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

The Appropriation Bill (No. 1) 2007-2008 and associated appropriation bills are this parliament’s opportunity to approve or disapprove of many of the measures in the budget—many of the measures, but not all. Each year the government makes a series of announcements on budget night, welcomed with various degrees of warmth or disdain depending on the announcement, which are announced with various degrees of hoopla and ceremony. But the enactment of those changes does not happen immediately on budget night. Let us have a look at some of the changes that were announced, not in this budget but in the last budget, the 2006-07 budget. Eight measures announced in the 2006-07 budget last May—that is, 12 months ago—have still not been implemented. Four of the eight are currently in the House, in various bills which will be debated tomorrow and the day after, but that legislation was only introduced after this year’s budget was brought in. So measures are announced in one year’s budget but not introduced into the House until after the next year’s budget.

This underlines a problem I have spoken about in the House previously and which is a major focus of my time. In fact, there are two related problems: the length of time it takes this government to implement tax changes announced in budgets and at other times, and the poor consultation process that this government embarks upon when implementing those changes, which leads to further delays and to bad law. This is a problem for several reasons: it leads to uncertainty in industry and it leads to a disincentive for investment. It creates confusion for businesses, particularly small businesses, which do not necessarily have the resources to have highly paid tax advice on how to navigate through these announced changes. This government has taken legislation by press release to new levels, and fixing this problem will be one of my top priorities should the Labor Party win office later this year and I become Assistant Treasurer.

There are other examples of why I am talking about this tonight, apart from the measures that were announced in last year’s budget. Let us have a look at some of the other measures that have been announced by this government but not yet implemented—press releases issued, credit claimed, but no action. Aspects of the simplified imputation system, including the 45-day rule; aspects of tax consolidation, changes announced but not yet implemented; financial assets and liabilities, including the introduction of a regime of taxation for commodity hedges; tax timing rules, disposal rules and synthetic arrangements in relation to financial arrangements; trust loss rules; amendment to the foreign currency provisions announced by the Minister for Revenue and Assistant Treasurer in his press release on 5 August 2004—that is, not the current Assistant Treasurer, but the previous one—and harmonisation of anti-avoidance tests within the income tax legislation. That is a list prepared not by me but by the Institute of Chartered Accountants, which I fully endorse.

And then there are the famous reforms to section 51AD and division 16D of the tax act. If I had a dollar for every time I have spoken about this in the House, I would be a very rich man indeed because this government has been completely negligent when it comes to these reforms. I note that the Financial Review ran a story this week with a hint from the government that they were about to reform section 51AD of the tax act. ‘Soon,’ they said. In an election year—five minutes to midnight—they are going to reform section 51AD ‘soon’.

Forgive me for not getting too excited, because we have heard it all before. Let us have a look at the history of this particular section of the tax act. The government has admitted that section 51AD impedes investment in infrastructure. They have admitted that—they agree with that, they agree that it is a problem. The then Assistant Treasurer—not this one, not the one before, but the one before that—Senator Coonan issued a press release on 26 June 2003 which said:

… the Government is committed to reforming the Income Tax Assessment Act 1936 provisions (Section 51AD and the associated Division 16D), which have particular relevance to financing arrangements in the infrastructure industry …

These provisions are in urgent need of reform.

Not my words, the government’s words: ‘These provisions are in urgent need of reform.’ The date of that statement was 26 June 2003; the legislation is still not in the House four years later. The Assistant Treasurer of the day issues a press release saying the section is in urgent need of reform and four years later we have seen no action by this government. Here we are with infrastructure bottlenecks around the country. The government will say that they have been consulting, but there is absolutely no excuse for a delay of this kind.

Another example of very poor consultation is the proposed changes to the withholding tax treatment of debentures and syndicated loans, which will be before the House tomorrow. At my insistence, this bill was referred to the Senate Standing Committee on Economics to examine the interest withholding exemption. I expressed concerns that the bill created uncertainty and practical problems that could inhibit raising debt finance. The Assistant Treasurer initially stated that the Labor Party did not know what it was talking about—there was absolutely no problem and there had been more than adequate consultation. The Assistant Treasurer then backflipped and agreed to refer the matter to the Senate Economics Committee. Submissions to the committee demonstrated the appalling lack of consultation undertaken by the government on this measure in Tax Laws Amendment (2006 Measures No. 7) Bill, which directly contradicts the Assistant Treasurer’s constant assertions that the government did consult. The Australian Bankers Association noted in its submission:

… a breakdown occurred in the consultation process in relation to the … IWT amendments.

If only the government had done its job in the first place and consulted properly we would not have had substandard legislation and the delay in implementing it would not have occurred. This example underlines my point that poor consultation leads to delays. The relevant legislation would already have been in place if proper consultation had occurred in the first place.

The Assistant Treasurer says: ‘You can’t have it both ways. You can’t say we should be doing more consultation and we should be doing things quicker.’ That just underlines the fact that he does not understand the problem. I am not the only person who thinks that the lack of consultation and time delays are related. The other day I was flicking through the budget submission of the Business Coalition for Tax Reform, which is a well-considered document. Their very first recommendation deals with this point. They make the case very well and I will read into Hansard part of their submission:

The BCTR believes that new taxation policy could often benefit from earlier consultation at the level of detailed policy formulation, before the laws progress to drafting stage. This would enable a more careful consideration of the practical implications of tax policy proposals, and could result in simpler and more effectively targeted measures. In several recent cases, such as the loss usage rules for companies and the promoter penalty regime, policy settings that were inadequately fleshed out before the drafting stage resulted in laws that were too far-reaching and gave poor effect to the stated policy intent.

It is a lengthy quote but a very good one. It goes on:

Improving the consultation at the detailed policy formulation level would, in the BCTR’s view, greatly reduce the subsequent consultation times on the draft legislation, once it is completed. It would also contribute to developing legislation that is simple, clear, more certain and easier to comply with. As is currently the case, consultation on detailed policy development may need to take place on a confidential basis with appropriate external stakeholders, relevant to the measures under consideration.

So I am not the only one who says that if you consult better earlier you can do things quicker. I agree with the Business Coalition for Tax Reform that earlier consultation on tax changes is vital to getting better and quicker tax law. When it comes to the question of how to do that, I am attracted to the New Zealand model of consultation. Under this model, a discussion paper is issued addressing the mischief that the government is trying to address. That discussion paper deals with the various legislative options open for addressing the mischief. Parties are entitled and encouraged to lodge submissions on what would be the best legislative framework for dealing with that mischief. The legislation is then drafted, taking into account those submissions. As I said, I am very attracted to that model. I think the government, having been in office for so long and having its blinkers on, is refusing to look at fresh ways of approaching this matter. But the Labor Party is more than happy to embrace fresh thinking to get tax changes implemented more quickly and to get the quality of law improved so that we will not see the constant stream of errors that we see under this government.

There is no one-size-fits-all model. There will be times when this option is not possible, but it should be used more often. I flag that if we are successful in the election later in the year and form government then we would be looking very closely at going down a road similar to the New Zealand model of consultation on tax changes. I would be looking to engage a small number of experts—two or three—and practitioners in this field to give me advice on how the consultation process could be improved and on how we could move most effectively towards this model or a model similar to it. I would be asking that small group to give me some advice within a couple of months of taking office.

Earlier consultation can lead to better law and quicker changes. It is simply not good enough for this government to sit on reforms for months and years and then put them out for very brief consultation to relevant groups. As I go around the country consulting with groups interested in tax reform—whether they be lobby groups for certain segments of business, whether they be accounting organisations or whether they be legal organisations—I hear time and again, ‘Yes, there is consultation but we get given the tax changes and we have to respond within 24 hours or a couple of days.’ It is pro forma consultation. It is simply not good enough and it will not be good enough under a Labor government.

While talking about reforms taking too long, I noted in the Financial Review today that the Treasurer has flagged changes to section 46 of the Trade Practices Act to protect competition and to protect small business from predatory behaviour. I say of this: it may be too little—we will wait to see the detail—but it is definitely too late. This has been a problem since the Boral case in 2003. Since then, section 46 of the Trade Practices Act has effectively been dead. Since the High Court made that decision, not one action to protect small business has been taken by the ACCC under section 46 of the Trade Practices Act. Why? Not because they have not had concerns about anticompetitive behaviour and not because they have not thought that there have been small businesses adversely affected by the predatory behaviour of people with market power, but because they know that an action under section 46 has zero chance of success. Why would they launch an action? It would be a misuse of taxpayers’ money if they did try to launch an action when they knew it would have zero chance of success. Since 2003, what have we had from the government? Silence. The Labor Party has constantly called for more protection for small business under the Trade Practices Act. The Labor Party—including my predecessor the member for Hunter, the shadow minister for small business, and me—has constantly called for action to be taken, yet the government has been silent. Now, less than six months from an election, the government finally finds it within its wit to act. At least, there are reports that the government is going to act; we are yet to see the legislation. There are hints in the financial papers that the government will be acting.

Section 46 was strengthened in 1986, under a Labor government, by reforms of the then Attorney-General, Lionel Bowen, and it worked well until 2003. It was the Labor Party that put in those extra protections for small business and for competition. Yet in 2003 we saw a High Court decision effectively emasculate those Lionel Bowen reforms and we have seen the government refusing to act for the last four years. Now, at five minutes to midnight, we see a hint from the Treasurer on the front page of the Financial Review that small business will be protected. I think small business is entitled to be cynical about this cunning move just before an election to introduce changes.

We will look at the detail of these proposed changes to see whether they are genuine reforms—to see whether they genuinely will help competition and help to protect small business from predatory behaviour. The Trade Practices Act should be about supporting competition. It is not about supporting one business against another. It is not about supporting one segment of society against another. It is about promoting competition and competitive behaviour and stopping anti-competitive behaviour. We will be looking at the proposed reforms to section 46 in that light and we will be supporting changes, if we are satisfied that they are in the best interests of small business and the economy more generally.

That gives me the opportunity to talk about some other small business matters. It gives me the opportunity to talk about Labor’s response to this budget and the Leader of the Opposition’s announcement of financial services reform. The government talks a lot about changes to disclosure regimes. From the parliamentary secretary to the Treasurer, we have seen lots of discussion papers and the odd self-congratulatory press release but very little change. Labor has announced that it will take an axe to the overprescription of documents. Labor’s standard disclosure form will be no more than three or four pages and it will reflect different products and providers. It will be simpler and easier for both consumers and financial services providers.

We will introduce a superannuation clearing house, not just for small business but for all businesses that seek to use it. I note that my honourable friend the Assistant Treasurer issued a press release—I think on the night of the Leader of the Opposition’s response, or it may have been the next morning—condemning this policy and saying that Labor would direct businesses to put their superannuation into this clearing house. The Assistant Treasurer got it wrong. It was very clear in both the Leader of the Opposition’s speech and the policy document that Labor would not be directing anybody to do anything in relation to superannuation. It would be a voluntary system. It would provide business with an option. I suggest that the Assistant Treasurer really needs to be more careful about the facts and allegations he makes in his press releases about Labor Party policy. He somehow managed, as he normally does, to make some link to the unions and say that this was a union inspired policy. That was the most bizarre part of the press release, but it is what we have come to expect from the Assistant Treasurer.

Labor has also announced other reforms. I believe that one of the most significant is the announcement by the Leader of the Opposition that Labor will provide, based on the national competition model, incentive payments to the state and territory governments to implement regulatory harmonisation and reform. We all know the benefits that national competition policy has had for the Australian economy and that model is a very useful one. Overregulation and lack of harmonisation in regulation is one of the biggest issues not just for small business but for all businesses that operate across state and territory borders. We need to have a cooperative arrangement with state and territory governments to ensure that there is regulatory reform and harmonisation of regulations, where appropriate. Why should the first-aid kit requirements be different in Queensland from those in South Australia and be different again from those in New South Wales? Why should there be other differences? Why should there be differences in the payroll tax bases across the country? These are the sorts of things that Labor will tackle in government, which the government, after 11 years in office, has simply run out of puff to tackle.

Labor has welcomed the government’s acceptance of our BAS Easy proposal, lifting the threshold for compulsory GST registration from $50,000 to $75,000 and cutting the time spent by small business doing GST paperwork. I suspect strongly that that announcement would not have been in the budget unless Labor had announced, a fortnight or so before the budget, that this was our policy. I suspect that, just as has been their policy since the GST was introduced— that the threshold be $50,000—it would have continued on and they would have ignored the recommendation of the Banks report. But, of course, Labor announced that change and then miraculously the government matched that announcement in it budget. The budget announced that the simplified accounting method would be extended to any business that had a mix of GST and non-GST sales purchases. A small business could apply at the tax office to obtain its own specific ratio to be used for future GST calculations. That is very similar to Labor’s Bass Easy proposal.

This is a budget which is more about the election than about the future, but there are elements with which we find ourselves in agreement, of course, because they match Labor policy that was announced in the lead-up to the budget. However, I emphasise that the government needs to do much better. When it comes to implementing its announced changes, much better consultation and more timely implementation are needed to provide business with the certainty that it needs in order to invest and to improve the infrastructure and productivity situation facing this nation.

See this speech in context