I'd make this point: we were very clear that the company tax cut had to be funded out of changes to the business tax system. Do you know what this government is doing? It wants working peopleworking people!to fund the cuts for big business. There's a very stark difference in the position that the Labor government took and the position that the coalition is taking. In fact, there are few policies in recent years that I think have more starkly illustrated the difference between the Labor Party and the coalition than this government's commitment to handing $65 billion to Australia's biggest and wealthiest companies.
Recall that this is a tax cut which comes at a time when government debt is at record levels, when Australia's health system is under pressure, our schools need more resources, and inequality in this country is worsening. What do we see this government's priority as? Their priority is giving a massive handout to our most powerful and most wealthy. It's also a transfer of wealth offshore, with an estimated 60 per cent of the benefit of the tax cut likely to head overseas.
Remember that this is on top of the $19 billion this government is giving our wealthiest taxpayers over the next decade by cutting income tax for people earning over $180,000. The only income tax cut we have seen in the five years the Abbott and Turnbull governments have been in power is for people earning over $180,000.
In the very same budget, where this government reaffirmed its commitment to giving big business a $65 billion tax cut and cutting income tax for people earning over $180,000, it slugged working- and middle-class Australians with a $44 billion tax hikea $44 billion tax hike! That's what the Medicare Levy increase costs.
These are their priorities: a tax hike for middle Australia, a tax cut for the wealthiest taxpayers and a massive handout for big business. At a time when we see school funding being cut, universities being forced to push up fees, the out-of-pocket costs of health care soaring, the government demanding pensioners work until they're 70 and the government continuing its intention to cut the energy supplement, the biggest companies in the land are being handed $65 billion.
Of course, there's the debt. Gross Commonwealth debt has hit $520 billion. This is the party that said they'd deal with the debt and deficit disaster. Remember the debt and deficit disaster? Gross Commonwealth debt has risen almost $250 billion since they've been in government. They are very quiet over there, aren't they? They hate to be reminded of the fact that debt and deficit under them has gone up $250 billion. You've made the debt and deficit disaster $250 billion worse. Now you want to make sure that you give a company tax cut so that the budget is in a worse position. Which companies are so deserving of the massive act of generosity from the Turnbull government? I'm glad Senator Williams is in here because, of course, among those undeserving recipients is the banking sector. He knows a bit about that.
In the very same month that the royal commission that this government fought so hard to prevent is hearing daily horror stories of the appalling behaviour of our banks, what's this government's response? 'Give the banks $7.4 billion in tax cuts. Let's do that.' That's what the government's priority is.
According to the Australia Institute, a third of this tax cut will go to just 15 of our most profitable companies, companies which are clearly doing well, making profitsbut, in this government's view, not making enough. Their argument is that somehow this will trickle down to workers and it will boost employment.
I want to ask something, just a very simple, straight question: does anyone really think that Woodside or Rio Tinto aren't already employing everyone they need to maximise their profits? Do you really think they are holding back from employing the workforce they need to maximise their profits? Does anyone really think the banks will suddenly put on more tellers and open more branches, and Woolworths and Coles will get more shelf stackers, if we just give them more money? There is no evidence for this. Indeed, if directors did give such a commitment they probably would run the risk of breaking the law, because, of course, what is the No. 1 duty? It's not to their staff or the country but to their shareholders. Their jobwe know thisis to maximise return to shareholders. That's what we know. That's what we have seen.
We are seeing it also in the context of the tax cuts in the United States that the government keep pointing to. According to US research firm TrimTabs, the level of stock buyback announcements made by corporate America since the start of the year has reached a staggering $214 billion. That's almost as much as you have increased the gross debt of the Commonwealth in that time frame. This is already the biggest share buyback in US history, and that's just the start, with the Bank of America predicting that the S&P 500 companies will use repatriated foreign profits to buy back about $450 billion of stock, around triple the previous record of a single year's share buybacks. So, instead of investment and jobs, what we are actually seeing is higher share prices, higher returns for stockholders and bigger pay packets for the chief executives, whose pay is tied to share pricesall funded by a company tax cut.
Just last week, Senator Pauline Hanson declared that we weren't American, that tax cuts would not benefit workers and that she would never support them. Well, she was right then, but now Senator Hanson says she's been inspired by the US experience and will back these cuts, in return for a pilot program of 1,000 apprentices. Let's talk about that. This is in the context of a government which, since it came to power, has cut 140,000 Australian apprenticeships, in the name of budget repair. Now it gets support for a $65 billion handout from One Nation in return for a pilot program which puts back less than one per cent of these cutsI think it's 0.7 per cent.
Senator Hanson also cites as evidence for her backflip the wage rises which have supposedly gone to workers in the US as a result of the tax cuts. Let's look at the amount of money allocated so far on bonuses and wage hikes in comparison with Wall Street's buyback bonanza. Research from academics Wartzman and Lazonick, as well as the Academic-Industry Research Network, finds the S&P 500 companies have devoted about $5.6 billionthat is, six per centof the tax cuts to bonuses and wage hikes. Much of this has been paid in one-off bonuses. It's a pretty expensive way to give workers a small handout, a pretty effective way of shovelling massive amounts of their money into the pockets of some.
Of course, the double whammy for Australia is that much of the benefit of the Australian tax cuts will flow overseas, either in direct profits or other benefits of our foreign tax arrangementsand in return for what? As Peter Martin revealed in the Fairfax papers last month, Treasury is now forecasting the net benefit of the tax cuts will be a one-off gain in 10 years time of around 150 bucks per person. I think Ross Gittins got it right when he said, 'It doesn't seem a lot.'
Dr Goldie, CEO of ACOSS, points out:
Any economic gains from cutting company taxes are decades away, while the cost of the cuts will be felt immediately
Right now the federal budget is in deficit, and we can't be confident it will move back into surplus in the next few years.
What that means is that if unfunded tax cuts go through, people across Australia will have to start paying more for essential services they have always relied upon.
Of course, the $150 a year a decade from now assumes all sorts of unlikely outcomes such as that, in return for lower taxes, business will pay more. The Australia Institute found that the Treasury-commissioned modelling attributes a $3.9 billion gain in government revenue to 'multinationals suddenly and voluntarily deciding to pay more tax because the company tax rate drops five percentage points'. Does anyone remember the Laffer Curve, where the more you taxed the less you got?There isn't any evidence, and there's no commitment, that one cent of this tax cut will boost employment or boost wealth for anyone other than the companies that directly benefit. It is a tax cut built on putting ideology and hope over evidence and experience. This was made clear in the Business Council letter last week, which gave no guarantees of any level of investment or employment in return for the $65 billion. Senator Hinch said, correctly:
The business council letter was very Kumbaya, you know, we'll do this and we'll do that, but it didn't guarantee anything.
What is most obvious, at a time when the budget is massively in deficit and Commonwealth debt under this government has almost doubled to over half a trillion dollars, is that these big business tax cuts are not affordable.I return to the contribution of Senator Abetz, who pointed out that Labor, in government, also had a plan to lower company taxes. The difference is that we had a plan to fund it. Prime Minister Gillard told a business forum in 2012:
We're in the cart for a lower company tax rate but it has to be affordable. And that means it has to be funded by other changes in the business tax system.
When Prime Minister Gillard imposed that condition in June of 2012, Australian government debt was $238 billion. It is now $520 billion. But no such condition is being imposed by the coalition on this occasion. They are very clear who is paying it: ordinary working people are paying iteither through the tax hikes which are proposed for working people or through the inevitable and continued decline in essential services that the budget position drives. So if more modest company tax cuts weren't affordable in 2012 without trade-offs, how are far bigger cuts more affordable today when this government has almost doubled our debt?As Chris Bowen said, the $65 billion company tax hit is 'an unfunded budget wrecking ball' with no guarantee for investment in Australia or wage rises and it will be left to middle- and low-income working Australians to pay for them.
There is a better way, a smarter waya Labor way. Labor has announced its Australian Investment Guarantee, which, instead of simply funnelling money straight into the pockets of shareholders, is a pro-growth, pro-jobs reform that is only available to businesses making new investments in Australia. Under the guarantee, companies that make the decision to invest in Australia will be able to immediately deduct 20 per cent of any new eligible asset worth more than $20,000. Do you know what that means? It means the tax break goes to those who invest here and employ here whereas, with the tax cut that is being proposed by the other side, 60 per cent of the company tax handout goes to foreign shareholders.
Budgets are about priorities. What this bill tells us is that the Coalition's priorities for Australia are a $65 billion tax handout for big business whilst increasing taxes on every Australian earning over $21,655. Look at this government's choices: cuts to schools, cuts to universities, cuts to hospitals, cuts to pensions and making middle Australia pay more in taxesso they can give more money to big business and send billions of dollars overseas. Mr Turnbull, Mr Morrison and those on the other side have made their choice. They choose big business over middle- and working-class Australians and they choose multinationals over Medicare.
Well, Labor says no. At a time when this government has sent debt soaring above half a trillion dollars, has cut schools and hospitals and is hiking tax on middle Australia, our priority cannot be, must not be, a $65 billion handout to the nation's most powerful corporations.
This will be the choice at the next election. Have no doubt about it: the contours of the election campaign, the landscape of the election campaign, are being set in this chamber this week. And it is our party on this sidecommitted to schools and hospitals, and tax breaks for actual investment in Australia to drive local jobs and growth here in Australiaversus those on the other side committed to tax handouts for multinationals and tax hikes for working people.
Authorised by Noah Carroll ALP Canberra.
