Joel Fitzgibbon (Hunter, Australian Labor Party, Shadow Assistant Treasurer and Revenue) Share this | Hansard source

If the member for Moncrieff disagrees with that, I invite him to put his case and argue it well when he rises to speak after me. I think he will struggle on that case. How can he argue against the proposition that tax cuts will put pressure on interest rates in an environment where the government has dropped the ball on productivity gains? Is he going to deny that productivity is hovering around one to 1½ per cent? I will listen with great interest to what he has to say, because I know he does not have any argument whatsoever. He knows that a golden opportunity has been lost, and the Treasurer knows that a golden opportunity has been lost.

This takes me to the issue of forecasting. Members of the House might have been reading the Financial Review with some interest over the last couple of days because, in the Senate estimates process, Labor have been doing a little bit of a teasing out of their own to try to determine what is going on in this area of forecasting. Something very strange is happening. While there was no increase in the company tax rate, for example, in the budget, the effective tax rate on companies is actually increasing. Chris Richardson from Access Economics made the point that something strange is happening when company revenue is growing at 18 per cent and company profits are growing at 12 per cent.

We challenge the Treasurer when summing up this debate to tell us the basis on which his projections on company tax revenue are made. It is pretty simple. These increases in company tax receipts are critical to funding the tax cuts, and I think it is appropriate for the Treasurer, given the uncertainty that has been raised in Senate estimates this week, to tell us what is happening. He should tell us specifically why it is that the budget is getting an 18 per cent increase in company tax receipts, while company profits are growing by only 12 per cent. He might come in here and say: ‘This is very easy to explain. Companies, particularly mining companies, over the last year or so have been investing heavily in additional capacity to try to catch up with demand, particularly in China.’ That would explain why there would be a disparity in the figures.

Labor say, ‘If that’s the reason, we accept the explanation.’ But nowhere in the budget papers are we given any such explanation. So the Treasurer, in closing the debate, has to explain why it is that we have company receipts growing at 18 per cent and company profits growing at only 12 per cent. As I said, if it is as a result of heavier deductions which flow from the additional investment in productive capacity, we would be satisfied with that answer. But if the Treasurer says, ‘No, that’s not what it is about,’ can he tell us what it is about? It is a new phenomenon, one we have not been familiar with in the past, and I think the Australian people are entitled to an explanation. These revenue forecasts are so important, and of course we all know that revenue forecasting can be manipulated for political gain.

Senator Watson in Senate estimates hearings yesterday made the point that it is possible that real and meaningful wholesale tax reform might have been overlooked because of conservative revenue forecasts. Maybe it is time to take a US style approach and have an independent agency do the forecasting on behalf of the government, or look at the UK model of having, in parallel, an institute funded by the government also measuring these forecasts to keep the government of the day honest. (Time expired)

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