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

I table a supplementary explanatory memorandum relating to the government amendments to be moved to this bill. I seek leave to move government amendments (1) to (37) on sheet JP186 together.

Leave granted.

I move the amendments:

(1) Clause 2, page 2 (after table item 9), insert:

(2) Clause 2, page 3 (table item 17), omit the table item.

(3) Schedule 1, page 8 (after line 4), after item 5, insert:

5A Subsection 3 ( 1 )

  Insert:

  large ADI has the same meaning as in the Income Tax Assessment Act 1997.

Note: For a consolidated group, the head company is the large ADI.

(4) Schedule 1, page 8 (after line 6), after item 6, insert:

6A Subsection 23(1A)

  Omit "section 23A", substitute "sections 23A and 24".

(5) Schedule 1, item 7, page 8 (line 10), omit "section 23A", substitute "sections 23A and 24".

(6) Schedule 1, item 8, page 8 (lines 12 to 14), omit the item, substitute:

8 Paragraph 23 ( 3 ) (b)

  Repeal the paragraph, substitute:

  (b) in respect of the standard component:

     (i) unless subparagraph (ii) applies—27.5%; or

     (ii) if the company is a large ADI for the year of income—30%.

(7) Schedule 1, item 13, page 9 (lines 5 and 6), omit the item, substitute:

13 Paragraph 23A(a)

  Repeal the paragraph, substitute:

  (a) in respect of the ordinary class:

     (i) unless subparagraph (ii) applies—27.5%; or

     (ii) if the company is a large ADI for the year of income—30%; and

(8) Schedule 1, page 9 (after line 6), after item 13, insert:

13A After section 23A

  Insert:

24 Rate of tax payable by large ADIs

     The rate of tax in respect of the taxable income of a company (other than a life insurance company or an RSA provider) that is a large ADI for the year of income is 30%.

(9) Schedule 1, item 15, page 9 (lines 14 to 18), omit the item, substitute:

15 Paragraph 28(a)

  Repeal the paragraph, substitute:

  (a) if paragraph 98(3)(b) of the Assessment Act (about beneficiaries that are companies) applies:

     (i) unless subparagraph (ii) applies—the rate specified in subsection 23(2); or

     (ii) if the beneficiary is a large ADI for the year of income—the rate specified in section 24; and

(10) Schedule 1, item 19, page 10 (line 7), omit "Paragraph 23(3)(b)", substitute "Subparagraph 23(3)(b)(i)".

(11) Schedule 1, item 23, page 10 (line 15), omit "Paragraph 23A(a)", substitute "Subparagraph 23A(a)(i)".

(12) Schedule 1, item 27, page 11 (line 7), omit "Paragraph 23(3)(b)", substitute "Subparagraph 23(3)(b)(i)".

(13) Schedule 1, item 31, page 11 (line 15), omit "Paragraph 23A(a)", substitute "Subparagraph 23A(a)(i)".

(14) Schedule 1, item 35, page 12 (line 7), omit "Paragraph 23(3)(b)", substitute "Subparagraph 23(3)(b)(i)".

(15) Schedule 1, item 39, page 12 (line 15), omit "Paragraph 23A(a)", substitute "Subparagraph 23A(a)(i)".

(16) Schedule 1, page 12 (after line 18), after Part 8, insert:

Part 8A—Amendment of the Income Tax Assessment Act 1997

Income Tax Assessment Act 1997

40A Section 960 -265 (at the end of the table)

Add:

40B Subsection 960 -270 ( 3 )

  After "item 14", insert "or 15".

40C Subsection 960 -275 ( 6 )

  After "item 14", insert "or 15".

40D Subsection 960 -280 ( 6 )

  After "item 14", insert "or 15".

40E Section 960 -290 (heading)

  Omit "levy threshold for the major bank levy", substitute "thresholds for major bank levy and large ADIs".

40F Subsection 960 -290 ( 1 )

  Omit "the amount mentioned in the provision listed at item 14", substitute "an amount mentioned in a provision listed at item 14 or 15".

40G Subsection 995 -1 ( 1 )

  Insert:

  applicable reporting standard has the same meaning as in the Major Bank Levy Act 2017.

40H Subsection 995 -1 ( 1 ) (paragraph (aa) of the definition of indexation factor )

  Omit "for the amount mentioned in the provision listed at item 14", substitute "for an amount mentioned in a provision listed at item 14 or 15".

40J Subsection 995 -1 ( 1 ) (paragraph (b) of the definition of index number )

  Omit "the amount mentioned in the provision listed at item 14", substitute "the amounts mentioned in the provisions listed at items 14 and 15".

40K Subsection 995 -1 ( 1 )

  Insert:

  large ADI: an Australian resident company is a large ADI for an income year if:

  (a) disregarding subsection 701-1(1) (the single entity rule) both of the following apply:

     (i) the company is an *ADI;

     (ii) the amount equal to the total liabilities of the ADI for any *quarter in the income year, as reported under an *applicable reporting standard, exceeds the *large ADI threshold for the quarter; or

(b) the company is the *head company of a *consolidated group and paragraph (a) applies to one or more *subsidiary members of the group for the income year.

Note: The effect of this definition for a consolidated group is that, if paragraph (a) applies to any member, the head company is a large ADI. The head company's status as a large ADI affects the rate of tax payable on the head company's taxable income (worked out on the basis that subsidiary members are part of the head company): see subsection 701-1(1) (the single entity rule) and the Income Tax Rates Act 1986.

  large ADI threshold: the large ADI threshold for the *quarter starting on 1 July 2017 is $500 billion. The amount is indexed quarterly.

Note: Subdivision 960-M shows how to index amounts.

(17) Schedule 1, page 13 (after line 25), after subitem 41(8), insert:

  (9) The amendments made by Part 8A of this Schedule apply to the 2023-24 year of income and later years of income.

  (10) The amendments made by Parts 5 and 8A of this Schedule also apply for the purposes of determining the corporate tax rate for imputation purposes for the 2023-24 income year.

Note: This ensures the amendments made by Parts 5 and 8A can be applied to the 2022-23 income year for the purposes of working out the corporate tax rate for imputation purposes for the 2023-24 income year.

(18) Schedule 2, Part 1, page 14 (line 3) to page 17 (line 20), omit the Part, substitute:

Part 1—Amendments commencing 1 July 2023

Income Tax Assessment Act 1997

1 Subsection 995 -1 ( 1 ) (definition of corporate tax rate )

  Repeal the definition, substitute:

  corporate tax rate:

  (a) in relation to a company that is a *large ADI—means the rate of tax in respect of the taxable income of a company covered by section 24 of that Act; or

  (b) in relation to another entity—means the rate of tax in respect of the taxable income of a company covered by subsection 23(2) of that Act.

2 Subsection 995 -1 ( 1 ) (definition of corporate tax rate for imputation purposes )

  Repeal the definition, substitute:

  corporate tax rate for imputation purposes, of an entity for an income year, means:

  (a) unless paragraph (b) applies—the rate of tax for the income year in respect of the taxable income of a company covered by subsection 23(2) of the Income Tax Rates Act 1986; or

  (b) if the entity was a *large ADI for the previous income year—the rate of tax for the income year in respect of the taxable income of a company covered by section 24 of that Act.

(19) Schedule 3, item 1, page 19 (lines 5 to 15), omit the item, substitute:

1 Subsection 160AAB ( 1 ) (definition of statutory percentage )

  Repeal the definition, substitute:

  statutory percentage means:

  (a) if the year of income is the 2002-03 year of income or a later year of income before the 2024-25 year of income—30%; or

  (b) if the year of income is the 2024-25 year of income or a later year of income and the policy concerned was issued by a company that is a large ADI (within the meaning of the Income Tax Assessment Act 1997) for the year of income—30%; or

(c) otherwise:

     (i) if the year of income is the 2024-25 year of income—27.5%; or

     (ii) if the year of income is the 2025-26 year of income—27%; or

     (iii) if the year of income is the 2026-27 year of income—26%; or

     (iv) if the year of income is the 2027-28 year of income or a later year of income—25%.

1A Subsection 177A ( 1 ) (definition of standard corporate tax rate )

  Repeal the definition, substitute:

  standard corporate tax rate means:

  (a) unless paragraph (b) applies—the rate of tax in respect of the taxable income of a company covered by subsection 23(2) of the Income Tax Rates Act 1986; or

  (b) if the relevant taxpayer is a large ADI (within the meaning of the Income Tax Assessment Act 1997) for a year of income in which the DPT tax benefit is obtained, or would be obtained—the rate of tax in respect of the taxable income of a company covered by section 24 of the Income Tax Rates Act 1986.

(20) Schedule 3, item 2, page 19 (line 19), after "Company A", insert "(which is not a large ADI)".

(21) Schedule 3, item 3, page 20 (line 12), after "Company E", insert "(which is not a large ADI)".

(22) Schedule 3, items 6 and 7, page 20 (line 28) to page 21 (line 8), omit the items, substitute:

6 Subsection 65 -30 ( 2 )

  Repeal the subsection, substitute:

  (2) However, reduce the *tax offset by the amount worked out by multiplying your *net exempt income by:

  (a) unless paragraph (b) applies—0.275; or

  (b) if you are a *large ADI for the income year—0.3;

if you have a taxable income for the income year.

7 Subsection 65 -35(3A)

  Repeal the subsection, substitute:

  (3A) In reducing *net exempt income for an income year under subsection (3):

  (a) unless paragraph (b) applies—each 27.5 cents of *tax offset reduces the net exempt income by $1; or

  (b) if you were a *large ADI for the year—each 30 cents of tax offset reduces the net exempt income by $1.

(23) Schedule 3, Part 1, page 21 (after line 21), at the end of the Part, add:

8A Subsection 713 -545 ( 6 ) (definition of ordinary class tax rate )

  Omit "a life insurance company", substitute "the life insurance company".

(24) Schedule 3, item 9, page 22 (line 5), after "Company A", insert "(which is not a large ADI)".

(25) Schedule 3, item 10, page 22 (line 30), after "Company E", insert "(which is not a large ADI)".

(26) Schedule 3, item 13, page 23 (line 13), omit "Subsection65-30(2)", substitute "Paragraph 65-30(2)(a)".

(27) Schedule 3, item 14, page 23 (line 15), omit "Subsection65-35(3A)", substitute "Paragraph 65-35(3A)(a)".

(28) Schedule 3, item 16, page 24 (line 5), after "Company A", insert "(which is not a large ADI)".

(29) Schedule 3, item 17, page 24 (line 30), after "Company E", insert "(which is not a large ADI)".

(30) Schedule 3, item 20, page 25 (line 13), omit "Subsection65-30(2)", substitute "Paragraph 65-30(2)(a)".

(31) Schedule 3, item 21, page 25 (line 15), omit "Subsection65-35(3A)", substitute "Paragraph 65-35(3A)(a)".

(32) Schedule 3, item 23, page 26 (line 5), after "Company A", insert "(which is not a large ADI)".

(33) Schedule 3, item 24, page 26 (line 30), after "Company E", insert "(which is not a large ADI)".

(34) Schedule 3, item 27, page 27 (line 13), omit "Subsection65-30(2)", substitute "Paragraph 65-30(2)(a)".

(35) Schedule 3, item 28, page 27 (line 15), omit "Subsection65-35(3A)", substitute "Paragraph 65-35(3A)(a)".

(36) Schedule 4, page 28 (lines 3 and 4), omit the heading.

We also oppose schedule 4 in the following terms:

(37) Schedule 4, items 1 and 2, page 28 (lines 5 to 14), to be opposed.

In the interests of a compromise, the government is willing to move these amendments to exclude the large authorised deposit-taking institutions, the big four banks, from accessing the reduced company tax rate. The government has faithfully sought to implement our enterprise tax plan policy. We secured passage of the first stage of company tax cuts in March 2017. In May 2017, we then introduced this further bill to implement the remainder of the enterprise tax plan. We have continued to negotiate, respectfully, with the crossbench over many months.

The opposition, of course, have been running around the country claiming that the reason that they do not support this bill is that it provides a tax cut to the big banks. Well, the Labor Party now has the opportunity to support our amendments, to vote in favour of our amendments and to support opportunity for working families around Australia to get ahead. If you're genuinely concerned about a tax giveaway to the big banks, you now have the opportunity to vote in favour of these amendments to exclude the four big banks, to carve them out, and still protect jobs for working Australians around Australia by helping to ensure that our businesses around Australia can be internationally competitive. If you vote against these amendments, you will be exposed for the absolute hypocrisy of the political attack that you've been running for the last two years. If you genuinely care about working Australians, if you genuinely care about working families, you will help ensure that businesses around Australia who compete with businesses in other parts of the world have the opportunity to be viable, to be competitive and to be successful into the future. If it's all about the big banks, no doubt you will vote in favour of these amendments, and you will then vote in favour of the legislation as a whole.

So here is the proposition. These amendments will reduce the cost of corporate tax cuts for the period to 2027-28 by $7.9 billion. So this corporate tax reform package now costs $7.9 billion less. We've already indicated that we are prepared to pursue reforms to our petroleum resource rent tax arrangements, which would not have an impact over the forward estimates but which should have a positive revenue impact over the medium term and beyond.

Here we are. As a result of the vote by the Senate on the second reading, the Senate now has the opportunity to act in the best interest of working families around Australia for today and into the future. I urge the Senate to take that opportunity. I urge the Senate to support our amendments. If Labor votes against this amendment and this bill then it will be proof that Bill Shorten doesn't care about jobs, he doesn't care about investment into Australia, he doesn't care about economic growth and he's essentially just interested in the politics; he's just interested in doing everything he can to prevent the elected government of Australia from implementing our plan for more jobs and stronger growth.

Doug Cameron (NSW, Australian Labor Party, Shadow Minister for Human Services) Share this | Link to this | Hansard source

What a pathetic performance that was from Senator Cormann, from a pathetic government that's on the rocks. It is a government that doesn't know what it's doing, a government that doesn't have an economic plan for this country, a government that would sacrifice working families, a government that would put big business before working families. This is not just about the banks; this is about an ideological obsession from this government: if you simply cut tax jobs will be created.

Contrary to what Minister Cormann has just indicated, wages are not growing in the United States. The Canadians have done this on a couple of occasions, and the companies that benefitted from the tax cuts produced fewer jobs than companies that did not benefit from tax cuts. This is an absolute joke. This is trickle-down economics in action. How disgraceful it is that we have One Nation again doing a deal to get us into a position where trickle-down economics is what this is all about. We have seen Senator Cormann stand up here and try, in my view, in vain, to defend trickle-down economics. He put up all these propositions. We don't know what this government is doing from one day to another. We certainly do not understand where this government is going. Whether it's on climate change or on economics, this government cannot be trusted. This is a government in absolute chaos. With this government you don't know who the leader will be from one day to another, because the battle is on within this government as to who is going to be the Prime Minister of this country. The sooner we go to an election and the sooner we get it resolved the better. We need to get to a position where working people can elect a government that truly cares about them and truly looks after them, and the sooner the better.

We've heard Senator Cormann say that this is about stopping an elected government doing what the elected government has promised to do. The elected government promised to hand over $80 billion to the big end of town. We saw their party room panic today, and we just saw Senator Cormann panic on the floor of the Senate when he tried to concede and give in on what they said was something they would not do: apply differential tax rates for different companies in this country. That's exactly what they've done.

Ian Macdonald (Queensland, Liberal Party) Share this | Link to this | Hansard source

That's what you've been advocating. You've been advocating for that.

Doug Cameron (NSW, Australian Labor Party, Shadow Minister for Human Services) Share this | Link to this | Hansard source

I'll tell you what we're advocating, Senator Macdonald. We're advocating for fairness and decency in this country. We're advocating for a government that is a stable government. We're advocating for a government that can stand up and deliver for the working class of this country. That is something that you have never done and that the coalition has never done. Cast your mind back to when this government came in. They had their first budget in 2014-15, and their big economic argument then was that they would be increasing the GST. That's what they did. They said, 'We'll increase the GST.' Who suffers from that? It's working families.

Ian Macdonald (Queensland, Liberal Party) Share this | Link to this | Hansard source

Who said that?

Doug Cameron (NSW, Australian Labor Party, Shadow Minister for Human Services) Share this | Link to this | Hansard source

Who said it? Go back and have a look, Senator Macdonald. You had propositions going up to increase the GST. Then you had propositions going up to hand taxation back to the states. Both of those propositions did not last very long. They didn't last very long at all. Then, when those failed, what did it become? Trickle-down economics. That's what you've got at the moment. And before you got to them, you had an austerity budget in 2014 that Senator Cormann was right behind—celebrating cutting the pensions with the big, fat Havana cigar. Remember that? That's what we saw: austerity budgets cutting support mechanisms for the working poor in this country. That's what this mob were all about. They cannot be trusted on economic issues, they can't be trusted on the environment and they can't be trusted on power prices. This government are an absolute disgrace. They are a government that in absolute chaos. They are a government that have just not got it.

The sooner we get to an election where the public can once again make a determination on these issues, the better. Remember Senator Cormann during the by-elections recently? That was going to be a test of the government's tax cuts. Well, the people in Longman and the people in Braddon made their point: they did not support this. That test failed. And it was going to be a test of the Prime Minister's leadership. Well, the voters around the country in those five by-elections made a call on that as well and said that this Prime Minister should not be leading the country. So both the Prime Minister's test and Senator Cormann's test, which they set for themselves, failed.

The test this morning is in the party room of the coalition. Malcolm Turnbull nearly failed that test again, and it's only a matter of time before this Prime Minister hits the wall. So instead of going through all the contortions of who's going to be the leader and what changes you are going to make to your policies, take your policies to an election and let's give the public in this country, the citizens of this country, an opportunity to make a determination about this rabble of a government—this government that would cut social services, would cut health and would cut education.

This is a government that no-one trusts. We've got a leader who not even the coalition party room trusts. We've got a leader who is on his last legs, a Prime Minister who, in the first challenge, was almost knocked off. If the other part of this government—the National Party—had been in that party room this morning, we would have had a new Prime Minister this morning. That's exactly what would have happened, because there is huge division in this government. Why any crossbencher would give any succour to this declining, deteriorating, decaying government, I don't know. We need a proposition here that indicates that this government will go to the election and take these issues to the public. That's what we should be doing.

I will quickly ask Senator Cormann: Minister, can you confirm the cost, over the forward estimates and the medium term, of the tax cuts that we are debating today?

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

These numbers have, of course, all been provided in public, and I'll confirm again that the cost of the tax cuts that are in front of the Senate today, as published in the explanatory memorandum, is $35.6 billion in the period to 2027-28, and the fiscal impact of the amendments that I've circulated over the period to 2027-28 is an increase in revenue of $7.9 billion.

As I'm on my feet, let me just deal with some of the comments that have just been made by Senator Cameron. It is so important for our future economic security and prosperity as a nation that we truly get our head around this. When Senator Cameron talks about trickle-down economics, that is a socialist insult to the free market. I happen to have seen the impact that different economic policy models have had on the quality of life of individuals, their families and the communities they live in. I happen to have seen the impact of the socialist model, the income and wealth distribution model where we want to pursue equality of outcome instead of offering equality of opportunity. I've seen the impact of that. It makes people poor. It makes people poor as individuals. It makes people poor as families. It makes communities poor. It leaves them worse off, because it removes the incentive to be the best you can be. It removes the incentive for people who can succeed and lift everybody up to do the best they can.

The reason I'm a Liberal, the reason I'm a proud member of the Liberal Party and of the Turnbull government, and the reason I'm standing here proudly promoting the benefits for Australian families of a lower, globally more competitive business tax rate is that I believe that policies of promoting freedom, free enterprise, reward for effort and encouraging people to risk themselves and take risks deliver the best possible opportunity for a high quality of life for individuals, their families and the communities they live in—yes, with an appropriately generous social safety net. And do you know what? That's what Paul Keating and Bob Hawke used to believe. That's what Bill Shorten and Chris Bowen used to believe when they were in government. That's what Chris Bowen used to believe as recently as 22 September 2015.

There's only one reason the Labor Party have taken the position that they have. It is because, in the lead-up to the 2016 election, Bill Shorten made a political decision that this was going to offer him the best political prospect to differentiate himself from the Turnbull Liberal-National Party government and that he could run an antibusiness populist agenda which would win him votes and help him, ultimately, to secure his political aspiration of becoming Prime Minister. He doesn't believe that he's pursuing the right agenda for Australia. Let me tell you: if we end up with a government that is elected on an antibusiness agenda of the politics of envy, class warfare and equality of outcome, all Australians will end up poorer, because an antibusiness agenda, making it harder for businesses to be successful across Australia, means that we'll have fewer jobs. We'll end up with fewer jobs. And do you know what happens when we create fewer jobs in the economy? There are more people unemployed and, as more people are unemployed, the wages of workers around Australia go down because there's less competition for workers. Less demand and increased supply means lower wages.

If we want to ensure that families around Australia today and into the future have the best possible opportunity to get ahead, we need to ensure that there is incentive for businesses to invest in their future growth. We've got to ensure that business has an incentive to take risks, to pursue opportunities and to sell Australian products and services around the world and here domestically. If we make it harder for Australian businesses to sell Australian products and services overseas and here in Australia, if we make it easier for businesses overseas to take business and investment away from us, we will be sending jobs from Australia overseas, and our children and grandchildren will not thank us for that.

Again, this is something that the Australian Labor Party used to understand. The Australian Labor Party used to understand that, in order to ensure that workers around Australia could succeed, the businesses that employed them had to have the opportunity to succeed. But this has changed under Mr Shorten as opposition leader and Leader of the Labor Party—sadly, supported by the Australian Greens and by a number of others, though not the majority in the Senate so far. A majority in the Senate was clearly prepared to give the government's plan for a lower, globally more competitive business tax rate the benefit of the doubt and is prepared to have this debate in committee, and we thank the Senate for that.

If we allow ourselves to be dragged down into this rhetoric around trickle-down economics and anti-business class-warfare politics-of-envy rhetoric Australians will end up poorer for it. Low-income Australians will be worse off as a result. We need to vote in support of business creating more jobs and attracting more investment so that the increased competition for workers around Australia drives up wages. As I said in my summing-up speech in the second reading debate, the evidence is very clear that in the United States, as a result of the Trump administration's tax cuts, that is precisely what is happening. That is what we should offer to workers here in Australia. The government, by moving the amendments that I've moved, is removing and carving out the big four banks. Let's take them out, but let's make sure that all of those big employers across Australia competing with big businesses from other parts of the world have the best possible opportunity to successfully compete with them so they can continue to hire millions of Australians and can continue to buy products and services from small and medium-sized businesses here in Australia—instead of helping businesses overseas hire people overseas and buy more products and services from small and medium-sized businesses overseas.

Derryn Hinch (Victoria, Derryn Hinch's Justice Party) Share this | Link to this | Hansard source

First of all, I don't want to let Senator Cameron off the hook with his Scottish brogue about this rabble of a government, which is his normal speech. What we're forgetting here is that if, or when, a Labor government comes in, they will want to cut the benefits already fought for for small and medium-sized businesses that have a turnover of more than $2 million. We may get them through Senator Wong and we may get them up to $10 million, but we've already legislated, and the government has folded to us and given us a $50 million turnover limit. That was organised last year. Labor wanted $2 million; former senator Jacqui Lambie and I got it to $10 million; and Senator Hanson, through One Nation, and I got it to $50 million. That's where it sits now.

But that makes a joke of Senator Cormann's saying we don't want a two-tier system of taxation. You've got one now. You agreed to it last year. Anybody who has a turnover of $50.1 million doesn't get it. In the same way, I'm pleased to see you're now carving the banks out, because I proposed that on Sky back in March. I'm pleased that you agreed to it. I will vote for your amendment to carve out the banks—the robber banks—who should never have been in there in the first place. At the royal commission, daily, we see what they are doing. Daily, we see the way they've been stealing money from estates. Daily, as I said yesterday, we see they have been doing what Mick Young, the Labor hero, used to say: stealing pennies from dead men's eyes. We see the disgraceful behaviour of the banks, and not just the big four but AMP and other people as well. And we have seen also what their superannuation funds have done. They do not deserve a tax cut. I'm thrilled, Senator Cormann, that you realise finally that the banks deserve to be carved out of this.

But don't give me this rubbish about a two-tier system, because, as I said back in March—and I've got an amendment coming up here in committee shortly—I believe what you should be doing now is taking the threshold from $50 million to $500 million. At the same time, I'd vote for you if you put up an amendment that said, 'I want to advance the tax cuts for the smaller companies from 27½ per cent to 25 per cent,' and that moved the cuts forward by one or two years. I wouldn't mind. I'd vote for that as well, because I believe in company tax cuts. I believe they should be there, but out there in the real world—the voter world—they don't believe you. You proved it in Longman. You made Longman an unofficial plebiscite on company tax cuts. You also made it a popularity contest between Prime Minister Turnbull and Bill Shorten, and that didn't work very well, did it?

I would say to you, think again. Bring in an amendment that says $500 million. You have much vauntedly said, 'We'll take it to the election.' The Treasurer, Scott Morrison, has said, 'We'll take it to the election.' You said in this chamber last week, 'We'll take it to the federal election.' Well, take it to the election. I give you a pledge now that if you take it to the election in April or May—or if you change prime ministers and have one earlier, take it there as your major proposal—and the people of Australia vote you in on it I'll look at it again. In the meantime, the Justice Party has said since March, and we've stood firm despite all the things you've thrown up: 'We will go to $500 million for companies.' That will improve things for the business—and the workers, as you put it—of about 4,000 more companies. You're the one, Senator Cormann, along with Scott Morrison, who said to me that 'compromise' is the buzzword in Canberra and that 70 per cent of something is better than 100 per cent of nothing. Well, a $500 million company limit, giving 4,000 more companies tax cuts, is more than 70 per cent of something, and you should think it through again.

Peter Whish-Wilson (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I have a couple of questions, Minister. Firstly, you mentioned, in response to Senator Cameron, what this is going to cost. I'll be a little bit more specific with my question: what is excluding the banks or ADIs over $500 billion going to cost your revenue projections? You said that was all in the explanatory memorandum, but I can't find any dollar figures in the explanatory memorandum at all. And could you explain to the Senate why you've chosen $500 billion as your cut-off point for a large ADI, when, for the purposes of legislation around the bank levy, a large ADI was $100 billion? Why the difference in this legislation versus what we saw in the bank levy?

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

I did actually explain before that, over the medium term to 2027-28, the revenue impact of removing the four big banks is increased revenue of $7.9 billion. Over the forward estimates, there is no impact, and the reason for that is that, under the Ten Year Enterprise Tax Plan, the banks of that size don't actually become eligible for the lower corporate tax rate in that period. You've also got to remember that, while the banks are carved out from the enterprise tax plan altogether, they are still subject to the major bank levy, which is raising more than $2 billion a year from those banks.

In relation to why we have chosen the $500 billion threshold, that is based on advice that that was the appropriate threshold to put in. You've got to remember that the banks below that threshold are involved in putting competitive pressure on the major banks in a domestic context, and a number of them are also involved internationally. The four major banks are the ones that, essentially, have their activities concentrated domestically in Australia and, as such, arguably are less exposed to global competition.

Ian Macdonald (Queensland, Liberal Party) Share this | Link to this | Hansard source

I have a couple of questions I'd like to ask the minister, but before that can I just say that I was stuck in the chamber yesterday afternoon and I listened to Senator Hinch when he was talking about the amendment he was proposing. I thought he made some sense, and I'm pleased that his call in relation to the banks has been heeded by the government. I address the same comments to Senator Hanson. I know that Senator Hanson, a fellow senator from my home state of Queensland, has long campaigned, loudly and strongly, against giving the banks anything, for reasons which Senator Hanson and I well understand, coming from Queensland and seeing some of the things the banks have done to the citizens of our state, our constituents, in the past. I can well understand Senator Hanson's call.

Longman has been mentioned in this debate. I stood at the same polling booth in Longman with Senator Hanson's Queensland leader and with a team of Labor workers. At one stage, I seem to recall, both Senator Ketter and Senator Watt turned up to Caboolture East. I have to say it was mainly when their leader came around and the television cameras were around, but, notwithstanding that, they were there. And if I heard it once, I heard it a thousand times that day: the Labor Party—and, I might say, Senator Hanson's party—saying to voters, 'Don't give money to the big banks.' That was their main rhetoric as people walked into the polling booths: 'Here's a how-to-vote card, and don't let the government give money to the big banks.'

I've acknowledged Senator Hinch and Senator Hanson for their campaigns. I should perhaps, in fairness, acknowledge the Labor Party for that campaign too. But here we are today accepting what has been put to us by other parties, and quite frankly by many people within Australia, and yet the Labor Party are still choosing not to support it. I will interpret that—and I will interpret that very loudly back in my home state of Queensland—to mean the Labor Party are not in favour of not helping the banks. If you put that in another form, the Labor Party now seem to be helping the banks that they were so critical of. They weren't talking about other things at the Longman by-election; they were talking about, 'Don't let the government give the money to the big wealthy banks who've been such horrible people.' Here we are. We've listened to that. We're a government that acts in the best interests of people, and a government that listens. We're a government that actually is prepared to change policy where we're convinced that the Australian people are not with us. So here we are doing this and yet we still have opposition from the Labor Party. Forget about the Greens, because we know they'll always vote against the coalition regardless of what.

I would appeal to my Queensland colleague Senator Hanson, and her team, to seriously consider the new regime. I say to them: 'Well done; you've succeeded. I now urge your support for this package, with the banks excluded.' Senator Cameron rabbits on with his rhetoric in his 'broad Scottish brogue', as Senator Hinch said, about looking after the workers. But as I always say in this chamber—I think it's one statement I say that I get universal agreement on—I'm not very bright, but I can work out that companies need to have alternatives, options, on where to invest their money. If they can invest in country A and make a profit of 100, but they only pay 15 per cent tax on that profit, and if they can invest in country B—the same investment, the same return of 100—but they have to pay 25 or 30 per cent tax, then you don't have to be very bright to work out where they will make their investment. And, of course, if you don't have companies making investments in Australia, you don't grow industry and you don't employ people.

The Labor Party are all talking about how they're interested in the welfare of workers. We know they're not. In fact, I came across an article just recently about Senator Wong's favourite union. They're not my favourite union, I have to say, but Senator Wong's a member of CFMMEU. I see that even the CFMMEU has warned the Queensland government that its ambitious 50 per cent renewable energy target is 'not realistic' and that Labor should instead back new 'clean coal' power stations. This article, by Jared Owens, says:

The influential union, which represents workers at coalmines and generators, wrote to the—

Queensland—

government in May cautioning it against rushing to "unreliable and expensive" green energy.

The CFMEU, as I say, not a union I usually quote, go on to say:

The 50 per cent renewable target is not realistic. Whilst you can build solar and wind generation to achieve the target on paper, what do we expect is going to happen at night?

They say to read the advice of Treasury, released under the right to information laws. The quote from that is:

During the summer months it is still very warm into the evening … you will have high demand, no solar and potentially little wind generation.

I do remember the CFMEU. I remember them very fondly from when, as forestry minister back in 2004, I worked with Michael O'Connor, who was then the head of the forestry section of the CFMEU and who's now the boss of the bigger union. I remember how in those days, back in 2004, we worked together because we were interested in the jobs of workers in the forestry industry. And I have to say that, working in very close concert with the forestry section of the CFMEU at the time, we did achieve that. For a while, we saved the jobs of forestry workers. The CFMEU and Michael O'Connor were very courageous in standing up to the Labor Party in those days, because they knew what was best for their workers and for workers across Australia at the time.

Now, as I say, it's a bit of deja vu that I'm onside with the CFMEU in relation to renewable energy and clean coal. I agree with the CFMEU because I have an interest in the coal workers of North Queensland. The mines are not far from where I live. I know the wealth that's there. I know the jobs that are created there, and so do the CFMEU. I'm delighted to see that they are showing the same courage they had in the 2004 forestry debates by now getting stuck into the Labor Party for their stupidity on renewable energy.

I only mention that in this debate because, again, Senator Cameron talked about looking after the workers and looking after the poor people. I don't believe him, and neither does the CFMEU, I have to say, in the two instances I met. But, if Senator Cameron and the Labor Party are correct about not favouring the big banks, as they were talking about at the Longman by-election—I heard them all day; all day they were talking about not giving money to the big banks—if it's a win for them, well, so be it. But here we have a piece of legislation which excludes the big banks.

As I say, I was impressed with Senator Hinch's speech yesterday, and he's more or less repeated that just now. I concede that I'm not always one of those who take much notice of Senator Hinch, and some of the things he talks about we're directly opposed to. But I thought his contribution on this was very important.

As to what the limit is, that's something that Senator Cormann's answered. I will seek from Senator Cormann some additional explanation of that because I'm trying to understand what Senator Hinch is proposing. Dare I repeat, Senator Hinch, that you've had a success on the banks, but I would hope that, regardless of where the government goes on the other issue, you will at least support us in this amended legislation so that we can get it through. I think you accept, Senator Hinch—I think most of the crossbenchers do accept—that you don't relate to the Labor Party's rhetoric about looking after the poor people.

You understand, as I do—and, as I say, you don't have to be very bright to understand this—that, when companies have money to invest, they're going to invest in a place where they can keep the majority of their profits, and that is in a low-tax country. If we don't get that sort of investment in our country, we're not going to have the growth of industry. We're not going to have the jobs that we need in many of these industries, which these mainly foreign companies invest in. It's so simple. So I'm just begging Senator Hinch and Senator Hanson and her colleague to think in the broader picture. We do need that investment. I think they all accept that. But then we get tied down on where the cut-off should be. I'm going to ask Senator Cormann to again explain to me what exactly Senator Hinch is proposing and why the government isn't looking at it. Until I hear that, heaven knows where I will end up. It might even be that the government should look at it, but I don't fully understand it at this time.

I conclude by again appealing to my Queensland colleague Senator Hanson and her colleagues in One Nation to look at the bigger picture of investment in Australia and, for us, investment in Queensland. Senator Hanson, you and your colleague and Senator Hinch have had a success on the banks' carve-out. The government's gone along with that. I appeal to you because I'm interested in jobs for Queenslanders. I'm even interested, Senator Hinch, in jobs for Victorians. They're going to have a better chance of getting a job if there is investment coming into this country, and there won't be investment if companies can make more money by investing in a country with a lower tax regime. So, Minister, will you again explain, for my simple mind, what the government is proposing on the cut-off, what Senator Hinch is proposing on the cut-off and why one is better than the other?

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

I thank Senator Macdonald for that question. It's a very good question. When we legislated the first three years of our business tax cuts in March 2017 to a threshold of $50 million—which is the threshold that came into effect in the 2018-19 financial year, and that takes us now, in terms of our Ten Year Enterprise Tax Plan, to 30 June 2019—it was always on the basis that we would seek to legislate the entire enterprise tax plan. Being able to make the case for lower, globally more competitive business tax rates for businesses with more than $50 million in turnover is hard enough. If we now lock in a $500 million cap we will never, ever revisit that. It'll be absolutely impossible to go to the Australian people and say, 'We want you to now support a lower, globally more competitive business tax rate just for businesses with a turnover of more than $500 million.' The practical effect of that is that we would be locking in, in a structural sense, on an ongoing basis, a five per cent higher tax rate on profits for businesses with a turnover of more than $500 million. So, as soon as you are a business that goes from $500 million to $500 million plus $1, you would end up getting hit with a five per cent tax increase on 100 per cent of your profits—from your first dollar in profit to, essentially, 100 per cent of your profits.

What that means is that we would be providing a perverse incentive to businesses around Australia who've been somewhat successful to downsize. Any business that is able to generate $500 million worth of turnover has been somewhat successful. They've proven that they've got the entrepreneurial flair, the ideas, the products, the services, the know-how, the workers, the team and the capacity to generate economic activity, generate jobs and pay wages. But, if we say to that business, 'If you have one additional dollar of turnover, we will hit you with a five per cent increase in tax on 100 per cent of your profits,' that is a massive disincentive to further growth. As Mr Shorten used to assertively argue, it provides a perverse incentive to downsize.

The reason we're so committed to lowering the corporate tax rate for all businesses, irrespective of their turnover—carving out the four big banks, but for all other businesses—is that we want to show that, down the track, they will have the benefit of a lower, globally more competitive business tax rate. They're making investment decisions now based on their expectations of future after-tax profitability. If you talk to fund managers around the world, they will tell you that what they consider when making investment decisions is the expected after-tax return on that investment.

Do you know what the biggest source of foreign direct investment into Australia is? The biggest source of foreign direct investment into Australia is the United States. And do you know what has happened in the United States? Their corporate tax rate, earlier this year, went from 35 per cent to 21 per cent. We compete with businesses in the United States for investment into Australia, and in the US, their home market, the corporate tax rate went from 35 per cent to 21 per cent. So how can we here in Australia—with a comparatively small population, a large continent, lots of opportunity, capital intensive industries and significant reliance on foreign capital in order to continue to generate stronger growth and create more opportunities for workers around Australia—say that we're going to tie the arms of our businesses behind their backs and we're going to put rocks into their backpacks to make it harder for them to compete with businesses overseas?

The impact of putting a cap in place that would likely never be able to be shifted would be that we would provide an incentive to bigger businesses to become smaller businesses, when what we should be wanting to do is provide an incentive to smaller businesses across Australia to become bigger businesses. If we say to a smaller business or one approaching the $500 million cap that if they are even that little bit more successful we're going to hit them with a five per cent additional corporate tax rate, the enthusiasm to pursue further growth opportunities will be hampered. And we shouldn't hamper that, because, in the end, who gets hurt when a business is less successful? The people who miss out on getting a job in that business.

The people in the US won't mind if we make it harder for businesses here to compete with businesses over there. We have to remember that the US has a big population and a big domestic capital market, comparatively speaking. The reason they were able to have a 35 per cent corporate tax rate for so long is that, the need for them to have a competitive business tax rate—compared to Australia; in a comparative sense—was actually less urgent. It is much more urgent for a country like Australia—an open trading economy, a globally focused but also globally exposed economy—to have a globally competitive business tax rate so that we can continue to attract capital investment into Australia from other parts of the word and continue to build our businesses here in Australia. People say, 'Big businesses is unpopular.' But, hang on: if big businesses employ more people, where do those people go to shop, to have their coffees, to go to restaurants? The flow-on effect goes throughout the economy.

I see Senator Brockman, from the great state of Western Australia, is here. We are a trading economy in many ways. We are part of a trading nation. We have got some big companies. FMG didn't exist in 2003; today it's a big company. BHP is a big company in Western Australia. They are exposed to changes in commodity prices which we don't influence. We don't have any control over them. We are price takers. When the iron ore price, which is 20 per cent of national export income and a significant proportion of the economic activity in Western Australia, goes from $180 a tonne down to $45 a tonne, forcing iron ore businesses and other businesses to seriously cut their costs in order to remain viable and competitive, what happens in the rest of the economy? It means less opportunity for small and medium-sized business. It means lower job security. It has an impact all the way through the economy. But that is something that is outside our control. Our tax rate is directly under our control. If we keep taxes in Australia high, it is a deliberate decision to make it harder for our businesses in Australia to compete with businesses in other parts of the word. It's a deliberate decision to make it harder for workers in Australia to get a job and pursue a career here in Australia, compared to workers in other parts of the world.

I see Senator Macdonald. Qantas was set up by three people in Longreach in Queensland. It was a small business that started with a mail run. Today they employ 30,000 people, and 3,000 small and medium-sized businesses supply goods and services to them. They operate in a fiercely competitive international industry. If Qantas has less opportunity to be viable, to be competitive, to be profitable and to be successful into the future, it has a direct impact on the job security of people working at Qantas. It has a direct impact on the job security of the many Australians working in small and medium-sized businesses supplying goods and services to Qantas. It has a direct impact on the job security of the many Australians working in cafes, restaurants and shopping centres around Australia, serving the people who work for Qantas and all of their suppliers. In Townsville, I believe there is a business that has secured the contract to paint the Qantas planes. Senator Macdonald is nodding. These are the sorts of things that a successful business can do.

If we here in Australia, as policymakers, make a deliberate decision to make it harder for our global champions—the businesses that have grown from employing three people to employing 30,000 people—and to put them at a competitive disadvantage in the global economy, it will hurt families around Australia, hurt our economy and cost jobs. If we genuinely want the best possible opportunity for Australians today and Australians in the future to get ahead, to get a job, to be able to build a career and to get wage increases, we've got to ensure that our policy settings facilitate business success, because nine out of 10 working Australians work for private sector businesses, and their future job opportunities, job security, career prospects and wage increases depend on the future viability, competitiveness, profitability and success of the businesses that employ them.

That is why I'm urging the Senate to get behind this very important reform. In an absolute sign of good faith and a demonstration of how important we believe this is, we have put forward these amendments to carve out the four big banks, because clearly, in the political debate, that was an issue that was making it harder for people to support otherwise good policy and otherwise important reform. So, given this concession by the government, we really would urge the Senate to reflect on the national interest here and to reflect on all of the things that Mr Shorten, Mr Bowen and Senator Wong have said in the past about how important it is for Australia to have a globally competitive business tax rate.

Senator Hinch is right. He was on the record for a long time. The reason I always heard him say that he wanted to put in the $500 million cap was that he wanted to exclude the big banks. Well, we want to exclude the big banks, but without hurting those businesses employing millions of Australians that are exposed to global competition. That is what we're putting to the Senate. Work with us. We have taken a step towards you—a significant step. Let us come together in the national interest. Let us come together in the interests of working families around Australia whose future job opportunities, job security and wage increases depend on the future success and profitability of businesses around Australia which employ them.

Rex Patrick (SA, Centre Alliance) Share this | Link to this | Hansard source

Centre Alliance will not be supporting these late-landing amendments. These amendments do carve out the banks. Of course, we understand the politics of that. The royal commissioner has found the conduct of not only banks but also other financial institutions to be poor, if not abhorrent. But the best way to deal with that conduct is directly, not indirectly by saying, 'We're going to carve you out of something else.' You need to take that on directly, and that means you need to have much tougher laws and regulations around the banks. You need to have very strong whistleblower laws so that every executive inside a bank understands that someone inside their organisation will call out misconduct and that, when they do so, they will be protected and those protections will be strong. It also includes having good enforcement. That's how you deal with misconduct in the banks: solid, strong enforcement. That includes criminal proceedings against executives that have breached criminal law. It also means stronger regulators—so making sure that ASIC, APRA and the ATO do their jobs properly. That's the way in which you tackle misconduct inside the banks. So that's the reason we won't support this. It's not good policy. You need to take on the banks directly in respect of their conduct.

Murray Watt (Queensland, Australian Labor Party) Share this | Link to this | Hansard source

I want to take a couple of moments to bring to the chamber's attention the reason we are now in the in committee stage and why the position Senator Hanson takes at the third reading stage, when we get to it, will be crucial to the outcome of this bill. I know today is a bit of a crazy day in Canberra. There's lots happening. I think as I speak we see Mr Dutton, the next Liberal Party leader, having a press conference to explain his actions. There is all of that craziness within the government. There has also been a bit of confusion about what's happening here on the vote regarding the company tax cuts.

What happened a little while ago was the vote on the second reading. It was lost, from the Labor Party's perspective, 35 to 34, so 35 people voted in favour of the second reading of the bill and 34 voted against it. What was very notable in that vote was the absence of one particular senator—Senator Hanson. My understanding is that she was not paired for that vote. It wasn't as if there were a prearranged situation where she wouldn't vote and someone else would refrain from voting as well. Senator Georgiou did come in here and vote with the opposition against the company tax cuts, but Senator Hanson was missing. As a result of that, the government succeeded in passing this bill at the second reading stage.

The vote was 35 to 34. If Senator Hanson had been here and had voted with Senator Georgiou, as they had indicated publicly they would do to kill off these company tax cuts, then the vote would have been tied at 35 all, which would have meant it would have been lost and we wouldn't be having this debate now. Senator Hanson's failure to vote or her abstention has meant that the government got the legislation through at the second reading stage by one vote, and that's why we're continuing to debate it now.

No-one seems very clear about what Senator Hanson's actions were based on—whether it was deliberate on her part to miss that vote or whether she had some legitimate reason why she was not here to cast her vote. Whether it was accidental or deliberate, her absence from that vote allowed the government to succeed in passing this bill at the second reading stage and has given new life to the possibility of these company tax cuts going through.

Government senators: Hear, hear!

As I said that, government backbenchers were cheering Senator Hanson on. Their hopes in passing this bill and getting these company tax cuts through rest on Senator Hanson's actions from here on in. If we are to take Senator Hanson at her word and believe her when she says that it was an accidental abstention and that she actually does intend to vote against these company tax cuts, as she has been indicating over the last 24 hours, fortunately for her there is an opportunity for her to come in here and make amends. When we get to the third reading stage of this bill she will have the opportunity to cast her vote and to follow through on her claims to oppose these company tax cuts by voting with the opposition to kill off this bill.

The acid test is really on Senator Hanson. Whether she actually supports these company tax cuts, whether she's going to vote against them with the opposition or whether she will simply abstain from that vote again and help the government out, Senator Hanson needs to be under no illusions what the consequences of her decision will be. If she does assist the government in passing these company tax cuts, then I think she knows very well what is coming her way. She needs to have a very close look at the results in the Longman by-election to understand what battlers in outer suburban areas and regional Queensland think about these company tax cuts. Let's hope she is telling the truth in having accidentally missed that vote and let's hope that she does make amends and, to make sure that these company tax cuts do not pass, votes with the opposition when we get to the third reading stage.

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

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

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

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

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

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

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

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

I thank Senator Paterson for that question. As I said in my summing up speech, in the period since we legislated the first three years of company tax cuts for businesses with a turnover of up to $50 million, economic growth is up, employment growth is up and just under $10 billion in higher company tax receipts have been collected compared to our expectations in the 2017-18 budget. If you look at the 2017-18 budget and you compare that with the actual performance as reported in the monthly financial statements, what you will be able to see is that company tax receipts are actually going up, which is very good news in terms of our objective to put funding for important social services, for health, for education and for national security on a fiscally sustainable foundation trajectory for the future.

In the end, a strong economy is central to everything. It is central to making sure that Australians today and into the future—Australian families today and into the future—have the best possible opportunity to get ahead, to reach their full potential, to have a great quality of life. It is also central to making sure that the government can generate the necessary revenue moving forward. The experience on the back of our plan for stronger growth and more jobs is that, as more jobs have been created, not only have more company tax receipts been collected but also we've had significant increases in personal income tax receipts compared with what was expected.

The good news doesn't end there. We've had significant reductions in expenditure on welfare payments because more people are in jobs than was expected. So we've got more revenue—more revenue from company tax, more revenue from personal income tax—and we've got less expenditure on welfare, because more people are in employment than had been anticipated. I would have thought that would be something everyone in the Senate would and should welcome. In fact, the proportion of working-age Australians on welfare today is at its lowest level in 25 years. That is one of the proud achievements of the Turnbull government. That is why we say that our plan for a stronger economy, our plan for more jobs, our plan to help families around Australia to have the best possible opportunity to get ahead, is the best recipe against poverty.

But, if we make it harder for business to be successful, low-income earners will be hurt the most, because it is low-income earners around Australia who are the most exposed to the negative impact of lower growth, who are the most exposed to the negative impact of lower business growth, because invariably it is at the lower income end that people are trying to break into the jobs market. It is often at the lower-income end that people are most exposed to the variability in hours worked. Stronger growth means a better opportunity for more working hours, a better opportunity for permanent employment instead of casual employment.

These are all things that come from helping to ensure that businesses around Australia have the best possible opportunity to be successful. I say again what I said in my summing-up speech: if we make decisions that make it harder for business to be successful, they will be less successful. And as businesses are less successful they will hire fewer people than they otherwise would have and will invest less in their future growth. As businesses around Australia hire fewer people than they otherwise would have, employment growth will be less, the unemployment rate will be higher, the demand for workers will be less, the supply of workers will be higher, the wages that can be secured by workers will be lower and the revenue for government will be less.

So, it is lose, lose, lose, lose, whereas what we have demonstrated—certainly the data is obvious in our monthly financial statements, and later in September the Treasurer and I will be releasing the final budget outcome for 2017-18. People will be able to see how the Australian economy and Australian businesses have performed in 2017-18 compared with what was estimated in May 2017. And people will be able to see, based on the data that I've already released, that company tax receipts, even in just the one calendar year, are substantially higher than what had been anticipated, to the tune of nearly $10 billion.

To put that into context, the cost of the remaining unlegislated business tax cuts, per the explanatory memorandum that was tabled with the legislation, is $35.6 billion to 2027-28. So, just in 2017-18 we have raised $10 billion more than had been anticipated. The cost for the remaining unlegislated tax cuts to 2027-28 is $35.6 billion. We've put an amendment on the table in relation to the four major banks which, I'm advised, would reduce the cost of corporate cuts to 2027-28 by $7.9 billion. We've already flagged that we are considering reforms to the petroleum resource rent tax arrangements, which would not have an impact over the short term, over the forward estimates, but which also would have a revenue impact over the medium term, further reducing costs.

If you look at the cost of the opportunity to make businesses around Australia internationally competitive, it is actually very low when you put it next to the opportunity to create more jobs, create more personal income tax revenue for government and create more company tax revenue for government on the back of stronger growth, rather than on the back of higher taxes. As certainly as night follows day, the Labor Party agenda—the Labor Party antibusiness, politics of envy, higher taxes agenda—would lead to less investment, lower growth, fewer jobs, higher unemployment and, on the back of higher unemployment, lower wages; whereas our agenda, which is all about encouraging business to invest more by making sure that businesses have the best possible opportunity to sell Australian products and services around the world and in Australia, is all about attracting more investment to deliver stronger growth and more jobs. As more jobs are created and the unemployment rate continues to come down, the increased competition for workers drives up wages. As more people are employed and as wages go up, personal income tax revenue goes up, as does company tax revenue, on the back of more profitable businesses. That is the win-win-win that we believe Australian families deserve and that is the win-win-win that we are asking the Senate to support.

Tim Storer (SA, Independent) Share this | Link to this | Hansard source

This amendment appears to emerge from the public concern surrounding the behaviour of the big banks, uncovered by the royal commission. There is no doubt that many of the practices that have been exposed have been appalling and that many ordinary people have suffered greatly. Many of the senators have spoken about this today and at other times in this place. But I have made it clear that I regard a consideration of the company tax cuts to be distinct and separate from the behaviour of the big banks, and I said as much to the government, and publicly, when I opposed the consideration, in March, of the initial legislation. I have considered the case for and against the company tax cuts thoroughly, on their merits and on the basis of evidence, but I do not believe that the government bringing forward legislation today to exclude the big banks is the appropriate way to prosecute their case, which they have been doing consistently for the past months in which I've been here as a senator.

I spoke yesterday regarding the bill as presented previously, and my focus was on that and on the future of the economy and the future of our families. I am, as a South Australian, a passionate advocate of South Australian businesses—and I note that Senator Cormann referenced a South Australian business today. I do note that business is the backbone of the economy and I will do all that I can to encourage business growth and prosperity. But my review of the evidence to date about the tax cuts legislated already is that they have not delivered the changes in employment and wages, as indicated by the modelling provided to me by Treasury and other sources, upon which this legislation was based. I have consistently noted that I found the legislation too narrowly based and the benefits too small to outweigh the costs. Whilst they've now been reduced from $35.6 billion to perhaps $7.9 billion less, they are still very considerable in terms of the future need for funds to tackle the budget deficit and growing government debt and also the services that Australian people wish to have. I reference the intergenerational reports, which indicate a further and growing need, particularly in aged care and retirement as the populace grows older. So I see the tax cut itself, even with the big banks removed, as not true tax reform. I don't believe that it's in line with the clear principles outlined within the Henry tax and transfer review. There were at least seven principles, of which a company tax cut was one, and Senator Cormann has noted that with me previously. But it was one of seven principal feature reforms that were all to be brought about together.

So I will not be supporting these amendments. I believe that the conduct of the banks should be referenced in another forum—be it the royal commission findings or APRA and other entities set up to do so—and that putting forward a piece of legislation just to remove the big banks in order to gain support is not an appropriate way to move forward. So I remain opposed to the extension of the tax cuts as legislated, even with the removal of the big banks or, under Senator Hinch's proposal, a threshold of $500 million in turnover. The evidence I've seen on the changes from 2015 is that they have not delivered what was indicated, and we have significant gross government debt and future requirements for services that need to be funded.

There are arguments that many foreign investors are looking at Australia in terms of many, many aspects alongside, but outside of, the company tax rate headline figure, which is often quoted by government senators and other advocates of this. It's a misleading argument because, to date, we have gained significant foreign investment into Australia against other economies, even in our region, that have much lower headline company tax rates. Investors come to Australia for a variety of reasons. So to indicate that there's going to be a massive problem with investors choosing not to invest in our country, given our headline tax rate compared to the headline company tax rates of other countries, is slightly misleading.

In summary, I have considered the case for and against these company tax cuts thoughtfully, on their merits and on the basis of evidence, and I remain opposed to any extension of the tax cuts as legislated, even with the changes made today.

Ian Macdonald (Queensland, Liberal Party) Share this | Link to this | Hansard source

I am interested in this debate, and I am listening to contributions made by other senators. In relation to the last contribution, as I keep saying, I'm not terribly clever, but you don't have to be clever to work out what companies will do with their investment strategies. If they can get a cheaper tax rate in a similar country to Australia, they're looking at their profits, and so they'll make their investment in a country that gives them and their shareholders the greatest return. That's relatively easy to understand. We are a country that does need investment, particularly foreign investment, but the foreign investors have plenty of options. As Senator Cormann mentioned in answer to a previous question of mine, most of the foreign investment that comes into Australia is from the United States. They are reducing their taxes to a much lower rate, and I'm sure it makes investors in the United States wonder why they should be investing in Australia when they can invest in their own country and return a lot more of their profits to their shareholders.

Senator Cormann, in answer to a previous question from me, spoke about Qantas and spoke about it being a Queensland company that started off with three people and now employs tens of thousands right around the world and supports lots of small businesses. That sort of brought it home to me. We tend to talk in the abstract in this place and throw around billions of dollars and use Treasury terminology. It's always very easy to get out of the realm of reality, and this building is very good at doing that.

Again I come back to Senator Hinch's amendment of companies over $500 million turnover being excluded. I've asked the minister's advisers to give me some information, which they have. But I find it difficult to accept that this is what Senator Hinch's amendment would do, because the companies that would not receive the reduced tax, which means they'd be paying more, are companies like Mackay Sugar. The company, self-grown in the Mackay area of my state, just down the road from where I live, owns quite a few sugar mills. It crushes the cane of thousands of farmers in the Mackay region and it employs thousands of workers in its mills. But, under Senator Hinch's amendment, Mackay Sugar would pay more tax than other companies.

The same applies to Sun Metals, a Korean company set up in Townsville to refine zinc. That is a company which made an investment in Australia some years ago, when energy was cheap, I have to say—when electricity was cheap. That's one of the reasons they came to Australia, and I suspect they often regret it nowadays, with the cost of electricity, particularly in North Queensland. But that's a company that can make investments anywhere in the world. Are they going to put more investment into Townsville when they know that a bigger share of any profit they make is going to be taken from them and their shareholders than if they invested their money somewhere else? They have refineries in other parts of the world, so why would they invest in Australia and create more jobs for Australians if they're going to be penalised by paying more tax?

I note in this list of companies—I can't believe it's true, but I'm sure it is if it was given to me by the minister's advisers—is Mantra Group, which owns a lot of hotels around Australia and employs thousands and thousands of Australians. But, under Senator Hinch's amendment, they're going to be paying a penalty tax rate not paid by some of their competitors. JJ Richards & Sons are a waste collection group. I think they're based in Brisbane; they certainly have lots of operations around my home state of Queensland. They fall into the category that would be caught by Senator Hinch's amendment. And I know they're a family company. I've heard presentations they've made before, and they are a home-grown company. But they will be penalised in the tax they pay, if I understand what's being proposed.

Brisbane Airport, another group that, according to my figures, has a turnover of well above the $500 million mark, will be paying more tax than its competitors. The Kilcoy Pastoral Company are an Australian food manufacturing company in Queensland. Senator Hanson would know the Kilcoy Pastoral Company well because it employs a lot of Queenslanders. I dare say, her party having stood at the Longman by-election and seen who took whose card—Kilcoy is, I think, in the Longman electorate. If it's not, certainly the workers at Kilcoy would be living in the electorate of Longman. Kilcoy would pay a penalty rate of tax.

I'm pleased to see Senator Hinch coming back into the chamber. I'm just saying, Senator Hinch, a lot of the companies that would be caught by your amendment about $500 million turnovers—so they'd be getting less of a tax cut—are little companies like the Kilcoy Pastoral Company that Senator Hanson and I know well. I mentioned Brisbane Airport; JJ Richards and Sons; and Sun Metals, the refinery in Townsville. These are all companies that will pay more tax than their competitors. And I repeat, again for your benefit, Senator Hinch—

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

Senator Macdonald, I will just remind you to direct your remarks through the chair.

Ian Macdonald (Queensland, Liberal Party) Share this | Link to this | Hansard source

I beg your pardon, Chair; you're quite right. I just wanted to repeat for other senators' benefit what I'd said earlier. Sun Metals is an international Korean company that came to Townsville a couple of decades ago to refine zinc. They have refineries all around the world, and if they're going to expand, they can make investments anywhere, which means that they won't invest in Australian plants, which means fewer jobs for Australians. A couple of weeks ago I was opening the Mount Isa Rodeo Hall of Fame, and I met Australians who work for Sandvik Mining and Construction, a Swedish company that earns more than $500 million in income and thus will not be eligible for the tax cuts, which means the guys I was talking to at the rodeo may find that their head company in the future invests more in Africa or South America than they do in Mount Isa.

The list goes on. ERM Power, a homegrown Australian electricity supply company, will not be in the same race competitively with tax. Aurizon, a company involved in railway transportation in Queensland, partly owned by the Queensland government, will not get the same tax cuts as other people in the transport industry. Senator Cormann mentioned Qantas in response to my question. Not only Qantas but also Virgin Airlines will not benefit from increased investment, because they're not going to get the tax cut.

I continue with the higher-range turnovers: Wilmar Australia Holdings. In the town that I live in, Wilmar is not always the best name to mention—although they own four or more sugar mills, crush the cane and employ thousands of workers. They're a Singaporean company who can and do invest anywhere in the world. Why would they be interested in increasing investment in Australia when they can invest in other parts of the world and take home more of the profits they earn? Similarly Glencore, which now operates the Mount Isa mines, is a Swiss company. They can invest in Australia, or they can invest in Africa or the Americas. They know that, if they do that, they'll get a better return, because they'll pay less tax, since the Australian tax system is not competitive.

Teys Australia Ltd, a homegrown Rockhampton based meat-processing company with processing facilities in Rockhampton and Biloela, is on this list. They're not going to be eligible for reduced tax. Teys compete against some big multinationals in the meat-processing area. I know Senator Hinch is very keen on processing meat within Australia, and here is an Australian company doing it. With the limit Senator Hinch is proposing, Teys will not have the benefit of reduced taxes, which means their investment will be more circumspect. I go to the bigger companies. Myer employs tens of thousands of Australians in its various operations. This list goes on and on.

Progress reported.