James Paterson (Victoria, Liberal Party) Share this | Hansard source

I find myself yet again following Senator Bernardi in a debate about economic matters. I thank him for bringing this very important economic matter to the attention of the chamber today because he's absolutely right. The case for company tax cuts in Australia was already very, very strong, and no-one on this side of the chamber needed any further convincing, but, as Senator Bernardi has pointed out, the success of the Trump administration in legislating massive tax cuts for companies and individuals has brought that into even further and even starker vision for Australians.

We already knew that Australia's corporate tax rate was high and uncompetitive. We already knew that it was way out of step with the OECD and becoming increasingly out of step every single year. As major OECD nations like the United Kingdom, Ireland, France and others continued to cut and reduce their corporate income tax, Australia's became increasingly out of step, high and uncompetitive. From the most recent statistics, even before taking into account the US tax cuts, Australia was in the top handful of high corporate tax rates in the OECD—only Germany, Belgium, France and the United States were higher. As we know, very shortly the United States will be lower. There are many countries below Australia in that OECD list of rankings that you wouldn't normally think of as having lower and more-competitive corporate tax rates than Australia, particularly Scandinavian countries such as Sweden and Denmark, and the Netherlands and Luxembourg, but it's true that Australia's corporate income tax rate is even higher than those.

But we already knew all of that, and we knew that courtesy of people like Ken Henry, who in his review of the taxation system for the Rudd government identified the corporate tax rate as being very high and uncompetitive almost a decade ago—and it has only become more so in the years since. He also identified that, of all the taxes that the Australian government levies, the company tax is one of the least efficient—that is, the deadweight loss, the loss to the Australian economy, of raising $1 of revenue through the corporate income tax makes it one of the least efficient ones compared to others. It causes more displacement, it causes more ill effects and it reduces economic activity more than dollars raised from other forms of taxation.

So there was already a pretty compelling case from Ken Henry, there was already a pretty compelling case from where we stand in the OECD and there was even a very articulate case made in recent years by none other than Bill Shorten and Chris Bowen, when they were in government, for the need to cut the corporate tax rate in Australia. We already knew from historical records that when nations, including Australia, cut the corporate tax rate it stimulated economic activity, increased investment, increased jobs and flowed through to higher wages. We know from economic research that all of this is true. But now we have a very powerful real-world example from a very relevant neighbour and friend of Australia, the United States. It has put this issue into very, very stark focus.

The United States has legislated massive corporate and personal income tax cuts. This is relevant to Australia not only because the United States is the world's largest economy, and that's obviously an important factor, and not only because the United States is a competitor for global capital—and a competitive corporate tax rate is an important means by which we will compete with countries like the United States for global capital—but also because the United States is by far and away the largest foreign investor in Australia. Why is that important? Why is it important that the largest foreign investor in Australia has just cut its corporate tax rate? An investor in the United States who invests in countries like the United States and Australia, in contemplating where they're going to make their big investment next year, deciding between an equivalent investment in Australia and the United States, will now know that they can get a relatively better return on that investment in the United States than they would have received in Australia, because the corporate tax rate in the United States is now going to be considerably lower, at 21 per cent, than Australia's rate of 30 per cent for large companies. So that investor will think, 'Previously, I might have invested in Australia.' The corporate tax rate in Australia used to be 30 per cent compared to the United States' 35 per cent, where they would get, relatively speaking, a better return on an equal investment because of Australia's lower company tax rate. But now that same investor making that same choice will be much more sympathetic and more likely to invest at home in the United States, given there is a nine per cent advantage in the corporate tax rate in the United States. So by far and away our largest source of foreign investment in this country—those investors—will now be contemplating whether or not Australia remains a good destination for investment.

If we were to lose that investment or even if that investment was to decline slightly, that would have profound implications for Australians. We want foreign investment and we particularly want foreign investment from likeminded, close nations like the United States. It is a good thing when they come here and invest. When they come here and invest, they do so to create jobs, to create employment, and they provide products and services to Australian citizens, and we benefit from that. So it is vitally important that Australia has a company tax rate which is at least in the ballpark of the United States' company tax rate—let alone being way, way above it, as it will now be if we don't take action, if this parliament doesn't legislate the government's enterprise tax plan.

We had a powerful example of the kinds of benefits that the United States will reap from the company tax cuts that the Trump administration has legislated. Wouldn't it be nice if Australians could enjoy these benefits too? I will read from a selected list of the companies that have announced the actions they are going to take after the Trump administration decided to reduce its corporate tax rate. One is American Airlines. After the Trump administration's tax reform bill passed Congress, they announced that a $1,000 bonus would be paid to all of their employees in the first quarter of 2018. AT&T, a major telecommunications company, announced a $1,000 bonus to more than 200,000 US employees, and is also going to invest an additional billion dollars in the United States in the 2018 year. The Bank of America Corporation announced a one-time bonus of $1,000 for US employees earning up to $150,000 a year, which amounts to about 145,000 employees. Boeing has announced $300 million in charitable giving, workplace development and workplace facility enhancements. There are many others.

Comcast, another major telecommunications company, announced a $1,000 bonus for more than 100,000 workers. They said they would hire thousands more employees and invest over $50 billion in infrastructure. Disney, the entertainment company, announced a one-time $1,000 cash bonus for its more than 125,000 employees. ExxonMobil announced $50 billion in new US investments over the next five years. FedEx announced over $200 million in pay rises, about two-thirds of which will go to hourly team members—they are, the employees who are on the lowest wages—and they'll contribute $1.5 billion to the company's pension plan, which will ultimately go to its workers upon their retirement.

JP Morgan announced it would hire 4,000 new employees and open up to 400 new Chase branches, including increasing the minimum wage from $15 an hour to $18 an hour for 22,000 of their employees. Lowe's, a major department store, announced up to a $1,000 bonuses for more than 260,000 employees. They said they would expand their maternity and parental leave benefits. UPS, the distribution company, said they were going to invest $5 billion dollars in their pension plans and $7 billion dollars in a new smart logistics network. Visa announced they would hike their 401K—the equivalent of superannuation for US workers, the rate at which they match their contributions—from six per cent to 10 per cent. These are all the really tangible benefits from major US companies to their employees, to their shareholders and to Americans who will benefit from this increased investment. Wouldn't it be nice if Australia could share in these benefits too? The truth is that we could share in these benefits.

I want to share the announcement of one other company, which is Apple. Apple has announced that they are going to bring back the vast majority of their hundreds of billions of dollars of offshore cash into the United States. They estimate that they have $269 billion of cash outside the United States, and they're going to bring that back onshore. That's going to have a couple of benefits. Obviously that money can then be invested in Apple's business in the United States, in their employees, returned to their shareholders, invested in new products, in R&D, but it is also going to result in a one-time tax payment to the US government of $38 billion. So, a tax cut by the US Congress is going to result in a massive once-off payment from Apple to the US government in the form of higher tax payments. Wouldn't it be nice if Australia could share in this? The answer is we can, and all it requires is for this chamber to take action in passing the government's enterprise tax plan.