place that is attractive to foreign investment—and we are in a lot of ways. We have a highly skilled, well-educated and motivated workforce. Discounting the six years of Labor instability, we have one of the most stable governments in the Asia-Pacific region. We value and enforce the rule of law. They are all important factors for a company to consider before investing in Australia as opposed to somewhere else.

But our company tax rate is letting us down. We have become globally uncompetitive. Countries all over the world have understood that an attractive tax rate for companies plays a major role in attracting investment. So we, too, must face reality and adapt. We must accept that what might feel like a short-term loss is the only way to secure a long-term gain. There is only one way to secure our future prosperity, to make sure we have jobs, our children have jobs and we can afford to take care of each other, and that is to enable our local businesses to keep growing and remain open for business to the rest of the world.

The fact of the matter is a vote against this enterprise tax package is a vote for less work, not more. It is a vote for higher unemployment, not less. It is a vote for more people on welfare, not fewer. It is a vote for lower wage growth, not higher. It is a vote to stunt Australian businesses when all they want to do is compete internationally against the best in the world. It is a vote, frankly, for complacency. It is a vote for the very things that this parliament is meant to be against. It is a vote for removing the spirit of community that led to the creation of one of the greatest countries in the world.

Shayne Neumann (Blair, Australian Labor Party, Shadow Minister for Indigenous Affairs) Share this | Link to this | Hansard source

That was an extraordinary speech from the previous speaker. I wondered for a long time whether he actually had the right speech and if his staff had given him the wrong speech. But right near the end he got to a point where I thought he was actually dealing with the bill.

From a government that has tripled the deficit and increased the debt by more than $100 billion, we get a piece of legislation called the Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016 which is going to give away nearly $50 billion to corporate Australia. It is an extraordinary thing—to put at risk the AAA credit rating while, at the same time, to work as hard as they can to cut funding in terms of pensions, young people and assistance to families. This government seems to be taking away the capacity of battling people who are doing it tough with low wages growth—the lowest on record; about 1.9 per cent growth, and it is backwards in some parts of the economy and some regions—to spend money on goods and services. It is not defending them on penalty rates at all, with 700,000 Australians to lose up to $77 a week. It will not defend them there. It wants to cut pensions and put young people onto youth allowance instead of Newstart and make them wait up to about five weeks before they can get access to Newstart. It is cutting payments in terms of energy supplements for pensioners. This is a government that is determined to put ideology ahead of economic reality.

I spent more than 20 years in private enterprise, building up a business. I know how important small business is. I know the delight on a young person's face when I offered them a job. I know the delight on my business partner's face when we saw we were profitable at the end of the year and had made more money than the previous year. I know how important small business is to my community because it is a battling community and we struggle at times. We are still struggling, I think, in the aftermath of the 2011 and 2013 floods and in the aftermath of the Global Financial Crisis.

The government, when in opposition, talked about a massive time bomb in debt and a budget emergency that was terrible. They said that we were maxing out the nation's credit card, that debt was spiralling out of control, and that it was a disaster. Those opposite promised a surplus in their first year in office and every year thereafter and have monumentally failed. They gave away billions of dollars in revenue by getting rid of the carbon price and then failed to make any reform to excess—capital gains tax and negative gearing—which their own Treasurer talked about but he was overruled by the cabinet.

From this government, we see a giveaway effectively of $50 billion. I have heard speech after speech from those opposite about how this will be good for jobs and growth. But platitudes and just because you say it does not mean it is actually real. If you look at the analysis done by Treasury, in the long term, a decade or more, you might have seen a 0.1 per cent improvement on employment. The Gonski funding would triple the growth in employment if this government decided to invest in young people and actually supported needs based funding instead of cutting $30 billion out of education and $50 billion out of health funding in their 2014-15 budget—cuts which continue on with Medicare freezes and the like.

This government today put forward this legislation and speaker after speaker said how it was going to be good for small business and how it was a 10-year plan without any reference to any reports, analysis or anything to back up the platitudinous statements they made. But their own Treasurer dropped them in it during question time today. Question after question was put to him about their signature policy, the raison d'etre, the reason for the government, their championship of jobs and growth—remember the corflute's on election day and all throughout the campaign—and whether they would stick to it. Again and again he has refused to commit. So he is leaving those members who have made statements today high and dry.

What does this legislation actually say? What is the purpose of the bill? The purpose of the bill is this: in 2016-17, the company tax rate will be cut from 28.5 per cent to 27 per cent for companies with an aggregate turnover of less than $10 million. That is going to be progressively lifted over the period to 2022-23 with the effect that companies with a turnover of a billion dollars or more per annum—real small businesses there, guys—will be eligible at that time for the lower 27.5 per cent rate. In 2023-24, the threshold will be removed so that all companies will be subject to a 27.5 per cent rate. The general company tax will be reduced from 27.5 per cent to 25 per cent over the period of 2024-25 to 2026-27. And the turnover threshold that applies to determine whether certain small business tax concessions will be available, currently $2 million, will be retained for those applying to certain capital gains tax concessions, to be lifted to $5 million or $10 million or more.

So companies, within 10 years, with a turnover of $1 billion or more—small businesses they believe—will actually get these tax concessions at a time when the government is trying to cut funding for pensioners. They have cut the asset test and increased the taper rate so we have got a situation where pensioners are losing their income. Those opposite are all over the place having done a deal with the Greens on the asset test. They have then launched the attack through the Centrelink automated debt recovery process without any manual review whatsoever and failed to understand the impact of those debt collection letters upon people. We know that at least 20 per cent of those letters are actually wrong. The legal aid society from New South Wales reckon it is about a 37 per cent improvement in overturning decisions when Centrelink actually calculates a debt. So they are in fact more accurate. The government seems to think that there is nothing wrong, nothing to see here but it publicly releases personal information without privacy considerations. This particular government today is actually trying to do this.

The unemployment rate in this country has gone up from 5.7 per cent to 5.9 per cent, much higher than it was during the Global Financial Crisis and the highest in more than 12 months. There were 6,400 fewer jobs last month and a decrease of 33,500 part-time jobs. There are 1.1 million Australians underemployed—wanting more work but unable to find it. This government seems intent on actually giving tax cuts to corporate Australia without any analysis and without any information to back it up. Indeed Treasury analysis says to the contrary, that it will have virtually no impact at all on jobs and growth, which seemed to be the obsession of this government at the last election.

So what they are doing is not actually improving jobs—the unemployment rate is going up—and growth is anaemic. Inequality is at a record high, and these guys are not doing anything about it. They are not addressing it. The legislation before for the chamber today is going to accentuate the challenge we face. They should not be supporting this particular legislation. It is not in the best interests of a fairer Australia and it is not good for business either.