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

I move:

That all the 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 notes that the Government's return to surplus—already at risk by the abandonment of fiscal rules—is premised on an accounting change in the timing of the imposition of tobacco excise'.

Labor will be supporting these bills which, in the main, put in place sensible, uncontroversial changes aimed at cracking down on the black economy. Schedule 1 to the black economy bill denies an income tax deduction for certain payments if the associated withholding obligations haven't been complied with. To give honourable members an example of that, currently it is possible to claim as a deduction withholding payments such as pay-as-you-go earnings, even if the required withholding obligation hasn't been met. Changing the rules around that will provide a greater incentive for employers and entities engaging contractors to comply with their withholding obligations, and that measure will have a positive but unquantifiable gain to revenue. It is a recommendation from the Black Economy Taskforce's final report.

Schedule 2 to the black economy bill requires entities providing road freight, IT or security, investigation or surveillance services that have an ABN to report to the tax office information about transactions that involve engaging other entities to undertake those services for them. That's an expansion of the taxable payment reporting system introduced by the former Labor government for the construction sector and expanded with Labor's support to the courier and cleaning services. That measure is projected to increase revenue by some $605.8 million over the forward estimates, and it too was a recommendation of the Black Economy Taskforce's final report.

The two bills also amend the excise acts to establish a framework to make excise duty on tobacco due and payable at the time of manufacture. It's an issue that was touched upon in debate earlier today in a customs tariff bill, which deals with parallel issues relating to the implementation of this change. As my colleague the member for Blair pointed out, the change in timing is ostensibly to reduce the importation of illicit tobacco. But, just coincidentally, in a 'Oh, my goodness; is that you, Deirdre Chambers?' kind of moment, the measure moves $3.27 billion into tax year 2019-20. That's because the change is to tax tobacco 12 weeks earlier, upon its entry into Australia, rather than when it leaves the warehouse.

This is really an advertising trick, pretty much what you'd expect from a government led by a former advertising executive, albeit one who was fired by the Howard government—

Mike Kelly (Eden-Monaro, Australian Labor Party, Shadow Assistant Minister for Defence Industry and Support) Share this | Link to this | Hansard source

Where the hell is he?

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

Indeed! I appreciate the interjection by the member for Eden-Monaro. Without that timing trick, the return to surplus would be pushed back a year to 2020-21. This is coming at the very time the government is in confusion, inconsistency—that's being too kind; they are in complete abandonment of their fiscal rules.

Let's just remind the House what those fiscal rules say, from the 2018-19 budget:

The budget repair strategy is designed to deliver sustainable budget surpluses building to at least 1 per cent of GDP as soon as possible, consistent with the medium-term fiscal strategy.

A little back, before the 2013 election, we were promised surpluses in the first year and every year after that, but that's this year's fiscal strategy.

The strategy sets out that:

As recently as 26 September, the finance minister told Sky News:

No. I do not know where all this speculation comes from. The rule remains precisely the same.

But then the Prime Minister began to crab-walk away, saying, 'There are exceptions to the rules.' He said, somewhat confusingly:

The government reserves the right to exercise that discretion, but they are the rules.

The finance minister then went a little bit further:

Actually, the offset rule in our fiscal strategy in our budget requires that any new spending measures have to be more than offset with spending reductions in other parts of the budget.

What we are talking about here is a tax cut.

As my colleague the shadow Treasurer told the House yesterday, apparently the fiscal rules are now that tax cuts don't need an offset; only spending measures need an offset. The problem is, then, if you're not going to offset them, how are you going to pay for them? So you're spending the revenue upgrade, which is effectively a breach of the fiscal rules. No matter how you cut it, the Liberal Party is planning to breach its fiscal rules by not offsetting tax cuts, by effectively not having a way to pay for the tax cuts, by breaching its own fiscal rule, which says that improvements to the economy, to the extent that they improve the budget bottom line, should be banked rather than spent.

So then Australians are entitled to say, 'What will be the long-term effect of this?' Is it to be an increase in debt already in excess of $20,000 per person, in gross terms, in excess of $14,000 per person in net terms? A Liberal Party that once drove debt trucks around the country should now be driving debt road trains around the country.

Andrew Hastie (Canning, Liberal Party) Share this | Link to this | Hansard source

I call the minister for immigration.

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

I draw your attention to standing order 75, in relation to the speaker being on the point of the bill.

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

Deputy Speaker—

Andrew Hastie (Canning, Liberal Party) Share this | Link to this | Hansard source

I haven't called you. Resume your seat, please. Standing order 75 is on relevance, and I remind you of it. I call the member for Fenner.

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

Thank you, Deputy Speaker. It is difficult to see how the minister could regard the fiscal rules as being irrelevant to a debate over a Treasury laws amendment bill. It speaks to this government's attempt to jettison its own fiscal strategy by suggesting in this House, as the minister has just done, that the fiscal rules are irrelevant to the debate on a Treasury laws amendment bill.

The very fact is that this bill has an accounting gimmick in it—an accounting trick that the projected budget surplus relies upon—which was one of the last-ditch efforts that the government made before completely abandoning any pretence of fiscal responsibility. This is a government which is engaged in fiscal profligacy and fiscal gimmickry and is unable to crack down on much of the wrongdoing that we've seen in the multinational profit shifting, tax havens and the black economy.

Of course we welcome the modest measures in this bill, but the government's complete failure to do anything about tax havens means they are ignoring the $600 billion of profits shifted annually to tax havens and the $40 million dollars of multinational profits shifted to tax havens. Tax havens are used by drug runners, extortionists and money launderers. The government's failure to close the loopholes that are allowing profits to be shifted to tax havens is imperilling the budget, as well as being a threat to good, honest businesses in Australia which are not availing themselves of tricky accounting tricks and tax havens.

Labor will get tough on multinational profit shifting and Labor will get tough on tax havens through our transparency measures, through cracking down on passports for sale, through the introduction of a beneficial ownership registry so we can see who really owns Australian firms, and through mandatory shareholder reporting of tax haven exposure. Labor believes in cracking down on tax loopholes. Labor takes seriously the task of budget repair.

In conclusion, at the next election Labor will be able to invest more in schools and hospitals. We will deliver more generous personal income tax cuts for the bulk of Australians. We will pay down debt faster over the forward estimates and over the medium term. We can do that because we've made the hard decisions under the consistent leadership of Bill Shorten and Chris Bowen over the last five years. Labor takes this task of budget repair and economic policy very seriously. We support these modest measures, but we wish the government would close the loopholes that remain gapingly wide.

Sharon Bird (Cunningham, Australian Labor Party) Share this | Link to this | Hansard source

I thank the member. As the member indicated he was summing up, I didn't interrupt, but I remind members they should refer to people by their titles and not by their names. The original question was that the bill be read a second time, to which the member for Fenner has moved an amendment. Is that amendment seconded?

Mike Kelly (Eden-Monaro, Australian Labor Party, Shadow Assistant Minister for Defence Industry and Support) Share this | Link to this | Hansard source

I second the amendment and reserve my right to speak.

Sharon Bird (Cunningham, Australian Labor Party) Share this | Link to this | Hansard source

The amendment is seconded, so now the question before the chair is that the amendment be agreed to.

Tim Wilson (Goldstein, Liberal Party) Share this | Link to this | Hansard source

Where does one begin after the address from the member for Fenner? That random, long dissertation and rant really had nothing of substance to it beyond the broad commentary and political narrative of an opposition that has never had any economic credibility—not ever; not even under him, and he used to be a professor in these things. He was seeking not even to remotely address the fundamental issue in the legislation, yet he has made an amendment to the bill, which I am sure will be just another pointless exercise in trying to drag members of parliament into this place for the purpose of his own ego, to show to other members that he is capable of moving these things. He can sit and swivel around in the chair that one day, he dreams, he might sit in more permanently.

When it comes down to it, this legislation is actually quite constructive. It's designed to try and help deal with things in a black economy. It's pretty straightforward. I don't even know why it's not just going through on the voices rather than the charade that's being put forward by the opposition. What we're trying to do is increase compliance with the law—and not just the practical application of the law but the spirit of the law. We actually don't think that people should be engaging in aspects of the black economy and deducting things unless it's necessary or appropriate under schedule 1 of the bill; dealing with tax reportability, particularly around domestic freight, in schedule 2 of the bill; and, of course, the matter which I spoke about earlier this morning, related to the collection of tobacco excise.

What we have in this country are thousands of law-abiding taxpayers and citizens. Every day, they wake up, brush their teeth and go off to work. They are on a PAYG system for the most part. They pay their tax. They're in small business. They make their reporting through their BAS, their annual returns and their company reports. And they carry the weight of this country. They're the ones who actually do the right thing. They're the people we should be backing. But we should be making sure that the people who don't do that, who wake up every day with their nefarious agenda of minimising tax—it's not just about minimising taxation, because invariably minimising taxation comes off the back of doing other illegal activity as well, though you can do it without engaging in illegal activity—or finding pathways or loopholes to try to keep more money in their pocket. By the way, I do understand that; I'm a small-tax person—big time. But everybody has to share the obligation of carrying the burden of supporting the structure to keep our country strong, safe and united and to provide support for those people who can't support themselves.

This bill, like all the other measures about the black economy, is designed to cut any loophole or any pathway where somebody can seek to undermine that degree of responsibility they have not just to themselves, not just to their country but to their fellow citizens. That's what this bill is about. It's not about grand political posturing by the opposition or the member for Fenner, because he wants to be able to get up and talk about how apparently there's some sort of problem in this government because it inherited a disastrous budgetary circumstance and the opposition has stopped pretty much any attempt to repair it. That's a thing they forget and don't like to draw people's attention to. Every time we try to reduce spending or reduce the debt, they get in the way, but then they sit on the side of this chamber and crow with their moral authority, the farcical basis of any economic credibility that this opposition has, and then use it to perpetuate the myths and the ideas that, if they were to come to government after the next election, somehow magically they would do away with their habit since the foundation of the modern Labor Party, which is that there is nothing that they're afraid to spend money on, there is no set of fiscal rules they're not prepared to break and there is no sense of responsibility to the Australian people that they're not prepared to trade off.

They're suddenly going to become model citizens, model custodians of the Commonwealth, adhering to tight fiscal rules in the same way that they farcically deceived the Australian people when Kevin Rudd promised in 2007, in the election lead-up, that he was an economic conservative. He only went on then to trash the inheritance that he got—trash it completely. We were one of the few countries in the entire world that had not just a budget surplus but cash in the bank. They then went on and spent more money and then legislated even more spending, stopped at every single point, any opportunity to bring the budget back and then had the temerity to sit on the other side of this chamber and lecture people about fiscal prudence, as we heard from the member for Fenner—

Milton Dick (Oxley, Australian Labor Party) Share this | Link to this | Hansard source

Why the debt double? You've been in government five years. The debt's doubled.

Tim Wilson (Goldstein, Liberal Party) Share this | Link to this | Hansard source

as we are hearing right now from the member for Oxley.

I don't mind if you want to come into this place and continually vote for more and more spending and to stop every single effort for the government to show any sense of prudence for the Australian budget. If that's your objective, that's fine. Just own it. Just be honest with the Australian people. There are people out there who will vote for that deception, that dishonesty, that misinformation, that irresponsibility. There are people out there who enjoy it because they see the benefit for themselves. I'm not one of those people. I like prudence; I like responsibility; I would like the taxes to be kept as best as possible for my constituents. I like to make sure that future generations won't inherit the legacy and profligacy of the member of Fenner, the member for Oxley—members who sit on the other side—and particularly the member for Lilley. Some of us actually believe in this and we're quite happy to stand up for it. The bit that's the exception is the absolute incompetence of the former government, who sit there and lecture us.

The party on the other side, the opposition, at their heart have no economic integrity. They do not have an economically prudent bone in their body or their infrastructure—in any part of their objective in seeking to govern this nation. They will always find an excuse. They will deceive the public before the election and find an excuse afterwards. The Australian people actually aren't that dumb. Nobody looks at the member for Oxley and says, 'He's a very prudent man, you know.'

Mike Kelly (Eden-Monaro, Australian Labor Party, Shadow Assistant Minister for Defence Industry and Support) Share this | Link to this | Hansard source

That's why they voted against you in every by-election.

Tim Wilson (Goldstein, Liberal Party) Share this | Link to this | Hansard source

Very prudent! He actually believes in consistent themes in the narrative, except for the fact that he's always arguing why he should spend more money. They don't look at the member for Eden-Monaro either and say, 'At his heart, the integrity of his policy platform is prudence and responsibility and wanting to keep more money in our pocket.' They look at them and say, 'No, it's more about the big hand of government in their pocket.' People see through it, so just own it.

We're being responsible, we're taking the steps, we're taking the measures to improve the status of the budget and relieve the burden that sits on the kitchen tables of this nation. People get their payslip at the end of the fortnight or the month—these days they're emailed—and what they see is a government that wants to reduce their tax burden, wants to reduce the liability and wants to say to the people who do the right thing, 'We're going to reward you,' not turning a blind eye to those doing the wrong thing, as has occurred sometimes in the past. That's the foundation of what these bills are about and what the government is about: backing those who have a go. I'm proud to stand for that, but I'm not sure there's any pride in the chicanery and games of those who sit opposite.

Sharon Bird (Cunningham, Australian Labor Party) Share this | Link to this | Hansard source

I thank the member. The original question was that the bill be now read a second time. To this, the honourable member for Fenner has moved, as an amendment, that all words after 'that' be omitted with a view to substituting other words. If it suits the House, I will state the question in the form that the amendment be agreed to. So the question before the chair now is that the amendment be agreed to.

Milton Dick (Oxley, Australian Labor Party) Share this | Link to this | Hansard source

I'm disappointed the member for Goldstein is leaving the chamber, because I wanted to start where he finished—about how he's doubled the debt under the Liberal-National government and that gross debt has now crashed through half a trillion dollars for the first time in the nation's history. I will put it on record as part of tonight's debate, while we debate these Treasury laws, that the national gross debt is at a record $540.1 billion. Net debt has doubled, gross debt has gone through half a trillion dollars and both kinds of debt are growing faster under the Liberals than under the previous Labor government. I understand the member conveniently left out of the equation, over the last 10 years, a minor international economic collapse—as we call it, 'the global financial crisis'. It was conveniently left out of the argument tonight. We will not take any lectures from the government—the alleged or phantom so-called 'economic managers' of this nation's fortunes—when our national gross debt is through half a trillion dollars and net debt has doubled. That is a fact. That's not spin; that's not messaging. That is a simple statement of fact.

I rise to speak on the Treasury Laws Amendment (Black Economy Taskforce Measures No. 2) Bill 2018 and the Excise Tariff Amendment (Collecting Tobacco Duties at Manufacture) Bill 2018 before the House tonight. They concern the black economy and collecting tobacco duties, both of which will have a positive effect on the nation's budget, which is a rarity when it comes to this government. On this side of the House, we support measures to tackle the black economy, which refers to people who operate entirely outside of the tax and regulatory system or who are known to the authorities but do not correctly report their tax obligations. It encompasses a wide range of practices which, at the end of the day, penalise honest taxpayers, undermine the integrity of Australia's tax and welfare systems and create an uneven playing field for the majority of small businesses, who are doing the right thing. Labor welcomes the government extending the use of measures introduced by the previous Labor government to tackle tax avoidance in the black economy, such as those we are debating today.

I want to spend some time going through the schedules, as the previous speaker seemed more intent on giving us a history lesson than actually talking about the bill tonight. Schedule 1 of the black economy bill denies an income tax deduction for certain payments if the associated withholding obligations have not been complied with. Withholding payments such as pay-as-you-go earnings can currently be claimed as a deduction even if the required withholding obligation has not been met. Schedule 2 of the black economy bill requires entities providing road freight, IT or security, or investigation or surveillance services that have an ABN to report to the ATO information about transactions that involve engaging other entities to undertake those services for them. This is an expansion of the taxable payments reporting system introduced, as I said, by the former Labor government for the construction sector, which has already been expanded by the government to courier and cleaning services, with this side of the chamber's support.

Both of these measures were recommendations of the Black Economy Taskforce's final report, which was handed down in October last year. I want to read to the chamber the chair's remarks in that report:

The black economy is a significant, complex and growing economic and social problem. In our opinion, it could have increased in size by up to 50 per cent since 2012.

The report also mentions:

In 2012, the Australian Bureau of Statistics estimated that the black economy equated to 1.5 per cent of GDP, with the illicit drug industry adding a further 0.4 per cent of GDP. This estimate is now outdated. We consider that the black economy could be as large as 3 per cent of GDP (roughly $50 billion)—

Think about it: $50 billion!

given the trends we identify in this Report—

which I believe is a fairly accurate measure. Whilst Labor welcomes the government's efforts to crack down on the black economy, I believe there are some sneaky measures contained in these bills. The sneakiest thing of all in the most recent budget is taxing tobacco 12 weeks earlier, upon entry into Australia, rather than when it leaves the warehouse as at present. This will boost tax receipts once and once only, in 2019-20, by $3.27 billion, which is convenient because it means the government is able to pull a rabbit out of a hat and return the budget to surplus a year early. What a coincidence, as Deidre Chambers would say. Without that timing trick, the return to surplus would be pushed back a year to 2021. Let me remind the House that this is a government which came to power on the back of a supposed debt-and-deficit emergency, which no longer seems to ever, in any shape or form, raise a mention from those opposite. We had debt trucks driving around Australia. We had billboards, leaflets, direct mail letters and TV ads about the debt-and-deficit emergency in Australia. Perhaps it's not mentioned now, because this government has taken a wrecking ball to the nation's budget and things have blown completely out of control since then.

I would like to put on the record that despite the member for Goldstein's valiant efforts he is in a state of denial when we talk about the budget blowout being four times worse than forecast in the Liberals' first budget. Gross debt has crashed through half a trillion dollars, net debt has doubled since they came to office and both kinds of debt are growing faster under the Liberals than under the previous Labor government, which we all know had a global financial crisis to contend with. Keep in mind that there have been very favourable global conditions and billions of dollars of extra revenue rolling into the budget, and the government has still managed to substantially worsen the budget position. So that's right—things have picked up, but the budget position has got substantially worse.

The world is taking notice of this as well, with the IMF last week downgrading the economic growth expectations for Australia and raising several risks for our future outlook. With heightened global challenges on the horizon, the IMF is urging countries to build up 'fiscal buffers' and, urgently, to adopt policies for strong and inclusive growth. Well, if the government is going to produce this strong, inclusive growth they had better get cracking. Wages growth, as we know, remains at historic lows, coming off an all-time high record of around 1.9 per cent last year, which we know has led to inequality being at a 75-year high.

I want to say clearly tonight, on the record, that this is not a government for working Australians. This is a government for the top end of town and which is out of touch with what the community expects. But there is an alternative, with this side of the chamber bringing cumulative services over the forward estimates. We will have a better plan to pay down debt and to put the budget on a more structurally sound footing with reforms that, as we know, are being outlined by the shadow Treasurer and the shadow Assistant Treasurer around a whole range of issues pertaining to negative gearing, capital gains tax, dividend imputation and trusts.

I want to talk briefly in the time remaining to me tonight about the government's inaction on offshore tax havens, and I thank the member for Fenner for raising the second reading amendment. Globally, around $600 billion of profits are estimated to be shifted to tax havens, representing almost 40 per cent of multinational profits. Tax havens are used by drug runners, extortionists and money launderers. Basically, they are used to hide fraud, corruption and tax evasion. According to one estimate, around four-fifths of money in offshore bank accounts is there in breach of other countries' tax laws. So the government must start taking action on tax havens.

Again, I say to the government that we offer to work in a constructive, bipartisan way on that. I call on them to adopt Labor's comprehensive package of tax haven reforms. I will briefly go through those and put them on the record tonight. They include an integrity measure, targeting people who shop for citizenship in tax havens. Under this system, passports or citizenship for sale by tax havens are deliberately structured to undermine the OECD's base erosion and profit-shifting program, particularly the Common Reporting Standard. Under a Labor government, if we are privileged to be elected, all individual Australian taxpayers would need to notify and declare to the ATO if they have residency or citizenship of any other jurisdiction, and the name of that jurisdiction.

Other measures of Labor's tax haven transparency include: mandatory shareholder reporting of tax haven exposure; government tenderers must disclose their country of tax domicile; all firms tendering for Australian government contracts worth more than $200,000 must state their country of domicile for tax purposes; developing guidelines for tax haven investment by superannuation trusts; and establishing a publicly-accessible register of the beneficial ownership of Australian listed companies. This will allow everyone to find out who really owns our firms. Shareholders should not be able to use complex structures and sham ownership to avoid complying with corporate transparency rules. There are also public reporting of country-by-country reports, whistleblower protection and rewards and ATO disclosure of settlements and reporting of aggressive tax minimisation. When revenue gets lost to tax havens Australians ultimately have to pay higher taxes or suffer cuts to vital services.

In closing, Labor welcomes the introduction of these bills by the government and we support these measures to tackle the black economy. Despite the government slipping in some accounting tricks, as we've identified tonight, to enhance the budget's bottom line for a single year, I'm happy to say that these measures are sensible and practical in order to crack down on the black economy. But I close my remarks tonight by saying that we on this side, under the leadership of the Leader of the Opposition, the shadow Treasurer and the member for Fenner, recognise, and will continue to make sure, that the work still to be done is done, because more work still has to be done in this area.

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

Firstly, I would like to thank those members who have contributed to this debate. In the 2018-19 budget, the government responded to the Black Economy Taskforce's final report by announcing measures to address the growing economic and social problem of the black economy. These bills introduce the 2018-19 budget measures.

Schedule 1 to the Treasury Laws Amendment (Black Economy Taskforce Measure No. 2) Bill 2018 introduces changes to deductibility rules, denying a tax deduction for certain payments where an entity such as an employer fully fails to comply with their withholding and reporting obligations, therefore encouraging non-reporting or underreporting of incomes by their employees and contractors. It will send a message that certain black economy behaviours are not legitimate activities by removing deductibility where the obligations are disregarded.

Schedule 2 to the bill extends the taxable payment reporting system to the road freight, security and IT industries, since contractors in these industries are considered by the ATO to be at higher risk of not reporting their income.

Schedule 3 to the black economy bill, along with the Excise Tariff Amendment (Collecting Tobacco Duties at Manufacture) Bill 2018, is designed to combat illicit tobacco. Schedule 3 to the black economy bill 2018 alters the Excise Act 1901 to change the point at which tobacco is taxed to more effectively combat illicit tobacco activity. The excise tariff amendment bill alters the Excise Act 1901 to enable the calculation of duty payable once the taxing point is moved. With this change and complementary Customs amendments, all tobacco entering the domestic market will already have had tax paid, removing the opportunity for untaxed tobacco to make its way from warehouses to the illicit market.

Through effective tobacco control policy, Australia has become a world leader in reducing smoking rates. This has improved the health and wellbeing of Australians and reduced the social costs associated with smoking. It is important to support Australia's tobacco control policies with effective measures to combat illicit tobacco, which is a major source of funding for criminal organisations, and to ensure that tobacco products are taxed correctly to continue reducing the prevalence of smoking. These amendments will help to restore the integrity to our tax system. The government is committed to countering black economy practices in Australia. I commend this bill to the House of Representatives.

Sharon Bird (Cunningham, Australian Labor Party) Share this | Link to this | Hansard source

I remind the House that it was the decision of the House to have a cognate debate, so now I'll deal with the first bill before us, which is the Treasury Laws Amendment (Black Economy Taskforce Measures No. 2) Bill 2018. The original question was that this bill now be read a second time. To this, the honourable member for Fenner has moved as an amendment that all words after 'That' be omitted with a view to substituting other words. The immediate question is that the amendment be agreed to.

Question negatived.

Original question agreed to.

Bill read a second time.