Tony Smith (Casey, Liberal Party, Shadow Assistant Treasurer) Share this | Hansard source

The International Tax Agreements Amendment Bill (No. 1) 2009 was introduced into this place on 19 March of this year. It amends the International Tax Agreements Act 1953 to incorporate into Australian law the two separate tax agreements signed with the British Virgin Islands and the Isle of Man. The agreement with the British Virgin Islands was signed in London in October 2008, and the agreement with the Isle of Man was signed also in London in January of this year. The coalition will be supporting the passage of this bill through the House and through the Senate. The provisions in these arrangements are consistent with other bilateral treaties that Australia has signed with other countries.

I will turn first to the agreement with the British Virgin Islands. The first section deals, in substance, with information sharing. The agreement itself provides for a complete exchange of tax information between the two countries in both criminal and civil matters. This will remove the ability of taxpayers to use the British Virgin Islands as a tax haven or to avoid their tax obligations. It expands the existing relationship, where both countries only share tax information for criminal matters, to include civil matters as well.

The second area of the agreement deals with the removal of double taxation for certain income. In addition to the exchange of tax information provisions, this agreement also ensures that certain income is not subject to double taxation. Specifically, this applies to ensure that those people employed by governments are not subject to double taxation. Under this agreement any income received from government service is only taxable by the country to which the service was provided. Currently, such income would be taxed in Australia and the British Virgin Islands. This provision does not apply to those earning income from private business or commerce.

The agreement also ensures that education related payments received by students are exempt from taxable income. This will ensure that students from Australia or the British Virgin Islands do not have to pay income tax on any payments made from their resident country for the purpose of education and maintenance.

Turning now to the agreement with the Isle of Man, again there are two substantive sections, the first dealing with information sharing and increased cooperation. This agreement provides for a complete exchange, again, of tax information between the two countries in both criminal and civil tax matters. Likewise, it will remove the ability for taxpayers to use the Isle of Man as a tax haven. Currently, both countries only share tax information for criminal matters. The agreement also commits the revenue agencies in each country to assist taxpayers in resolving any disputes relating to transfer pricing.

Turning to the removal of double taxation for certain income, again in addition to the exchange of tax information provisions, this agreement also ensures that certain income is not subject to double taxation. It ensures that income received from pensions and retirement annuities will only be taxed in the individual’s country of residence. Currently, income received from a pension or retirement annuity may be taxed in the country of residence and in the country where the income is sourced.

As in the agreement with the British Virgin Islands, this agreement also ensures that those employed by governments are not subject to double taxation. Currently, such income would be taxed in Australia and the Isle of Man. Again, as in the agreement with the British Virgin Islands, the provision does not apply to those earning income from private business or commerce. The agreement also contains the same exemption provisions relating to education purpose payments as the agreement with the British Virgin Islands.

The coalition has a long record of initiating and fostering the development of bilateral tax agreements. We recognise that these agreements encourage foreign investment and provide further opportunities for Australian businesses in overseas markets. In 2001 the coalition provided a commitment to review Australia’s international tax arrangements in our policy outline Securing Australia’s prosperity.

In its review of international tax arrangements the former coalition government implemented a package of reforms to improve the competitiveness of Australian companies with operations in overseas jurisdictions and to maintain Australia’s status as an attractive place for foreign investment and business. As part of these reforms the former coalition government undertook negotiations with more than 20 other jurisdictions to modernise Australia’s existing tax treaties and foster new tax treaties to provide a competitive and modern tax treaty network for companies located in Australia.

The agreements signed by the former coalition government greatly improved integrity aspects of administering and collecting tax from those with tax obligations in other countries. Many of those agreements signed included information exchange provisions that met OECD standards and provided reciprocal assistance for tax collection agencies. The former coalition government also undertook to expand the collection and the range of taxes that come under our international tax agreements. This strengthened economic relations between Australia and other countries and led to greater cooperation between the Australian Taxation Office and other revenue agencies in those countries.

The achievements of the former coalition government strengthened the integrity of our tax treaty network by increasing bilateral cooperation to ensure that all taxpayers pay their fair share of tax. This bill builds on that legacy. As I said at the outset, the coalition supports the bill in this House and will also do so in the Senate when it is considered there. I commend the bill to the House.

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