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Thursday, 14 May 1987
Page: 3189


Mr STAPLES(12.37) —The timing of the debate on the Taxation Laws Amendment (Company Distributions) Bill and cognate Bills is indeed ironic in the light of the statement delivered by the Treasurer (Mr Keating) last night. These Bills in fact provide a most powerful counterpoint to that statement. The introduction of these Bills and the debate on them provides a new dimension to that statement. Last night details were given of the cutback in expenditure, directed mainly at the poor in this country and the ordinary Australian. This cut in expenditure was made in the name of the free market. These Bills being debated today will cost taxpayers $300m. It will not cost shareholders $300m; that cost will be incurred by the ordinary pay as you earn taxpayer. It will not be the shareholder but the wage earner, the pensioner and the social security beneficiary who will pay that cost. They are the people who were affected by last night's proposals. This $300m of PAYE taxpayers' money is a direct transfer from the PAYE base to the corporate sector. It goes right to the private sector. These changes will provide massive advantages to shareholders, reducing the effective rate of taxation of taxpayers on the top marginal rate from 78c in the dollar to 49c.

The honourable member for Mackellar (Mr Carlton) referred to an article published in the Australian Financial Review of 29 April headed `Land of Ned Kelly taxes'. The article pointed out that Australia is the only Organisation for Economic Co-operation and Development country, apart from West Germany, to introduce such a full imputation system. The honourable member complained about the fact that the corporate tax rate in Australia was so high. The article in the Financial Review and the honourable member for Mackellar have maintained that, in relation to corporate tax rates in Australia, companies in Australia capable of off-shoring, such as Elders IXL Limited, actually do pay 49c in the dollar company tax. However, that is not the case, as I tried to point out in a letter that I wrote to the Financial Review. I was completely flabbergasted by that article. It is not the case-one might as well say that one's Falcon is a Rolls Royce, just because it has four wheels. They do not pay anywhere near 49c in the dollar. Any really honest and enlightened comparison of international corporate tax rates should involve a comparison of the average rates of tax actually paid and not the notional amount as was cited. Any reader of the Financial Review and any member in this place should know that in 1986 the top 150 companies in Australia paid an average tax rate of not 49c in the dollar but 28c in the dollar. In 1980 those same companies paid 37.12c in the dollar. Elders IXL paid 10.35c in the dollar in 1985-86 and that was not the lowest figure by any long stretch of the imagination. Honourable members should also know that tax as a percentage of gross operating surplus fell for all Australian companies from 25.5 per cent in 1981-82 to 18 per cent in 1985-86. The difference is mainly because approximately 65 per cent of all Australian registered public companies are not taxed at all because they do not show a taxable income. In 1983-84, 58.5 per cent of companies were taxed on incomes of less than $10,000.

Let us cut the rubbish! We all know what the game is. It is simply to shift the tax base from business to the pay as you earn taxpayer. The proportion of tax receipts from the corporate sector has fallen from 17 per cent in the 1970s to an estimated 9.9 per cent this financial year. The editorial in the Australian Financial Review of 28 April, the day before that article appeared, talked about the welfare slime. The welfare slime, for goodness sake! What is this country coming to when the people on the lowest incomes in the community are referred to as welfare slime. This editorial referred to them as the greedy. But the real greedy-those with their snouts in the public trough-are quite clearly the big Australians. If Opposition members and a respected journal such as the Australian Financial Review want to take part in a debate about corporate tax, they should at least make sure that it is an informed and accurate debate.

There has been talk of profits. Let us look at some of the profits in 1984-85 and 1985-86 for some of the big Australian companies. The profits for the Bell Group Ltd increased by 129.3 per cent, the Adelaide Steamship Co. Ltd by 106 per cent, and FAI by 155.8 per cent. They are the levels of profit with which we are dealing in this country today. These Bills really help the corporate sector to provided more jobs-which it will have to do-and more wealth for all Australians. This massive benefit to business and shareholders has been accompanied by a range of other reforms from this Government, including the abolition of branch profits tax, the removal of the former Government's dividend withholding tax, and the removal of the excess profits retention tax on private companies.

Frankly, it is quite dishonest of members of the Opposition and companies to complain about this Government's business tax record without mentioning the tremendous benefits that have been achieved from this Government. I understand, as the Treasurer does, why the business managers have not been as praise worthy as might have been expected about the changes that have been made. I refer to people such as Mr John Elliott. The reason is that these changes affect the owners of the companies, the shareholders whose immediate interests do not in all cases accord with those of the managers who run the companies on their behalf. In some cases now we will see not just paper profits-not just the building of empires-but production and jobs. This will help to shift the emphasis of successful management, real management, innovative management and productive management, away from the generation of capital gains and the acquisition of tax losses and back towards the generation of profit making trading activities. Mr Deputy Speaker, I seek leave to incorporate in Hansard some tables which show the points that I have just been making.

Leave granted.

The tables read as follows-

COMPANY TAXATION AND PROFITABILITY, 1979-80 to 1985-86

Income

Tax

Gross

operating

surplus

Tax as %

of G.O.S.

$m

$m

%

1979-80...

2,776

14,604

19.0

1980-81...

4,003

16,515

24.2

1981-82...

4,322

16,926

25.5

1982-83...

4,079

17,663

23.1

1983-84...

3,641

23,724

15.3

1984-85...

4,477

26,122

17.1

1985-86...

5,400

30,033

18.0

Source: The Round-up, June 1986, The Treasury AGPS, Canberra 1986.

Company group

Company leader

% tax

paid

1985-86

%

Industrial Equity...

Ron Brierley

4.66

Southern Farmers...

Ron Brierley

5.06

Elders IXL...

John Elliott

10.35

David Jones...

John Spalvins

10.75

Queensland Press...

7.13

Bond Corp....

Alan Bond

13.95

Hooker Corp....

George Herscu

16.8

Westfield Holdings...

Frank Lowy

13.12

Sunshine Group...

Lee Ming Tee

5.95

Source: Sydney Morning Herald 29th October, 1986 from Statex Survey

DEDUCTIONS ON ACCOUNT OF INTEREST PAID ON BORROWINGS OUT OF GROSS OPERATING PROFIT BY CORPORATE TRADING (NON-FINANCIAL) ENTERPRISES

Year

Proportioned

to net

Taxable

Income

per cent

1966-67...

22.41

1972-73...

47.3

1975-76...

67.1

1982-83...

162.4

1983-84...

110.2

1984-85...

124.6

Source: National Income and Expenditure-Australian National Accounts (A.B.S.5204.0: Table 7)

TABLE SHOWING PROPORTION RELATIVE TO INCOME TAXED OF INCOME WHICH WAS NOT TAXED ON ACCOUNT OF LOSSES ALLOWED UNDER S. 80.

Year

per cent

1966-67...

12.5

1972-73...

9.0

1975-76...

12.7

1982-83...

33.1

1983-84...

24.5

Source: Australian National Accounts-National Income and Expenditure.


Mr STAPLES —I thank the House. We have had talk here about shareholders. Who are the shareholders? Let us face it; there are not too many people out there who are shareholders. The ordinary Australian is not usually a shareholder. The most recent survey I could find was commissioned by a stock exchange and was based on a sample survey of the adult population. It was done in 1986 by the McNair Anderson organisation. This study estimated there were a little over one million share owners in Australia-about 9 per cent of the adult population. About half of that 9 per cent had bought or sold shares during the previous year. Incidentally, there are about three million union members in Australia.

In 1968, at the peak of the mining share boom, a Morgan gallup poll included a question on share ownership in one of its national surveys. It was estimated that 8 per cent of electors had bought shares that year and about 15 per cent of electors had bought or sold shares at some time in their lives. That situation has not changed much; the Australian economy is not democratising itself by spreading share ownership widely. Yet it is shareholders who will be gaining the maximum benefit from this legislation. So we are going to be looking for some real benefits back from them-putting it back into the Australian economy, putting it back into wealth for all Australians, putting it back into jobs and changing our balance of payments situation.

Some of the biggest shareholders are superannuation funds. In the last couple of years huge increases have been made in the share markets. The average individual portfolio in the superannuation share market area increased by about $5,000 in the last six months alone. Despite significant efforts by the Government to address the most outrageous and blatant abuses of the taxation system that were there before-the fringe benefits, deductibility of entertainment expenses, and the lack of withholding tax and an assets test have changed and brought fairness into the taxation system-we are still faced with the public emergence of very dark and powerful forces of greed and anti-social capitalism. They are the most powerful forces this country has ever seen. They had been there, but now they are out in the open. Those opposite, who are bereft of policies themselves, are being run from outside this Parliament by the forces of the New Right. Opposition members stumble around in their own internecine warfare while the barons of the New Right are out there telling them what to do.

Today Australia is making a transition from a rural mining and low level service and industry based economy to a new economy and society based on a regenerated and efficient government sector. This transition is based on industrial growth, a developing service sector and the education system developing to suit the needs of our economy and our society. I am proud of the efforts of this Government in building up employment, industrial development, defence self-reliance, social security and community services, economic growth and general management of this economy.

But that is not good enough. Where is the private sector? We are giving it a $300m free kick today. Last night it got another free kick. What is it going to do? The onus is right on it. The effort has to be now in its court. It has to produce the jobs now and the wealth. The poor people of this country-the ordinary Australian, the ordinary pay as you earn taxpayer-have paid enough. What is the private sector going to do? Where are the great entrepreneurs? What are they doing with their wealth-the wealth of Australia? Now, 1.5 million of them own $600,000,000 or 60 per cent of the nation's wealth. Ten per cent of the people in this country own 60 per cent of the nation's wealth. What are they doing? Buying paintings for $60m? That is a year's wage for 3,000 ordinary Australians. Some of the wealthiest are going to the races and betting $20m in a weekend.

The wages of 1,000 workers for one year is played with in one weekend at the races. The Elders jet, the Fosters jet, is worth $10m. That sum is the annual wage of 5,000 workers. The taxpayer pays for that jet; the shareholder pays for that jet. A cost of a return flight across this continent is as much as the annual wage of the ordinary Australian; just to fly one man across this continent and back costs the annual wage of one Australian family, of $20,000. What are our entrepreneurs doing? It is a sad, sad day. I would like to incorporate in Hansard another table which shows how the Japanese are doing things. It shows their interest in developing new products and new technologies, as distinct from the corporate barons who are just interested in takeover profits.

Leave granted.

The document read as follows-

PRIORITIES OF MANAGEMENT STRATEGY FOR 1990 FOR JAPANESE COMPANIES

(per cent answering yes to questions by Japan Committee for Economic Development)

1980

1985

%

%

Cost Cutting ...

11.9

5.9

Emphasis on profitable areas ...

6.5

6.1

Increase Market Share ...

8.3

11.1

New Markets ...

4.2

13.1

New Product Development ...

6.6

24.2

Source: A Long Term Outlook for the Japanese Economy (1984-1995) Nomura Research Institute, Japan, 1985.


Mr STAPLES —I thank the House. After last night's statement and after this legislation today there can be no excuses from the private sector. There can be no excuses from those opposite who will come in here at Question Time and bludgeon the poor and those on social security payments. There can be no objections and no more excuses from the New Right after the statement delivered in this House last night and the legislation we are dealing with today. There can be no more talk of dole bludgers, no more talk of excessive government spending, no more talk of bloated welfare budgets or unjustifiable welfare or job programs. Last night's statement and this legislation give the private sector, the Opposition and the New Right no more scapegoats for their pathetic response to the favourable economic situations and taxation conditions created under this Labor Government. They have simply to put up or shut up.

There is no scope for the ordinary Australian, the middle Australian, the wage earner, the pensioner and the poor to bear more of the brunt of the burden of development of this country. The New Right has got everything it could want out of this Government short of bankrupting government. Ordinary Australians have paid enough; more than their fair share of the burden. They have suffered the real cost of our balance of payments problem. They suffered under Fraser and Howard, who got rid of 300,000 people in the work force in their last year of office. But enough is enough. This Bill is costing the taxpayer, the ordinary worker, the ordinary person in Australia $300m, on top of the measures announced last night. Now is the acid test for the private sector, the big shareholder, the corporate barons. As the honourable member for Corangamite (Mr McArthur) said, they produce the wealth, the jobs and the profit. After last night and today let us see them produce not only wealth and profits for themselves, but wealth and jobs for all Australians.