Linda Reynolds (WA, Liberal Party) Share this | Hansard source

I, too, rise today to speak on the Treasury Laws Amendment (Enterprise Tax Plan No. 2) Bill 2017 and I do so with great pleasure, also recognising that this is one of the most important pieces of legislation to come before this chamber for many years—one that is actually vitally important for the prosperity of our nation.

I was just sitting there, listening to Senator Rice, and I almost could not believe what I was hearing. In fact if any year 7 economics and business students actually read the transcript of Senator Rice's contribution this morning or tried to apply her version of economics to their own year 7 economics exams they would fail dismally. We heard, and we hear constantly now, from those opposite about trickle-down economics and we hear about the big end of town. But that's all rhetoric. What we also just heard from the previous contribution was all about the desire for infrastructure expenditure on roads and other large projects. We, too, believe in infrastructure spending, but what any year 7 economics student knows is that there is no such thing as government money.

What we heard is a long list of where we should be spending money. But, of course, from the Greens there was absolutely nothing about where that money is going to come from. They are completely divorced from reality. As the great Margaret Thatcher reminded us, there is no such thing as government money. That money is taxpayers' money. It comes out of the pockets of hardworking Australians and Australian companies who actually employ those Australians.

This measure, which I am very proud of, is a pillar of the coalition's economic plan to ensure that Australia remains competitive as nations all over the world realise a lower corporate tax rate is the key to economic growth and creation. So let's have a look at the facts here in Australia so far. Let's get beyond the rhetoric of trickle-down economics—I actually think they don't understand the concepts of what they're spruiking. But let's have a look at this.

We do live in a global economy. There is no 'Fortress Australia'. Our economy and our future wealth generation in terms of jobs, and all of the money that the Greens want to spend on infrastructure projects, have to come from somewhere. They will not be generated solely internally within Australia. So we do have to be competitive. The government has already passed legislation that backs small business by reducing their tax rate from 30 per cent to 27.5 per cent, starting with businesses with a turnover of less than $10 million, on 1 July last year. In total, the legislative changes to date will support 3.2 million businesses with a turnover of up to $50 million. It is these small businesses that employ 6.7 million hardworking Australians. This is hardly what those opposite refer to as the big end of town. There are 6.7 million Australians employed by small business, and small business is now employing more Australians because they are more competitive with a more competitive tax rate.

So let's just have a look at the facts. Again, forget the rhetoric about the politics of division and envy and everybody being worse off. Let's have a look at the impact of the policies that this government has implemented for small business, and what that has resulted in. Let's have a look at the facts. The fact is that we've now had 16 consecutive months of job growth, the longest period of job growth in our history: 16 consecutive months of job growth! Those opposite should be dancing in the streets because we have now created 971,500 new jobs—not old jobs; new jobs have been created, an increase of 8.5 per cent. Total employment is now at a record high because we are entering into free trade agreements so that we can export more and we can employ more. And we get more money for those projects so loved by the Greens, because that money has to come from somewhere.

What have we created through these policies of actually allowing business to do business here and overseas, and to be more competitive? On average, 1,100 new Australian jobs are being created every single day. So, again, what do we hear from those opposite? Not congratulations! Today 1,100 Australians have got jobs, most of them full-time jobs. Those opposite should be shouting from the rooftops that the majority of those jobs are for women, and increasing women's participation in the workforce. It is very clear that our economic policies are driving confidence and investment. Again, the keys to stronger wage growth are policies that both grow the economy and strengthen our labour market by making our companies more competitive. Signing up to the Trans-Pacific Partnership will lead to additional significant jobs growth in Australia. We've seen it with the free trade agreements that have already been signed by this government—an additional 1,100 new jobs every day and 16 consecutive months of jobs growth—and yet not a word from those opposite.

We live on an island, but we do not generate the wealth here. We have to trade with other nations. We have to make sure that our companies, big and small, are competitive and have access to overseas markets so that we can create jobs. At the moment we're creating over 1,100 jobs a day. Measures like the TPP, and this tax cut now, will make sure that companies can employ more, so, hopefully, we'll get 1,200 or 1,300 new jobs a day as a result of these increasing measures.

I want to have a look at what our competitors overseas are doing. In recent years, a large number of our international competitors—companies that reside in Canada, Singapore, the United Kingdom, New Zealand, Norway, Israel, Japan and France—have all reduced their company taxes. Why? Because they know they need to be competitive in the international market to stimulate jobs, businesses and income to pay for domestic services. In December last year, the United States slashed business tax from 35 per cent to 21 per cent—a measure that is clearly and demonstrably yielding results in the United States in terms of jobs growth. If Australia's rate was to remain at 30 per cent, Australia would then have one of the highest company taxation rates in the OECD, making it all that much harder for Australian companies to compete in fiercely competitive global markets. Having the free trade agreements is very important, but we also have to make it competitive in terms of tax rates so that our companies can compete, win business, sell goods and services, employ more Australians and pay higher wages.

Those opposite, who have traditionally supported meaningful and bipartisan tax reform, have abandoned all economic reason for the philosophical beliefs that somehow continuing to have one of the highest corporation tax rates in the world and in the OECD will magically make us a more prosperous nation and pay for all of the services that the Greens were saying would fix the problem. Well, they won't. We need lower company tax rates to increase our economy to pay for those very services. The World economic outlook released last year by the IMF warned that the US corporations tax cut plan will cut Australia's GDP by one per cent. That cut means fewer jobs and also lower wages. This is the IMF themselves saying that the US corporation tax cut will cut Australia's GDP by one per cent and threaten the sustainability of Australia's tax system unless Australia responds. This is consistent with Australian Treasury analysis. It is also consistent with the analysis of any student who studied year 7 or year 8 economics. That is the way the international economy works.

We, as a nation, must recognise that the international tax scene has changed and that we are not immune from it. The case for an Australian response is overwhelming. The government's enterprise tax plan is a sound and sensible response to changing global economic circumstances. Treasury, themselves, have said that the adverse impacts on Australia of US tax reform could, in effect, be offset by the implementation of the government's enterprise tax plan. Australians benefit from our openness in investment, which allows us to build on our resources, employ more hardworking Australians and trade our goods and services on a global market. But I again remind those in this chamber: as the mobility of global capital increases, Australia's high corporate tax rate can and will deter this investment. Why would large global companies come to Australia if we are not competitive in terms of our taxation?

Ultimately, this again will lead to lower wages and less money for infrastructure and social investment spending.

Let's have a look at the hypocrisy of those opposite. I know that many of those opposite did year 7 and year 8 economics. In fact, for many years those opposite were supportive of lower company tax rates, because they know the implications for our economy if we don't keep up with those we trade and engage with. Let's look at what former Prime Minister Julia Gillard said in the other place:

If you are against cutting company tax, you are against economic growth. If you are against economic growth, you are against jobs.

So it is not just those of us on this side saying that. This is the Labor Party acknowledging basic economics.

A government senator: The ALP.

The ALP—Prime Minister Gillard. What did Mr Shorten—who has a long history of backflipping on probably every important national issue—say on this very issue not so long ago? He said exactly the same thing as Julia Gillard did. He said:

The Government's tax reform agenda has a strong focus on ensuring that Australia remains an attractive place to invest.

…   …   …

Cutting the company tax rate is an important step along this road.

I'll say that again: Bill Shorten himself said that cutting the company tax rate is an important step along this road. He said:

This recognises the benefits to investment and growth from lower company tax rates and a trend to lower rates across the OECD over the past 30 years.

I said at the beginning of my contribution that I believe this is one of the most important—if not the most important—pieces of legislation for our economic future in this country. Given that Bill Shorten not so long ago clearly understood the importance for our economy and for jobs of cutting tax rates here, he is doing little more than sabotaging this country's economic future. It is very consistent with his pre-budget and pre-election positioning on his messaging. And, sadly for this country, it is a message of division and envy, not one of recognising that this government has created almost a million new jobs—16 months of unbroken growth in jobs.

All I can say is: shame on the Labor Party for doing this on this issue, because we need to compete globally, we need to keep foreign investment coming in and we need new business opportunities. And as Bill Shorten said—in fact, I'll remind you of what Julia Gillard said, because it is very, very wise:

If you are against cutting company tax, you are against economic growth. If you are against economic growth, you are against jobs.

We know, as those opposite actually know as well, that a more competitive business tax environment will encourage higher levels of investment in Australia for both small businesses and large businesses. We've seen the effect that the company tax rate for smaller businesses has had on their growth and their employment rates.

So, despite the fact that Labor very clearly understand that lower taxes are unequivocally good for our economy and jobs, what is their approach? Labor oppose the enterprise tax plan and a reduction in company tax rates. Labor actually have said that they want higher taxes, reduced investment, fewer jobs and lower wages. Shame on them! Bill Shorten is reported to have told business leaders to expect nothing from a Shorten Labor government. They might demonise big business, as they keep describing it—sneering at it—but it is small and big businesses that employ Australians. Governments do not generate money, and they do not generate jobs; the private sector does. Bill Shorten and Labor have such little respect for small business that they refuse to tell them about their secret plan to reverse the already legislated tax cuts for small to medium-sized businesses. These are the millions of mum-and-dad businesses across this country, people who work their guts out to set up their businesses, to keep their businesses going and to employ fellow Australians.

As we've heard from these quotes and quotes from some of my colleagues who've talked on this already, Labor know that company tax will boost jobs, will lift wages and will lift investment, because they used to support these very policies, as we've heard. In shadow Treasurer Chris Bowen's own words:

… it's a Labor thing to have the ambition of reducing company tax, because it promotes investment, creates jobs and drives growth.

That is the shadow Treasurer—again, like so many others, and Bill Shorten. They say one thing—clearly having the ability to pass year 7 and year 8 economics—but then when they want to position themselves pre-budget and pre-election with their policies of division and envy, they will jettison the economic future of this country.

Canadian tax expert Jack Mintz has pointed out that 'it is a myth that company taxes are paid by the rich and the powerful'. Mintz says repeated studies show that at least two-thirds of company tax is shifted onto labour through higher consumption prices, wage cuts and also lay-offs of staff. We know this is true, because we have seen it here in Australia, and we know the converse is true, because we have seen now with small-business tax cuts and other support for small business that they are growing and they are employing more Australians at record rates.

In a similar vein, our own Treasury has pointed out that while company tax is paid by companies the burden is passed on to shareholders, consumers and employees. The Tax Foundation in the United States found that for every $1 rise in state and local corporate tax collections real wages had fallen by $2.50 five years later. Unsurprisingly, they also found the reverse is true. Wages have actually risen in the United States by $2.50 for every $1 reduction in state and local corporation taxes. The simple and undeniable fact is that higher corporate taxes end up hurting workers the most. The longer term benefits of a lower corporate tax rate accrue to workers and households through permanently higher after-tax real wages and consumption.

In the Financial Review, Richard Holden observed:

… a recent empirical study by three German economists, published in the flagship American Economic Review, contains an ingenious way to get at the causal effect of company tax rates on wages. They utilise the fact that in Germany the company tax rate is determined in part by the federal government and in part by local government. This gave rise to a staggering 17,999 tax changes in 10,001 municipalities …

This was over a 10-year period. At the end of this analysis they found that, on average, workers bear 51 per cent of the total company tax burden. Through very detailed analysis they clearly showed what they had found in America: that the higher the company tax, the greater the burden on workers than anybody else. They also found that higher company taxes reduce wages for the low-skilled, for women and for younger workers disproportionately.

The Turnbull government wants to give all hardworking Australians the opportunity to earn more and to be rewarded for their efforts. The enterprise tax plan is a critical step in our economic transition. As we look to encourage private investment across the economy, to generate broader based economic growth, this bill, as I said at the beginning, is one of the most important pieces of legislation to come before this chamber. No matter the fact that the Greens clearly have failed in their year 7 and year 8 economics, obviously thinking that national wealth is found at the bottom of the garden, through the sprinkling of fairy dust, we have to go out and businesses have to earn money. This has been demonstrated to work for small businesses in this country, just as it will work for larger businesses in this country.

I will conclude by saying: shame on those opposite. Every single one of you who stood up and spoke against this bill knows that this is important for this nation. You are on the record. Your shadow Treasurer and your leader are repeatedly on the record saying that lower company tax is critically important to jobs growth and to the future prosperity of our nation. It is not too late. I commend those on the crossbench who have taken this issue seriously and who do understand the importance of this for our future. It's not too late for Labor to change their minds and do the right thing, but I'm certain they won't.

Debate interrupted.