Gavin Marshall (Victoria, Deputy-President) Share this | Link to this | Hansard source

The Senate is considering the Tax Laws Amendment (Research and Development) Bill 2014 and amendments (1) and (2) on sheet 7618 moved by Senator Wang and amendment (1) on sheet 7650 moved by Senator Carr.

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

Yesterday the government was trying to assert that the opposition's concerns on this matter, my personal concerns on this matter, were about fighting old battles. I think it is important to state for the record that the minister of course has completely misread this situation. This is not about fighting old battles. It is an argument about what sort of country we want this to be. Unlike my colleagues on the other side of the chamber, Labor recognises that investments in innovation are critical to the future prosperity of this nation. In advanced industrial economies, innovation is the chief driver of increases in productivity. It makes firms more competitive and it sustains high-skilled, high-wage jobs.

According to the Australian innovation system report, innovation almost doubles the likelihood of productivity growth in Australian businesses. Firms that innovate are 78 per cent more likely to report increases in productivity over the previous year, and firms that collaborate with research organisations are almost 2½ times more likely to report increases in productivity. Without a strong innovation system, Australia will not be able to build a diverse economy.

The perfidy of this government absolutely astounds me. As the minister is well aware, the amendments before the chamber in the name of the Palmer United Party were actually drafted by the government. They have been undertaken without consultation. According to Treasury officials who appeared before the Economics Legislation Committee, there has been no modelling undertaken to support them. There has been no consideration of the impact on future R&D investment and no concern for R&D intensive firms that have hired R&D workers and sought approval for R&D activities in future years on the basis of the current legislation. So this is not about fighting old battles; it is about fighting for what sort of country we want this to be.

What we do know is that it is the largest firms that undertake the most extensive R&D in this country and that the government's assault upon those firms will do untold damage to our R&D effort. We saw this pattern in previous times. We saw it in 1996, when the incoming Liberal government accepted carte blanche the advice of Treasury and cut the R&D incentives. The consequences were felt for years.

We know particularly that manufacturing businesses will be affected, at a time when they need all the help they can get. I find it extraordinary that the minister yesterday, at the last minute, suggested to us that there was modelling undertaken, despite what we were told at the Economics Legislation Committee. I would suggest that 30 years of data demonstrates that the incentive for R&D supports growth and jobs. R&D cuts in 1996 impaired R&D spending for at least five years. The statistics show that R&D spending dropped by nine per cent from 1996 through to 2000. Jobs associated with R&D fell throughout this period, particularly in manufacturing and mining. That is what the official reports told us.

So, Minister, now that you say there has actually been modelling undertaken, contrary to the advice tendered previously, I would like to ask you specifically: how many firms will be affected by the government's—not PUP members'—new measures? I would particularly like to know the number of firms affected, not the number of consolidated groups. Can you provide that advice?

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

Contrary to what Senator Carr is trying to suggest, he is fighting old battles. He continues to run his vendetta against former Prime Minister Julia Gillard and former Treasurer Wayne Swan. Former Prime Minister Julia Gillard and former Treasurer Wayne Swan decided that it was not appropriate for businesses making more than $20 billion in profits a year to get a 133 per cent tax deduction. They thought it would be appropriate for companies in those circumstances to only get a 100 per cent tax deduction for their research and development expenditure.

We have had a lot of rhetoric from Labor in recent times on how we ought to ensure that larger businesses, multinational businesses, pay their fair share of tax, and here we have Senator Carr fighting for a 133 per cent tax deduction for businesses earning more than $20 billion a year, instead of a 100 per cent tax deduction. We do not think that is fair. We do not think that is appropriate. We understand that former Prime Minister Gillard and former Treasurer Wayne Swan shared that view. They actually reflected that view in their last budget. In the 2013-14 budget, that was what they initiated and what they banked by way of savings in the budget.

We have not been able to get the support of Labor for their own savings measure. Senator Carr personally rolled Mr Shorten, who was too weak to stand up to Senator Carr and who was too weak to do the right thing in the national interest—which was what former Prime Minister Gillard and former Treasurer Wayne Swan were prepared to do in relation to this matter. That is why the Labor Party are taking the reckless and irresponsible position they are taking here in this chamber today.

That is also why we have engaged constructively, positively and in good faith with crossbench senators who, like us, want to ensure that tax incentives for research and development are better targeted. That is why we have worked with the Palmer United Party and other crossbench senators to come up with a structure that ensures that the adjustment is fair between those businesses that predominantly generate their profits in Australia and those businesses that perhaps predominantly generate their profits in other parts of the world.

Senator Carr has asked how many businesses will be impacted. The answer is less than 25—less than 25 of the largest businesses operating here in Australia.

What we are actually dealing with—I know the shadow minister went back to some issues that we traversed at length yesterday—are the amendment before the chair, which is Senator Carr's amendment, where he seeks to substitute 1 July 2014 in the Palmer United Party amendment with 1 July 2016. We have to remember that, when Labor initiated and banked this savings measure in the budget, the starting date was 1 July 2013. By the time we went to the election in September 2013, Labor had failed to legislate their own savings which they initiated and banked in their budget. We are now here doing Labor's work for them, with Labor opposing us all the way and playing politics. This amendment is an implicit recognition that what we are trying to do is right, because clearly Senator Carr is working on the basis that this legislation will go through. He just wants to delay the start date by another two years. We have said in good faith, given the delays, that 1 July 2013 is no longer appropriate but 1 July 2014 is because, of course, we are in the 2014-15 financial year.

So the government will oppose the amendment circulated by Senator Carr. We will support the two amendments circulated by Senator Wang on behalf of the Palmer United Party, and we would urge all senators to do the same.

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

Minister, you say there are 25 businesses affected by this measure. How many consolidated groups are affected?

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

Senator Carr, it is a matter for individual businesses how they organise their corporate structures. You know the sorts of businesses that we are talking about here: the BHPs, the banks and the Rio Tintos. And here we have the Greens and Senator Milne fighting for bigger tax breaks for the big resources companies, the big banks and big oil and gas. That is what the Greens are doing. We have Senator Milne out there fighting for a tax refund for big oil. That is the Greens in 2014—quite extraordinary, really, and quite unbelievable. The hypocrisy is breathtaking. But the point here is that it is a matter for individual businesses how they structure their corporate affairs. That is not a matter for the government.

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

Minister, the whole point of this exercise is to establish just how much you understand your amendment. It is no good blaming the PUP; they are not even here. The PUP have not even spoken in favour of this amendment. They have not said one word in support of this amendment. This is the government's amendment, drafted by the government for the benefit of the government. You have an obligation to explain to this chamber the consequence of this measure. You say there are 25 businesses affected—25.

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

Less than 25.

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

Less than 25? Okay. Then, of course, you say that you cannot tell how many consolidated groups would be affected. I put it to you, for instance, that Wesfarmers would be one business; it is made up of a number of firms. There are many manufacturing businesses associated with the consolidated group around Wesfarmers. Is that part of the 25? There are a number of others. Rio Tinto has a whole series of firms associated with it. Is that part of the 25 or is that one firm?

You see, that is the point here. We would like to know precisely how your amendment will work. We want to know the number of firms and, of course, from that we will be able to tell how many employees this involves and the firms' investment in R&D, to make some judgement as to whether or not the Treasury advice that you are relying upon is a reasonable basis on which we should make a judgement.

I say to you, Minister: while you are on the topic, you can perhaps tell me: in the last 20 years, pick one year in which the Treasury advice on expenditure on R&D has actually been correct and accurate. Just pick one year and tell me which year that is—because this is the basis on which you are now asking us to make a judgement. You say it is fewer than 25 firms, yet you cannot tell us who they are. Naturally enough, you will tell me, 'Oh, it's confidential.' I put to you that the sorts of companies we are talking about—BHP Billiton, Wesfarmers, Woolworths, Rio Tinto, National Australia Bank, Commonwealth Bank, ANZ, Westpac, Telstra, AustralianSuper, Caltex, BP, Shell, Xstrata and QBE—are firms that undertake major investments in R&D in this country. There are considerably more than 25 firms tied up in that list that I have read to you.

So, Minister, how many firms is it really? Are we talking about firms or consolidated groups? What is the level of investment that those firms would claim for collectively?

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

Senator Carr is just throwing around red herrings. Senator Carr knows very well that it is absolutely a standard procedure, that it is absolutely the consistent application of relevant methodology, for consolidated groups to be the basis on which to claim the refundable tax offset.

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

Oh, so we are talking about consolidated groups?

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

Of course we are. That is actually not a big revelation; that is actually what matters. It is absolutely consistent—it is absolutely standard procedure to assess these things at the level of consolidated groups. Otherwise, if you do not, you actually facilitate and encourage all sorts of manoeuvring to avoid relevant tax and other obligations, which I am sure Senator Carr would not want to be party to encouraging.

If Senator Carr does not like the methodology put forward by the Palmer United Party, which the government has agreed with, it is free to him to say that he would prefer to go down the path of the original Gillard-Swan Labor government measure. If Senator Carr is saying, 'Actually, I'm really worried about this alternative way of doing it,' the objective of which is to ensure that, whether you are a business operating out of Australia that generates most of its profits in Australia or whether you are a business operating in Australia which generates large parts of its profits in other parts of the world, you are going to be treated the same, that is the effect of using a cap instead of the assessable income methodology. If you say you prefer to go back to the assessable income methodology, tell us now and we will pass the legislation based on the way that Labor initiated it and banked it in their last budget.

But I suspect that that is actually just another red herring, because you have rolled your leader, Mr Shorten. You have rolled him, where Julia Gillard and Wayne Swan were strong enough to stand up to you in the national interest. You are just here, joined with Senator Milne, trying to keep up a special interest for rent seekers that are particularly profitable.

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

BHP are rent seekers, are they? BHP are now rent seekers?

The CHAIRMAN: Order!

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

You are here protecting a special interest for companies generating more than $20 billion in assessable income. That is what you are doing, and you are doing it as part of your ongoing political battle inside the Labor Party against Julia Gillard and Wayne Swan—and everybody knows it.

Christine Milne (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I think we have just seen from the minister the kind of performance that is the reason that the Australian community is so fed up with the Abbott government. Minister, you can stand in here and go on with your ill-considered ideological rhetoric and what you think are effective pre-formulated attacks on Labor and the Greens, but you are not answering the questions and this Senate is absolutely being treated with contempt. To stand there and say that these are the PUP amendments is a joke. The senator who moved this amendment is not even in the chamber, because he cannot explain it; he has no idea whatsoever what he is putting to the Senate. Why? Because you wrote it for him—Treasury wrote it for him; you gave it to him; you gave it to the Palmer United Party. They stood up and moved it; they could not answer a single question on it. If you stood Senator Wang in here, he would not be able to answer a single question about which companies he is excluding or why he is taking $1 billion out. If he can, he should be in here.

Barry O'Sullivan (Queensland, National Party) Share this | Link to this | Hansard source

On a point of order, Mr Chairman, the rules are clear in terms of casting aspersions upon other members in this place. I do not think you could make a graver allegation against another member in this place than the one that has been presented by the senator.

The CHAIRMAN: I do not think there is a point of order, Senator O'Sullivan.

Christine Milne (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I would challenge Senator Wang to come in here and explain his amendment and defend it, instead of leaving it to the minister, who wrote it and who gave it to him, to now be explaining it.

I want to come back to the essential thing here, and that is that the Greens never supported the change. One of the reasons they did not legislate it is that we would not have supported it—and we do not. I do not want to see $1.1 billion taken out of supporting research and development in this country. Let me put that firmly on the record. We want to see more targeted research and development, but we do not want to see you ripping $1 billion out of research and development in this country, and that is precisely what Senator Cormann, the minister, stands for. Ripping up money going into the CSIRO, taking money out of our universities, taking money out of research and development and handing it back as fossil fuel subsidies—that is what we have from the government.

Everybody knows, if you are going to get away from being an economy which is 'dig it up, cut it down and ship it away', you have to invest in education and research and development. You have to make sure that that happens. That is what the Greens want to see, and that is why I moved last night to make sure that small businesses, those drivers of real innovation, of cutting edge innovation, can benefit in the way that they sought to—and the government just showed absolute contempt for that. And what we are seeing from you, Minister, is very much the vandals coming over the wall—but this time they are coming over the wall with cigars in their mouths and in sedan chairs. And that is what the community does not like. They are sick of it, and they want to see some equity.

I would like to get back to a serious question—Senator Carr asked it, and I am asking it now: who are these 25 companies that are going to be affected? Is Telstra one of them? I want to read you what Telstra had to say. They said:

As a proud Australian company and one with an increasing global footprint, the R&D tax incentive has been one of the reasons behind Telstra's commitment to undertake the majority of our R&D work onshore.

R&D investment, according to the submissions to the committee—not Telstra submissions but general submissions to the committee—highlighted that not only will R&D investment go offshore, hurting our economy; it will mean that estimated savings will not actually materialise because of the impact on longer term growth to the economy. The focus on removing incentives for larger companies makes this very likely because they are most able to offshore research. That is the first thing. So if you take this money out of here, you will see the research, the innovation, the intellectual property develop offshore. That is the last thing you want if you are transitioning your economy. Secondly, smaller and medium enterprises and public institutions such as CSIRO and universities will be hurt by the changes because of the flow-on impact—as I said in my second reading speech. The University of New South Wales, for example, gave evidence at the inquiry that 30 per cent of its research effort is backed by companies directly affected by this bill.

So let's hear from the minister what the difference is between what the government put up and what, supposedly, Senator Wang put up. He said last night that there were marginal differences in the number of companies and only marginal differences in the amount they are expected to receive. Well, let's hear it. I want to know exactly the differences. Which companies will now be captured that were not captured before and vice versa? I want to know exactly about the money. You have supposedly done the modelling, so let's hear it. Give us some specifics instead of just standing there pontificating and protecting people who cannot even be interested enough to turn up to the debate in the Senate.

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

I confirm again that Australia's largest and most profitable businesses are large and profitable and do large research and development. Our advice and the advice that was available to the previous government is that they are not as sensitive to tax incentives, tax subsidies, as small and medium sized firms. That is why the previous Gillard Labor government made a judgement to better target the tax incentives for research and development. And that is because small and medium sized firms are more responsive to incentives—that is what the OECD has found. Again, that is the policy intent and rationale for this Labor Party savings measure.

With this legislation, which was 100 per cent consistent with Labor's original measure, the methodology used was to essentially make the adjustment where the special tax incentive was no longer available for businesses that generated more than $20 billion in assessable income a year. The issue raised with us by the Palmer United Party is this: an Australian company that generates more than $20 billion of its assessable income in Australia will lose this additional incentive whereas a company that generates $5 billion or $10 billion in assessable income in Australia but $20 billion, $30 billion or $40 billion in income which is not part of the Australian tax jurisdiction is not impacted in the same way. That is why they have said to us it would be fairer, from their point of view, if we used a different methodology to achieve essentially the same outcome, and that is to use a cap up until which the higher tax incentive is available and above which the higher tax incentive is no longer available. So, up to $100 million in benefit from the taxpayer to a particular business, the tax deduction available is 133 person. Above $100 million in benefit from the taxpayer, the tax deduction falls back to 100 per cent—not nothing, not zero, just 100 per cent instead of 133 per cent. That was not our initial approach, but that is the approach which we believe has the support of the Senate. It achieves a similar outcome.

And now Senator Milne and Senator Carr have invited me to give them an exhaustive list of the companies that are likely to be impacted by this. Of course, they know that there are confidentiality provisions that prevent me from doing so and it depends on the tax affairs of particular companies in a particular year. It is obviously very hard to make a conclusive judgement in relation to this because it does depend on what happens on a whole range of fronts. Having said that, Treasury has costed this measure, it has costed this amendment, it has modelled the impact of this amendment; and the advice that we have got is that fewer than 25 businesses in Australia are likely to be affected, that this will broadly achieve the same saving and that, broadly speaking, the businesses impacted are likely to be in the same category. So that is the advice, that is what I put openly and transparently to the Senate, and it is up to the Senate to make its judgement.

Christine Milne (Tasmania, Australian Greens) Share this | Link to this | Hansard source

So we are told that it broadly achieves the same, that broadly the companies are in the same category. But essentially we get the same outcome. So, broadly, you would say that Malcolm Turnbull and Tony Abbott are in the same category. Broadly, you would say we will get essentially the same outcomes. The community have a view that 'broadly' and 'essentially' are not the same thing. So I would like to know: what is the difference? That is what we are asking here.

One piece of legislation went to a committee. It was a farce, but it went to the committee at least. Now we have amendments which have not gone to committee, which nobody knows, and the person who is putting forward the amendments has not turned up in the chamber, has not made a speech on them and does not know anything about them. We are asked to be assessing because the minister says they are broadly the same, with essentially the same outcome and approximately the same set of companies. We have not had the opportunity to test what the real difference is between what the government has proposed and what Senator Wong, who has not even turned up here, is proposing.

I do not think the community is going to buy it. In the parliament you need more than 'broadly', and 'Essentially, it is the same,' and, 'It is similar,' and, 'Just take it from me; take my word for it.' It has not gone to the committee. If you are not prepared to tell us what 'essentially the same', 'broadly speaking', 'broadly achieves the same', and 'broadly the same categories' mean, then you are asking people to buy a pig in a poke. And we are not going to do that.

The CHAIRMAN: The question is—Senator Carr?

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

I thought the minister might be responding, but, clearly—

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

We could go round and round in circles all day.

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

We will not be going around in circles. I think we are entitled to have specific answers to specific questions. You have indicated that these measures have now been modelled. What is the nature of that modelling? You indicated that it is 25 firms, and then you tell us that maybe it is 25 consolidated groups.

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

I didn't say 'firms'; I've never said 'firms'.

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

You have said 'firms'. I asked specifically, 'How many firms?' You told me 25. I then went on to say, 'Do you mean consolidated groups?' You are confusing the two. It is quite clearly not 25 firms. How many firms is it, then?

The CHAIRMAN: The question is—Senator Carr?

I have asked a question. Are we not answering it at all? Is this the minister's new technique—that he just refuses to answer? How many firms are affected by this measure, and what is the nature of the modelling that you claim has now been undertaken?

Christine Milne (Tasmania, Australian Greens) Share this | Link to this | Hansard source

This is a pattern of behaviour that the government has adopted—as I said, very much the cigar smoking in the sedan chair with complete contempt for the Senate. The fact is that government has done this on a number of occasions, and I am just going to point it out for all and sundry, and that is: to just sit there and refuse to answer the questions, to leave the people answering the questions to ask in consecutive order because nobody else is here to support them, and then to use the chair—not in your case, Mr Deputy President, but in other cases—to call the order in terms of how many questions are asked without an intervention and get a vote on the issue. This is contempt of the Senate. We want answers to the questions. It is surely not too hard for the minister to actually answer the questions. I have asked him: what is the difference between what he is proposing and what Senator Wong is proposing, because what Senator Wong is proposing, via the minister, has not been to a Senate committee. There has been no opportunity, other than this stage in the committee, to have that, and so I am going to ask specifically: is Telstra one of the companies that would have been captured by both, and, having assumed that it is, will the minister say why a company like Telstra would now not take their R&D offshore and therefore undermine the research capacity of places like the University of New South Wales and other universities around the country? Why won't that occur? Secondly, did the minister consult with AusBiotech or any other of the umbrella groups for small research and development companies about quarterly payments, or did he just arrogantly decide to dismiss it on the basis of intuition?

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

What is going on now, I will just place on record, is a desperate attempt at a joint filibuster by the Labor-Greens coalition. And Senator Milne just misled the Senate. She just indicated to the Senate that the Palmer United Party amendment never went to the Senate committee. Well, it actually did go to the Senate committee. When we circulated the amendments towards the end of last year, Senator Xenophon asked me to facilitate a briefing by Treasury and relevant others to all interested members of the Senate economics committee. It was a very productive and constructive meeting. The government absolutely acted in good faith. Our preferred approach was to go down the path that Labor initiated and banked in their last budget. But because Labor under Bill Shorten's leadership is too weak to stand up for the national interest and too weak to do what needs to be done to repair the budget and strengthen the economy, we are in the situation where we have no choice but to negotiate with the crossbench.

I have answered these questions many times before, and if you go over Hansard you will see that I have. You asked me again: what is difference between what the government is proposing and what the Palmer United party amendment is proposing to achieve? The policy intent behind both approaches is to ensure that special tax incentives for research and development are properly targeted—that they do not go to the biggest, most profitable businesses but are appropriately targeted to small and medium-sized businesses where the research, including through the OECD, consistently shows that those incentives actually make a difference. The approach that we put forward in our legislation was for any business with an assessable income—relevant profits above $20 billion—to be excluded from the 133 per cent tax deduction and to only be eligible for 100 per cent tax deduction for their expenditure on research and development.

As to the issue that was raised—and, again, we have gone round and round in circles in relation to this, and I have been very clear in relation to this—the Palmer United Party said to us: 'What we worry about is that that means that, if you generate most of your profits in Australia, you are slightly disadvantaged compared to a business that generates some profits in Australia but most of their profits in other parts of the world.' They asked us to consider whether we could achieve the same policy intent using a different methodology, and that is by putting a cap on the special benefit that is available to larger businesses for their research and development expenditure. The cap that is on the table is a $100 million cap, and the advice from Treasury is that that means that we will generate broadly the same savings, and that broadly the same businesses, the same companies, will be impacted.

Senator Carr is trying to confuse people and run red herrings about firms and consolidated groups. The truth is that these things are always, consistently, as a matter of standard operating procedure, assessed at the level of consolidated groups. That is the way this works. No amount of red herrings is going to distract from the fact that this is a very personal agenda that Senator Carr continues to run against the former Prime Minister and the former Treasurer. I am not interested in getting in the middle of Labor Party factional infighting. I am totally not interested in that. I am interested in doing the right thing in the national interest. All I am interested in is progressing a budget measure that was initiated and banked by Labor in their last budget. We are doing Labor's hard yards for them, even though Labor has turned against themselves on this.

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

The statements that the Minister for Finance has made are quite erroneous in a number of ways. The specific inquiry that Senator Milne and I are seeking to prosecute with you is the detail of the modelling that you claim has been undertaken. It is true that I do have some interest in this topic. I have been pursuing these questions for the better part of 20 years while a member of this parliament. That is why I can say with certainty that Treasury has never ever, not once, got it right when it comes to their projections on R&D expenditure—not once in 20 years.

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

Projections are projections.

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

Projections are certainly projections, and now the minister is saying to us that he has relied upon these experts, who have never once got it right in 20 years, to now tell us that you have done this modelling which will produce a particular result. He cannot even tell us the number of firms that are directly affected, and he says, in the broadest of terms, it might have the same impact as our original intention. He further goes on to say that it is exactly the same as what the Labor Party wanted to do. Of course that is not true and the minister knows that is not true. The Labor Party was developing a jobs package—over $1 billion worth of expenditure, investing in jobs in this country, which those opposite have scrapped. That is a point that the minister chooses to ignore.

I come back to the central proposition: Minister, will you table the modelling. While you are there, there is this other subsidiary argument that Treasury have been running for some years. As the minister says, I have some interest in this matter. When I was minister they did run this same modelling. It is not the argument you will find, of course, in other parts of the government—when you talk to the Department of Industry you will get an entirely different perspective. People who actually have to deal with enterprises and understand the importance of incentives in developing our industrial capabilities in Australia will take an entirely different view. The government maintains that large firms will invest in R&D regardless of whether or not they can access R&D incentives, but this is a well-furrowed field. The argument is flawed. There is evidence that smaller firms are more responsive to R&D tax incentives, but that does not equate with the alternative proposition that large firms are unresponsive. There is also evidence to suggest that large firms are able to make more effective use of incentives. This is historic evidence that, Minister, if you had more understanding of this issue you might appreciate. The evidence demonstrates that large firms are influenced by R&D incentives and the removal of those incentives risks having them offshore their R&D activities. That is what this government is really good at. One of their great achievements is exporting jobs, and this is another example of it. This is about how you export jobs. This is a government that takes the view that it does not matter what investment attractions you offer because the firms by divine right will come here. We know that is not the case.

International studies have demonstrated that firm size and R&D incentives are directly linked. R&D credits are effective in increasing R&D investments especially in large firms. Kroger in 2003, for instance, says that R&D tax credits are a great stimulus for R&D investment in large firms as compared to medium-sized firms. That is the point that has been made throughout the OECD literature. The Australian ABS highlights this—it demonstrates a clear link between changes in R&D incentives and regimes and large business investment in R&D. The historic evidence here is very clear, because the same sort of Treasury dogma was accepted in 1996 when there was a previous Liberal government. The concession was reduced from 150 per cent to 125 per cent. As a consequence, R&D investment fell by 9.6 per cent—for large firms much more dramatically than for small firms. It was particularly important in the finance and insurance sectors. In 2001 the premium tax concession was introduced, encouraging increases in R&D investment. That was under a conservative government. Inevitably what will happen is that there will be a swing within the coalition at some point towards understanding that you have to correct the error of your ways on this issue.

That is the historic pattern. Between 2000 and 2002, large firms increased R&D investment by 43 per cent—much more dramatically than small firms increased their investment. R&D investment by large firms is particularly important in the finance services sector. Studies undertaken in other countries argue the same point. The Australian Innovation System Reports have highlighted this. They say that this is an initiative we took to ensure that this sort of data was collected. That is not something you will see from the Treasury, but it was material that we did see through the department of innovation. That showed that:

SMEs are lean innovators, accounting for a very small share of total investment in innovation, and are much less likely to generate new-to-the-world innovations. By contrast, large Australian businesses make up the majority of total investment in innovation, are much more likely to collaborate with the research sector and generate new-to-the-world innovations.

That is in the Department of Industry's Australian innovation system report 2013 that I have here.

A survey conducted by the Australian government in 2005 found that large firms have the strongest focus on radical R&D, which involves costs with an order of magnitude higher than adapted off-the-shelf technologies when carrying out incremental R&D as typically undertaken by smaller enterprises. That information was found under your government, Minister. That was in The R&D Tax Concession—impact on the firm: report on a survey of 116 firmsdone in Canberra in October 2005.

The OECD 2011 International experience with tax incentives report looked at the effect of R&D incentives on the choice of location for R&D by multinational firms. Analysis of the data and R&D activities of multinational enterprises suggests that the growth rate of R&D by affiliates of multinational enterprises is higher in countries providing an R&D tax incentive than in those countries that do not offer such schemes. That again suggests that the decisions of multinational enterprises in conducting R&D in a particular country are correlated with the availability of tax incentives in that country and other potential destination countries. It is clear that when having two or more similar location alternatives, especially when such competition occurs within the region, government incentives tilt the investment decisions. The OECD 2011 report says that a study on US investments by US firms outside the US demonstrated that the R&D incentives were a driver to encourage investment outside the US.

Another report asks:

Are US tax incentives for corporate R&D likely to motivate American firms to perform research abroad?

The report results provided evidence that countries with tax based incentives for R&D and higher annual increases in R&D investments had more foreign affiliates of US firms than countries without such an investment.

When the changes to the R&D tax proposals were announced by this government, the French minister for innovation stated they had a competitive advantage and encouraged companies to invest in her country instead of Australia. She was directly pinching French firms and encouraging them to get their investment out of Australia and move it into France.

I am making the point to you, Minister, that you have misjudged this completely. This ideological obsession you have with reducing expenditure actually costs this country jobs. It costs opportunities. It undermines capabilities. You are expert at exporting jobs. You are exporting Australian jobs because of your obsessions and your dilettante behaviour in adopting the Treasury advice when all the evidence points to how wrong this approach is internationally and how the approach taken in this country where you are now seeking to repeat these mistakes will have to be changed again. I come back to the question: where is this modelling? When are you going to produce it?

Christine Milne (Tasmania, Australian Greens) Share this | Link to this | Hansard source

It is clear that the minister has no intention of answering any questions, so I shall try again. I asked who the minister had consulted with before making a decision not to allow the quarterly payments that would so help small businesses. I would like to know who you consulted with apart from Treasury, who apparently on this occasion have opposed it.

Secondly, I would like to know what modelling or research you have done on the impact of taking $1.1 billion out of research and development in Australia on small and medium enterprises and public institutions that depend on the flow-on impacts from investment in research and development. As I indicated before, quite often these corporations put money in but do it in conjunction with research institutions and universities as well as other small businesses. It is a collaborative approach. What modelling have you down on the impact of taking $1.1 billion out of research and development? I want to know about the flow-on effects to universities in particular, to the CSIRO and to other smaller and medium enterprises. I would like to know if Telstra is one of those corporations that are involved.

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

It is interesting that Senator Milne is now interested in modelling the economic impact from changes in policy because there is a significant and demonstrable growth impact on the economy which is very good for all of the firms that the Senator Milne is concerned about from scrapping the carbon tax. Scrapping the carbon tax will help all of these firms be more profitable, create more jobs, employ more Australians and invest more in research and development.

You are trying to make it harder for businesses to be successful and then want to give them a subsidy from the taxpayer. You want to make it harder for businesses to be successful, grow their businesses, employ more people and help us grow the economy more strongly and then, after you have done that, after you have hindered businesses from growing more strongly, you want taxpayers, the mums and dads of Australia, the working families of Australia, to help fund a special 133 per cent tax deduction for businesses generating more than $20 billion in assessable income. That is what you are doing.

Senator Carr, in his lengthy contribution as part of the Labor-Green filibuster, tried to suggest that the reason they were opposing this is that it was all supposed to be about the jobs package; this was not supposed to help repair the budget. He has misled the Senate again. I am quoting here directly former Treasurer Mr Wayne Swan from a speech he gave to the Australian Business Economists Breakfast on 22 February 2013. The title of the speech, if you want to google it, Senator Carr, is 'Challenges and choices in a post-GFC world'. This is what he said, and I quote former Treasurer Mr Swan directly from when he was defending this measure which you are now opposing. Mr Shorten was too weak to force you to support it in the same way as Ms Gillard and Mr Rudd had forced you to support it. This is what Mr Swan said:

We said we would remove the R&D tax concession for large companies with a $20 billion Australian turnover or more, to ensure innovation spending is directed to where it will have the biggest benefit. This saving will also deliver benefits to the bottom line over and above funding the package – so it's a down payment on the repair that the budget needs.

So do not come in here with your confected outrage, attacking the coalition because we are doing the hard yards in progressing a budget measure which the Gillard Labor government, with Mr Swan as Treasurer, initiated, banked in their budget and failed to legislate. We understand what this is all about. You are running a factional war inside the Labor Party. You have told Mr Shorten that, unless he backs you on this, your personal vendetta, you would not be supporting him, and Mr Shorten rolled over. That is exactly what happened. In the past when I have said this, you had a big Cheshire-cat smile on your face because you felt quite proud of having been able to do that. Do you know what? That is the problem with the modern-day Labor Party under Mr Shorten. Mr Shorten does not have what it takes to put the national interest ahead of his political self-interests, trying to stay on top of the factional dynamics inside the Labor Party.

We cannot let the national interest get caught up in that. All we are doing is progressing a Labor Party budget measure, with a slight amendment in order to take into account some legitimate concerns that were raised, and facing up to the reality that Labor and the Greens are blocking everything and anything in the context of political self-interest.

Christine Milne (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I will try again. I asked a specific question: who did you consult with when you decided to oppose quarterly payments? Can I please have an answer to that question? If there was any consultation, with whom did you consult? That is a more than reasonable question, because you have just really destroyed the hopes and aspirations of a lot of small to medium sized businesses who have argued very strongly that they needed this in order to make the kind of investment in research and development that they want. I think that it is more than reasonable that you answer the question. The second question I asked relates to the modelling on what it will do to universities and to research institutions.

As to your ludicrous proposition that abandoning carbon pricing helps these businesses, it is actually the exact opposite. Every innovative business in the country is looking towards the capacity building and new research that it needs to transition to a low-carbon economy. That is what they are doing. They are out there in the renewable energy field, in the energy efficiency field, in the alternative building materials field, in public transport, in systems thinking for changing design—all manner of things, including in agriculture and in cool storage. In all manner of things, people are looking at the innovation that you need to build resilience in the system in a world that is warming. And you, by tearing down carbon pricing, by throwing back to the fossil fuel age, have destroyed and sent offshore a huge number of our researchers already.

At a solar forum in Sydney, a fifth-year solar engineer got up and said that there is no future for her this country under the Abbott government and that she will have to go overseas because of the attack on renewable energy. Go to any of those forums and you will find small businesspeople standing there saying that their growth sector is in medium-scale solar rollout and that is being undermined by the Abbott government. If you are serious about jobs, then you would be moving full-on to build resilience to global warming and bring down emissions, because that will unleash a whole wave of innovation and research across the country. What you are doing is forcing them offshore. Part of your forcing them offshore is now not only taking $1.1 billion out of research and development but also not allowing small and medium cutting-edge businesses the ability to manage their cash flow in a way that enables them to further invest in research and development.

I again put to you, Minister: firstly, who did you consult on not pursuing the quarterly payments and taking it seriously? And, secondly, what is your modelling or what assessment have you got to indicate what is going to be the impact on universities, on public institutions such as the CSIRO and on small and medium enterprises as a result of these changes?

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

The first point I would make is that Senator Milne just does not take no from the Senate for an answer. She is still arguing the supposed merits of her amendment, which the Senate passed judgement on yesterday and rejected. We have in front of us an amendment put forward by Senator Carr that, instead of deferring the implementation starting date to 1 July 2014, in the Labor Party view it should be deferred to 1 July 2016. The whole argument and all of the issues that you have raised relate to an amendment which the Senate considered yesterday and has already rejected.

You ask whom we have consulted. I will tell you whom we have consulted. We consulted the Australian people in the lead-up to the last election. The policy that is in front of us was not only our policy but Labor Party policy in the lead-up to the last election. Do you know what?

That is the way democracy works here in Australia. And I know the Greens have trouble accepting democratic principle. I understand that the Greens would much rather be in charge, with their enlightened views that are so much better than anybody else's, and impose them on everybody else. But the way the system works here in Australia is that every three years we have an election, and every three years the Australian people make a judgement on who they want to be the government. And, as it happens, in the lead-up to the last election the Labor Party and the coalition both went to the election with a policy position, reflected in our costings, which suggested that we wanted tax incentives for research and development to be better targeted and not to go to those businesses generating more than $20 billion a year in assessable income.

Now, we have been going around and around in circles in relation to this. The Labor Party and the Greens, led by Senators Carr and Milne, clearly are desperate to keep the filibuster going. I am not going to continue to support this filibuster. I have been absolutely open and transparent on all of the legitimate issues that have been raised. I have provided an abundance of helpfulness—all the relevant information—and it is time that we bring this now to a close, I would have thought.

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

Minister, is it the government's intention to reduce the company tax rate by 1.5 per cent?

Senator Cormann interjecting—

It is a very relevant issue, because the original rationale that the government used for the reduction in the R&D tax concession was the proposition that the reduction in the company tax rate would mean that it would legitimise the reduction in the R&D tax concession.

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

That was a different measure.

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

No, it is a very similar measure. The government stated that it was its intention to link the two issues. Is it your intention to reduce the company tax rate?

Christine Milne (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Well, it is clear that we are not going to get an answer to that. But I just want to go back to the minister's suggesting that it is not a legitimate question to ask, first of all, which businesses he consulted about the refusal to pay quarterly payments and, secondly, what research he has on the impact of taking $1.1 billion out of research and development and of these particular changes on smaller and medium enterprises and public institutions such as CSIRO and universities. I do not see, Minister—why don't you go back to your sedan chair and finish your conversation somewhere else? Can I just ask, Minister: why will you not tell the Senate and the Australian people what the impact is going to be of taking $1.1 billion out of research and development on CSIRO and on universities and small and medium-size enterprises? If you have done the work that you have said you have done, and if Senator Wang's amendment does as you say, you should be able to tell us what the likely impact is going to be on universities, given that you are taking millions out of the universities already and given that you have slashed CSIRO funding by more than $1 million. Now you are reducing research and development capacity that would flow on to them because, as I said, these larger institutions actually contract some of these small and medium-size businesses and involve universities.

Please answer the question. I think Australia's universities, Australia's research community and Australia's small businesses deserve to know what modelling you have on the impact of taking $1.1 billion out and these changes on their capacity for research, innovation, new technology and jobs growth, because this is where the jobs engine is, not in the old fossil fuels sector, not in the old 'dig it up, cut it down, ship it away'. The innovation is in these future businesses that are working with the universities. And I want to know the impact on the universities, especially given, as I indicated before, that the University of New South Wales has said that 20 per cent of its research effort is backed by companies that will be directly affected by the bill. Now, if that is the University of New South Wales, it will be the same for the other big universities around the country, and smaller ones as well. What is the impact on those universities and research institutions?

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

At the risk of repeating myself, we are going around and around in circles, where Senator Milne attacks our government for doing certain things and reducing funding available for research and development as a result of this measure. I would just say again: this is a Labor Party budget measure. It is a measure that has been initiated and banked in the 2013-14 budget by the Gillard Labor government, with Mr Swan as Treasurer and Senator Wong as the finance minister. That is what happened. And I have already read into Hansard the justification by former Treasurer Mr Swan at an Australian Business Economists breakfast—and I will quote it again for your benefit—when he said:

We said we would remove the R&D tax concession for large companies with a $20 billion Australian turnover or more, to ensure innovation spending is directed to where it will have the biggest benefit.

He also said that this was 'a down payment on the repair that the budget needs'.

Now, we can go around and around in circles, and Senator Carr has tried his best to come up with one red herring after the other to keep the filibuster going, including mixing up the various budget measures. He was trying to pin this government for a Labor government budget measure. All we are doing here is seeking to legislate a budget measure initiated and banked in the 2013-14 budget by the previous Labor government. I understand that Senator Carr has stared down his leader, Mr Shorten, in relation to this matter, to get him to change the position compared with the position of the Gillard and Rudd Labor government before the last election, as reflected in their economic statement before the election and the Pre-election Economic and Fiscal Outlook. The fiscal impact is broadly the same. That is the truth of it. Actually, it is going to be less now, because we are starting a year later.The Labor measure was supposed to start on 1 July 2013. If the Senate passes the Palmer United Party amendments, it will now start a year later, so there will be a loss there in terms of the beneficial impact on the budget bottom line because of that delay. I am intrigued as to why Senator Milne did not ask these questions of the previous Gillard Labor government which initiated and banked this particular measure, so I am not going to continue to go round and round in circles with you.

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

I have budget paper No. 2 here. On page 18, under the title 'Research and development tax incentive—reducing the rates of the refundable and non-refundable tax offsets'—

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

It is not this legislation.

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

No, but this is what it says:

Consistent with the Government’s commitment to cut the company tax rate from 1 July 2015, the Government will preserve the relative value of the Research and Development Tax Incentive by reducing the rates of the refundable and non-refundable offsets by 1.5 percentage points, effective from 1 July 2014.

That is a direct quote from budget paper No. 2—so the government itself sought to base a relationship between the company tax rate and the R&D tax incentive. Is it your intention to reduce the company tax rate by 1.5 per cent, or are the reports that you no longer wish to proceed with that matter true?

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

Firstly, Senator Carr again is trying to confuse the chamber. If he knows anything at all about this particular topic, he knows that this legislation has absolutely nothing to do with the budget measure that he has just referred to. This legislation before us seeks to implement a measure in the 2013-14 budget that was initiated and banked by the former Gillard Labor government when Mr Swan was the treasurer and Senator Wong was the finance minister. That is what this government is seeking to do: implement a Labor budget measure. The measure that Senator Carr has just read out is of course included in our budget—it is not reflected in this legislation but is included in our budget. What we have said in relation to the company tax rate is that there will be a company tax cut, that large companies will not pay any more tax and that small and medium sized companies will pay less tax as a result of the package that is about to be released in the not-too-distant future. The detail of all of that will be released at the appropriate time.

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

Can I put a question to you, Mr Temporary Chairman. My understanding is that the substantive motion to the amendment before the chair is actually Senator Wang's amendment; I had moved an amendment to his amendment. In what order will they be put?

Cory Bernardi (SA, Liberal Party) Share this | Link to this | Hansard source

Senator Carr, my advice is that we will deal with your amendment first, and then we will go to the Palmer United Party amendment. The variation of that will depend on whether your amendment is successful. The question before the chair is that opposition amendment (1) on sheet 7650 be agreed to.

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

I would like to deal specifically with this so-called question of retrospectivity, given that clearly the ground rules are changing. For instance, the company tax issue for large firms—the 1.5 per cent reduction—is not going to occur, despite the assertions that were made in the budget papers. I want to deal with the—

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

That is just not true!

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

Well, that is what you said.

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

That is not what I said.

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

That is what you said. You said: '…will remain the same—they will pay the same tax. The reductions won't occur.' If I have misunderstood you, I am sure you will be only too happy to correct the record. Perhaps you can do that. Maybe that is one question you can answer, since you are so short on answers for everything else. But that is clearly what I understood you to be saying—that large companies will still be paying the same rate of tax.

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

I said they will not pay any more.

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

Oh, they will not pay any more? Does that mean they will pay the same rate of tax or that they will not pay any more? I do not recall ever reading a measure in a government's budget papers where they are going to increase the taxes. Is that a new measure you are proposing?

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

In an abundance of helpfulness, Senator Carr obviously knows that the policy we went to the last election with was to have a company tax cut of 1.5 per cent to come into effect from 1 July 2015. This was, in effect, offset for Australia's 3,000 largest companies by the 1.5 per cent paid parental leave levy, which means that, in practice for those largest companies, the effective tax rate remained at 30 per cent. That is a matter of public record. Now, what we have said is that we are not proceeding with the paid parental leave scheme that we took to the last election. We have also said that there will be further announcements in the coming weeks and months about a families package, about a jobs package. Of course, that will include all of the detail in terms of how those changes—in particular, the measures to facilitate access to more affordable child care—will be funded and what we have put around all of that. You have asked what we have put around all of that by way of parameters. As was our policy before the election and as is the policy reflected in the budget papers, large companies are not going to pay more in tax than they are paying now. There is that 30 per cent cap which is the same as is reflected in the budget papers right now when you take the 28.5 and the 1.5 together. But the fact that small and medium sized businesses will be at least 1.5 per cent better off is the language the Prime Minister used in his Press Club speech, which I am sure you would have studied in great detail. So this is completely irrelevant to the legislation that is in front of us; but, given that you are trying to mislead the Australian people with some of the verballing and misleading assertions that you have been making, I thought it was important to make that clarification.

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

It is an assertion that you have made yourselves on page 18 of your budget paper No. 2, and I raised it in the context that the previous Labor government explicitly decoupled the proposition that there would be a link between the taxation rate of companies and the R&D tax credit. That was one of the reforms that we introduced.

Mr Scott Morrison admitted when he made some statements just last week that the Abbott government had left Australian business in limbo. I think that was the word he used: 'in limbo'. Clearly you are trying to extract yourself from the chaotic arrangements that your leader had placed upon you in regard to his changes to the Paid Parental Leave policy and the backflip that he engaged in with that. There is no doubt that there is a flip-flop arrangement when it comes to the taxation policy of the government, and my concern here is what the government has prosecuted through its budget papers: trying to assert that there is a link between the R&D tax incentive scheme and the rate of company tax.

But let me just go to the issue of the arrangements regarding so-called retrospectivity. In the report of the Senate Economics Legislation Committee examining the original government bill—that is the $20 billion proposal, as distinct from the revised government bill, since it is quite clear that you are the real owners of this revised amendment, which of course was never flagged anywhere and never discussed prior to the consideration of these matters—the Liberal Party's Senator Bushby argued on page 14 of the report:

Generally, retrospective tax legislation is not desirable and any such legislation should ideally be limited to rare circumstances, such as to correct unintended consequences or to address integrity issues. However, the proposed amendments have been foreshadowed for some time—

by, it was claimed, the previous government.

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

That's right—by Labor.

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

I am quoting directly from the report. This is the argument that was put:

… the previous government introduced a bill in June 2013 which, if passed, would have enacted them.

That is page 14 of the report. Irrespective of the fact that the parliament had been prorogued and that this was a new bill—and, of course, irrespective of the fact that the previous regime was directly tied to the jobs package—I would ask you: where was the $100 million cap foreshadowed by any public announcement or previous legislation by this government? How would such a statement actually satisfy the test that was established in the economics committee report by Senator Bushby?

Christine Milne (Tasmania, Australian Greens) Share this | Link to this | Hansard source

Before we end this debate, I want to have an answer to my question about the impact of taking $1.1 billion out of research and development on smaller and medium enterprises and public institutions like the CSIRO and universities. So I would ask Senator Cormann: will he give an unequivocal guarantee that, if this legislation passes, there will be no negative impact on the research effort of Australian universities—yes or no?

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

The best way to boost the capacity of Australian businesses to invest more in research and development is to grow a stronger economy. Over the last 17 to 18 months, the government has worked very hard to strengthen the economy and create more jobs, and of course the results are starting to show. Last year the economy grew by 2.7 per cent, up from 1.9 per cent the year before. We have scrapped the carbon tax. We have scrapped the mining tax. We have finalised three free trade agreements with key economies in the region: China, South Korea and Japan. We are rolling out a record infrastructure investment program. We are pursuing a whole range of measures to boost economic growth and to help Australian businesses be more successful and generate more profits to give them more capacity to employ more Australians and invest more in research and development to facilitate stronger growth into the future.

What we are saying here is that we agree with the former Labor government that it is appropriate in the current circumstances to better target the tax incentives available for research and development. Instead of providing a 133 per cent tax deduction for Australia's most profitable businesses, we are proposing for that to be a 100 per cent tax deduction only. The way we have structured it, in consultation with the crossbench, is to put a $100 million cap on the special benefit available from taxpayers for those businesses making research and development investments. We think that is appropriate, we think that is well balanced and we think that the issue is well understood, and I would urge the Senate to support it.

Christine Milne (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I did not ask for a party political broadcast on Liberal Party propaganda. What I asked for was an unequivocal guarantee that the research effort of Australian universities will not suffer—will not actually be cut—because the government has decided to move to take $1.1 billion out of research and development as a result of this legislation. It is a straight-up question. The vice-chancellors, the students, the businesses associated with it and the PhD students all deserve an answer. It is a serious business. You get a university like the University of New South Wales, with 30 per cent of their research effort, they estimate, backed by companies that are directly affected by this bill. Given that that is the fact, they deserve an answer: if this passes, is this going to undermine the dollars available for those research efforts, given an environment where you are cutting back funding to universities?

These are the serious questions the community want answered. You have not learnt anything from the feedback from the community on what they think of the Abbott government if you keep on standing here just going into a party political broadcast. Answer the question: will universities suffer in their research effort—yes or no? Will there be any adverse consequence because you are stopping large corporations investing in research and development by taking that $1.1 billion out? It is a straight-up question: yes or no?

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

I take it the minister is choosing not to answer this question.

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

It is your saving—the Labor Party's saving.

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

No, you were asked a specific question: what was the effect on universities?

You have not mentioned the word universities. You have not been able to even get near an answer to the question.

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

Ask Wayne Swan!

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

You will have your chance. I also asked you a question about the issue of retrospectivity. The government made assertions in the Senate economics report that there had been announcements and that satisfied the government, in their own minds, that they did not have to worry too much about retrospectivity. I have asked you a specific question: when was the announcement made by the government, regarding the $100 million cap foreshadowed in this amendment before the chamber, which would satisfy the retrospectivity test that you as a government brought to this parliament through the economics committee report?

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

The first point I would make is that this measure in this legislation was announced as part of the 2013-14 budget back in May 2013 by the then Gillard Labor government. Now the government has agreed with crossbench senators to delay the start date of the research and development targeting measure to income years beginning on or after 1 July 2014, in order to minimise the risk of the law applying to companies retrospectively because of the delays that Labor has driven against its own savings measure.

Under the original date of effect of 1 July 2013 this measure would have affected income years that may have finished and would therefore raise the risk of companies being required to make an amended tax assessment. By delaying the start date of the measure to income years beginning on or after 1 July 2014 the amendments will only apply to companies—and this is the very important point that you need to listen to—lodging their tax returns from 1 July 2015 onwards. This will provide affected companies with additional time and notice to plan for the changes in the law.

The point here—through you, Chair—is: the Gillard Labor government announced this measure in May 2013 to take effect from 1 July 2013, and it would have impacted on companies lodging tax returns from 1 July 2014. In an abundance of transparency, and taking on board the feedback from the crossbench, we have delayed that by one year, so it is now only due to come into effect in relation to companies lodging their tax returns from 1 July 2015. Now, when I last looked, we are not yet past 1 July 2015; when I last looked 1 July 2015 was still more than four months away. I do not know how Senator Carr, given that this was announced in 2013 and will not come into practical effect until 1 July 2015, could describe it as a retrospective measure in any way, shape or form.

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

On the basis of what you have just said, you should accept the opposition's amendment. Also, the problem with what you have just said is that you propose that the fact you gave notice on a previous measure ignores the fact that the government has accepted a different measure. We are not actually debating that matter any longer because the government has proposed a fundamentally different proposition.

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

That's just not true.

Kim Carr (Victoria, Australian Labor Party, Shadow Minister Assisting the Leader for Science) Share this | Link to this | Hansard source

You have—a $100 million cap instead of the $20 billion arrangement. It is a new measure of which no notice has been given, none whatsoever. Minister, is it not a fact that companies get prior approval before they lodge their claims and often before they actually undertake the investment? Is it not a fact, Minister, that the proposition you have just put to this chamber is completely erroneous because some companies such as CSL—an Australian manufacturer that makes vaccines and biopharmaceutical products—undertake strategic investment decisions on the basis of that advice, and that your proposal will in fact change the ground rules retrospectively on the basis of the investment they make? Whether or not they lodge their claim at any point in the future for activity undertaken in the period covered by this new amendment—this new proposition—the $100 million cap will, in fact, come into play irrespective of any other statements you have made. That is the nature of the retrospectivity. Is that the case?

Christine Milne (Tasmania, Australian Greens) Share this | Link to this | Hansard source

It is clear the minister has no intention of standing up and answering the question, so I would like to ask him another one. Which universities did you consult about the impact on their research effort of your taking $1.1 million out of the research and development budget in this country? The University of New South Wales made its submission to the Senate inquiry; which other universities did you consult? Did you consult any? Did you consult the CSIRO? And if you did not consult the CSIRO, why not? They are a central institution in this particular mix. I can see the minister is much more interested in talking to his other colleagues than in answering the question. So, Minister, if you are—

Michael Ronaldson (Victoria, Liberal Party, Minister for Veterans’ Affairs) Share this | Link to this | Hansard source

More important things to do than listen to you!

Christine Milne (Tasmania, Australian Greens) Share this | Link to this | Hansard source

It is interesting—the government has learned absolutely nothing. They have more important things to do than answer questions about which universities they consulted about the impact on their research efforts of a government amendment to take $1.1 billion out of research and development!

This is exactly why the community is fed up with the current government. You just go back to your rhetoric and dismiss people's concerns as if they are of no consequence because somehow you are born to rule. Let me tell you: you are not born to rule. The community is sending that message. So I ask the minister directly: will you tell us which universities you consulted before you made the move on this legislation? Did you consult with any? What is the impact on their research efforts?

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

As I have indicated before, the government consulted the most important people of all—that is, the people of Australia—in the lead-up to the last election. The people of Australia supported the policy reflected in our costings which was both the policy of the coalition and the policy of the Labor Party, which was to ensure that the research and development tax incentives could be better targeted. We can go round and round in circles on this Labor/Green filibuster. It will not change the fact that this is a measure that was taken to the last election.

The CHAIRMAN: Order! It being very nearly 2 pm the committee shall report progress.

Progress reported.