It is an absolute privilege and honour to follow my dear colleague and friend, Senator Bragg, who, in that speech—which traversed many areas—wandered across the Australian policy landscape like an explorer. He really did make a number of fundamental, salient points that I think we should all reflect upon in the course of this debate.
I would also like to thank Senator Bragg for the contribution he is making to policy development within the Coalition. I think he is doing an outstanding job.
Deputy President, as Senator Bragg said, we have to start this debate with the fundamental fact that this budget represents a broken promise. It is a broken promise. The Labor government went to the Australian people at the last election and promised on no fewer than 50 occasions that it would not change the rate of capital gains tax. It said it would not impact negative gearing arrangements, and it would not engage in the very conduct—the very changes—it is now seeking to implement through this bill.
That is the starting point. The Australian people were misled. They were told one thing before the election, and now we are seeing a complete backflip. That does damage to all political parties because it undermines the integrity of our democratic system. The Australian people have a right to expect that when a party goes to an election on a particular platform—on a particular policy suite—it will remain true to its word. That did not happen at the last election, and it will remain an albatross around the neck of Prime Minister Albanese and this Labor government as we move towards the next federal election.
In terms of the policy issues themselves, on a number of occasions in this place I have referred to a monumental work—Basic Economics by Thomas Sowell, a highly regarded economist. He deals with the issue of capital gains tax, and it is, quite simply, basic economics.
I want to quote from page 448 of Sowell’s book in relation to capital gains tax. In the United States, when the federal tax rate on capital gains was reduced from 28 per cent to 20 per cent in 1997, it was assumed that revenue would fall below the $54 billion collected under the old rate in 1996, and the $209 billion projected over the following four years. Instead, tax revenues rose.
Over the next four years, $372 billion was collected in capital gains tax—nearly twice what had been projected. People adjusted their behaviour to a more favourable investment environment by increasing investment. As a result, the lower 20 per cent tax rate generated more total revenue than the previous 28 per cent rate applied to a smaller investment base.
That is the point. There is a difference between tax rates and the revenue those taxes actually generate. When capital gains tax was reduced, more revenue was collected.
Conversely, investors, founders and entrepreneurs do not remain static when taxes increase. Capital moves. It moves across borders and to jurisdictions with lower tax burdens. That is the reality of the global economy.
What the federal Labor government will find—and I have no doubt about this—is that under these changes, future Australian success stories, the next generation of companies like SEEK or Canva, will choose to establish themselves offshore in more investment-friendly jurisdictions. Why would you start a business in Australia when you can go to Singapore and pay zero per cent capital gains tax?
