Wednesday, 27 June 2012
Tax Laws Amendment (2012 Measures No. 2) Bill 2012, Pay As You Go Withholding Non-compliance Tax Bill 2012; Second Reading
The Tax Laws Amendment (2012 Measures No. 2) Bill is yet another demonstration of the complete incompetence and the complete dysfunction of this high-spending, high-taxing Labor administration. This government does not know whether they are Arthur or Martha. They do not know where they are going; they do not know whether to go left or right or straight ahead. They are spending so much money that they are always casting around for more cash. They are always looking for another opportunity to tax somebody. When Mr Rudd was Prime Minister and Mr Bowen was looking after this particular portfolio responsibility, they decided to reduce the withholding tax on managed investment trusts. When Prime Minister Gillard and Minister Shorten come in, they decide to double the withholding tax on managed investment trusts, but they did not have the support in the parliament for that particular tax grab. They did not have their alliance partner, the Greens, on board, so what did they do? In a rush, in complete chaos, they quickly scramble to take that part of this bill and reintroduce it as part of a separate bill. This government is all over the place. In their desperate rush for more cash, their processes are in an absolute shambles. This government has completely lost the plot.
Here we have another tax laws amendment bill before us, which contains a whole series of tax grabs—including, I might add, some retrospective tax grabs, which are there to fix up some of Labor's past stuff-ups. Remember back in 2010 when Labor was trying to make some changes to the consolidation scheme arrangements and we said to them at the time, 'What you are doing is wrong. The way you are doing it is going to cause you some issues.' And sure enough, it has caused issues. Here they are in a mad scramble trying to fix it, but—guess what?—they say it is going to be retrospective. They are going to take it all the way back to 2010, when they made the original stuff-up.
Let me say that tax law changes that impose adverse consequences on taxpayers should not be retrospective. How can a taxpayer be expected to have complied with a law that he or she did not know existed at the time? The reason we have these sorts of chaotic, incompetent, dysfunctional changes to our tax laws, proposed by this incompetent and dysfunctional government, is that, under the leadership of Prime Minister Gillard and Treasurer Swan, our public finances have got into a complete mess. This is the government that inherited from the coalition a strong fiscal position–a budget position with no government net debt, with a $22 billion surplus and with $70 billion invested in the Future Fund. We actually left the Labor Party a situation where the government was collecting net interest payments, rather than having to pay net interest to service the debt that they have accumulated. What has this government done? In four and a half years they have delivered $174 billion worth of accumulated deficit. They have taken us from no government net debt to a situation where we are now heading for a $145 billion worth of government net debt. They are planning to spend about $30 billion over the forward estimates in net interest payments to service the debt that Labor and the Greens have accumulated over the last four and a half years. That is why we get the sorts of chaotic tax law changes that are before the chamber today.
In a mad last-minute rush last week the government actually had to remove Schedule 4 from this bill—Schedule 4 which was supposed to be the doubling of the withholding tax on managed investment trusts. That was an extraordinary measure. The chaotic approaches to tax administration and to tax policy from this government have already had a very significant impact on our sovereign risk profile. We need a government that spends less so that we can tax less. We need a government that is committed to a more stable approach to tax policy and tax administration, because we need to focus on being internationally competitive and on being an attractive destination for investment. We need to focus on these things, so that we can grow our economy more strongly. The one thing that senators on this side of the chamber understand, and which Labor senators clearly do not understand, is that an economy that grows more strongly not only delivers increased economic prosperity for all Australians, but it also delivers increased revenue for government without the need for all these new and ad hoc Labor Party tax grabs—all this constant chopping and changing of tax arrangements. As I have mentioned, it was Prime Minister Rudd and Minister Bowen who reduced the withholding tax on managed investment trusts to 7½ per cent, only for Prime Minister Gillard and Mr Shorten to turn around and double it. It is only since 2010-11 that this tax has been at 7½ per cent. The parliament was expected to turn around and say, 'Okay, in 2010-11 the tax rate was 7½ per cent, but we will be complicit in turning around, making yet another change and doubling this rate, which will have significant implications for our capacity to attract investment, particularly for critical infrastructure.' Yet again, the government has not done its homework. It introduced this Tax Laws Amendment (2012 Measures No. 2) Bill without having checked the numbers, without having made sure that it had support on the floor of the parliament. There is one reason, and one reason only, why the government removed schedule 4 from this bill in the House of Representatives last week: the government knew that it did not have the confidence of the House of Representatives to pass that tax increase. That is why the government, in a mad rush, removed that schedule from this bill. In order to save face it then scrambled to reintroduce it as a stand-alone measure, which it is now attempting to ram through the parliament. I only hope that the Greens will remain strong and impose proper parliamentary processes and proper parliamentary scrutiny on what is yet another ad hoc Labour Party tax grab, which will have bad consequences, including for investment, dare I say, in important environmentally friendly green infrastructure.
This bill includes a number of proposed changes in relation to the taxation of financial arrangements provisions and the consolidation tax cost settings, in particular. It is proposed that the changes to the consolidation tax cost settings be retrospective to 2010 in order to fix, as I have mentioned, a problem of the government's own making. It is to fix yet another Labor Party stuff-up. These bills make changes to the taxation of financial arrangements and link changes to the consolidation regime provisions. The government says that this is a revenue protection measure, even though there is going to be, and the budget indicates that there will be, a revenue gain over the forward estimates. A consolidation regime treats a group of wholly owned or majority owned companies and other associated entities, such as trusts and partnerships, as a single entity for tax purposes. This means that the head entity of the group is responsible for all or most of the group's tax obligations, including the lodgement of tax returns and the payment of tax obligations. The explanatory memorandum to the bill highlights how this bill operates to reverse retrospectively the changes to consolidation regime is made in 2010. It says:
For corporate acquisitions that … took place before 12 May 2010, the changes prevent the retrospective operation of unintended effect—
that is what the government says—
of, and perceived weaknesses in, amendments to the law that were made in 2010. These changes are necessary to protect a significant amount of revenue that would otherwise be at risk.
That is what the government says in its explanatory memorandum. My office contacted the Assistant Treasurer's office to ask how much revenue is at risk, because we were told that the fiscal impact of this bill was nil. We asked what the impact of not passing this bill would be. The Assistant Treasurer's office was not able to tell us—it did not have a clue. It was only later, during the inquiry by the House Standing Committee on Economics into this bill, that Treasury revealed that there could be a negative $6 billion impact on government revenue.
The government was warned before the 2010 changes were introduced that it had got things wrong, but it refused to listen, as is so often the case with this incompetent, dysfunctional Labor government. During the consultation on the exposure draft for the 2010 legislation, industry clearly warned Treasury and the government that they had got their costings wrong and that the proposed changes would lead to much higher deductions being claimed, which would lead to a reduction in revenue. The government did make some changes while we were debating these changes in the Senate in 2010 but it still did not address the key issues that had been clearly identified during the consultation process, especially the issues around the costing of the measures.
When the 2010 legislation came into force, industry predictions came true. Companies did take advantage of the higher deductions permitted by the government's flawed legislation, exactly as had been predicted, and there was a collapse in anticipated revenue. When the ATO informed Treasury and the government of this collapse in anticipated revenue the government asked the Board of Taxation to look into these issues. The board's inquiry confirmed what everybody but the government knew before it made these changes back in 2010—that is, that higher deductions would lead to a lower associated taxation revenue.
Now the government proposes to punish taxpayers for its incompetence. It proposes to punish taxpayers for its own error, even though it had been warned about the error and refused to listen to that advice. The government should not punish taxpayers retrospectively for its own incompetence, for its own mistakes and for its refusal to listen to the advice that it was provided in good faith at the time. Importantly, the government should also let the parliament and the Australian public know what new procedures if any it has put in place to make sure that such errors, with such enormous financial consequences, will not be made again. People across Australia have lost confidence in this government's capacity to manage anything competently. People across Australia concluded long ago that this is an incompetent, dysfunctional government which deserves to be thrown out of the next election. I do hope that in the bowels of the Public Service some serious work is being done to review the processes that led to the lack of adequate consideration as these bills were put together back in 2010. The consolidation tax cost setting arrangements and changes in taxation of financial arrangements are, as I have mentioned, retrospective tax changes. The coalition is opposed to retrospective tax changes as a matter of principle. I put that on the record very clearly. We do not believe that taxpayers should be adversely affected through retrospective changes imposing tax laws on people when people did not know these existed at the time they made certain decisions that were relevant to the taxes being proposed now.
The reasons the coalition is opposed to retrospective tax changes are, among others, that they can change the substance of bargains struck between taxpayers who have made every effort to comply with the prevailing law at the time a particular agreement or decision was made; they can expose taxpayers to penalties when taxpayers could not possibly have taken steps at the earlier time to mitigate the potential for penalties to be imposed; they may change a taxpayer's tax profile which in turn can materially impact the financial viability of investment decisions and the pricing of those decisions; and they can increase Australia's level of perceived sovereign risk.
I ask the question again, and this is really the crux of the issue: how can taxpayers be expected to have complied with laws that they did not know existed at the time they were supposedly expected to have complied with them? I really would like the government to provide an answer to that question as it sums up this debate. That really goes to the crux of this issue. The government has not made a compelling enough case publicly to justify the retrospective application of this legislation. The government has not explained why a taxpayer should have to pay the price for the Labor Party's dysfunctional incompetence over the last 4½ years in government but, in particular, in relation to the tax changes that were passed through the parliament by the government back in 2010. This is just a belated attempt by Labor to amend the consequences of its mistakes made in 2010. Taxpayers should not be expected to pay for the consequences of Labor's incompetence and mismanagement through retrospective tax changes.
Incidentally—and I make this position very clear—if the changes that are on the table now were made to be prospective from the date of announcement, 25 November 2011, then we would be inclined to support those changes. But the reason we will vote against this bill is the retrospective nature of its provisions. That is why the coalition cannot support those changes in the current form.
Commenting on the proposed changes in schedule 1, through schedule 1 the government proposes that it wants to target, yet again, phoenixing activity. This is the government's second attempt at this. It has previously tried to move similar amendments as part of its previous bill. These changes propose to make directors personally liable for unpaid superannuation, stop director penalties being discharged by placing a company into administration and make directors and associates liable to pay out PAYG withholding non-compliance tax when a company has failed to pay. These changes were previously the subject of a parliamentary economics committee inquiry and, in a bipartisan fashion—that is, Labor members and coalition members—that committee said the government got it wrong. They sent the government back to the drawing board. They said to the government, 'These measures are not appropriately targeted to focus on phoenixing activity'. Phoenixing activity is not even defined in this legislation. The House economics committee, in a unanimous fashion, told the government, 'Go back to the drawing board; go and do your homework'. Even Labor members on that committee were embarrassed by what the government had put forward.
Now, a couple of months later, the government turns around and says, 'Here, we are bringing it in again'. Do you know what, Mr Acting Deputy President? It is not good enough. We do not believe that the government has addressed the concerns that the House economics committee in a bipartisan fashion expressed earlier this year, which is why, in their current form, we will not be able to support those provisions either. We take phoenixing activity very seriously. We do need effective action against phoenixing activity, activity where people try to avoid paying debts that they have incurred by shifting funds from one company to another when they have an interest in both companies.
People who want to avoid paying their debts should have the book thrown at them but you have to make sure that the measures that you put forward properly target that activity and do not just catch everyone. That is our concern with the provisions in this bill. This is far too broad a brush. It is not adequately targeted and it is just yet another demonstration that this government—even after its own members told them that they needed to have another look—is not able to do a job professionally and competently.
I finish where I started. This is the most incompetent, the most dysfunctional government since Federation. Even Labor voters across Australia are embarrassed by the incompetence of this high-spending, high-taxing government. This bill is another demonstration of a government that has lost the plot, that is completely chaotic, that does not know what it is doing, that does not know whether it is Arthur or Martha. One day it says we need to reduce a particular tax and then it wants us to double it. One day it is in the bill then it is out of the bill. It has not got a clue. (Time expired)
The Tax Laws Amendment (2012 Measures No. 2) Bill 2012 is an important bill and there are at least nine speakers who would like to make a contribution. Of course, that is what this parliament is all about. We as senators come here representing our states, representing the people who have sent us here. These people make representations to us and expect and ask us to make sure that their concerns about this and other bills are raised in the parliament. Indeed, for those listed to speak on this bill—and the voters they represent—regrettably few are going to get the opportunity because, by arrangement between the Greens political party and the Australian Labor Party, this bill is another one of the 36 bills this fortnight that have been guillotined. That is, for those listening to this debate, it has been truncated. The normal arrangements where you debate bills fully have been denied to the parliament by the Greens political party and the Australian Labor Party. It is rather unusual that the Greens should be part of that because in former days they used to complain long and loud when there was any suggestion of curtailment of free speech in this parliament. But now the Greens seem to have had another thought, at the behest no doubt of their left wing colleagues in the Labor Party.
This bill will not be fully debated. This parliament will not do what it is meant to do—that is, to fully assess every particular aspect of a bill. It is not just this bill; there were three previous bills that I was listed to speak on. The passenger movement charge bill had a sum total of 40 minutes for debate in the parliament—a bill that does so much to harm the tourism industry in Far North Queensland, where Senator McLucas comes from and where I come from, the Whitsundays and the Gold Coast and Sunshine Coast in my state of Queensland; a bill that will do enormous damage to tourist industries and small businesses, and will impact on the inflow of overseas tourists. Yet what did we have? We had 40 minutes to debate it in this chamber.
Listeners might remember that when Ms Gillard eventually became Prime Minister of this parliament she told everyone this was the new paradigm: 'We are going to have openness and accountability'—that nothing would be done behind backs; everything would be fully explained and fully debated. Here we are in this fortnight alone, because of the Greens and the Labor Party, with 36 bills curtailed, guillotined, so that senators are denied the right to fully address the issues.
I am concerned about these bills because the changes proposed in schedule 1 are not properly directed at phoenix activity, which I will come back to later. This was one of the intentions of the government in introducing this bill. We do not think it properly addresses the issues that the government are trying to address. Further, I believe these measures are broad based; they are not properly targeted. If implemented, they will impose very onerous obligations on company directors that would have those company directors more focused on compliance rather than on performance on behalf of their shareholders and the people whom they represent—the reason that they are directors, which is to try and get a good return for investors.
As my colleague Senator Cormann, the shadow Assistant Treasurer, has mentioned, there are retrospective tax changes here, and the coalition have always had an abhorrence for retrospective tax changes. Senator Cormann mentioned that we could probably support that aspect of the bill if the tax changes were not to be retrospective. We could talk for hours on the evils of retrospective taxation. But I think most senators understand, and indeed most of the Australian public understand, that proper governance requires you to know in advance what you are responsible for, not to actually take a course of action and then find out later that the government has changed the rules some time previously. They are abhorrent and should not be agreed to. Indeed, as Chair of the Senate Standing Committee for the Scrutiny of Bills, I can say that these retrospective changes are something that the committee is always concerned about and we continually draw to the attention of parliament any retrospective issues.
The one good thing I think you can say about this bill is that it does not now contain the schedule 4 that was originally proposed by the government. The government have withdrawn schedule 4. It was such a dodgy proposal that the Labor Party could not even get their mates in the Greens political party to agree with them on that. As Australians, we can be grateful for small mercies.
As Senator Cormann also pointed out, during consultations with the industry on the exposure draft of the 2010 legislation, industry warned the Treasury and the government that they had not got their costings correct and that the proposed changes would lead to much higher deductions being claimed, which would lead to a reduction in revenue. But this government are so arrogant and so incompetent that they ignored that advice from the industry and went ahead anyhow, and now we find out, thanks to the House Standing Committee on Economics, that if it is not fixed today it is going to cost $6 billion. The government were told about that just two years ago.
It shows again and again that this government simply cannot be trusted with money and they cannot be trusted to keep their promises. We all remember that this government are only in place at the moment because on the eve of the last election Ms Gillard promised the Australian nation solemnly, and what everyone thought was sincerely but which clearly was not, that there would be no carbon tax under a government she led. The people of Australia said: 'We don't want a carbon tax. We know it will destroy the Australian economy. We know it will do absolutely nothing for the environment.' Australians said, 'We know Australia emits less than 1.4 per cent of the world's carbon emissions. We know that China is opening one coal-fired power station every week.' So we know that Australia reducing its 1.4 per cent of world emissions by five per cent by 2020 will not make one iota of difference to the global environment. So Australians sensibly said: 'Good. We don't agree with it.' Neither does the Labor Party, neither does the Liberal Party and neither does the National Party. The Greens political party do agree with this. At least they are honest. They got—what was it?—11 per cent of Australians to agree with them. But the rest of Australians said, 'No carbon tax,' because Ms Gillard and Mr Abbott had both promised there would be no carbon tax. But purely for the purposes of retaining power Ms Gillard breached her solemn commitment to the Australian public and we know that in a couple of days time Australians are going to be burdened with the world's largest and broadest carbon tax—a tax that will do nothing for the global environment.
That is why the people of Australia no longer trust the Labor Party with money. Nor do they trust their word. It matters little these days what Ms Gillard or in fact any member of the Labor Party says. Australians know that you cannot take the word of Australian Labor Party politicians. Whatever they promise, Australians know there is no commitment to the words that come out. Of course, that is reflected in opinion poll after opinion poll. We all say we do not take notice of them, and we do not, but there are so many opinion polls and they cannot all be wrong. The Labor Party vote now sits at around 23 per cent, just a little bit above the Greens political party vote. Surely the Labor Party should understand that they are doing it wrong.
As I said earlier today in another debate, perhaps I am maligning Ms Gillard. Perhaps she was being truthful when she said, 'There will be no carbon tax under a government I lead,' because there is every indication that, come 1 July, she will no longer be leading the Australian government. It will be Mr Crean, Mr Shorten or some fill-in patsy, I might say.
Or Mr Rudd. Actually, I think you are right, Senator Bernardi. It is probably more likely to be Mr Rudd taking over, awaiting the eventual electoral slaughter. My guess, Senator Bernardi, is that Mr Rudd will take over. He will immediately say: 'I made a mistake on the carbon tax. We're not going to introduce it and we will go to an election.' There is my tip. That might at least stop the slaughter that will happen to the Australian Labor Party. It will not change the result of the election, but it may save one or two of the senators opposite who clearly know that they will not be back here after the next election. And why? Because of the Labor Party leader's broken solemn promise and because of the financial mismanagement of this government that I highlight in this particular bill before the chamber.
The government was warned two years ago that the legislation they were then putting in place would lead to a reduction in income, and we now find that that impact was in the order of $6 billion. That is typical of the Labor Party's financial management. You will recall that when the Howard government took office in 1996 there was a $96 billion debt—some of it hidden, I might say—to greet the new Howard government. Over the next 10 years the coalition, through good management and a tightening of the belt, paid off the $96 billion and actually put another $60 billion or $70 billion into the bank—$60 billion in credit. Within three short years the Labor Party turned that $60 billion credit into a $150 billion deficit, rapidly rising towards $250 billion.
Labor's debt is costing Australians $25 million each and every day for interest alone. Can you imagine if we had $25 million every day to build a new hospital, to build a passing lane on the Bruce Highway, to reduce the passenger movement charges that the Labor Party have just increased because of their financial incompetence? Can you imagine what you could do with $25 million every day? That is the $25 million that the Labor Party are spending on interest alone to foreign lenders because of their incompetence in financial management.
That incompetence is clearly demonstrated in the bill before the parliament at the moment. Here is another $6 billion. Who in the Labor Party cares? 'It's only $6 billion—it doesn't cost us.' No-one in the Labor Party has ever had a real job, or very few of them. They have either been union officials or staffers for another politician here or in another place. Most Labor politicians do not understand what business is about. They do not understand what it is like to make your own way, to have to make your books balance, to make sure that your business earns more than it spends. Can you imagine if that applied to the government—that you had to earn more than you spent? Here we are, approaching $250 billion of debt, and the Labor Party, supported by the Greens political party, seem to think that they know what they are doing. This bill proves that they do not. They are correcting past errors. I had a lot more I wanted to say on this but, because of the truncated debate due to the guillotine put in place by Labor and the Greens, I am not going to take my full time because I know my other colleagues desperately want to speak on this bill. So I will conclude there, urging the Senate to vote against this bill for the reasons that have been mentioned.
I thank my colleague Senator Macdonald for making some time available before the time comes to truncate this debate. I rise today to speak on the Tax Laws Amendment (2012 Measures No. 2) Bill 2012 and the Pay As You Go Withholding Non-compliance Tax Bill 2012. This legislation will add to the sense of confusion and the lack of confidence that now hangs over much of our economy because of this government's mismanagement. With the introduction of an economy-wide carbon tax, what Australia does not need is more legislation to weigh down our economy. We in the coalition do not support passing these bills in their current form.
I would like to first turn to the issue of adding indiscriminate liability to all of Australia's directors and the considerable burden to business that this obviously represents. Included among the measures of this legislation is making directors personally liable for unpaid superannuation. This legislation extends director penalties that cannot be discharged by placing a company into administration. It would also make directors and associates liable for PAYG withholding non-compliance tax where a company has failed to pay.
The key issue is the manner in which protective action can be undertaken which is specifically directed at and focused on phoenix activity. In this sense, the government's current bills continue to be flawed with their broad based, non-targeted approach. This government are refusing to change the legislation because of their own political agenda. They have pushed on with these measures despite the widespread concerns from many key stakeholders. Poor consultation has been a hallmark of this government and this is no exception.
For instance, on 4 June 2012, which was only a matter of weeks ago, Mr John Colvin of the Australian Institute of Company Directors made a great contribution to this discussion; however, it has gone unheeded. I note his comments to a House of Representatives committee on that day. He said:
We are disappointed that since the last time the Australian Institute of Company Directors appeared before the committee on the same issue, the government has not made significant changes to the original bill, nor has it picked up all of the recommendations of this committee, particularly the phoenixing recommendation.
That is very clear. I will refer to some of his other comments a little bit later. The measures intended to address phoenix activity have not appropriately targeted that activity. The liability would indiscriminately apply to all directors across the board. We in the coalition are very concerned about this.
Unfortunately, it is typical of this government to burden all directors with liability and shift off the responsibility and make everybody accountable and say: 'For the limited activity that takes place in the bad sector of any industry, we will apply it to the whole of industry. We will apply it to all of commerce.' This is regardless of their guilt and due to an unsuitable definition of the activity that would appropriate it. Again, Mr Colvin raised this point:
… as we have said on numerous occasions, the problem with this bill is it is not confined to fraudulent phoenix operators. By failing to define fraudulent phoenix activity, it instead targets all of Australia's 2.2 million directors including those who volunteer their time to work for charities and community organisations. Following submissions to this committee last year, it recommended the government investigate whether it was possible to amend the bills to better target phoenix activity. Yet the government has made virtually no attempt to target phoenix activity in revising the bill.
The most glaring error in this legislation is the indiscriminate proportioning of liability and the possibility of holding new directors liable after the fact.
Again, I will refer to comments made by Mr Colvin of the Institute of Company Directors. He said:
No person in Australia in any occupation should commence a new job or a new position only to find that within 30 days they become personally liable for a breach that occurred before they commenced work in the role, which involve acts which they, by definition, cannot have taken part in and cannot be held culpable for. We are of the view that applying automatic liability on new directors for acts of the company which occurred before they were a director is particularly offensive to the rule of law.
Yet we see no accommodation of those comments from an organisation representing 2.2 million directors around this country. It is an abrogation of what is a commercial responsibility. This government's measures will make potential directors think twice about taking up a position on a board. These measures ignore the fact that the recruitment of highly skilled directors is an internationally competitive process. Inevitably, this will have long-term ramifications for Australia and the calibre of directors that we attract to this country. This liability for the past would serve to discourage potential directors and pose burdensome requirements on businesses, especially charities and not-for-profits that are limited by guarantee. In fact, there are around 11,700 companies in Australia that are limited by guarantee. It is not surprising that this Labor government wants to lump directors of companies, even those where there is no illegitimate activity, with undue liability. I see Senator Sinodinos has joined us for the discussion. I look forward to his contribution and his input into this policy, because surely he will have something that the government can learn about from his many years in this sector. We in the coalition are concerned about phoenixing activity. 'Activity' is the key word. We support targeted legislative initiatives that are efficient and effective in dealing with the problem; however, this Labor government bill is neither efficient nor effective. Again, lack of efficiency and effectiveness are hallmarks of much of this government's legislative agenda. I think we are up to the guillotining of 125 bills today, which certainly marks a record not to be proud of.
As someone with a background in business, it is important I now discuss the significant costs in the proposed regulatory compliance. Through massive increases in red and green tape, this government has been holding Australia back. This legislation imposes exactly the sort of blunt compliance that distracts directors from concentrating on the performance of their companies. Australia cannot afford more regulatory costs right now; we are on the eve of introducing one of the most fraudulent taxes this country has ever seen. We in the coalition are not convinced that the government has adequately checked parts of this legislation. Specifically, I refer to the productivity costs associated with the additional indiscriminate duties imposed on directors who are not involved in phoenixing activity. This government has not produced a regulatory impact statement which analyses the costs of these measures in how they may impact on these companies, nor has it produced one for the economy as a whole. It is: grab a handful of wheat and throw it at the side of the barn. Yes, sure, it will all hit the barn, but it will not make any difference. You will spray it—you will achieve the objective; you will hit the barn—but you will have sprayed it right across with a handful of wheat. It just shows how insincere they on the other side are about managing business effectively and economically.
That brings me to the issue of retrospective taxation. We on this side of the chamber have a very strong in-principle opposition to retrospective taxation. If it is to happen at all it must have incredibly strong justification. This government has not made a strong enough justification for the retrospective application of the proposed changes contained in schedules 2 and 3 of the Tax Laws Amendment (2012 Measures No. 2) Bill 2012, which is in relation to consolidation of tax cost-setting arrangements and related charges to taxation of financial arrangements. Schedules 2 and 3 show the laziness of this government. The government is attempting to use the legislation to retrospectively extract taxation from past years, reaching into our lives backwards and forwards, anywhere it can. These government measures will, sometimes years later, persecute those who acted lawfully and in compliance with the prevailing laws of the time, which creates great uncertainty for business and increases Australia's risk profile as a good place to do business.
We work in a global economy. The legislation as it currently exists is out of step with legislation around the world. There is the irony of introducing an NBN so we can be at the so-called world's edge of all the magical and wonderful things that it is going to bring to us, yet at our core, in our structure, all we are doing in the way we regulate business is throwing out a boat anchor to drag business down even harder and further. Those on the other side just do not understand business. If you asked those people on the other side who had had more than five years in a private enterprise business to put their hands up there would not be one hand go up—certainly not in this chamber at the moment.
This Labor Party policy will impact on the financial viability of investment decisions, with all of the serious negative flow-on effects this will have for jobs and the economy as a whole. That leads me to my concerns about the increased perceptions of sovereign risk. How can the erratic behaviour of this government inspire confidence? It is the rabbits in the headlights approach, which says, 'Which way did they go? What are we going to do? We'll go retrospective. We'll do this—actually, we'll ignore that. We'll ignore these amendments—actually, they're good amendments but they're from the opposition. No, we can't do that; that'll look bad. It'll be good for Australia but we won't do it. We just won't do it.' How can overseas investors trust a government that promised never to introduce a carbon tax? 'There will be no carbon tax under a government I lead.' Every time you on the other side hear that it must chill you to the bone. And, for that matter, why would ordinary Australians trust a government that promised never to introduce a carbon tax? How can the mining industry trust it? Labor was not going to have a Minerals Resource Rent Tax. Let us also not forget the great uncertainty the government's mining tax is creating around investment by miners in this country and around attracting foreign capital to this country to start mines. The Labor government's application of retrospective taxation, and the breaking of key promises, totally undermines Australia's economic credibility. In international forums people must sit around and giggle about all the resources and all the capacity we have in this country, yet we seem to be governed by the Gillard Labor government's undisciplined, unthinking, uncaring approach to business. The government is also showing that it is unconcerned about Australia's international competitiveness. Along those same lines, we still have to compete with countries in South America and all over the world that have also got quarries, IT industries and manufacturing. On top of the world's biggest carbon tax, it is using this legislation to double the withholding tax rate. Again, this undermines Australia's reputation as an attractive destination to invest in with certainty. It puts Australia out of step with comparable rates in the Asia-Pacific region. It sends offshore based companies with investments in Australia down tax-haven rabbit holes in an effort to search out ways of minimising their tax so that they can at least justify to their boards, located elsewhere around the world, why they are doing business in this country.
These measures by the Labor Party would see Australia lose its position as 'the leader of the pack' when it comes to the headline rate of tax. This government seems as though it is trying to derail our long-held objective of becoming a leading regional financial services hub in the Asia-Pacific region. This brings me to my next point, and it is a very important one for those opposite. This legislation presents a risk to billions of dollars in existing investment and subsequent government revenue.
The government asserts that this measure would raise $260 million over the next four years. Yet this has been brought into serious doubt in the analysis conducted by the Allen Consulting Group—not some fly-by-night consulting group but a very well respected commentator on these matters—for the Property Council of Australia. This was provided to the House of Representatives Standing Committee on Economics as a confidential submission. This analysis showed that the proposed increase in the final withholding tax revenue from MITs would have a 'profound adverse impact' on the economy, without raising the expected revenue. It was also found that, if there were a $1 billion drop in investment as a result of the increased tax, the net tax revenue in 2015-16 would be $35 million. This would be due to decreased receipts. This is less than half the $75 million predicted by Treasury. It again raises questions about the unforseen implications that this government's policy would have on Australia. And I do not need to go into the Treasurer's forecast budget surplus, which is so finely balanced and yet we see bills like this, ones that without the amendments that the coalition are going to put up would put all of these things in peril. But I guess you on the other side all know that and you just think you will manage it then: 'We'll get some spin doctors out and we'll manage this as to the surplus so that it will be somebody else's fault.' So it will be somebody else's fault, won't it? It will be the fault of somebody in Asia or somebody in South America. It will be: 'We didn't plan on this. We didn't plan on that.' So that $1.4 billion surplus due to be coming to fruition next year will evaporate.
I go back to the Allen Consulting Group analysis. They also found that by 2015-16 the increased tax would reduce GDP by $580 million and cost more than 4,600 jobs a year. Is there nothing that this government cannot put its hand on that reduces employment in this country? It just attacks everything in industry. What did they ever do to this government that it would keep putting the dead hand of bureaucracy across them wherever they go? Surely the government cannot proceed when there is strong evidence of the adverse impact of these measures on our economy?
In summary, I have outlined how these bills must be opposed. This is on the basis that they unduly increase taxation, propose retrospective measures without proper justification and give rise to automatic and indiscriminate liability to directors. I hope that the government will swallow its pride and suck it in and say, 'Well, the grown-ups in the room are the ones that actually understand business and they've got a few reasonable suggestions and we'll take them on board and we'll do the right thing by Australia.' I hope that this government will just get on with it and say, 'We shouldn't ignore Senator Cormann's good work on this,' and that there is a bit of goodwill. I hope that they understand that these bills in their current form are just not going to cut it when it comes to serving Australia's best commercial interests. I will sit and let my other colleagues, who are plentiful, take the debate further.
Thank you for that powerful speech, Senator Edwards. You stole all my best lines! That having been said, there is so much in this government's approach to taxation policy that even I can make a contribution to this debate. The first point I would like to make is that I am surprised that the Tax Laws Amendment (2012 Measures No. 2) Bill 2012 contains a number of measures which, I suppose, taken together almost exemplify this government's approach to taxation policy generally. We are looking at a series of measures which impose retrospective elements and a series of measures which impose onerous new obligations. Thankfully, we have been saved one measure which was withdrawn in the House of Representatives regarding withholding tax on managed investment trusts. This goes to the heart of the way that this government does taxation policy and people in the community and people who are out there listening to this debate should be very concerned about the approach that the government takes to these matters.
I turn to the Pay As You Go Withholding Non-compliance Tax Bill 2012 and schedule 1 of the Tax Laws Amendment (2012 Measures No. 2) Bill 2012, which makes directors personally liable for unpaid superannuation, stops director penalties being discharged by placing a company into administration and makes directors and associates liable for PAYG withholding non-compliance tax where a company has failed to pay. Ostensibly, these measures are directed at phoenix like activities. Those of us on this side of the house fully support efforts to stop companies being put into administration in such a way so as to remove them from their lawful obligations. We do not like phoenix activity. People such as Senator Fierravanti-Wells, in a previous profession as a solicitor, including during the time she spent with the tax office, was very much involved in trying to unearth examples of that sort of activity and combating it. No-one has an argument with that, but here we have a bill which is a sledgehammer to crack a nut. The reason I say that is that we are putting further onerous obligations on directors and I think this is where there is an element of unrealism in the approach of the government.
The reason I say that is that, as part of my role as Chairman of the Coalition Deregulation Taskforce, I have been talking to companies across the country, to top company directors and also to people who might be said to be a bit more objective about the role and responsibilities of company directors. They are saying that company directors today face so many obligations that there is a concern about attempts to keep increasing those obligations, particularly in circumstances where a director may have no direct control over the matter that is of concern.
The Australian Institute of Company Directors have identified 700 separate pieces of legislation or regulation that they believe imposes obligations on company directors. So things are getting to a stage where many people are hesitating to become directors because of the obligations they are being asked to take on. That is not necessarily a reaction to the specific points being made here but it is like all these things: if you add further regulation or layers of regulation on top of what is, if you like, an iceberg of regulation, they can be the straw that breaks the camel's back. Many directors give us that feedback. So often with this government, with all respect to my colleagues on the other side, there seems to be this lack of understanding of how the corporate sector works.
We saw an important example of that when this government rushed through measures to do with employee share ownership, which were the subject of considerable brouhaha after they were introduced as part of one of the budgets a few years ago, were considerably unrealistic and did not seem to understand the underpinnings of these schemes. I think they had to be substantially redrawn and modified. That was a concern, because that betrayed a mindset of not understanding the way some of these schemes work in the private sector. We as a parliament and as, if you like, stewards of the public interest have an obligation to ensure that private operators, private interests do not in some way subvert the public interest or get an undue tax advantage. But the way that those bills were structured and the way those schemes were attacked showed a lack of understanding of how the corporate sector works. Again, I think there has been a lack of understanding here about the obligations already being put on directors. As I said, we on this side of the house support targeting phoenix type activities.
One issue with the bill, as I see it, is that we keep having ad hoc piecemeal measures introduced to deal with phoenix activity, but we have yet to see a comprehensive definition of 'phoenix activity'. The government stands accused of having continually failed to target measures applying to directors of phoenix companies, without imposing onerous and new obligations on directors of the vast majority of companies that continue to comply with their legal obligations. This is all a matter of perspective and proportionality. This idea that the business sector out there is spending its whole time trying to find ways to get around the laws of the land is not right. In every section of society there are bad apples and we should go after them. But in business you have to build trust with your customers, suppliers, employees and others. In building trust you have to show that you will meet your obligations.
Every parliament and every government have an obligation to understand the broader role that trust plays, particularly in a market type society. That is why, as I say, there is a lack of proportion, a lack of perspective in some of these measures. The coalition will continue to strongly oppose fraudulent phoenix activity and we will support all appropriate measures to stamp out this practice. However, this bill imposes too many obligations on too many good people who are trying to do the right thing.
In relation to a second set of measures, the changes to the taxation of financial arrangements provisions, let me first make the point that TOFA, as it is known in the vernacular, was a long time coming and very complex in the way it was put together. That is not a reflection on the people who put it together. We are talking here about an inherently very complex set of arrangements. No-one on this side of the chamber underestimates the difficulty of framing measures dealing with aspects of the taxation of financial arrangements. But that said, what we are dealing with here is a very clear, if you like, abrogation of the government's duty in that they are introducing changes which are retrospective to the existing tax law. These are being done both as a revenue protection measure and as a revenue gain over the forward estimates. They relate to a consolidation regime which treats a group of wholly owned or majority owned companies and other associated entities such as trusts and partnerships as a single entity for tax purposes so that the head of the entity group is responsible for all or most of the group's tax obligations, including the lodgement of tax returns and the payment of tax obligations.
This bill operates to retrospectively reverse the changes made to the consolidation regime in 2010:
For corporate acquisitions that … took place before 12 May 2010—
which, I think, was budget day—
the changes prevent the retrospective operation of unintended effects of, and perceived weaknesses in, amendments to the law that were made in 2010. These changes are necessary to protect a significant amount of revenue that would otherwise be at risk.
In other words, this is a retrospective tax increase to correct legislative errors the government now accepts that it made when changing the consolidation tax cost-setting arrangements in 2010—clearly a mistake of the government's own making. The government had been warned before the 2010 changes were introduced that it had got this wrong, but it refused to listen. This is of a pattern where consultations occur with the private sector but where, essentially, you sometimes wonder whether it is for form's sake or for going through the motions or for ticking the box, as opposed to having a genuine dialogue and listening to each other. There is nothing worse than having some sort of dialogue of the deaf when it comes to consultation between government and stakeholders.
Sometimes, unfortunately, I find that governments can bring the attitude to the table that the people on the other side, because they are in the private sector, are potentially tax evaders, tax dodgers and the rest and therefore they should be treated as being guilty and have to prove their innocence.
Thank you, Senator Bernardi. On the money, as usual.
During the consultations with industry on the exposure draft of the 2010 legislation, industry clearly warned Treasury and the government that they had got their costings wrong and that the proposed changes would lead to much higher deductions being claimed, which would lead to a reduction in revenue. What has happened? It has come about that these people in the private sector, speaking sincerely in the context of consultations, made the government aware of the potential for significant deductions. The government did make some changes in the Senate in 2010, I do not know at whose behest, but they still did not address the key issues that had clearly been identified during the consultation process, particularly around the costings of the measures, so these predictions have come true.
They remind me very much of what happened with the mining tax, where, in a windowless room in Treasury or somewhere else, the gang of four—Gillard, Swan, Tanner and Rudd—sat down and worked out the resource super profits tax with a small group from Treasury. They did the modelling, and then what happened is that when they took it out there—
I am sorry. No, what happened is that they put it out there, and guess what? The mining industry took a nanosecond to look at this and to see that the government was going to accrue vastly greater revenue than its model was suggesting, so they saw that this would have a much more swingeing impact on the mining sector than the Treasury had assumed, because the Treasury did not understand the mining sector in regard to the modelling of the impacts of the resource super profits tax.
Sorry, Madam Acting Deputy President. As usual, you are right, and I will proceed. It reminds me very much of the mining tax exercise, where either the consultations with the private sector did not occur or the private sector was not listened to. You get the situation where the government has to hurry back to the parliament and has to put together these measures in order to protect this revenue and protect a revenue gain in the forward estimates.
When the 2010 legislation came into force, the industry predictions came true. Companies did take advantage of the higher deductions permitted by the government's flawed legislation, exactly as had been predicted, and there was a collapse in anticipated revenue. The Board of Taxation looked into the matter and confirmed everything that the government had previously been told about the higher deductions and the associated lower tax revenue. So there we have it: another botched consultation; another botched listening exercise.
Retrospective legislation is pernicious. If people are moving ahead on the basis of what they believe to be a set of settled arrangements, there is nothing more unsettling and more a breach of trust than to suddenly find themselves liable for something that they had had peace of mind that they were not going to be liable for. I remember that John Howard was burnt considerably in the early eighties when he introduced some retrospective tax legislation to do with the waterfront, to do with some of the bottom-of-the-harbour schemes that were uncovered as a result of the Royal Commission on the Activities of the Federated Ship Painters and Dockers Union. He paid a high price for years, particularly in Western Australia, where they are great federalists and great believers in following the principles of tax law. People should have learnt from that exercise that retrospectivity in the tax law, as in other parts of the law, does not serve the interests of the government or the governed. It is a breach of an important trust between taxpayers and the government. Breaching that principle alone, I think, should condemn this particular bill.
I turn now to the managed investment trusts which were withdrawn from this bill in the House of Representatives, I gather at the behest of the Greens. It is very interesting how the Greens, on occasion, can be greater economic rationalists than the government—sorry, yes, they are the government. The Greens had acknowledged, had recognised, that if the measure went ahead to increase the withholding tax rate—
to double it from 7½ to 15 per cent, that would have a chilling effect on investment, particularly in areas—they were concerned—around renewable energy but more broadly around investment in critical infrastructure in Australia. This is after only a couple of years. The late lamented Kevin Rudd and the talented Chris Bowen reduced this tax to 7½ per cent as of 2010-11, only for Julia Gillard, Bill Shorten and David Bradbury to try and double it two years later.
One of the important things as a principle in tax policy and economic policy generally is certainty and stability. Continuity, consistency and credibility are what the Organisation of Economic Co-operation and Development used to talk about, and that is important in policy settings. If you are sending a message, as my colleague Senator Edwards said, that you want Australia to be a financial centre, you cannot chop and change on these measures. The government has chopped and changed on these measures in this budget because it needed revenue for other things, just as it transmogrified a company tax cut—
Madam Acting Deputy President, I entirely agree with you. It transmogrified a company tax cut into further cash payments to households in order to shore up its support ahead of the introduction of the carbon tax on 1 July. You cannot make tax policy on that short-term a basis.
Yes, governments have to have flexibility, a capacity to change policy settings over time in response to changing circumstances, but we are talking here about a measure that was trumpeted as part of our efforts to promote Australia as an international financial centre. Lamentably, our efforts to do so have gone backwards in recent years. Singapore is growing as an international financial centre. Hong Kong is growing as an international financial centre. Shanghai is growing as a financial centre. Some of that growth is inevitable. As more and more of the axis or centre of gravity of world economic activity shifts towards East Asia, it will be centralised in places like Shanghai and Hong Kong. But the fact of the matter is that, with our highly educated workforce, our experience in the financial services sector, our first-class lifestyle, our IT base, our advantage in time zones and all the rest of it, we are in a good position to be an international financial centre, but we are losing that to Singapore, just as in a number of areas in recent years we have been losing our competitive edge. Our costs are going up relative to our competitors and today our competitors are not the US, the UK or Europe. That is not who we benchmark ourselves against in terms of economic competition. Today it is very much Asia, Africa and Latin America. Places in Africa which are getting their governance systems right and are promoting more favourable regimes for foreign investment are starting to attract, for example, big mining investment. If you are a miner in Western Australia you will look seriously at the costs and benefits of doing work in Africa as opposed to do further work in our own region, including within Australia.
The issue of competing against areas in our own backyard in industries like financial services is critical. Anything that sends the signal that policy settings are volatile, are easily changed and are at the whim of government is not good enough. We have to have certainty, stability and continuity going forward. These particular measures were held up by the Greens in the lower house and I commend them for that. They saw the economic implications of this in a nanosecond and said, 'We have to have a further look at all of this.' Again I say I commend them for it. We encourage the government to rethink these sorts of measures and to create greater certainty and stability for our investment regime.
Let me say something about the mining tax. Over the last couple of days we have had revelations by UBS, through the work of a very respected mining analyst, that they expect this tax to raise less than half what is projected in the government's forward estimates. This is a concern because there are obligations for increased government spending which are linked to the revenue generated by the mining tax. We have this volatile, cyclically-sensitive tax revenue source which is tied to relatively certain future government spending obligations. That is increasing the vulnerability of the budget to the economic cycle. It is creating a further budgetary headache down the track and will come on top of the budgetary headache created by the carbon tax. Not only will we have fixed spending associated with the carbon tax but also we will have the danger that the price—once we go to a floating carbon tax when it becomes a carbon price—will fall and will reduce revenue available to governments. These are budgetary issues which are looming on the tax front and this discussion is an opportunity to raise those points.
I rise to speak on the Tax Laws Amendment (2012 Measures No. 2) Bill 2012 and the Pay As You Go Withholding Non-compliance Tax Bill 2012 and state from the outset that the opposition is opposed to these bills, with good reason, which I will get to in a moment. I would like to pick up on a point made by Senator Sinodinos in his excellent contribution. Senator Sinodinos pointed out that Australia's competitive edge is being eroded and that our new competitors are more likely to be in Asia and in parts of Africa, rather than in Europe. Unfortunately, this government seems intent on taking Australia down the European path, the social democratic experiment, where an increasing number of people are absolutely dependent upon handouts from government.
The entitlement mentality is meant to keep people dependent upon government so that government can exercise influence and power in areas where people like me and most of us on the coalition side think it is inappropriate to do so. We see that in any number of government programs, with cash splashes and billions of dollars being squandered in a number of areas. It is almost a case of legislate first and think later. These bills are indicative of the history of the last two governments, the first led by Mr Kevin Rudd and the recent one led by Ms Julia Gillard. We have a history of programs that have failed, have been ill-conceived and whose consequences have not even been considered. Had they been considered, the government would have accepted some amendments. They would have accepted at face value and in good faith statements by the minor parties, the Independents and, indeed, those on the coalition benches who are intent on ensuring that Australian taxpayers get value for money and that they get productive and worthwhile policy initiatives, rather than cooked up, half-baked schemes which have not been completely thought through.
There is a list of them, including the Computers in School program. We were told that a computer was the toolbox for the 21st century. Those computers in schools do not have the appropriate software or have not been installed properly, and some people are still waiting for them. We could go to the Building the Education Revolution, which was trumpeted as bringing schools up to 21st century standards. The problem with that is that schools which were apparently brought up 21st century standards were later closed down. Libraries were built for schools with one student. Thousands of millions of dollars were wasted and some have dubbed this the 'builders' enrichment revolution' because that is exactly what it did. It transferred huge amounts of money into uneconomic, unviable and uncompetitive projects. We are still, as a nation, dealing with the debt legacy from that one program in which approximately $8 billion to $10 billion are estimated to have been wasted. That is a small part of this country's debt.
When I look around I see schoolchildren up in the gallery who are wide-eyed and optimistic about their future. The unfortunate thing is that in just four years of this government we have gained $150 billion worth of debt. We have seen our net position deteriorate from a $70 billion net surplus of assets into $150 billion worth of debt.
Senator Jacinta Collins interjecting—
Senator Collins says it is not the end of the world—
Senator Jacinta Collins interjecting—
She said it is the end of the world, being sarcastic—
Government senators interjecting—
Thank you, Madam Acting Deputy President; I appreciate you putting an end to the squawking from the other side of the chamber. It demonstrates once again that empty vessels do make the most noise, because very few on that side of chamber understand anything about debt. If you go back through 100 years of federation, you would struggle to find a single Labor government that has paid back any debt or has left office with less debt than when it came in.
Labor's track record speaks for itself: the people on the other side of the chamber, this government, are used to living off other people's money, whether as politicians or as union bosses, with people rorting the system and with allegations of people using prostitutes and going out to highfaluting dinners—all on other people's money. That is the mindset that Labor are imbued with. They are inculcated with the notion of living off other people's money. It is an absolute disgrace. Where are the earners? Where are the people who are actually producing worthwhile things in our community? They are not found in the Labor Party, because their sense of entitlement is endemic. That is what the government is seeking to encourage amongst the populace—a sense of entitlement. I think that is absolutely wrong.
We could continue with their failed programs, of which these bills are another example. We could talk about pink batts, which cost $1 billion to roll out and burnt down some houses. There were poorly trained installers. It was ill considered. Another billion dollars was spent to remove the batts, and people lost their lives as a result—as I said, we had houses burn down. The minister responsible still sits in the cabinet; can you believe it? He still sits in the cabinet because they are too scared to remove him. They know he knows where all the skeletons are buried, so they will not do it.
We also have the abject failure of this policy of 'legislate first, think later', which is responsible for the armada of illegal vessels that have been hitting the shores of this country. It is an extraordinary indictment of this government that, under the Howard government, one, maybe two, maybe three boats would have arrived here in a year; we were told each boat was a policy failure. We have now had 194 boats since Ms Gillard became Prime Minister. We should have a birthday cake for Ms Gillard with 194 candles to celebrate her two years as Prime Minister of this country. It is an absolute disgrace. There are thousands of people dying at sea because of the poor policies of this government, but those opposite refuse to admit it.
We can go on to the minerals resource rent tax, which Senator Sinodinos also touched on. It was cobbled together by a small group who are all infected with groupthink; I do not think there is any question about that—
Senator Jacinta Collins interjecting—
Madam Acting Deputy President, I am not sure if you can hear the screeching from Senator Collins, but it is really quite disturbing and it grates. I am sure people—
I hope the people listening to the broadcast cannot hear the sort of vile abuse that I am receiving from Senator Collins. As I was saying, the minerals resource rent tax was concocted by a tiny group of people all infected with groupthink, where they pat each other on the back and tell each other what a great job they are doing. But of course they had not thought through the implications of the MRRT.
The examples continue with the National Broadband Network. We know that Senator Conroy—who has been in the same portfolio for some time and has very little to show for it—called for tenders for a national broadband network and did not receive any. As I recall, Telstra put in a one-page thing, which was a question about whether it was a tender or not. That was for a $6 billion rollout, as I recall, but I stand to be corrected. But, when nothing satisfactory came through, rather than accept the fact that $6 billion should be the limit, as was intended, Senator Conroy took an envelope and hopped on a plane with then Prime Minister Rudd. Mr Rudd was really, at the time, refusing to talk to any of his cabinet ministers. But Senator Conroy managed to lock him into a plane for a while and, together, they wrote up a $50 billion deal on the back of the envelope. Together they wrote up $50 billion of expenditure that the government is undertaking off the balance sheet, without a cost-benefit analysis, without a business case. It is an absolute disgrace. And they defended that, saying that it would bring us into the 21st century, just like they said about computers in schools, which was botched and a failure; just like they said about the Building the Education Revolution, which was botched, full of rorts and a failure; just like they said pink batts would; and just like they said green energy schemes and all those sorts of things would.
They also said that they would sort out illegal arrivals. They also said the minerals resource rent tax would pay for superannuation for all Australians. It will not. They do not understand. Superannuation is paid for by business employers. I made this point yesterday, which caused all sorts of consternation, because those opposite do not like to be mugged by reality; they do not like what they hear.
These bills continue this 'legislate first, think later' process. It is no way to run a government. It is no way to run a business. It is no way for a family to manage their own finances or to approach a particular problem. The ramifications of this are flowing right through our economy. As Senator Sinodinos said, we now have an increase in sovereign risk in this country causing a level of concern in international investors that I cannot previously recall in my lifetime. When I was a member of the financial advisory profession, I recall people saying they enjoyed the certainty, the security and the commonsense outlook that the Howard government provided. They felt they could invest in this country with a reasonable degree of trust that the economic outlook and policy directions would continue into the future. That was reinforced, might I add, when Mr Kevin Rudd—who was then pretending to be an economic conservative, in 2007—said there was not a sliver of light, not a cigarette paper, between the economic approach of the Howard government and that of the Rudd government. Well, we know that was simply not true, just like when Ms Gillard opened her mouth—you cannot believe anything that comes out of it—only a few days before the last election and said, 'There will be no carbon tax under a government I lead.' If that does not go down as one of the three great election campaign falsehoods in the history of this country, I do not know what would. It is right up there with 'the cheque is in the mail'. That is the sort of stuff we hear from the Labor Party. But the problem is that no-one believes what this government says, because they know the credibility of the Prime Minister is in absolute tatters.
That lack of credibility is further evidenced by the way these bills have been managed. The government cooked together these bills, which we are opposed to, and, on the eve of the debate, moments before the debate was to continue, it withdrew one of the important schedules, schedule 4—the doubling of the final withholding tax on managed investment trusts. I mentioned earlier the sovereign risk attached to this country. If people are going to invest significant amounts of money, they want to have reasonable confidence that the legislative environment and the general approach—'the vibe', if you like, in the words of The Castleis going to be maintained going forward.
How can people invest in managed investment trusts in this country when, having been promised a 7½ per cent taxation regime by Prime Minister Rudd, the Rudd successor is now proposing to put it up to 15 per cent? I am pleased it has been withdrawn, but that is not the point—the intention was for it to happen like this in the first place. The government did not think through the implications of this. It is unfortunate that it is the Greens who are the conscience of the government, but on this occasion I do commend the Greens—and that is a very rare thing for me to do—for putting their foot down and stopping this government from making an even bigger mistake in addressing these issues.
The government have withdrawn what they claim was a very important schedule—a schedule which, of course, was going to put up taxes. We know that this government love putting up taxes, because they cannot manage expenditure restraint. They have not been able to manage expenditure restraint at all. Instead of cutting its cloth to fit its purse, or the taxpayers' purse, they just likes to put taxes up and then hand out charity or entitlements or benefits to people they deem worthy. The problem is: that is not sustainable.
As I said at the start of my address, this is about the Europeanisation of Australia—making us more like Europe, where more people are dependent on government handouts. We have whole industries—the Greens' renewable energy industry, green power and those sorts of things—that are dependent on government subsidies in order to remain competitive and grow or even to be remotely competitive. That is why this government, with their intransigence and their swallowing of the extreme agenda on carbon dioxide and all the related misinformation about it, has done a disservice to Australia.
We know the carbon tax comes in on 1 July and we know there will be cost implications for families and businesses. We know that every business will be subject to the carbon tax in some shape or form, because electricity will be going up. There will be some one-off compensatory payments for those under certain income thresholds. But we know that this tax is going to continue and continue. Every time your local retailer turns on his fridge, every time your partner turns on the vacuum cleaner or every time they turn on the light, you will be hit with higher and higher taxes.
That is why there is a stark difference between the way the coalition approaches and manages government expenditure and the way this government does. We want to live within our means. We want to make sure that the Australian people have savings for a rainy day, not debt. That is why I am pleased that schedule 4 of this bill has been withdrawn. I am delighted because—whether it is the managed investment trust industry, local businesses, individuals or families—we cannot afford higher taxes in this country. That is the upshot. If we want to be competitive and if we want to continue to have a safe and stable democratic environment so that we can remain an attractive nation for investment, we need to have consistency, we need to make sure that our tax and industrial relations regimes are competitive and we need to make sure there is reasonable certainty about our future approach. That is the essence of the problem we face.
There is no certainty about the future approach of this government. They are just leaping from one crisis to another. They have no strategic agenda, though I did read today that yesterday in the caucus room Ms Gillard said she had a plan and put up a PowerPoint presentation. According to one right wag, some people tuned out as soon as the PowerPoint came on and so did not hear what the plan was.
Senator Jacinta Collins interjecting—
I am sure people like Senator Collins were paying very close attention to what the plan is, and that is probably why she is so cranky today and interjecting so vociferously. They know the plan—it is about the Gillard government clinging to power and doing whatever it takes to do so. I guess that those on the other side who have children and a semblance of an interest in the future of this country would be tearing their hair out, going: 'Oh, my goodness, what are we doing to the Australian nation? How long will it take for our legacy of dysfunction and hopelessness to be addressed so we can get this country back on an even keel?'
The Australian people clearly want to make sure that Australia does get back onto an even keel and onto a path of relative stability—one with opportunity, hope and reward for those who are prepared to invest in this country, rather than for those who seek to live off the proceeds of others. That, unfortunately, is what this government does. It is not about the people of Australia; it is about them clinging to the Treasury benches for as long as possible and doing whatever it takes to stay there. Former Senator Graham Richardson said that 'whatever it takes' is an appropriate approach to government. I do not believe that. I think there has to be some principle attached to what governments do. In conclusion, I think it is reprehensible for a government to impose retrospective tax penalties or a retrospective tax regime on Australians who have sought to comply with the law as it then stood. It is reprehensible. I condemn that approach being taken by any parliament, not just this one. I think it is wrong. If people are complying with a law at a particular point in time, they are entitled to the benefit of the doubt. Any decently minded person would have to stand against the imposition of retrospective tax changes such as those proposed in these bills. They are another example that this government seeks to legislate first and think about the consequences later. It is unfortunate that it is incumbent upon the opposition to do the thinking for this government, but what is worse is that the government refuses even to allow debate on so many important matters through its pernicious and rotten guillotining of these debates. (Time expired)
I would like to have spoken for some time but cannot because debate in this place is restricted, thanks to the government and the Greens. Once again we are on about tax—taxing the private sector, undermining the confidence of overseas investors by demonstrating that there is sovereign risk attached to this country and changing the rules. We are moving the goalposts halfway through the game.
When will this government learn that it is the private sector that drives our nation's wealth? That is where the money comes from; governments do not have money. The government is doing its best to cripple the very sector that drives our nation's wealth. I am proudly wearing a badge that says, 'I love small business.' Here is another tax that has been brought into this place simply because of the mess those opposite have made. Schedule 4 has been thrown out—thank goodness!—but those opposite want to make it retrospective. It is unbelievable to see how much of a mess they can make. They were warned by business. The business world warned the government in 2010 that this would blow up in their face, and it has. Once again the business world was right. Of course we do not expect the government to understand business—most of them come from the trade union movement; most of them have never run a business.
I have spent all my life in the private sector, in the small-business sector, Senator Collins—all my working life. You should get out there and learn about it. But, no, you are in here robbing the private sector again. You are anti small business. It will start again this Sunday with the introduction of the carbon tax, your broken promise. The Australian people will not forget that broken promise—they are not fools. They will put it in a saved file and, come the next election, they will square up to you for what you have done to the business sector in this country.