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Tuesday, 22 June 2010
Page: 6088

Mr ABBOTT (Leader of the Opposition) (2:07 PM) —My question is to the Prime Minister. I refer the Prime Minister to the Treasury secretary’s preference to extend the superprofits tax on mining to other sectors of the economy. Will the Prime Minister now nominate which industries are on the government’s hit list? Is the construction sector next or will it be the retail, agriculture, manufacturing or small business sectors? Why has the Prime Minister failed to reveal the full extent of his future tax grab to fuel his spending addiction?

Mr RUDD (Prime Minister) —The first thing that I would say in terms of the government’s tax reform plan is that the proceeds of that reform are to go to reducing company tax for all Australian companies, to reducing the tax burden on 2.4 million Australian small businesses and to providing on top of that extra superannuation for some 7½ million Australian workers. That is the basis of our reform.

Secondly, the Leader of the Opposition made reference to a speech given yesterday by the Secretary of the Treasury. My understanding is that the speech was delivered by the Secretary of the Treasury to the Australian School of Taxation, based at the University of New South Wales. My further understanding is that he was talking to students of taxation and urging them to continue working on tax theory in research for the purposes of policymakers. I quote his speech:

The Allowance for Corporate Equity model appears to offer the most promise.

On paper, it offers a more neutral treatment at the corporate level between debt and equity financing decisions, which has the added benefit of reducing the need for complex rules.

Addressing the students, he then said:

I urge you to continue this work; not with a view to an immediate tax reform package, but to ensure that policy makers have access to the analysis ...

I draw the attention of the Leader of the Opposition to the interesting fact that the Business Council of Australia has provided a similar submission in support of such a theoretical examination. I quote the BCA’s submission to the Henry tax review:

An alternative to lowering the corporate rate, an allowance for corporate equity (ACE) regime, also has the potential to be attractive for the economy.

The adoption of an ACE - whereby companies would be permitted to deduct an imputed normal return on their equity - removes a bias in favour of debt financing and has the potential to stimulate investment both for locally based companies and inbound investors.

An ACE has been adopted in other countries, but further detailed analysis of its application in Australia is warranted.

The government will not be adopting that model in Australia.

The bottom line is that the government’s position in relation to the resources super profit tax is that it applies to non-renewable resources in Australia. That is the entire basis of the regime. The Leader of the Opposition would know that from my earlier answers in this place. It is a taxation arrangement designed to deal with the non-renewable resources of this country. Once they are extracted and removed, they are not returned to Australia; they have gone forever. That is why they have been separately taxed for a long time through the royalties system. We propose tax reform based on a profits based tax, not a production based tax. That is the core of our reform and is therefore unique to the resources sector.