Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Hansard source

I confirm again that Australia's largest and most profitable businesses are large and profitable and do large research and development. Our advice and the advice that was available to the previous government is that they are not as sensitive to tax incentives, tax subsidies, as small and medium sized firms. That is why the previous Gillard Labor government made a judgement to better target the tax incentives for research and development. And that is because small and medium sized firms are more responsive to incentives—that is what the OECD has found. Again, that is the policy intent and rationale for this Labor Party savings measure.

With this legislation, which was 100 per cent consistent with Labor's original measure, the methodology used was to essentially make the adjustment where the special tax incentive was no longer available for businesses that generated more than $20 billion in assessable income a year. The issue raised with us by the Palmer United Party is this: an Australian company that generates more than $20 billion of its assessable income in Australia will lose this additional incentive whereas a company that generates $5 billion or $10 billion in assessable income in Australia but $20 billion, $30 billion or $40 billion in income which is not part of the Australian tax jurisdiction is not impacted in the same way. That is why they have said to us it would be fairer, from their point of view, if we used a different methodology to achieve essentially the same outcome, and that is to use a cap up until which the higher tax incentive is available and above which the higher tax incentive is no longer available. So, up to $100 million in benefit from the taxpayer to a particular business, the tax deduction available is 133 person. Above $100 million in benefit from the taxpayer, the tax deduction falls back to 100 per cent—not nothing, not zero, just 100 per cent instead of 133 per cent. That was not our initial approach, but that is the approach which we believe has the support of the Senate. It achieves a similar outcome.

And now Senator Milne and Senator Carr have invited me to give them an exhaustive list of the companies that are likely to be impacted by this. Of course, they know that there are confidentiality provisions that prevent me from doing so and it depends on the tax affairs of particular companies in a particular year. It is obviously very hard to make a conclusive judgement in relation to this because it does depend on what happens on a whole range of fronts. Having said that, Treasury has costed this measure, it has costed this amendment, it has modelled the impact of this amendment; and the advice that we have got is that fewer than 25 businesses in Australia are likely to be affected, that this will broadly achieve the same saving and that, broadly speaking, the businesses impacted are likely to be in the same category. So that is the advice, that is what I put openly and transparently to the Senate, and it is up to the Senate to make its judgement.