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

I move:

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

"whilst not declining to give the bill a second reading, the House:

(1) is of the opinion that with Government debt soaring ever higher, it's time the Turnbull Government abandoned its plan to give big business a multi-billion tax cut;

(2) notes that the Government is debating legislative fixes that are a result of its slapdash approach to policy making; and

(3) calls on the Government to commit to a post-implementation review of this measure".

Labor will support the Treasury Laws Amendment (Enterprise Tax Plan Base Rate Entities) Bill 2017, but we will not do so without calling the attention of this House to the Treasurer's litany of mistakes.

Just over 21 years ago, English Premier League side Southampton fielded a substitute player, Ali Dia, who had just arrived at the injury-depleted side with virtually unknown footballing credentials. In a match Southampton lost 2-0, Dia himself was substituted after a shocking performance and released from his contract within two weeks. As it turned out, he'd bluffed his way into the job by getting a university friend to impersonate Ballon d'Or winner George Weah in a phone call to manager Graeme Souness to extol the player's skills. Souness's misplaced faith was mocked for decades to come. The player whom Dia replaced, Matt Le Tissier, spoke of the new substitute's performance in the following terms:

He ran around the pitch like Bambi on ice. It was very, very embarrassing to watch.

Souness defended the decision on the basis that his playing stocks were depleted, but nonetheless confessed that the experience was 'a kick in the bollocks'.

As noted by Richard Cooke in The Monthly, the dire fiasco was in part a symptom of the pre-internet era. But what makes the experience of Southampton understandable, if not entirely defensible, is that they dealt with the roster situation swiftly. The contrast with the Turnbull government couldn't be clearer. Southampton addressed the issue within two weeks. We've had this Treasurer in his role for two years. We've seen the Treasurer slip and slide on policy positions like Bambi on ice, making mistakes with disheartening regularity. An error-prone history prefaces the bill before us today—a legislative fix to the unintended consequence of the government's rushed and poorly implemented tax plan. It is embarrassing to watch the Treasurer and the Minister for Revenue and Financial Services having to introduce legislation to clarify who's eligible for the lower corporate tax rate for small and medium businesses.

Let me be clear. Labor supports the small business tax cut. We just wish the government could have got it right the first time—or the second time. But, as I'll go on to discuss, it's taken the government three times to get this one right. But I'm afraid it's not the first time the Treasurer has messed up. He has 10 greatest hits on the muck-up table. No. 1 is his 15 per cent GST. In February 2016, when the tax white paper process had been abandoned, the Treasurer switched his focus to a 50 per cent hike on the GST. The Prime Minister started to back away but the Treasurer persisted—and after the conclusion of Senate estimates he dropped out GST modelling to the papers. But ultimately the Treasurer was rolled by the Prime Minister when the two of them realised—as the Australian community had known for years—that the GST is a regressive tax.

Then there was greatest hit No. 2, negative gearing excesses and hysteria. When Labor announced our carefully calibrated and prospective policy to restrict negative gearing to new dwellings and halve the capital gains tax discount, the Liberal Party didn't quite know what to do with itself. This was a policy supported by Joe Hockey in his outgoing speech, by Jeff Kennett and by Mike Baird. While waiting for guidance from the backbench, it seemed like the Treasurer might have considered negative gearing reforms. He appeared on Channel Seven's Sunrise program. When Kochie asked, 'Does it go too far?' the Treasurer said, 'There are excesses.' Kochie said, 'Does it need to be reformed?' The Treasurer: 'There are excesses.'

But then the Treasurer started to crab-walk away. At the National Press Club, he walked away from reforming negative gearing despite the fact it was clear that such reforms are needed. And he soon began embracing outright hysteria about Labor's negative gearing reforms, trumpeting a BIS Shrapnel report that, he purported, modelled Labor policy. BIS Shrapnel, to their credit, clarified to The Australian Financial Review:

The assumptions were set several months ago, and the analysis done late last year, well before Labor announced its policy. Therefore the assumptions do not align with Labor's policy.

The Treasurer could have picked up some warning signs in the report, which referred to Australia's GDP as $190 billion—well short of the true answer then of $1.6 trillion. The Grattan Institute's John Daley said:

Voters should be asking themselves whether a responsible government would rely on this sort of nonsense in a public policy debate.

But we now know that the Treasurer was sitting on analysis from his own department which sat in a desk, or maybe a filing cabinet somewhere in Fyshwick, for two years, until he was ordered to release it under freedom of information laws. That analysis stated:

In the long term, increases in taxation on rental property could have a relatively modest downward impact on property prices.

Why wasn't it heeded? The Treasurer said:

I didn't agree with them …

That's why. The Treasurer may be entitled to his own opinion, but the public are entitled to the facts.

Then there's No. 3, the timing of the budget. Having been sidelined on the tax white paper, GST and concerns over negative gearing, the Treasurer was going to stand firm on the date of the 2016 budget. Amid speculation that it might change, the Treasurer was asked if the scheduled date of 10 May 2016 was going ahead, and he said, 'That is the planning we have in place.' It wasn't. The Treasurer was rolled by the Prime Minister, who decided to bring forward the budget in a decision all to do with politics rather than policy, and advised the new timing via a cabinet teleconference.

Then there's No. 4, the hole in the Liberals' black hole claims. In the 2016 election, the longest in living memory, the government attempted to peddle dodgy numbers about Labor's policy. Journalists discovered, within a matter of minutes of the Treasurer releasing those numbers, a $19 billion mistake in their claims about a policy released by Labor just days before. The Treasurer was later reduced to giving himself a $35 billion variance in his statement about Labor's costings.

Then there's No. 5, the omnishambles. In 2016, we saw the Treasurer demonstrate that, while the Liberals are good with division, they're not quite so good with addition. The Treasurer, extraordinarily, produced numbers which had stuff-ups in them, with the acting secretary of Treasury seemingly bullied into releasing a statement saying the wrong numbers were 'due to a computational error'. We then had the Treasurer, in April last year, with extraordinary chutzpah, responding to the tax office's court victory over Chevron by tweeting:

Chevron will pay more than $300m to the ATO proving the govt's program of tax avoidance funding and new measures is working

But here's the thing: the Liberals voted against the very laws that the tax office used to take on Chevron. Specifically, in 2012, the coalition voted against the then Labor government's Tax Laws Amendment (Cross-Border Transfer Pricing) Bill (No. 1) 2012. At the time, they claimed the law was retrospective. In reality, it simply clarified the operation of our tax laws and ensured that multinationals couldn't exploit loopholes. If the Liberals had had their way, the budget would be $300 million worse off. If the Treasurer was being honest, he would have tweeted: 'I got it wrong in 2012. I'm glad Labor did the right thing, and this judgement is based on Labor laws that I voted against.'

But they continue to make this same argument. Late last year, during Senate estimates, the Australian Taxation Office confirmed that none of the $4 billion clawed back from multinational firms over the previous financial year could be attributed to Liberal laws, despite their repeated attempts to claim otherwise. The most diligent Senator Ketter asked the tax office's international deputy commissioner, Mark Konza:

In terms of the $4 billion that you announced was raised on 23 August for the last financial year, I'm interested in knowing how much of that is directly attributable to the multinational anti-avoidance law?

Mr Konza replied:

The answer is nil. The multinational anti-avoidance law only came in in 2016. The $4 billion concerned audits that went back as far as 2008 …

So the Treasurer and the Minister for Revenue and Financial Services have been telling blatant untruths when they've claimed it was their policy responsible for cracking down on multinational tax dodging. To top it off, the government spent $8 million in advertising their multinational policies. That is $8 million more than the revenue that we know to have been raised by those laws.

One revenue measure the government can take credit for is the bank levy, but from the get-go they couldn't even clarify simple details, such as whether the levy was tax deductible. The Treasurer's office issued a statement in the weeks following the budget announcement that included the statement, 'The government believes the bank's figures support Treasury revenue forecasts of $6.2 billion over the budget forward estimates.' But, a month later, testimony at the Senate Economics Legislation Committee confirmed a $2 billion budget black hole in the government's bank levy. The Treasurer refuses to release modelling backing the $6.2 billion claim—but he's always willing to release material that makes false claims.

That brings us to false claim No. 6, the pretend analysis of Labor's policies. Last year, the Parliamentary Budget Office took the extraordinary step of issuing a correction about claims made in the media. The Treasurer had been peddling modelling—fictitious numbers about Labor's tax policies—to favoured journalists and claiming that these numbers were from the Parliamentary Budget Office, but they weren't. As the Parliamentary Budget Office said:

References in the media this morning to modelling being released today by the Parliamentary Budget Office are incorrect. The analysis reported in the media this morning was not conducted by the PBO.

Then there is No. 7: the Treasurer's talk of lowering tax while he's trying to raise it. The Treasurer has regularly put on the garb of a low-tax crusader, wrapped himself in the cape of a man who is keen on cutting income tax for middle Australia. If you're a millionaire or a multinational then the Treasurer is there to back you, but seven million Australians face a tax hike under this Treasurer. At a time of low wage growth, at a time when this government is supporting cutting penalty rates and at a time when we are seeing the safety net, as the member for Gorton has pointed out, moving from 16 per cent of workers to 24 per cent of workers, the Treasurer sees fit to whack Australians earning as little as $21,000 with a hike in the Medicare levy. A worker on $60,000—a police officer or a teacher—will pay an extra $300 a year in income taxes under the Liberals compared to Labor.

Labor believe in progressive taxes. We support the reintroduction of the deficit levy on the basis that the debt has continued to increase and the deficit hasn't gone away. Why should the only temporary measure to get the budget back in surplus be the one that hits the top end of town? We would raise over $4 billion more than the government by increasing the Medicare levy only for those earning more than $87,000 a year and keeping the deficit levy on those income earners earning more than $180,000. Nine-tenths of that reintroduction of the deficit levy would be paid by the top one per cent, a group of Australians who have seen their share of income double in the past generation. The Medicare levy above $21,000 is a flat tax. When you ask a hairdresser and a surgeon to each pay 0.5 per cent of their income, that's a flat tax. Progressive taxes reflect the reality that a billionaire has greater capacity than a battler to pay for schools, roads and hospitals. With inequality as high as it has been in three-quarters of a century we don't need more flat taxes in Australia.

Then there is No. 8: the Treasurer's analysis of inequality. Earlier I paraphrased the great American professor turned senator Daniel Patrick Moynihan, who enjoyed saying to opponents, 'You're entitled to your own opinion, but you're not entitled to your own facts.' The Treasurer has claimed that inequality has 'actually got better', but experts from around the world, from Oxfam to the Reserve Bank of Australia, have confirmed what many Australians already know—that inequality is indeed increasing. The Australian Bureau of Statistics data shows that, since 1975, real wages have grown by 72 per cent for the top 10th but 23 per cent for the bottom 10th. The labour income share in the economy has fallen from 75 per cent in 1975 to 60 per cent today. Fat profits; skinny pay cheques.

The Treasurer tells us that we should look at the Gini coefficient. Let's do just that. Peter Whiteford shows that the Gini in 1981-82 was 0.27 but by 2013-14 it had risen to either 0.3 or 0.33, depending on whether you use the Melbourne Institute's Household, Income and Labour Dynamics in Australia survey or the Australian Bureau of Statistics income surveys. Either way, the Gini is up. My own estimates of pre-tax Gini coefficients for men from 1942 to 2010 show that we have seen a fall in the Gini coefficient from about 0.35 in the early 1940s to 0.27 in the early 1980s and then back in the region of 0.36 to 0.38 by the 2000s.

The top one per cent income shares are up. The top one per cent wealth shares are up. The share of national income held by the rich list is up. But the facts didn't stop the Treasurer using taxpayer money to mail out an 80-page glossy to Australian CEOs trumpeting Treasury analysis on inequality and wage growth. Will he release it? I don't think so.

Then there is No. 9—the Treasurer's own goals on company tax cuts. In December 2017, Treasury analysis commissioned by the Treasurer and released late on a Friday afternoon again clearly demonstrated that, for companies with a turnover of more than $50 million, workers are not remunerated in line with their productivity. This came on the back of OECD analysis earlier this year showing that Australia lagged most other OECD economies when it came to workers getting a fair share of productivity gains. This selective release of data late on a Friday is characteristic of the way in which this government operates. While this House was passing the historic same-sex marriage laws at the end of last year, the Turnbull government released tax transparency data. They didn't want the public to ever see these data. They voted against the laws and tried to get rid of them. The figures showed that one in three large firms in Australia pay no tax, including more than 100 firms that reported more than a billion dollars in total income.

And then there's No. 10—the bill we are debating today: base rate entities, patch-up on a patch-up. As I have noted, Labor have always supported a lower tax rate for small businesses with a turnover of up to $2 million. So we need to make sure that the eligibility rules for the lower rate are right. But we have had concerns being raised as far back as September 2016 about the applicability of these laws. Bodies such as The Tax Institute and the Chartered Accountants Australia and New Zealand, while welcoming the clarification, have recommended a post-implementation review of the legislation, possibly by the Treasury or the Board of Taxation. We hope the government heeds their calls. Support for this technical amendment has no further implications for Labor's position on the threshold at which a lower company tax rate applies. This is simply about clarity in the operation of tax laws, as long as a two-tiered company tax rate stands.

Under the measures contained in this bill, if more than 80 per cent of a company's assessable income is of a passive nature, for example, rents or dividends, they won't be eligible for the lower rate. Many of these entities are known as 'bucket companies', associated with discretionary trusts. The legislative patch-up is a result of the government's poor implementation of their $65 billion corporate tax giveaway. Indeed, it's extraordinary that as debt continues to soar—and those who have received their paperwork back from last year's tax return will have seen gross debt now at $501 billion—the Turnbull government refuses to abandon the rest of its plans to give some of the biggest companies in the world a huge tax cut.

In the case of the eligibility for passive investment, eligibility for lower tax thresholds was always intended to be contingent on 'carrying on a business'. The receipt of passive investment income hadn't been regarded as enough for a taxpayer to be able to demonstrate that. The government claims that, during the phase-up of company revenue tax thresholds, there was no intention for passive companies to receive lower tax rates. That has been Labor's understanding as well. Passive income entities would only be eligible for the same tax rate as other corporate entities if and when the corporate tax rate was uniform for all entities, which on the government's current schedule would be the 2023-24 income tax year at 27.5 per cent. Interestingly, the government are silent on why they exclude passive income entities during the phase-in period of their tax cut but include them at full implementation. No policy case has been given, which is rather telling.

As I noted, the tax practitioner consternation began in 2016, and in July last year the Minister for Revenue and Financial Services finally commented on the issue but didn't comment in a way that suggested she took those concerns seriously. Instead, she described the industry's concerns as 'premature'. The government was too focused instead on tax cuts for millionaires and multinationals. The detail of getting a small business tax cut right wasn't a priority, despite the fact that a small business tax cut had bipartisan support. In September 2017, we finally saw the government admitting that it had made a blunder. But, as we understand it, this bill is about to be amended by the government. They are going to patch up their patch-up. This is another omnishambles from a government that has shown its inability to get the detail right. If you're not focused on getting the detail right for small businesses, how can Australians have confidence in economic leadership in this country?

When the now Prime Minister rolled his predecessor, he said some of the key reasons for doing so were the loss of 30 Newspolls in a row—how's that going for you, Prime Minister?—and the lack of economic leadership. And as this bill has shown, Australia is failing to get the economic leadership from this government that it was promised. The government has failed to provide timely clarity to businesses and tax practitioners this year to avoid the chaos that flowed through at tax time last year. They are amending their own amending bill, admitting yet again that they haven't been able to get the detail right on the status of passive income.

Labor will support the government fixing their blunders. Let's face it, that's a lot of what we do on this side of the House—that is, try to save the government from making more blunders. Yet again we've seen this Treasurer unable to sort out the details, and a revenue minister who can't work out whether or not Labor's plans will send up or send down house prices. Yet again they're not focused on the detail of implementation. Labor will support this bill, this patch-up of a patch-up, but we shake our heads in so doing.

Ted O'Brien (Fairfax, Liberal Party) Share this | Link to this | Hansard source

I found it very difficult to follow the member for Fenner's logic there, typically criticising the government. One thing that he failed to mention, despite his apparent background in economics, is that Australia is in fact a free market economy and, therefore, it needs to be competitive. He did not touch on what's happening in the United States, despite the fact that the reduction in corporate tax rates being introduced in the United States is going to have a devastating impact on the Australian economy, unless we respond accordingly. Indeed, we need to ensure that we make Australia even more competitive than it is today because, at the end of the day, that will provide jobs as it means companies can maintain and reinvest more of their profits.

I am happy to be here to talk about this topic, because believe it or not I'm one of those odd ones in this House who actually gets pretty excited by tax law. I find it particularly exciting when a federal coalition government is working hard to reform tax law, albeit often in the face of perverse partisan resistance, which is what we have seen from the member for Fenner. Our aim is to better support our competitiveness in capital markets and ultimately create more jobs. These are real jobs, and this government has achieved record growth because of these real jobs. As we have heard time and time again over the last few days: 403,000 new jobs were created across the Australian economy last year—403,000 jobs! That is more than 1,100 jobs created each and every day, more than three-quarters of which were full time. That's an outstanding achievement, and this government's hard-won tax reforms are a big part of that success. The bill before the House simply seeks to build on that momentum by ensuring the government's Enterprise Tax Plan is targeted to deliver job-creating stimulus, precisely where and when it will do the most good, with minimal waste and unnecessary expense to the taxpayer.

This House is well aware of the government's broad strategy to help guide and drive reforms—precisely targeted reforms that deliver real incentives for the job creators of the new economy, the innovative businesses and the visionary entrepreneurs. The Enterprise Tax Plan No. 1, which recently passed into law, and the Enterprise Tax Plan No. 2, which is currently before the parliament, are both key ingredients of the government's core strategy, which continues to drive jobs and growth across the economy. The genius of the government's plan has been to comprehensively reject the chaos and operational dysfunction of the Rudd and Gillard governments by imposing a carefully coordinated alignment of programs and outcomes across key portfolios.

A perfect example of such alignment is how the Enterprise Tax Plan nicely complements the Turnbull government's signature National Innovation and Science Agenda, both working together to support new and existing enterprises, and to encourage job opportunities and growth right across our national economy. This is an agenda that commits government to support a smart future. It's an agenda to advance Australia's international competitiveness and help us become a leading smart economy within that global international political economy. This is a new and rapidly evolving economy that requires new skills and delivers new opportunities, not only to lift the living standards of Australians but to firmly stamp our brand on a century just brimming with promise. This bill is part of that vision, as it helps to ensure both the efficacy and integrity of the government's cornerstone Enterprise Tax Plan. This is a great plan, the key concept of which has again been endorsed by no less than the International Monetary Fund. And that, of course, directly contradicts the economics that we heard from the la-la land of the member for Fenner in his address, just before mine.

The January 2018 update to the IMF World economic outlook reveals that half of the expected lift in global growth, up to an estimated 3.9 per cent over 2018-19, will be due to the effects of the Trump tax package, which sends US corporate tax rates plummeting to just 21 per cent. Does this tell us that lower corporate tax rates stimulate economic growth? Well, yes, it does—of course it does—but there's a sting in the tail with this one for us. The recent IMF report analysed the impact of a drop in the US tax rate on global growth, while an analysis from last year also released by the IMF suggests that the US tax cut would reduce Australia's GDP by one per cent and threaten the sustainability of Australia's tax system unless we respond. And it's not just the IMF. As eminently credible as that organisation is, this assessment is also consistent with the Australian Treasury's analysis. Treasury finds that the negative consequences to Australia of the US corporate tax cuts 'could be offset by the implementation of the government's Enterprise Tax Plan'. The Treasury and the IMF—surely this crucial debate should be at its end, yet the opposition continues to try to fight the government's tax plans.

Labor have been caught out, pure and simple—caught out on their self-serving attempt to deny Australians the clear benefits of the government's plan. After months of misleading claims and self-righteous hyperbole, especially from their leader, who is desperately trying to fan the flames of class envy for an upcoming by-election and to feed his own personal ambition, Labor's position has been exposed as an utter sham and is now laid bare for all to see. After all, who could reasonably deny the common sense, the sheer logic of the government's enterprise tax plan? By gradually folding in predetermined corporate tax cuts to benefit higher turnover thresholds through to 2023-24, when thresholds are removed, Australia's corporate tax system will remain competitive compared to overseas markets and ensure critical capital inflows are maintained. While the natural bias of those opposite is to favour a command economy, the fact is we operate in a highly competitive free market global economy, and compete we must.

The additional benefit of the government's plan is to give more Australian businesses the ability to retain and invest their profits, to innovate and grow, and ultimately to employ more of our fellow Australians. The measures outlined in this bill will help do just that. This bill ensures that companies who have more than 80 per cent of their assessable income as passive income will not qualify for the lower 27.5 per cent corporate tax rate introduced as part of the government's enterprise tax plan no. 1. This new measure replaces the previous 'carry on a business' test as a prerequisite to access the lower rate and will apply from the current 2017-18 financial year onwards. However, subject to the Treasury Laws Amendment (Enterprise Tax Plan No. 2) Bill 2017 passing this parliament without critical amendment, the lower corporate rate will then apply comprehensively to all companies from 2023-24. I fully support this measure, principally because it complements the government's strategy of applying the initial corporate tax cut directly at the coalface for those small and medium businesses best able to grow and create the jobs that will help deliver a more sustained spending burst to reinforce the consumer economy before the scaffolding of the higher corporate tax rate is completely removed in 2023-24 at the conclusion of the threshold phase.

This bill will determine eligibility for the lower corporate tax rate by imposing a new passive income test to effectively exclude those companies that derive most—defined as over 80 per cent—of their income from passive sources, such as interest, dividends, rents and so on, from assessing that lower rate. This is far different from what we hear defined by those opposite, far from the wild and reckless claims of the Labor Party. The bill being debated today further demonstrates just how targeted and balanced the government's comprehensive enterprise tax plan actually is. The second tranche of this plan, the Treasury Laws Amendment (Enterprise Tax Plan No. 2) Bill 2017, drives home this reform with a further reduction in the corporate tax rate to 25 per cent for all corporate entities by 2026-27. This will complete the task of ensuring Australia's corporate tax rate remains globally competitive, allowing Australian businesses to attract investment, employ more Australians and confidently base their future planning on a 25 per cent tax rate—a rate, I might add, that Treasury modelling indicates would generate a sustained increase of over one per cent to Australia's long-term GDP.

Rather than looking after the top end of town, as the Labor Party pretends to argue, this is actually a multi-staged tax reform package that benefits all Australians, a reform that is essential to our prosperity and competitiveness as a nation and as a people. It's worth noting that Australia has slipped 12 places in the overall Institute of Management Development World Competitiveness Ranking to 21st in the last seven years, from 2011 to 2017. As an aside, the House may be interested to know that China gained seven places in the 2017 listing to claim 18th spot, the second largest jump up the listing. For those who may be interested, the largest jump came from Kazakhstan, which went from 47 to 32.

So the cold reality is that Australia must become more competitive. Any Australian government, or opposition for that matter, that puts our global competitiveness at risk, either in our ability to attract capital or in our ability to export goods and services, compromises the prosperity and wellbeing of every Australian. Unlike the Labor Party, this coalition government both acknowledges and respects Australia's place in the world. We are relentless in our ambition to implement sensible, well-considered policy to better leverage Australia's global position and to improve the security and standard of living of all Australians. It's for this reason that I commend the bill to the House.

Julie Owens (Parramatta, Australian Labor Party, Shadow Assistant Minister for Citizenship and Multicultural Australia) Share this | Link to this | Hansard source

If there were any bill that we have considered in the last few months in this House that goes to the confidence of this government, the bill before us would be it. This is a bill that attempts to fix a problem with the government's key centrepiece policy, which is its big business tax cut. This policy has been around since it was announced in 2016 and then legislated in 2017. It has problems that tax agents and business have been warning the government of since 2016. Today, in 2018, seven months into the financial year, we have come into this House to deal with an amendment to fix a problem in this financial year. After businesses have made their decisions and judgements and after accountants have made plans based on the law as it is, seven months into the financial year, we're making an adjustment to something that was well known and could have been foreseen way back in 2016.

Let's look at what this is all about today. Passive investment companies, sometimes called bucket companies, earn their income through passive investments. Through inadvertently neglecting to address those kinds of companies in their original legislation, the government have allowed those companies to benefit from the business tax cut. That was never the intention. This little piece of legislation today, the Treasury Laws Amendment (Enterprise Tax Plan Base Rate Entities) Bill 2017, attempts to address that. It is very dry reading. It contains great new acronyms, like BREPI, the base rate entity passive income. The story of how this inadvertent error in their drafting has been hanging around since 2016 without action is really quite instructive, because it tells you a great deal about the government's sloppy work up-front and their inability to listen to people, to listen to experts. The criticism has been absolutely consistent since 2016. The incompetence here is really quite extraordinary.

We heard the previous speaker talk about how wonderful this will be. As I said before, this is the only policy that this government has. By the government's own figures—never mind the member for Fairfax claiming we made the figures up—this one-point plan will provide a one per cent increase in 20 years time. That's a $2 a day increase in wages in 20 years time. That's it. That's the benefit. So there is $65 billion for that benefit, on the government's figures—not my figures, not some commentator's figures, but their figures. So the policy itself isn't actually competent.

Before I move on, I point out that the vast majority of businesses that invest in Australia come from countries with lower business tax rates than ours, so they're investing in Australia because they wish to invest in Australia. If tax rates themselves were the answer then it would be impossible to have a situation where the vast majority of investors in Australia come from regimes with lower business tax rates, not higher.

But let's talk about exactly how this happened, because this is really quite interesting. I'm actually going to go through the time line, because that's the key to pointing out exactly how incompetent this is. I'm not going to go right back to the beginning. I'm going to go back to 1 August last year, seven months ago, when TheAustralianFinancial Review reported:

Tax time has been plunged into chaos by uncertainty over which companies are eligible for the lower tax rate of 27.5 per cent but the nation's biggest accounting bodies are split over what should be done.

Chartered Accountants Australia and New Zealand is demanding the Turnbull government end the uncertainty with a legislative fix when Parliament returns next week.

"Because Australia's tax system is based on self-assessment, it is up to taxpayers and their advisers to lodge tax returns based on what they think they should be paying," Chartered Accountants' tax leader Michael Croker said.

"But without clarity we will see differing tax calculations for taxpayers in similar circumstances, impacting their tax, franked dividends and accounts."

That was 1 August last year. That wasn't the beginning of it; it was actually much earlier than that.

The tax cuts plan was announced way back in 2016. Shortly after it was announced on 27 September 2016, Chartered Accountants Australia and New Zealand raised concerns with the Senate Economics Legislation Committee about uncertainty as to whether passive investment companies were eligible for the government's then proposed tax cut. That was September. It was passed just before the budget in May, so that's eight months before the bill actually hit this House for its final debate. Chartered Accountants Australia and New Zealand were already raising concerns about whether passive investment companies and bucket companies, as they're affectionately known, would be eligible for the proposed tax cut. It is really clear that the government never intended that passive investment companies would receive the tax cut; it was designed for operating businesses that were working out there.

On 15 March 2017, the ATO issued a draft ruling on an unrelated matter, containing a footnote with what amounts to a definition of 'carrying on a business'. That kind of sat there, and the accountants out there in the field, the accounting peak bodies, realised that that might have an impact and started contacting the government and making comments. The enterprise tax bill was ultimately passed on 9 May 2017, but without this issue of eligibility being addressed either legislatively or through public guidance from the ATO.

On 4 July 2017, the Financial Review wrote an article that passive investment companies, including bucket companies associated with family trusts, would become eligible due to the ATO's apparent view of the definition of 'carrying on a business'. By 17 July, it was already in the media. It had been raised nearly 10 months earlier by the peak bodies, and now 10 months later it had hit The Australian Financial Review. It was well and truly out there. Then Minister O'Dwyer issued a press release stating:

Reports today that the Australian Taxation Office … has broadened the interpretation of company tax cuts are premature.

That was July 2017. The Australian reported:

The Turnbull government has been forced into urgent action to close a … loophole that could have opened a tax windfall for wealthy families … saying it may have no choice but to introduce new legislation.

That was July last year, at the beginning of the tax year, of which we're now in the seventh month. At the beginning of the tax year, there was already media coverage by some of the more respected newspapers in this field, and peak bodies had been talking about it for eight months. It was the beginning of the tax year in which this law applied.

Senior BDO tax partner Tony Sloan replied in July in an article in The Australian that the government has a problem here:

The ATO does not take dictation from politicians. There is a mountain of tax cases that support the ATO's interpretation of the measures that ushered in the tax cuts.

There was quite a debate going on out there about this. The article goes on to say:

Since 2015, the federal government has reduced the company tax rate for smaller companies … Mr Sloan says the legislation that introduced the tax cuts was "too broad" to exclude passive family investment companies.

So people who interpreted the tax law for clients out there in the field were saying it as well. Peak bodies had been saying it for eight months. The media was reporting on it. The ATO had made a ruling. The financial year had just begun. And, now, seven months later, finally, the government is acting by introducing this bill. Mr Sloan went on to say:

The ATO is actually acting in good faith here, and applying the law as it is currently drafted.

If the law doesn't work, the government will have to fix it. That could mean having to change the tax measures as they stand through changes to the tax cut legislation. The government can try to bend the tax office on this, but they can't snap them in half.

Then, on 1 August, the Financial Review put out the article that I read earlier.

It was also mentioned in this House in September 2017. The shadow Treasurer, Chris Bowen, said in this House in September 2017:

I mentioned, before, the matter of competence, which is something that leaves the Labor Party plenty to talk about … In relation specifically to corporate tax and the legislation before the House, we have seen very considerable confusion over recent weeks about the government's approach: which businesses are eligible; the contrasts between active trading businesses; companies holding passive investments. You would have thought that, on the centrepiece of economic policy which was announced in last year's budget, the government could've got the detail right. But here we have, in this case, the minister for revenue playing desperate catch-up, saying: 'Oh, no, you've misunderstood the law. That's not what we mean.' Well, there are plenty of experts out there who will point out that the legislation, in their reading of it, has a different impact from the one that the minister for revenue and the government would assert it has. So it goes to the heart of the competence of the government—let alone their wrong priorities—that they have not been able to get that policy detail right.

That was September last year—at least a year after the tax cuts were announced and at least a year after the peak bodies started saying that it would be a problem.

On 18 September, the government finally released draft legislation for Treasury consultation. The submissions to the Treasury website haven't been published, but some of the submitters sent them to the opposition. The Tax Institute, for example, noted that the broader issues of defining 'carries on a business' applies only to tax rate matters and not in other applications of law. So what we've got now are experts in tax law pointing out that we have different definitions. We have 'carries on a business' generally and, for this particular aspect of tax law, there's another one.

And, again, I would say that we are seven months into a financial year and we're discussing a piece of legislation that fixes a problem which was known eight months before the start of this financial year. For all the talk on the other side about certainty and how you have to give business certainty—come on! It is ridiculous that we're dealing with this. It is 20 or 21 months since this problem was identified and we're now talking about saying to businesses that have organised their tax affairs, made plans based on the law as it is and talked to their accountants that the last seven months and the decisions they have made are now going to be completely rewritten. We support the rewriting of it, by the way. We support the closing of this loophole. But I just point out to the other side of this House how frequently they talk about certainty and their understanding of the importance of making sure that business has a known playing field in which to operate. They talk about that. They know that. They don't deliver it. When it comes to delivering in this House, all of those rules and all of that understanding of the need for business to know what the rules are go out the window. It's not because they choose to throw them out the window; it's because they don't work hard enough and they're just not competent when it comes to consulting with business.

And this morning there was another one. This morning, the Treasury Laws Amendment (Enterprise Tax Plan Base Rate Entities) Bill 2017 was tabled. So now we have another amendment to this amendment. Now, it turns out, the definition of 'interest' for the purpose of passive income needs a special definition for this section of tax law. So now we have a special definition of 'business activity' and a special definition of 'interest', because they didn't get this right in the first place. Again, I know from sitting in committees and talking to the members opposite that they know how important it is to reduce the number of definitions—not to have more tax law definitions so that every time you turn around you have to think, 'Does that definition mean this or that?' depending on which bit of law you're reading. This is quite absurd. We're also seeing in the submissions that the experts out there don't think it's over yet. They think that, at some point fairly soon, the Commissioner of Taxation will have to issue further advice on the definitions of rent and royalties.

What we're talking about here is not some tiny little bit of policy or legislation; we're talking about the only piece of policy that the government has designed to make this economy grow—by one per cent over 20 years. That's it. This is the centrepiece. This is the thing they talk about over and over again. This is all they have, and they couldn't get it right. Seven months into a financial year, 20 months after the problem was first raised, we're walking in here and discussing an amendment which will affect what businesses have done over the last seven months, the structures they've set up and the decisions they've made. This is incompetence. We don't need anything more than this little piece of amendment that we have here in front of us—the two, rather—to make a judgement on the competence of this government, and it's very, very poor.

Debate adjourned.