David Leyonhjelm (NSW, Liberal Democratic Party) Share this | Link to this | Hansard source

Tax cuts are usually popular, but many senators here oppose the tax cut we are discussing here today because it is a tax cut for companies. This is odd because company is not a dirty word. A company is just a gathering of humans for common cause or just for fun. Someone's company is a thing to be enjoyed. Other words for company include association, society, community, cooperative, kibbutz, union and collective. If only we reworded the tax cut we are debating today as a tax cut for collectives we might even get the support of our comrades in the Greens. For the Greens, a collective is good but a company is bad, even though they are both gatherings of people to achieve things that they couldn't do alone.

If anything, a company is better than a collective because a company is always thought of as a voluntary gathering of people, whereas a collective is sometimes used for a gathering achieved through duress and the use of force. A company consists of people. Any tax on a company is a tax on the people who own it, and the people who own Australian companies are overwhelmingly Australians. The great majority of Australians are part-owners of companies, either directly or through their superannuation fund. A company tax cut is a tax cut for the people of Australia.

Keeping a high company tax rate is not a smart way for low-income Australians to punish high-income Australians. We've got a progressive tax system that serves that dubious purpose. Given that we've already got a high top-income tax rate that punishes high-income Australians, keeping a high company tax rate just punishes low-income Australians. And keeping a high company tax rate does not punish foreigners. It just encourages them to keep their money at home or invest it elsewhere, rather than inject it into Australia. This means a shrinking of production in Australia, which hurts workers through fewer jobs and lower wages.

Given company tax cuts in the rest of the world, we are past the stage where a small-company tax cut under consideration here would boost jobs and wages. Now this small cut is necessary for us to save our current jobs and to stop our wages from dropping. The Liberal Democrats will of course support the small cut currently under consideration, but we must go further, such as by moving to the 20 per cent company tax rate that forms part of the Liberal Democrats' fully-funded, fully-costed policy platform—the costings for which are all published on the website of the Parliamentary Budget Office. Only with a competitive tax rate can we go beyond the current fear for our jobs and instead look forward to a better future: a future with more jobs and higher wages, and a future with more money in the pockets of the millions of citizens, both rich and poor, who have a stake in the companies of Australia.

Jonathon Duniam (Tasmania, Liberal Party) Share this | Link to this | Hansard source

Again, it's great to see some very reasonable contributions being made from the crossbench on such an important issue. I, too, am pleased to be able to make a contribution on the debate relating to the Treasury Laws Amendment (Enterprise Tax Plan No. 2) Bill 2017, something that, as a nation, we've been talking about for quite some time.

I will just pick up on a point that was made by Senator Reynolds in her contribution—just before we broke to deal with the business of the Senate and other items—about that previous sense of bipartisanship we've had around tax reform and tax policy in this country and which has evaporated. Later on I will come to claims and points that have been made by the opposition leader, by former Prime Minister Gillard and by other members of the ALP in this debate previously, because I think it's important to point out how strong and strident supporters they were of the tax reforms we are now talking about. It does beg the question: why the change? What has motivated this change in policy? I think the answer starts with the letter 'P', and that it's all about politics.

On the coalition's part, though, this bill and the previous reforms that have passed through this place are all about giving people opportunities, as previous speakers in this debate have said. We are known as the 'lucky country', the land of opportunity, and you only have to speak to people who come from countries where there aren't opportunities to understand exactly why they say that. The reforms contained in this bill and, indeed, the reforms that have passed so far, go precisely to creating an environment where those opportunities are given to people. It creates that situation where people are enticed to take a risk, to invest, to create a business, to create jobs and to grow the economy—and, at the end of all that, reap the reward for the effort they put in. That is not a bad thing. That is not a dirty thing. In many cases, particularly in our regional communities, you see those benefits flowing on to others, in the form of employees, which in turn results in money being spent in the local community and economy.

It is my view, and the view of the coalition, that people are fundamentally better off having the money they work hard for in their pockets rather than having it taken out of their pockets and given to the government to do with as they please. Somehow the government thinks it knows best what to do with other people's money. I think we have comprehensively, over many generations, proven to the Australian public that the government doesn't always get it right when it comes to tax expenditure. What we do need to do is rein in expenses rather than taxing people more.

There is a bizarre notion being peddled by those opposite that affording a more competitive tax regime and better tax conditions to that part of the economy that creates jobs—that is, the private sector—is somehow wrong. It is bizarre, it is wrong, it doesn't stack up. I don't understand the opposition's hollow claim that it is somehow favouring the big end of town. The current Leader of the Opposition didn't seem to have a problem with it before. Indeed, he made reference to tax reform applying to all types of businesses, big and small, so that we do have a level and competitive playing field.

As I said before, this side of the chamber—the government, the coalition—believes it would be better if this money were circulating in the economy and being spent by the people who earn it, who create it, who take the risk to generate the funds that they are going to be spending, to invest further, to expand the business that they may run, to create more job opportunities and to enable others to reap the benefits of their hard work. That's our view. But as was pointed out a couple of days ago by Senator Cormann, the Leader of the Government in the Senate, the Labor point of view is that the starting point is that any dollar earned by an Australian should go to the government; and you can see that point of view when the opposition refer to providing businesses with a more competitive tax regime as a cost, as a spend. But it's not the government's money; it is still in the pockets of those who are yet to pay the tax. It doesn't belong to this place; it belongs to those people who work hard and earn it. And we think that they know best what to do with their money. So that's what it's all about.

I do wonder, though, whether this is about finding money to prop up large, costly, big-spending programs by the Labor Party should they happen to be successful at the next election. In a previous iteration of a Labor government, we saw costly programs such as pink batts and school halls. So hanging onto the money that Australians earn through their own efforts would enable the opposition to pay for some of these things that they will no doubt promise in the lead-up to the next election. But none of those increases in the size of the bureaucracy here in Canberra, none of those big-spending programs within government, will do much to stimulate the economy. They won't create jobs in regional communities. They won't enhance the opportunities for people to make a go of things themselves. We should be fostering a sense of self-worth and self-determination—that you can have a go and you will reap the rewards for your hard work. What Labor will propose to do, by hanging onto this cash that Australians have earned and worked hard for, is spend it themselves in a way they see fit—predominantly here in Canberra, I suspect, and probably other capital cities around the nation, but certainly not in regional communities.

The other point to make on that, of course, is that when we have more people out there working in private entities right across the country, when we have businesses thriving, growing and choosing to do business here rather than somewhere else, more people are paying tax and more entities are paying tax and we have more revenue for government. I point that out to those opposite in probably some vain hope that they will see sense in the bills before the Senate. As my colleague Senator Fierravanti-Wells said in her contribution earlier today, if those who are opposed to this legislation are successful in blocking it then they will continue to apply the handbrake to the economy. We will not be able to pick up to full steam and do what we need to, to ensure that for the generations to come we have done all we can to ensure that our country can pay for the services it needs and to make sure that young Australians—generations that are yet to enter the workforce—are able to find employment, wherever they live, particularly, as I always say in this place, in regional communities, not just in our capital cities.

That is why this legislation is so critically important. It is about facilitating, right across Australia, an environment in which we will keep the economy growing, we will keep wages growing and, most importantly, we will keep creating jobs. Every business that benefits from this will want to do better. They will want to take advantage of the circumstances that will apply with regard to tax rates in this country, and they will want to invest more. That means they will open new factories, they will open new distribution centres and they will open new shops, and that means there will be more people employed, and each of those people spend money in the community and contribute to the economy through the payment of taxes.

We've come to learn over recent decades that the business world is very much a global place. It's not something that we have a firm border around in this country. It's not the case that decisions made in other trading partner nations—Japan, India, China and the US—have no impact on business conditions in this nation. What happens over there does have an impact right here, and that is as a result of businesses becoming far more global, being more mobile and being able to pick up their operations very quickly and move them from one place to the next. Indeed, being global operations, as they expand they will be looking to see what the conditions in various countries across the world are like in order to make decisions about how best to invest their money. It comes down to a choice for them, as it does for all of us. All of us make choices on a daily basis about how we spend our money: whether buying a house in that suburb is better than buying a house in the other suburb, or whether buying the generic brand of toothpaste at the supermarket as opposed to the name brand is the best way to go. These are choices that are made on a very micro scale. But also as companies want to make the decisions that are right for them they will consider all factors, and the tax rate here relative to the tax rates in other countries will be chief amongst them.

So I think it is good for us to, in this debate—and I'm sure others have as well—consider the tax rates that apply in other nations and to consider where we sit as a country with reference to international tax rates. Over the past few years we have seen quite a number of countries with similar economies and regimes to our own making efforts. And these companies are our competitors, as I said. It is a global market in which we are seeking to bring business here rather than allowing it to go offshore.

We talk about that all the time in this place, so again I highlight the contradiction in the argument of the opposition. What we are doing by not endorsing this legislation is creating an environment in which people are forced offshore, as are the jobs that are attached to those businesses. But countries like Canada, Singapore, the United Kingdom, New Zealand—our neighbours across the Tasman—Norway, Israel, Japan and France have all reduced their company tax rates. They are all countries that are seeking to grow whatever markets and industries they have within their nation. Some of them are agricultural exporters, some of them are manufacturers, some of them are tech providers and others are service economies. Each of them, in some way, competes with us. When they take trade delegations to other countries, when they attend trade shows and when they have diplomatic meetings, each of them will be putting in the hardcore pitch to say, 'Our place is the best to do business because of these reasons.' One of the reasons they will highlight is the tax regime as it applies to the country they represent.

Only last year a significant economy—that is, the United States' economy—emerged as a serious competitor. They made the choice to slash their tax rate from 35 per cent to 21 per cent. We are already seeing the benefits flowing right across that nation as a result of the decision by the government to cut the corporate tax rate. I remember watching—I think it may have even been on SBS—a journalistic piece about the benefits flowing to every corner of that nation, including a former down-and-out region in the Appalachian Mountains in West Virginia, which was formerly a coalmining region of the United States. Because of Donald Trump, his government and the decision they made to reduce the tax rate to a far more competitive rate—a rate that poses a threat to this nation in terms of our business growth and attracting business from overseas—things picked up over there. The piece I saw on SBS talked about coalminers who were second-generation, or sometimes third-generation, unemployed people. Because the economy had picked up and there was increased manufacturing going on—more house building and more production of concrete and cement products—there was an increased demand for energy. So coalminers in this formerly down-and-out and forgotten part of the United States finally had jobs, all because of Donald Trump and his government's decision to reduce the tax rates. That one example should be enough for those who claim to represent regional communities to support this legislation.

There's a lot of commentary with regard to this from right around the world. The International Monetary Fund's World economic outlook released last year warned that the reduced tax rate that applies now in the United States will cut Australia's GDP by one per cent and threaten the sustainability of the Australian tax system unless Australia responds. That was backed up by our very own Treasury analysis here in Australia. And I suppose that's the point. It goes to this very simple point: we need to compete. We need to be able to say to those people who are making that decision, 'Come here, because this is a better tax rate than you will get somewhere else.' Of course, there are other factors, but these are businesses we are talking about; they are in the business of improving their investments, growing them and wanting to make more money. I don't think that's a bad thing, because one of the results of that, as I pointed out in that example about the United States, is that jobs are created because demand has increased. As I said, Treasury here has indicated that the adverse impacts on Australia of US tax reform could, in effect, be offset by the implementation of the government's enterprise tax plan—the very bill we have been debating. It is pleasing to note that Treasury has come out and said exactly that.

Treasury modelling released at the time of the 2016-17 budget estimated our tax cut would increase the size of our economy by around one per cent. That would be a permanent boost to economic growth, jobs and wages. There you see a direct rebutting of the claims made by the opposition in relation to why they, for some bizarre reason, want to oppose this legislation that will actually create jobs. The reality is that as a nation, and as a competitor globally, we have fallen behind other jurisdictions and we need to ensure that we don't fall further behind, because every time we fall behind, companies that are making a choice about whether to invest here or to invest somewhere else are going to be less likely to make a decision to invest in the Australian economy, to create jobs here.

It is a domestic problem as well if you don't have a local environment in which businesses have incentive, and the capacity, too, because if they are paying higher rates of tax, there's less money in their pockets to invest here in an increased operation—in establishing a new factory and investing in new plant and equipment, in putting on further lines of production, and in opening new shopfronts. All of these things create jobs, so it matters domestically. It's not just about attracting businesses who are making a choice between, say, investing in the United States or Australia, or France or Australia or any other country and our own. It's about ensuring that those countries that are here, that do have the capacity to grow, have that opportunity.

It's also very much about fostering innovation. When we have a prohibitive tax rate we end up hampering innovation. Australia, and my home state of Tasmania, are home to some great leading innovators. The point has been made to me that the tax rate we currently face in this country is something that makes businesses think that they might either not do it altogether or go somewhere else to invest in their start-up. All of these things need to be taken into account. But it is very simple: it's about creating an environment where you have a desire and an incentive for people to invest more, because it does translate into more jobs and wages growth. And at the end of the day it translates into greater tax receipts, which means we can sustainably pay for the services we need in order to keep this country ticking over.

Just to reiterate some points made by my colleagues earlier. I started by highlighting a question I have in my mind, which is yet to be answered: why on earth are Labor now opposed to this piece of legislation, given they've previously been so strongly behind bipartisan approaches to tax reform? You have only to look at the comments made by the Leader of the Opposition with regard to the tax laws in this country and the need to have a better tax rate. He said:

… lowering the corporate rate for smaller businesses only (as the Greens propose) creates an artificial incentive for Australian businesses to downsize.

In worse case scenarios some businesses might actually lay people off to get smaller - and the size based different tax treatment would create a glass ceiling on business workforce growth.

(Time expired)

Jim Molan (NSW, Liberal Party) Share this | Link to this | Hansard source

I rise to speak on the Treasury Laws Amendment (Enterprise Tax Plan No. 2) Bill, but I am about to do a very brave act in that I'm doing it directly from an iPad. So if the South Australian power situation changes in any way, shape or form, I maybe in big trouble! This bill complements stage 1 of the government's plan to reduce the company tax for small to medium companies. It's worth going through the enterprise tax plan part 2 detail. It's very important that we understand the detail, because so many of the comments that have been made so far have ignored the detail of the bill and have equated things that cannot be equated. As we transition from the mining investment boom it is vital that we give businesses every opportunity to invest, to innovate, to grow and to employ more Australians. This government wants to give all hardworking Australians the opportunity to earn more and be rewarded for their efforts.

This tax plan is a critical step in our economic transition as we look to encourage private investment across the economy to generate broader based economic growth. The legislation currently in parliament is designed to deliver the remainder of the government's plan to cut company tax. It follows the passage of legislation in May 2017 to cut company tax for companies with an aggregated turnover of up to $50 million. This is a good start. It helps around 3.2 million businesses employing over 6.5 million workers. But we can't stop there. We must continue this process. While the cutting of company tax for companies at $50 million is a really good start, Australia must continue with the second stage. That's what we're talking about here—the second stage of this reform to make the nation's company tax rate internationally competitive. If we fail to do so, we will be effectively applying a handbrake on the growth of some of our most innovative businesses. It would be a truly perverse outcome if the reward for a firm growing and going over the $50 million level were for it to suffer a tax penalty—that's just bizarre. That's why passage of the full enterprise tax plan is absolutely necessary.

Under the plan, the turnover threshold to qualify for a lower tax rate will be progressively raised to cover all companies by 2024-25, before the company tax rate is reduced to 25 per cent for all companies by 2026-27. This is not something which sits by itself. It's not something that you can look at and criticise on a single basis. It fits into the government's economic plan. The government has delivered substantial reforms designed to put more money into people's pockets in a number of different ways; for example, in energy, in school funding, in child care, in medicines and in the small-business tax cuts that we've spoken about, which have been successful or are about to be successful. By doing this, the government is ensuring that you have more money in your pocket and your cost of living is lower.

As we have said, these corporate tax cuts exist in the context of a broad economic plan. They're just one part of the plan. Certainly, when the budget can afford it, we want to provide income tax relief to individuals and families, and that's the complementary side of what we're talking about today. The government are committed to keeping taxes as low as they possibly can be, because we have to deliver, and we will continue to deliver, activities that reduce the burden on families and ensure that Australians retain more of the money they earn. We've seen chief executives such as Alan Joyce and Andrew Mackenzie call on the Senate to pass the business tax cuts. They understand that pledging a lower tax rate will lead to more jobs and higher wages. These are some of the biggest employers in Australia.

Reducing the corporate tax rate would make a strong contribution to Australia's economic growth, which is vital for generating the next wave of productivity in Australia. The contrast with Labor is clear. Labor stand for higher taxes in every way that they possibly can. Their plan is to slug Australians with something like $150 billion to $200 billion in new taxes, including taxes on housing, electricity, income, small business and investment. We've even heard, unfortunately, the Leader of the Opposition, who seems to have declared war on businesses, say that businesses should expect nothing from a Shorten Labor government. Eighty-six per cent of Australians are employed by private businesses, so the Leader of the Opposition, Mr Shorten, has declared war on the businesses that employ the overwhelming majority of Australians, and that means he's declared war on jobs. It's very sad that we no longer have a degree of bipartisanship on tax, something which I suspect has been sacrificed on the altar of politics and not on the logic of economics. We, as a government, have an obligation to carry this country from the prosperity of the mining boom days through the prosperity which is being maintained today into Australia's future, and Australia's future must be a prosperous future. The most important thing that any government can do is create the conditions for an economy that produces prosperity for each and every one of its citizens.

I've spent a good deal of my life in countries where economies don't work. The biggest problem that exists in these countries is quite often one of corruption. Corruption is quite often caused by the fact that such countries do not have an effective tax system. People see corruption in many of these countries as a form of taxation that just does not go through the government.

We cannot afford to take ourselves back in any way, shape or form to a situation where there is not enough finance being raised for the government to do the good things that government can do. The first start of this tax reduction plan was a good start. On my travels, I've met small-business owners and operators who anticipate benefitting from these tax cuts and who can now spend more on what they do, which benefits the entire community, and they can employ more people—as they are in fact doing. One of these operators was anticipating growing his company, over the next couple of years, over the current $50 million aggregated limit. If Labor and the Greens had their way, he would then be penalised. This is a bizarre consequence of how you would reward people for innovation, hard work and being successful.

The point of this bill is to lower tax on all companies progressively, as I described previously. This is a good plan and it is a good bill by itself. But, given the international situation of nations across the world reducing corporate tax, it goes away from just being a good thing to do to being absolutely essential. We know that one of the most important aspects of prosperity is the creation of jobs through trade deals, which this government is proud of and has engineered over a long period of time. This tax plan is a good plan, while Labor and the Greens have offered us no plan at all but to leave taxes high, or to increase taxes so that they can spend more.

Trickle-down economics has worked. Regardless of where it comes from, it has happened over the past and it has made this an extraordinarily prosperous country. This is not a neoliberal economics concept. It's not something which has been made up by anyone. It is basic Economics 101, and we see it in this nation in the jobs that have been created in this country.

The Greens have described their total and absolute opposition to economic policy in such unsophisticated terms as 'crappy'. They say that we are giving away $65 billion to the big end of town. They've put their opposition to the bill in terms of corporate versus the battlers; that there is no connection between company tax and wages; that we favour fat cats or we favour nurses or teachers—I'm surprised that police somehow didn't get into this strange combination. This is appalling class warfare. It's a denial of the benefits that the economy has conferred on this nation for many, many years. Money, prosperity and happiness apparently come from the fairies at the end of the garden, as a previous speaker has said on a number of occasions.

The concept has been put to this chamber that we should be spending a similar amount of money on transport. That's fantastic. We would certainly be able to move everyone everywhere, except there would be no jobs for anyone—but, of course, we could always get to the Greens' rallies on time. Someone's got to create the wealth, and wealth is created by successful companies and individuals, with the workers able to be prosperous as a result.

What is not the way to create wealth for all in our society is by becoming internationally uncompetitive. What is not the way to create wealth is to attack entrepreneurs and employers in some form of class warfare. What is not the way to create wealth is by denying jobs to workers who then spend. Class warfare seems to lead directly to the kind of undergraduate socialism that we so often see mentioned in certain areas. What direction should we be going in? We should be aiming for a prosperous nation based on an effective economy which is internationally competitive.

Australia has always been dependent on overseas investment, ever since its colonial past. We have achieved extraordinary results—truly extraordinary results. We see the prosperity built on a nation which has something like the 12th-largest GDP in the world. For a country of 24 million people, what an extraordinary achievement this has been.

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

It being 12.45, pursuant to order, debate on this bill is now interrupted. Senator Molan, you will be in continuation when debate on this bill resumes.