Chris Bowen (Prospect, Australian Labor Party, Shadow Assistant Treasurer) Share this | Hansard source

The measures encompassed in Tax Laws Amendment (2007 Measures No. 1) Bill 2007 are sensible and will meet with the support of the opposition. Schedule 1 of the bill allows the Commissioner of Taxation to disclose taxpayer information to Operation Wickenby task force officers and to officers of future compliance operations. Operation Wickenby is, of course, the multiagency operation established in 2004 to crack down on offshore tax fraud. It is led by the Australian Taxation Office. Other agencies involved are the Australian Crime Commission, the Australian Federal Police and ASIC.

Allowing the commissioner to share information with other government agencies involved in Operation Wickenby should help the compliance task force investigate tax evasion and enforce the law. The amendments allow the commissioner to disclose information to officers at Operation Wickenby and agencies for any purpose related to the task force. It also allows the commissioner to disclose information to officers of the agency for any future task forces established to protect Australia’s revenue. Labor supports all of the efforts by the Australian tax office to address tax avoidance and evasion and to increase fairness in the tax system.

I note that there has been some concern by some commentators about the potential privacy implications of this measure. The Law Society of New South Wales, the Taxation Institute of Australia and the Law Institute of Victoria expressed concerns in their submissions to the government’s discussion paper late last year. We respect these views and, of course, the motivation of these bodies. However, on balance, we are satisfied that these proposals are sensible.

I do note the concern of the Law Institute of Victoria that organisations such as ASIC will have no legal requirement not to disclose personal information provided to it by the Australian tax office. This is a valid issue to raise and perhaps the Assistant Treasurer, when he sums up this debate, could address that concern.

I do understand that the Australian tax office and ASIC have concluded or are about to conclude a memorandum of understanding on the sharing of information. I would assume that this would include a provision that ASIC would not provide the information to any third party. I recognise that this would not have the force of law if this were the case, but we do recognise the need for these measures and we do seek reassurance from the government that every possible protection is being put into place.

The government has made a significant financial commitment to Operation Wickenby; over $300 million has been allocated to the project over seven years. The 2006-07 budget measures increased revenue as a result of the operation. It estimated the increased revenue to be $323 million over four years. I note that the tax commissioner stated in additional estimates approximately two weeks ago that he is confident that the $323 million figure will be reached, and Labor certainly hopes that this is the case.

Schedule 2 of the bill proposes amendments to the Superannuation Guarantee (Administration) Act 1992 to enable the Commissioner of Taxation or another ATO officer to provide information to an employee in response to their superannuation guarantee complaint against their employer. The provisions of the Superannuation Guarantee (Administration) Act prohibit the disclosure of information about the progress of any action in relation to any person. This prevents the ATO from providing information to employees on the progress of their superannuation guarantee complaints. The amendments will allow the ATO to provide information to an employee in response to that employee’s complaint that their employer has not complied with its superannuation guarantee obligations.

The ATO will be allowed to provide information on the steps taken to investigate the complaint, actions taken in relation to the complaint and steps taken to recover any superannuation guarantee charge from the employer. Again, this is an eminently sensible measure. It is not logical for privacy laws to prevent an Australian government body from presenting information to the very individual concerned. If an individual rings up the Australian tax office and says, ‘I want to find out how my complaint’s going,’ it is illogical for the Australian tax office to have to say, ‘I can’t tell you how your own complaint’s going because it might breach your privacy.’ It beggars belief that the privacy laws could prevent information being given to an individual about their own case. So we support this schedule wholeheartedly; we have no concerns about it at all. The amendments will allow enhanced services to employees with concerns about their employer’s contributions.

I do note that this is estimated to cost $19.2 million over four years. I note that the budget announcement concerning this measure also mentioned that the government would clear the backlog of complaints made to the ATO in relation to superannuation, and I gather that that is the reason for the $19.2 million worth of cost.

Schedule 3 of the bill proposes amendments to a number of the tax acts to extend employee share ownership concessions and related capital gains tax treatment to stapled securities. The amendments allow the employee share ownership concessions for employee share ownership schemes to apply to stapled securities and rights that are included with an ordinary share listed on the Australian Stock Exchange. Currently, only the ordinary share component of a stapled security can qualify for the employee share ownership concessions. The other component, for example a unit in a trust, will be subject to fringe benefits tax.

Of course some companies encourage employees to participate in employee share schemes by offering them discounted shares in that company. Where the scheme complies with the employee shares scheme income tax rules, certain tax concessions apply to the share discount given to the employee. Employees can choose when they include the discount given on the shares or rights in their assessable income through the upfront concession or the tax deferred concession.

Where an employee elects to take advantage of the upfront concession, the taxpayer obtains a $1,000 income tax reduction in the year that they acquire the shares. The difference between the purchase price and the market value is included in the employee’s assessable income in the year of acquisition. Only the excess over $1,000 is included in the employee’s assessable income. Therefore, if an employee receives $1,000 or less of shares they will not pay any tax on that acquisition.

Of course, the second option is to defer the tax liability on the shares for up to 10 years. Where an employee defers tax liability on the shares, the difference between the purchase price and the market value is included in the employee’s assessable income in the year in which the cessation of time occurs. The cessation of time is either when the shares are disposed of, when the disposal restriction ceases, when the employee’s employment with that particular organisation ceases or 10 years from the date of acquisition of the shares. Capital gains tax and fringe benefits tax concessions also apply. Labor supports this proposal.

There is strong evidence that employee share ownership schemes result in higher productivity. Some evidence suggests that the productivity differential between similar firms is six per cent higher for the firm with an employee share ownership scheme. Even at the conservative end of estimates, studies suggest that an increase of three per cent in productivity is likely with the introduction of an employee share scheme.

In 1987 a study in the United States found a 50 per cent increase in productivity when firms introduced an employee share ownership scheme. In other words, a firm with productivity growth of two per cent would have a growth rate of three per cent after the introduction of a share ownership scheme. Most studies find that the introduction of a share ownership scheme, in conjunction with participatory management, delivers the best results.

In 2000, a Rutgers study found that sales employment and sales per employee increased from 2.3 per cent to 2.4 per cent after the introduction of an employee share ownership scheme. As the Employee Ownership Group points out, these gains might seem small but, over 10 years, a company with a share ownership scheme will be 30 per cent bigger than it would otherwise be. This is good for the Australian economy, as well as being good for the individual firm involved.

Australia must take any step which improves productivity. I am glad that the honourable member for Lilley is in the chamber. He wrote a very fine article in the Australian Financial Review today about productivity. As shadow Treasurer he has been talking about productivity for months on end, if not years. And he has a lot to talk about because, currently, Australia’s productivity record is particularly poor. We have been seeing a slowing of productivity growth. In September 2006, the quarterly national accounts showed that productivity growth actually declined by 1.6 per cent in the previous six months. They also showed that labour productivity had not increased since June 2004. That is more than two years with zero net productivity growth.

When the Governor of the Reserve Bank appeared before the House of Representatives Standing Committee on Economics, Finance and Public Administration, I think last week in Perth, he agreed with the committee that the fall in the increase in productivity was not entirely due to the mining boom. He pointed out that, even when you take the mining boom out of the equation, we still have very worrying productivity trends. We are seeing the gap between the productivity in Australia, the productivity in the United States and the productivity of our competitors getting bigger. We are not catching up.

What is this government’s response? To introduce Work Choices. Work Choices does not increase productivity, but things like employee share ownership schemes do. Employee share ownership schemes can give you positive partnerships: partnerships between employers and employees, to improve the way they do business, to give employees a stake in the firm and to give employees more motivation to increase their productivity. Instead, this government drives us to a wages race to the bottom.

So far this decade we have seen Australia’s productivity, compared to the levels in the United States, fall from 85 per cent to 79 per cent. That is a very significant drop. It is unusual to see figures of that magnitude when you are talking about productivity gaps between nations. In this decade we have seen a six per cent productivity gap between Australia and the United States. That is a very poor result indeed and we as a nation, as a government and as a parliament must embrace measures to improve productivity. We welcome this as one very tiny step from the government, which is a positive contribution to improving Australia’s productivity rate. We would like to see much more of this. And we will see much more of this under a Labor government, because improving productivity is a priority for the Rudd Labor opposition and will be a priority for the Rudd Labor government. We need to see much more productivity in this nation. We need to talk about it more and we need to do more of it. Only by improving productivity can we compete with our competitors. It is not through reducing wages, it is not through driving wages down to the bottom, as we see from this government; it is through innovative measures to improve productivity. This proposal is a good, small first step.

This proposal will encourage more employees to take a financial interest in the company for which they work. However, the government could do even more to encourage employee share ownership schemes, putting aside all the other things they could do about productivity in the education field, for example. They have had 11 years in office but have done very little to increase the take-up of employee share ownership schemes.

The House of Representatives Standing Committee on Employment, Education and Workplace Relations conducted an inquiry into employee share ownership schemes in 2000 and recommended that stapled securities be included for ESS purposes. They conducted that inquiry in 2000. It is now 2007, and we are dealing with this legislation.

It has taken seven years for the government to adopt the bipartisan recommendation of their own committee. That is seven years of lost opportunities in relation to productivity. I am not suggesting that employee share ownership schemes are a magic bullet, I am not suggesting they turn around productivity overnight, but they are one part of the process. They are one part of the policy response that this nation must provide to improve productivity.

In February 2004 the then Minister for Employment and Workplace Relations, the member for Menzies, announced a target of doubling employee share ownership schemes in workplaces, from 5.5 per cent to 11 per cent by 2009. We are roughly halfway through that period and the latest Australian Bureau of Statistics data show the total number of employees participating in employee share schemes has risen from 5.5 per cent in 1999 to 5.9 per cent in 2004. We need to see much more of an increase. I recall that the Prime Minister once said that he wanted Australia to be one of the great share-owning democracies of the world, but the government has done very little to promote employees owning shares in their own companies.

Finally, I note that this is the first of the tax laws amendment bills of the year, no doubt the first of many. The government, as is its wont, will be introducing many tax laws amendment bills, and we still have no action from the government in relation to section 51A(d) of the act. When I see every tax law that comes into this place, I think maybe this is the time the government will fix section 51A(d)—maybe this will be the one; maybe we are finally going to see some action.

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