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Monday, 7 September 2015
Page: 6048


Senator SINGH (Tasmania) (12:37): I am pleased to inform the Senate at the outset that the opposition will be supporting the Tax and Superannuation Laws Amendment (2015 Measures No. 2) Bill 2015. This bill contains four schedules. Schedules 1, 3 and 4 are non-controversial, technical changes with no fiscal impact. Schedule 1 provides tax relief for certain mining arrangements, schedule 3 deals with income tax look-through treatment for instalment warrants and similar arrangements, and schedule 4 deals with certain categories of company losses.

Schedule 2 is the material schedule of this bill. It increases the statutory effective life of in-house software from four years to five years, and this means that deductions will be claimed over five years for expenditure allocated to software development pools. The measure is a recognition of the fact that software developed in-house has a longer effective life now than it had in the past. The savings are not inconsiderable either—some $420 million over the forward estimates—and it is a measure of Labor's constructive and bipartisan approach to budget savings measures that we do support this bill. We believe it meets the key tests of being equitable and efficient by aligning the statutory life of in-house software with its practical life span.

I would, however, contrast Labor's constructive approach to this particular measure with the approach the coalition took in 2008, when the effective life of in-house software was last changed. In the 2008 budget, the then Treasurer, Mr Swan, recognised that the effective life of in-house software had risen, and moved that it be extended from 2½ years to four years. At that time, the member for Cook, Mr Morrison, in the other place referred to that move as 'a completely fruitless and pointless exercise' and 'a grab for tax'. So, in 2008, the coalition displayed a lack of bipartisanship when facing exactly the same measure that we are considering now. They chose the cheap political grab over sensible and constructive support, which is what the opposition offer here today.

The Labor opposition will not be doing what the then coalition opposition did in 2008, because we recognise that the depreciation of in-house software ought to reflect its practical life span. We recognise that the practical life span of in-house software has increased. Software is now doing its job for longer in the real world, and the tax laws need to keep up with that. We will not be suggesting, as the coalition did in 2008, that this is a 'completely fruitless and pointless exercise' and 'a grab for tax'. We recognise that in-house software development is an extremely important part of innovation and an important part, therefore, of a modern economy. It is supported through the tax deduction for software development itself and through the research and development tax credit.

In this vein, the significant cuts to the research and development tax credit contained in the Tax and Superannuation Laws Amendment (2015 Measures No. 3) Bill, which is listed for debate in the Senate tomorrow, put in jeopardy the $9.3 billion of in-house software development paid out by companies with turnovers larger than $30 billion. The Parliamentary Library has estimated that research and development spending will be 0.56 per cent of GDP in 2014-15. That is equal to the lowest level since records began in 1978-79.

This is hardly surprising, given this is a government that came into this office without a science minister, a government that has been slashing jobs recklessly from the CSIRO and a government that has been cutting the research and development tax credit. It is hard to imagine how Australia goes forward as a strong and innovative nation when we have a government which is so anti science, shutting down the Climate Change Authority and cutting back funding to the CSIRO and to the research and development tax credit. Many on this side of the parliament have a passion for research and development, for science, for the development of new firms and for the ability of existing firms to innovate. But you do not get any of that when you cut back on research and development assistance.

This is a tax reform measure, and so it is appropriate that we look at the government's overall record on tax. If we look at tax as a share of GDP and at tax receipts, we see that tax receipts are predicted to rise from 22.3 per cent of GDP in the current fiscal year to 23.4 per cent of GDP at the end of the forward estimates. That puts tax considerably higher than it was under Labor. During Labor's period in office, the tax share of GDP sat at around 20 to 21 per cent. So Australians will find it strange when they hear Mr Abbott and Mr Hockey bellowing about this being a low-taxing government. All you have to do is look at the budget papers—budget statement No. 1, pages 10 to 12 and 10 to 13—to see that they give the lie to the suggestion that this is a low-taxing government. This is a government which aims to have a tax share of GDP considerably higher than Labor did. The last budget brought down 17 new or increased taxes, and, when this government brings down taxes, almost invariably they are taxes that hit low- and middle-income Australians.

We in the Australian Labor Party believe in serious tax reform. That is why during the first half of this parliamentary term we brought out a policy on fair taxation and multinationals—a move not made, I believe, since the 1990 to 1993 parliamentary term. It is a policy that will raise over $7 billion over the course of the decade by allowing more careful treatment of hybrid instruments—by allowing the Australian Taxation Office to look at how other tax offices deal with hybrid instruments, rather than being blind to the tax treatment of hybrid instruments in other jurisdictions.

Labor's multinational tax package says that, rather than allowing companies to pick their favourite debt deduction rule, all companies should have to use the debt deduction rule that makes economic sense—that is, the worldwide gearing ratio. It is a rule that, put simply, says that if you owe a lot of money to the banks you can deduct a lot of money for your Australian operation; if you do not owe much money to the banks you cannot claim large debt deductions for your Australian operation. It is economically sensible, it is grounded in work that the OECD has been doing in their Action Plan on Base Erosion and Profit Shifting, and it adds to the budget bottom line to the tune of $7 billion over the course of the next decade. It is sensible policy.

This year, Labor has announced a package curtailing excessive superannuation tax concessions. The government's own Financial System Inquiry found that 10 per cent of Australians receive 38 per cent of Australia's superannuation tax concessions—more than the bottom 70 per cent of Australians receive. Indeed, if we go further up the distribution chain, we know that the top one per cent of Australians get more superannuation tax concessions than the bottom 40 per cent. This is why the government's own Treasury secretary, John Fraser, has said that we need a rethink of superannuation tax concessions. This recognises that superannuation tax concessions are the fastest-growing tax concessions in the budget.

As the Shadow Treasurer has pointed out, current superannuation tax concessions are not fair and they are not sustainable. The forgone budget revenue from superannuation tax concessions almost doubles over the next four years, from $11.8 billion in 2014-15 to $22.4 billion in 2017-18. The forgone budget revenue, as a result of the superannuation tax concessions, will soon exceed the total expenditure on the pension. The government's own tax white paper suggests that superannuation tax concessions are an area that ought to be looked at. The government have eschewed that recommendation, saying instead that they will not change superannuation. When they say that, they are not saying that they will not take away the low-income superannuation contribution, which benefits three million low-paid Australians, two-thirds of whom are women. No. They are willing to scrap that! They do not mean that they will not continue to increase the universal superannuation contributions, frozen at 9½ per cent. No. They intend to do that, despite the fact that they themselves benefit, as those who have served as parliamentarians since 2004 receive a 15.4 per cent superannuation contribution. Nine and a half per cent is apparently good enough for the low paid; 15 per cent is good enough for those who serve in here. We on the Labor side of this Senate are deeply concerned that the government is not willing to tackle these unfair and unsustainable superannuation tax concessions, as are so many business groups and the head of the Treasury and as the government's own tax white paper has said.

The government's approach to multinational taxation has been to try to shield big companies from legitimate scrutiny. Extraordinarily, the Treasurer was out recently saying that we did not need the Senate economics inquiry into multinational tax, because the government was already requiring firms with a total income over $100 million to report total income, taxable income and tax paid. It might have helped if he had also told listeners to the program that he was on that that was the measure he was trying to wind back. That is right. It is such a good measure that Mr Hockey is trying to shield almost half the firms that are affected by it.

Multinational taxation is a core part of the taxation reform agenda, which we are discussing in this bill before us in the Senate today. Unless the government are serious about tax transparency, unless they are willing to take on Labor's sensible measures on multinational taxation, we are not going to get far with a constructive bipartisan debate that will add to the budget bottom line. The government's own multinational tax measures are so woolly that Treasury cannot cost them. The bits that can be costed raise a desultory $30 million, less than one-sixtieth of what Labor's package raises. Fundamentally, that is because this government is not serious about cracking down on multinational profit-shifting.

When Labor brought a sensible multinational profit-shifting package to the parliament in 2013—under the leadership of Wayne Swan and David Bradbury, who a couple of years later received an international tax award given to the 50 most serious tax reformers around the globe—the coalition voted against it. When coalition came to office, they failed to enact the $1.1 billion package, effectively handing $1 billion instead to multinationals. When Labor came up with our package, I have to be honest, given all the government's complaining about budget emergencies I fully expected them to embrace part of it. I thought, 'Well, that is a pity, we will not get to see a Labor government embrace it, but ultimately what you want in this place is for your good ideas to be at least taken up.' We were extremely surprised when the coalition government decided instead to back the big end of town—to not embrace our package, not even in part. Well, maybe we were not all that surprised after all, because, let's face it, they do have a bit of a track record in this space.

If on the one hand they say there is a budget emergency and on the other hand they are doling out a billion dollars to multinationals, it does not seem to fit. Many Australians will be concerned about the sacking of 1,100 compliance staff in the tax office in the past year alone, including 270 from specific sections that investigate private companies. Labor's additional investments in the tax office's compliance program continue to provide dividends in the form of increased revenue for the tax office, significantly exceeding in increased revenue what we spend on it. That program is slated to come to an end, and the government has no plans, so it seems, to continue it.

In recent times there have been attempts by those on the opposite side of the chamber to talk up the degree of bipartisanship the Hawke-Keating Labor governments enjoyed as part of implementing the groundbreaking reforms that opened up our economy and led to unprecedented economic growth. An opinion piece by John Howard in The Australian Financial Reviewon Monday, 17 August, this year even suggested that the bulk of those reforms enjoyed bipartisan support. Paul Keating responded the following day in classic Keating style, pointing out a reform or two not backed by the then coalition.

Let me go through only a partial list of those tax reforms and other reforms of the eighties and nineties which were not backed in. Medicare was fought by the coalition. Native title was fought by the coalition. The petroleum resource rent tax was fought by the coalition. The HECS scheme was fought by the coalition. Capital gains tax was fought by the coalition. The assets testing of the pension was fought by the coalition. The fringe benefits tax was opposed by the coalition.

They like to come in here and talk about the legacy of the Hawke and Keating governments. They love to say they were halcyon days when Labor believed in reform and the coalition just backed it in. That huge list that I just gave you shows what a furphy that is. The fact is that so many of the reforms on which Australia has been built, on which this country has been built—from universal superannuation to Medicare—were fought tooth and nail by the Liberal and National parties in this country. They have had to be dragged kicking and screaming to support good and sensible reform enacted by past Labor governments.

By contrast, we on this side of the Senate are today standing up and supporting the kind of reform that was opposed by those opposite in 2008 when we were in government. When we in the Australian Labor Party see sensible reform we back it in. In doing so, Labor is going to be supporting this bill and will not be doing what the coalition has done so many times throughout history when it has not backed in sensible economic reform.