Mathias Cormann (WA, Liberal Party, Minister for Finance) Share this | Hansard source

I seek leave to provide an update to the Senate about the government's progress in relation to our Ten Year Enterprise Tax Plan.

Leave granted.

I thank the Senate. We believe that:

… 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.

We also believe that:

… lowering the corporate tax rate for smaller businesses only—

as the Greens used to propose—

creates an artificial incentive for Australian businesses to downsize. In worse case scenarios some businesses might actually lay people off to get smaller—and the size-based different tax treatment would create a glass ceiling on business workforce growth. Instead we want a level playing field regardless of the size of the company.

We also believe that the burden of a higher company tax rate falls hardest on workers rather than wealthy shareholders. We believe that it is in Australia's national interest that 'the nation should be aiming for a 25 per cent corporate tax rate' over time, and we do understand that 'that is not an easy thing to do'.

If all of these comments I have just made sound familiar, that is because I have shamelessly plagiarised them from Mr Bill Shorten and Mr Chris Bowen—literally.

The truth is that the big businesses of today were the small businesses of yesteryear. Small businesses today want to become bigger businesses. We want small businesses today to become bigger businesses. We want there to be small businesses across Australia today that will be become the big champion businesses of Australia in the future, operating as a global champion for Australia in a globally competitive environment. That is what we want. We want small businesses in Australia today to aspire to become the BHP, the Qantas, the FMG and the Woodside—you name it—of tomorrow. That's what all of us should aspire to. We should all want that because we all know that big businesses and small businesses together create the jobs that help Australian families get ahead.

We don't want bigger businesses to become smaller businesses. If we put our bigger businesses at a competitive disadvantage by forcing them to pay higher taxes than that which is paid by businesses that compete in other parts of the world, they will become smaller than they otherwise would be. A smaller business will hire fewer people than they otherwise would; a smaller business will pay less in wages than they otherwise would, because if they hire fewer people and, if lots of businesses across Australia end up hiring fewer people, there'll be less competition for workers and, as there's less competition for workers, there would be less pressure on wages moving forward.

We want more investment, we want more jobs, we want higher wages, but more jobs and higher wages don't grow on trees. They are created and paid for by successful, profitable businesses. If we can get more businesses to be more successful and more profitable, they will, as they grow and expand—as small businesses of the past have done in years gone by—hire more people and they will have to pay them higher wages. In fact, having more businesses being more successful and more profitable is the only sustainable way to create more jobs and deliver higher wages. This is basic common sense and a basic economic truth, yet, for some reason in Australia today, it is a contested proposition. It never used to be. It used to be a bipartisan consensus that, if we wanted more investment into the Australian economy and if we wanted more investment into future business growth, then, of course, we needed to have a globally competitive business tax rate. Surely, everyone can accept that, if you make it harder for business to be successful and profitable, they will only hire fewer people and, hence, create fewer jobs. Surely, that is basic common sense. How can a business which is less successful in selling its products and services in Australia or around the world hire more people and pay them more? I mean, it just doesn't add up.

So that is the case that we have been making as a government over the last two years. The Senate is aware that this time last year we passed the first three years of our Ten Year Enterprise Tax Plan successfully through the Senate and, of course, we thank the Senate for having supported the first three years of our Ten Year Enterprise Tax Plan, which reduced the corporate tax rate for all businesses with a turnover of up to $50 million down to 25 per cent. That was a hotly contested proposition last year, too. It was hotly contested by the Labor Party, yet, if you look at what has happened in Australia over the last 12 months, more than 420,000 new jobs have been created. Wages growth is picking up; wages growth today is stronger than it was last year. We want wages growth to continue to strengthen and that is why we will continue to make the case as to why it is so critically important that Australia has a globally competitive business tax rate, not just for some businesses, but for all businesses—because, in the end, we are all in this together. Big business does not only employ a lot of people directly; it also buys goods and services from the many thousands and thousands of small and medium sized businesses. The more successful a big business is the more people they'll be able to hire directly, and the more they'll be able to pay them in wages, the more they'll be able to invest in their future growth and expansion, the more goods and services they can buy from small and medium sized businesses, and the more profitable they are the more tax they will pay. Look at what has happened to corporate tax receipts.