David Smith (ACT, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Minister representing the Prime Minister, Senator Cormann. I refer to the United States Congressional Budget Office report of March 2017, International comparisons of corporate income tax rates. The report finds that, in an analysis of the average corporate tax rate of G20 countries, Australia ranked fourth to last, with an average corporate tax rate of 17 per cent. What aspect of the United States' Congressional Budget Office analysis does the minister disagree with?

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

(—) (): I'm not familiar with the specific analysis that the good senator is referencing, but what I would say to you is that, in January this year, the corporate tax rate in the United States went from 35 per cent to 21 per cent. In Australia, for businesses above $50 million in turnover, it is locked in at 30 per cent. We now have the second-highest corporate tax rate in the OECD.

When you compare the Australian economy with the US economy, we actually are so much more in need of a competitive business tax rate than the United States. That is because the United States has a much bigger domestic market, so they've got a much bigger domestic consumer market, and they also have much easier access to a stronger, bigger domestic capital market. Australia is a relatively small economy in a global context. We have a small population. We have a very capital intensive economy. We rely on attracting foreign investment in order to continue to develop our economy to its best potential. And do you know what? The United States is our biggest source of foreign direct investment. An investor will now look at the corporate tax rate of 21 per cent in the United States, they'll look at the corporate tax rate of 30 per cent in Australia, and you know what they'll say: 'We have a better opportunity to get a higher after-tax return on our investment in the United States than in Australia.' So more investment will be diverted away from Australia and to the US and other countries around the world.

Whatever you say about the other tax settings in the US, you can't dispute the fact that the Trump administration legislated a reduction in the corporate tax rate from 35 per cent to 21 per cent—that is an absolute fact—just as you can't argue with the proposition that, in France, a centre-left leader has legislated to progressively bring the corporate tax rate of 33 per cent down to 25 per cent. (Time expired)

David Smith (ACT, Australian Labor Party) Share this | Link to this | Hansard source

I have a supplementary question. Minister, the report also finds that, in an analysis of the effective corporate tax rates of G20 countries, Australia ranked in the bottom half, with an effective corporate tax rate of 10.4 per cent. What aspect of the United States Congressional Budget Office analysis does the minister disagree with?

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

We don't have an effective corporate tax rate of 10-point-something per cent. We just don't. The only way you can make that false assertion is if you apply the tax paid to turnover, and tax is not applied to turnover; tax is paid on profits. And do you know what? The corporate tax rate in Australia is 30 per cent on profit. It's the second-highest tax rate in the OECD.

Now Mr Shorten is standing up for the big end of town at the expense of Australian workers. He's standing up for the big end of town in the United States, in France, in Sweden, in the United Kingdom, in Canada and in New Zealand. Mr Shorten wants businesses in every other part of the world with lower business taxes to be able to take jobs and investment away from Australia, and Labor should stand condemned for that. That used to be Labor's position. It used to be Bill Shorten's position. It used to be Senator Wong's position. It used to be Mr Bowen's position. You are just playing opportunistic politics, and you're selling out the best interests of working Australians.

Scott Ryan (President) Share this | Link to this | Hansard source

Senator Smith, a final supplementary question.

David Smith (ACT, Australian Labor Party) Share this | Link to this | Hansard source

Minister, when will the Turnbull government stop misleading the Senate and the Australian people with simplistic arguments about the headline statutory corporate tax rate, when many other factors impact upon the effective tax rate which informs investment decisions in Australia?

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

Unlike the Leader of the Opposition, we will continue to tell the truth to the Australian people. We will be telling the Australian people how Mr Shorten stands for higher taxes, which means less investment, lower growth, fewer jobs, higher unemployment and lower wages. Don't take my word for it; look at the evidence. When Labor were last in government, they left behind a weakening economy, rising unemployment and a rapidly deteriorating budget position. You want to take Australia back there again. You want to take Australia backwards. You want to force Australians back into a weakening economy, rising unemployment and a rapidly deteriorating budget position.

We are all about lower taxes so we can attract more investment, generate stronger growth, create more jobs and bring unemployment down. And as more jobs are being created, we are increasing the bargaining power of workers. If only the Labor Party were on the side of workers. If only the Labor Party cared about workers. We want workers to do better in this country. (Time expired)

Penny Wong (SA, Australian Labor Party, Leader of the Opposition in the Senate) Share this | Link to this | Hansard source

I seek leave to table the Congressional Budget Office document, which confirms the figures that Senator Smith was quoting.

Leave granted.