Wednesday, 21 March 2018
Treasury Laws Amendment (Enterprise Tax Plan No. 2) Bill 2017; Second Reading
As I was saying when I finished off earlier today, we were talking about the fact that corporations are not vehicles for social change; corporations are vehicles for delivering profit to shareholders. Corporations exist to deliver profit for their shareholders. They put the public interest ahead of that only when government forces them to do so. It's a bit like the parable of the scorpion and the frog: 'It's in my nature.' The nature of corporations is that they are institutions that exist to deliver profit for shareholders. There is no real-world evidence to show that company tax cuts increase jobs and wages growth. The idea that giving a huge handout to large and profitable companies will somehow lead to that handout finding its way not into increased profits but into the hands of working people is laughable. In fact, most of the real-world evidence demonstrates that company tax cuts flow overwhelmingly to the owners of businesses in the form of high dividends and share buybacks.
We actually have a real-world example going on right now. Let's look at the example of the corporate tax cuts that have been dished out in the US. We hear a lot about US company tax cuts and how much has flowed to workers. Yes, $5.6 billion flowed to workers—much of it in the form of one-off bonuses, it must be said, not sustained wage increases. But that compares to $171 billion in stock buybacks over the same period. So only a tiny fraction of the huge benefit given to those corporations through company tax cuts found its way into the pockets of ordinary workers. It has lined the pockets of shareholders. So far, the US example is actually in keeping with other evidence across the world. Company tax cuts flow to the owners of those businesses; they don't flow to the workers. They flow to the wealthiest people, not the poorest.
But it's the poorest people who are feeling the impact of government budget cuts. Economics 101 tells you that if you're taking money from the poor, who spend all of their income, to give it to the rich, who save a significant part of their income, that's going to be a drag on economic growth. Pushing down spending on consumption will do nothing for employment and wages growth. It just doesn't work that way.
Let's get our heads around this: a third of the benefits of the government's proposed tax cuts are going to go to 15 businesses. Who are those businesses? There are the big four banks. The big four banks alone are going to get $7.4 billion from these tax cuts. At the moment we have a royal commission looking at the culture and behaviour of the big four banks, and Malcolm Turnbull is saying, 'Here you go; have another $7½ billion.' It's not just the big four banks. There are a number of other resource companies and the two big supermarkets, all of whom are large oligopolies with extensive market power. They have little or no interest in investing in their companies beyond lowering costs so they can further increase dividend payments to their owners. We had a business group today saying, hand on heart, 'We promise to invest in Australia if the Senate passes these company tax cuts.' What does investing mean? It could mean things like investing in ATMs. That was a big investment from the banks. Internet banking was a big investment. Self-service checkouts were big investments.
These were huge initiatives by big business. They did nothing to increase employment. They might have improved efficiency, but how does having ATMs at banks increase employment? It may have increased the profits of the big four banking companies. It might have made them more efficient, but it doesn't increase the amount of jobs and it doesn't increase the wages of employees in those businesses. In fact, it was the opposite. One Nation claim to be the party of battlers, but what they're proposing to do is give a third of the benefits to 15 companies, who are going to be the biggest beneficiaries of this massive taxpayer largess. Fifteen companies are going to get one-third of the dividend from this massive corporate tax cut. We mentioned the big four banks; the supermarkets Coles and Woolies; and Telstra. These are the businesses that the government want to look after.
We know they're the party of big business, but what about One Nation? One Nation say they stand for battlers: 'Here you go; have $7½ billion, NAB and Commonwealth Bank.' They say they're ashamed about the banking culture that exists in Australia, and here we are: a massive, massive handout. These are the businesses that One Nation think are somehow magically going to grow employment and lift wages.
If this company tax cut is really about increasing employment and wages, there are a hell of a lot of far better ways of spending $65 billion to get an employment boost. How about this: how about spending it on schools; how about improving people's health? How about we get better productivity and a society that's better educated and healthier? That's a good start.
One of the largest benefits that the government-commissioned economic modelling predicted was a decrease in tax avoidance by large businesses. Well, let's follow that logic. The company tax rate for avoided tax is zero. Whether the tax rate's 30 per cent or 25 per cent or even 15 per cent, businesses are still going to try to avoid tax. That's an argument for having a zero tax rate. The government have got to spend more time cracking down on people who are avoiding paying tax. They've got to empower the ATO. There are a range of other things that they can do to make sure that these multinational tax avoiders start paying their fair share of tax, rather than giving up and saying, 'Well, there's a problem with tax avoidance, so we're going to reduce the company tax rate.' Based on that logic, let's bring it down to zero!
Of course, the Turnbull government say: 'Well, we've got to be internationally competitive. We've got to cut our taxes because other countries, like the US, are doing it.' Who on earth wants to compete with the US, the lowest common denominator—with Donald Trump? Do we want to be pursuing his policy agenda? Of course, that's just a race to the bottom. Do we keep cutting taxes until our tax rate is zero, until we lack the revenue to invest in education and health care?
Again and again, this government tells us that investment in Australia will boom if only we cut the company tax rate. But we know from the evidence—it's absolutely clear—that there is no link between increased investment and cutting the company tax rate. Businesses invest in Australia for all sorts of reasons. They do it because of our stable political environment. They do it because of the business environment. They don't do it because of a headline company tax rate. It's only one factor amongst many. Most of the foreign investment that comes to Australia is from countries with lower company tax rates than ours. That's the irony.
And of course these tax cuts won't lead to economic growth if they're paid for by cutting government spending. Taking money—I say it again—from low-income Australians and giving it to wealthy corporations is going to reduce growth, not increase it, and that's particularly true at a time of wage stagnation. The finance minister's fond of talking about how Australia's company tax compares to the rest of the world. He's pointed out that, among countries with high company taxes, one is Germany. Germany's got a very strong and growing economy. It's driven not by resources but by manufacturing. If manufacturing's not just surviving in Germany but thriving with a high company tax rate, it's obvious there are so many other factors that go into business investment decisions.
The Greens are committed to opposing these company tax cuts. We stand in opposition to big business getting an even sweeter deal at the expense of ordinary Australians. Our challenge right now is to address growing inequality, not contribute to it. It seems the government is bending over backwards to exacerbate the growing divide in this country.
It's time to end government handouts—huge handouts like fossil fuel subsidies. It's time to crack down on loopholes that benefit big business and the wealthy, like the capital gains tax discount and negative gearing. It's time to make sure corporations start paying tax, rather than seeking to give them a big handout. And it's long overdue that this government—and indeed the crossbench, along with its big-business crony—opposes the Treasury Laws Amendment (Enterprise Tax Plan No. 2) Bill 2017 and starts working on the foundations of a decent society, one where we recognise that tax is the price we pay for a civilised society, decent health care, decent education and a productive workforce, and one where inequality starts to reduce rather than continues to grow.