House debates

Tuesday, 23 February 2016


Tax and Superannuation Laws Amendment (2016 Measures No. 1) Bill 2016; Second Reading

8:03 pm

Photo of Andrew LeighAndrew Leigh (Fraser, Australian Labor Party, Shadow Assistant Treasurer) Share this | Hansard source

In summary, Labor will refer schedules 1 and 2 of this bill, the Tax and Superannuation Laws Amendment (2016 Measures No. 1) Bill 2016, to the Economics Legislation Committee. Labor supports the intention of both these measures, but we want to leave open the option of moving amendments in the Senate subject to the committee's findings.

This is another tax bill and another reminder of the Treasurer's play-it-by-ear approach to tax reform. The member for Cook has been engaged in an extended jazz improv solo for a few months now. It would be fine if he were a musician. He could just say, 'A couple of off notes but, hey, that's jazz.' The fact is, though, tax reform is not a jazz solo. You cannot get away with hitting off notes or just turning up not to play the gig at all. You have to be in tune with your stakeholders, in tune with the Australian public and willing to come out and say clearly what you mean. That action of being out of step with stakeholders and the Australian public is shown again in this bill today.

Labor has concerns about the haphazard approach of this bill, which I will go on to detail later. But, at the outset, I want to highlight the larger consequences of the member for Cook's haphazard approach. The Treasurer has floated numerous thought bubbles about an expanded or an increased GST over the last five months, since the coalition thought they had hit the refresh button. The mooted GST change led to widespread uncertainty. It did not help consumer confidence, still down from the election. It did not help business confidence. It did not help growth, which has been downgraded each quarter since the coalition came to office. It did not help unemployment, which has risen under this government. This government did not seem to realise what regular Australians realised—that raising a GST would not boost growth but would worsen inequality. Extraordinarily, it took until they received the Treasury modelling for this basic fact about a 15 per cent GST to finally pop the thought bubble.

On multinational tax reform the Treasurer continues to take a haphazard approach. After cutting 4,700 jobs at the Australian Taxation Office and after watering down multinational transparency laws, in another secretive deal with the Greens—which seems to be a regular feature of this parliament—we see the Treasurer this week talking up yet another multinational tax announce-able that yet again has no revenue estimate attached to it. So, while the Treasurer talks a big game on multinational tax, all he brings to the budget is more asterisks—just more waffle; not a coherent, clear idea about how to tax multinationals and add to the budget bottom line.

Labor has been clear about our policy on multinational tax. It better aligns debt deduction loopholes with economic first principles and it adds $7.2 billion to the budget bottom line over the course of the decade. They are resources that we badly need to make sure that Australians have the schools and hospitals that they demand and that they deserve. Labor's policy reforms now amount to some $100 billion in savings in additional measures over the course of the next decade. This includes our measures on multinational tax and high-end superannuation, on not proceeding with an expensive marriage equality plebiscite and on not proceeding with a slush fund for polluters. We do not believe it makes sense to reinstate the baby bonus and we believe that it is possible to have a measure on changing cigarette excise that delivers a health reform and a budgetary reform at the same time.

On top of that, we have announced measures on housing affordability which will help boost housing supply, improve housing affordability and help young Australians attain the dream of owning their own home. As Bill Shorten said at this dispatch box earlier today, Labor does not believe that the Australian dream is being able to negatively gear your tenth home; it is being able to buy your first home. And what does the Treasurer have in response? He has a 'no unicorns' policy—tough on unicorns, tough on the causes of unicorns. Well, it is great that he has finally nailed down his policy on fantasy animals. It would be nice if he could actually lay down his policy on multinational tax. When the Treasurer is getting beaten up by Ray Hadley, you know he is in some deep doo-doo. It led Ben Fordham to ask today: 'Treasurer, is there any truth to the rumour that you were hiding under the desk?'

Labor's policies on negative gearing and the capital gains tax discount will deliver $32 billion to the budget over the next decade. The current budget settings on negative gearing and the capital gains tax discount amount to a significant distortion that make housing less affordable, particularly for first home buyers. Again, we have seen a few thought bubbles floated from the government and a Prime Minister who, in 2005, thought that our negative gearing settings were among the more generous in the world. He was right then, and 11 years on he is even more right.

The concerns about negative gearing that the Prime Minister raised in his tax paper with Jeromey Temple in 2005 have led to Sydney becoming the second most unaffordable city in the world, measured by price to income ratios, behind only Hong Kong, and Melbourne becoming the fourth most unaffordable city in the world. The Prime Minister seems to think that is okay. He seems to think that the main role of government is to ensure that every tax loophole that assists people with a dozen homes is maintained. But the fact is young Australians are finding it harder than ever before to afford their own homes. We see the home ownership rate for 25- to 34-year-olds dropping 25 percentage points in a generation. For the low-income members of that bracket, it has dropped by 30 percentage points over the course of the last generation. Ninety-three per cent of new investment loans goes to people buying new housing stock. The current tax settings have a failure rate of 93 per cent if their aim is to boost the housing supply. Labor believes that we need tax settings that improve housing supply and that make sure that the benefits of this tax loophole flow not just to those who are fortunate enough to afford an investment property but to the entire Australian community.

We heard the Prime Minister at the dispatch box today touting misleading statistics about the beneficiaries of negative gearing. More benefits of negative gearing go to teachers than surgeons, he said. Well, I have a fact for the Prime Minister: it turns out there are rather more teachers than surgeons in Australia—roughly 300,000 teachers to 5,000 surgeons. So, although on a per-person basis, teachers do get far less of the benefits of negative gearing than surgeons, it probably turns out that if you have a group that is 60 times as large then when you aggregate up their benefits it becomes bigger. But the fact is that if you look at the Grattan Institute numbers, you can see that the average benefit in negative gearing for cleaners is $41, for nurses it is $254, for teachers it is $372, for anaesthetists it is $3,352 and for surgeons it is $4,161. In other words, the average surgeon gets 100 times more benefits from negative gearing than the average cleaner. That gap would narrow if we looked at the total benefit of all of the cleaners and compared it to the total benefit of all of the surgeons because there are more cleaners than surgeons in Australia. But let us not play fuzzy math with an issue as important as inequality in Australia—now at a 75-year high. We know that in the case of the capital gains tax discount that, again, 70 per cent of the benefits go to the top 10 per cent of income earners.

Labor aims for a plan which adds to housing supply and adds to equity. The coalition's defence of tax loopholes is at odds not only with the position that the Prime Minister took in 2005 but with dozens of outside experts. Joe Hockey stood on that side of the parliament and said that negative gearing should be restricted to new-built homes. Jeff Kennett has criticised his own side of politics for playing politics on negative gearing and has praised Labor for bringing positive policy ideas to the table. The Grattan Institute's John Daley, Saul Eslake, Chris Richardson are not people who instinctively line up with Labor on every issue, but they recognise good policy when they see it. The current tax settings burn a hole through the budget. The capital gains tax subsidy is blowing out from $4.2 billion in 2014 to a projected $8.6 billion in 2019. Labor's policies rein in the cost of the capital gains tax subsidy. The government's failure to come up with policies does not.

Just as we would welcome the government's adopting Labor's policies on restricting negative gearing to new-built homes for properties purchased after the middle of next year, so too we would welcome the government adopting our multinational tax plan. That would be more economically efficient and it would add to the budget bottom line. Indeed, the government does not have to listen to Labor; it could just heed the advice of the Financial System Inquiry it commissioned. Right under the headline 'Major tax distortions', it outlined the case for reform and the economic benefits that would follow.

Another tip for the Treasurer would be to tell stakeholders how they will be affected. Labor has carefully detailed our structural reforms with the long run in mind, whilst giving certainty to investors under the current regime. No-one is made worse off by Labor policy. Just to be clear about that: any investor who has purchased property before 1 July 2017 can carry on without concerns that the rug will be ripped from beneath them. Investors purchasing new housing stock from 1 July 2017 onwards can carry on with the confidence that they can still enjoy negative gearing if they can help contribute to housing supply. Investors who buy an existing property after 1 July 2017 will still be able to deduct costs relating to that investment against their rental income—or, indeed, against other investment income. That is how the system works in Britain, that is how the system works in the United States and—news flash for members opposite—these are places where house prices have been steadily rising over the last generation. So this scare campaign about Labor's policy causing house prices to fall is just that: a not very scary scare campaign, as someone famously put it before being scared off by a scare campaign.

The fact is that the coalition's first critique of Labor's policy was to say it did not raise very much revenue, that it did not do very much, that it was a very small policy over the next four years. They realised pretty quickly, though, that they could not run a scare campaign about our policy and keep on saying it raised more revenue in the long run than in the short run. They have, now, quietly dropped that discussion point—I did see it appear on their daily talking points today, but you did not hear it from the Treasurer or the Prime Minister—in favour of this outrageous suggestion that Labor's policy will have an impact on existing investors. The fact is, it does not. It has been grandfathered. And that is more than the government can say for their suggestions. They have been unwilling to rule out decisions that affect existing investments.

The suggestion that they might change the capital gains tax discount for superannuation funds should send a chill down the spines of Australian mums and dads with investments in superannuation—that they might be affected by changes to the capital gains tax discount for superannuation. Labor's policy does not touch superannuation. The coalition's sure does. Recently, when asked whether the Abbott-Turnbull tax white-paper process was still alive, the head of Treasury said the department was still 'waiting for direction' from the government. That is, nearly three years on, $7 million spent after the white paper was promised in the first two years of the Abbott-Turnbull government. The Australian people want to know what direction the coalition will take on tax reform, but in 46 minutes at the National Press Club the Treasurer was unable to offer a skerrick of direction on his tax policy. That is clear at a broad policy level but it is clear, too, in the minutiae of tax changes, such as those in schedules 1 and 2 of this bill.

Labor supports the intent of these measures but wants to make sure they operate as intended and that there are no unexpected adverse consequences. Levelling the playing field between local and overseas businesses is a goal that Labor supports. As the rules currently stand, overseas competitors can offer products 10 per cent cheaper than Australian companies because they are not required to pay the GST. Labor has real concerns about the operation enforcement of the cross-border tax treatment measures in this bill. Scrutiny is vital for tax measures, particularly ones thought up by this government. That is why Labor will refer the bill to the Senate Economics Legislation Committee.

Treasury was consulted twice in the GST treatment of digital product services and other intangibles: once in May 2015 and once in October 2015. But the submissions have not been made public. We do not know what concerns were raised or what modifications were made to the exposure draft to the legislation in response to these consultations. Stakeholder and media commentary has broadly welcomed the intended cross-border measures but has also raised concern about the collection of revenue and the treatment of GST-exempt services, such as those related to health and education.

We simply do not know how the government will effectively enforce GST compliance under these new rules. Where is the detail of the steps taken to make sure overseas retailers collect and remit GST revenue? What measures does the government take to penalise retailers who do not comply with the measures? These measures were announced in the 2015 budget, in May last year. Coming up towards the anniversary of that budget we are still waiting for direction in the operation of these measures. The Senate Economics Legislation Committee will openly and transparently examine this package and Labor will reserve its position until the committee reports. If the government wishes to split schedule 3 from this bill and progress it while the committee inquires into schedules 1 and 2, Labor is open to that course of action.

Labor supports schedule 3 and notes that in this instance, as part of the Agricultural competitiveness white paper, the government has had a rare instance of consultation and flagging potential reforms. Yet even within this very portfolio the government consults on one measure and acts unilaterally on another. That is why Labor opposes the Deputy Prime Minister's thought bubbles to arbitrarily relocate three agricultural research and development corporations and the Australian Pesticides and Veterinary Medicines Authority—moves opposed by the agricultural community and the organisations themselves. Moving these organisations out of Canberra is a blatant pork-barrelling exercise. The government has not consulted with producers or the research corporations about the appropriateness of relocating them into electorally-significant regional electorates rather than keeping them in proximity with the very scientific organisations they collaborate with.

Where there has been good consultation with stakeholders, Labor is open to sensible policy proposals. We will support measures that help make Australia's agricultural sector robust in the face of numerous challenges. The measures in schedule 3 were developed in response to the Agricultural competitiveness white paper released in July 2015 and they have been well-received by stakeholders. Labor welcomes the changes to the Farm Management Deposits Scheme, which follow on from a range of initiatives Labor led. In government, Labor demonstrated a commitment to advancing the agricultural sector and consulting on policy reforms. We have a strong record on assisting farmers through tough times, including the $420 million concessional loans program in the farm finance package announced in the 2013-14 budget. That Labor program came after significant consultation with stakeholders, including through the Rural Finance Roundtable Working Group in 2012. Labor provided three years of funding to the Rural Financial Counselling Service to expand by the equivalent of 17 full-time councillors. Those measures were accompanied by an awareness campaign to ensure farmers requiring assistance were aware of the programs available to them. But, as the bill as a whole currently stands, it is a reminder of the Abbott-Turnbull government's haphazard approach to tax reform and to governing itself.

In the past few months, it has become transparently clear for everyone that the government does not have the reformist zeal to match the rhetoric espoused by the new Prime Minister when he toppled the member for Warringah. In September the new Prime Minister promised 'new economic leadership', but starting over was no way to begin. The Prime Minister has dithered and delayed on tax policy. As Adam Giles, the Northern Territory chief minister, said recently: 'The national tax reform discussion has become even more uncertain.' No plans. No policies. The member for Wentworth promised he would change his party, but his party has changed him

He seems to lack political capital, and the best he has been able to do is to hide the Treasurer in witness protection. Tax reform is hard and requires scrutiny. Being Treasurer, you expect scrutiny. You do not expect to be running away even from your best mate, Ray Hadley.

The measures in schedules 1 and 2, though having an intent that Labor supports, require further scrutiny. We will refer them to the Economics Legislation Committee and reserve our position until that committee reports.


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