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

I'm very pleased to have an opportunity to contribute to the debate on this very important legislation in the committee stage—the government's enterprise tax plan. I'm very pleased that the government has already been able to secure the first stage of this plan. I'm very pleased about the early results of the success of the first stage of the government's plan. In a moment, Minister, I'll be asking you about some of those results, but I want to take the opportunity, since we are in the committee stage, to revisit some of the issues that we've considered in this debate.

As the minister said in an answer to a previous question, Australia is in a global economy. Although we are an island geographically we are not isolated from the rest of the world. The rate of company tax that we charge our companies here in Australia does have bearing on how much investment we have here in Australia. We can pretend if we like that that's not the case. We can dig our heads in the sand and think that it doesn't matter that the rest of the world is moving on the company tax rate and that company tax rates around the world are falling. But, ultimately, we will see the results of that. Ultimately, we will pay the price of that.

It's not just the United States, as Senator Cormann mentioned, that has dramatically lowered their company tax rates but other major trading partners in similarly arranged economies like the United Kingdom have drastically cut their corporate tax rate. In our region, we are now dangerously uncompetitive with our corporate tax rate. Even in the OECD—not exactly renowned for being a club of low-taxing countries—on the corporate tax rate average, we are getting dangerously out of step and we will soon be one of the highest company taxing countries within the OECD.

Investors don't invest in Australia just because we have great weather, because we have nice beaches and because we have cute animals; they invest in Australia because they can get a good return on investment in Australia. The relative return on investment that they need to justify an investment in Australia is going to be higher for every percentage point higher our company tax rate is. A like-for-like return on investment between New Zealand and Australia, with a lower corporate tax rate in New Zealand, means that dollar of investment is going to go to New Zealand instead of Australia.

The multinational corporations who operate in this country have to justify to their parent companies internationally why they are deserving of investment here in Australia. Why the best return on investment for them will be here domestically. Their task in doing so, their task in convincing head office that Australia is a great place to invest, only becomes harder when our company tax rate becomes dangerously out of step.

Minister, I want to return though to the question that I flagged earlier in my contribution. Of course, the government has already legislated part of the enterprise tax plan for small businesses. I'm interested to know from you what the result of that legislation has been in many aspects, but in particular what the result of that has been in terms of receipts from company taxes for the federal government. The reason why I ask that question, Minister, and why I flag that question to you, is that often it is the case—and I'd be interested to know the data from Australia—that when rates of tax are cut internationally, whether that be company tax or personal income tax, revenue from companies doesn't decrease, as you might intuitively expect it to, but it increases for a range of reasons. Companies are encouraged to invest more, they are encouraged to employ more and they are encouraged to deploy more capital. Their economic activity increases and so their profits increase. And sometimes they even choose to bank more of their profits, if it's an option for them, within a jurisdiction that now has a lower rate of tax. Minister, I'm interested whether you could enlighten the Senate on what the results on company tax revenues have been from the first stage of the company tax cut plan.