Ms JULIE BISHOP (12:18 PM) —The prosperity of our nation depends on the prosperity and the confidence of Australia's businesses, especially small businesses, for it is those businesses that generate employment and it is their production that provides both our national income and the taxes that drive the public sector at the federal, state and local level. The New Business Tax System (Simplified Tax System) Bill 2000, New Business Tax System (Capital Allowances) Bill 2001 and New Business Tax System (Capital Allowances—Transitional and Consequential) Bill 2001 before the House will help safeguard the interests of those small businesses and, by extension, Australia's economic welfare and our national interest. Small business in Australia will be offered the option of an alternative system of business taxation to that presently in place, an alternative system that offers reduced bookkeeping requirements and taxation compliance costs.

The principal elements of the new simplified tax system are threefold. First, it will allow eligible businesses to adopt cash accounting, the system by which income is recognised when received and deductions recognised when paid. Secondly, it will simplify depreciation. Assets costing less than $1,000 will be immediately deductible, while assets costing $1,000 or more can be grouped together and written off at accelerated rates without the requirement for detailed asset schedules. Those assets that have an effective life of less than 25 years may be written off at 30 per cent annually, while other assets will be depreciable at five per cent per year. Finally, the legislation reforms and simplifies trading stock provisions: where changes in trading stock are worth less than $5,000, eligible businesses will not be required to account for those changes. The Australian Taxation Office will also issue guidelines in relation to stock value estimation. In addition, there will be a new 12-month rule for determining deductions for prepaid expenditures by simplified taxation system taxpayers and individual taxpayers.

These reforms stem from the Ralph Review of Business Taxation that reported in 1999, and, consistent with the recommendations of that review, the simplified tax system will be accessible by most businesses with an average annual turnover of less than $1 million. The reforms have been bolstered by extensive consultation with small business representatives and detailed public comment on the exposure draft of the bill released by the government in October of last year. By their nature, these reforms will involve transitional arrangements for taxpayers and will apply from 1 July 2001.

The New Tax System (Capital Allowances) Bill and the New Tax System (Capital Allowances—Transitional and Consequential) Bill deal with the introduction of a uniform capital allowance system for those Australian taxpayers not included within the simplified tax system. This new system for the tax treatment of depreciating assets consolidates and replaces more than 27 separate capital allowances within the existing tax law. Standardised rules will be introduced for these disparate capital allowances, with specific provisions for the maintenance of the current rules that apply to primary producers and those involved in mining and quarrying exploration.

These reforms ought to be applauded—we are eliminating the negative and accentuating the positive. These reforms will relieve Australia's small business employers—the job generators and the wealth creators—of the burden of hundreds of millions of dollars of tax, as well as reducing compliance costs, while making the system simpler and fairer for smaller firms. As I anticipated, the reaction of some members opposite, the members who have promoted themselves as new voices of moderation and economic rectitude within the opposition ranks—not wishing to point the finger at the member for Rankin who is obsessing with form and not substance—is a condemnation of tax cuts, for the opposition have set their flag against reducing the tax burden on Australia's taxpayers. That is their so-called moderation—not a moderating voice on expenditure, just a strident opposition to tax cuts. And we now know that the opposition's roll-back policy must lead to an increase in the income tax burden.

On this side of the House, we are heading down the economically logical, socially responsible path of cutting taxes. We have lowered income tax rates, we have cut company tax rates, we have cut capital gains tax and we have taken away a number of taxes from financial transactions and from imports. This is the way to go. It is consistent with numerous international examples where the lowering of the tax burden has led to economic growth and prosperity. In this month's American Spectator magazine there is a most interesting and provocative article on taxation in Europe-, an article that sharply contrasts the economic performance and the taxation policy of the Republic of Ireland and the Republic of France. There are lessons in this comparison for Australia and there is much in the Irish example to emulate, whereas Labor has already demonstrated that it will follow the path of socialist countries in the European Union, and that is going to have very negative consequences for this country.

The present European preoccupation with punitive taxation has been highlighted by the case of Laetitia Casta, who is a French model—the personification of `Marianne' and the symbol of the French republic. She is now a tax exile in the United Kingdom. I think it rather odd that we would be citing the United Kingdom as a tax haven. Laetitia has fled a top marginal tax rate of 54 per cent that kicks in at just $45,000 per annum, plus 16 per cent in social security taxes, plus a wealth tax, plus a punitive capital gains tax—which defines short-term capital gain as less than four years—and now an exit tax of 40 per cent. So as continental Europe continues to struggle under high and increasing tax burdens, the glowing exception is Ireland.

Last year, I had the privilege of addressing the Irish Australian Business Association in Perth. I had the opportunity to pay tribute to Ireland for its extraordinary economic success since the mid-1980s, success personified by the call for the return of expatriates to Ireland to meet an escalating demand for labour. Members will recall the visit to this place of the Irish Prime Minister, the Taoiseach, Mr Bertie Ahern, who made that call for emigration to Ireland when he was here in Australia. Today, FAS—the Irish labour agency—scours the world not only for homesick expats but also for other potential migrants.

Mr Fitzgibbon —I think this is valid but I'm not sure.

Ms JULIE BISHOP —Absolutely. It is an example for the Labor Party to follow. This is extraordinary for a country whose principal export for centuries was people. As recently as 10 years ago, an average of 28,000 Irish men and women emigrated every year. Today Ireland is drawing to it 50,000 immigrants annually. What lies at the basis of the Irish renaissance, the birth of this Celtic tiger? The repudiation of the same punitive taxation that is drowning the other nations of the European Union—and that is a line that a Labor government would follow in this country. In 1985 the top marginal income tax rate in Ireland was 65 per cent; this year it will be 42 per cent. The company tax rate has been cut from 50 per cent to 24 per cent, and it is falling. Likewise overall capital gains tax has been halved. The relevance of this is that the results are profound—they fly in the face of those on the other side of the House who would repudiate the lessening of the tax burden on citizens.

In eight years in Ireland, unemployment has gone from 15.7 per cent to less than five per cent. A perpetual debtor state is now running surplus budgets. Taxation revenues are up due to reduced income tax rates. Interestingly, Ireland's success is giving the European Union a nervous breakdown as it cuts taxes lower than its socialist neighbours. Earlier this year the Keynesians in the European Commission wagged their finger at Ireland for loosening its fiscal policy; inflation had hit an annual rate of seven per cent last December. That is an interesting reaction from the European Commission, given that Ireland is the euro-zone country whose economy has been growing the fastest—at 10 per cent last year—and whose public debts are falling. It has had the largest fiscal surplus as a share of GDP in Europe.

Mr Fitzgibbon —How much EU money have they had?

Ms JULIE BISHOP —Of course, some people in Brussels would like to point to the EU handouts over the years, at times amounting to four to seven per cent of GDP. But make no mistake, member for Hunter: Ireland's success is of its own making. It has opened markets, improved education, managed the public finances assiduously and— this being my point—lowered taxes. In fact, Ireland has indicated that it will cut all corporate tax rates to 12.5 per cent by 2003. The result of course is a flood of direct foreign investment. Ireland has been the most aggressive tax cutter and the fastest growing economy in Europe. The Irish example, where freeing citizens from punitive taxation has had social, economic and fiscal benefits, follows similar examples of the United States between the wars, under the Reagan presidency and the second term of the Clinton presidency, the United Kingdom under Margaret Thatcher, and Hong Kong and Korea in the 1980s. Put simply, the lesson is that freeing businesses and individuals from the burden of taxation fosters growth, development and employment, and is the only sure long-term basis for fiscal stability and social prosperity.

In answer to the member for Hunter, I raise these examples because they support the approach of the Howard government to seek to cut taxes and to make the tax system fairer. The member for Rankin, instead of spending his time counting the pages of the tax act to score a passing political point, ought to spend his time explaining to the people of Australia what his party's position is on cutting taxes and lowering income tax rates. I am committed to the notion of lower taxes and lower tax rates. If the percentage of personal income that any government can collect in taxes is low and invariable, the only variable a government can turn to is growth. Growth can fund deficits and growth can fund programs. To increase growth there must be incentives to work and to invest, and that means to reduce taxes, as we have begun to do—reducing income tax rates, reducing company tax rates and reducing capital gains tax.

It is high time that the opposition came clean on its approach to taxation. It is presenting itself as an alternative government. Is it committed to raising taxes? Will it seek to emulate Ireland? Will it continue the work of this government in reducing taxes? Or will it seek to punish our achievers with higher marginal tax rates, working against increased growth, increased incentives, increased investment and jobs that result from tax cuts? The opposition is already on record with its roll-back policy. It is so evidently destructive. It invariably means that if you decrease the amount of tax collected under the GST you will find it elsewhere. As we know from Senator Conroy, `elsewhere' will mean increasing income tax. That will be Labor's position. Like the socialist countries in Europe who are envying the Irish example, taxpayers will face a powerful disincentive under a Labor government to work harder or a powerful incentive to work overseas. This government is committed to ensuring that Australia's workers, its job creators, its wealth creators, are working under a fairer, simpler tax regime with lower tax rates.

I commend to the House the consideration of further tax reforms which would see the further lifting of the tax burden from the shoulders of Australia's small business. In respect of the reforms in the New Business Tax System (Simplified Tax System) Bill 2000, the New Business Tax System (Capital Allowances) Bill 2001 and the New Business Tax System (Capital Allowances—Transitional and Consequential) Bill 2001, I commend them to the House.