Chris Bowen (Prospect, Australian Labor Party, Shadow Assistant Treasurer) Share this | Hansard source

As the minister at the table rightly points out, they do not agree with the Labor Party on everything. They are an independent body. They do not agree with our IR policies. I am more than happy to acknowledge the minister and I thank her for her help in pointing out that the Real Estate Institute of Australia is an independent body which does not agree with the Labor Party on every measure. I wanted to clarify that to assist the Assistant Treasurer, because he is likely to come in here and say, ‘The member for Prospect has been listening to the ACTU.’ Well, I do not think the ACTU has a position on this, but I will reveal to the House that not only have all the above organisations warmly endorsed Labor’s approach but so have the Finance Sector Union. The minister will at least be able to say, ‘The Finance Sector Union agree with the ALP.’ Yes, they do, and I welcome their endorsement just as I do that of the Property Council, the Real Estate Institute of Australia, the Investment and Financial Services Association, AMP and Vanguard. I welcome them all.

But there is one person who did not welcome Labor’s proposal to cut the withholding tax to a flat and final 15 per cent—that was the Treasurer of Australia. You might find that concerning, that the Treasurer of Australia does not support Australia’s having a competitive withholding tax regime. After the Leader of the Opposition’s address-in-reply, the Treasurer left the chamber. Within minutes of the speech, he was outside holding a press conference. He said two things about this proposal: firstly, that it would cost $100 million. I will come back to that shortly. Then he questioned why you would want to give foreigners a tax cut: ‘You should give Australians a tax cut before you give foreigners a tax cut.’ What an extraordinary thing for the Treasurer of this country to say. In my naivety, I thought a bipartisan consensus had developed in this country over the last 20 years that we want an open and competitive economy, not a closed one; that we do not want barriers to investment; that we do not want protectionist walls; and that we welcome foreign investment in this country. I thought we had a bipartisan agreement on this, but apparently it is only the Labor Party that believes that. Apparently the Treasurer’s view is an anti-foreign-investment one. These Hansonesque statements from the Treasurer do him no credit. They are a disgrace. Anti-foreign-investment comments like that from the Treasurer are a disgrace, and they do him no credit. The Treasurer has consigned Australia to having an uncompetitive tax regime which places a disincentive to foreigners putting their money in Australian hands.

Let me deal with the matter of costings, because the Treasurer went out and said: ‘The Leader of the Opposition has his sums wrong. This wouldn’t cost $15 million a year; it will cost $100 million a year.’ This was despite the Treasurer’s answer to a question—on 20 March this year; not long ago—that had been put on the Notice Paper by my predecessor the honourable member for Hunter about the revenue that was derived from the income paid overseas from funds managed in Australia and the amount of withholding tax that was collected. The answer was very instructive:

The information is not available.

They did not know. Then, within five minutes of Labor announcing their policy, they knew! The Treasurer knew how much it cost. He left the chamber, walked out from there, held a press conference and said, ‘It costs $100 million,’ when he told this parliament two months ago that he did not know, that the information was not available. How much credibility does the Treasurer have on this issue? Zero.

The second point is this: when you look at the financial implications of this bill, which takes a marginal tax rate to a flat rate of 30 per cent—it takes rates varying from 29 per cent to 48 per cent—and does not abolish deductability, as Labor’s proposal does, the government say this bill will make the Commonwealth $15 million a year. So their bill, which goes from tax rates of 48 per cent down to 30 per cent in some instances and does not abolish any deductions, manages to make the taxpayer $15 million a year and, somehow or other, Labor’s proposal will cost the taxpayer $100 million a year. Labor’s costing is conservative, and it is thorough.

There was some analysis done on the potential of a cut to listed property trusts. This analysis was done by Econtech, a respected consultant. Indeed, it has been said that it is the Prime Minister’s favourite costing organisation. It is the organisation which did the costing of the GST. That is how respected this body is. It did a costing on the proposal to reduce the withholding tax on listed property trusts, which is a core or major component of Labor’s proposal. Its analysis was that reducing the tax from 30 per cent to 15 per cent and abolishing the deductability of debt would make the Commonwealth $9 million a year. Now, Labor has been much more conservative than that, but that essential methodology and analysis is sound. I seek leave to table the Econtech costings of that proposal for the benefit of the House.

Leave granted.

I thank the minister. Let us have a look at what some third parties have said about Labor’s costings. The Investment and Financial Services Association said:

Importantly, this measure also entails boosting tax integrity, as a flat and final rate would protect the public revenue.

And the Property Council of Australia said:

The Opposition’s proposal for a 15% final withholding tax rate is more likely to generate additional tax revenue and create jobs as the world will give us more of its money to manage.

They went on:

The Opposition’s proposal also makes sense because it protects government revenue.

In the Property Council’s submission to the Senate committee, which was published today, they said:

The Government’s approach is based on inaccurate Treasury costings. Treasury says an internationally competitive withholding tax rate will cost more than $100 million a year, while industry says it will not impact on current revenues and could increase tax income over the medium term.

They went on:

It would be a tragedy to pass legislation that hurts one of Australia’s fastest growing export industries on the basis of inaccurate Treasury estimates.

I am not going to table those documents, because they are on the public record, but I say to the Treasurer, ‘Come in here and table yours.’ It is not acceptable for the Treasurer of this nation to say that Labor’s proposal costs $100 million and not reveal to the Australian people or to the industry the assumptions that underpin that costing, the methodology of that costing or the sums which went into that costing.

Thin capitalisation rules mean that offshore investors can borrow up to 75 per cent of their investment in managed investment funds in Australia. Labor has assumed a gearing rate of 45 per cent—a full 30 per cent below what foreign investors are allowed to go to in terms of gearing. Labor has taken a conservative approach. If the Treasurer has a different approach let him tell us what it is. Let him come into the House and reveal what the gearing assumption is. The Treasurer and Assistant Treasurer should instruct Treasury to sit down with organisations such as the Investment and Financial Services Association and the Property Council of Australia and go through the costings. Let us have a thorough analysis and let us see the Treasury documents. Let us have a full and open debate.

The Treasurer thinks he is going to get away with saying that this costs $100 million and not tell us the basis of that so that the Labor Party and the other organisations which have actively proposed this change can question those assumptions and potentially show where they are wrong—if there are any mistakes, because he did this in five minutes. The Treasurer left the chamber to go and hold a press conference. He only had five minutes to think about it, but I am told by some people that there are some gearing assumptions. The Treasurer has not publicly revealed those but I hear that there are some. If there are some gearing assumptions, he should tell us what they are and then we can have the discussion.

It is intriguing to me that tonight we are discussing a bill, which will presumably be passed tomorrow, which introduces a new tax regime. We do not know how much money the current tax regime raises with the new tax rate. We do not know because it is not in yet, but the Treasurer knows how much it is going to change it! He did not know the revenue. He told the parliament, just a month or so ago, rightly—because it seems impossible to know—that he did not know the revenue.

If the Treasurer does not reveal the assumptions, the industry is entitled to assume that it was a political knee-jerk reaction not based on the facts. I will quote Robert Harley in the Financial Review because it is a good quote. He said:

Unfortunately Costello has the reactive blinkers on.

That was the quote from the newspaper—I would, of course, refer to the Treasurer by his proper title. Labor does not have the reactive blinkers on, and I take this opportunity to formally move the second reading amendment which has been circulated in my name. I move:

That all words after “That” be omitted with a view to substituting the following words: “whilst not declining to give the bill a second reading, the House condemns the Government for its lack of commitment to the Australian managed funds industry and its lack of commitment to ensure Australia becomes an Asian financial services hub and calls on the Government to reduce the withholding rate applied to non dividend, royalty and interest distributions from managed investment funds to non-residents to a flat and final rate of 15 per cent”.

Labor is showing fresh thinking. Labor is showing a different approach to encouraging industries that are working hard and have results on the board, like the managed funds industry in Australia. This government has the reactive blinkers on. It is tired, out of puff and does not show fresh thinking.

When the Assistant Treasurer comes into this House to sum up this debate, he might share with the managed investment industry, and the thousands of Australians who work in that industry and who are exporting services and earning export credits for Australia, why the government thinks they should be held back by an uncompetitive tax regime. He might share with the Australian people why he thinks that we should not promote service exports but saddle them with the highest withholding tax rates in the world. He should reveal to the House whether he agrees with the Treasurer that you do not give foreigners tax cuts—whether he supports that Hansonesque approach to economic management. The Labor Party certainly do not. The Labor Party will always take the approach that people who are out there earning export income for Australia do not necessarily deserve government support but deserve a level playing field. They deserve the Australian government getting out of the way and letting them do their jobs. That is what they deserve; nothing more and nothing less.

Australia has a choice. We can continue to ride the mining boom and not get ready for the downturn, whenever it may come—it might come this year, in five years time or in 10 years time—or we can say to industries like the financial services industry and the funds management industry: ‘We think you’re doing a good job and we’re going to help you export more.’ That is Labor’s approach, the Leader of the Opposition’s approach—fresh thinking—whereas the government ‘has the reactive blinkers on’, as stated in the Australian Financial Review. Get the reactive blinkers off or get out of the way and make room for a government which is prepared to take an innovative approach, which is prepared to say to the Treasury, ‘Sit down with the industry and work out how to make this happen; go through the costings and sort out any discrepancy,’ and which is prepared to be open and honest and say, ‘This is how much we think it’ll cost,’ and why. I hope the Assistant Treasurer does that when he sums up the debate. I hope he comes in here and tables the costings. At least then we could go through them and have a debate about them. Until he does that, the government’s costings have zero credibility. They have zero credibility because it will not release the assumptions or the other information which went into making them.

I commend the amendment to the House and I commend the bill to the House, with the exception of the uncompetitive, backward-looking and disgraceful withholding tax regime that it gives this nation.

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