Monday, 27 March 2017
Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016; Second Reading
I thank members for their contribution to the debate. This measure works to deliver job security, stronger wages, increased investment, and the growth that Australians depend on. It has been now 26 years that Australia has had continuous annual economic growth. In the September quarter of this year, should that growth continue, and we believe it absolutely will, that will be the longest run in economic growth in recorded history. This is an extraordinary achievement of the Australian people.
But you cannot take credit for granted. You cannot just expect that it will continue to turn up year after year, unless you do the things that are necessary to drive that growth. That is what the Treasury Laws Amendment (Enterprise Tax Plan) Bill does. That is what these changes do. These changes to our corporate tax rate will provide the impetus, the opportunity, the encouragement, to coax capital out of its cave, to ensure that businesses are investing their businesses, to support the jobs held within those businesses and the wage increases that will flow from those businesses doing better. You don't get a job in a business that is not open and you do not get a wage rise in a business that is going backwards. These changes are designed to support investment in Australian businesses, because that is what Australian jobs depend on, that is what Australian wages depend on, and that is why they are critical.
Treasury analysis shows that over half the benefits of these arrangements flow through to workers as increases in real wages. Economy-wide modelling undertaken by Treasury suggests a cut in the corporate tax rate to 25 per cent would increase before-tax wages by over one per cent. As the Prime Minister recently stated, full-time workers on average weekly earnings would have an extra $750 in their pockets each and every year if we had a 25 per cent business tax rate today.
The corporate tax cuts are expected to increase business investment by 2.6 per cent and GDP by over one per cent in the long-term. The benefits of a lower company tax rate were outlined in a Treasury working paper released by the government on 3 May 2016. This was supported by independent modelling undertaken by KPMG and Independent Economics. All three studies found the company tax would raise living standards. Modelling released in February by the IMF as part of its article IV review of Australia is also consistent with these estimates. When Australia cut its rate to 30 per cent in 2001 it was below the OECD average corporate tax rate of 32 per cent. At that time there were 19 OECD countries with a higher company tax rate. Now, Australia has one of the highest corporate tax rates in the OECD, above the average corporate tax rate of 25 per cent. Only five OECD companies have a statutory company tax rate that exceeds Australia's 30 per cent rate, and it is going to get worse unless we take action.
The United States, as we know, is already moving to a 15 per cent corporate tax rate. When I met with the Treasury Secretary recently he made it very clear that this was a high priority item for the new US administration, and they will be bypassing us unless we are able to take action to ensure a more competitive tax rate for Australian businesses.
Various countries we compared directly with, such as the UK, Ireland and Singapore, have corporate tax rates well below the OECD average, ranging from between 12½ per cent and 20 per cent. The UK corporate tax rate is currently 20 per cent and they are planning to reduce it to 17 per cent by 2020. Nine other countries we compete with have reduced company tax rates in the last decade, including recently Malaysia, Japan and Vietnam. The US, France, Israel and Indonesia—as I have mentioned in terms of the US—are also looking to reduce their company tax rates.
Opposition to these changes betrays a disturbing complacency on the part of those who believe growth in our economy, and the jobs and incomes that depend on that, simply falls from the sky. It is made worse by the fact that those in the Labor Party who are opposing this bill have spoken so much in favour of these changes in the past and are choosing for nothing more than rank politics and opportunism to engage in the politics of negativity. That is the position of the Labor Party. But there are others who take a different view. The Governor of the Reserve Bank, Phillip Lowe, said it simply: 'We need to make sure our tax system is internationally competitive.' Rio Tinto's global chief executive said:
If Australia remains stuck with a 30 per cent corporate tax rate, this will come at a cost in investment and jobs, as other nations leave Australia further and further behind.
Indeed, former Treasury secretary Ken Henry said:
If the company income tax were to be cut, the principal beneficiaries would be workers.
But it is the Labor Party's own words that condemn them. When he was Assistant Treasurer the Leader of the Opposition told the ACOSS national conference on 30 March 2011:
Reducing the corporate tax rate … sees more capital flowing into our domestic economy, which will then flow on to workers in the form of higher wages—thereby improving standards of living.
Again, as Assistant Treasurer he said in this House on 23 August 2011:
Cutting the company income tax rate increases domestic productivity and domestic investment. More capital means higher productivity and economic growth and leads to more jobs and higher wages.
The shadow Treasurer, when he wrote his book Hearts & Minds, had a chapter on promoting growth through cutting company tax. There was a chapter on the need to cut company tax. He said:
It's a Labor thing to have the ambition of reducing company tax, because it promotes investment, creates jobs and drives growth.
And when he was asked whether Martin Parkinson's statement that a higher company tax falls hardest on workers and employees, he said, just in 2015—in late September—'That's a statement of fact which I agree with.' He said:
I have previously said that the nation should be aiming for a 25 per cent corporate tax rate.
Now, I do not believe that the shadow Treasurer has changed his mind on any of that. I do not think the Labor Party have changed their mind on any of these things at all. They know that this policy boosts investment, supports jobs and increases people's wages.
But they are going to oppose it. They are going to oppose it for the simple, crass politics of negative opposition. And they are saying to every Australian worker—and it is not just businesses with a turnover of $50 million or $25 million or $100 million or $200 million or $1 billion but businesses that have a turnover of between $2 million and $10 million, companies that have an average number of employees of 22, and there are 100,000 of them, and there are 2.2 million Australians who work in those businesses—'No, we are not going to allow the business that you work for to have greater scope to invest in that business to secure your job and to secure your wage.'
This is a massive sellout, not just by the Labor Party but by the shadow Treasurer in particular. I know that he knows that this is the right thing to do. It is a sad day when a person who has stated such strong convictions on this issue has been so appallingly rolled by his leader. That is disappointing. But the moment of truth is about to arrive, and he will have to vote to oppose this. And he will vote to oppose this, and that will go on the record. And perhaps the shadow Treasurer should put an insert into his book Hearts & Minds, and he should call that chapter, an epilogue, 'The day I sold out', because that is what he is about to do. He is going to write a new chapter in that book which says, 'The Labor thing is no longer a Labor thing.' And he cannot use the excuses of the situation of the current fiscal position, because he praised the UK government for cutting company taxes when their deficit was at 10 per cent.
So, there are no excuses. There is nowhere to run. There is nowhere to hide. He is going to vote right now in this place, with his leader, who also expressed these strong convictions about the importance of having a lower company tax rate to support investment, to support jobs and to support wages. And he is going to refute it all, and his name will be entered in the Hansard as being a massive sellout. That is for him to address. It is for the Labor Party to address. But the real losers from that process: 1,000 workers today and this week are losing their jobs in Victoria, at the Hazelwood plant. Those opposite, the Labor Party, cheered on the closure of that power plant. And now we have the other issues in the timber industry. On this day, they are going to vote against jobs again this afternoon. They are going to vote against investment. They are going to vote against wage increases for Australians. They have no alternative plan to grow the economy—none whatsoever. All they are doing here today is crass, rank political opportunism. And I thought better of the shadow Treasurer.
Order! For members' benefit: the original question was that this bill be now read a second time. To this the honourable member for McMahon has moved as an amendment that all words after 'That' be omitted with a view to substituting other words. The immediate question, therefore, is that the amendment be agreed to.
The House divided. [15:53]