Matt Thistlethwaite (Kingsford Smith, Australian Labor Party, Shadow Assistant Minister for Financial Services) Share this | Hansard source

I'm speaking in support of the Treasury Laws Amendment (International Tax Agreements) Bill 2019, which gives force of law to a taxation treaty between Australia and Israel and will help alleviate concerns about double taxation between our two countries. This is one of 40 taxation treaties that Australia undertakes with other nations to avoid double taxation in both signatory countries. It is nothing new to Australia, but it does support and grow the relationship between our two great countries. The treaty supports cooperation between Australia and Israel and our tax authorities, and may help address multinational tax avoidance issues as well, something both Australia and Israel have been at the forefront of through OECD processes—in particular, the base erosion and profit shifting, or BEPS, regime that's come into play in recent years.

The bill also introduces a general domestic source of income rule to ensure that Australia can exercise its taxing rights. Legislating this rule will help streamline future tax treaty negotiations. The requirement for the legislation of this particular rule comes about to overcome a 1965 High Court decision regarding the ability to tax international income. Australia's rules have provided that income profits or gains that are permitted to be taxed by Australia under the relevant treaty are taken to be sourced in Australia. Currently, Australia seeks to secure agreements to include specific source rules in the course of negotiating a tax treaty or legislate a specific rule where such agreement cannot be secured. Legislating a general rule will ensure that this is not required and will streamline future tax negotiations. The new general provision only applies to Israel's convention and any future international agreements. Existing legislation will apply to previous agreements.

This bill will support a healthy economic relationship between Australia and Israel—a relationship that has certainly stood the test of time and, in recent years, has been growing. Australia's bilateral trade with Israel was worth nearly $1.3 billion in 2018. Significant Australian exports to that country include beef, plastics and aluminium. Obviously Australia derives a benefit from trade with Israel as well. Israel is known as the start-up nation. It has a very healthy start-up and tech sector, and I think that we could learn a lot from Israel in terms of incentives for businesses around research and development and the start-up community to encourage new business enterprises to begin in Australia. Israeli investment in Australia was more than $250 million in 2015, while Australian investment in Israel was worth more than $650 million in that same year.

There are 20 Israeli companies listed on the Australian Stock Exchange, making Israel the third-largest source of foreign company listings in Australia. As I mentioned earlier, that relates to that great culture in Israel of encouraging new business enterprises and businesses to start up within their economy. There's no doubt that the Australian stock market and Australia more generally have benefited from that culture. Australia's relationship with Israel has a very strong historical dimension that's supported by the large Jewish diaspora that live in the many cities and regions of Australia, going back to particularly post World War II. Australia and Israel have cooperated at all levels of international bodies, particularly around economic cooperation and issues associated with tax transparency and accountability, which have been a trend in international tax relations in the wake of the global financial crisis. I'm talking, of course, of OECD programs around base erosion and profit shifting. This particular treaty is based on a model treaty program that is conducted through the OECD to avoid double taxation between countries and to reduce barriers to trade between countries as well, and it will ultimately grow incomes between countries and create jobs.

This is a bill that supports stronger economic ties between Australia and Israel, growing the economic relationship into the future and ensuring a smoother economic relationship, particularly when it comes to taxation issues. Nothing in this treaty will change Australia's commitment to a two-state solution in Israel and negotiation of that particular issue. But this bill ensures that, in the future, the economic prospects between our nations will grow and the relationship will get stronger and stronger to the benefit of both nations. I commend the bill to the House.

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