I believe we need to have comprehensive tax reform. Australia’s current tax system is destructive. Individuals on average incomes pay a staggering 68% of their income in various taxes, meaning they work nearly half the year just to cover government obligations. With median incomes at $67,000, many Australians are struggling.

We need reform to address the regressive nature of the tax system, which hits the less fortunate the hardest. Let’s strive for a fairer, simpler tax future for all Australians.

Transcript

In my first speech, in 2016, and many times since, I’ve called for comprehensive tax reform. The tax system in Australia as it exists is our country’s most destructive system, and not just exorbitant tax rates. I’ll give you some figures from the late 1990s and early 2000s. Someone on the average income paid 68 per cent of their income to government in the form of rates levies, fees, charges, special charges and special levies—68 per cent. That means someone’s working from Monday to mid-morning Thursday to pay the government. 

Since then, it’s got much more complex and more absurd, and some of the data I’ll give you is more recent. Some of the figures are indicative, not definitive. The ABS average income figure is $100,000. The median income figure is $67,000. Life is tough for people on the median. In 2015 Joe Hockey said that a typical person in Australia pays 50 per cent in tax—works from January to June to pay the government, and then gets to keep from July to December. Basically, as I said, people are working at least half the year—probably 68 per cent of the year—for government. 

Then we think about the tax. Tax on a house, according to a News Corporation article a few years ago and according to recent figures, is 45 to 50 per cent of the house price, The effective tax rate is 80 to 100 per cent. International accountant and auditor Derek Smith in Queensland says that 50 per cent of the price of bread is tax, which is an effective tax rate of 100 per cent. Petrol excise and tax varies. At 70 per cent, the effective tax rate is 230 per cent. So, a worker on the average income on payday gives 21 per cent of his or her gross income to the government. With what’s left—that’s 79 per cent—she the next day wakes up in her house and pays 80 to 100 per cent to have that house and makes some sandwiches because food is too expensive to purchase wherever she works. So, that’s a tax of 100 per cent. Then she fills up at the petrol station on her way to work, and that costs her 230 per cent tax. 

Then we have GST. GST can be levied on bills, including stamp duty, so we’ve got a tax on a tax. So, there are three aspects. First, there’s the total tax paid. Second, how is it levied? And third, is it enforced fairly? Ultimately, the people pay a tax in the form of higher prices. So, it doesn’t matter if a company is being taxed or if another entity is being taxed; they pass it on to the customers. 

Cost of living, inflation, overregulation and many other factors make sure that today’s system of government impositions—government cost recovery—is highly regressive. Look at the carbon dioxide tax and offsets—a UN tax, driven by the UN, introduced by the Liberals-Nationals in 2015 under Greg Hunt and Malcolm Turnbull and now ramped up under this government with Chris Bowen and Anthony Albanese. We’ve got a highly regressive imposition of taxation and other charges by the government. The Australian Bureau of Statistics showed that the median income is $67,000. People on that median income are doing it extremely tough because of government and the mishmash that’s evolved in the taxation system. 

That takes care of terms of reference (a) and (b) in Senator Rennick’s motion. I agree with them; in fact, I agree with his whole motion, and I thank him for his motion. I’ve raised the need for comprehensive tax reform many times, so I support this motion. 

Then we see the core, one of the bedrocks of our federal system and Constitution—competitive federalism. That is being converted under the current tax system to competitive welfarism, destroying productivity in this country. The way competitive federalism should work is it promotes competition between the states—not cut-throat competition, just competition for efficiency. As I said yesterday, Joh Bjelke-Petersen, as Premier of Queensland, abolished death duties in Queensland and people moved to Queensland to retire, which developed the Gold Coast. The other states then saw their people were leaving, so they abolished death duties too. Now we’ve got Labor—and the Greens, I think—wanting to put in place a central death duty as a state duty—centrally imposed, no competition, no accountability. When you have a marketplace in governance because the state can’t operate according to their needs and the needs best suited to their constituents, then you have competitive federalism, a marketplace in governance, and that is priceless. One of the reasons we’ve got such low accountability in state and federal parliament is it’s too easy for the states to blame the feds and the feds to blame the states, as I said yesterday. The GST undoes competitive federalism and replaces it with competitive welfarism. It’s a reward for states like Tasmania and South Australia to be inefficient and not use their resources and, instead, bludge off of Western Australia. 

I mentioned yesterday that systems drive behaviour and behaviour shapes attitude, and the combination of behaviour and attitudes along with values and leadership and symbols determine the culture, which is the most important determinant of productivity, security and accountability. Energy prices, as I said, are a huge regressive tax on the poor. Massive record immigration is a huge regressive tax on housing, especially on the poor. As I list some of these examples, as Senator Rennick listed some of his examples, I urge you to think about the impact on our culture in this country. 

The tax system is Australia’s most destructive system. What behaviours does it drive? We’ve got the best and brightest accountants and lawyers in this country fighting the government, not helping our producers to fight our competitors overseas—the Koreans, the Japanese, the Chinese, the Americans. We’ve now got a tax system that’s grown-up like Topsy; it’s a mishmash of dishonest promises to various vested interests for favours. What behaviours does that drive? Is that productive? It’s certainly not productive. Inefficient or suboptimal allocation of capital, allocation of resources, leads to inefficient or suboptimal decisions and a waste of resources and inefficient allocation to minimise tax rather than to maximise wealth and value. 

Then we have the ATO in a position where it can level complaints against people and businesses—small businesses particularly, because they don’t have the lawyers to back them up. In addition to prosecuting those cases, they adjudicate on those cases. How can that be justice? It’s not justice. It leads to corruption—and we saw that in the Australian Taxation Office just a few years ago. 

There is the complexity of various structures that Senator Rennick mentioned; he’s got far more experience in that than I have. They’re unfair to people who can’t set up structures. Senator Rennick discussed some of the modern structures in the technologies that have come up. That increases the appeal for workarounds. 

Then we’ve got something that Senator Hanson has talked about for many years, since 1996: multinationals basically pay no or little company tax. These use their resources for free. We’ve got the world’s biggest freeloader, the biggest tax avoider in the world, Chevron, taking our gas and sending it overseas, using our infrastructure, using our security forces, using our education system and not paying much at all for the gas. This is a figure I got from Jim Killaly, the former Deputy Commissioner of Taxation, Large Business and International, who retired in 2015 or 2016. I’ve met him. He said in both the nineties and in 2010—and it’s quoted in the newspapers—that 90 per cent of Australia’s large businesses are foreign-owned and since 1953 have paid little or no company tax. Who’s paying that share of tax? It’s the men and women of Australia, working families. 

Since 1953, when we had double taxation legislation enacted by the Menzies Liberal government, we’ve had foreign companies paying little or no company tax. In the 1980s, we had Labor, with the petroleum resource rent tax, making sure that large companies such as Chevron pay little or no tax when exporting our gas from the North West Shelf. Then we had transfer pricing rorts and so many other rorts, which Senator Rennick went into. So terms of reference (c) and (d) are definitely worth keeping. 

The tax reform, while it’s necessary and arguably one of the most important things in this country, is difficult because the uniparty, Liberal and Labor, sees new ideas, seizes on new ideas and then basically tells lies and misrepresents to destroy our tax system. Paul Keating, as Treasurer to Bob Hawke, introduced the concept of the GST. Later, when John Hewson raised it as opposition leader, who smashed it? Paul Keating smashed it. He destroyed the GST concept even though he’d come so close to putting it over the line in Australia. 

When Pauline Hanson, who wasn’t a senator at the time, got hold of the transaction tax, it was also sent to Costello by the originators of that taxation system and taxation proposal. Peter Costello, as Treasurer—and a good treasurer—was asked about it and he said: ‘Sounds like a good system. We must have a look at it.’ Then Senator Hanson introduced it to the public, and he used it to try to destroy her. 

And look at my motion for stopping bracket creep—a motion on a Labor bill for stopping bracket creep. Labor stood right up there and said it supports work to remove indexing of bracket creep, but it voted against it. The LNP, the Liberals and Nationals, did something similar. They stood up—Senator Hume, I think it was—and said, ‘We support removal of bracket creep, the stealth tax, the hidden tax, the deceit tax,’ but they voted against the indexation of bracket creep. Barely a few weeks later, Senator Sharma, in his first speech, said that one of his goals was to get rid of bracket creep. Well, pile on, but just a few weeks earlier he had voted against removing bracket creep. 

As Senator Rennick has already mentioned, the tax system has been wangled and mismanaged to protect special interest groups feeding off tax loopholes. The terms of reference (e), (f), (g) and (h) are all necessary. Tax is the cost of government. That’s necessary. But it’s now got to the point where tax, in this country of ours, is the cost of excess government interference and excess waste—well, all waste. It’s the cost of poor governance, and it’s the poor who pay regressively for it. 

I support Senator Rennick’s motion as a step to exposing the harm and inefficiency of the tax system. Because of the complexities of the tax system and because of the politics around it, I think the first thing to do is to get an agreement to understand that the tax system is so destructive and so inefficient. Senator Rennick’s motion is a commendable first step to exposing the inefficiencies and the unfairness in the tax system. Once there’s an agreement on the inefficiencies, then we need to develop principles—not a system but principles: for example, simplicity; efficiency, so the tax system actually collects more than the cost of implementing that tax; fairness; objectivity; and the fact that it’s inescapable, so we don’t have multinational companies coming here, stealing our resources and assets, using our infrastructure and our people, and skipping the country without paying their fair share. So we develop principles and get agreement on them, and then, once that’s done, the specific system falls out. 

I see Senator Rennick’s motion as leading to an important first step in identifying the problems and some of the solutions and then, ultimately, we can take the next step: comprehensive tax reform, defining the ultimate system and the transition of baby steps to getting there. I support Senator Rennick’s motion. Question agreed to.