Shayne Neumann (Blair, Australian Labor Party) Share this | Hansard source

This bill is part of the Rudd government’s comprehensive program of campaign finance reform. It fulfils an election commitment that we made to remove tax deductibility for political donations. It also ensures that the GST treatment of political parties is not affected by income tax amendments. The bill opens the door on the issue of campaign donations and breathes even more life into our democracy. There is an old joke in Washington, DC that congress is the best that money can buy. That is a cause for concern in Australia, as the inquiry to which the member for Cook referred was told.

The Howard government failed to implement the reforms that we have proposed. In fact, during their final term in office, electoral laws were changed so that people could donate up to $10,000 without being publicly identified. In fact, after they did that, there was a more than 85 per cent reduction in declared donations. That is an indication of the transparency that the Howard government believed in. We also saw a real decline, vis-a-vis our growth in population, in the number of people who cast valid votes at the last election. It was more difficult to vote at the last election by reason of the Howard government’s changes to the electoral laws. Those opposite do not have a great record when it comes to this. Sometimes I wonder, when I hear those opposite talk about electoral reform, whether they hark back nostalgically to the old days, when there needed to be a property entitlement before someone could vote. Certainly historically the conservatives in the UK, Canada, Australia and New Zealand opposed the democratisation of their countries. That is a fact. They opposed it, just as they oppose the legislation here today. I think it is quite sad that they have done so.

This bill, the Tax Laws Amendment (Political Contributions and Gifts) Bill 2008, amends the A New Tax System (Goods and Services Tax) Act 1999, or the GST act, and the Income Tax Assessment Act to ensure that individual taxpayers will no longer have the ability to claim a tax deduction in respect of political party membership fees paid on or after 1 July 2008. Further, the bill denies tax deductions to corporate taxpayers and individual taxpayers in relation to contributions or gifts to political parties, members of council, candidates, parties and Independents on or after 1 July 2008. Interestingly, employees or office holders will continue to be entitled to claim tax deductions for those amounts incurred in earning their taxable income.

Currently, the maximum deductibility for corporate taxpayers and individual taxpayers is $1,500 per annum if the contribution or gift is paid to a political party registered under the Commonwealth Electoral Act. Before 22 June 2006, the maximum amount was $100 per annum and only for gifts or contributions made to parties registered under the Commonwealth Electoral Act.

Earlier this year, the House passed identical legislation to the bill here today. However, on 19 March 2008 the Senate referred the bill to the Joint Standing Committee on Electoral Matters for inquiry and report by June 2009. On 26 June 2008 the Senate voted down the legislation. The committee tabled an advisory report on schedule 1 on 16 June 2008. I will speak about that report a little later.

The Labor Party first announced its position on these matters as early as 3 October 2006. It was announced by the then Leader of the Labor Party and Leader of the Opposition, Kim Beazley. It was re-announced by the now Minister for Finance and Deregulation, Lindsay Tanner, during the last election campaign. Labor’s election commitment was to deny tax deductibility for gifts and contributions for political purposes. The estimated financial impact of this bill is that it will benefit the Australian government’s revenue by about $31 million over approximately three years. This is a considerable saving. I think the average person in my electorate of Blair would consider $31 million to be a lot of money.

The Joint Standing Committee on Electoral Matters, to which I referred, made some recommendations in its advisory report, but I accept that there was division along party lines. The committee supported the discontinuation of tax deductibility for political donations and recommended that schedule 1 of this bill effectively be passed by the Senate without amendment. Regrettably, there was a minority report in relation to this matter and the opposition has steadfastly opposed these reforms. So the majority of the committee supported the removal of tax deductibility for contributions and gifts made to political parties, members and Independent candidates and made the recommendation that the bill should be passed.

The committee went through a long process, with much advertising, with respect to this matter. In fact, they announced the inquiry on 28 March 2008 and advertisements were placed in the Australian newspaper on 2 April 2008. Correspondence was sent to all political parties and others who might be interested in the issue. Ten submissions were received and a public hearing was held on 29 April 2008. So the Australian public was told about this and stakeholders and interested parties were given the opportunity to respond in relation to it. As I said, there were a number of submissions, which I have looked at.

Tax deductibility can be viewed as part of a matrix of campaign finance funding. Currently in the law there are two ways political contributions and gifts can be deemed deductions. Firstly, there is the general deduction, which any person might have for expenses incurred in earning assessable income—and there is no limit to that general deductibility concerning political gifts and contributions. Secondly, there is the specific deductibility for gifts greater than $2 but less than $1,500 in any single year. It is in relation to the second that deductibility applies separately. It is possible that an individual personally can make the full deductible claim of $1,500. That individual, if they have a corporate structure which they use to run their business, for example, could then also make the claim of $1,500, effectively allowing a $3,000 deduction. This is a double dip, a double claim, on taxpayers’ funds. In 1991, after Senate amendments, the House of Representatives passed legislation including the tax deductibility for contributions of $2 or more to parties registered under the Commonwealth Electoral Act, with a further amendment setting a maximum deductibility of $100. That is where it stood until 2006. In 2006, the Howard government increased the threshold from $100 to $1,500. Further, it allowed deductibility for contributions made to political parties registered under state and territory legislation. Thirdly, it permitted deductibility for payments to members and Independent candidates. Fourthly, it extended deductibility for payments from companies.

This bill allows the continuation of the general deductibility for individual taxpayers. It prevents businesses from claiming deductibility for donations in relation to the general deductibility provision. It amends the capital gains tax provisions to ensure that types of expenses do not form part of its cost base or reduced cost base for capital gains purposes. The Joint Standing Committee on Electoral Matters found that about 2.1 million individual taxpayers in 2005-06 had a taxable income of less than the tax-free threshold of $6,000. These more than two million individual taxpayers would receive no benefit from tax deductibility for political donations. However, presently if a person is paying 40c or 45c in the dollar—perhaps earning an income in excess of $80,000 or $180,000—they can claim the full deductibility. If they have the benefit of a corporate structure, they can claim up to $3,000. Mr Deputy Speaker, you can see there is an equity argument in these circumstances. It is a matter of fairness and treating individual taxpayers the same.

There are some very good arguments for the removal of tax deductibility in this bill. First, as I said, it is discriminatory. It treats taxpayers differently depending on their circumstances—their socioeconomic status and their ability to contribute financially to political parties and individuals. The tax deductibility favours those who have high incomes and can therefore afford to pay large donations to political parties and candidates. It allows them to adjust their financial affairs to minimise their tax and yet contribute to political parties they love or support. In addition, there is an opportunity cost. As I said before, my constituents would consider $31 million a very large sum. Tax money given back to individual taxpayers who earn high incomes and is given by way of tax concession could be used for public purposes. Think of what that money could do for education, health, roads and the community sector—all of which require considerable amounts of money and all of which we are contributing to after many years of neglect. So there is $31 million worth of taxpayers’ funds which could be put back and given out to help my community and other communities around Australia.

There is another argument. If tax deductibility is given in this way, what about not-for-profit organisations which may not have a charitable purpose or be registered under tax legislation as charities? Why don’t they get the same treatment and the same benefit as political parties? There is an argument that they should if we are going to maintain the tax deductibility. It could be argued also that tax deductibility increases the likelihood of individuals or businesses being involved in the political process. That is the argument that has been put by those opposite—and I have heard that argument before—but I am not convinced of that because I do not think there is any cogent evidence to that effect. Businesses donate for a whole range of reasons, and the committee made that point in its report. It said in paragraph 2.41:

Businesses donate to political parties for a range of reasons including altruism, management self promotion, corporate social responsibility, to express political free speech and to maximise profit.

There is a whole host of reasons why they do it. In the circumstances, I am not convinced that the tax deductibility should remain. It provides an opportunity for high-income earners to gain a deduction in circumstances where the average Australian—struggling to pay their mortgage, pay their rent, pay their food costs, clothe their children and pay for sporting and cultural events their children are involved in—just does not have that sort of income. That is an unfairness in our system that should not be maintained in all circumstances. For a lot of corporate entities, paying money to political parties is all about self-interest. It is about access. It is all about ensuring that they have a seat at the table and that they benefit. Sometimes it is given with a hook involved. Sometimes it is altruism. But often it is so they get a benefit that other taxpayers would not enjoy.

The Rudd government’s position is to remove tax deductibility, and I think it remains as the best policy option to promote honesty, transparency and integrity in our polity. It is a very good thing if it is allied with a reduction in the threshold for disclosing political donations.

It is interesting that one of the organisations that made a submission to the standing committee’s inquiry was the Democratic Audit of Australia. I think they made a very cogent argument in support of the Rudd government’s now position on removing tax deductibility. They noted, contrary to what the member for Cook said, that removing tax deductibility for donations was in line with the Rudd government’s pre-election commitment. In the circumstances I agree with the Democratic Audit’s electoral reform agenda in relation to tax deductibility. As the Democratic Audit stated, corporations are not holders of political rights. Why should they be treated in a more preferential way than individuals who do have the right to vote? I do not think it is fair that proprietors of businesses could effectively have an annual tax-deductible donation of $3,000. Corporations also claim business donations for political access and they often sponsor sessions at conferences and the like.

The minority coalition report is that removal of deductibility should be deferred until such time as the committee has had the opportunity to conclude a broader inquiry into the 2007 federal election. I think there should be a broader inquiry into the 2007 federal election, because it concerns me that, as our population grows, we are not seeing commensurate parity with those on the electoral roll and those who are actually casting votes. That is of great concern for the Australian political system. I encourage the state governments and the federal government to think about changing their systems when it comes to making it easier for people to register and to vote, because it is the hallmark of any democratic system that people who are eligible should be able to vote and should be able to vote without feeling pressured to do so. They should not have obstacles placed in their paths to vote.

It is important for our long-term political democracy that people learn more about our political system. I am pleased that this year the Rudd government had a roundtable conference and a report in relation to constitutional law reform. But one thing that really concerns me as a federal politician is that a lot of people do not understand the federal system of government, the way our political structures have evolved over many years and the importance of those. In the short time I have been here I have observed that politicians on both sides of the House generally work very hard. In my experience I have come across very few politicians who do not aspire to serve their constituents to the best of their ability—even if I disagree with their political philosophy.

This particular bill is about improving where we go as a country in terms of the integrity, transparency and honesty of our political system. I think this is a just and fair bill. I think it is fulfilment of the Rudd government’s pre-election commitment. The coalition should reconsider their position and support the Rudd government’s proposals in this bill and consider again the folly of so much of what they did in the last few years under the Howard government to make it more difficult for people to enrol, to vote and to be involved in the political processes. I support the bill and I commend it to the House.

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