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Thursday, 24 March 1994
Page: 2327


Senator KEMP (11.01 p.m.) —There are two matters that I wish to bring to the attention of the Senate during this debate on the appropriation bills. I want to look at an issue which is occurring outside Australia and the impact that this may have on the Australian economy, and also an internal domestic matter in relation to this parliament which will ultimately have a very significant effect on the Australian economy, and I refer to the budget and the proposals that the Australian Democrats have put forward for consideration in the budget process.

  Turning to the first point, I bring to the Senate's attention that negotiations are under way tonight in Geneva which I believe could have an effect on sections of Australian industry. Most senators, I think I am fair in saying, would not be aware that in 1989 Australia was one of the earlier countries to sign the Basel Convention on the control of trans-boundary movements of hazardous wastes and their disposal—Senator Coulter may be as he takes a great interest in these matters.


Senator Coulter —Jumping on the bandwagon, are you?


Senator KEMP —It is not quite the bandwagon that I think Senator Coulter may be predicting. There would be no argument in this chamber that the transfer of hazardous waste should be closely monitored to protect the environment. The Basel Convention was also rightly aimed at preventing the dumping of toxic wastes in sites in developing countries. Unfortunately, the Basel Convention does not adequately distinguish between, on the one hand, hazardous waste destined for disposal, and, on the other hand, materials which are by-products and secondary raw materials which are destined for recovery, recycling, use in other production processes and further refining. These materials, as I hope Senator Coulter would agree, are not wastes, but valuable recyclables and raw materials for a large number of industries both in Australia and internationally.

  Australian trade in these materials is worth around $2 billion a year in exports of metals, plastics, paper, cardboard and metal concentrates, to mention just a number. A portion of this Australian export trade is directed to developing countries within our neighbouring Asian-Pacific region, including Malaysia which has world class recycling facilities. This export trade is currently at risk as a result of a proposal by Denmark to amend the Basel Convention to ban the export to non-OECD countries of hazardous wastes, which unfortunately would also involve banning the export of recoverables. Any unnecessary risk to this trade in recyclables would, I believe, work against the principles of ecologically sustainable development by jeopardising regional initiatives in waste minimisation, cleaner production and resource conservation.

  Following questions which I and Senator Troeth put to Senator Evans in Estimates Committee A last Friday, the foreign minister tabled a document which set out the principles guiding Australia's position in the Basel Convention negotiations. This document does give some hope that the government will pursue a responsible approach from an environmental and economic perspective. The document states that Australia will not accept trade restrictions or prohibitions on safe recoverables such as paper, plastic, textiles and some bulk-traded scrap metals. The document also makes clear that the government would oppose any kind of ban proposed by Denmark that would clearly damage legitimate Australian trade in recyclables which, in the government's own words, does not damage the environment and may even bring environmental benefits.

  Despite the government's attempt to achieve a balanced perspective on this issue, there is a real chance that a vote will be taken tonight to bring into effect a ban on hazardous exports which include recyclables to developing countries, and that Australia will find itself isolated on this issue. One may well ask why European countries and others are taking such a relaxed interest in this issue. I believe there is a justifiable suspicion that they are more concerned about protecting the competitiveness of their own domestic industries compared with the emerging highly competitive recycling industries in other countries. It is vital that we distinguish here between genuine environmental concerns and hidden protectionist motivations.

  I will raise one further concern. I note that the leader of the Australian delegation has been elected to the position of chairman of the negotiating conference. At a time when the protection of Australia's national interests leads it potentially to be isolated in its negotiating stance, it is unclear to me why Australia should seek a position which could have the effect of restraining the vigorous pursuit of our interests. I hope I am proven wrong. This issue is being watched, not only by senators, but also by Australian industry and those who do not welcome the use of UN conventions to confine the legitimate interests of this nation so that other nations can pursue their own self-interest. I will be interested to see the results of the negotiations in Geneva, and to see whether the delegation has been able to ensure that the interests of this nation are protected.

  The other matter I wish to raise with the Senate this evening concerns the budget proposals that have been brought down by the Australian Democrats. Senators will recall that the government has invited Senator Kernot and her colleagues to take part in the budget negotiations. I think this is a mistake. It is the first mistake of the budget. I think it is a mistake from the government's point of view, and I suspect that in the end it will be seen to be a mistake from the point of view of the interests of the Democrats themselves.

  When one sups with the government, one is drawn into endorsing aspects of the budget which may, in the fullness of time, turn out to be to the detriment of the Australian economy. I think three alternative budget proposals have been brought down in the last three years. On each of those occasions, the Australian Democrats have called for a very substantial increase in taxation. Senator Coulter, who is in the chamber, would not dispute that.


Senator Coulter —This is a low tax country.


Senator KEMP —Senator Coulter thinks we are a low tax country. I think Senator Coulter is wrong, but I have to say that Senator Coulter is honest, as distinct from the government. I have to give it to the Australian Democrats that they have constantly argued for higher taxes so that they can be distributed in ways that suit them. The Democrats, in fairness, have not hidden their policies about calling for an increase in taxes.

  The first danger is that the policies of the Australian Democrats give the government, which is desperate for revenue to cover its own spending plans and the huge deficit that its policies have left us with, an open invitation to this Senate and this parliament to bring forward higher taxes. The budget proposals put down by the Australian Democrats signal that the government will have little difficulty in getting these tax increases through this chamber because they will have the support of the Australian Democrats.

  The stated objective of the Democrats' budget—I think I am citing the document fairly—is, in their own words, to repair the damage the recession caused and to make fundamental changes to the tax structure to favour long-term productive investment over speculation and debt. I believe the Democrats' budget will fail in its objectives. If it were implemented, in part or in full, it would slow economic recovery, discourage savings and leave Australia even more dependent on foreign investment. As my colleague the shadow Treasurer, Mr Downer, has said, the budget proposes job destroying tax increases. I believe all Senator Kernot and her colleagues have done is call for a further lift in taxation levels in this country. Any gains that the budget proposals of the Democrats may bring in terms of expenditure or other cuts in taxation will be more than offset by the additional tax burdens which the Democrats are calling on to be imposed on the Australian community.

  We can all support such things as the removal of payroll tax, if it is done in a responsible manner. But what advantage, I ask Senator Coulter, would there be if we discourage business investment and employment by imposing higher company and income taxes? One of the fundamental structural problems in this country is the low level of savings. I think Senator Coulter would agree with that. Arguably, Australia has one of the lowest savings rates in the developed world. It certainly has a far lower savings rate than the so-called Asian tiger economies. This is why Australia is so dependent on overseas savings for its investment.

  Senator Coulter interjecting


Senator KEMP —I know Senator Coulter is sensitive about this and is now probably embarrassed by the fact that he has called for higher taxes. The Australian community understands that, if this government is to bring in higher taxes, it is in a sense bringing them in at the invitation of Senator Coulter and his colleagues; and the government will reap the harvest of such proposals.

  The taxation measures proposed by the Democrats will, in total, discourage savings and investment. I am referring not only to the higher income taxes that are proposed but the fact that superannuation would become a significantly less attractive option. I am sure that Senator Watson, who is with us in the chamber, would agree with that.

  If we are going to—using Senator Kernot's words—repair the damage of the recession, we need to encourage investment. On the contrary, I believe this proposal by the Australian Democrats, in total, will discourage enterprise and entrepreneurship in this economy. One example is company taxation. One of the few promises Mr Keating kept was to lower the rate of company taxation to 33 per cent.

  In the Democrats' proposed budget there are a number of changes to company taxation. First, in this budget proposal the company taxation rate will be increased to 36 per cent. Second, there will be a minimum company tax rate of 20 per cent, which will raise a whopping $1,030 million. Make no mistake, this is a radical proposal which fundamentally changes the way the tax system operates.


Senator Coulter —Ignore the facts.


Senator KEMP —Senator Coulter says, `Ignore the facts'. Is it not correct that the Democrat budget proposal calls for a minimum company tax rate of 20 per cent? Is there not such a proposal? Senator Coulter should keep calm; I am going to analyse this. We have established the facts, and what I was saying was correct. At present, companies are able to deduct such things as accelerated depreciation, 150 per cent for research and development, and of course investment allowances. All these have been put together to provide incentives for investment and are deductible against income.

  What the Democrats are saying, in effect, is that these incentives should be reduced for companies that have been legally able to make use of these incentives and as a result pay less than 20 per cent company tax on the accounting profit. How many companies will share in this billion dollar tax burden? The Democrats said they were going to raise over a billion dollars from this taxation proposal. How many companies will find they have vastly higher tax as a result of this proposal?

  It is interesting that the Democrats want to encourage deductions for employment and reduce the research and development threshold but at the same time companies are slugged with this additional tax. It must also be remembered that any increase in company tax will affect business confidence and discourage investment, particularly at this delicate stage of the recovery.

  Let us look at the issue of savings, which will again be savagely hit by the Democrat budget proposal. Reducing dividend imputation to 50 per cent will discourage investment by shareholders in Australian companies. The Democrats keep coming in here and complaining about foreign investment, but their proposal will discourage investment in Australian companies.


Senator Watson —That's on the government agenda.


Senator KEMP —Senator Watson says that he believes this is already on the government agenda. The Democrats have signalled that dividend imputation will be very seriously modified in the next budget.


Senator Murphy —What's on your agenda? You've had Fightback and Jobsback. What is it now—comeback?


Senator KEMP —Senator Murphy happens to be in the government, which happens to have said it is not going to increase taxes. It is of great interest to find what is on the government agenda. I cannot remember Senator Murphy going around before the election saying that the government was going to increase taxes by $3 billion in its first budget.

  As I have said before in this chamber, I am willing to apologise to any Labor senator who stands up and says, `Before the last election I went around and promised that there would be an additional $3 billion in taxes in the first Keating budget'. None of them have stood up—not one of them has jumped to his feet and taken up my offer. Senator Chris Evans is smiling. He knows that he has never said that. In fact, Senator Evans said that taxes were going to be cut by the government. I bet he said they were l-a-w, law. I make that genuine offer to stand up and apologise in this Senate to any Labor senators who can tell me that before the election they promised that the government would massively increase taxation.

  We are now discussing the Democrats' alternative proposals. The problem is that the proposed changes to dividend imputation will have the effect of discriminating against companies or income generated through corporate structures, effectively increasing tax burdens on dividends from a maximum of 48.4 per cent to 64.9 per cent. At the same time, money from partnerships—maybe even piggeries—or any other trading arrangements remains at the maximum of 48.4 per cent. Why penalise the most widely recognised and arguably the most efficient trading entity, particularly if the government is concerned about encouraging investment? Mr Acting Deputy President, you will be aware that the savings of many Australians are now tied up in superannuation funds, in part by choice but in part because of the compulsory nature of superannuation which this government has insisted upon.


Senator Murphy —What a great thing it is, too.


Senator KEMP —The fact of the matter is that the government forced workers to put their money into superannuation funds rather than alternative forms of investment. Now that their money is in there, the superannuation funds are investing in Australian companies and picking up the imputed value of taxation on these dividends as an offset. These are very important to superannuation funds. Through this proposal, which Senator Murphy apparently agrees with and likes, the government is saying that it will be cutting savings of Australian workers. Senator Murphy will be standing up there and cheering this on.

  Unfortunately, my time has concluded. There are quite obviously a lot of issues to be debated. I am waiting for a point of order to be taken so that one of these Labor senators can tell me that the government promised tax increases before the election. I believe there is a danger with the proposals that the Australian Democrats have put forward. They are an open invitation to this government to massively increase taxes.