Tim Storer (SA, Independent) Share this | Hansard source

I rise to speak on the Treasury Laws Amendment (Enterprise Tax Plan No. 2) Bill 2017. My position on the Enterprise Tax Plan is simple and straightforward. The evidence does not support the contention that the proposed tax cuts would provide the immediate boost to employment and growth that the government claims. In addition, there is no evidence that bringing forward the remaining tax cuts already legislated for companies with a turnover of $50 million or under would provide a significant increase in wages or employment, and I will return to that issue later. I will also oppose any attempt to link the tax cuts to any other initiative that may occur during the discussion of the bill today and in voting on it in the days ahead, regarding coal-fired power or any other matter.

My focus on this, as it is on all other legislation that comes before me, is on the future: the future of the economy and, even more importantly, the future of our families. As a South Australian, I am a passionate advocate for the businesses of my state. Business is the backbone of the economy, and I will do all I can to encourage business growth and prosperity. Arriving at my position on the proposed company tax cuts in this bill was difficult indeed, but I got there using the same principles I would apply to business decisions—that is, by looking at the evidence and treating the proposals on their merits, not as an opportunity to bargain with the government to achieve some other trade-off.

By way of background, it's worth reminding ourselves that the budget is in poor shape to withstand the possible shocks that an uncertain world may visit upon us. Look at the immediate global reverberations from the currency crisis in Turkey, just as a recent example. Gross government debt is more than half a trillion dollars. Interest payments are around $1.5 billion a month, or $18 billion a year. Employment has been improving, but wages are stagnant and official data suggests families are still dipping into savings to pay essential bills. In these circumstances, the government is asking the Senate to endorse the disbursement of at least $36 billion to corporate Australia over close to a decade into the future. On the government's own commissioned figuring, the improvement in employment a decade from now from such a tax cut would be barely perceptible, and wages would increase by a mere 0.4 per cent.

To inform my decisions, I have spoken and continue to speak with a wide range of stakeholders and economic experts, many of them directed to me by the government itself. Our current budget deficit and debt demand that these tax cuts not proceed. Our present tax system is insufficiently robust to support a medium-term fiscal strategy of budget surpluses, on average, over the course of the economic cycle, as has been pointed out by many esteemed economists. My conclusion remains that the legislation is too narrowly based and that the benefits are too small to outweigh the cost.

The evidence is, for example, that there would be a much quicker boost to growth and jobs through greater investment in infrastructure, investment that would have clear intergenerational as well as more immediate benefits. In addition, the actual results from the 2015 tax cuts on businesses with under $2 million in turnover have been reviewed by independent economic consultancies, and that shows that there's been a marginal increase in employment, from 2.1 per cent to 2.6 per cent, for firms above the threshold. Firms beneath that $2 million which received the tax cut were having a marginal increase in employment, but there was a very limited increase in wages growth for those firms, from 4.84 to only 4.88 per cent. There was an increase in investment for those that had received the tax cut, from 1.53 per cent to 2.45 per cent; however, that rise was relatively modest. This evidence was provided by AlphaBeta economics advisers on the survey of Xero accounting firms—those firms that had received the tax cut in the 2015 legislation from 30 per cent to 28.5 per cent. I have seen estimates that accelerating the tax cuts already legislated would cost the budget another $2 billion on the forward estimates. Based on the evidence and the situation in terms of our overall debt and deficit position, we cannot afford it, and I don't believe there is evidence that it would produce substantial economic benefits.

It is not that I am opposed to tax reform, or even to corporate tax reform, but it must be more than just the piecemeal proposals being presented by the government if it is to be of genuine benefit to the community and the budget. A tax cut in and of itself is not tax reform. The Henry tax and transfer review of nearly a decade ago did support a company tax cut, but only as one of 149 recommendations. It was one of seven principal feature reforms, including a uniform resource rent tax, many of which have not been put in place.

I note the acknowledgement from the Australian Chamber of Commerce and Industry that the current tax system 'is becoming unaffordable and no longer fit for purpose'. Quite so. I have been told that the political environment is such that it is impossible to achieve comprehensive tax reform. I disagree, and history suggests otherwise. The economic conditions in the mid- to late 1980s—double-digit inflation and unemployment—could hardly have been more trying, yet the economic reform plan of those years became law. The tariff cuts of the early nineties were introduced in the midst of Australia's last big recession. The GST and allied reforms were promoted at a time when both the Prime Minister, Mr Howard, and his government were deeply unpopular, yet the coalition won the subsequent election, in 1998, and two more to boot. What it took was courage, political skill and the will to promote public discussion, rather than political leaders hurling largely unsubstantiated epithets at each other.

I have been heartened by the response to my decision on the company tax previously, not just from ordinary voters but from a number of professionals who have expertise in the field. It is clear there is a recognition that the tax system is no longer fit for purpose but that any attempt at reform needs to be broad based and surrounded by inclusive discussion, rather than focused on a single initiative without benefits to the general community. In all this we must keep a close eye on the state of the budget—with 'significant error bands', as the Treasury secretary noted, outside of the current forward estimates—the economy and the future prosperity of the nation as well as the wellbeing of our citizens.

As I've said before, large tax cuts for big corporations and foreign investors mean less money for teachers and nurses in my home state, and less money for roads and public transport in South Australia and in Australia generally. They also mean less money for research and development, for advanced manufacturing and for building the jobs of tomorrow. Therefore, I oppose this legislation.