Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Hansard source

I thank Senator Hinch for his contribution and for his support of our previous set of amendments. The government will not be able to support those amendments. Senator Hinch talks about going to an election. Well, we went to an election in 2016, with our Ten Year Enterprise Tax Plan, proposing to lower the business tax rate for all businesses to 25 per cent over the 10-year period to 2026-27.

We understand the politics in relation to the banks, in particular in the context of the royal commission inquiry currently underway, but we maintain that it's critically important for our future economic security, our future economic prosperity and the job opportunities of millions of Australians today and into the future that we ensure that businesses here in Australia are competitive with businesses in other parts of the world. Imposing significantly higher taxes here than in other parts of the world puts businesses here and their workers at a competitive disadvantage with businesses overseas and their workers. You're right; that argument has been prosecuted for some time. But, as Bill Shorten eloquently argued when he was the Assistant Treasurer—he was right then—if you put in such a cap, which will become a permanent cap the way you are proposing to do it, at $500 million, you are providing a perverse incentive for business to downsize in order to stabilise the cap. The effect of your amendment is that, if a business which already has a track record of success approaches the $500 million threshold, it would be exposed to a five per cent increase in tax on 100 per cent of its profits as soon as its turnover goes above $500 million. That provides an incentive for bigger businesses either to become smaller businesses or for businesses below $500 million in turnover to remain below $500 million in turnover.

What we need to do through our tax system and through our policy settings generally is ensure that smaller businesses have the right incentive to become bigger businesses so that, as they grow and expand and pursue further opportunities to sell more of their products and services here and overseas, they hire more Australians than they otherwise would. As they hire more Australians than they otherwise would, the competition for workers across the Australian economy increases and that drives up wages. The additional capital investment that we attract on the back of a lower globally more competitive business tax rate helps drive productivity improvements which in turn also help to finance—help business to afford—the wage increases that we all want to secure. So, for all of these reasons, the government will not be able to support these amendments.