Sam Dastyari (NSW, Australian Labor Party) Share this | Hansard source

I rise today to join my colleagues in the Labor Party in offering our tentative support for the Tax Laws Amendment (Temporary Budget Repair Levy) Bill 2014 and related bills. But I also want to take this opportunity in the time that is allocated to me to put on the record that I think this is an example of poor policy that has been poorly considered and is being poorly executed. These bills have been cobbled together.

We are sceptical of the revenue that the government proposes will be raised as part of these measures. We note that this temporary tax will have no impact on the long-term structure of Commonwealth revenues. So let's be honest and call it what it is: a quick political fix which is merely a wind-up for wealthy Australians. It is really a measure designed to cover up the reality of how much the budget attacked lower- and middle-income earners.

It has been widely reported that those with the means to do so will inevitably have their tax planners come around—and they will use their creative ways and their fixes—and find ways of avoiding and minimising this tax payment. That being said, any measure that is about increasing the burden of responsibility on those higher income earners deserves to be considered. Again, although the Labor Party has made it very clear that this is perhaps not a measure we would have introduced, we are happy to give the government our tentative support; but we have argued in this place and in other forums that there are better ways of doing it.

The Treasurer, the honourable member for North Sydney, Joe Hockey, offered this bizarre semantic response when quizzed about whether the temporary budget repair levy was a levy or a tax. He said: 'You want to call it a tax? You can call it anything you want. You can call it a rabbit.' This was of course a squirming response to the bizarre semantics of the Prime Minister who had promised voters 'no new taxes' on the eve of the election.

The temporary budget repair levy is of course a tax. A tax is a tax is a tax. There is no doubt about it. The pundits have dubbed this measure 'the debt tax'. This is no rabbit. There is nothing sleek about it. This is a lame duck. It is an elephant or a gorilla. It is an old dog. It is a silly goat.

Tony Abbott spent his years in opposition crying about the Labor government's Keynesian measures to ride out the global financial crisis. As opposition leader, the Prime Minister promised time and time again not to introduce this tax increase, and in fact in his own words, he said:

A coalition government will keep current income tax thresholds…

He also said:

What you will get under us are tax cuts without new taxes.

And

… there should be no new tax collection without an election.

Then what do we get straight after the election? Straight after the election on this measure, as with so many other measures, we have a broken promise. We had one thing said to us before the election and the reality of what came after the election.

After the election, the Prime Minister cobbled together a few friends from the Business Council. They went through a Commission of Audit process to argue on one side the proposition that Australia must make structural adjustments to the mechanism it uses to raise and spend taxes. I think he would be surprised to find that there is actually no argument from anyone in either house of this parliament that structural adjustments must always be considered, and these structural adjustments to our tax system need to be debated in both chambers of parliament. Again, structural adjustments to our tax system need the consultation of our tax experts, our tax academics and, most importantly, we need to take these decisions to our taxpayers large and small.

The Australian Labor Party has a proud record of making structural adjustments to our taxation system. That is not what this is. This is a temporary measure. It has no effect on the structure of the taxation system. It is petty politics as practised by some ideologues on the other side of this chamber much to the disgust of other sensible voices in the government's backbenches—many of whom have been prepared to speak out privately and anonymously at times. It is simply a measure that has been designed to cover up the reality of how much this budget and the budget measures are really targeting lower- and middle-income Australians. It is a political manoeuvre, and I dub it an expensive cheap shot,

I repeat: the temporary budget repair levy will have no effect on the structure of our taxation system, and I think that is one of the major faults with this piece of legislation. But that is not the only problem I have with this bill: the temporary budget measure is poorly considered in terms of its actual implementation and the avoidance opportunities it is going to provide so many Australians. The major design flaws in the tax lie in the fact that it will allow many wealthy Australians to avoid paying this tax and will likely drive even more into the already thriving tax minimisation industry to avoid the top rate of income. That is what we always have to be careful of when we are looking at these kinds of measures.

As I said earlier, it is not that there is a fundamental issue or problem—I am in fact sympathetic towards the case that says those on higher incomes should be paying more—but let's also understand that, when you start increasing this on higher income Australians, you are also growing a tax minimisation industry. We know that, of the almost 300,000 individuals earning more than $180,000, almost 20,000 of them use tax minimisation techniques to reduce their taxable income below $180,000. That is just under 10 per cent of Australians who would otherwise be captured by this.

It should also be noted that these figures include the 75 people in this country who earned in excess of $1 million and paid zero income tax in Australia last year. Let's just think about this for a minute: there are 75 Australians who earn over $1 million of income who did not pay a single dollar of taxation in this country.

The government has announced the time frame in which it intends to impose the levy, allowing those with the means to shift the balance of their incomes to the most convenient years of the forward estimates. Again, by announcing from the outset that it is going to be a temporary measure and only going to be for this period of time, they have given the tax minimisers a dream opportunity to restructure their payments to make sure they are minimised. Taxpayers who would ordinarily have a taxable income of more than $180,000 will look for ways to avoid paying the levy for certain income years.

During the recent budget estimates, Treasury officials conceded this measure could end up costing hundreds of millions of dollars in lost revenue, because those with the resources do so, those on the highest incomes, will use their power and leverage, certainly within their organisations, to structure their payments in such a way that they are forced outside of this period.

Another significant concern we have with this proposal is the way the income tax increase is actually going to impact the fringe benefits taxes, the taxes paid by employers for non-cash benefits. There is a major mismatch between the introduction of the income tax increase and the commensurate increase in the FBT which creates a significant opportunity to negotiate various forms of tax avoidance and tax structures.

What does this mean? In both the first and third years of these measures, there are opportunities for taxpayers to shift income out of salary and into fringe benefits to avoid the tax. The income tax increase is going to begin on 1 July 2014; however, the fringe benefits tax increases will not occur until 1 April 2015. Let's be clear: the tax increases happen on 1 July 2014; the FBT increases do not occur until 1 April the following year. That is a nine-month window where the FBT rate will not be aligned with the top marginal tax rate. This is a tax minimiser's dream scenario which will allow them to start shifting income into fringe benefits.

Again, in the third year, the FBT increase will end on 31 March 2017, providing a further three months where the FBT rate will not be aligned with the top marginal tax rate. In effect, this will mean that this tax increase will apply in full for only one complete year. During budget estimates, Treasury officials themselves revealed this FBT loophole and said that it is going to reduce anticipated revenue by hundreds of millions of dollars.

I said this idea is a duck or a dog or a goat, but what is so amazing is how poorly it has been introduced through this legislation. Given the astonishing lack of public consultation by government and the astonishment that rippled through the good people in Liberal electorates like Warringah, North Sydney, Wentworth, McKellar, Kooyong, Higgins, and Curtin, we can expect that the next few years will be good ones for the tax planners catering to Australia's millionaires, and we are right to be concerned about just how much revenue will be raised by this measure.

Concerns about the fringe benefit tax loophole have been repeated in submissions to the Senate legislative committee inquiry into this temporary budget repair levy. Certainly a lot of experts in this field and others have shared the real concern that what we are doing is creating a tax minimisation avenue. Economist Saul Eslake stated in his submission that it will likely be avoided by 'greater use of the myriad provisions in the income tax system which offer preferential or concessional treatment for particular types of income, forms of business organisation or categories of investment vehicles.' What does this mean? It means that the debate we should be having, and the debate that should have happened as part of this, is: how do we close down loopholes? How do we close down these opportunities that are giving a few Australians an incredible opportunity to avoid paying the rate of taxation that they should be paying? But that is not the debate that we have had and it is not what this legislation proposes to tackle.

Taxpayers Australia, a non-profit who state they are focused on improving fairness and transparency in the tax system, also raised concerns about how easily this tax will be avoided using this FBT loophole and other tax minimisation strategies. They say in their submission:

Treasury estimates are therefore likely to be overstated because considerable amounts of relatively straightforward tax planning is likely to take place which have the effect of reducing taxable income, often to beneath the $180,000 threshold.

We note that most of this planning is relatively straightforward and is already being actively marketed by many tax advisers. In short, it is clear that in practice only the wealthy but poorly advised will be paying the Debt Tax.

This loophole raises the obvious question of just how serious the government are about 'sharing the burden' of structural adjustments to our tax system. If they were serious, they would have closed loopholes in their new tax measure with the same zeal with which they are cutting services and raising taxes on the poor, the sick and the young.

As I said before, largely what we have here is a measure that has been used as a political fix to disguise some of the horrendous elements of the most recent budget. I am talking here about the cuts, for example, that have happened in the university sector. Young Australians looking at going to university, with the 30 per cent cut to university funding that has already been proposed and, in addition to that, the deregulation of fees, are going to be put under a kind of debt burden they have never experienced before. That is what we should be talking about. We should be looking at taxation measures to make sure that those kinds of things do not happen.

At the moment we are looking at a taxation system and certain measures that have been proposed in this budget that I and others on this chamber will be opposing in coming weeks, like the fuel excise tax and the Medicare levy. The fuel excise tax is going to be a tax on every single Australian every time they get into a car. The Medicare levy is about making sure that the cost of seeing a doctor is going to increase for all Australians and that the idea of a universal healthcare system is something that will be coming to an end. They are the measures that this budget was about introducing. They are the measures that the government wanted to introduce.

They wanted to sugar coat it, they wanted to cover it, and they wanted to show that they were somehow sharing the burden by saying, 'We are also going to be increasing taxation on the wealthiest Australians.' Will we be supporting this measure? Yes. But, if the government were serious about actually sharing the burden on the most wealthy Australians, we would certainly be having a debate about tax loopholes and negative gearing. They are not the debates that we are having. Rather, what we have before us is a measure which is going to be avoided. The tax planners of Australia would not be able to dream of an easier piece to get around. It is a measure that is not going to raise anywhere near the revenue that is proposed.

After getting to the end of the budget and realising that, with what they were doing with Medicare, with the university cuts, with the fuel excise tax, with the cuts to programs across the board—for example, the $500 million of cuts to Indigenous program—and with the cuts to the SBS and the ABC, they were damaging and attacking a lot of things that mean a lot to middle-income earners, they needed some fig leaf that they could point to and say, 'We are also attacking the wealthiest Australian as well.' That is simply what this measure is.

I reiterate that this temporary budget repair levy is an example of poor policy. It is poorly considered and it is being very poorly executed. Frankly, the government could have done a better job at sharing this burden.