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Thursday, 17 February 2000
Page: 13760


Mr SLIPPER (Parliamentary Secretary to the Minister for Finance and Administration) (12:50 PM) —Initially, I would like to thank honourable members for their contribution to the debate on the New Business Tax System (Miscellaneous) Bill 1999 and the New Business Tax System (Venture Capital Deficit Tax) Bill 1999 which are currently before the chamber. We, as a government, are particularly proud that we are in the process of putting in place a new, modern and competitive tax system. Our predecessors ran away from this challenge and we are pleased that we stood up, regained the support of the Australian people and are in the process of implementing that mandate. We have put in place a new tax system which will benefit individuals, families and business. This new tax system replaces an unfair, outdated, uncompetitive, inefficient and, in the long term, unsustainable tax system, which we inherited upon election to office in 1996. The government is also pleased that it has been able to get its business tax reforms through the parliament swiftly so that we are able to give greater certainty to business and taxpayers generally. More legislation will follow this year.

Honourable members will be aware that the business tax reforms that we are legislating are based on the recommendations of the review of business taxation conducted by three eminent businessmen. The review consulted the community widely, and this has resulted in these reforms being strongly welcomed by both the business and farming communities. Since the government outlined the proposals for business tax reform, we have continued to consult widely in the Australian community and with Australian business on the details of implementation. This continues the widely applauded consultative approach which began with the Ralph review.

Already the government has legislated reductions in capital gains tax and company taxes. It is illuminating to note that from 1 July this year individual taxpayers will have to pay capital gains tax on only half of any capital gain that they make. Together with the government's income tax cuts, this means that 80 per cent of taxpayers will have their maximum rate of capital gains tax at 15 per cent. Australia's company tax rate will also become one of the lowest in the region. It will be slashed from 36 per cent to 34 per cent for the 2000-01 income tax year, and right down to 30 per cent thereafter. Scrip for scrip rollover relief has also been legislated by the government. This will be available where interests in one entity, company or fixed trust are exchanged for interests in another equity as would typically occur as a result of a takeover.

There are also a number of measures that will assist small businesses in particular, such as the simplified tax system and capital gains tax reductions. Small business is the engine room of the Australian economy and produces an amazing proportion of jobs in Australia. For many small business taxpayers, tax will be payable on a maximum of 25 per cent of a capital gain on the sale of active small business assets from 21 September 1999. A capital gains tax exemption will apply in certain circumstances where small business taxpayers have held an active asset continuously for 15 years. This is a pretty impressive performance by any criteria.

Another important part of the business tax reforms is the boost that will be delivered to venture capital. Foreign pension funds from specified jurisdictions that are exempt from tax at home will be freed from tax in respect of income, including capital gains earned on the disposal of eligible venture capital investments in Australia. Honourable members will be aware that this matter has already been legislated through the parliament.

Mr Deputy Speaker Hollis, you will be interested to know that Australian widely held superannuation funds and like equities will be able to receive, effectively tax free, venture capital gains derived through a pooled development fund. This is one of the measures that we are debating today. It is interesting that we are the government that has been prepared to have the courage to stand up and say that, as we approach the Centenary of Federation, we cannot continue with an outdated and ramshackle tax system. The Labor Party were in office for 13 years, terminating their role on the Treasury bench in 1996. The Labor Party, however, have been quick to stand up in the parliament, as they always do, and roll out lots of negativity seeking to criticise the very important and beneficial changes which this government is making. Let me draw to the attention of honourable members some of these fairly extreme examples where Labor members are simply unprepared to give the government the credit that we deserve.

The honourable member for Blaxland referred to the refunding of imputation credits. He made the most incredible accusation. Mr Deputy Speaker, even you would have been shocked by it. He made the assertion that the refunding of imputation credits will benefit only a small proportion of the community taxpayers whom he said are generally well off anyway. The Minister for Financial Services and Regulation in the parliament over the last couple of days has pointed out that we have turned Australia into the greatest share owning democracy in the world. We have brought about a situation where more Australians own shares than do the citizens of any other country, so we are talking about a large number of Australians. We are not talking about the filthy rich. We are not talking about the well off. We are talking about ordinary, decent mums and dads who have been prepared to work very hard to make a future for their children and, in doing so, are building a wonderful future for Australia.

Let me just indicate where the honourable member for Blaxland is wrong in this particular area. It is clear that the refunding of imputation credits will benefit low income earners and self-refunded retirees rather than the high income earners who pay tax at higher rates and therefore would not have excess imputation credits. It is a simple case of mathematics. The honourable member for Blaxlandwho used to work for the former Prime Minister who was, shall we say, responsible for building up a huge budget deficitought to perhaps undertake some mathematics lessons. It is clear that this measure, which has been praised widely by the community and indeed spoken very strongly in favour of by coalition members, will benefit only those whose marginal tax rate is less than the company tax rate. Superannuation funds are also entitled to a refund of imputation credits, and this will benefit the funds and, through them, ordinary workers who have been deserted by the Labor Party and who have been moving to the coalition over the last couple of elections in enormous droves.

The honourable member for Rankin claimed that the budget was going into deficit due to personal income tax cuts, especially to the wealthy, to pay for the GST. We have the Timor levy; it is before the parliament at the moment. Nobody could have assumed or understood that Australia was going to be called upon, as we have been, to protect the interests of the people of East Timor in the way that we have. We have received, not only from the United Nations Secretary-General but from people around the world, very strong praise for the decisive way that Australia was the first nation prepared to stand up and be counted and make sure that the interests and the rights of the people of East Timor were looked after. The Labor Party, of course, have supported the government in this and they ought to be given credit for this.

But it is ridiculous that the honourable member for Rankin crawls into the chamber and suggests that the budget is going into deficit because we are giving personal income tax cuts to the wealthy. The simple fact of the matter is that we have skewed the tax cuts towards middle Australia. The higher income earners do not get the same level of tax cuts as those less well off—and this is a government for ordinary, middle Australia; a government for the working man. If the member for Rankin is going to come in and make assertions in the parliament he ought to make sure that they are in fact accurate.

The member for Rankin also tried to persuade us that there was now a lost opportunity, because of this government's actions, to invest in Australia. He suggested that we are now not having research and development in universities and that somehow our new tax system is responsible for what he sees as this nefarious development. We ought to note that investment in Australia is encouraged through the business tax changes. Any objective, economic, literate observer would know that these business tax changes will encourage investment, and the things that encourage that investment will include the cut in tax rates, the venture capital rebates and cuts in capital gains taxes.

I listened very carefully to the very thought provoking contribution by the honourable member for Forrest. He spoke about the importance and benefits which will flow to Australia as a result of the changes in venture capital rules. The member for Forrest ought to be congratulated on his very close attention to this particular matter and his recognition of the important reform contained in this particular legislation. The member for Griffith also said that he wanted to see announced the introduction of integrity measures which would lead to what he referred to as revenue neutrality. The honourable member for Rankin ought to dip into the parliamentary database and he would see that already a range of measures have been introduced to the parliament and actually been passed through this place. These measures have already become law. Other measures will come in the coming months. The member for Rankin referred to what he claimed was government propaganda about the GST, referring to Australian Tax Office brochures. There is a thirst for knowledge about Australia's new tax system. On 1 July we will have a new tax system as we have entered the new millennium. Would it not be the height of irresponsibility if, as a government, we decided not to tell people about the changes to our new tax system? It is ridiculous when the member for Rankin comes into the parliament and suggests that somehow the Australian Tax Office ought not to issue brochures. He says that ATO brochures are a government propaganda campaign. Nothing could be further from the truth. The Australian Tax Office brochures explain to the taxpayers of Australia the law as legislated by this parliament.

Honourable members interjecting


Mr SLIPPER —Honourable members opposite ought not to interject because they are part of a parliament which, for 13 years, failed to bring about the real and meaningful tax reform which is one of the great prides of this particular Howard government.

Let us look at Labor's approach to business tax reform. The member for Griffith said Labor had adopted the role of a constructive opposition. I have to say that in respect of business tax reform, Labor has certainly been constructive. They have supported what the government has proposed, and full credit to them for this. Let us quietly applaud the Labor Party for the approach it has taken to business tax reforms and its joining with us legislatively to respond to the Ralph report. But let us not give them too much praise. You know the Labor Party should not be given too much praise. The distinction we ought to draw is that the Labor Party, while supporting the government on business tax reform, has had a totally bankrupt approach to the general issue of tax reform in Australia. The applause for Labor is a bit one-handed, sadly, and you cannot hear that applause because the Australian people can see through the ruse that the ALP has adopted.

The Labor Party has been happy to let the government do all the hard yards in reforming their failed broken tax system and, yet, would you believe, the very many state Labor premiers in Australia were prepared today to sign on the dotted line and grab all the revenue that will flow from the GST. It is appropriate to point out that following the introduction of our new tax system all of that GST revenue will pass through to the states and they will now have a more realistic basis for the future provision of important government services. They will be able to carry out their constitutional responsibility. They will have the funds to properly look after hospitals, schools, police and roads. This government is the first government which has been prepared to give to the states sufficient funding so they are able to carry out their roles under the Australian Constitution.

I would like to pause for a moment to praise the contribution by my colleague the honourable member for Curtin. She quite rightly lauded the historic tax reform which this government has brought in and pointed out that it will benefit both Australia and small business in this country. The member for Curtin makes thought provoking and very substantial contributions in relation to a range of debates before this parliament. Let us just look at the benefits which will flow through to the people of Australia from our new tax system. There will be a $12 billion cut in personal income tax. This will be the largest personal income tax cut in history. It will mean people will have more money in their pocket and they will be able to spend it or save it in an accordance with their own priorities. As a result of our tax changes, more than 80 per cent of Australian taxpayers will have a marginal tax rate of no more than 30 cents in the dollar. This certainly should be applauded. We have brought about a substantial increase in pensions, benefits and family assistance. This a government which is family friendly, and the benefits, reforms and assistance which we have given the Australian families since our election in 1996 are reforms of which we as a government have every right to be justifiably proud. We have abolished a range of complex, outdated and distorting taxes, most notably Labor's wholesale sales tax which was levied at a multiplicity of irrational rates from zero up to 45 per cent, or thereabouts, and it was very difficult to know just what was taxed at one rate or why a particular rate was chosen with respect to a particular item. What we are doing is doing away with Labor's wholesale sales tax. Until the Labor Party addresses the particular provisions of this bill, what they do is in effect say that they support the wholesale sales tax. I do not know how any reasonable and rational person could support Labor's wholesale sales tax. It is a 1930s tax system which is grossly out of date. The Treasurer constantly points out that only countries like Swaziland still retain such an outdated model.

I mentioned before our new internationally competitive system of business tax. It will have a reduced company tax rate and I have outlined the progressive reductions in company tax rate. There will be significantly lower capital gains tax rates—and I challenge members opposite to deny that they have had complaints about capital gains tax rates from their own constituents—and we are bringing about a range of incentives for small business; for example, significant reductions in transport costs for rural and regional Australia and major reductions in business costs, especially for exporters. We are getting taxes off exports and, of course, that will make it easier for us to compete in the international marketplace.

A moment ago I referred to the way that all of the GST revenue will be flowing through to the states. That is particularly important.

You do not get anything out of life unless you are prepared to put in the hard yards. This government has been prepared to grasp the nettle and endure the criticism from special interest groups because we have brought about reform that is in the interests of the nation of Australia. Labor's opportunistic and hollow argument that they will roll back the new tax system is the ultimate policy bankruptcya cynical exploitation of a few items of implementation will not detract from the enormous benefit that tax reform provides to our nation and to Australian families. The negativism of the opponents of tax reforms, those opposite, will not weaken this government's resolve nor dampen our focus on the national interest in pursuing tax reform and addressing the deficiencies of Labor's antiquated tax system.

The shadow Treasurer yesterday showed just how hopeless the Labor Party is. He showed that it is a party which has absolutely nothing of substance to say on tax reform. These two bills before the parliament are important measures further implementing our government's wide-ranging reforms that will give Australia a new business tax system. We are proud of these reforms, as we are of the whole new tax system which is being introduced. I thank honourable members for their support and commend these bills to the chamber.

Question resolved in the affirmative.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.