Tony Zappia (Makin, Australian Labor Party) Share this | Hansard source

Australia prides itself on being a democratic country with a government and a legal system underpinned by the fundamental principles of democracy. In fact, the oath of allegiance to Australia sworn by new citizens states, in part:

… I pledge my loyalty to Australia and its people, whose democratic beliefs I share …

Democracy—our belief in it and our practice of it—is fundamental to good government and an inclusive society. Only last week, the member for Fremantle gave an excellent address in this place about the virtues and importance of democracies, not only in Australia but throughout the world, for mankind generally. Democracy, however, implies much more than the right to vote and the right to participate in the governance processes of a nation. The democratic process must be transparent, must be free of any form of manipulation and must have the confidence of the people it serves. Yet in Australia, a country where we constantly espouse the importance of democracy, we can still do better in ensuring that our claim of democracy is matched by the processes we have in place to deliver that democracy.

This bill, the Tax Laws Amendment (Political Contributions and Gifts) Bill 2008, has a number of important implications with respect to the principles of democracy. The bill’s primary function is to amend the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936 to remove tax deductibility for contributions and gifts to political parties, independent members and independent candidates. Presently, tax deductions of up to $1,500 for such donations can be claimed, costing taxpayers over $10 million per annum. In fact, in the last federal election the taxpayers contributed an additional amount of $49 million.

The current measure, which allows tax deductions of up to $1,500, was introduced in 2006 by the Howard government, along with a raft of other amendments. When the bill was introduced, the member for Eden-Monaro, who was the Special Minister of State, said, in justifying the need to provide tax deductions of $1,500:

By changing the tax deductibility arrangements, the bill will encourage greater public participation in the democratic process.

It was a theme that was supported by the member for Wentworth, now the Leader of the Opposition, when he spoke to the bill that is presently before the House. He said:

This is a big moral issue. It is not just a financial issue; it is not just a political issue. It goes to the very heart of our democracy. We cannot afford to allow our democracy to become less contestable than it is today.

He also said:

The question that we have to ask ourselves, as Australians committed to a contestable democracy, is what price democracy if one side of politics has an inordinate share of the financial resources available for campaigning?

In the first quote from the member for Wentworth, and in the introduction of this measure two years ago by the Howard government, the obvious underlying implication is that, if you allow tax deductions for political donations, then clearly more people will make political donations. The obvious implication of more people making political donations is that there will be more funds raised by the political parties. So on one hand the Leader of the Opposition is saying that, if you increase the amount of political donations that are made, that is good for democracy, but on the other hand he questions whether, if one side of politics or another has an inordinate amount of funds at its disposal, that skews the process of democracy. Quite frankly, I cannot see the logic. I do not know whether he is supporting this bill or opposing it.

The reality is that the opposition are opposing this bill because of their personal reasons with respect to the need to have people donate to their particular party. I will just go to some other comments made by the member for Wentworth, because in speaking about this he also raises some other matters. It is interesting that when the member for Wentworth refers to donations that have been made over the years to political parties he also says that it appears that in recent years the business sector, which in the past would have traditionally made most of their donations to the Liberal and National coalition, have gone on to share their donations between the two major parties.

I say to the Leader of the Opposition that if he is concerned about that particular aspect of political donations then perhaps he should ask himself this very simple question: why? If the corporate sector is today giving donations to both sides of politics, the obvious conclusion that I draw from that is that the corporate sector has faith in the Rudd Labor government and the alternative parties to the Liberal and National parties. In my mind, if the corporate sector is no longer making the kinds of donations it might have made in the past to the Liberal Party, that implies that it has also lost faith in the Liberal Party. So I guess that if the Leader of the Opposition is concerned about why his party is not receiving the levels of contributions and political donations that it might have done in the past, rather than relying on legislation which is fundamentally flawed, it should look to its own performance and its policies.

Contrary to the views of the member for Wentworth, it is my contention that this bill in fact enhances our democracy and that the existing provisions introduced by the Howard government, under which tax deductibility for donations of up to $1,500 is allowed, are in fact what undermines our democracy.

Another matter that I want to comment on is the Leader of the Opposition’s reference to the trade unions when he was speaking about his opposition to this bill. He said:

At the same time, the Labor Party has 100 per cent of the donations that come from the trade union movement.

If the Leader of the Opposition were rational about that, he would know that the trade union movement has from time to time donated to parties other than the Australian Labor Party. But, more importantly, if the member for Wentworth, the Leader of the Opposition, were simply to ask why that is so, the answer would be staring him in the face. How can he expect the trade union movement, which has been under attack from the Howard government for almost 12 years—with a whole raft of measures aimed at undermining the trade union movement—to make donations to the Liberal and National parties? Again, if you want anyone to make donations to you, then clearly you have to put forward policies that are in the interests of the organisation from which you are seeking donations.

When you introduce policies such as those of the Howard government, which included the Work Choices policy, when you introduce government entities like the Australian Building and Construction Commission and when you do everything you can to undermine the trade union movement, then how can you in all seriousness criticise them for supporting parties other than your own? I say to the Leader of the Opposition—because he now is the Leader of the Opposition but at the time that he gave that address he was not—that perhaps he ought to start looking at ensuring that the Liberal and National parties stand up for the rights of working Australians and support the efforts of unions in this country, who are doing nothing more than trying to ensure a fair go for the members that they represent. It is absolutely clear that the members opposite are simply opposing this bill for their own political purposes and nothing else.

What is also interesting about this bill is that it highlights the fact that providing tax deductions for people who make political donations of up to $1,500 is costing the Australian taxpayers $10 million per annum. I am sure that, if you asked those same Australian taxpayers what they would rather see that money spent on, the last thing they would say is: ‘Tax deductions to those people who make political donations.’ I am sure that they would rather see that money spent on health, education, water, pensioners, carers, veterans and so on and so on. There are a whole range of needs out there in the community that people would rather see the government spending its tax dollars on.

The other matter is that by withdrawing the tax deductibility of political donations it is likely that lesser amounts will be donated. That, in my view, is a good thing for democracy because it means that the democratic process is less subject to the manipulations or influences of advertising dollars. Let me just return to the point about $10 million of taxpayers’ funds being returned to those people who make political donations. As the member for Lindsay quite rightly said in his address prior to mine, tax deductibility is allowed where expenditure is made in order to earn an income. If the expenditure is legitimate expenditure for the purpose of deriving an income and is necessary in deriving that income then tax deductibility is allowed. The only other scenario in which I can recall tax deductibility being allowed—and I am certainly not a tax law expert—is where the expenditure is made for the public good. A typical example is where a donation is made to a public charity or similar.

Political donations do not fall into either of those categories. They are not necessary expenses in earning an income and nor are political parties public charitable organisations. Why political donations were ever allowed as tax deductions bewilders me. As I said, the argument used at the time by the Howard government was that it enhanced our democracy. If, however, for some obscure reason, a political donation can be demonstrated to be a legitimate income expense, then I would expect that the general laws of taxation would apply. If you can demonstrate that making that donation was relevant and necessary to the income you earned then argue that case with the Commissioner of Taxation.

Cynics will argue that political donations ultimately affect incomes and that is why they are made. I recall—I think it was in about 1984—that when the measure allowing the government to fund public elections was made, the point that political donations can certainly affect the public’s confidence in the political process was also raised, and raised quite properly. The argument was that political parties and individual politicians, if elected to office, would give special consideration, and perhaps even favourable consideration, to the views of those who supported their election. Of course, that perception will continue even if political donations are not tax deductible, because political donations will still be made. The donations, however, are likely to be of a lesser amount, and that in itself is an important outcome of this legislation.

Of greater relevance is that taxes are used by governments to fund expenditure for public good. Tax deductions are a form of government expenditure. Whenever a government gives back a tax deduction, it is part of the budget process, it is part of a budget allocation—in other words, it is part of government expenditure. By allowing tax deductibility of public donations, governments are effectively returning money to individual taxpayers, who in turn use that money to fund political parties or politicians of their own choosing without any form of accountability to the community. It is hardly an appropriate or legitimate use of tax revenue. The net effect is that taxpayers are indirectly funding political campaigns—something which, perhaps, they have no interest whatsoever in doing.

Political donors are more often people who donate large sums and support politicians or political parties that the donor believes will implement policies which the donor subscribes to. That is normal practice and no-one would be critical of that. It is, in fact, the case that those who make political donations are generally supporting something because it is self-serving; it has nothing to do with good policy or democracy. Self-interest, however, is more easily protected by wealthy, large entities, or a collection of entities with a common objective who pool their resources, than it is by individual households, who have neither the finances nor the resources to coordinate their position. Encouraging protection of self-interest by providing tax deductions for political donations simply fuels the perception that governments are beholden to their political donors. The public good is set aside in order to protect the interests of those who make the political donations. Not surprisingly, people lose confidence in and become cynical about the political process.

Political donations are not the only option available for supporters of political parties or politicians, of course. Donors can fund their own campaigns which indirectly support a particular political position and in which expenditure incurred may still be eligible for tax deductibility. As result of this legislation, I suspect we may see more of that type of political support in the future. Of course, there will be other forms of tax-deductible options that some smart tax accountants will use to ensure that political donations will be tax deductible. These options, however, are much more cumbersome than simply making a donation. Not all political donors will be interested in pursuing complicated options of making political donations for which they can claim a tax deduction. We may also see less money spent in donations to election campaigns and more spent on professional lobbyists who will use their skills to influence the government that is ultimately elected.

There are a few more points I would like to make in relation to this matter. The first is this: this bill not only affects candidates or political parties at federal level; it also affects both state and local government candidates. Local government candidates with a small amount of money can have a huge advantage over other candidates when they contest their election because, generally speaking, there is very little private funding of local government candidates. Any candidate who has access to funding will have a huge advantage over other candidates.

This bill will also ensure that it will be a much more even playing field for both state and local government candidates and parties. The reality is that making state and local government elections much more even and much more democratic will be good for all Australians. The federal government, as we all know, has a huge interest in what happens at both state and local government levels, because much of the funding spent by both the state and local governments comes from the federal government. If we are going to ensure democracy is in place, we need to ensure that it is in place not only at federal government level but also at state and local government level.

The last point I want to make is in relation to a point that was made by a number of opposition speakers. They said that they oppose this measure because it should not be made in isolation and because it should be part of a series of changes that may be necessary—or at least should be looked at—to the electoral laws. I say to members opposite: if something is wrong, if something is flawed, if something needs to be changed, it should be changed regardless of whether it is a single measure or part of a number of measures. The fact that it is part of a series of measures does not change the fact that these laws need to be changed. (Time expired)

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