House debates

Tuesday, 7 February 2023



7:49 pm

Photo of David ColemanDavid Coleman (Banks, Liberal Party) Share this | | Hansard source

As we start the parliamentary year, here's a prediction: the Treasurer's national conversation on the budget will finish in May with the sentence, 'Here are your new taxes.' The grave declarations about the nation's finances are a softening-up process so transparent that it can be seen from the moon. But there are some inconvenient truths in the budget. Take this one: on the government's own figures, income tax revenue will be $40 billion more three years from now than it will be this year, even including the impact of the stage 3 tax cuts. Income tax revenue, which is supposedly not enough for the government, and is a big problem, will actually grow by 14 per cent over the next three years. But that entire growth in income tax will be more than offset by the increase in just one area of government spending: social security and welfare. Income tax will grow by $40 billion, but social security and welfare spending—only one line item—will grow by $42 billion.

Between now and the May budget we'll be told repeatedly that hard decisions have to be made and that the government is engaged in thoughtful analysis on the best way to address the situation. There'll be round tables, there'll be working groups, there'll be consultative committees, and there'll be press conferences with furrowed brows. The faux crisis atmospherics will be reinforced by the usual suspects, who will call for changes to so-called tax concessions and various other so-called reforms. This supportive phalanx won't call on the government to control spending of course; it never does. From slightly different vantage points they'll all say the same thing: 'More tax, please.'

Now, the government will seek to frame the entire budget around the need for more revenue. It will not seek a debate about spending; it will not seek a debate about the benefits of tax cuts; it will seek to create a narrative that budget equals structural problems equals a need for more revenue equals ways to get more revenue. And it will then, with feigned reluctance, legislate to increase tax in the May budget. We don't know the specifics, but we can be sure that this will occur in one form or another. There'll be no meaningful reductions in spending growth and there will be nothing at all on real tax reform. The well-established fact that tax cuts can drive productive investment won't get a mention, much less a policy.

But no serious budget can consider only one side of the tax equation. After all, we've got a good recent example of how targeted tax cuts can support productive investment. Back in 2016, the former government took action on a range of tax cuts that have unquestionably helped investment in the Australian technology sector. Tax was cut for investments in start-ups and, as a consequence, investment in that area has grown dramatically. Of course, those tax cuts aren't the only reason that tech investment has boomed, but they definitely helped.

There's more that could be done in this area. Today, if you're a small or medium-sized business owner seeking outside investment, the odds are stacked against you. The capital gains tax treatment of investment in many small and medium-sized businesses is exactly the same as if you bought an investment property or shares in Macquarie Bank. So, if you're a business owner seeking investment, what you're really asking is this: 'Please invest in my company. If it doesn't work out, you lose. If it does, the government will take its share in capital gains tax.' That's not a great proposition, especially when you're competing for capital with Australia's obsession with real estate. It would make sense to consider changing the tax system to provide more incentive to invest in Australian companies. For instance, Australia could abolish capital gains tax for investments in some small businesses. We should be looking at reducing capital gains tax, not increasing it.

Australia wasn't built by big government think tanks, and our future shouldn't be given over to them now. A reflexive focus on how to get more tax from the economy forgets that you need to have a strong economy in the first place. In order to tax the thing, the thing must first exist. It's best to focus on its existence and its success.