Tuesday, 12 February 2019
Treasury Laws Amendment (Making Sure Foreign Investors Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018, Income Tax (Managed Investment Trust Withholding Tax) Amendment Bill 2018, Income Tax Rates Amendment (Sovereign Entities) Bill 2018; Second Reading
It's always a pleasure to see you there in the chair, Mr Deputy Speaker Vasta, ruling over this parliament with an iron fist. It's a good opportunity to get up and speak not just about the issue at hand around the Treasury Laws Amendment (Making Sure Foreign Investors Pay Their Fair Share of Tax in Australia and Other Measures) Bill 2018, the Income Tax (Managed Investment Trust Withholding Tax) Amendment Bill 2018 and the Income Tax Rates Amendment (Sovereign Entities) Bill 2018 but about the broader challenges upon which they sit.
I pick up from where the previous speaker made reference to the challenges of tax reform, but he seemed to be mostly focused on corporate tax reform and seeking to target and demonise some sectors of the economy rather than looking at the even bigger picture of the task and challenge we confront. As was mentioned by the previous speaker, despite his wanting to make it self-referential: yes, the Economics Committee is currently completing an inquiry into the implications of removing franking credits, but it's not an investigation into opposition policy; it's an inquiry into the issue and the opportunity to have a dialogue and a discussion about the challenges of dividend imputation, the structure of retirement planning, how the tax system can seek to advantage some and not others, and, critically, when and at what point and at what stage of people's lives they should make contributions to the tax system, when they should get deductions and when they should not.
A simple point to which those on the other side of the chamber seem to be completely oblivious is that a franking credit is a tax credit reflecting tax paid. Remove the tax credit and only tax is paid, which is why I and others talk about Labor's retirement tax and what it's going to do for a million Australian retirees who are going to have their overpaid tax stolen from them, should there be a change of government. The impact of this, by the way, is very real. We've heard witness statement after witness statement, testimony after testimony, going specifically through examples of these people's experiences—what it means for them and their lived experience. I know that isn't the core focus of this bill but it is part of the tax system and challenges we face.
One of the most interesting things, when you talk about these issues with people affected by dividend imputation and refundable franking credits, is how many of them say, 'What we really want is comprehensive tax reform.' We recognise there's got to be a change in the system and structure. People talk regularly about the challenges faced around corporate taxation, whether it's efficient and whether it meets the expectations of the Australian community, whether the tax revenue that's collected is sufficient, whether people are using loopholes or privileges to minimise their tax obligation. But they also go through why they feel they're being targeted if they simply get rid of removing refundable franking credits. I've got many of them here, witness statements and examples of people who have serious issues as a consequence. And some of them are quite difficult.
Mr Thistlethwaite interjecting—
It's quite disappointing that the deputy chair of the committee is deriding the witness testimony of people like Chris Sparks. He was at the Merimbula hearing on 4 February 2019 and heard it directly. This is his statement:
Thank you, committee. My name is Chris Sparks. I live in Kalaru and I'm here today with my wife, Wendy. Those astute members of you will note that I sit in front of you today in a wheelchair—a very stylish custom-made ultralight wheelchair. That's because I was injured when I was three years old and had a spinal cord injury. In spite of my injury, I've been lucky enough to work in open employment since the age of 19. I'm now 59 and I'm moving into my latter years and retiring.
I worked initially in the world of information technology and went on to run small and large businesses. I ran a corporate entity for a US company in Australia and up in Asia. I've led a great life. The sad reality, though, of ageing with a spinal cord injury, particularly when you've had one for as long as me, is you can add 10 years to your life—so, at 59, I probably have the abilities to get around of a 69-year-old able-bodied bloke. I can't travel independently anymore, and maintaining my business life is proving increasingly difficult. So we're heading for retirement.
Like many of the accused here—
His words, not mine—
I've got a self-managed super fund. I consulted my accountant last week. We'll probably be wrapping up our business next year, as I turn 60 in October. You're all welcome to come to my birthday at the Tathra pub.
That was his comment. By the way, I'm sure if you make an investigation you'll be able to find out about it.
These people are the victims of removing refundable franking credits. I, literally, have hundreds of them. They're not people confected; they're not people who just send in proforma submissions; they're real Australians who have come to voice their concerns. Some of the concerns people have raised are not just about why they're being discriminated against, why they're being targeted, why there hasn't been a focus on comprehensive tax reform but also, quite legitimately amongst the Australian community, concerns about what is being done to deal with multinational tax avoidance and investor avoidance as well as large company tax avoidance and why that isn't being focused on.
We know this government actually has quite a proud record of doing so. At the start of this term, we introduced a series of measures to close loopholes and put extra obligations on multinational companies who do business in Australia and shift their assets and investments overseas and minimise their tax obligations. This presents us with a whole host of challenges around competitiveness, of which tax is an important part. It blows me away that some members of the opposition don't seem to understand that competitiveness in the tax system, in a global economy, is important. Therefore, the only solution—I said it in my first speech, I've said it a hundred times before in this House and I'll continue to say it, and I don't care whether it conflicts or is consistent with government policy—is wholesale tax reform. And we need a rebasing of the tax system not just about who's paying tax. It needs to be about what stages of life they're at and making sure that people can't find ways to avoid it.
There's an excellent book on this by a fellow by the name of Charles Adams, called For Good and Evil: the Impact of Taxes on the Course of Civilisation. I'll buy you a copy, if you like, Deputy Speaker, not to influence you but because it's a genuinely good read. It looks at the history of tax and the failure of tax reform, and it looks at how bad tax systems become worse and dramatically undermine the structure of a society and an economy. There are a number of lessons out of the thesis that's been done, looking at historical examples. What does it say? Taxes should generally be low so that people don't want to avoid them. Taxes should be simple to remove opportunities that can be exploited. And, of course, it's to make sure that as many people as possible pay tax. This is a point that former Treasurer Peter Costello regularly made. He always talked about the failure of different approaches—particularly when the opposition were in government; they took the approach of trying to minimise the number of people who were paying tax and maximise the number of people who were relieved of tax obligations.
I make no apology: I fundamentally believe that everybody should pay at least some contribution to the tax system. If you can take out of it, you should be expected to contribute to it. Everybody should have an equal investment in society. Everybody should have a want to perpetuate it. Everybody should expect a sense of responsibility for the country that we live in and cherish and love and should not be able to avoid that responsibility. And that includes multinationals who take advantage and seek opportunity in this country. I think that's an utterly fair and consistent approach. What we need to do is make sure that people can't take advantage of the tax system to take advantage of Australians. Of course, in the end, the only way that's truly achieved, to be contrarian, is to look at things like broad based tax reform, particularly consumption based taxes, which companies find more difficult to avoid, rather than simply try to focus energy and resources on having an extremely complicated, unnecessarily complicated, tax system. I don't want it to be taken that I'm some sort of deserter, running off and supporting New Zealand, but their tax system is a lot simpler than ours, and I have to say it has a few strengths too.
What do we have before us? We have some bills to at least close some loopholes, to start to address some of the challenges around tax reform for Australia, to minimise the opportunity for companies to take advantage of Australia and take revenue offshore, unchecked. We have a number of proposals within the legislation, the broad principles of which I think most members agree with, despite them putting forward an amendment. The bill stops double gearing so that foreign investors can't shift profits to avoid tax. Tick. It stops foreign investors from getting tax concessions on stapled structures to achieve tax rates of 15 per cent or less—or in some cases almost tax free—on Australian business income. Tick. The bill has measures to tax foreign investors' income from Australian agricultural land and Australian residential property, other than affordable housing, in managed investment trusts at the top corporate tax rate. Tick. There is a measure to provide transition periods of up to seven and 15 years for existing investments—and that's critical if we want to continue to be an attractive destination for capital so that we can create job opportunities for the next generation of Australians. It allows for a 15-year concessional rate for investments in new, nationally significant infrastructure, as determined by the Treasurer, and implements the government's budget commitments to supporting affordable rental housing by providing a 15 per cent tax rate. All the measures are good. All the measures are critical.
The final point I want to pick up on—and it's one the previous speaker raised as well—is that, more than anything else, what we need to do is drive investment in the housing market. Housing affordability is one of the most foundational principles on which a healthy society prospers. Yes, it creates jobs, and that's very important. But, as observed by Hernando de Soto Polar, the Peruvian economist, in one of the great lessons of the French Revolution, if people don't have an investment in society, they will not seek to conserve the status quo. And he's right. We should want every Australian to own their own home, or aspire to own their own home, and to be in a position to secure so. This government has done quite a lot in making sure, through housing agreements, we can help that pathway on its way. I know the opposition have policies too, and they're welcome to. I at least appreciate the fact that they have an appreciation for the challenge and the issue. But this requires a whole-of-government, whole-of-nation response, because it is in the best interests of the country. You'll hear me say this time and time again, and I say it for deeply philosophical, committed reasons—