Judi Moylan (Pearce, Liberal Party) Share this | Hansard source

The changes to international taxation arrangements began with the review conducted by the Board of Taxation in 2003. The aim was to reduce the compliance burden on trustees, who were required to withhold tax at various rates according to the nonresident’s investment circumstances. This involved rates from 29 per cent to 45 per cent for individuals. If Australia was to carve out a place as a global financial services hub, these changes were pivotal to attaining that goal. Notwithstanding the rates and complexity of withholding tax, Treasury were advised that there was a substantial flow of foreign investments into the Australian property trusts. We have just heard from the honourable member for Charlton that Australia is fourth in the world in terms of its property trust holdings. The coalition government accepted the Board of Taxation’s recommendations, and the 2007 legislation set a single rate of 30 per cent to be withheld by funds. If a tax return were lodged in Australia, the nonresident investor’s effective rate of tax would be subject to relevant deductions. If the nonresident elected not to lodge a tax return in Australia then the rate would remain at 30 per cent of gross income, which seems to me to be a reasonable proposition. The legislation simplified tax but did not make it any lower for a foreign investor than for an Australian company.

To prevent double taxation and tax evasion, Australia has forged tax agreements with over 40 countries and sought their cooperation in enforcing taxation laws. Double tax agreements were made with Japan in 2007, and negotiations were underway under the coalition government with the Netherlands and Germany in relation to Australian sourced real property income paid out by a property trust up to 15 per cent of the amount derived. The proposed unilateral reduction in withholding tax by Australia reduces our bargaining power in the negotiation of future double taxation agreements.

The property market in Australia has been very robust. However, world events, including increased petrol prices, with all the flow-on effects, may see a contraction of development in the future. Rather than give out overgenerous additional tax breaks to foreign investors, the Rudd government should reconsider some of the 2008 budget measures it has announced, such as the one to change the GST, which will cost the Australian industry $620 million over the forward estimates. You really have to wonder what is going on here. Why are we favouring foreign investors? We know that foreign investment is important, but why would you want to favour foreign investments and make them pay less tax than Australian companies and Australian people pay? It really beats me.

While the coalition recognised the need for change and accepted 17 of the Board of Taxation’s recommendations, the Tax Laws Amendment (Election Commitments No. 1) Bill 2008 and cognate bills which we are debating today require further scrutiny, with particular reference to the following points. Under this proposal there will be no reduction in the withholding tax on dividends and interest. In fact, foreigners will face higher withholding tax after 2010-11. Placing a lower withholding tax on income from property trusts, which is usually rent and capital gains, when reducing withholding tax on dividends or interest is more likely to encourage investment and promote Australia as a global financial centre. The lack of logic in this ought to be challenged. In evidence given to the Senate Standing Committee on Economics in regard to the Tax Laws Amendment (2007 Measures No. 3) Bill 2007,IFSA and the Property Council of Australia recommended a final withholding tax rate of 15 per cent. Even IFSA recommended that the rate fall to no less than 12.5 per cent, which is a higher rate of withholding tax than the government is now proposing in this bill. So even the property organisations, which are there to look after the property industry, were not recommending reductions to such a low figure, which is out of kilter with what the Australian people would be expecting to pay.

To have a Labor government, and the Prime Minister in particular, the supposed friends of the Australian working family, suggest that a reduction in tax on overseas investment should be made is hard to fathom. They really only needed to impose a minimum reduction, but not only have they gone below the 15 per cent; they have taken this tax rate down to seven per cent. I am just amazed. We saw the Labor government justifiably expressing concern in the lead-up to the election about cost-of-living pressures on Australian families. It was one of the things that, I am sure, attracted families to electing a Rudd Labor government. They made so many commitments to taking those cost pressures off Australian families. We now know that that was just rhetoric, as there has been absolutely no action to truly address the cost pressures on Australian families since the election—unless you take the Treasurer’s interesting little snippet on how to shop effectively in his latest newsletter, which we heard about in question time yesterday. It was laughable.

Yet here we are today discussing a proposed amendment to the tax laws, in the Tax Laws Amendment (Election Commitments No. 1) Bill 2008, the Income Tax (Managed Investment Trust Withholding Tax) Bill 2008 and the Income Tax (Managed Investment Trust Transitional) Bill 2008, giving generous deductions to foreigners while many Australians are hurting as they struggle to make ends meet. I just find this extraordinary. Many Australian working families, some of whom are in my electorate of Pearce, are also small business owners and primary producers. The feedback from my constituents has been that it is becoming increasingly difficult for owner-operators to keep their head above water amongst the ever-escalating costs associated with running a business, particularly the cost of fuel, as well as other goods. And consider the poor old primary producers. In Pearce they tell me they have had massive increases in the cost of chemicals and fertilisers, which are necessary to harvest a crop. They cannot harvest a crop without them. We rely on them as food producers of the nation and they are doing it tough. Here we are giving away money, more money than is necessary to do the job, to foreign investors.

I say: let’s reduce the burden of tax on Australians—on Australian families, on Australians primary producers and on Australian business. Let’s get down and do the job and let the government get down and do the job that they were elected to do. For us to be here today in a position to make things a little easier for Australians hard hit by the pressures of the rising cost of living and the rising cost of doing business and debating a bill that provides overgenerous tax relief to foreign citizens and companies ahead of our own truly puzzles me. On the ALP website, the Prime Minister says he believes that Australia is the lucky country. As the great Italian Renaissance artist Benvenuto Cellini said, ‘Let everyone witness how many different cards fortune has up her sleeve when she wants to ruin a man.’ We should not forget that things can turn very quickly and we have an obligation and a duty to make sure we are doing everything to shore up our own economy and to make sure our own people are taken care of. That does not mean ignoring the importance of foreign investment in this country. We cannot afford to do that in a global economy. It is one of those things we have to do, but we do not have to give foreign investors more than is necessary.

Offering higher tax breaks to foreign investors seems to me pointless when they will just be hit by taxes by their own governments at a later date, so any gains they have made from this will be diminished and they will feel no benefit. Meanwhile, Australians struggle to get dealt a decent hand by the Labor government. It certainly seems that the Labor government have no intention of supporting Australian small business owners. This is evident in the recent treatment of the solar panel industry. We heard the pre-election cries of, ‘We’re going to fix the greenhouse gas problem,’ ‘We’re going to deal with the climate change issues,’ and, ‘We’re going to support small business.’ So what do they do? The first thing they do when they get into government is to remove the $8,000 solar panel rebate, which was vital in helping many people to install solar power in their homes and, indeed, to make significant reductions in greenhouse gas emissions. On top of that, small businesses are now shedding contracts and going out of business, and jobs are being lost, and ultimately the environment will be worse off. So it was a hollow promise.

In looking at these amendments we must consider all the repercussions of any decision we make. Australia does not want to discourage foreign investment—far from it. I agree with the member for Stirling, the shadow Assistant Treasurer, who was just at the dispatch box, in that any moves to give tax relief in order to promote Australia as a regional financial hub must be done with due process and consultation in order to get the best possible result. We want to maintain Australia’s reputation as a financial services centre, a reputation that was built and enhanced during the 11 years of the Howard government. But, despite the high rate of withholding tax, the Treasury advised our government that there were still substantial flows of foreign investment into Australian property trusts—in other words, the withholding tax rate was no barrier to investment in property trusts in Australia by foreign interests. The question is: do we need to go over the top in giving tax breaks to foreign investors? I say we do not. We should rather provide further support for Australian families, small businesses and primary producers.

We understand that Prime Minister Rudd has been courting foreign investment in the past week by promising $35 million of taxpayers’ hard-won money to foreign multinational companies. The Prime Minister wants to be seen to do the right thing; however, the hard-earned dollars of the Australian taxpayer will go straight into the pockets of overseas interests. I fail to see how this is the right thing for Australian workers and small business owners. The government is under a lot of pressure—we understand that, and rightly so—because the engine for the Toyota Camry hybrid will be fully imported, unlike the current Australian-made Camry engine. The government is now trying to pretend that the $35 million grant will encourage research and development in the automotive industry. Surely the government could have contributed this money to the Holden hybrid technology program. For those of you not aware, Holden has joined forces with Australia’s largest scientific research agency, CSIRO—which, by the way, has had money cut from its research programs by this government—to produce a unique electric/hybrid prototype vehicle.

This vehicle showcases Australia’s ingenuity, provides a testbed for evaluating future technologies and offers a glimpse into the automotive future. The prototype hybrid power train has the potential to reduce fuel consumption by up to 50 per cent. Consequently, hydrocarbon emission levels would be dramatically reduced, making a real contribution to the protection of our environment. This uniquely Australian technology is designed to power a full-sized family car, the kind most Australians prefer to drive.

To a self-confessed economic rationalist such as the Prime Minister, such a large investment in local industry and ingenuity would be a far more logical decision. However, the Prime Minister has proved himself not to have the most rational economic judgement, and that is coming to the fore very early in this government’s administration.

This brings me back to the proposed tax law amendments. With Australia experiencing record property prices—prices which have seen many younger buyers priced out of the market, not to mention those who are on fixed and low incomes in this country—Australia does not need to encourage further pressure on the Australian property market. I do not think that this is necessary. Monday’s Sydney Morning Herald reported that house prices are tipped to rise next financial year as Australia’s fastest population growth in two decades outweighs the effect of higher interest rates. On top of that, we have heard that the government proposes to massively increase migration into this country. I know of people who have had to consider living in their cars or going into refuges because they simply cannot find a place to lease. You will have 30 people trying to lease the same property in Sydney. You have got to pay six months rent in advance to get a lease on a property, and it is not much different in my state of Western Australia, where property values for rental properties alone have increased by about 40 per cent—they have nearly doubled in cost.

How on earth can a person on a disability pension of $270 a week even pay their rent? No wonder we have got 100,000 homeless people on the streets of our cities every night in this country. It is a disgrace. So why would we want to add to the pressures of the Australian property market?

The other point that I think has not been made and must be made is that, in the 2008 budget that has just been announced by the Labor government, there are measures there which aim at reducing incentives to buy properties. These include the changes to the GST, a tax once referred to by the current Prime Minister as the highest form of fiscal vandalism. They do not mind now using the GST to up the revenue base so that they can then swish some money across to tax breaks for foreigners—that is perfectly okay: ‘We will rip it off the local Australian market, and we will swish it across here for foreign investors and give them a few tax breaks.’

I know a few Australians who would like to have a few tax breaks. I know a few people on disability support pensions who would like a bit more support. This measure in the Rudd Labor government’s budget will actually cost the Australian property industry an estimated $620 million. That is what the tax measures in the 2008 budget will do. It appears that the Prime Minister and the Labor government do not know if they are Arthur or Martha in their ability to make rational economic decisions, and this is hurting Australians everywhere.

Bringing this amendment in the way it has been brought is a bit of sleight of hand, in actual fact. It is to cover a mistake that Labor made with costings. The former Treasurer, the member for Higgins, pointed out, when Labor last year announced their $105 million policy in relation to this legislation we are debating today, that they had made a huge miscalculation in the costs. It amounted to about a $400 million blunder. Treasury’s most recent update put the figure at $505 million. The data used by Labor during the election as a base for the costing, according to Treasury, was ‘volatile’. It certainly is.

That money would go some way toward alleviating some of the cost pressures facing people in the Australian community. It is not difficult for us to see why these amendments should be subjected to further scrutiny to avoid further hurting Australian taxpayers. The best course of action is, I believe, as the shadow Assistant Treasurer, the member for Stirling, has recommended: to refer the first part of this legislation to a Senate committee for further scrutiny.

As I said, this Labor proposal does not reduce the withholding tax on dividends and interest. Dividends and interest paid to foreigners will face a higher withholding tax after 2010-11. To promote Australia as a global financial centre, reducing the withholding tax on dividends and interest is a much smarter move than reducing the withholding tax on property trust income. This very amendment seems to be a token gesture from Labor in at least some part, so I support our shadow minister, the member for Stirling, in his recommendation that this legislation should go forward to the Senate for further scrutiny.

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