Michael Danby (Melbourne Ports, Australian Labor Party) Share this | Link to this | Hansard source

My question is to the Minister for Finance and Deregulation. Does the government support proposals to increase taxes in order to fund new social spending?

Lindsay Tanner (Melbourne, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

I thank the member for Melbourne Ports for his question. The government is committed to restraining growth in government spending to two per cent real per annum once trend growth in the economy resumes, partly in order to avoid raising taxes and also to ensure that the government can continue to honour its commitment to keep taxation as a proportion of our total economy at or below the level we inherited from the former Howard government. I note that the Leader of the Opposition has just announced a new policy of increasing company tax on Australia’s biggest employers in order to pay for an open-ended paid parental leave scheme. It is somewhat difficult to pin down the details of the proposal from the Leader of the Opposition; indeed, it is somewhat difficult to pin down the authorship of this proposal as well. It would appear that the opposition cannot agree whether this is a tax or a levy. The shadow finance minister, Senator Joyce, says it is a tax; the member for Murray says it is a levy.

The Leader of the Opposition cannot even agree with himself about what the threshold is—one minute he says the threshold is $5 million per annum in income for the company and the next minute he says it is $5 million of tax paid by the company. He did not consult his shadow finance minister about the scheme, even though he has just indicated that he was on the phone to the shadow finance minister about other matters. It appears that nobody quite knows whether this proposal has been to the shadow cabinet. The member for Fadden says that it has, the Deputy Leader of the Opposition says it has not but it will, and the shadow minister finance is not quite sure whether or not it has. The Leader of the Opposition has admitted that he has not consulted major business about this proposal, even though, according to the member for North Sydney, this proposal constitutes a huge windfall for big business. So somehow we are expected to believe that a huge windfall is something they want to hide from major business. Of course, most significantly of all, in all this chaos and confusion on the other side there is one fundamental point, and that is that only a few weeks ago the Leader of the Opposition stood up and swore with his hand on his heart, ‘We will not increase taxes; we will not introduce any new taxes.’ Within a month or so of that commitment, when we are still months away from the scheduled election, he has now broken that commitment.

Even if some of the complete chaos and confusion that reigns on the opposition side about this proposal is clarified, it still contains within it fundamental problems. The $5 million threshold for taxpaying companies is a major problem. Companies, by the sheer nature of fluctuations in the economic cycle and the business cycle, will move in and out of range. There is a disincentive for companies that are slightly below the threshold to grow, to add new workers and to increase their investment, and of course there is a fantastic incentive for artificial avoidance arrangements like the kind they encouraged on the waterfront with Chris Corrigan and Patrick in order to ensure that companies can be broken up into constituent components to avoid this additional tax slug.

The key point is this: for all of their posturing about debt and deficit and all of the blowhard performances we have had to put up with over past years, all we get from the opposition is big new spending commitments—three spending commitments alone worth $18 billion over the next four years—and when finally, after still not having come up with one single spending cut and not one single savings measure, they are shamed into actually explaining where the money is coming from, guess where it is coming from? A big tax increase. They still are unable to specify any spending cuts that they would put in place. They block the spending cuts that the government put in its budget, and their only answer to financing their big spending, freewheeling promises is to increase taxes. Tax to the max, Tony’s strategy, is not going to help Australian workers; it will slug businesses and jobs in order to provide more money for higher income earners. The Leader of the Opposition’s cavalier approach to economic management demonstrates that he cannot be trusted to manage the Australian economy and the public finances of this nation, and his chaotic approach to managing the affairs of his own party shows that he cannot be trusted to manage the affairs of the Australian nation.