Coalition following Trump over fiscal cliff - Transcript, Doorstop

E&OE TRANSCRIPT

DOORSTOP

PARLIAMENT HOUSE, CANBERRA

THURSDAY, 21 DECEMBER 2017 

SUBJECTS: US  tax cuts, Malcolm Turnbull’s cuts to universities, Scott Morrison’s delayed action on petrol prices.

ANDREW LEIGH, SHADOW ASSISTANT TREASURER: Thanks very much for coming along today. My name’s Andrew Leigh, the Shadow Assistant Treasurer. Under the Abbott and Turnbull Governments, Australia has seen high inequality. We’ve seen home ownership fall to its lowest level in 60 years. We’ve seen wages stagnate. And yet the Liberals’ answer to Australia’s economic challenges has been a budget-busting corporate tax cut for big multinationals, paid for by raising taxes on middle Australia.

When they were first asked to show some evidence in favour of this, they produced research which showed that if you looked at the impact of a corporate tax cut for the big end of town, it increased household income by just 0.1 per cent in the 2030s if it was paid for by raising taxes on middle Australia. 0.1 per cent in the 2030s is hardly a pot of gold waiting the Australian middle class. It’s hardly a reason to be blowing out debt still further. It’s hardly a reason to be raising taxes on seven million low and middle income Australians, as Malcolm Turnbull plans to do.

Now the Liberals would have you believe that Australia’s company tax rate somehow ranks us the highest in the world. But the lie was given to that by analysis done by the United States Congressional Budget Office earlier this year. That analysis looked at the statutory corporate tax rate across the G20. It found that Australia had the 10th highest corporate tax rate in the world’s 20 largest economics – precisely at the middle of the pack. After the passing of Donald Trump’s tax cut, we’d move to ninth – still the middle of the pack. This analysis doesn’t take into account the deductions that are available and the effective rates that are available to companies. When the US Congressional Budget Office compared countries’ corporate tax rates on the average rate or the effective tax rate, which is the tax rate taken into account by businesses making investment decisions, they found that we ranked below average in the G20. And that will continue to be the case regardless of what the United States does.

Effectively, the argument that’s being made by the Liberals is that Donald Trump is doing it and we should follow Donald Trump wherever he leads. It’s absolutely clear from independent economic analysis what the Trump tax cut entails. We know from research done by the University of Chicago that the majority of eminent US economists believe that the Trump tax cut will add significantly to the deficit. It will be paid for in the medium term by the middle class and we know that, according to eminent US economists, that it won’t tangibly add to growth. So there are certainly similarities with the plan being spruiked here in Australia, with the snake oil plan being spruiked by Malcolm Turnbull and Scott Morrison, a plan too which in Australia would increase the deficit, would be paid for by the middle class and would not tangibly add to growth.

Now any comparison of corporate tax rates across countries also has to take into account a couple of other things. We don’t have state corporate taxes in Australia, whereas they do in the United States and will continue to do regardless of what the US Congress and Donald Trump have done. Moreover, most countries don’t have dividend imputation. It’s critical to realise what dividend imputation means. It entails around a third of the corporate tax revenue being handed back to personal income tax payers. So a 30 per cent rate with dividend imputation raises about as much as a 20 per cent rate without dividend imputation. In fiscal terms, that’s a critical distinction and one that you’ll never hear coming from Scott Morrison’s mouth.

Scott Morrison and Malcolm Turnbull want Australia to follow Donald Trump off the fiscal cliff. They are like lemmings, following Donald Trump off the fiscal cliff. The proposal that Australia should put in place a regressive, budget busting corporate tax cut is an economic mistake and one which Australia should not pursue. Under Labor, Bill Shorten and Chris Bowen have put forward responsible plans, closing tax loopholes around negative gearing and the misuse of trusts. We’ve said very clearly that we believe there are multinational tax loopholes that need to be closed. We know that one in three big companies paid no tax thanks to information handed down just as the same-sex marriage vote was taking place - how’s that for trying to avoid transparency? Labor believes in closing multinational tax loopholes, not in giving the big end of town a huge, unfunded corporate tax cut.

Happy to take your questions.

JOURNALIST: Dr Leigh, what’s the Labor position on the already legislated corporate tax cuts for businesses with a turnover of up to $50 million? Is it possible that Labor might seek to unwind that if you win the next election?

LEIGH: As Chris Bowen has made clear as recently as this week, Labor will have all of our fiscal policies set out for the Australian people before the next election. But frankly, it’s a bit rich to be asking Labor about these sorts of questions when the Government itself is making it up as they go along. One day they're raising income taxes on seven million Australians. The next day, the Prime Minister is out talking to the big end of town, promising middle income tax cuts. They don’t even know if they’re Arthur or Martha.

JOURNALIST: But there’s still no answer on whether you’re going to keep them or unwind them.

LEIGH: I have answered your question. We'll have our fiscal policies ready for the Australian people’s scrutiny well in advance of the next election.

JOURNALIST: Are you going to reverse the freeze on the cap on university funding?

LEIGH: Certainly, if you judge us by our record in office, you’d see that under Labor we saw a significant increase in university funding. Not only a one-quarter increase in the number of students at universities, but also an increase in per student funding. That overall increase – which by my recollection was around the order of 70 per cent during Labor's term in office - meant more people were able to go to university and boosted university research funding. Obviously our first priority is to fight the Liberals’ cuts to universities. Australia is not going to become a clever country by cutting university spending.

JOURNALIST: They don’t need legislation though, so it’s hard to see how you are going to fight them. It is not a commitment to undoing the $2 billion cut, is it?

LEIGH: Australians need to be clear with the Turnbull Government that it is just not on to be cutting university funding. We know the technological revolution is happening apace. You have a series of important speeches by Ed Husic, a valuable book by Mike Quigley and Jim Chalmers, talking about the challenge of automation that’s coming to Australia. Bill Shorten and Chris Bowen have been emphasising of the importance of ensuring our workforce is ready for the jobs of the future. Yet you have the Abbott and Turnbull Government dipping back into the old Liberal playbook, ripping money out of the universities, as though that’s the way to set us up for the future. We don't know precisely where the jobs of the future will be, but we do know that over the course of the last two generations, more and more jobs have been generated for people with higher levels of education. We need to be investing in universities, to make sure that young Australians are ready for the jobs of the future.

JOURNALIST: The Treasurer’s given the ACCC new powers to essentially scrutinise the whole supply chain in the petrol industry in an effort to keep prices down. Is that something Labor agrees with?

LEIGH: Labor has certainly been concerned about the possibility of price collusion in the petrol industry. We’ve had important research focussing on the Western Australian petrol market by a couple of  young economists at the University of Sydney and the University of  Melbourne, and that work has shown that far from big data putting power in consumers hands, it appears to have provided opportunities for petrol companies to keep margins higher. That research has suggested that motorists might be paying as much as 10 cents more per litre at the bowser as a result of what they called increased what they call "tacit collusion”. In response to that I argued in a piece for The Monthly earlier this year that we need to give the ACCC an independent market studies power. That's what its British counterpart has. That’s what the Harper Review recommended. Yet, the Government has been unwilling to put in place that simple recommendation. So we have have ad hoc measures such as the one today rather than the ACCC being able to act of their own volition. We also need stronger penalties to crack down on anticompetitive conduct. Labor's proposed, indeed, we took to the last election, a package of penalties that would see corporate collusive conduct penalised by higher penalties, as is done at the moment in the European Union. We do have a competition problem in Australia, let’s be frank about that, and the concentration in the petrol market is a part of that. But we need systematic changes, not the sort of ad hoc-ery that we see today.

No other questions? Thanks everyone.

ENDS


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