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Wednesday, 31 May 2000
Page: 16634


Mr BAIRD (10:18 AM) —It is my pleasure to support these business tax system bills today. It was particularly interesting to hear the member for Hotham quoting much of Joe Cocker. I think, in terms of his performance today, it would be better if he took the advice of another one of Joe Cocker's songs `to leave his hat off' (sic). His speech really was a very sad attempt. At the end of the day, it was a whole lot of wind without very much substance. We waited and waited for his proposals—the substantive measure and how he was going to save this $500 million. His speech was based on two matters. One was related to the transitional arrangements. Transitional arrangements would be needed to suddenly change any arrangements which were established during the 13 years of your government. Then, of course, there is the question of how working for one company is to be defined, and in the current economy that is often difficult to estimate.

However, I recognise that the member for Hotham grudgingly accepted that this legislation will go a long way. He put forward the concept that the Treasurer was rolled. The Treasurer was not rolled by the party room. I was there in the party room when it was discussed. It was a very interesting and forthright discussion about the problems of small business. We talked about how employees who worked for one company and looked around for another company to work for were treated—particularly how the development of the information technology area has changed the dimensions of companies today—and how, when a lot of large corporations decided that they would just simply contract out their work, employees, often with many years service, would suddenly find themselves in a situation where they had to set up their own business, provide their own premises and pay all the costs associated with running their own business. So the days of being treated like an employee were over. They had to accept the insecurity into the future of being out there on their own, without any guarantee that the work would continue.

We looked at those issues, and the minor modifications that are there are as a result of discussions with the Treasurer. I commend him for listening to what was being said in the community. We have some tough legislation. We have some provisions which will sort out those who are genuine in providing personal services from those who simply for their own tax reasons want to avoid paying appropriate taxation levels. The tests that are provided in this legislation are appropriate. The integrity of the Treasurer is a very common line that the opposition throw out to desperately try to show that the integrity of the Prime Minister or the Treasurer is in question. Unfortunately for the opposition, despite their efforts, they cannot provide any dint in the integrity of either. We are very fortunate on this side of the House to have two people with their integrity in such key leadership positions.

The line from the member for Hotham is that the Treasurer is a serial offender in terms of the question of tax avoidance. We should look at the way tax avoidance flourished during the 13 years that Labor was in power. We had the great icons of tax avoidance: Mr Christopher Skase and Mr Alan Bond. They went around with tax avoidance that flourished in the wonderful halcyon years, as you saw them, of Labor in power. If you want to look at when tax avoidance measures flourished par excellence it was during the days of the Bond-Skase era. The Labor Party was so busy trying to get into bed with Alan Bond and Christopher Skase and have them attend all those wonderful $10,000 a head fundraisers that tax avoidance was very much on the agenda. It takes this government and this Treasurer to provide these avoidance measures to deal with the issue in the past of people simply rorting the tax system for their own benefit and reducing their income levels.

If the timing is the problem, your side should put up what you think the appropriate timing should be. Bear in mind that the arrangements that this bill seeks to avoid were flourishing during the time that you were in government. We are providing transitional arrangements to address that issue. Put up a suggestion. We are taking this issue from a situation where it flourished under your government to a new era. If you want tougher tests then put them on the table. Let us see what is required. These provisions came out of the Ralph report. Not only will we have the GST, which involves the most significant changes to the tax system since Federation and will deliver $12 billion in tax cuts to the Australian community and income earners throughout Australia and reduce the business tax from 36 per cent to 34 per cent on 1 July and then see it go down to 30 per cent on 1 July 2001; we will also have a number of significant changes as a result of the Ralph report recommendations—not the least of which is capital gains tax being reduced by half.

The member for Hotham comes in here and says, `They do not talk about the amount of revenue that is going to be raised by the GST.' Where is this revenue that is raised by the GST going to go? It is all going to go to the states. It is going to go into building better schools, hospitals, police stations, railways, bridges and roads across each state. Instead of having the regressive taxes that they had in the past—the BAD tax, the FID tax, bed tax, et cetera—they will have a growth tax which will assist them to plan their economies. It is going to revolutionise the financial arrangements in each of the states. That is why the states rushed to sign up. Bob Carr, the Premier of New South Wales, was the first to sign up and put his name to it because he knew what a good deal it was going to be for the states. It is nonsense from the member for Hotham about how tough it is going to be. The real beneficiaries will be the people of Australia in terms of what infrastructure, services, assistance measures for disadvantaged groups, teachers' salaries and police salaries will be delivered. It is not as though Treasury is going to collect it all. That is a nonsense.

This is about providing integrity in the taxation system. It is about fairness and equity, which are amongst the key criteria for developing a taxation system. In terms of fairness and equity, a person who is working for one corporation and has located themself in their own home and, for all intents and purposes, is spending 100 per cent of their time working for that company and has managed to get all the deductions of a company, instead of paying 48½ per cent corporate tax if they are over the threshold will pay the considerably lower rate of 36 per cent. Clearly, that is inequitable and, I think, there is bipartisan agreement on that. I am sure the member for Paterson would agree that all of us in this House want to remove those anomalies of unfairness so that that person who is clearly working for one company pays 36 per cent tax. Under this government and the progressive reforms that were recommended by the Ralph committee report, that will go down to 30 per cent, which is the lowest corporate tax rate that we have seen in this country. At the moment somebody doing exactly the same work could be paying 48½ cents in the dollar. That is the inequity which the Treasurer is rightly attempting to address.

I understand the member for Hotham was saying that the Labor Party, on a bipartisan basis, wanted to support that. He said, `We came out and found it terribly difficult to get the agreement that we were seeking in terms of these proposals.' What was the reality? The reality is that he had no choice in terms of the proposals. I saw him being interviewed on one talk show after another. He was told that the business community are saying that these measures that were recommended by Ralph are highly appropriate and that they are the types of reforms the business community want and was asked, ` How are you going to address them?' The fact is that he knew that he was in big trouble. If he said that he was going to support them, what would his colleagues in caucus say? If he said he was going to oppose them, what would all their supporters in the business community say? What would happen to all those fundraisers that they love to have. He said, `We do not know. We did not know quite where to go.' The weasel words came out: on the one hand we agree on this and on the other hand we do not. People asked, `What exactly is your position?' The exact position is that he knew that the Labor Party had been arguing about it. They had not had the guts to implement it when they were in government. It took this Treasurer and this government to implement the measures and they are on the table.

So, despite all his handwringing—`I went to caucus and it was tough to get it through'—the member for Hotham knew he had nowhere to go. He had been thundering on about the `integrity of the taxation system' for a long time, and it was put to him on a plate. It was put there in terms of reducing the corporate tax and capital gains tax rates. Part of the tax package is the integrity measures in this bill which ensure that people who genuinely provide personal services and work for a range of companies get the benefits of appropriate tax deductions and the benefits of paying lower corporate tax rates and are not disadvantaged compared to those who are simply rorting the system. We believe that the rorting has gone on for too long.

The member for Hotham spent some time talking about the tests. It is appropriate that no more than 80 per cent of the income of an individual who provides these personal services should involve only one company. If it is going to be more than 80 per cent, then a determination needs to be sought from the Commissioner of Taxation. That determination will be granted if the individual meets the circumstances that are outlined, such as if they have two or more unrelated clients. As was pointed out by the member for Hotham, where an individual can show that in the past they have had two or more clients, or alternatively where they are in the initial stages of setting up a corporation or a small company and they expect to have additional clients in the future, they would receive the exemption, but they would need to apply to the taxation commissioner. Where they have one or more employees, even the member for Hotham had to conclude that the way the legislation is framed you have to do something more than just have your wife work alongside you occasionally. If you are working in the computer area the person who is deemed to be the employee has to have the appropriate computer skills. Right the way through, the mix of skills would have to be deemed appropriate by the taxation commissioner. Another provision is that an individual should have separate business premises. This is an important aspect. We were seeing individuals working for companies who would say: `I will put in my own computer link at home; I will set up one of my rooms at home and I will get the appropriate corporate tax cuts.' To have separate business premises usually indicates that you have a very serious intent to operate a genuine, legitimate business.

Another provision required by the taxation commissioner is that, if an individual is contracted to produce a result, he supplies his own plant and equipment or tools of trade and is liable for the cost of rectifying defective work. In other words, subcontractors can fulfil this requirement by being liable for the effectiveness of their own work and in terms of the range of skills that they bring to bear with the tools that they use, et cetera. I would have thought the Labor Party would be supporting this approach: if the tradesmen of Australia who have their own businesses can claim they are working in a legitimate arrangement regarding their own personal services, they can operate a company if they can fulfil the business taxation requirements in terms of tax measures. I think that is appropriate.

We heard a whole lot of rhetoric from the member for Hotham. The member for Hotham talked at some length about the integrity of the Treasurer and the promises he had given. As I understand it, the Treasurer promised that the government would look at this question of the alienation of services and the alienation of business income in terms of trusts and separate private companies. This has been addressed. He talked about those people who were clearly working for only one company. This has been addressed. He talked about the GST in general at great length. One of the failures in this House has been the performance of the member for Hotham when it came to the crunch. He was asked to provide the document that said that, as of 1 July, if Labor were ever part of a government that got into power they would rescind the GST. What could they do? They had to say that on 1 July if the GST was brought in they would simply implement it. So sincere are they about their objection to the GST, so bad is the tax that, come 1 July, they will keep the tax.

So all this rhetoric that comes from the member for Hotham is not really worth a pinch of salt. It has no validity. If the opposition were genuine in their overall criticism of a tax which is in every country around the world—certainly in virtually every developed country—they would have the sincerity to say: `We are going to roll back the GST. We are going to reintroduce the wholesale sales tax.' But they did not do that. They would continue a GST. So all this rhetoric that we hear is a whole lot of nonsense. Suggesting that the Treasurer is a serial offender in terms of tax avoidance measures is a nonsense on two grounds. This bill is a legitimate attempt by the government to address those areas where tax avoidance has gone on to a significant extent, and to take measures, to introduce criteria, to ensure that this is avoided in the future. So all of those who work for one company are on notice. If they are claiming company tax they are on notice that `These are the criteria and if you do not meet them, you had better change quickly; you had better find some other clients; you had better diversify; you had better start employing somebody; and you had better change your office location.'

It is clear that if we want to see tax avoidance on a grand scale, then we only have to go back to those years of Labor because those were the years of Christoper Skase and Alan Bond where tax avoidance reigned supreme—and, of course, they all liked it. When we have genuine attempts to change the system and when we have genuine changes in the personal alienation of income as part of the overall tax measures, we will see real reform and real taxation changes that will make this country a much stronger economy.