Dennis Jensen (Tangney, Liberal Party) Share this | Hansard source

I rise to discuss some of the issues arising from the International Tax Agreements Amendment Bill (No. 1) 2011. While seemingly innocuous and straightforward, the bill touches on some broader issues regarding taxation in Australia, and I would like to expand on these issues. The bill broadly solidifies the agreement between Australia and a number of other nations to avoid double taxation. This is a step in the right direction. After all, lower tax is always the preferred scenario. I encourage this government to minimise taxation where at all possible. The bill is also designed to crack down on tax evasion with respect to taxes on income, the aim being to ensure that the government continues to collect income tax earned overseas at all costs.

Reform elicited by this bill will go some small way to ensuring that people like Mr Parishan, in my electorate of Tangney, are no longer unfairly targeted through double taxation—but, sadly, only in a handful of nations. Mr Parishan is on the verge of selling his family home in order to pay a $250,000 tax bill. This retrospective tax bill is on income earned during two of the five years he worked in both Qatar and Dubai as a structural engineer. While Mr Parishan paid various duty, tariff, import and export taxes, the fact that his income was not directly taxed in the United Arab Emirates nations means that Australia's Treasury is within its right to effectively take my constituent to the cleaners. While income earned by Mr Parishan in Dubai and Qatar is not subject to an income tax, other receipts including money, duty, tariff, import and export taxes—paid in addition to the cost of living burden in these countries, must surely, in any just taxation assessment, be taken into consideration when making any rulings on whether income has been fairly taxed overseas.

While a selective focus by the Australian Treasury on income tax is unfair, it is also a lost opportunity for our federal government coffers. Tax receipts from other streams of income earned overseas are largely ignored or only minimally taxed. A focus on the single income tax model narrows the federal government's receipts and pressure to meet mounting deficits forces drastic and overzealous actions when chasing taxes the government believes they are owed. This can only be to the detriment of our citizens. There is not an agreement between Australia and either Qatar or Dubai for the avoidance of double taxation and the prevention of fiscal evasion with respect to withholding tax, tax on income or in respect of administrative provisions.

At present, the general proposition under Australian law is that treaties which Australia has joined are not directly and automatically incorporated into Australian law. While amendments contained in this bill will give Australia's tax treaties the force of law through streamlined arrangements, the fact that we are not reciprocal signatories with countries of significant Australian expatriate investment and development is of most concern. Why are our citizens who work in countries with no income tax, but with other excises and tariffs, attacked by the Australian Taxation Office? Let us look at whether it is even necessary to have an income tax at current indexation levels—or indeed an income tax at all. Should we look at a greater focus on consumption taxes and the like to improve efficiencies and drive down bureaucratic waste? I believe that income tax and the money it generates for the government is the facilitator of government growth and waste, including those moneys earned overseas. The Treasury will tell us that an income tax is imperative. After all, it addresses what would inevitably be a shrinking revenue base. However, this is what Treasury is tasked to do. It is their job to ensure that government spending can be met by reciprocal taxation receipts. This relationship is fundamentally flawed. It places the onus on the government of the day to constantly keep a check on its budget growth. This trust that we have placed in the federal government to self-regulate its spending has been betrayed, with both parties massively increasing the size of the federal government over successive governments. Real issues arise from this growth in the federal government, most importantly the issues of economic and social freedoms. The federal government has expanded far beyond its proper constitutional limits, regulating virtually every aspect of our lives. There is no real argument about whether we live in an over-regulated society; the fact is readily accepted and backed up by numerous studies. Big government and numerous departments and bureaucracies take billions of dollars out of the legitimate private economy and penalise productive behaviour, with most Australians giving a large chunk of their income and other monies to the federal government. Philosophically this is taking money directly from some Australians to give to others, with inefficiencies resulting from bureaucratic process. The ridiculous complexity of our tax laws makes tax time a nightmare for both individuals and businesses. These factors are made worse by our electoral cycle. Come election time Australians are given the false choice between bigger and bigger government; between which party can promise and redistribute wealth to a greater extent while maintaining a facade of fiscal responsibility. These are two choices from the same side of the coin.

The Australian people need to grasp the concept that the more government spends, the more freedom they lose—both personal and economic. All things considered, Australians should be dismayed by the income tax mess and the tragic loss of liberty and freedom which has ensued. Yes, reductions in income taxation would force the federal government to be massively reduced, but that is a good thing. It would force a debate on spending levels. Again this is a good thing, but we ought not to be debating whether we can save a million here or a million there; we should be debating whether whole departments, agencies, and programs funded by the budget should exist at all. Little cuts here and there do not address the big picture problem. To get to this small government place we need to get away from the idea that big government makes our lives better, that government can do anything other than redistribute and then waste economic resources from the productive private sector and citizenry.

Examples of government overreach are everywhere. The hot button issue at the moment is cost of living pressures. It is a problem government cannot make better, but can make infinitely worse by meddling in the affairs of private citizens. Every attempt at providing handouts and stimulus merely inflates the economy and makes life harder for everyone. So why not try the opposite; why not less government, less tax and reduced expenditure? If the average Australian was to look at how much they pay in tax and then cut that number in half, this would go a long way to solving the cost of living pressures and inflation in the economy. The answer is less, not more. Perhaps US Congressman Ron Paul said it best:

I believe income taxes are responsible for the transformation of the federal government from one of limited powers into a vast leviathan whose tentacles reach into almost every aspect of American life.

In our case, all that needs to change in that statement is to substitute 'Australian' for 'American'. Money, duty, tariffs and import and export taxes must also be considered when making judgment on taxation owed to the government to ensure double taxation does not occur even under amendments contained in this bill. Most tax discussions are based around simplification for taxpayers and ensuring a solid revenue base for the government. But we also need to discuss how much of our private citizens' money should be entrusted to a government and for what purposes. This inevitably will require a review of the way taxes are collected. While amendments contained in this bill will give Australia's tax treaties the force of law through streamlined arrangements, a discussion of the fact that Australia is not a reciprocal signatory with countries of significant Australian expatriate investment and development is an issue that must be placed on the table.

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