Chris Ketter (Queensland, Australian Labor Party) Share this | Hansard source

I welcome the opportunity to participate in this debate on a matter of public importance on the issue of company tax rates. One of the things I do regret in relation to this debate is that the focus on the headline company tax rate often—in fact, always—obscures the true picture of the tax burden that companies face around the world, and I will expand on that later.

I want to start off by looking at the fiscal position in Australia. We have a government that wants to go down the track of looking after the big end of town and providing tax cuts to companies in the order of $65 billion. But what is the fiscal context of that? If we look at the 2016-17 final budget outcome, we can see that, at that point, net debt had blown out by $147 billion under the government, having ballooned from $175 billion in September 2013, to $322 billion in the latest FBO figures. Gross debt at that time was at record highs, having crashed through half a trillion dollars for the first time in our history, with no peak in sight. The government's own budget papers showed that net debt would hit record highs at that point. That was the 2016-17 final budget outcome.

Last year the Parliamentary Budget Office's national fiscal outlook came out in October, and what did it say about the situation at that point? The national fiscal outlook showed that the Commonwealth net debt was continuing to rise and would be at record highs for two more years; net debt had blown out by another $19.6 billion since last year's outlook, due to higher than expected deficits; the government's projected return to surplus relied on wages growth—and we know that wages growth is at record lows—and also relied on higher personal income tax revenue—heroic assumptions there; and a projected return to surplus relied on a period of faster growth in taxes than the 2001-06 period, when we know that the mining boom was in full swing. We also saw there that, under the government's watch, taxes would rise to the highest levels since before the GFC.

Let's look at MYEFO and what the position was at that point in time. We know that, despite the minor improvements that were expected in the budget position, the budget deficit remains eight times larger than the $2.8 billion deficit in the government's first horror budget of 2014; net debt had blown out by $80 billion to $343 billion since 2014; economic growth is down on the back of families struggling to pay their bills and weaker household consumption; and the Liberals' return to surplus continues to rely on a $44 billion tax hike for middle Australia delivered in the budget from last year. So that is the fiscal position that this government is intending, many would argue, to make even worse, by virtue of a further raid on the fiscal position, by introducing the tax cuts.

Now let's look at the tax cuts in the United States, which Senator Bernardi has drawn attention to. We know that the IMF has come out and made some comments about the tax cuts there. There's an IMF report which points to the negative impact of the US tax cut package and what this would do to growth. I quote:

Due to the temporary nature of some of its provisions, the tax policy package is projected to lower growth for a few years from 2022 onwards.

This is from the IMF's World Economic Outlook for January 2018. I also note in passing that the Treasurer's own advice that he received on the $65 billion tax handout to big business showed that any benefits that would flow from that would be negligible at best and would not be felt for a very long time. So the Treasurer is ignoring the advice of his own Treasury. That IMF report that I referred to also calls for inclusive growth, which is something that Labor has been talking about for some time. All Australians need to enjoy the benefits of economic growth, not just the big end of town. Unfortunately, the government's policies on tax, wages and the social safety net make our economy less inclusive and more unequal.

I mentioned that focusing on this headline company tax rate is quite misleading. I also want to draw attention to the fact that currently, if you don't look at the headline rate and look at the average corporate tax rate, or the effective corporate tax rate, Australia looks much better, if you are looking at it from Senator Bernardi's perspective. I'm relying on Congressional Budget Office figures that were prepared on corporate tax rates in G20 countries back in 2012, so they are a little bit old, but many of the figures are quite relevant. At that point in time, the average corporate tax rate in Australia was listed at 17 per cent. There are only three countries in the G20 table that are below that level of average corporate tax rate. When you look at the effective corporate tax rate, which many commentators talk about from time to time, Australia is in the middle of the pack of the G20 countries, at about 10.4 per cent.

There are a range of factors that need to be looked at that the debate at the moment tends to obscure. We're yet to see any facts that back up the scare campaign from the coalition that, if we don't do something about corporate tax rates, capital investment will go elsewhere and multinational companies won't come to Australia and those that are here will leave. I believe that multinational companies have an extremely sophisticated approach when it comes to analysing the tax burden that they face in any of the countries in which they operate. They're not just going to look at the headline tax rate; they're going to look at the overall burden of tax which will confront them. As we can see from those figures, the real level of tax that companies are paying is quite different to the headline level.

There are a whole range of other factors that need to be taken into account when one looks at this issue of the tax burden. The differences in our health systems, for example, are quite an important factor. We know that in the US it's companies that face the burden of paying for the health system, whereas in Australia the taxpayer picks up that. That is something that is obscured in this debate. We also have a rather unique system in Australia of dividend imputation, which ensures that dividends are not taxed twice. The overall burden of tax is something that's quite sophisticated. I don't think that the public is done any favours if we are just going to focus on one aspect of the overall picture and not look at the full level of the impact of tax across the country.

If the coalition is serious about debt and deficit, they should stop looking after the big end of town. They should stop refusing to take action to stop corporate tax dodgers. They should look at negative gearing and capital gains tax. There's a growing list of supporters for Labor's policy of addressing those distortions, including the IMF, the OECD, ACOSS, CEDA, the former RBA governor Glenn Stevens, Jeff Kennett and Mike Baird. All of them understand that these are distortions which need to be addressed. They could look at trust tax policy, and they really have taken a lacklustre approach to productivity reform. Cutting penalty rates has not created jobs and it has impacted on consumer spending. Fundamentally, Labor believes it's irresponsible to spend $65 billion on the big end of town when wages growth is historically low and cost of living is weighing heavily on low- and middle-income households.