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

in reply—I thank all members who have contributed to this debate—not least the member for Corio, although I am sure his opening remarks do not have the unanimous support of the House. I know the Parliamentary Secretary to the Prime Minister has expressed a strong pro-Hawthorn view at the dispatch box, and there will be various views around the House. Of course, those of us who are disenfranchised because the Sydney Swans are out of the action may sit on the sidelines. But I am sure the member for Greenway will join me in supporting the new Western Sydney team when it comes into operation.

I thank the members for Casey, Cowan, Blair, Lindsay, Corangamite and Corio. As honourable members have outlined to the House, the International Tax Agreements Amendment Bill (No. 2) 2008 gives force of law to a new tax protocol with South Africa. The new protocol, which was signed in Pretoria on 31 March 2008, modernises and enhances the bilateral tax treaty arrangements from 1999. This bill will amend the text of the existing South African tax treaty in the International Tax Agreements Act 1953. Australia’s and South Africa’s bilateral economic and trade relations continue to grow, as the member for Corio indicated. South Africa is Australia’s largest and most dynamic market in Africa, and South African investment dominates investment from the African continent into Australia.

Tax treaties facilitate trade and investment by minimising tax barriers between treaty partner countries by relieving double taxation, preventing tax discrimination and providing certainty with respect to tax treatment of cross-border income flows, thereby reducing compliance costs on taxpayers. Accordingly, the new protocol updates the taxation arrangements between Australia and South Africa to enhance Australia’s relationship with South Africa by reducing barriers to bilateral trade and investment by lowering withholding tax rates on interest and royalties.

The South African tax protocol delivers on Australia’s most favoured nation obligation in the existing tax treaty to provide for rules to prevent tax discrimination. Tax discrimination under other countries’ tax systems can be a significant barrier to outbound Australian investment. The protocol inserts a non-discrimination article which prevents discriminatory tax practices between the countries. The protocol was also prompted by proposed changes to South Africa’s domestic taxation law of corporate profits. The protocol amends the withholding tax rates applying to dividends, providing a five per cent rate for all non-portfolio intercorporate dividends and a 15 per cent rate for all other dividends. These changes align with the OECD norms and address South Africa’s changes to its domestic law system of taxing corporate profits. Australian non-portfolio investment in South Africa will generally benefit from a reduced total South African tax on corporate profits as a result of these changes.

In responding to the needs of both Australian and South African business and in ensuring protection of Australia’s revenue base, the new protocol also includes a number of key changes. It updates capital gains tax treatment so that it aligns more closely with the OECD to assist trade and investment flows between countries. It modernises the exchange of information provisions to conform with OECD standards, allowing the tax administrations of both countries to share tax information. It also introduces integrity measures which provide for cross-border collection of tax debts.

The new protocol will enter into force once both countries have advised that they have completed their domestic requirements, which, in the case of Australia, includes the enactment of this bill. This treaty has been considered by the Joint Standing Committee on Treaties, which has recommended that binding treaty action be taken. I commend the bill to the House.

Question agreed to.

Bill read a second time.

See this speech in context