Lin Thorp (Tasmania, Australian Labor Party) Share this | Hansard source

There are many opportunities for the contrast between the different political parties represented in this place to be demonstrated; that most recent contribution by Senator Bernardi probably illustrates it more clearly than most times I have heard it. The big difference between the Labor Party and the Liberal-National coalition—more particularly the Liberal Party—seems very much to be one around individualism as opposed to the common wealth. The Labor Party is always going to take the position whereby the wealth of this country is distributed equally so that every man, woman and child—every person with disability and every person who reaches a ripe old age—can be assured of decent housing, good education, access to public health and a safe future—not to live with the dregs of what is left over when the rich people have got a bit to spare. That is the chronic difference between these two groups.

Labor is going to be supporting this particular budget measure basically because it is going to be raising revenue from high-earning taxpayers, which is fundamentally acceptable to the Labor Party. But it must be said that the Labor Party, as the opposition, does have serious problems with its implementation and criticisms of its design. Fundamentally, they are around the time frame, specific design flaws, capacity for tax minimisation, misalignment with the fringe benefits tax and effects on superannuation. These problems with this particular piece of legislation have been canvassed quite widely through relevant groups and also in the committee that looked into it. Those concerns were also around the short time frame, the temporary nature, the adding of potential complexity to the tax system and the failure to address broader inequities in the tax system.

Around the time frame, the Taxpayers Australia group considered the levy's implementation period was too short to make a real contribution to 'budget repair'. The submission it gave to the relevant committee contended that the levy will end right at the time that government spending measures will be particularly high and need some support. In the submission that they gave they said:

Estimates released by Treasury show public debt accelerating rapidly over the period 2018-2023 but we note that the Debt Tax is scheduled to end in 2017. The $3.1bn which Treasury estimates the tax will raise contributes little to the repair of the budget and contributes nothing in the period when action is most required …

Also the Grattan Institute noted that the levy fails on one of the most important criteria for effective budget repair in that it has no impact on the long-term structural position of the budget as it will cease in 2017-18. Other important institutions noted real difficulties with the levy's design. The Tax Institute expressed the view that the levy would create unnecessary complexity in the Australian tax system, which would create a burden of compliance for taxpayers while not substantially increasing tax returns for government. The Tax Institute also suggested that the bills would introduce unnecessary complexity to the Income Tax Assessment Act 1997 by the addition of three steps to calculate a taxpayer's basic income tax liability.

Then there are also issues around tax minimisation and arbitrage opportunities. Many critics of this particular piece of legislation argue that the design contains opportunities for high-income earners to minimise their tax liabilities. For instance, Mr Saul Eslake has suggested that the levy could be avoided by most high-income earners through:

… greater use of the myriad of provisions in the income tax system which offer preferential or concessional treatment for particular types of income, forms of business organisation or categories of investment vehicles …

Taxpayers Australia have made similar comments. They have been known to say that 'only the wealthy but poorly advised' will be paying the debt tax, and I repeat that: only the wealthy but poorly advised will be paying the debt tax. Taxpayers Australia contend that the Treasury's projection for raising $3.1 billion over three years may well be overstated as:

… considerable amounts of relatively straightforward tax planning is likely to take place which have the effect of reducing taxable income, often to beneath the $180,000 threshold.

Taxpayers Australia contend that tax agents are already out there advising the wealthy how to avoid this tax anyway. They are telling people to accelerate tax receipts or tax deductible expenditures into years where the tax relief is available or the levy is not active. They are also advising their clients on deferring tax into those years as well and also exploiting the misalignment between the financial and fringe benefit tax years through salary packaging programs. The people who are supposedly going to be hit by this levy are also the ones who have access to the kind of information they need to avoid paying it in the first place. That is how the rich get richer. That is how they do it. They are also increasing contributions to superannuation funds, which will continue to be taxed at 15 per cent, and so are reducing their taxable income below the level at which the levy will kick in.

We have got a measure here that is ostensibly there to demonstrate to the broader Australian public that the rich are going to take a hit, they are going to share the pain. But Australians are not thick. They know that wealthy Australians got there, in many cases, through the hard work of their ancestors, not necessarily themselves. But they got there and they know how to hold on to it. They hold on to it by having accountants and financial advisers advising them how to avoid paying tax that the average Joe Blow has no access to. How many Australians have family trusts to split and stream incomes? It is not a generally acceptable thing for an average family to have. These are tools of the trade for the wealthy to protect their wealth. When it is as obvious as this, look at the potential for rorting that the paid parental leave scheme is going to bring in. It is as clear as a bell what is going to happen there. So, on one hand we have a levy that is trying to demonstrate to the broader Australian public that the rich are going to take a hit, and we already know that they are out there making their appointments now, paying their accountants to say, 'How can we avoid paying this?'

Then there is the issue of the misalignment with the fringe benefits tax. Many critics of this scheme have noted that there are many opportunities for high income earners to exploit the levy's misalignment with the FBT system through the use of salary packaging and fringe benefits schemes. These both reduce the taxable incomes of high income earners and impose a lower rate of tax on money that they put into these schemes. This is another problem with the system.

There is quite specific detail I could go into here, but suffice it to say that there are problems with the time frame of this legislation and the levy. There are serious design flaws in it. There are massive opportunities for tax minimisation and misalignment with the fringe benefits tax. And most of the companies in Australia who deal with superannuation have said that there are problems in the way that this will impact on superannuation.

Anybody here who has not had a chance to look at the red for today only has to look at the list of legislation that is required. There are something like 20 bills that are required to make these changes. There is legislation relating to family trust distribution, fringe benefits tax distribution, first home savings accounts misuse, TFN withholding tax, departing Australia superannuation payments, excessive non-concessional contributions tax, excessive untaxed roll-over amounts and trustee beneficiary non-disclosure tax. All of these bills are necessary because even those who wrote this poor piece of legislation have realised what problems there are with it.

But the Tax Laws Amendment (Temporary Budget Repair Levy) Bill 2014 is fundamentally about raising money from those who can afford to pay it, not from those who cannot afford to pay it. So, from that point of view, this legislation does get the support of the opposition. But, like Senator Whish-Wilson, I believe that there are many alternative ways we can go if we wish to raise more revenue in this country.

Why wouldn't we remove tax concessions around negative gearing, which some people—like Mr Saul Eslake—consider would save about $4 billion per annum in the short term? What about reform of the superannuation tax concessions to tax earnings of those over 60 at the 15 per cent tax rate? People have already got to the age of 60, they have saved up their superannuation, they have earnings on that superannuation and they are still getting concessional tax on it. Mr Eslake notes that that reform alone would save about $3 billion per year.

And what about reducing superannuation contribution tax concessions such that only $10,000 can be contributed at the reduced 15 per cent tax rate—currently it is at $25,000—which would save $6 billion a year? If you add those figures up you will find that the sum is quite considerable. Those matters are spread widely over the community and, to some extent, they take away what this government seems to believe is the necessity to put the bite on the most vulnerable people in our community.

We have a levy, which is a bit of a con because we all know—Australians know—that those with a lot of money also know how to keep hold of it. It is a con in that respect but there are better ways to raise revenue. There are better ways to make sure that the wealth of this country is distributed more broadly.

I received, as I am sure a lot of people did today, a letter from the Clerk of Canberra Quaker Meeting. It is quite scathing in its comments about this particular budget. Amongst the points it makes, the letter talks about the exaggerated emphasis on debt and deficit, which are modest by international standards, as a justification for severe reduction in government outlays. The letter talks about the budget's unfairness, with the greatest impact falling on the poor and disadvantaged, the cut in foreign aid and the quarantining of Defence expenditure from constraints at a time when diplomacy is severely limited by funding cuts. The letter talks about the move away from universal health care, the wholesale cutting of environmental programs, the cutting of welfare, community services, the reduced funding for Australian Aboriginals, and the continued allocation of much greater resources for off-shore detention of asylum seekers whilst denying extra funding support to agencies such as the Refugee Council. It refers to the adverse impact on young people in the decisions to change rules for unemployment benefits, training and education.

The Quaker letter concludes by saying: 'Our overall assessment is that the budget undermines collaboration in front of competition, reinforces individualism at the expense of cooperation, and imposes the greatest burdens on those with the least capacity to carry to them. It adds to inequity, breaks promises and places too little stress on the willingness of all of us, as citizens, to create a harmonious community within Australia and to contribute to peace beyond our shores.'

I can only conclude my remarks by saying that I think they have got it pretty right.