Senate debates

Tuesday, 21 August 2018


Treasury Laws Amendment (Enterprise Tax Plan No. 2) Bill 2017; In Committee

6:24 pm

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

I couldn't put it any better than the current shadow Treasurer, Mr Bowen, who very succinctly pointed out that the burden of company tax falls hardest on workers, rather than wealthy shareholders. And that stands to reason, because, if we make it harder for businesses here in Australia which employ millions and millions of Australians to compete with businesses in other parts of the world, then we will lose business to other parts of the world and the beneficiaries of that will be workers in other parts of the world.

The principal beneficiaries of a lower, globally more competitive business tax rate here in Australia, as none other than Dr Ken Henry, the then Secretary of the Treasury to Wayne Swan as Treasurer, clearly pointed out, would be workers here in Australia. That is because, if businesses here in Australia are in a better position to compete with businesses in other parts of the world, they have a better opportunity to grow and expand. As they grow and expand, they will hire more people than they otherwise would, and, as they hire more people than they otherwise would, of course, that means the unemployment rate is lower than it otherwise would be. Demand for workers is higher than it would be. With shrinking supply and increasing demand, wages would have to go up because there's increased competition for a diminishing resource. This is all stuff that the Labor Party used to understand.

Just to put this into context, across Australia, about nine out of 10 working Australians work in a private sector business. So, Australia-wide, there are just under 11 million Australians working in a private sector business out of 12½ million working Australians all up—about 3½ million in New South Wales, about 2.9 million in Victoria, about 2.1 million in Queensland, 725,000 in South Australia, 1.2 million in Western Australia, 210,000 in Tasmania and 107,000 in the Northern Territory who all work in private sector businesses.

Even in the Australian Capital Territory where, of course, we have a larger proportion of public sector workers, the overwhelming majority of working Australians actually work for private sector businesses. Some 63.8 per cent of working Australians in the ACT work for private sector businesses, and 36.2 per cent work for the public sector. In the ACT, self-evidently, the proportion of private sector workers is lower than in other parts of Australia, but, nationally, it's about nine out of 10. What we need to understand is that future job opportunities, future job security, future career prospects and future wage increases for these nine out of 10 Australians—these 10.9 million Australians—working for private sector businesses depend on the future success, profitability and competitiveness of businesses here in Australia and their capacity to compete with businesses in other parts of the world.

And there's a long list of businesses who will be affected by this bill as amended by our proposal to carve out the four big banks, including Aurizon and JBS Australia, a meat-processing company which is headquartered out of North Queensland. I see Senator Ian Macdonald here, a proud LNP representative, representing, in particular, the great people of North Queensland. The managing director of JBS Australia is on the record as saying that a lower, globally more competitive business tax rate will enable them to invest in the expansion of their business and will enable them to hire more Australians. In fact, I see that in the gallery we have Renee Viellaris from The Courier-Mail, and I think The Courier-Mail might have reported the managing director of JBS Australia, earlier this year, making the point very strongly that the lower, globally more competitive business tax rate is critically important to securing future investment and future job opportunities and to ensuring that businesses here in Australia can compete with equivalent businesses in other parts of the word. Virgin Australia, Qantas, John Deere, Domino's Pizza, you name it—there's a whole bunch—these are not what you would describe as the nasty big end of town. These are big employers. These are businesses that provide job opportunities and job security to millions of Australians.

But if we make it harder for them to be successful, they'll hire fewer people. If we make it harder for them to be successful then more Australians will be unemployed. This is the core point, Senator Brockman, in answer to your question: if we keep the taxes on businesses with a turnover of $50 million a year higher by international standards, when countries around the world have substantially lowered theirs, then we help businesses in other parts of the world, who take business investment and jobs away from us. If we help workers in other parts of the world, they take jobs away from workers here in Australia. That is a fact. People talk about this proposition that somehow this is a benefit to some abstract people that nobody knows. Well, the abstract people that supposedly nobody knows are about 11 million Australians working for private sector businesses across Australia.

So, we've put forward the proposal to ensure that we have a corporate tax rate that is globally competitive for all businesses across Australia. But in order to give ourselves the opportunity to secure a consensus across the chamber we have put forward this amendment to carve out the four big banks. But we do believe that it's very important for all these other businesses to get the benefit of a globally more competitive business tax rate. And yes, people have made the point in this debate that this is just a headline tax and there are other taxes—individual states in the US will charge taxes as well as the federal government. Well, that is true in Australia, too. In Australia we've got federal taxes and we've got state taxes. But whatever the equivalent combination is, the headline US corporate tax went from 35 per cent plus other taxes to 21 per cent plus other taxes. That is a 14 per cent reduction in the United States, where most of our direct foreign investment into Australia to generate our future economic growth comes from.

Businesses in Australia will find it harder to secure investment out of the US into Australia if the after-tax profit in the United States is going to be higher than the after-tax profit for the same level of risk here in Australia. In the end, fund managers around the world will assess opportunities around the world. Capital is globally mobile. They will assess opportunities around the world across a whole range of indicators. But for the same level of risk they will look at where they can secure the highest after-tax return on their investment, and that is where the money will go. If we can't continue to attract it into Australia, because the after-tax level of return is materially lower here than it would be elsewhere, then the money will go elsewhere. And, as I've said, compared with the US and compared with Europe we have a much smaller domestic capital market. The United States and Europe—the European Union has a common market—have a much more substantial domestic capital market. But even in Europe—say, France: the President of France is hardly a right-wing ideologue. President Emmanuel Macron, when I first met him, was the minister for the economy in the socialist administration—the Parti Socialiste. Don't get yourselves upset by my using the word 'socialist'; they were literally the socialist administration of Francois Hollande. France, with Emmanuel Macron as their President, a left-leaning President—and he won't mind me saying it—is lowering their corporate tax rate from 33 per cent to 25 per cent by 2022 because they want to protect jobs in France, because they know that if they don't lower the corporate tax rate to 25 per cent in France they will help businesses in other parts of the world take business and investment and jobs away from France.

And France actually is in a safer position than Australia. Australia is more exposed. France is in the middle of Europe. France is in the middle of a 500-million-people market. Australia is a 25-million-people market with significant capital investment requirements in order to continue to develop our economy. France is an established economy in a large, 500-million-people domestic market. It is actually not as exposed to competitive pressures as we are. So you've got France going to 25 per cent. Scandinavia is meant to be the social democratic—


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