Tony Zappia (Makin, Australian Labor Party, Shadow Parliamentary Secretary for Manufacturing) Share this | Hansard source

I support the second reading amendment moved by Labor's shadow Assistant Treasurer, the member for Fraser, who spoke just a few minutes ago on the Tax and Superannuation Laws Amendment (2015 Measures No. 6) Bill. This legislation enacts two changes that were previously announced by the Labor government. The member for Forde asks why we did not enact these changes when we were in government. The Labor government enacted over 500 pieces of legislation, I believe nearly 600, in its term in office. It was almost a record amount of legislation. The parliament has only a certain capacity to deal with matters and there are always priorities. Nevertheless, these were matters raised by the previous Labor government.

There are two schedules to this bill. One effectively deals with capital gains tax liability and the other deals with capital gains tax obligations on foreign residents, where 10 per cent of the sale of a property will be withheld until the capital gains tax issues have been finalised. In my view, both of these measures are sensible. The first will cost the government and the budget bottom line some money but the second will save some money for the taxpayers of this country. I think that is fair and reasonable, given that it is obvious that there are foreign investors who are gaming the capital gains tax system in Australia at the moment.

The legislation is before us because the government has a budget problem: it simply cannot balance its books. The deficit is projected to blow out to $38 billion by the end of this financial year, and that is after the government has made substantial cuts to just about every policy area and every department of government: $80 billion of health and education cuts; $11 billion cut from the foreign aid budget; $1 billion or thereabouts from the research sector; industry assistance has been decimated—about $1 billion has also been cut from that; we saw over $1 billion cut from local government assistance grants; and then we had another $1.3 billion cut from pensioner concession payments made to the states. In addition to that, there have been cuts to the ABC of about half a billion dollars; social welfare pension disability reforms which effectively reduce the amount of money that is going into social payments around the country; and then, only in December, when we had the MYEFO statement handed down, we saw another $650 million of health cuts to pathology and diagnostic imaging services—cuts that will hit the lower income people of this country the hardest and will hit people who are already not only on low incomes but perhaps facing serious health problems. They are cruel cuts that any decent government would never implement.

It is no good—as the Prime Minister continues to do and as we saw him do in question time only this week—to continue to mask the government's incompetence by blaming the previous Labor government for the financial position we are in. This government has been in office now for 2½ years. In fact, this is an election year and we are almost at the end of this government's term in office. It is time that they took responsibility for their own actions, for their own policies and for their own mismanagement of the economy, rather than continuously try to blame it on the previous Labor government. It is not washing anymore with the Australian voters. It is wearing thin with them because they know that there comes a time when governments need to take responsibility for their own incompetence and their own actions.

The truth is that it is this government's own foolish policies that have contributed to and largely caused the financial mess it is in. Turning its back on industry, attacking Public Service jobs and other government institutions, creating job insecurity and taking away workers rights do nothing to raise confidence or strengthen the Australian economy. So the government then looks to more cuts.

Rather than cuts, the government should look to a more equitable tax system, a tax system that ensures that all taxpayers pay their fair share of tax—something that the Turnbull government dances around but does little about. Indeed, it is clear that it seeks to protect large corporate entities and other high-income earners from being scrutinised. Only last month we had a tax commissioner's report released. From that report we learn that, out of 1,539 of Australia's largest corporate entities, 38 per cent did not pay any tax in 2013-14. Of those 1,539 entities 985 are foreign owned, and those 1,539 entities had a combined turnover of $1.6 trillion—that is, $1,600 billion. They also made a significant profit—$169.9 billion—and they paid a combined amount of tax of just $39.9 billion. That is a tax rate of less than 25 per cent. Notably, the 579 local and foreign based companies that paid no tax had a combined turnover of $405.9 billion and a taxable income of $4 billion. That is, 579 companies pay no tax, yet they have a taxable income of $4 billion. It is no wonder that ordinary taxpayers and people around Australia are angry about the tax system which allows people earning that kind of money to not pay tax.

The figures are confirmed in several other reports that have identified the level of corporate tax being evaded or avoided here in Australia and around the world. The Tax Justice Network has been particularly focused on global tax avoidance or tax minimisation schemes and the additional burden that tax avoidance places on ordinary Australian taxpayers. A report put together jointly by Tax Justice Network Australia and United Voice found that, through the use of trusts, stapled securities and related party transactions that utilise thin capitalisation, transfer pricing and tax havens, billions of dollars in tax are avoided each and every year. The report also found that the overall tax rate of the Australian Stock Exchange 200 companies over the last decade is 23 per cent—that is, below the statutory rate of 30 per cent. If the ASX 200 companies had paid tax at the statutory rate it would have produced an additional $8.4 billion in annual income for the Australian government. Within the ASX 200 companies, nearly one third have an average effective tax rate of 10 per cent or less. I repeat: a third have an average effective tax rate of 10 per cent or less. Fifty-seven per cent disclose having subsidiaries in secrecy jurisdictions and 60 per cent report debt levels in excess of 75 per cent—a matter that the member for Fraser alluded to in his comments when he spoke on this legislation. By having those excessive debt levels they artificially reduce their taxable profits.

Corporate tax is the second largest tax revenue base for the Australian economy, comprising 28 per cent of total income tax revenue in 2013-14 budget estimates. For that year, the government projected that they would collect $70.4 billion from company tax alone. By comparison, GST was projected to collect $52.7 billion. Australia's statutory 30 per cent corporate tax rate is also below the 2013 weighted average corporate tax rate for all OECD countries of 32.5 per cent. So, when members opposite claim that we need to reduce the corporate tax rate in Australia, the reality is that by comparison with other OECD countries we are not doing too badly.

Interestingly, mining corporations are huge beneficiaries of tax concessions. It has been estimated that the mining sector benefited from $4.5 billion in federal tax subsidies in 2013 and $3.2 billion from state and territory subsidies. Also I note from the tax commissioner's report that some of Australia's biggest earners that did not pay tax in 2013 were indeed some of the world's biggest and best-known mining and oil entities. So not only do they pay little or no tax but their Australian operations are being subsidised by the Australian taxpayers. It is little wonder that the government has a budget problem.

Yesterday there was also the report of how McDonald's Australia halved its Australian tax bill by paying McDonald's Asia Pacific, based in Singapore—which has a lower tax rate than Australia—an inflated service fee of $392.6 million. It appears to be nothing more than an internal company transfer of money from Australia to Singapore, under the guise of a service fee, for the purpose of minimising tax paid here in Australia because Singapore has a lower tax rate.

I suspect McDonald's would not be the only company doing this. Avoiding tax is a very clever way of boosting profits.

The budget deficit is blowing out under the Turnbull government, and the government needs to do something about it. We support this kind of legislation because it is sensible. However, if the government really wants to increase the bottom line of its budget—if the government really wants to increase total tax revenue in this country—the answer is not to do it by raising the GST or adding it to items such as food or health expenses. As the member for Fraser quite rightly pointed out, raising the GST just dampens economic growth in the country. It is actually a retrograde step. Indeed, the most effective way of raising income for the government is to boost productivity around the country.

But there is also another compelling argument as to why raising the GST is not a good idea. Anyone arguing for an increase in the GST must explain to the Australian people why they are being forced to pay more tax when hundreds of corporate entities turning over billions of dollars every year and making millions of dollars in profits are paying little or no tax. They also need to explain why they are supporting an unfair GST tax when there are much fairer options available to the government and which federal Labor has drawn attention to.

Those people supporting a GST increase should also explain to the Australian people why people at the lower end of income levels in this country—people often already doing it tough—should pay more of their meagre income in tax, because it is those people that the GST hits the hardest. The fact is that nobody rejects that argument. We have raised many a time that the people at the lower end of income are the ones most affected by GST increases, and I have never heard anyone reject or rebut that argument. We already have inequality at a 75-year high in this country, and the GST will simply widen the gap between the rich and the poor.

I also note reports that there is a growing nervousness amongst government backbenchers as to increasing the GST. Perhaps they are waking up to the fact that the Australian people are not fools and that they understand unfairness when they see it—they understand the unfairness of raising the GST when other people in this country who are making huge profits are being allowed to get off scot-free with paying little or no tax.

In March last year Labor put forward a $7.2 billion multinational tax package. Labor also announced that we would scale back superannuation tax concessions, which overwhelmingly go to those with the highest income. Labor has made it clear that, if we want to increase income for the government in this country, we need to lift productivity levels. That is the way to fix the budget problem: to look at those areas where we are currently neglecting the ability to raise tax, rather than to hit the people on lower incomes.

This measure, whilst it goes some way towards achieving some of those objectives, is only a small drop in the bucket. There is much more that we can do, and, despite the Prime Minister's protestations that this government is acting in closing the loopholes and the schemes available to those who want to minimise their tax, the reality is that the government is not doing anywhere near enough, when the facts and the figures are clearly before it pointing out that the country could do much better and would have a much fairer system if those people and those entities making millions of dollars in tax every year paid their fair share of tax.

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