Gerard Rennick (Queensland, Independent) Share this | Link to this | Hansard source

I rise tonight to announce the policies of the People First Party with regard to taxation. I will note the People First Party is the only party to have such a comprehensive taxation policy, and I'm more than willing to share it with the two major parties if they would like to take any of my ideas, which I suggest they do. One great thing about being Independent is that I can sit back here and watch you guys play the Punch and Judy show, but we really need to be providing vision and hope for the people of Australia. We just aren't getting that at the moment.

The first policy that I want to introduce is effectively lifting the tax-free threshold to $40,000. It is completely wrong to tax people who earn less than the cost of living—and I'll be honest and say that $40,000 is probably not quite at the cost of living, but I can't afford any more than $40,000 at the moment. We should not be taxing people if they earn less than the cost of living. It is completely wrong. We want to reward these people. I believe in reward for effort. The words in our national anthem are 'wealth for toil'; they're not 'wealth for foreign debt or watching your asset prices increase because we've got a rapid population increase'.

The second thing I want to do is change the way superannuation is taxed in this country. For some bizarre reason, superannuation is taxed on your balance and not on income. That is completely perverse, because all other legal structures, trusts and companies and your own individual selves are taxed on how much income they earn. I will give you an example of how you can have distortion in the market. If you have $2.8 million in superannuation and you earn five per cent, under the proposed superannuation scheme you will only pay 15c on the dollar by earning $140,000, but, if you only earn three per cent over $3 million, you would earn, say, $90,000, and you would pay 30c. We don't want to see those sorts of perverse outcomes.

The proposal would be that your first $25,000 in super would be tax free. There would be no limit on how much money you can put in or take out or how old you are or all these other things. Basically, if you decide you want to put money into a superannuation account and split your income, that is up to you. However, we are not going to make it super generous like the system we have now, where we had multimillionaires put a heap of money in under the Costello rules of the early 2000s. Dick Smith is one of them, and he openly admits he should be paying more tax on super. We have to have an equitable super system. The beauty of the system is that, if you are a young person, you can put all your savings into super and effectively split your income so you can earn another $25,000 tax free to help you save quicker for your house. Not many people will understand this, but it is very important.

The next thing I want to do is lift the rate of withholding tax on profits sent offshore. I will give you one example. Ireland has a 10 per cent withholding tax—or we have a 10 per cent withholding tax on royalties sent to Ireland. Ireland has a company tax rate of 12½c, so 12½c plus 10c is 22½c. It is in the interests of many multinational properties to transfer much of their profits to Ireland because they will get a 30c tax deduction for it here and they will only pay 22½c to send it to Ireland. As I was saying to a couple of politicians this morning, Pfizer, for example, sent over $1 billion of their 2023 profit over to Ireland. I am not sure why Pfizer even has factories in Ireland, but 7½c out of a billion dollars is $75 million for the sake of a couple of accounting journals. It really is that simple: you just do a couple of accounting journals and justify the arms-length provisions. For some reason, the tax office thinks it is okay that Pfizer have an operating profit ratio of seven per cent here in Australia when their worldwide operating profit is 40 per cent.

The next step I take will be to tighten offshore profit leakage to make sure we have an operating profit ratio test. As I just said, Pfizer and Facebook—Meta—have worldwide operating profits of about 40 per cent but their operating profit ratio in Australia is only seven per cent. Why is the tax office allowing these multinationals to send so much money overseas when it is clearly in breach of the arms-length transaction rules?

I will quote other countries such as Germany and the UK. There is a five per cent withholding tax on sending royalties to those countries. Germany has a company tax rate of 15c, and 15c plus 5c is 20c. You see, there is a 10 per cent arbitrage there if you want to transfer profits offshore. We need to stop the leakage. It is much better to retain earnings in this country from earnings derived in this country than to let earnings go offshore and then have to borrow money from offshore back into Australia.

The other thing we need to do is fix up our franking credits in this country. Franking credits are a dog's breakfast. There are only a handful of countries in the world that actually refund franking credits. The whole imputation scheme is very complicated and very inefficient. When Paul Keating originally introduced the imputation credit scheme, that was probably fair enough; we didn't want double taxation. But Peter Costello came along in 2000 and started refunding franking credits. In the year 2000 there was about $500 billion in superannuation; I think there was a little bit less than that. Today there is $3½ trillion in superannuation. Superannuation is forecast to grow to $10 trillion by 2050—I am not quite sure what you will invest in—and is forecast to be about 200 per cent of GDP. The problem with that is that you are effectively going to end up with superannuation funds owning most of the ASX, so companies will pay 30c tax to Canberra, the superannuation fund will then do their tax return and Canberra will then repay 15c back to the superannuation fund. Effectively, our real company tax now, because so much is refunded in franking credits, is actually below 15c. We are effectively eroding our company tax base. Many people talk about the big oil companies not paying enough tax et cetera. We need to stop the erosion of our company tax base.

What I'm proposing is a 25 per cent company tax but a 15 per cent rebate. Effectively, for small investors, there will be a $10,000 refund, but, above $10,000 in franking credits, basically all you're going to get is a 15 per cent non-refundable rebate so that your effective rate of tax is 10c. If we don't have that, we are going to erode our company tax base down to zero. It's a little bit complicated, but it's got to be done.

The other thing we need to do is abolish the 50 per cent CGT discount. As I discussed earlier today and posted yesterday, that concession costs the tax act $20 billion. Since that was introduced in the late nineties, asset prices have rapidly increased. So we need to look at using that money by abolishing that. Bring back cost indexation—I need to stress that. You can still index your cost base by the rate of inflation. That is what we used to do when I first became an accountant back in 1991. My first job ever was to go through and index the cost base. In a period of inflation, that will actually benefit you if you hold your asset for more than six or seven years anyway, because your cost base will grow by 50 per cent. That policy will encourage people to take a long-term view on their investing. So we need to look at that.

What I would then do with that $20 billion is to cut the income tax rate from 30c to 20c between $45,000 and $65,000, because I believe in reward for effort and wealth for toil, and I think our income tax rates in this country are way too high. Yet again, we need to flatten our tax structure, lower the rate of tax on those people that get out of bed and put their noses to the grindstone, and reward effort.

There are a number of loopholes in the tax act that I want to get rid of as well, and I'll discuss them very briefly. Section 128F of the Income Tax Assessment Act 1936 allows interest paid offshore to foreign banks to be tax free. People in Australia have to pay tax on their savings. I don't see why foreign banks don't have to pay tax on the interest income they earn. I also want to get rid of the CGT exemption for foreigners who own less than 10 per cent of a non-real asset. They should also pay CGT, and that includes water rights. Can you believe it? Foreigners can buy water rights and not have to pay CGT on that. That is not a good thing, so we need to remove that as well.

There's another thing in the tax act where big Australian multinationals can go offshore and buy companies offshore and, because they buy a permanent establishment offshore, the income earned offshore is not assessable here, but they can use the interest on what they borrowed in Australia as an expense against Australian income. That lacks symmetry, and Australian taxpayers shouldn't have to be subsidising Australian multinationals to expand offshore.

I look forward to pushing these policies over the next six to eight months.

Senate adjourned at 20:42