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Wednesday, 30 May 2018
Page: 4983


Mr CRAIG KELLY (Hughes) (17:15): I'm pleased to rise this evening, or late this afternoon, to speak on the Treasury Laws Amendment (Black Economy Taskforce Measures No. 1) Bill 2018. I want to start by talking about the black economy. There are really two forms of the black economy: firstly, there are the illegal activities. There are criminal enterprises dealing in drugs, illegal tobacco, prostitution and the like that are simply operating outside of the law and that are dealing in cash. We've seen some estimates that there is up to half a per cent of GDP in that activity. The other part of the black economy is legitimate businesses that are engaging in lawful activity but not declaring the correct rate of tax or paying the correct rate of tax.

Firstly, when it comes to those engaged in illegal activity, we have to have a strong iron fist to crack down on that activity. That's why we've seen strong legislation on the proceeds of crime, so that if people are engaged in that activity those proceeds can be confiscated. We've also seen unexplained wealth legislation. If someone cannot legitimately explain where their wealth came from, it most likely, or almost certainly, came from illegal, criminal activity. That also needs to be cracked down very hard on.

I'm pleased to see in the budget methods and improved resources to crack down on illegal activity when it comes to illegal tobacco. I don't think there's a member in this House or this parliament who thinks we should not do everything we can to drive down the rate of cigarette smoking in this country. One of those methods is through price. We are effectively going through a form of prohibition by price on tobacco. There is, I think, about a 12½ per cent increase in the excise on tobacco year after year after year. That will push the price of a packet of cigarettes to around $40. When that happens and when you can buy that same packet of cigarettes for around $1 to $2, lawfully—if it's a lawfully made product in the country of origin—overseas and the retail price is $40 in Australia, we will have created a huge incentive for a black market and for a black economy. So, it's very important that we put those extra resources into our Border Force and into tackling that scourge of illegal tobacco. The incentives, those price differentials, are far too great to just sit by and not do more in that particular area.

The other area of course is legal businesses—businesses operating in a lawful manner—that for some reason decide that it is better for them not to declare their rate of tax. The first thing we can do, and one of the best ways that we can do it, is make sure our corporate rate of tax is low and fair. Unfortunately, we are heading for a situation in this nation where the rate of tax will no longer be internationally competitive. That is the situation that we face today. Since the turn of the century, about the year 2000, we have seen almost every major OECD nation lower their rate of corporate tax. The reason almost every nation has done that is they understand that if you lower the rate of tax you actually create more incentives, you get more economic activity and you get more tax revenue flowing in. Some people say, 'Oh, that's just an assumption,' but I'll tell you what: it's not just an assumption. Every single time in this nation that we have lowered the corporate rate of tax we have ended up not only with a bigger economic pie but with more company tax receipts as a percentage of GDP.

When Paul Keating lowered the corporate rate of tax, he understood that it wasn't a giveaway of money, as we hear so often. He understood that it was important to keeping Australia internationally competitive and to driving entrepreneurial activity and that ultimately it would result in a larger economy, more jobs and more revenue flowing in. We saw the same thing when Peter Costello lowered the corporate rate of tax in this nation. He lowered it from 36 per cent to 34 per cent to 30 per cent, where we are stuck today. It was argued, yes, that it was going to give away a lot of revenue. But we've seen the lowering of the corporate rate of tax from 36 per cent to 30 per cent, and how much did it cost the economy? Nothing. We are getting more revenue at 30 per cent, as a percentage of GDP, than we got at 36 per cent, 39 per cent and even 49 per cent. That's why it's important that we lower our corporate rate of tax. We can't have an internationally uncompetitive corporate rate of tax. We can't have an internationally uncompetitive cost of energy in this nation and also have higher wages and a prosperous economy. The three things do not go together.

There are two schedules in this bill. The first schedule is a ban on electronic sales suppression tools. The schedule creates a new offence for the manufacture, distribution, possession, sale and use of electronic sales suppression tools for the purpose of not disclosing business income. There's simply no legitimate reason for such types of computer software. They remove transactions from electronic record-keeping systems, they change transactions to reduce the amount of each sale and they can modify GST-taxable sales to GST non-taxable sales in all instances, with no audit trail made to exist.

We want to have an economy with a low rate of tax because we want businesses to report their sales and, strange as it may seem, be happy to pay the rate of tax. That actually increases the value of that business. If a business is able to have a set of accounts that say, 'This is the rate of tax we have paid and these are the profits that we have made,' in the long term that makes that business more valuable. So, if that business owner ever wants to sell that business in the future, showing the results that they have and their sales makes their business much more valuable for them to sell. The benefit that they get from that can be much greater than any short-term benefit they may have got through avoiding tax. So I'm glad to see this measure of banning electronic software for suppression of sales information. It's something that should be banned. It should be prohibited. I'm pleased that the opposition have given their support to that part of the legislation.

The other part of the legislation goes to third-party reporting. From 1 July 2018, businesses in the courier and cleaning industries will be required to give annual reports to the Australian Taxation Office regarding the payment they make to businesses for them to provide courier and cleaning services. The reporting obligation will apply for the 2018-19 income year, and reports will be required by 28 August 2019. The government has acted on concerns raised by stakeholders that small, mixed businesses providing courier or cleaning services may have a disproportionate compliance burden where the provision of those services is merely a small part of the overall activity of the business. Again, that goes to making all these compliance burdens that we put on business as low as possible. We want Australian people who are running businesses to be entrepreneurs. We want them to spend as much time as they possibly can on improving their businesses and thinking of new ways of production, distribution and manufacture. We want them to be creative and come up with new products. That's what we want our entrepreneurs to do. We don't want them tied to a desk with a red tape burden, because not only does that have a direct cost; it has the indirect cost of taking away the time they should be spending on the creative and wealth-creation processes that are so, so valuable and vital to this nation.

We in this government have a big task. We've almost got the budget back to surplus. We've done the hard yards. We inherited a mess five years ago from the Labor Party. We've made hard decisions. We've got the budget in sight of being back to a balance and then a surplus, and we have the long, hard road to pay that debt down. The coalition has done it before. John Howard and Peter Costello did it when they paid back $96 billion worth of Labor debt, and along the way—we should never forget that it wasn't only the $96 billion—they also paid back $54 billion in interest payments on that debt.

The coalition have done it before and we can do it again, but to do so we must make sure that we've got the tax burden as low as we possibly can so we can incentivise Australians to get out there and take risks. Not all of them are going to succeed, but we need enough of them to take risks to develop new products, new services and new ways of distributing goods. We need them to develop those things to drive the economy and create wealth so we can get that debt down. That's the task of our government going ahead. We've done a good job so far. Over a million new jobs in this economy have been created since the coalition government was elected. I can remember being in this chamber when we first talked about a million jobs during the coalition's first two terms. Those on the other side laughed. They sat there and they laughed at us. They sniggered and said, 'You cannot create a million jobs in the economy.' Not only have we done it; we've done it early. We've done it in a little over five years and we're going to exceed those million jobs.

Ultimately, it's not us here in government who create jobs; it's those entrepreneurs out there, taking risks, who create the jobs. We have to provide them with the legislative framework that gives incentives to those who are doing the right thing and penalises those who are engaging in the black economy; a legislative framework that gives the businesses that are out there competing every day a level playing field and the opportunities they need to succeed. If we're able to do that, we'll see in the years to come, with continued good government, that we're able to get surpluses happening and get the debt paid down so that it's not something our children and grandchildren have to inherit. This legislation is just one small piece of the jigsaw that the coalition is working on. I congratulate the minister on the work done on this and I commend the bill to the House.