Senate debates

Tuesday, 20 June 2017

Matters of Public Importance


4:46 pm

Photo of James PatersonJames Paterson (Victoria, Liberal Party) Share this | Hansard source

I commiserate with you, Mr Acting Deputy President Leyonhjelm, having to sit there silently in the chair while Senator Dastyari verbals you in a most egregious and defamatory way for having moved positions on issues of economic freedom towards Senator Dastyari. I am pleased to be able to exonerate you of such crimes, Chair. As far as I am aware, you have not done so, and I would certainly be alarmed to learn if it were the case. I hope it is never the case.

No issue better highlights the economic illiteracy of the Australian Labor Party than the issue of taxation, and this motion before us today moved by Senator Dastyari is yet more evidence of it. On what economic planet does a tax cut which returns money earned by people back to those same people constitute a handout? On what planet is it a handout to allow people to keep their own money? There are two initiatives of the Turnbull government that have returned money earned by individuals and companies back to them. I want to talk about why those are important and positive initiatives and why they do not constitute in any way or in any form a handout.

A handout is a gift by government of someone's money to someone else in society. For example, if the government were to provide a bailout or assistance to industry in the form of a subsidy that would be a fair description of a handout. What is not a handout is the taking of a little bit less tax than you used to take from someone the previous financial year, and the Turnbull government has done this in two ways. The Turnbull government has ensured that the temporary budget deficit levy enacted in the 2014 budget has come to an end, as it was scheduled to come to an end after two financial years, having collected extra revenue for the government. It means that an income earner earning more than $180,000 a year will go from a tax rate, including the Medicare levy, of 49½ per cent to 47½ per cent. On what planet is allowing people to keep only 47½ per cent of their income over $180,000 a handout? On what planet is confiscating nearly half of someone's income a handout? It is a strange place, indeed, if you seriously think that is a handout. My view is that it is a very good thing that that levy has come to an end, and I hope it is the first of many more reductions in personal income tax rates for all income tax earners at all levels, because the truth is that Australian individuals are relatively highly taxed by world standards. We are relatively highly taxed in our region. We are relatively highly taxed among our competitors. When looking at our top income rate, we are, believe it or not, even relatively highly taxed compared to the OECD, which has been described not by me but by others as a club of high taxing countries. So that is indeed quite an achievement.

The other way in which the Turnbull government is returning to taxpayers money that they have earned is through the enterprise tax plan, which reduces the tax rate to 27½ per cent for small- and medium-sized businesses with revenues of up to $50 million. It means that, instead of the government taking 30 per cent of the profit that companies make and spending it, the government will now take only 27½ per cent. That, in any plain language understanding of English, does not constitute a handout in any way, shape or form. It is a very important initiative because, as we know, there will be significant economic benefits that will flow from that. Companies, knowing that they will receive a lower rate of tax on their profits in the future, can have confidence today that the investments they make will earn them better returns than they would have earned otherwise. They can have confidence today that they will have the capacity to invest in their businesses by employing more people today, and we know the economic benefits that will flow from that.

But you do not have to take my word for it, as I have said in these sorts of debates before, because, happily and helpfully, we have extensive comments on the public record from the Labor Party themselves. The Leader of the Opposition, Bill Shorten, and the shadow Treasurer, Chris Bowen, have been extensive in their praise of the idea of tax cuts, including for companies. I will cite just two examples, although there are dozens and I have cited them before in these sorts of debates. It was in the House of Representatives on 23 August 2011 that Bill Shorten said:

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.

Amen, Mr Shorten. You were absolutely spot-on, then, and you would be spot-on today if you had upheld that position. His colleague the shadow Treasurer, Chris Bowen, said:

… it's a Labor thing to have the ambition of reducing company tax, because it promotes investments, creates jobs and drives growth.

I could not have put it better myself. I could not have put it more eloquently myself. Chris Bowen is absolutely right to say that all those benefits will flow from reducing the company tax rate. Unfortunately, it seems that the Australian Labor Party have been caught by the siren's song of Corbynism, the economics of Bernie Sanders and perhaps the Australian Greens, and have gone to the populist far Left on these issues and are now railing against the things they once believed in and advocated in this very place.

Most important, though—and I think it goes to the heart of Senator Dastyari's motion today—is the suggestion that, in some way, tax cuts for businesses and individuals do not benefit families. Nothing could be further from the truth. Families benefit more than anyone else from a competitive company tax rate that ensures that companies have the incentive and the certainty to invest and to employ more people. No-one benefits more than families from a reduced income tax burden that will make it easier for them to balance the household budget. If we are really concerned about the cost-of-living pressures facing Australian families, if we are really concerned about their ability to make ends meet, then the best thing we can do is give them back their money which they earned through their own hard work. That is the best thing we could do to help them afford all the many pressures they have in their family household budgets.

Finally, I want to turn to the issue of so-called multinational tax avoidance that Senator Dastyari and others have talked about this debate. Firstly, let us start with some economic theory and talk about why it would be that a company would choose, if it were able to, to try and avoid paying tax in Australia. Of course, the government has a number of tough measures to ensure that there are no legal means of doing so. But what are the economic reasons why a company would seek to place its profits elsewhere in the world?

They would do so if they were able to get a better return on their investment elsewhere in the world. In a modern, capitalist economy, where so much of the benefit derived from a company's innovation is in the form of intellectual property, and that intellectual property can be based anywhere in the world, it makes sense that companies will choose to base their intellectual property in countries which have lower rates of company income tax because that ensures that they get a better return on the investment for that intellectual property. They are acting in the interests of their shareholders when they do so because it is their obligation to return the best investment to their shareholders.

So, if we really want to ensure that companies are booking more of their profits within Australia, that their taxes are being paid in Australia, the best thing we can do is ensure that our company tax rate is internationally competitive. While ever it is the case that there are like jurisdictions that offer secure property rights and competitive tax rates—Ireland is one such example—that are far lower than Australia's, then there will be an economic incentive for companies to try and move their profits elsewhere. We could ensure that that was not the case by further lowering our own company tax rates here in Australia.

One person who is not an economic illiterate is my great colleague and friend from Western Australia Senator Back. I will not be contributing to the valedictory debate later on, so I take the opportunity now to say what a pleasure it has been and what an honour it has been to serve with him for just a little bit over a year, and how sorry I am to see that he is retiring. We would have loved to continue having his company and his service here in the Senate. He has been a distinguished servant of the people of Western Australia. He has been a dedicated member of this Senate, he has upheld its traditions in the proudest way and he is a great Liberal, and I have been very proud to serve with him.


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