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

I rise to speak on the Economics References Committee report Australia's taxation system. I thank the people who made submissions about the need to overhaul Australia's tax system.

It's been one of the great frustrations of my time in this parliament that the two major parties do not want to talk about tax in this country. Our tax act is killing us. I have to laugh because everyone is jumping up and down this week about Trump's tariffs. We actually have reverse tariffs in this country that punish Australian industry. If you make a dollar of profit in this country, you pay 30c on that dollar of profit. Yet if you set up an overseas company, or you are a subsidiary of an overseas company, you can shift your profits offshore—interest, royalties, rent, management fees, insurance fees, whatever—and you will get a tax deduction of 30c here, and, depending on the tax treaty, you will pay no more than between zero cents and 15c. It is a reverse tariff. If you keep your profits here in Australia, you pay 30c in the dollar.

On the other hand, we have sections in the tax act that encourage foreign investment in this country to the extent that foreign companies pay no tax on their income earned in this country. Section 128F of the Income Tax Assessment Act 1936 covers the public offer test. All that money that Australians pay on interest, all that interest earned by foreign banks as Australians pay their mortgages, and maybe 40 per cent of Australia's mortgages are funded by overseas debt—all that interest that goes offshore does so tax free. Think about it: if you're an Australian pensioner or any Australian that earns interest income on a bank account, you will pay tax. Yet foreign banks that lend into this country, that control you through that debt, don't have to pay any tax provided they meet the conditions in section 128F of the 1936 tax act.

Division 855 of the Income Tax Assessment Act 1997 says foreigners don't have to pay capital gains tax on the sale of shares if they own less than 10 per cent of a company. If I make a profit or if Senator Tyrrell makes a profit, capital gains on the sale of shares, we pay tax. All Australians—all you people out there—pay capital gains tax on any capital gains they make on the sale of shares. Yet we have an explicit section in the tax act that says it's okay if you're a foreigner; you don't have to pay any tax. Guess what? If you buy property in this country, a real asset, you have to pay stamp duty. If you're a farmer and you buy a farm, you pay stamp duty. If you buy a house, you pay stamp duty. If you buy commercial land, you pay stamp duty. But if you're a foreigner—or an Australian, actually—you don't have to pay stamp duty on buying shares. Why is it that people who want to speculate on the stock market don't have to pay stamp duty, yet other people who do real productive labour out there in the real world pay stamp duty?

One of the big mistakes we made when we brought in the GST in this country was that the state premiers were allowed to abolish stamp duty on share trading—but they didn't abolish payroll tax. You want to know why we've got a productivity crisis in this country? It is because we tax the wrong things. I call out the teals for wanting to lift the GST. No, we do not need to lift the GST in this country; we need to abolish the GST in this country, because the PAYG system and the BAS returns are killing Australian businesses.

When I was offered partnership at an accounting firm back in the nineties, the margins we were going to make, had I stayed around or went overseas, would have been 50c in the dollar. When I came back 25 years later the margins were less than 20c. Why? Because today you've got to do four BAS returns a year, you've got to do your division 7A loans and you've got to do FBT returns.

I was speaking to the wonderful ladies from the Isolated Children's Fund yesterday. It turns out that, if a boarding school pays the people that look after the children and live on site, if they are allowed to have their own little cottage off to the side, they have to pay fringe benefits tax. That is absurd. That is just one of the many examples in this country. Take franking credits. Why not get rid of franking credits altogether, lower the company tax rate and increase the offshore tax rate so it actually penalises people who shift profits offshore? We encourage people here to keep their companies, when they earn profits, onshore. It is absolutely crazy what we do with our system.

And, by the way, I just got a reply from the tax office today. There is $482 billion in franking accounts out there that the federal government has to refund. If you think our federal debt is big at almost a trillion dollars, you can add another $482 billion in franking credits onto that.

Question agreed to.