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Thursday, 14 May 1987
Page: 3258


Mr DOWNER(7.52) —This debate is about a series of taxation Bills that the Government has recently introduced into the House. These Bills should present a very clear objective for our taxation policy. The aim of these Bills should be to regenerate investment in Australia. We need Bills that will revitalise entrepreneurship in our economy--


Mr Price —I take a point of order, Madam Speaker. Will the television lights be turned off now?


Madam SPEAKER —They will be turned off very shortly; please have a bit of patience.


Mr DOWNER —The other thing that the Government's taxation policy should do is to try to rebuild the wealth creating capacity of our economy. The simple fact is that the Labor Government's policies simply will not do that. That Australian Labor Party is a party committed only to wealth redistribution and imposing a heavier and heavier tax burden on all Australians. We can see that in these taxation Bills that have been brought before the House. There has been an increase in corporation tax. During the period of this Government there has been an increase in personal income tax from $65 per week for the average family with two children to $102 per week. These Bills are at least better than some others because what they fundamentally do is to introduce the ending of the concept of double taxation of dividends. This proposal is a vastly complicated way of achieving that and it compares quite unfavourably in its degree of complexity with the proposal of the Fraser Government which provided a $2,000 tax free allowance for those people who earned income from dividends. Indeed, it is true to say that this proposal is barely understood by the accounting profession. But at least it does end the policy of double taxation of dividends. That is very good initiative, and I congratulate the Government at least on pursuing that.

This measure is good for two reasons. In the first place it encourages greater public participation in the share market, which is a very important objective. In the second place, it will reduce incentives for companies to finance investment through debt rather than equity. As far as greater participation in the share market is concerned, it is well remembered by all members nowadays we live in the age of takeovers. There has been an increase in concentration of market power. It may be inevitable, in a economy such as ours, that there will be some greater concentration of market power. We need to achieve greater economies of scale in many of our industries than we have achieved to date.

But one of the problems of this has been the decline in public participation in the market. Harold Macmillan, when he was Prime Minister of Britain, talked about the importance of having what he described as a property owning democracy. The concept of the property owning democracy should not be narrowly defined as housing and land. The definition should be taken much more broadly to include shares in the share market-in other words, to extend the principle of so-called people's capitalism. In Australia the trend has been for institutions to control the major companies in our community. That is a trend which has also taken place in countries such as the United States of America and Britain. For example, in the United States only 13 per cent of shares in American companies are held by individuals. In Australia only four per cent of Australians actually own shares. In 1979, 32 per cent of all shareholdings were owned by individuals-a reduction from some 73 per cent in 1953. So that shows a very sorry decline, a very sad decline, in the degree of community participation in the ownership of shares in Australia. What we are really doing is moving towards some kind of pension fund socialism in Australia because, increasingly, shares are being held by the superannuation funds and not by individuals.

This legislation provides an opportunity, an incentive, for more people to become involved in the ownership of shares. Of course, that gives people a much greater stake in Australia. There are other ways that this can also be achieved and encouraged. I do not expect that the Government is interested in those other initiatives. For example, we could expand the employee participation schemes and give tax incentives for those schemes. Of course, that has been part of the industrial relations policy of the Liberal Party of Australia, but it has not been supported by the Labor Party.

We also need to look at the idea of the banks and other financial institutions providing greater community education in the share market and in participation in that market. If we can do those things, we will increase the participation of ordinary Australians in the Australian share markets. We will increase the ownership of our national corporations by ordinary Australians, and we will increase the overall reputation of capitalism in this country, because capitalism will then be not pension fund capitalism but genuine people's capitalism. That is what we on this side of the House want to achieve. We want to put power into the hands of ordinary people, not into the hands of major interest groups.

I mentioned earlier that the second advantage of this legislation is that it reduces the incentive for companies to finance investment through debt rather than equity. It is appropriate that this should happen at a time when Australia has the highest foreign debt in its history-a foreign debt that has grown under this Government from around $35 billion to $105 billion. The very recent change in attitude by this Government towards debt contrasts dramatically with its election program in 1983. It is worth remembering that back in 1983 the Labor Party stated in its platform that it had a desire to `increase the portion of capital inflow on the basis of loan capital rather than equity capital'. Australians should never forget that that was one of the objectives of the Labor Party. They should never forget that that was one of the objectives which the Labor Party successfully and sadly fulfilled. The cost to Australia has been a foreign debt of $105 billion-a debt for every baby born today of an additional $6,000-and this country losing, for the first time, its AAA credit rating. The Government admits that it has made a mistake. It admits that it has gone in the wrong direction. This legislation will help to cope with that.

It is important to point out that the Government, when introducing such schemes, should not do so in isolation. It should not lose sight of the greater objectives of building Australia. This scheme should be part of tax reductions generally. The Government should be lowering company taxes and personal income tax rates. In reality, it is not doing that. What this Government does in this legislation, to the astonishment of most Australians, is to increase the company tax rate from 46c in the dollar to 49c in the dollar. As the honourable member for Mackellar (Mr Carlton) pointed out, that compares unfavourably with countries such as Britain, the United States of America, Hong Kong and those in our own region.

The Government also introduced its pernicious fringe benefits tax, capital gains tax, foreign tax credits system and so on. The upshot is that if we compare Australia's cost of capital with that of comparable countries, we can see that over the past five years our position has weakened. Five years ago, we had something like the eighth highest cost of capital out of the 15 major industrialised countries. Once the investment allowance was taken away and nothing was put in its place, Australia went to No. 4 in terms of the highest cost of capital. With the new taxes which I have mentioned-that is, the fringe benefits tax and the capital gains tax, the increase in company tax and the foreign tax credits system and so on-we will surely climb higher still on that scale.

If one wants to build up a country and create a greater country, one does not push up the cost of capital to make it uncompetitive. We need investment in Australia. To get that investment we must compete with the United States, Canada, the Asian countries-particularly the newly industrialised countries-Japan and Western Europe. We cannot do so if the cost of capital in Australia is too high. The imputation scheme which the legislation introduces is welcomed. However, it is regrettable that the Government has done nothing to make our country and our economy more competitive.

I refer to one other specific aspect of this package of legislation; that is, clauses 32 to 34 of the Taxation Laws Amendment Bill (No. 2). The clauses relate to the administration of what is called the 10ba tax concessions to the film industry. The clauses provide that the Minister for Arts, Heritage and Environment may deny the issuing of a certification of a film for eligibility for 10ba on the grounds that the film has some non-Australian content. This amendment has been introduced as a result of the fiasco that took place on the film the Return of Captain Invincible. The film which, admittedly, was not a box office success, was sent overseas. It was sent overseas only for the purpose of cutting. The film was made in Australia; it was simply cut in the United States so it could be sold more readily into a rather different market in that country.

The Minister for Arts, Heritage and Environment (Mr Cohen) tried to deny the certification of the film for eligibility for 10ba on the grounds that it had some non-Australian content. I think that anyone could see that that was a pretty absurd decision. However, that was his decision. The result was that the producers of the film challenged the decision in the Federal Court and won that challenge. It would be interesting to know how much the Government's defence in the Federal Court cost the Hawke Labor Government. We do not know. I would like to know how much the taxpayer had to fork out for that defence. I ask the Minister to provide, when he replies to the debate, the figures so that all Australians who had to pay for that defence in the Federal Court, because of the Minister's decision, may know precisely how much was actually expended. The upshot was that the producers, not the Government, won the case in the Federal Court. This legislation has been found necessary to enable the Minister not to issue a certification for eligibility for 10ba if the film has some non-Australian content.

We on this side of the House do not object to such an extension of ministerial discretion. However, we want a cast iron assurance from the Minister for the Arts, Heritage and Environment that, in using that discretion, he will act intelligently and with common sense-something which he was seen to lack in the case of the film the Return of Captain Invincible. I would like an assurance from the Government, when the Minister replies to the debate, that it will use this discretion intelligently and that, if it is necessary to make changes to a film overseas to make it more marketable in an overseas market, it will ensure that it is still eligible for the 10ba tax concession for as long as that tax concession applies. It is an absolute nonsense to say that no film with any foreign content can have any tax advantages, simply because a foreigner has had something to do with the film. If that is the case, our film industry will simply roll over and die. We would like that assurance from the Minister at the conclusion of the debate.

In conclusion, let me return to what I said at the beginning. We want a taxation system in Australia that will encourage incentive, investment and development. We are not being given one. I congratulate the Government on its initiatives on the imputation system, although it is vastly complicated and will no doubt result in a mass of litigation. However, we would like to see a reduction in company and personal income taxes. We would like to see this Government showing some commitment to the building of a greater Australia, not to reducing this nation, as it has done over the past four years, to economic rubble.