Chris Bowen (Prospect, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

The Tax Laws Amendment (2007 Measures No. 3) Bill 2007 is an omnibus tax bill that contains 10 separate schedules. I would characterise seven of these schedules as being non-controversial: schedules 1 to 6 and schedule 9, which contain sensible measures to either protect government revenue or correct unfair anomalies. As Labor supports each of these schedules, I will not be detaining the House by going into detail other than to express the opposition’s support for the measures contained therein. I will deal with schedules 7, 8 and 10.

Before I go to each of these schedules, I note that this bill has been referred by the government to the Senate Standing Committee on Economics. Presumably, this follows the imbroglio that was Tax Laws Amendment (2006 Measures No. 7) Bill 2006, which the government refused in the first instance to refer to a Senate committee but then agreed to do so. This bill in part corrects that bill. I note, however, that the bill has not yet been examined by the Senate committee—submissions closed on Monday—and that the original time constraints put on the Senate committee were such that there would be no public hearings to flesh out submissions. I understand that following complaints from several people who put in submissions to the inquiry there will now be a public hearing, which I welcome. I say this to the government: if they think their solution to the general lack of consultation over tax measures is to refer every bill to the Senate committee and then emasculate the process so that the Senate committee does not have time for hearings, they are kidding themselves. Consultation needs to happen much earlier, as I outlined in the House yesterday. It should not be referring matters to a Senate committee at the end of the process and then indeed attempt to emasculate the process so as not to have committee hearings. That would be a joke.

That brings me to schedule 7 of the bill, which amends section 128F of the Income Tax Assessment Act 1936. The House will need no reminding of the background to this particular schedule. Tax Laws Amendment (2006 Measures No. 7) Bill 2006 contained proposed changes to section 128F which had the effect of significantly reducing the ability of firms to obtain an exemption from withholding tax for syndicated loans or debentures. Labor pointed out that this had the potential to significantly affect the ability of Australian firms to raise funds for capital projects overseas. Labor referred the matter to the Senate economics committee, a move which, as I said before, the government resisted. Evidence was received from the Australian Bankers Association, the Asia Pacific Loan Market Association, the Institute of Chartered Accountants and the Australian Financial Markets Association. Each of their submissions underlined the concerns that I had outlined. They underlined the fact that the government had failed to embark on proper consultation.

Labor senators recommended that the schedule be removed and redrafted. Government senators did not recommend that. However, the government eventually accepted Labor’s position and withdrew the schedule, and we see before us today the replacement schedule. I said in the debate on Tax Laws Amendment (2006 Measures No. 7) Bill 2006 that Labor stood ready to support a sensible measure on which there had been proper consultation. Tonight we support that measure because this schedule meets that test.

The Asia Pacific Loan Market Association, in its submission to the inquiry, noted:

These proposed amendments as set in Schedule 7 to the Bill now provide a firm foundation for this important Australian market and will facilitate Australia being able to access offshore capital for major infrastructure projects and other requirements on a more competitive basis.

I am glad that this result was able to be achieved. Of course it would have been better if the government had done its job in the first place and consulted properly on these changes. But I am glad that we got there in the end, even though it was delayed and we had to go through the saga of having bad law put before this parliament by the minister and having the parliament overturn it.

I will now turn to schedule 8 of the bill, which deals with the tax treatment of forestry managed investments. This schedule comes about as a result of the Australian Taxation Office revisiting its view on the tax deductibility of investors’ contributions to forestry schemes. Forestry MIS was covered by the definition of ‘primary production business’ under the general deduction provision.

The government announced that it would legislate to restore up-front deductibility of expenses for forestry, but it would not do so for non-forestry investments. The bill provides a deduction under a separate statutory provision. This means that it will be a specific deduction rather than fall under the general deduction of the 1997 act. It will no longer be necessary for taxpayers to demonstrate that they are ‘carrying on a business’ in order to access the statutory deduction.

The specific deduction provision ensures that initial investors in forestry schemes will receive a tax deduction for their contributions and that secondary investors will receive a tax deduction for their ongoing contributions, provided that there is a reasonable expectation that at least 70 per cent of the scheme manager’s expenditure under the scheme, at arms-length prices, is expenditure attributable to direct forestry expenses.

Schedule 8 of this bill also amends the Income Tax Assessment Act 1997 and the Income Tax Assessment Act 1936 to allow secondary investors to obtain deductions for ongoing contributions to forestry scheme arrangements under the new deduction provision. An investor who acquires an interest in the scheme from another investor cannot claim the specific deduction in relation to the payment to acquire that interest—only the ongoing costs are deductable. The scheme introduces a four-year holding period for initial investors. Where an initial investor disposes of the interest within four years, any deductions obtained by the investor under the new deduction provision will be denied in the income years claimed. These are sensible measures, which the opposition supports.

I have been very critical of the government’s appalling handling of the non-forestry investment scheme issue—the lack of consultation by the government and the lack of a transition period—which has created massive uncertainty in rural and regional areas. However, in fairness, I think the government has got the balance right on the matter of managed forestry investments. I recognise that the tax treatment of managed investment schemes, in general, is a very divisive issue, with passionate views held on both sides.

The Australian forestry industry plays an important role in our battle against climate change. We have seen that the returns are so long in coming that any changes to the up-front tax deduction regime will mean that investment turns down very quickly. The 70 per cent rule strikes an appropriate balance and ensures that only legitimate expenditure has been claimed. I am a little concerned about the paperwork and compliance burden that this might create; however, I recognise that there is no easy solution. I would monitor this should we form the government later in the year, but I have no problem in supporting the measures as they are put before the House this evening.

Finally, I would like to deal with schedule 10 of the bill. This schedule enacts an announcement made by the government in the 2006 budget to introduce a flat withholding tax on non-dividend interest and royalty distributions from Australian managed investments to overseas residents. It could be said that this is a step in the right direction—a very small step made too late—which was announced in the 2006 budget. Now, after the 2007 budget, the government is getting around to implementing this legislation, but it will still leave Australia saddled with an uncompetitive withholding tax regime. This shows a lack of concern by the government about the financial services sector and the ability of Australian fund managers to compete around the world.

The bill introduces a 30 per cent withholding tax rate. This is uncompetitive: it impedes the ability of Australian fund managers to best our competitors. Why is this important? It is important because countries have a choice. They can support services exports or they can get in the way of them. Some countries around the world have embraced their financial services sector and helped to make them vibrant export industries. Ireland stands out as an example of such success. This is not about picking winners, because the Australian funds management industry is already a winner. They have already won, thanks to the superannuation reforms of the Hawke and Keating governments. We have the largest savings pool in Asia and the fourth largest in the world. This means that the Australian funds management industry is well developed and has well-respected skills.

This is particularly the case when it comes to property investment trusts. Australia is already the world’s No. 2 property trust manager. Over 12 per cent of the world’s listed real estate now resides on the Australian Stock Exchange. Australia pioneered real estate investment trusts, and the rest of the world has followed. We have a number of competitive advantages. We have a well-respected and transparent system of regulation. Although from time to time we may have issues about particular matters, our prudential regulators are well respected—as they should be. We are in the same time zone as Asia, which is important when it comes to funds management. But our funds management sector is being held back by this government having its blinkers on. This is not about picking winners; it is about giving Australia a competitive tax regime and then getting out of the way to let the funds managers do what they do best, which is compete around the world.

The bill before the House gives Australia one of the highest withholding tax rates in the world. Belgium, Canada, France, Germany, the Netherlands, the UK and the USA all have rates of 15 per cent. Singapore has 10 per cent. Japan has seven per cent. The government say that it is good enough to have 30 per cent. They say that it is good enough to let the Australian funds management industry compete with the rest of the world with a tax rate of 30 per cent. They walk away from the industry and say: ‘You’re on your own. And, by the way, you’ve got your hands tied behind your back because we’re going to give you a tax rate of 30 per cent. Go and compete with that.’ That is a disgrace. This is such a short-sighted government. They are not looking towards the future; they are not looking to where the economic growth is. They just say: ‘Bad luck. We’re giving you a tax rate of 30 per cent.’

Labor has announced a policy on this. The Leader of the Opposition announced it in his budget reply. He said that Labor will introduce a flat and final 15 per cent tax rate. This would help position Australia as the financial services hub of Asia. It would mean that the sector would no longer be held back by uncompetitive tax rates that exist under this government; it could compete on its own merits, and it could do well. It would also be good for our current account deficit. It would mean more services exports. We all know the challenges facing Australia as a trading nation with almost 60 consecutive monthly current account deficits. Yet the government says to one of the most successful Australian industries, ‘We’re going to give you a tax regime which saddles you, which holds you back, and which stops you exporting.’ It would mean more jobs and more highly paid jobs in Australia. It would make Australia the funds management hub of Asia—and it makes eminent sense. That is why Labor’s announcement has been so warmly welcomed by third parties. The Investment and Financial Services Association said:

This policy measure would greatly assist Australia’s global competitiveness and facilitate capital raising for the Listed Property Trust ... market.

…            …            …

This policy, if implemented, is a welcome ... step in securing Australia’s future as a global financial services centre in the Asian region ...

AMP said:

AMP Capital Investors has welcomed the Federal Opposition’s plans to halve the withholding tax charged to foreign residents investing in Australian managed funds.

…            …            …

Any reduction of the withholding tax for foreign residents will continue to increase the appeal of Australia as an international investment destination.

The Property Council said:

The Property Council of Australia applauds the Leader of the Opposition’s commitment to reform Australia’s outdated withholding tax system.

The government’s current proposal keeps us out of step with our international competitors ...

Then Vanguard Investments, which is one of Australia’s leading investment funds, said:

... we need some government help to get the impediments out of the way ... We view the proposal by Kevin Rudd very favourably.

The list goes on. I will refer to some submissions to the Senate inquiry into this bill. GPT Group, a well-respected investment group, said:

We would like to express our concern at the introduction of a 30% withholding rate on distributions to non-residents. We believe that Australia needs a flat and final rate that is competitive and removes the need for complex tax administration.

They went on to say:

Investors consider that the present system, if not changed, will be a major deterrent to foreign investment in Australian Funds.

…            …            …

GPT believes that if Australia does not adopt an international system with a more competitive tax rate, the immediate scenario will be an adverse effect on the market with foreign investors choosing to invest elsewhere in the region—followed by difficulties for Australian funds managers in raising new capital.

Now I will go to Barclays Global Investors. I quote:

We believe that Australia needs a flat and final rate that is competitive and removes the need for complex tax administration. The proposed 30% rate is non-final and permits the investor to offset it with deductions—which may produce the same net Australian tax cost as a reduced flat rate.

The Real Estate Institute of Australia supports Labor’s proposal. The Business Coalition for Tax Reform have been calling on the government to introduce a similar measure, and the government has ignored them.

For the benefit of the Assistant Treasurer, who will sum up this debate, can I confirm that none of the organisations that I just mentioned are trade unions. I say that because he will come in here, and he will sum up the debate—I am happy to go out on a limb here—and say: ‘The Labor Party follow their union taskmasters in every event. They do what the unions tell them at all times, and all they do is do what the unions say.’ I know he will say that, because he summed up two other bills today that had nothing to do with trade unions, and that is exactly what he said. He says that on every press release. He says that when he sums up every measure. No matter what it is about, he says, ‘This is just about the Labor Party listening to trade unions.’ So I want to be clear: the Investment and Financial Services Association is not a registered trade union. I checked, and Barclays Bank is not a registered trade union. AMP is not a registered trade union. GPT is not a trade union. The Real Estate Institute is an employer organisation. That is how it works.

Fran Bailey (McEwen, Liberal Party, Minister for Small Business and Tourism) Share this | Link to this | Hansard source

Fran Bailey interjecting

Chris Bowen (Prospect, Australian Labor Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

As the minister at the table rightly points out, they do not agree with the Labor Party on everything. They are an independent body. They do not agree with our IR policies. I am more than happy to acknowledge the minister and I thank her for her help in pointing out that the Real Estate Institute of Australia is an independent body which does not agree with the Labor Party on every measure. I wanted to clarify that to assist the Assistant Treasurer, because he is likely to come in here and say, ‘The member for Prospect has been listening to the ACTU.’ Well, I do not think the ACTU has a position on this, but I will reveal to the House that not only have all the above organisations warmly endorsed Labor’s approach but so have the Finance Sector Union. The minister will at least be able to say, ‘The Finance Sector Union agree with the ALP.’ Yes, they do, and I welcome their endorsement just as I do that of the Property Council, the Real Estate Institute of Australia, the Investment and Financial Services Association, AMP and Vanguard. I welcome them all.

But there is one person who did not welcome Labor’s proposal to cut the withholding tax to a flat and final 15 per cent—that was the Treasurer of Australia. You might find that concerning, that the Treasurer of Australia does not support Australia’s having a competitive withholding tax regime. After the Leader of the Opposition’s address-in-reply, the Treasurer left the chamber. Within minutes of the speech, he was outside holding a press conference. He said two things about this proposal: firstly, that it would cost $100 million. I will come back to that shortly. Then he questioned why you would want to give foreigners a tax cut: ‘You should give Australians a tax cut before you give foreigners a tax cut.’ What an extraordinary thing for the Treasurer of this country to say. In my naivety, I thought a bipartisan consensus had developed in this country over the last 20 years that we want an open and competitive economy, not a closed one; that we do not want barriers to investment; that we do not want protectionist walls; and that we welcome foreign investment in this country. I thought we had a bipartisan agreement on this, but apparently it is only the Labor Party that believes that. Apparently the Treasurer’s view is an anti-foreign-investment one. These Hansonesque statements from the Treasurer do him no credit. They are a disgrace. Anti-foreign-investment comments like that from the Treasurer are a disgrace, and they do him no credit. The Treasurer has consigned Australia to having an uncompetitive tax regime which places a disincentive to foreigners putting their money in Australian hands.

Let me deal with the matter of costings, because the Treasurer went out and said: ‘The Leader of the Opposition has his sums wrong. This wouldn’t cost $15 million a year; it will cost $100 million a year.’ This was despite the Treasurer’s answer to a question—on 20 March this year; not long ago—that had been put on the Notice Paper by my predecessor the honourable member for Hunter about the revenue that was derived from the income paid overseas from funds managed in Australia and the amount of withholding tax that was collected. The answer was very instructive:

The information is not available.

They did not know. Then, within five minutes of Labor announcing their policy, they knew! The Treasurer knew how much it cost. He left the chamber, walked out from there, held a press conference and said, ‘It costs $100 million,’ when he told this parliament two months ago that he did not know, that the information was not available. How much credibility does the Treasurer have on this issue? Zero.

The second point is this: when you look at the financial implications of this bill, which takes a marginal tax rate to a flat rate of 30 per cent—it takes rates varying from 29 per cent to 48 per cent—and does not abolish deductability, as Labor’s proposal does, the government say this bill will make the Commonwealth $15 million a year. So their bill, which goes from tax rates of 48 per cent down to 30 per cent in some instances and does not abolish any deductions, manages to make the taxpayer $15 million a year and, somehow or other, Labor’s proposal will cost the taxpayer $100 million a year. Labor’s costing is conservative, and it is thorough.

There was some analysis done on the potential of a cut to listed property trusts. This analysis was done by Econtech, a respected consultant. Indeed, it has been said that it is the Prime Minister’s favourite costing organisation. It is the organisation which did the costing of the GST. That is how respected this body is. It did a costing on the proposal to reduce the withholding tax on listed property trusts, which is a core or major component of Labor’s proposal. Its analysis was that reducing the tax from 30 per cent to 15 per cent and abolishing the deductability of debt would make the Commonwealth $9 million a year. Now, Labor has been much more conservative than that, but that essential methodology and analysis is sound. I seek leave to table the Econtech costings of that proposal for the benefit of the House.

Leave granted.

I thank the minister. Let us have a look at what some third parties have said about Labor’s costings. The Investment and Financial Services Association said:

Importantly, this measure also entails boosting tax integrity, as a flat and final rate would protect the public revenue.

And the Property Council of Australia said:

The Opposition’s proposal for a 15% final withholding tax rate is more likely to generate additional tax revenue and create jobs as the world will give us more of its money to manage.

They went on:

The Opposition’s proposal also makes sense because it protects government revenue.

In the Property Council’s submission to the Senate committee, which was published today, they said:

The Government’s approach is based on inaccurate Treasury costings. Treasury says an internationally competitive withholding tax rate will cost more than $100 million a year, while industry says it will not impact on current revenues and could increase tax income over the medium term.

They went on:

It would be a tragedy to pass legislation that hurts one of Australia’s fastest growing export industries on the basis of inaccurate Treasury estimates.

I am not going to table those documents, because they are on the public record, but I say to the Treasurer, ‘Come in here and table yours.’ It is not acceptable for the Treasurer of this nation to say that Labor’s proposal costs $100 million and not reveal to the Australian people or to the industry the assumptions that underpin that costing, the methodology of that costing or the sums which went into that costing.

Thin capitalisation rules mean that offshore investors can borrow up to 75 per cent of their investment in managed investment funds in Australia. Labor has assumed a gearing rate of 45 per cent—a full 30 per cent below what foreign investors are allowed to go to in terms of gearing. Labor has taken a conservative approach. If the Treasurer has a different approach let him tell us what it is. Let him come into the House and reveal what the gearing assumption is. The Treasurer and Assistant Treasurer should instruct Treasury to sit down with organisations such as the Investment and Financial Services Association and the Property Council of Australia and go through the costings. Let us have a thorough analysis and let us see the Treasury documents. Let us have a full and open debate.

The Treasurer thinks he is going to get away with saying that this costs $100 million and not tell us the basis of that so that the Labor Party and the other organisations which have actively proposed this change can question those assumptions and potentially show where they are wrong—if there are any mistakes, because he did this in five minutes. The Treasurer left the chamber to go and hold a press conference. He only had five minutes to think about it, but I am told by some people that there are some gearing assumptions. The Treasurer has not publicly revealed those but I hear that there are some. If there are some gearing assumptions, he should tell us what they are and then we can have the discussion.

It is intriguing to me that tonight we are discussing a bill, which will presumably be passed tomorrow, which introduces a new tax regime. We do not know how much money the current tax regime raises with the new tax rate. We do not know because it is not in yet, but the Treasurer knows how much it is going to change it! He did not know the revenue. He told the parliament, just a month or so ago, rightly—because it seems impossible to know—that he did not know the revenue.

If the Treasurer does not reveal the assumptions, the industry is entitled to assume that it was a political knee-jerk reaction not based on the facts. I will quote Robert Harley in the Financial Review because it is a good quote. He said:

Unfortunately Costello has the reactive blinkers on.

That was the quote from the newspaper—I would, of course, refer to the Treasurer by his proper title. Labor does not have the reactive blinkers on, and I take this opportunity to formally move the second reading amendment which has been circulated in my name. I move:

That all words after “That” be omitted with a view to substituting the following words: “whilst not declining to give the bill a second reading, the House condemns the Government for its lack of commitment to the Australian managed funds industry and its lack of commitment to ensure Australia becomes an Asian financial services hub and calls on the Government to reduce the withholding rate applied to non dividend, royalty and interest distributions from managed investment funds to non-residents to a flat and final rate of 15 per cent”.

Labor is showing fresh thinking. Labor is showing a different approach to encouraging industries that are working hard and have results on the board, like the managed funds industry in Australia. This government has the reactive blinkers on. It is tired, out of puff and does not show fresh thinking.

When the Assistant Treasurer comes into this House to sum up this debate, he might share with the managed investment industry, and the thousands of Australians who work in that industry and who are exporting services and earning export credits for Australia, why the government thinks they should be held back by an uncompetitive tax regime. He might share with the Australian people why he thinks that we should not promote service exports but saddle them with the highest withholding tax rates in the world. He should reveal to the House whether he agrees with the Treasurer that you do not give foreigners tax cuts—whether he supports that Hansonesque approach to economic management. The Labor Party certainly do not. The Labor Party will always take the approach that people who are out there earning export income for Australia do not necessarily deserve government support but deserve a level playing field. They deserve the Australian government getting out of the way and letting them do their jobs. That is what they deserve; nothing more and nothing less.

Australia has a choice. We can continue to ride the mining boom and not get ready for the downturn, whenever it may come—it might come this year, in five years time or in 10 years time—or we can say to industries like the financial services industry and the funds management industry: ‘We think you’re doing a good job and we’re going to help you export more.’ That is Labor’s approach, the Leader of the Opposition’s approach—fresh thinking—whereas the government ‘has the reactive blinkers on’, as stated in the Australian Financial Review. Get the reactive blinkers off or get out of the way and make room for a government which is prepared to take an innovative approach, which is prepared to say to the Treasury, ‘Sit down with the industry and work out how to make this happen; go through the costings and sort out any discrepancy,’ and which is prepared to be open and honest and say, ‘This is how much we think it’ll cost,’ and why. I hope the Assistant Treasurer does that when he sums up the debate. I hope he comes in here and tables the costings. At least then we could go through them and have a debate about them. Until he does that, the government’s costings have zero credibility. They have zero credibility because it will not release the assumptions or the other information which went into making them.

I commend the amendment to the House and I commend the bill to the House, with the exception of the uncompetitive, backward-looking and disgraceful withholding tax regime that it gives this nation.

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

Is the amendment seconded?

Anthony Byrne (Holt, Australian Labor Party, Shadow Parliamentary Secretary for Foreign Affairs) Share this | Link to this | Hansard source

I second the amendment.

Wilson Tuckey (O'Connor, Liberal Party) Share this | Link to this | Hansard source

I have come to the House prepared to speak about schedule 8 of the Tax Laws Amendment (2007 Measures No. 3) Bill 2007, ‘Forestry managed investment schemes’, and associated issues. But I was interested in the member for Prospect’s remarks, and I note Labor’s pious amendment. I have always been of the view—and I cannot present myself as a taxation expert—that a withholding tax was exactly that: a withholding tax. In other words, my view has been that it is much the same as an employee’s PAYE contributions. They are calculated as closely as possible to the tax that might be attributable, but a refund is available if those PAYE deductions are in excess of the eventual liability of the taxpayer. I have to assume that the member for Prospect was talking about a rather similar arrangement. The company tax rate in Australia is 30c in the dollar. One must assume that, when we tax the profits of the huge mining companies, the corporate sector and all the other companies that export from Australia, we tax them at 30 per cent. They of course pay these days on a regular basis. They no longer have the privilege of adding it all up at the end of the year and paying it. I think they were initially Hawke-Keating government initiatives.

I was also interested because the member for Prospect happened to make a reference to the Finance Sector Union. When he was holding forth on ‘union bashing’, as he saw it, I was reminded of something that reflects very strongly on any promise that is made in this place by the Labor Party opposition. My recollection is that there was another finance sector union, which may have amalgamated with something else, called the Commonwealth Bank Officers Association. They were deeply concerned about the moves of the then Labor government to sell off the Commonwealth Bank, their employer. They felt more comfortable while it belonged to the taxpayer. Originally a very small proportion was sold and then that was extended to 49 per cent. A letter was written, fairly close to an election, by the Labor Party to the union movement, which promised that under no circumstances would the other 51 per cent of the Commonwealth Bank be sold. No doubt all the union members supported the government. As a result of that they got back into office and immediately announced that they were going to sell the other half of the Commonwealth Bank. So one wonders what you can read into a policy that says: ‘We’re going to make it 15 per cent. We will halve what this nasty government is now doing.’ That seems fairly logical to me, but how much trust can the financial sector and overseas investors have when there is an example of them writing to their own union mates and saying, ‘Under no circumstances will we sell the other half of the Commonwealth Bank,’ and then doing so with alacrity? For the broader tax-paying community, there was a wonderful statement made at about that same time about tax cuts that were in ‘l-a-w’, and they never materialised.

So one might wonder about the enthusiasm of the member for Prospect. I believe his protestations about union influence will only be discovered, whether in government or opposition, after the next election, when the likes of Combet, Dougie Cameron and Bill Shorten take their places here. In fact, I hope the young man still has a place on the front bench when those fellows shuffle themselves into a position there, as they anticipate. Any policy promoted in this place at this time by the opposition will be subject to the review of those and other union bosses who either have decided to jump ship and get a real job or are coming here to protect the species of the trade union movement, which really lost all relevance at the turn of the 19th century. I refer people to my maiden speech, where I quoted the leading left-wing academic in the United Kingdom who made that remark. Having responded to the words of the member for Prospect, my warning to those who are in hope of getting their 15 per cent withholding tax is: do not hold your breath; it might never happen, irrespective of what they say now. They have only to ring up the former executives of the Commonwealth Bank union and say, ‘How did your promise work out?’

I am a significant supporter of foreign investment in Australia, provided they come here, conduct their business and, where they make profits, pay their taxes. A withholding tax has always been a component of money shipped overseas for the good reason that it is a bit late to chase money if the entire profits are repatriated without tax. The following speaker might want to correct me: my understanding of withholding tax is that it is not the overall tax but it might restrict the capital assets of the person or body that is paying. I will give some credit to Keating as a Treasurer: compulsory superannuation funds have now created such huge amounts of money that Australia seems to be having considerable difficulty finding a home for its own money. I get a little disappointed about that because there are better opportunities in Australia for investment. I pick up the paper and find that we have bought Thames Water and toll roads in Canada, and it seems that most of our financial institutions are looking for homes for Australian savings in many parts of the world. The other great advantage those institutions have is that we as a government do not compete with them for savings. In fact, we contribute savings; we put money into future funds and trusts for education. The financial sector has to invest so there is more money for others to borrow and utilise for the promotion of profit and good living standards in Australia.

I did not come to speak about that in particular, but I am not really sure that the member for Prospect knows it all. I have borrowed a bit of money in my time. Like you, Mr Deputy Speaker Causley, I ran a hotel for many years, and we always seemed to have an overdraft of some sort, so I know a bit about that aspect of business—and I think that is important. While we are talking about institutions, profit and the performance of company directors, I thought there was nothing more outrageous than the attack on the broad body of company directors in the ACTU ad where people like them sat around the table and were accused of saying, ‘Blow the workers.’ Those directors are paying a kid I know, who was a track rider, $1,000 a day to work up in the Pilbara as a semiskilled worker—I might add that he is a hard worker—and when his donga was blown away in the recent cyclone he was luckily in Perth. He got a phone call from his boss who said, ‘Don’t go looking for another job; your full wages are available until we get you up here.’

Ian Causley (Page, Deputy-Speaker) Share this | Link to this | Hansard source

I think the member for O’Connor might be straying from the provisions of the bill.

Wilson Tuckey (O'Connor, Liberal Party) Share this | Link to this | Hansard source

The previous speaker started to talk about the Commonwealth Finance Sector Union, and I thought it was appropriate—but I thank you for your guidance, Mr Deputy Speaker. It was just too good an opportunity to miss.

I would like to address a very significant issue in this omnibus legislation. Maybe some of these issues could have been dealt with independently. Investment in forestry managed investment schemes is a matter of longstanding interest to me. I served for three years as Minister for Forestry and Conservation and had the responsibility of implementing the 2020 Vision. I opposed it at all stages and I see the progress continuing in Western Australia: another section of native forest has closed down. That native forest has closed down because it has a component of old-growth forest in it.

We have competing arguments today. We have the problems of CO emissions and coal-fired power generators. We try and find a way through these problems. We are told that the growing of trees is a contributing factor to sequestration of carbon dioxide, which is the food of trees. Trees absorb it, keep the carbon and emit the oxygen. They are great recyclers of the atmosphere. Trees do that very efficiently until they get old and then, through the process of degeneration, they start to emit more carbon than they sequester. It is the same question. The people who advocated that we save the forests—significantly to let them burn down and create the associated emissions that nobody wants to talk about—are the same people who said we cannot have nuclear power. Now we are between a rock and a hard place: do we have coal-fired power, with its identified environmental problems, or do we have nuclear power? As you will be well aware, Mr Deputy Speaker, I promote tidal power because, with the huge resources of the Kimberley, it is the better alternative to both. It is disappointing that that does not seem to have much support on either side of this House. We locked up all our native forests for political reasons, particularly at the state level. Every election you could feel another forestry reserve coming on. It used to be a dam or some project of that nature. We gave up on all those and now we are short of water.

Consequently, as that native timber resource dried up, we found ourselves with an ever-increasing trade deficit in forest products—in particular, paper, the consumption of which is huge. We were not allowed to cut down the native forests, and we did not have any other forests at the time. Consequently, in sawn timber and paper products, we closed our eyes to the rape of the rainforests of Asia—Indonesia and other places. We also closed our eyes to the fact that, when green interests tried to prevent the retailing of sawn rainforest timber, we accelerated the destruction of those rainforests—because, once the trees no longer had an economic worth, they were all knocked down and palm trees were planted to produce palm oil. Peculiarly enough, no-one ever pickets our fast-food outlets that use that product.

The outcome of all that was that our government had to come up with a policy to redress the $2 billion trade deficit and achieve some sequestration of carbon from healthy young trees—while the old ones that we were protecting were emitting more carbon dioxide than they were absorbing. We generated the 2020 Vision. At that time you could have tax deductions under what was known as the 13-month rule, a longstanding component of tax law that applied to agricultural activity. That meant you could invest money in the last half of one financial year and, if it was expended during the 12 months of the next financial year, you could get a deduction for your expenditure in that first month when you actually spent the money. That has attracted a huge investment in the growing of trees. In my electorate, that has materialised into an industry. I visited Albany the other day and saw the naming of a brand-new, purpose-built 60,000-tonne vessel that has been built by Japanese interests just to transport from Albany, in the southern end of my electorate, to Japan woodchips from trees that are only eight or 10 years old. Of course, these are the creme de la creme of woodchips. One of the disadvantages of chipping in old-growth forests was that the product was not as attractive to paper manufacturers as these new products are. So we have fixed that up.

With the last piece of legislation—on which I had significant negotiations with the Assistant Treasurer because there had been some changes made which put this program at risk—a sunset clause was pasted to those arrangements, which virtually reinstated the 13-month rule. That means we now have to revisit that legislation. The legislation is quite simple and sensible. In fact, it adds another reform which says that there has to be at least 70 per cent of direct forest expenditure taken from the investor’s funds—and that was fine. But the real fact of life is that that applies only to forestry.

This investment program has developed all sorts of other opportunities. The government has decided—and I do not necessarily agree with it—that these other developments, such as olives, almonds and fruit trees, would have been better left as they were, under similar arrangements. But, no, we have created total disarray by saying that we will let the courts sort out where in the system they lie. I think we should have made it certain—even if in a negative sense. I think the amount of prosperity that that sort of investment has delivered throughout the rural areas of Australia was well worth the taxes that might have been temporarily lost—and, when you sort through them, I am not sure they were as large as people thought.

The greatest problem I have is that some young men in Western Australia have commenced a new MIS whereby the investor purchases rights to the sowing of a crop—and, of course, rights in percentage terms to a share of the profit. The interesting thing is that, in parts of the Kalgoorlie electorate, growers had no rain at all this year. In the absence of rain, they did not take their machinery out to the paddock. But that was a loss that the investors, the cashed-up people from the city, had to carry. Actually, the manager of these funds sent cheques to growers who, because there was no rain, never took their tractors out of the shed—and they have been living on that money in the absence of any return from cropping. That is part of the scheme. The investor takes that level of risk, just as farmers have done for centuries. Farmers in my electorate are now discovering that they want to be part of the investor base as well as being one of those who receive investments. They reinvest some of the money they have received from a cashed-up city investor so that they have geographical cover; if it is raining in one part of the electorate and not another, they still have the opportunity to have cash flow.

That scheme has been left out of these provisions. I sent to the minister a copy of an amendment that might have been included here. I am disappointed that it has not been included, because it is virtually multi-peril crop insurance provided by the private sector. I believe it stands in a different segment from investments in other agricultural activities, which are to be resolved in court. There is a possibility that next year the scheme will fall over, when in fact there have been huge benefits for people. Just today we were discussing how people who have now had some rain can find some cash to sow a crop. They should contact AACL and participate in this scheme, because they will get the cash. Let us hope they have a significant crop and share some of the profits. That is fair enough. But at least they will be back in business. It is a pity that this scheme is not mentioned today. (Time expired)

Debate interrupted.