Arthur Sinodinos (NSW, Liberal Party) Share this | Hansard source

That is an example. There are others, Senator Cameron. The important point here is that Labor should not put their head in the sand. We cannot just fund increasing spending. The gap will just open up and the deficit goes up. The deficit goes up, so the debt goes up. Debt is just deferred tax. Sooner or later, you have got to pay it. We cannot just keep kicking the can down the road.

The ratings agencies look at Australia and they look at our debt. When our net debt gets to about 20 per cent of GDP, they will start to ring the alarm bells if we not careful. They will start to say, 'Well, this country isn't on the right path. It's not a sustainable path.' Why is it an issue for us? Because even though we are in the G20 and we are the 12th largest economy in the world, relatively speaking, we are still a small, open economy that is still subject to external crises and still very much subject to foreign investment.

We need to attract foreign investment. A huge amount of that foreign investment into Australia is coming in the form of debt through our banking system, which then gets recycled into housing and so on and so forth. That is why during the global financial crisis, when capital markets froze across the world, we had issues with our banking system and had to provide guarantees for depositors and all the rest of it, as other countries were doing. That was because we were so interconnected with global capital markets.

This is an important bill. It is a further instalment and a further down payment on our second budget. It is an important budget which also rightly recognised the role of small businesses in our economy. It had a range of measures to support small business by cutting tax to those businesses in the tax net, giving a benefit and giving instant asset write-offs of up to $20,000 from now until 2017-18 to those businesses who are not incorporated and who are not in the tax net. They are very important measures, all of which are meant to promote the small business sector of the economy. That is a sector where you get the new enterprises which are potentially the medium and large enterprises of the future—the start-ups.

That is why we have also made good on our promise to fix up employee share ownership, which Labor had botched in 2009. That is because people who work in start-ups cannot be paid an appropriate salary, but they will take a cut of the upside of what happens when the value of a company or a start-up goes up when they finally commercialise a major new product, process or service. These are very important measures. That start-up economy is something that we need to increasingly nurture.

In my own state of New South Wales, there is a lot of work going on around promoting the fintech sector, which is technology and its application to financial services, which will disrupt existing models. It will disrupt the way the big banks operate and it will provide new products, processes and new ways of doing things. That is very important to us and it, of course, has implications over the next few decades about taxing points and how we tax. As I said before, we are increasingly living in a world where intellectual property is so important. Taxing that properly on an equitable basis between countries is going to be very, very important.

For those who want to see multilateral tax reform—particularly in this area of base erosion, profit shifting and dealing with multinationals—it is very important that the United States of America is persuaded to be as supportive as possible of these measures; without the support of the US, these measures will not be as effective as they should be. That is because so many of the corporations that we are talking about are, at the end of the day, American corporations. I am thinking of Google, Amazon and Microsoft—you can go through the list. One of the challenges we faced, and I faced when I was Assistant Treasurer, was understanding better the business model that underpins these companies and the implications that has for tax. You cannot look at tax, as I said before, through a filter of our local conditions only. You have to look at it in the context of the multilateral rules around all of this.

In the time left to me, I will just say that the OECD has done valuable work in these areas. I think it would be a pity if we just discount that work. It is complicated work; it is complex. In fact, there are people like the former Assistant Treasurer, David Bradbury, who have been involved at the OECD end of all of this. This is important work. It is rigorous. If we do things in tandem with other countries, we will get the best possible result. On that point, I will sit down.