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Thursday, 14 May 1987
Page: 3185


Mr MARTIN(12.12) —The Taxation Laws Amendment (Company Distributions) Bill, the Income Tax (Franking Deficit) Bill, the Income Tax Rates Amendment Bill, the Taxation Laws Amendment Bill (No. 2) and the Bank Account Debits Tax Amendment Bill represent the continuation of this Government's determination to reform the taxation system in Australia. I believe that they are most timely. They have arisen from the Government's commitment, which was given after the National Taxation Summit some 18 months or so ago, to look at all aspects of the taxation system and to bring about a fairer and more just taxation system. The Bills represent a very real attempt by this Government to approach the difficulties that have been faced by the business community with respect to the imputation of dividends. I am afraid that I cannot share some of the comments which have been made by the honourable member for Parkes (Mr Cobb) and others in this debate so far that whilst there are commendable things in this legislation there are many anomalies. I do not accept that. This Government has approached this matter in a very realistic and very fine fashion in an endeavour to come to terms with what has been a very poor situation with respect to company dividends, profits and so on over a number of years.

Before making some specific comments on this legislation we need to look again at why there is the need for taxation reform. We often tend to lose sight of why that is necessary. Quite clearly, there is a need to ensure that the government-any government-has the necessary financial capability to pay for all those necessary services in the community. Those services, of course, refer to health commitments, defence commitments, transportation commitments, social service commitments, and so on. Money is just not able to be produced by the printing presses here in Canberra at whim. Rather, there has to be a recognition of the responsibility of all taxpayers to contribute their fair share to the coffers of any government so that those services can be provided.

A real attempt is being made by this Government to redistribute wealth. That is well in keeping with the platform of this Government and the policies that this Government has endeavoured to pursue in the more than four years it has been in power. We want to stop the rorts that have grown in the taxation system. We went to collect a fair share of tax from all people. We do not want to allow people to get away with paying a minimal amount of tax or, indeed, not paying any tax at all. Everyone who lives in Australia benefits from the services that the Federal Government provides. Therefore, any working person and any shareholder should be expected to contribute to the maintenance of those services. Quite frankly, I am sick to death-as, I know, are many of my constituents who talk to me about this issue-of hearing the whinges that come from those opposite who do not have a policy to put in place of ours. The honourable member for Parkes in his contribution said that the legislation is fairly good as far as it goes but that there are some anomalies. But nothing was offered to be put in its place.

At least the National Party of Australia, now that it is no longer in coalition, is prepared to recognise that the Government makes a significant contribution in these debates on economic and taxation issues, which is more than I can say for the Liberal Party of Australia. The people of Australia are asking: `When are we going to get the taxation policy of the Liberals? Will it, for example, pick up on company distribution and the amendments to the tax laws affecting shares? Will it touch those very issues which affect the business community?' After all, it used to be the business community of this country that the Liberal Party purported to support. We all realise that that support has gone out the window because of the lack-lustre performance of Liberal Party members opposite, particularly the poor performance of its leadership. Now, as usual, the business community turns to the Labor Party for guidance and support.

In introducing this imputation legislation, the Treasurer (Mr Keating) said that we were developing a system which is a world first. I certainly agree with that observation. The honourable member for Parkes said that that, in fact, was not the case and that there were many anomalies associated with it.

What will this legislation do? As I have indicated, it will put Australians at the forefront of business taxation reform. It will give us one of the most advanced and efficient tax regimes in the world. It will restore the position of the stock market as a mobiliser of investment funds. It will reduce the previous bias in favour of corporate debt finance over equity. One only has to see what has happened in recent months in the share markets here in Australia to realise the effect this Government's policies have had in pushing share markets to record levels. We have seen the dollar go up once again. It is all because of the economic thrust of the policies that have been embraced by this Government. This imputation legislation will ensure that that continues.

It will also mean that entrepreneurs who are trying to get new businesses off the ground will find it easier to raise equity finance. It will improve the climate for productive investment and enhance economic growth in Australia. It will provide an increased incentive for all Australians to participate in the ownership of Australian companies by significantly reducing taxes on dividend incomes. That is one of the most important things. This Government has embarked upon campaigns such as the Buy Australian campaign and so on. We should also embark upon an `invest in Australia' campaign. We have said time and again that the economics are right for investment in Australian industry to get off the ground, for it to pick up, and for it to take advantage of the devaluation. The signs are there that that is happening, but I believe that we should be doing more to encourage the business community to do just that. It is through legislation such as this that it will happen.

The Minister for Sport, Recreation and Tourism (Mr John Brown) raised with me over the last couple of days a very interesting point about business taxation. It is well known that he has been a very successful businessman in his own right. He indicated quite clearly that the removal of Division 7 under this imputation legislation will enable small companies, in particular, to retain capital within the company, and therefore avoid being takeover targets. In the past, Australian businesses, particularly small businesses, have not had the equity to be able to retain the capital in the businesses themselves. Naturally enough, the big boys come along and swoop, and another company disappears. What we are going to see is that small businesses-and we have been told on many occasions that they are the backbone of Australia-will have that opportunity to survive because they will be able to retain capital in the companies, and that is a very significant part of this whole legislation.

In conjunction with this legislation we have introduced substantial personal income tax cuts, and they are going to be delivered with the second successive round coming on 1 July of this year. Imputation in relation to those cuts will result in a reduction of something like 40 per cent in the overall tax burden for shareholders and small businesses. I would have thought that small businesses would have leapt at that. The people in my electorate who are in small businesses and medium sized companies have indicated they believe this is on the right track and in fact is, as the Treasurer rightly pointed out, a world first in bringing in a very viable imputation system. To put that another way, what we are saying is that imputation will substantially increase the after-tax returns to shareholders. That is a very important point, because we are talking about shareholders.

The honourable member for Parkes (Mr Cobb) said that a lot of low income earners are going to be disadvantaged by this legislation. I do not know too many low income earners who play the stock market or have shareholdings, so I would dismiss that as a comedy, but what I believe he was really trying to say is that shareholders should not be disadvantaged by the legislation. No-one forces people on any level of income to go and purchase shares. No one says `You have got to go and do it', so I think that point that the honourable member raised was absolute nonsense.

The Bill is going to give effect, as I have indicated, to the most significant business taxation reform in this country in the post-war years because it will eliminate the double taxation of company dividends, and that is a very important part of this whole legislation package. The fact that by amending these laws we are going to eliminate the double taxation so that, as I have said, small companies can survive, and there is going to be a greater return-in fact a doubling-to the shareholders after imputation comes in place is very significant. The honourable member for Parkes actually commended the Government for doing that. He used the figures that I think were illustrative of this point, suggesting that prior to this point under the existing system and before personal tax cuts-which were already put in place-a dividend paid to a shareholder in the top tax bracket was effectively taxed at something like 78.4c in the dollar. The return to the shareholder was a meagre 21.6c in the dollar. Under what we are doing here, under the imputation-and the honourable member for Parkes pointed this out-and the maximum personal tax rate and company tax rate, which is to operate from 1 July on being aligned, the maximum tax that will be paid on any dividends will be only 49c in the dollar, so the return will be 51c in the dollar to those shareholders, which is a more than doubling of their return. I should have thought that that is good economic and good business sense in anyone's language, and therefore I cannot see where criticism can be levelled at the Government for this legislation.

I believe, and I come back to the point where I started in my contribution today, that what we are talking about here is a further example of the commitment of this Government to bringing about a very radical and a very rational and real change in the tax system that has operated in this country for many years. This legislation is going to be a boon to small business. We are going to see the removal of the double taxation as far as the business community and shareholders are concerned, and we are going to see a very real contribution to the continued well-being of this country. We will see the ability of small businesses to survive without being worried about the takeover merchants coming along to try to knock them off. We are going to see their having the ability to retain capital within the business, and obviously we are going to see a greater return to shareholders. I, like all honourable members on this side of the House, congratulate the Treasurer for taking our tax reform proposals that one step further and making this a very attractive package indeed.