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Monday, 26 March 2018
Page: 2090


Senator GICHUHI (South Australia) (13:45): Someone once said that the beauty of the word 'and' triumphs over the tyranny of the word 'or'. We always have a choice. Do we forever fight over a bigger slice of the pie or do we work together to grow a bigger pie for companies and Australians as a whole? This is how I see the current debate in basic terms. It is a privilege to be part of a government that is determined to help all Australians and Australian businesses realise their full potential, to be free to partake in the dignity that economic participation and growth provide. The coalition government wants to empower the Australian people to showcase their skills and talents, to improve themselves by playing their part in building a better and more prosperous country. Whether you are an employer or an employee, a vibrant economy allows you to realise your full potential by creating the options you need to express your individuality and creativity.

As Australians, we have proven ourselves to be blessed by such world-class innovation. Average people and average families are willing to take the risks associated with small and medium businesses—and large businesses as well—putting their entrepreneurial spirit on display as they serve their fellow man and support their families and businesses. As their businesses grow, they provide the work that we all crave to sustain our sense of self-worth and our sense of belonging. There would be no employment without an employer, without a business. One of this government's policies is our competitive tax reforms that will ensure this entrepreneurial spirit is sustained and promoted.

We must rise above any talk that jeopardises the interdependence between employee and employer, or puts Australians against one another. The use of rhetorical devices that simplistically pit rich against poor, or stoke the fires of envy, only hurts our shared identity and our Australian spirit. Historically, our company tax rate has been broadly aligned with OECD averages. Whilst other countries have considerably lowered their rates, we have been stagnating at 30 per cent. We are now five percentage points above the OECD average of 25 per cent. Our international competitiveness is suffering under the trend of new corporate tax rates all over the world. For example, America has locked in a rate of 21 per cent, to be implemented immediately; the French parliament has recently moved to gradually reduce the rate from 33 per cent to 28 per cent; and Britain has reduced its tax rate to 19 per cent.

Our government, as a start, needs to adjust our own rate to reflect these international trends. We have gone from having the ninth lowest corporate tax rate among the advanced countries in 2011 to our current position of fifth highest. Prior to the last election, our tax rate was still lower than the United States of America's. Now that they have issued a significant cut, our current rate of 30 per cent will be a stark contrast in the global marketplace.

Our plan to lower the rate to 25 per cent by 2026-27, for all Australian companies, is part of a larger package of reforms to boost business investment and the level of GDP by over one per cent in the long term. This builds on the tax cut provided to small and medium business in the 2015-16 budget and the first stage of the Treasury Laws Amendment (Enterprise Tax Plan) Bill 2016. It provided a business tax cut for companies with an overall turnover of less than $50 million. This includes small- and medium-sized businesses. This lower corporate tax rate will improve the competitiveness of our businesses and ensure a greater level of business investment. It will boost the productivity of all Australians and Australian businesses and drive an increase in real wages and real standards of living.

Modelling done by Treasury two years ago revealed that, if the 25 per cent tax rate had already been in place today, full-time workers on average weekly earnings would have had an extra $750 per year. Since the initial tax cut was passed in early 2017 some 400,000 new jobs have been added to our economy. In addition, wages have grown by 1.2 per cent over the September quarter and three per cent through the year. It is important to remember the remarks of former Treasury Secretary Ken Henry, who knew the true cost of keeping company tax rates high and uncompetitive: 'The unintended consequence of this kind of tempting tax revenue is the pain and suffering it causes to average Australians. In addition to the reduction of overseas investment in Australian companies, high tax rates lower the demand for Australian workers.' This position is shared by Canadian tax expert Professor Jack Mintz, who pointed out that 'companies do not bear the taxes they pay but people do'.

Only when living costs are incorporated into our understanding of wellbeing will we understand the importance of competitive tax rates. Australians will benefit from a higher standard of living and be part of a marketplace with cheaper consumer goods. Now that the Australian mining boom is over, it is crucial that we move to a more diversified economy that can innovate and flourish without burdensome tax rates. We will see considerable job creation in new industries—industries that will have the freedom to thrive in this creative environment. Those who are now employees will be encouraged to put their business ideas to the test, becoming employers who will build our nation and hire the next generation of Australians. Small businesses will become medium businesses, and medium businesses will become large businesses. Existing employees will also be able to look forward to a more competitive bargaining position. Businesses will be required to pay more to keep their workers when there are more jobs available. It will create a more conciliatory and cooperative atmosphere between employee and employer, and all Australians will share in this increased prosperity.

This already has firm international precedents. Now that America has issued their company tax rate, more than 350 companies have given wage increases and bonuses to more than four million Americans. The bottom line of our plan is to allow businesses to hire more Australians and pay them a better wage. This applies to nine out of 10 working Australians who work for the private sector. There are 4,500 Australian businesses that have a turnover of greater than $50 million per year and employ about four million people. The coalition tax plan will gradually introduce tax cut cuts over the next seven years, providing the certainty that businesses need as they make short-, medium- and long-term investment decisions. This is why we have to review policies that keep us economically stifled.

Growth for individuals and businesses is one of the core values of the Liberal Party. We want our economy to be a fertile ground for individuals and businesses to thrive in the global marketplace. Until recently, this was the position of the current Leader of the Opposition, Bill Shorten. Speaking in the other place in 2011, he said:

Cutting the company income tax rate increases domestic productivity and domestic investment. More capital means higher productivity and economic growth and leads to more jobs and higher wages.

I agree. In addition, the Labor Party's 2010 budget stated:

Cutting the company tax rate will make Australia a more competitive destination for investment. Greater investment in capital will support higher productivity and real wage increases for Australian workers.

I agree. The current shadow Treasurer, when asked in 2015 whether or not he agreed with a statement that company tax falls hardest on workers, said:

It's a statement of fact, which I agree with—

and I agree. These are lucid comments made in more sober-minded times. We cannot allow the politics of the day to intrude upon sound economic policies and practices. Let us all support policies that accord with what is best for all Australians. We cannot afford to submit to a spirit of fear, division or economic propaganda.

Contrary to popular opinion, the vast majority of businesses in Australia pay their fair share of tax and do not engage in sophisticated tax avoidance strategies. The Australian tax office has received over $663 billion in company tax over the last decade. Roughly, 20 per cent of all Commonwealth taxation revenue in 2017-18—

The PRESIDENT: Order, Senator Gichuhi, it being 2 pm we'll move to questions without notice. You'll be in continuation upon the resumption of the debate.