Tony Zappia (Makin, 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 finance increased government spending by introducing new distortions in the tax system?

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

I thank the member for Makin for his question. The government does not support new spending being financed by the introduction of distortions into the tax system. The key reason why we have rejected the demand made to us by the opposition to support the great big tax being proposed by the opposition to finance paid parental leave is that the proposal does involve the introduction of major new distortions into Australia’s taxation system. Companies who fall above the $5 million per annum taxable income threshold will inevitably, in many cases, be competing with companies who fall below that threshold, therefore suffering a significant competitive disadvantage. The threshold of $5 million would act as a significant disincentive for companies just below the threshold to grow, to increase employment or, indeed, to merge with other companies. The threshold would distort investment decisions and it is quite unclear what connection there would be between that changed company tax rate and the existing arrangements with respect to dividend imputation and franking credits in the tax system. Perhaps at some point the Leader of the Opposition may wish to explain that particular aspect.

This proposal would also constitute an excellent incentive for phoney restructuring of companies in order to avoid the tax threshold. But, most importantly of all, this proposal would inevitably lead to the increased tax being passed on to consumers, whether it is through major supermarkets like Woolworths and Coles, petrol stations via Shell and BP, or Telstra. Major companies are big providers of essential products to households around the country. Of course, they also provide substantial inputs to small business. So, the increased cost impact for consumers would flow through directly via larger businesses and also indirectly through smaller businesses.

Actually, it is something of a furphy that this proposal applies only to so-called big business. In fact, of the 3½ thousand or so businesses that are above the threshold, I understand that 400 or so actually employ 20 or fewer employees—hardly big business. In fact, when the opposition were in government, under their infamous Work Choices approach, they set the threshold for what they saw as smaller business at 100 employees and they exempted any company that had fewer than 100 employees from unfair dismissal laws. But in this case they defined big business as companies that have as few as 20, or even fewer, employees.

I am delighted that at least one aspect of the confusion that has been generated over the past week on this issue has belatedly been cleared up by the opposition, and that is the indication that they are prepared to pass the government’s paid parental leave scheme in the Senate. That is a positive development, and I look forward to this new-found commitment to responsibility transferring to other proposals that are also before the Senate. For example, the Electoral and Referendum Amendment Bill, which is proposing to introduce greater integrity and accountability into Australia’s electoral system, is before the Senate this week.

In all of this there is an object lesson for the opposition on the dangers of making it up on the run and making it up as you go along. They did not consult business. They did not consult their own party. The Leader of the Opposition did not consult his shadow cabinet or his economic shadow ministers—the shadow minister for finance or the shadow Treasurer. The end result is a flaky, flabby, sloppy policy. But it does not look like the Leader of the Opposition is about to change. On Friday, he was asked: ‘You’ve broken your promise not to introduce any new taxes; will you promise now not to do it again?’ His response was very interesting. His response was, ‘That’s not my intention.’ He has learned his lesson here. He has worked this one out.

The Leader of the Opposition is very keen on exercise. He is a very physical kind of guy. We see him on our TV sets night after night in the speedos, in the swimming pool or on the quad bike. I have even seen him jogging inside Parliament House from time to time. But there is one part of his body that does not get much exercise, and that is the brain—and it is long overdue that it got a work-out in the interests of the Australian nation.