Joel Fitzgibbon (Hunter, Australian Labor Party, Shadow Assistant Treasurer and Revenue) Share this | Link to this | Hansard source

The International Tax Agreements Amendment Bill (No. 1) 2006 is essentially driven by the need for changes to Australian tax law to facilitate the pursuit of nonresidents living in Australia who have foreign tax liabilities. The government is seeking to aggressively align the Australian international taxation system with the OECD model tax convention. Article 27 of this convention provides for mutual assistance in collection of tax debts. Under many of Australia’s tax treaties there are reciprocal obligations to take measures to pursue persons who have tax debts in one of those jurisdictions. This usually requires a change in the enforcement and investigation powers in each hosted jurisdiction.

There are a number of Australian residents with foreign tax liabilities. The current statute law does not permit the commissioner to seek to retrieve these funds directly. In order to pursue the matter, the commissioner would need to take common-law action on a case-by-case basis. Schedule 1 allows the commissioner to create a register of taxpayers with foreign country tax debts and apply the tax collection conditions operative under Australian tax statutes. Provisions are also included to allow conversion of payments in foreign currency from foreign governments to repay Australian tax debts under the reciprocal arrangements of the OECD tax treaty system.

Schedule 2 gives the commission information-gathering power for overseas tax debts. This follows from measures in schedule 1 and permits exchange of information between nations otherwise captured by tax secrecy laws. The schedule on the protocol with New Zealand aligns the Australia-New Zealand tax protocol with the OECD model tax treaty, clarifies where information can be exchanged and modifies the agreement to provide for enforcement action by officials on behalf of the other country. There is also a most favoured nation clause, which ensures Australia benefits from the reduction New Zealand makes under treaties with other nations.

Labor supports these measures, as it is generally committed to the adoption of the OECD model tax treaty. In particular, there is no reason why Australian tax authorities should not cooperate with countries in the pursuit of tax debts if a satisfactory double tax treaty is in place. I am sure the minister will be very pleased with the brevity of my contribution to the debate.

Peter Dutton (Dickson, Liberal Party, Minister for Revenue and Assistant Treasurer) Share this | Link to this | Hansard source

Can I begin by thanking those members who have taken part in this debate on the International Tax Agreements Amendment Bill (No. 1) 2006, particularly the contribution from the member for Hunter. It was short and sweet. This bill will give the force of law in Australia to a protocol amending the Australia-New Zealand tax agreement by inserting the text of the protocol into the International Tax Agreements Act 1953. The bill also includes consequential amendments to provide the legislative framework to support Australia’s treaty obligations, to provide assistance in the collection of tax debts and to exchange information on tax matters with other jurisdictions.

The protocol between Australia and New Zealand was signed on 15 November 2005. Details of the protocol were announced and copies were made publicly available following the date of signature. The New Zealand protocol enhances trans-Tasman integrity aspects relating to administering and collecting tax imposed in accordance with the treaty and the laws of both countries. The protocol reflects the government’s desire to provide for more effective exchange of information on a broader range of taxes, including the GST, and to provide for reciprocal assistance in the collection of taxes in future tax treaties.

The government believes that the conclusion of the New Zealand protocol and the associated amendments will strengthen the integrity of Australia’s taxation system. These measures will reduce tax evasion in both countries and will assist in ensuring that the tax liabilities on cross-border transactions are correctly determined and efficiently collected through bilateral administrative cooperation between the Australian Taxation Office and the New Zealand Department of Inland Revenue.

The protocol also includes an obligation for New Zealand to enter into negotiations with our country in the event that New Zealand agrees to lower rates of withholding tax with another country. This most favoured nation obligation recognises the importance this government places on lowering withholding taxes imposed on Australian investment in New Zealand, consistent with the direction set in Australia’s tax treaty arrangements with the United States and the United Kingdom. The protocol is another example of the strong bilateral relationship Australia shares with New Zealand, and the enactment of this bill and our formal notification of the completion of our domestic requirements through diplomatic channels to New Zealand will complete the processes followed in Australia for the entering into force of the protocol. On that basis, I commend the bill to the House.

Question agreed to.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.