Michael Keenan (Stirling, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

Before I was interrupted by the adjournment last night, I was outlining to the House that the ALP has come up with a plan to make Australia a financial services hub for our region. I was saying that I thought it was a terribly good plan, a very sensible thing for us to do, and of course it was something that the coalition government had been pursuing for 11 years before the Labor Party came across it as a great idea. Extraordinarily, this measure seems to be the extent of what they believe will make Australia a hub within our region. They do not say anything about possibly reducing personal tax rates further, as the coalition had been doing for a number of years; they do not talk about making the regulatory regime better—again, improvements that were pursued extensively by predecessors in the roles of Treasurer, Assistant Treasurer and parliamentary secretaries of the previous government. The reduction in the withholding tax seems to be the extent of their vision. I have not even got to the most absurd part of that yet, but I will in a moment.

I note that the draft regulations that were published for this legislation actually exclude some of the most important players in our region. They exclude Singapore, Korea, Malaysia and the Philippines. They also exclude some players outside of the region: Switzerland, Austria and Belgium are countries that we have treaties with, but it was judged that we do not have an effective exchange of information with them. This measure is designed to make us a hub within the region, but it excludes some of the most important players in our own region.

Now I want to turn to what I think is the most extraordinarily silly part of this legislation. If you are a foreign investor in America, the UK or Japan and you decide that you would like to invest in Australian property trusts—and we reduce unilaterally our rate of withholding tax here in Australia—then what will happen is that your tax rate will go up correspondingly in your home jurisdiction. So let us just say you are a Japanese investor and you want to invest in Australian property trusts. We unilaterally reduce our rate, but that means that your tax liability will go up in Japan. If that is the case, there is absolutely no incentive for any individual to invest extra funds in Australia under this measure. This is the absurdity of it. It gives no incentive for individuals to actually invest under these circumstances. Essentially, what we are doing is taking money out of the pockets of the Australian taxpayer and directly transferring it from the Australian Treasury to treasuries in other parts of the world. Perhaps the US Secretary of the Treasury will write to Wayne Swan and thank him for this free gift that he has given taxpayers in his country. Sadly, it is something that will cost Australian taxpayers but will not enhance the investment environment in Australia one iota. That is the absurdity of this measure.

I will move on to a little bit of the background about what the coalition did. We were always concerned to make Australia as competitive as possible in the international arena. We asked the Board of Taxation to review our international tax arrangements with a view to seeing where we are competitive and where we are not competitive. They came back and they recommended that net rental income distributed by property trusts to nonresidents be taxed at a rate of 30 per cent, subject to a reduction of 15 per cent on a reciprocal basis in double taxation agreements. The recommendations sought to reduce the compliance burden on trustees, who were required to withhold tax at various rates according to the non-resident investor’s circumstances. The coalition government accepted the board’s recommendations, which were some of the many recommendations that were designed to promote Australia as a global financial services centre.

Despite alternative rates of withholding tax applying for basically the last decade, what we have witnessed in Australia is a substantial inflow of foreign money into Australian property trusts. So it does not appear that this rate of withholding tax was necessarily a barrier for investment. Indeed, you could probably make the case that commercial property in Australia is pretty well awash with investment in many cases. In fact, commercial property has proved to be an extraordinarily good investment over the past 10 years. The withholding tax rates have not seemed to be a barrier to foreign investors wanting to invest in those trusts in Australia.

I will conclude by referring briefly to the second measure contained within this bill—a measure we consider important. It will exempt the recipients of the Prime Minister’s literary award from income tax. The opposition support this measure. We think it is a sensible measure. We would have been very happy to split the bill to pass these measures straightaway. That offer was made by the shadow Treasurer to the Treasurer on Monday but, unfortunately, we have yet to receive any acknowledgement or response to that correspondence, which I think is a shame, because I would have liked that measure to have passed this House straightaway.

The Labor Party has completely misled the Australian people about what this measure would cost. This measure is essentially going to take money from the Australian Treasury and give it away to foreign treasuries for no corresponding benefit to the Australian investment environment. We are just taking money from our pockets and giving it to foreign governments for no good reason. What they will do is correspondingly increase the tax liability of individual investors in their home jurisdictions. So why would it be an incentive for individuals to invest in Australian property trusts? That is the absurdity of this measure.

The opposition believes it is appropriate that some of these issues are aired. I would very much like subsequent speakers in this debate to explain to us why this 7½ per cent rate is appropriate. The government is grudgingly giving the coalition’s tax cuts in this budget but, apparently, the government believes that the only other people who are worthy of a tax cut are foreign investors in Australian property trusts, who will gain no net benefit, because their tax liability will just go up within their home jurisdiction.

I think these are the sorts of questions that would be appropriately referred to a Senate committee. I, therefore, 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:(1)   calls for the provisions in the bill relating to managed investment trust income to be referred to the Senate Economics Committee for review, thereby enabling greater understanding of why the withholding tax regime should particularly favour foreign investors in property trusts; and(2)   urges the Government to ensure that the provisions in the bill relating to the exemption of the Prime Minister’s Literary Award be put forward in a separate bill that can be dealt with more quickly”.

This is a $630 million measure. It is the only tax cut given, with the exception of the coalition’s tax cuts, in the budget. Let the Senate have a look at this legislation and go out into the community and try to find out why it is that this government seem to favour foreign investors in Australian property trusts over any other form of investor in Australia and why it is that they believe it is appropriate to transfer funds directly from the Australian Treasury to foreign treasuries for absolutely no net benefit to Australia.

Bruce Scott (Maranoa, National Party) Share this | Link to this | Hansard source

Is the amendment seconded?

Peter Lindsay (Herbert, Liberal Party, Shadow Parliamentary Secretary for Defence) Share this | Link to this | Hansard source

I second the amendment.

Greg Combet (Charlton, Australian Labor Party, Parliamentary Secretary for Defence Procurement) Share this | Link to this | Hansard source

I would also like to speak on the Tax Laws Amendment (Election Commitments No. 1) Bill 2008 and related bills. I will focus specifically on the reduction in the rate of withholding tax contained within the relevant bill. It is intended of course, as was outlined in the introduction of the bill, that this will contribute to the growth in what is already Australia’s third largest sector—that is, the finance and insurance sector. The legislation also represents another election promise fulfilled by the government—a promise that was first announced by the now Prime Minister when Leader of the Opposition in his budget reply last year. I think, to put it in some historical context, the bill represents the latest contribution by Labor to the growth of the funds management industry. This is a contribution that Labor has made to the economy stretching back to the 1980s, and I will go over a bit of the history later.

The bill, as we have heard, replaces the 30 per cent withholding tax regime that predominately applies to distributions of Australian source rental income and capital gains from Australian property trusts. Once fully implemented, foreign investors in countries from which Australia has an effective exchange of information on tax matters will be subject to a new final withholding tax of 7½ per cent on their distributions. It is the effective exchange of information on tax matters that I think the member opposite who spoke previously was referring to in relation to various countries that may effectively be excluded from the final withholding tax rate of 7½ per cent—and there are good reasons for that that have already been addressed.

Importantly, restricting the reduced withholding tax rate to countries with which Australia has an exchange of information agreement will ensure that the reduced rate is not abused and will encourage foreign jurisdictions to enter into exchange of information agreements with Australia. That is the purpose: to try to engage countries in that discussion and negotiation and to have reciprocal taxation understandings through exchange of information agreements. The reduction in the taxation revenue that is involved in this change should, at the end of the day, be thought of and seen as it is: an investment in the future of the financial services industry in this country. I think that is an extremely important objective. The purpose of the bill is to encourage growth in the funds management industry in Australia. Taxation revenue will grow at the lesser rate of the withholding tax as the industry and the financial services sector itself expands.

To put some of this in an economic context domestically and internationally, it is important to note that Australia now has the fourth largest onshore managed fund market in the world. In 2007 Australia had $1.36 trillion in consolidated funds under management, including $128 billion in Australian property trusts. The finance and insurance sector contributes more than seven per cent of GDP. It is an extremely important part of the Australian economy now. This makes it the third largest industry in the Australian economy, behind manufacturing and property and business services. It employs approximately 400,000 people and contributes $30 billion in taxation revenue. Lateral Economics estimates that the funds management industry may account for 40 per cent of the economic contribution of the finance and insurance sector. This puts the contribution of funds management to the economy at over three per cent of GDP. To put that in a bit of context as well, the funds management industry is therefore bigger than the agricultural, hospitality, utilities and communications industries. Any measure by government, such as those contained in these bills, to support the growth in that sector is extremely important economically and will have a significant impact over time.

As a result of the growth of the industry, we have in Australia a very skilled financial services workforce strategically placed in the Asian time zone. We have a very stable economic environment and a regulatory regime that is well respected internationally. Corporate governance in this country, albeit that there are always continuing opportunities for improvement in this area, is well regarded in general internationally. However, when you look at some of the economics of the industry, and in particular the international engagement and investment in Australian managed funds, you see that less than three per cent of the fees derived by Australian managed funds are attributable to foreign investment. According to the ABS, this ranks the financial sector as 27th out of 35 industries in terms of export performance. The current 30 per cent withholding tax rate—and this is the point that the member for Stirling, who spoke prior to me, needs to consider—is one of the reasons why Australian managed funds struggle to attract foreign investment. This is not mere conjecture; anyone in the funds management industry in Australia could attest to that fact. With the reduction in the withholding tax, one would expect an increase in foreign investment in Australian managed funds thereby increasing fund size and export in services.

Put in a historical context, this reform is another that will build upon the contribution that the labour movement has proudly made to the development of the funds management industry in this country. The introduction of compulsory superannuation provided the domestic base for the industry, and the measures contained in this bill will help boost the industry’s export potential. Compulsory superannuation, it needs to be recalled—because this history is sometimes lost—was the result of a concerted campaign by the labour movement. You have to remember that, back in the early 1980s, most working people did not have a superannuation account. Superannuation was largely restricted to people at an executive level in the private sector and to some limited areas of the private sector for workers generally, such as in the industry in which I worked for some time, the coal industry, and also in the stevedore and maritime sectors. Of course, many in the public sector at a state and federal level also had a superannuation benefit. But the fact of the matter was that millions of working Australians had no access to retirement savings through a superannuation system.

The growth of the compulsory superannuation system since the 1980s has resulted in millions of Australians amassing retirement savings, increasing their quality of life in retirement and relieving financial pressure on the Commonwealth pension system. In fact, over the last 20 years, the universal superannuation system has been the single most important mitigating factor in preventing widening wealth inequality. It has been an extremely important social and economic reform and it has built a large amount of national savings—the savings within the Australian funds management industry.

Part of the changes that were made as a result of the campaigns by the union movement in particular in the 1980s to achieve universal superannuation were the establishment of an accumulation fund and a move away from defined benefits. These are extremely important achievements. It is relevant to note that it was very effective too: at a time when there were higher inflationary pressures, in the second half of the 1980s, the achievement of the superannuation contributions at an industrial level contributed to the alleviation of some of those inflationary pressures through the trade-off between wages and super contributions by employers.

In fact, Accord Mark II, as it was then identified in 1986, began the process of really building the universal superannuation system. A three per cent superannuation contribution was ultimately agreed to in 1991 after a subsequent accord between the ACTU and the Keating government. As a consequence of that agreement, the universal superannuation system, through the super guarantee, was introduced by the Keating government in 1992, and that laid the basis for the contribution level that now applies across the workforce at the rate of nine per cent of people’s earnings.

Until the labour movement undertook these reforms, superannuation was beyond the wildest expectations of most working people. Not only do most working people now have a superannuation account that is building towards supporting their standard of living in retirement but the other result, to come back to the focus of this bill, is that these reforms led to the growth in the financial services industry that we have today. The domestic financial services market has grown by more than 460 per cent since 1992, and the pool of funds is forecast to grow to $2.5 trillion by 2015.

I saw and participated in this growth in the work that I did over the years representing working people as a union official and particularly as the leader of the ACTU. I also sat for many years as a trustee of one of Australia’s largest superannuation funds, Australian Super. It has in excess of $30 billion in funds under management and 1.3 million members and account holders.

The industry superannuation movement collectively has built very large wholesale funds management businesses, an industry superannuation property trust, a funds management business that invests strongly in infrastructure within the country and also a bank known as Members Equity Bank that I was privileged to serve as a director. In fact, part of Members Equity’s business is one of the largest infrastructure wholesale funds management businesses in the country behind Macquarie Bank.

All of these are extremely important reforms that have been achieved, and we need to continue to build and support the growth in the funds management industry. The measures contained in this bill will build upon the legacy of the establishment of the industry and assist in making Australia a funds management hub in the Asia-Pacific region.

Access Economics in fact released a report last year highlighting the export potential of Australian funds management. The report found that, if there were no policy changes, by 2010 the financial services industry would export $1.5 billion out of total sales for the industry of $50 billion—and that is not a significant proportion, of course. However, if the share of exports in the sector were lifted from the current three per cent to 10 per cent, Access Economics found that exports would actually reach $4.8 billion, GDP would be $1.9 billion higher and an extra 25,000 jobs would have been created—all by lifting exports, in effect, in this part of the services sector. This is what the bill is designed to do.

This country has a great opportunity to be the Asia-Pacific financial services hub. Australian funds under management are roughly the same as funds under management for the rest of Asia combined, minus Japan. It is an extremely important industry and we have the skills within Australia now to continue to expand it and have a greater export focus. This is vital to diversifying the economy. While we are enjoying the best export prices for our resources sector in many years, it is unlikely that that will last forever. Unlike the previous government, the Rudd Labor government is not content to leave Australia in a position of such heavy reliance on commodity prices. Just as we are investing in the future of Australian manufacturing, we are investing in the future of the services sector and, in particular, through this legislation, the export potential of the financial services sector. The boost in this area will be very timely.

In the last six years of the Howard government, despite the resources boom and record improvements in terms of trade, total export revenues grew at an average annual rate of only 5.8 per cent, compared to 10.7 per cent in the previous 18 years following the floating of the dollar in 1983—a poor performance on this front by the Howard government. As a result, the Howard government’s legacy is 70 consecutive months of goods and services trade deficits. No government in history has presided over such a run. In fact, the trade deficit for the December quarter of 2007, the last quarter of the Howard government, was $6.9 billion, the worst on record. Again I emphasise that this is in the context of high commodity prices, where we have had a tremendous lift in the terms of trade. We in Australia, though, also have a record current account deficit, at over 6.9 per cent of GDP, and soaring foreign debt of $616 billion at the end of the Howard government’s period. It is worth considering that, if commodity prices returned to their long-term average, we would see a current account deficit closer to 10 per cent of GDP. This is clearly unacceptable. The agenda of the Rudd Labor government, including the measure contained in this bill to reduce withholding tax, is aimed at strengthening our trading performance by supporting the diversification of our economic performance, particularly in the export of services.

You really have to ask why more emphasis was not placed on this issue by the Howard government. In fact, it was always a curiosity to me in my former roles outside parliament, and with my involvement in the funds management area, that so little was done during the Howard and Costello period to boost retirement savings, build national savings even further and address the intergenerational issues that former Treasurer Costello used to speak about but not do a great deal about. The only measure that I can recall of any credit in an attempt to address the retirement savings issue was the superannuation co-contribution, but in general this was an area of significant policy failure under the Howard-Costello government. They did not, I believe, make enough public policy effort to build the funds management sector and, in particular, provide a greater incentive for foreign investors to invest more in the Australian funds management industry. Continuing policy reform is therefore important if we want to see the Australian funds management industry grow, increase its international competitiveness and become more export oriented. For that reason, I commend the bill to the House.

Judi Moylan (Pearce, Liberal Party) Share this | Link to this | Hansard source

The changes to international taxation arrangements began with the review conducted by the Board of Taxation in 2003. The aim was to reduce the compliance burden on trustees, who were required to withhold tax at various rates according to the nonresident’s investment circumstances. This involved rates from 29 per cent to 45 per cent for individuals. If Australia was to carve out a place as a global financial services hub, these changes were pivotal to attaining that goal. Notwithstanding the rates and complexity of withholding tax, Treasury were advised that there was a substantial flow of foreign investments into the Australian property trusts. We have just heard from the honourable member for Charlton that Australia is fourth in the world in terms of its property trust holdings. The coalition government accepted the Board of Taxation’s recommendations, and the 2007 legislation set a single rate of 30 per cent to be withheld by funds. If a tax return were lodged in Australia, the nonresident investor’s effective rate of tax would be subject to relevant deductions. If the nonresident elected not to lodge a tax return in Australia then the rate would remain at 30 per cent of gross income, which seems to me to be a reasonable proposition. The legislation simplified tax but did not make it any lower for a foreign investor than for an Australian company.

To prevent double taxation and tax evasion, Australia has forged tax agreements with over 40 countries and sought their cooperation in enforcing taxation laws. Double tax agreements were made with Japan in 2007, and negotiations were underway under the coalition government with the Netherlands and Germany in relation to Australian sourced real property income paid out by a property trust up to 15 per cent of the amount derived. The proposed unilateral reduction in withholding tax by Australia reduces our bargaining power in the negotiation of future double taxation agreements.

The property market in Australia has been very robust. However, world events, including increased petrol prices, with all the flow-on effects, may see a contraction of development in the future. Rather than give out overgenerous additional tax breaks to foreign investors, the Rudd government should reconsider some of the 2008 budget measures it has announced, such as the one to change the GST, which will cost the Australian industry $620 million over the forward estimates. You really have to wonder what is going on here. Why are we favouring foreign investors? We know that foreign investment is important, but why would you want to favour foreign investments and make them pay less tax than Australian companies and Australian people pay? It really beats me.

While the coalition recognised the need for change and accepted 17 of the Board of Taxation’s recommendations, the Tax Laws Amendment (Election Commitments No. 1) Bill 2008 and cognate bills which we are debating today require further scrutiny, with particular reference to the following points. Under this proposal there will be no reduction in the withholding tax on dividends and interest. In fact, foreigners will face higher withholding tax after 2010-11. Placing a lower withholding tax on income from property trusts, which is usually rent and capital gains, when reducing withholding tax on dividends or interest is more likely to encourage investment and promote Australia as a global financial centre. The lack of logic in this ought to be challenged. In evidence given to the Senate Standing Committee on Economics in regard to the Tax Laws Amendment (2007 Measures No. 3) Bill 2007,IFSA and the Property Council of Australia recommended a final withholding tax rate of 15 per cent. Even IFSA recommended that the rate fall to no less than 12.5 per cent, which is a higher rate of withholding tax than the government is now proposing in this bill. So even the property organisations, which are there to look after the property industry, were not recommending reductions to such a low figure, which is out of kilter with what the Australian people would be expecting to pay.

To have a Labor government, and the Prime Minister in particular, the supposed friends of the Australian working family, suggest that a reduction in tax on overseas investment should be made is hard to fathom. They really only needed to impose a minimum reduction, but not only have they gone below the 15 per cent; they have taken this tax rate down to seven per cent. I am just amazed. We saw the Labor government justifiably expressing concern in the lead-up to the election about cost-of-living pressures on Australian families. It was one of the things that, I am sure, attracted families to electing a Rudd Labor government. They made so many commitments to taking those cost pressures off Australian families. We now know that that was just rhetoric, as there has been absolutely no action to truly address the cost pressures on Australian families since the election—unless you take the Treasurer’s interesting little snippet on how to shop effectively in his latest newsletter, which we heard about in question time yesterday. It was laughable.

Yet here we are today discussing a proposed amendment to the tax laws, in the Tax Laws Amendment (Election Commitments No. 1) Bill 2008, the Income Tax (Managed Investment Trust Withholding Tax) Bill 2008 and the Income Tax (Managed Investment Trust Transitional) Bill 2008, giving generous deductions to foreigners while many Australians are hurting as they struggle to make ends meet. I just find this extraordinary. Many Australian working families, some of whom are in my electorate of Pearce, are also small business owners and primary producers. The feedback from my constituents has been that it is becoming increasingly difficult for owner-operators to keep their head above water amongst the ever-escalating costs associated with running a business, particularly the cost of fuel, as well as other goods. And consider the poor old primary producers. In Pearce they tell me they have had massive increases in the cost of chemicals and fertilisers, which are necessary to harvest a crop. They cannot harvest a crop without them. We rely on them as food producers of the nation and they are doing it tough. Here we are giving away money, more money than is necessary to do the job, to foreign investors.

I say: let’s reduce the burden of tax on Australians—on Australian families, on Australians primary producers and on Australian business. Let’s get down and do the job and let the government get down and do the job that they were elected to do. For us to be here today in a position to make things a little easier for Australians hard hit by the pressures of the rising cost of living and the rising cost of doing business and debating a bill that provides overgenerous tax relief to foreign citizens and companies ahead of our own truly puzzles me. On the ALP website, the Prime Minister says he believes that Australia is the lucky country. As the great Italian Renaissance artist Benvenuto Cellini said, ‘Let everyone witness how many different cards fortune has up her sleeve when she wants to ruin a man.’ We should not forget that things can turn very quickly and we have an obligation and a duty to make sure we are doing everything to shore up our own economy and to make sure our own people are taken care of. That does not mean ignoring the importance of foreign investment in this country. We cannot afford to do that in a global economy. It is one of those things we have to do, but we do not have to give foreign investors more than is necessary.

Offering higher tax breaks to foreign investors seems to me pointless when they will just be hit by taxes by their own governments at a later date, so any gains they have made from this will be diminished and they will feel no benefit. Meanwhile, Australians struggle to get dealt a decent hand by the Labor government. It certainly seems that the Labor government have no intention of supporting Australian small business owners. This is evident in the recent treatment of the solar panel industry. We heard the pre-election cries of, ‘We’re going to fix the greenhouse gas problem,’ ‘We’re going to deal with the climate change issues,’ and, ‘We’re going to support small business.’ So what do they do? The first thing they do when they get into government is to remove the $8,000 solar panel rebate, which was vital in helping many people to install solar power in their homes and, indeed, to make significant reductions in greenhouse gas emissions. On top of that, small businesses are now shedding contracts and going out of business, and jobs are being lost, and ultimately the environment will be worse off. So it was a hollow promise.

In looking at these amendments we must consider all the repercussions of any decision we make. Australia does not want to discourage foreign investment—far from it. I agree with the member for Stirling, the shadow Assistant Treasurer, who was just at the dispatch box, in that any moves to give tax relief in order to promote Australia as a regional financial hub must be done with due process and consultation in order to get the best possible result. We want to maintain Australia’s reputation as a financial services centre, a reputation that was built and enhanced during the 11 years of the Howard government. But, despite the high rate of withholding tax, the Treasury advised our government that there were still substantial flows of foreign investment into Australian property trusts—in other words, the withholding tax rate was no barrier to investment in property trusts in Australia by foreign interests. The question is: do we need to go over the top in giving tax breaks to foreign investors? I say we do not. We should rather provide further support for Australian families, small businesses and primary producers.

We understand that Prime Minister Rudd has been courting foreign investment in the past week by promising $35 million of taxpayers’ hard-won money to foreign multinational companies. The Prime Minister wants to be seen to do the right thing; however, the hard-earned dollars of the Australian taxpayer will go straight into the pockets of overseas interests. I fail to see how this is the right thing for Australian workers and small business owners. The government is under a lot of pressure—we understand that, and rightly so—because the engine for the Toyota Camry hybrid will be fully imported, unlike the current Australian-made Camry engine. The government is now trying to pretend that the $35 million grant will encourage research and development in the automotive industry. Surely the government could have contributed this money to the Holden hybrid technology program. For those of you not aware, Holden has joined forces with Australia’s largest scientific research agency, CSIRO—which, by the way, has had money cut from its research programs by this government—to produce a unique electric/hybrid prototype vehicle.

This vehicle showcases Australia’s ingenuity, provides a testbed for evaluating future technologies and offers a glimpse into the automotive future. The prototype hybrid power train has the potential to reduce fuel consumption by up to 50 per cent. Consequently, hydrocarbon emission levels would be dramatically reduced, making a real contribution to the protection of our environment. This uniquely Australian technology is designed to power a full-sized family car, the kind most Australians prefer to drive.

To a self-confessed economic rationalist such as the Prime Minister, such a large investment in local industry and ingenuity would be a far more logical decision. However, the Prime Minister has proved himself not to have the most rational economic judgement, and that is coming to the fore very early in this government’s administration.

This brings me back to the proposed tax law amendments. With Australia experiencing record property prices—prices which have seen many younger buyers priced out of the market, not to mention those who are on fixed and low incomes in this country—Australia does not need to encourage further pressure on the Australian property market. I do not think that this is necessary. Monday’s Sydney Morning Herald reported that house prices are tipped to rise next financial year as Australia’s fastest population growth in two decades outweighs the effect of higher interest rates. On top of that, we have heard that the government proposes to massively increase migration into this country. I know of people who have had to consider living in their cars or going into refuges because they simply cannot find a place to lease. You will have 30 people trying to lease the same property in Sydney. You have got to pay six months rent in advance to get a lease on a property, and it is not much different in my state of Western Australia, where property values for rental properties alone have increased by about 40 per cent—they have nearly doubled in cost.

How on earth can a person on a disability pension of $270 a week even pay their rent? No wonder we have got 100,000 homeless people on the streets of our cities every night in this country. It is a disgrace. So why would we want to add to the pressures of the Australian property market?

The other point that I think has not been made and must be made is that, in the 2008 budget that has just been announced by the Labor government, there are measures there which aim at reducing incentives to buy properties. These include the changes to the GST, a tax once referred to by the current Prime Minister as the highest form of fiscal vandalism. They do not mind now using the GST to up the revenue base so that they can then swish some money across to tax breaks for foreigners—that is perfectly okay: ‘We will rip it off the local Australian market, and we will swish it across here for foreign investors and give them a few tax breaks.’

I know a few Australians who would like to have a few tax breaks. I know a few people on disability support pensions who would like a bit more support. This measure in the Rudd Labor government’s budget will actually cost the Australian property industry an estimated $620 million. That is what the tax measures in the 2008 budget will do. It appears that the Prime Minister and the Labor government do not know if they are Arthur or Martha in their ability to make rational economic decisions, and this is hurting Australians everywhere.

Bringing this amendment in the way it has been brought is a bit of sleight of hand, in actual fact. It is to cover a mistake that Labor made with costings. The former Treasurer, the member for Higgins, pointed out, when Labor last year announced their $105 million policy in relation to this legislation we are debating today, that they had made a huge miscalculation in the costs. It amounted to about a $400 million blunder. Treasury’s most recent update put the figure at $505 million. The data used by Labor during the election as a base for the costing, according to Treasury, was ‘volatile’. It certainly is.

That money would go some way toward alleviating some of the cost pressures facing people in the Australian community. It is not difficult for us to see why these amendments should be subjected to further scrutiny to avoid further hurting Australian taxpayers. The best course of action is, I believe, as the shadow Assistant Treasurer, the member for Stirling, has recommended: to refer the first part of this legislation to a Senate committee for further scrutiny.

As I said, this Labor proposal does not reduce the withholding tax on dividends and interest. Dividends and interest paid to foreigners will face a higher withholding tax after 2010-11. To promote Australia as a global financial centre, reducing the withholding tax on dividends and interest is a much smarter move than reducing the withholding tax on property trust income. This very amendment seems to be a token gesture from Labor in at least some part, so I support our shadow minister, the member for Stirling, in his recommendation that this legislation should go forward to the Senate for further scrutiny.

Richard Marles (Corio, Australian Labor Party) Share this | Link to this | Hansard source

I rise to speak in support of the Income Tax (Managed Investment Trust Withholding Tax) Bill 2008, the Tax Laws Amendment (Election Commitments No. 1) Bill 2008 and the Income Tax (Managed Investment Trust Transitional) Bill 2008. Before I get into the substantive arguments in relation to those, I would like to welcome the students of the North Narrabeen Public School, who are present here today on my left, and the students of the Cambridge Park Primary School, who are on my right. I welcome them to Canberra, to this parliament and to this House, and I hope that they enjoy their time here.

I find this a very comforting debate. It is comforting because it is a debate about the engagement of this country with the rest of this world and a debate which completely characterises the positions on international engagement which have been taken by both the Liberal Party and the Labor Party since the Second World War.

This legislation is about trying to create a financial services hub based in Australia, levering off what is a very strong domestic industry and turning it into a financial services hub for the Asia-Pacific region. It looks at the suite of withholding tax rates which apply to the various earnings which can be achieved in this country, making them consistent with and competitive with the rest of the world. When you look at those tax rates, you see that most of the earnings which can be achieved by a foreign investor in this country are taxed at a rate largely consistent with and competitive with the rest of the world with the exception of one—that is, the rate of withholding tax which applies largely to property trusts, currently at 30 per cent and right out of kilter with the rest of the world. That means there is a significant hurdle in place to developing this country as a financial services hub for the Asia-Pacific region. Ultimately, this legislation is about reducing that tax rate to one much more consistent with and competitive with the rest of the world, so that we can build upon what is a very successful domestic industry and create this country as a financial services hub for the Asia-Pacific region.

The other side oppose this legislation. In doing so they use phrases like ‘tax breaks for foreigners’. When the Liberal Party have looked beyond our shores over the last half-century, essentially they have been scared. Instinctively their heads have turned 180 degrees and looked inwards. They have been incredibly insular; whereas, we see opportunities for our people which can be achieved when we go beyond our own shores. We see possibilities for our own people here by engaging in the rest of the world. When the Liberal Party look beyond our shores, they see threats. When we look beyond our own shores, we see opportunities. When they talk about tax breaks for foreigners, we see jobs for Australians. That is one of the fundamental differences which have characterised the Labor Party and the Liberal Party since the Second World War. This legislation is absolutely about Australia engaging with the rest of the world, levering off a very successful domestic industry to create a wonderful opportunity for our people and a very exciting opportunity for a new export industry in this country, which is why I am so excited in speaking today.

In a moment I will go to the funds management industry in Australia and what this opportunity represents for them, but before doing that I will go through the specifics so that it is clear what these bills are seeking to do. These bills apply to fund payments which, excluding dividends, interest and royalties, cover the distribution of Australian source net income of Australian managed investment trusts to foreign residents. The particular focus is on Australian source rental income and capital gains from Australian property trusts.

This legislation seeks to give rise to a change in the rate of tax incurred by managed investment trusts in accordance with section 55 of the Constitution. The bill which gives effect to this change is the Tax Laws Amendment (Election Commitments No. 1) Bill 2008. In this bill, the current non-final withholding tax rate for property trusts of 30 per cent will, in a staged way, ultimately be replaced by the final withholding tax rate of 7½ per cent. The difference between non-final and final is important because it goes to the issue of why the particular levels of tax have been chosen. It is important to understand that this is a staged transition. It will not happen overnight. In the first year after this bill gets royal assent, the reduction in the tax rate will be from 30 per cent to 22.5 per cent as a non-final withholding tax amount. In the second year, it will reduce further to 15 per cent as a final withholding tax and in the third year and thereafter it will come down to the ultimate goal of a 7½ per cent final withholding tax rate.

The difference between non-final and final under the current regime, which is a non-final regime, is that companies or investors are allowed to claim tax deductions against that 30 per cent, so ultimately they can bring that tax rate down. As a final tax regime, which is what we seek this to be, there will not be the ability to claim deductions. Technically, that means the reduction of the tax rate is not as large as it seems, which gives some explanation to the queries from the other side about why we have gone for a rate of 7½ per cent rather than 15 per cent. It is important to understand that the reason we have changed from a non-final to a final withholding tax regime is that many foreign investors found that engaging with our tax regime in a situation where they had to claim tax deductions was often complex and difficult from where they stood. In effect, we are reducing the tax rate to make it more competitive and more consistent with the rest of the world. By shifting from a non-final regime to a final regime, we are also making it a far simpler tax regime and one which is much easier to engage with for foreign investors. In that sense, it is a very important reform as well. That is why, ultimately, we will come to a rate of 7½ per cent.

There is another important point to be made in relation to this bill. That is, the reduction in the tax rate will apply only to entities who are residents of information exchange countries, as defined in the Income Tax Assessment Act 1997. Information exchange countries are countries with whom Australia has an information exchange agreement. Where those agreements exist and where we can verify absolutely the legitimacy of the foreign investors in our system, beneficial tax rates will apply, but where we do not have such an agreement in place, the current 30 per cent rate will be in place. Making that differentiation obviously is an important public policy stance because it encourages countries to engage in such an agreement with us. The one country talked about a lot in this debate is Singapore, with whom we do not have such an agreement. It is hoped we will reach an agreement with Singapore so that foreign investors from Singapore can enjoy the benefits of our new tax regime. It is an important point to make because it sends a strong signal that Australia is not tolerant of international tax evasion and avoidance. We send that the signal by making it clear that we will tax at a higher rate foreign investors from countries which do not have such an agreement with Australia.

Another technical point is that this new tax regime, of which these bills are a part, will apply to distributions received directly from managed investment trusts and indirectly from custodians and other entities. That is a point worth noting. The provisions in relation to indirect flows expand the current non-final withholding tax regime, which is currently limited in application to indirect flows through custodians only. So there is an increase in the breadth of this regime and, in increasing the breadth of the regime, we will make it consistent with the final withholding tax arrangements which currently apply to dividends, interest and royalties. If you like, there is some housekeeping to be done to the way this bill is constructed so that it is more consistent with the tax regimes which apply to other earnings that exist in this country for foreign investors.

These bills seek to facilitate the emergence of this country as a funds management hub for the Asia-Pacific region and in doing so we will turn our very strong, vibrant domestic industry into one which has an export capacity and which derives export earnings. It really is one of the most exciting opportunities that exist in this country today for the development of a new export based industry. The Prime Minister in August 2006, as the then shadow minister for foreign affairs and trade, addressing the Investment and Financial Services Association conference signalled the Labor Party’s intent to develop this area of Australia’s financial services industry. In a sense these bills represent the fruition of that vision.

Australia obviously has a number of really significant natural advantages and attributes in this area such that we can become a financial services hub for the Asia-Pacific area. Firstly, this country enjoys a very skilled workforce. Secondly, we have a strategic location in the Asia-Pacific time zone, and that is very important in being able to engage in real time with countries like Japan, China and Korea. Thirdly, Australia has a stable economic environment and a very well-respected regulatory regime. All those kinds of stable conditions will naturally attract foreign investors to this country. Fourthly, really significantly—and it is in a sense this fact that gives us the opportunity to develop this export industry from the existing domestic industry—right now Australia has the fourth largest onshore managed fund market in the world and currently the largest in Asia. We are clearly punching well above our weight. In December last year Australia had $1.36 trillion in consolidated funds under management—a very significant amount of money indeed. That total includes approximately $128 billion in Australian property trusts, which would be the subject of this change to the tax regime.

It is important to understand why we have such a large managed fund industry in this country already. It is basically as a result of the reforms brought in by the Hawke and Keating governments during the 1980s and 1990s that put in place comprehensive occupational superannuation in this country through the establishment of the superannuation guarantee legislation and the establishment of industry superannuation funds. It was a Labor reform in the 1980s and 1990s which gave the platform for this wonderful opportunity for our country in 2008.

As much as we will hear those on the other side of this House saying that when John Howard was in power they thought this was a great idea as well and they were doing all they could to bring it about, the fact of the matter is that they did very little to bring it about. Of that enormous managed fund money which currently exists in Australia, less than three per cent of the fees can be attributable to foreign investment. So, as large as a domestic industry as this is, what we are earning from that industry in an export sense from foreign investment in Australia is absolutely pitiful. That reflects the record of the Howard government over the last 12 years in relation to this opportunity. The fact of the matter was they were scared to look overseas and they did not see this opportunity. As a result, those 12 years are lost. That is why it is so important that this government act now to build upon this industry and to create a dynamic export based industry in Australia.

These bills will provide Australia with one of the lowest withholding tax rates in the world, in line with the withholding tax rates currently in operation in the United States, the Netherlands and Hong Kong. It is hoped that, as a result of that, we can attract a significant amount of foreign investment to this country. I think it bears to spend a moment thinking about how the international foreign investment market works. By definition, we are talking about funds which are very liquid and are able to be diverted to one country or another. When you are talking about earnings, you inevitably are talking about people making decisions on the basis of what is the best marginal rate of earnings. So getting the tax regime right, putting our country in a position where we have an attractive tax regime for international investors to invest in this country, is absolutely critical in attracting that investment to this country. Small changes can make very large differences. That is why this legislation is so important.

The 2007 estimates suggest that the global managed funds industry will top US$60 trillion before the end of this decade, increasing from the current US$50 trillion. Funds under management in Asia are expected to grow by 14 per cent over the next decade. The growth of China provides an incredible opportunity to develop Australia as a financial services hub and makes this such an important time to act upon this initiative.

Access Economics, using its in-house general equilibrium model, has suggested that the potential benefits that this type of reform could bring to the overall economy by 2010 include an additional 25,000 jobs. This is a huge industry development that we are talking about, including 3,500 jobs in the finance sector. Ultimately, they make the estimation that this could add as much as 0.3 per cent to overall GDP.

This is a very exciting opportunity. It is very important that we get our tax regime right. That we have not got it right over the last 12 years stands as a legacy which condemns the former Howard government for failing to see this opportunity and failing to build upon it. But, of course, it ought to be no surprise to anyone in this room or to the Australian people, because the Liberal Party are ultimately the party of economic laziness and it is Labor who have been the party of financial reform. This reform is ultimately not about radical thinking; it is actually about intent listening—listening to industry experts and taking their advice to develop good policy. The Howard government had over a decade to provide this type of reform but, as in so many other areas, they were far more concerned with the election cycle than they were about the long-term future of this country. This was a ball in the air that they simply dropped. This is just an issue that they completely missed.

This new regime is one of the many measures which are being put in place by the Rudd government to try to construct a future for our country which goes beyond the existing mining boom. There is enormous growth potential in the financial services industry in this country. This is a fantastic and exciting opportunity to make Australia a financial services hub in the Asia-Pacific region. Now is the time to entice those funds to this country and now is the time to develop this industry. For those reasons, I very much commend these bills to the House.

Bob Katter (Kennedy, Independent) Share this | Link to this | Hansard source

The advice provided to me is that we are also talking here today in the debate on these tax bills about treasury bonds. I will stand corrected by the frontbench if I am wrong, although I do not think the frontbench is with us today. I see the problem in Australia today very clearly because I represent the mining sector in this parliament. The mining sector I represent is probably the biggest of any member of parliament in this place. It is certainly amongst the top three. Once upon a time, the government would provide a joint user facility, whether that was a power station, a railway line or a port. The finance for the joint user facility was provided by the government. We found in Queensland that this was a very lucrative experience. It may have been that we had very good government and we got it right. When we provided a facility for Gladstone, for example, it may have been that we got it right. When we provided the railway line to Mount Isa, it may have been that we got it right. When we provided the railway line back from Collinsville through areas such as Moranbah, it may have been that we got it right. I would not say that; I would say that the philosophy was right.

We have a situation where the Lady Annie phosphate project, which will be one of the biggest phosphate deposits in the world, has to find the money for a slurry pipeline or a railway line to get its product out. It has to find the money for a port. That port will be there for hundreds and hundreds of years. That port will service the people of Northern Australia for hundreds and hundreds of years, as the ports of Townsville, Gladstone and Brisbane have. Hundreds and hundreds of people utilise the benefits that flow from the construction of a port. To ask a single company and a single project to meet the entire cost of creating a port is ridiculous. Any government that would seriously advocate that as the regime and mechanism by which the country can move forward is being quite ludicrous.

I have to say in fairness to the current government that their rhetoric is very attractive. They have said, ‘We will provide $20,000 million for the provision of infrastructure.’ The last government did not have that policy at all. They had some political one-offs. The current government are quite right in criticising them. The incredible $600 million that went into the railway line from Adelaide to Darwin was a most extraordinary allocation of money. It was simply to rescue the South Australian Liberal government, which it failed to do. From my experience, because I am not going to act holier than thou, the governments in the eighties that I was an integral part of did those things, but I thought they were counterproductive. In the end, I thought that trying to buy votes was counterproductive. A classic example was in my own electorate where the government spent some $360 million in the election before last trying to get rid of me. I recorded one of my highest votes ever because people were insulted and offended by that. That $600 million was for a railway line that goes from nowhere to nowhere through the greatest desert on earth and there is not a single, solitary export item that I can think of that would go out through the port of Darwin, with the exception of uranium. But the amount of uranium going out could be contained in a space about a quarter of the size of this chamber. It is very valuable, but it is very small. One person could take it out in a truck.

We are being told that reducing this withholding tax for foreign corporations will somehow be good for Australia. My belief somehow is that it will be good for foreign corporations. Excuse my naivety but, after watching these sorts of things for 35 years, my cynical viewpoint is: who is getting the money? The last time we did something like this, the Liberal and National parties removed the capital gains tax on foreign corporations, so their hypocrisy in coming into this place howling and wailing about this measure is really quite extraordinary.

Capital gains tax was removed for foreign corporations by the last government. The ALP want to act holier than thou, but today they are doing exactly what the Liberals did. They give us great rhetoric about how they opposed it and how it is disgusting to give a free kick to foreign corporations—and then voted for it in both this House and the Senate, exactly the same as the Liberals are doing here. We have had great speech after speech condemning the government for giving a free kick to foreigners, and then they are voting for it. Is it any wonder that people hate politicians? Is it any wonder that we enjoy one of the lowest rankings of respect of any category of people in Australia?

At the time, I said: ‘Why are you doing this? Why would you give this extraordinary free kick to foreign corporations? Are you trying to encourage them to take over the Australian economy?’ Let me be very specific. I represent a mining area, and in fact for the first time in probably 20 years our traded balance of payments is in a surplus. We exported a greater value of goods than we imported for the first time in maybe 20 years, and that is because of an explosion of mineral prices. Base metals have gone up about 320 per cent and coal has gone up about 120 per cent. So we have suddenly skyrocketed through the roof with our traded exports, and yet our current account is at its worst level in Australian history and one of the worst levels of any country on earth. The Liberal government left us with a legacy of the worst balance of payments of maybe any country on earth. If you exclude the Third World countries, then we come in about last on that list.

How is it that your traded commodities can show a positive and yet your current account shows a negative? I will explain to you why, Mr Deputy Speaker. Look no further than our own company Xstrata, which is run by really wonderful people in Australia. I want to put that on the record. It is run by really wonderful people who everyone, without exception, has immense respect for. But Xstrata came in much against the advice of Vince Gauci and the board of slithering Sydney suits, as I call them—those clever people that run Australia, make all the decisions for Australia and are listened to in this place much more than any of you members of parliament are listened to. I tried to explain ethanol. I said, ‘Let’s say 20 members of parliament go in and give every logical reason why we should do it,’ and then one of these slithering Sydney suits goes into the room. Who do you think they are going to listen to? He is a big powerful head of—I don’t know—one of these banks or corporations.

There are the most extraordinary events in the Westpac bank. A lady there, on the figures in the paper, has made $93 million for herself in the last six years. The first bank she ran collapsed and the collapsing bank is going to be purchased as an asset by the bank she is now running, and I read in the papers how marvellous she was! She was described as ‘the happy dragon’. I do not mean to condemn the lady—I don’t even know the lady—but I can tell you that there is a culture out there that is extremely evil and extremely destructive for this country.

Let me go back to Xstrata. They were running at a profit—do not quote me on the figures. It was about a $40 million or $50 million profit they were running internationally and they had expenditure in Australia of about $1.5 thousand million. So on an expenditure of $1.5 thousand million they had this tiny narrow profit margin. So the hawks from overseas swooped and picked up Xstrata. What happened is that metal prices went up 350 per cent, so the $1.5 thousand million income suddenly became a $4.5 thousand million income. But all that stays in Australia is the $1.5 thousand million. The traded assets are great stuff. Australia is exporting all these minerals and making this huge amount of money, but it just comes in and goes straight overseas to the owners.

Basically, the six major mining companies in Australia were all Australian owned 15 years ago. The Keating government and, I regret to say, because I have very great respect for John Howard, the Howard government are responsible for seeing that all six of those mining companies are now predominantly overseas owned. So the huge profits and windfall wealth that should have come to this country never came to this country because this place supinely allowed every single one of those companies to be taken over by foreigners. And what we are seeing here today is a facilitation of more takeovers—exactly the same as the last government facilitated takeovers. When after three days of frustration I could not find a single logical reason why the capital gains tax was being removed, one of the advisers sheepishly—his conscience got to him—said, ‘Mr Katter, I must say that this was all done in the two-month period that the Coles takeover was in the pipeline.’ If you were going to take over Coles and you knew you were not going to suffer any capital gains tax, then that was an enormous incentive for a foreigner to take over Coles. If you were one of the people selling Coles then you were going to make enormous profits out of that decision.

The Packer empire was apparently manoeuvring in a similar manner at the time. Whether the media reports were fair to them or not I do not know, but I do not blame a person for trying to make a quid. Anyone who says they are not is a damned liar or a fool—one of the two. So I do not condemn those people for doing that, but I do condemn the people in this place, who should make the rules so that that personal profitability will result in a greater wealth for the Australian people. But our rules are working in exactly the opposite direction. People should really do a bit of homework before they come in here. The opposition spokesman came in here and he said, ‘We are the low-taxing party.’ The Liberal and National Party is the low-taxing party. Well, I would hate to see a high-taxing party!

Pat Farmer (Macarthur, Liberal Party, Shadow Minister for Youth and Sport) Share this | Link to this | Hansard source

You’re looking at them now.

Bob Katter (Kennedy, Independent) Share this | Link to this | Hansard source

No, no. I take the interjection because you people have to know that you took taxation from $110,000 million a year to $364,000 million a year. So I would wipe the smile off my face if I were you. You skimmed the Australian public for $265,000 million a year.

If you say, ‘GDP increased; so we’re entitled to more taxation because of the GDP,’ I say that GDP only increased by $514,000 million to $952,000 million. So the people of Australia had an 80 per cent or 90 per cent increase in their income but had a 350 per cent increase in their taxation. So, if I were you, I would not be smiling and I most certainly would not be opening my mouth and inviting the obvious retort that you were going to get.

I hate to say this—I hate to admit it—because Mr Keating was amongst my pantheon of really bad leaders of this country. He would probably rank amongst the three or four worst! He would be up there with Joe Lyons, as one of the great disasters that this country has produced. Whitlam was only in government for a little while, so he could not do much damage in his time, but I do not want to insult him by leaving him out of that illustrious group of dreadful prime ministers. The more I read history books and look at what happened, the greater respect I have for the Fraser government. When they left office taxation was at $42,000 million. Under Mr Keating it more than doubled, to $110,000 million. But the last mob, in a shorter time frame, had taken taxation to $365,000 million. So, when we are trying to measure people by taxation levels, if I were from the Liberal or National parties I would be hiding in the toilets at this moment, in the middle of this debate.

I return to the substantive debate, that Australia will profit by this—that there will be huge money and we will become the financial hub. That really worries me greatly. It is the same sort of thinking that referred to Japanese bladders and called thongs Japanese riding boots. It was the same sort of attitude that said that the Japanese should not be taken seriously militarily when, if you had done any sort of study, you would know that their navy was not much smaller or less formidable than the American navy. In fact, by the time the Japanese had finished with the American navy the Americans had only one battleship and one aircraft carrier left in the Pacific Ocean. They could not defend Guam because they had nothing to defend it with. All of their battleships, destroyers, cruisers and aircraft carriers had been sunk. They were at the bottom of the ocean. The great difference was that, whilst the Japanese lost a large number of their aircraft carriers at Midway, the Americans could reproduce theirs; the Japanese could not. But the idea that they were somehow inferior to us almost cost us the invasion of this country.

The same dreadful thinking is abroad here—that somehow God is an Englishman or that somehow we are cleverer than all of the Asian nations and we will be the financial hub of Asia. I do not think anyone is seriously considering that we are going to be the financial hub of Europe or America but I think the background thinking to this is that we are somehow going to be the financial hub of Asia. Well, this is a very dangerous mode of thinking. It is a very dangerous mode of thinking, indeed.

If you are making your decisions on the basis that somehow we are going to be such really important people in Asia—they will have terrific respect for us!—I strongly suggest that you go and read the little black book that was handed out to all in the Japanese southern army. It said: ‘Three hundred thousand Europeans think they can rule an empire of 400 million Asians. Well, they can think again, because we’re going to throw them out.’ Whilst the Japanese may have lost the war they most certainly succeeded in throwing the Europeans out of Asia. Before the war the Dutch ruled Indonesia. Before the war South-East Asia was ruled by the French. China was ruled by the European powers—and that is, in fact, why Japan went to war. India was ruled by the British. The Philippines was ruled by the United States. After the war the only stupid country that tried to go back in was France, and that led to 54,000 Americans losing their lives in Vietnam. That happened because the French were so stupid as to try and go back in and reimpose themselves.

So it is dangerous thinking that is abroad. This dangerous thinking is again—as with the thinking on tariffs—giving our competitors a free kick. We give them, in the field of agriculture, a 33-metre start over 100 metres. I have lost some of my speed but I think I could still take out Linford Christie over 100 metres if I were given a 30-metre start. Yet we expect all of our farmers to run off a handicap of 33 metres and still compete over a 100-metre race. The average OECD support level is 49 per cent. The support level in Australia is just about zero. So what we are saying is: ‘You blokes are good. You’re 50 per cent better than your competition.’ Well, I have news for you. The late and great Ron Camm, from Queensland, was one of the founders of the coal and aluminium industries of Australia—Sir Joh Bjelke-Petersen’s right hand, if you like. Ron Camm said, ‘Five per cent differential in international trade is an unbeatable head start, and we’re not giving anyone five per cent.’ But this place has given them 50 per cent head start. And each day I walk into this chamber there is more legislation coming down which gives all of our competitors more and more of a head start.

In the field of ethanol the Americans are driving their cars at 81c and buying their grain for $170 a tonne. We are driving our cars at 150c and paying $250 a tonne for grain, simply because this place does not have the brains and the commitment to look after its own people. As Henry Lawson said—and I conclude on this note—‘Let us look to our own.’ (Time expired)

David Bradbury (Lindsay, Australian Labor Party) Share this | Link to this | Hansard source

I rise in support of the Tax Laws Amendment (Election Commitments No. 1) Bill 2008 and related bills that are before the House. These measures are in fact an important part of the government’s strategy to attract more investment into the country. Not only is it about investment but it is about jobs and local jobs. There has been much discussion in the debate and some of it has dwelt upon the racial elements of this particular series of measures. The constant reference to foreigners is something that I think does not really allow the debate to be conducted in an objective fashion. When we are talking about the particular taxpayers that are likely to be the immediate beneficiaries of these measures they are nonresident investors, but those nonresident investors will be the individuals and the entities that will be contributing capital towards industry in this country.

While matters of race are sometimes important to men and women, I have to say that when it comes to global capital there is much more interest in rates. That is why the significance of this particular measure is to reduce the withholding tax rate on managed investment trust income by taxing particular distributions arising from managed investment trusts. Perhaps the best way of describing the particular types of distributions involved is to say they are distributions other than those that would otherwise be characterised as dividend, royalty or interest income. There has been much discussion in this debate about listed property trusts, but of course the legislation is broader than that. It is not just about listed property trusts; it is about managed investment trusts, as defined in the bills.

The particular measures that are contained in these bills that I rise in support of involve the lowering of the current rate of withholding tax of 30 per cent in a staged fashion. The first stage will involve a reduction to 22.5 per cent, followed by a reduction to 15 per cent and then a further reduction to 7.5 per cent, which will take our rate of withholding tax for these types of distributions to one of the lowest, if not the lowest, rate in the world. That will be a very clear signal, a marker, to global capital that this is a place to invest—that Australia is a country where you are able to invest and you are able to get a reasonable rate of return without being slugged with excessive levels of tax, as may be the case in other jurisdictions.

A number of comments were made earlier in the debate that I would like to address, one by one. Firstly, I feel it is appropriate to go through and comment on some of the third-party endorsements that this bill has received from particular players in industry, many of whom have been calling for these measures for some time. Mr Richard Gilbert, the Chief Executive of the Investment and Financial Services Association, IFSA, said:

I was shocked that the move was better than the election target. It was a pleasant surprise. When you look at the package, it’s brilliant.

It is brilliant because it goes further than the election announcement, taking our rate to a level that is much lower than that of most of our trading partners, making Australia a more attractive destination for overseas investors looking to invest in the particular types of funds and projects that are in contemplation under the bills.

We have also heard Mr Trevor Cook, the Executive Director of the Property Council, state:

This is world’s best practice. This will increase the competitiveness of the Australian REIT sector and its ability to attract capital. The joy comes from the fact that the government has committed to aggressively attacking the issues.

That is true: this is a government that is very much committed to attacking those barriers to foreign investment. If we are to be internationally competitive then it stands to reason that we must have rates of taxation that are amongst the lowest in the world. Certainly this is a particular series of measures designed towards ensuring that in respect of these types of distributions we will be delivering one of the lowest rates of withholding tax in the world.

Mr Stephen Dunne, the Chief Executive of AMP Capital, said:

Reducing their withholding tax for foreign residents will strengthen Australia’s competitiveness as an international investment centre.

That is precisely the point that the government is making. Mr Jeremy Duffield, the Managing Director of Vanguard Investments, said:

This single initiative delivers a vital fillip to Australia’s credentials as a regional investment centre—

once again, that echoes the views of the government—

allowing our local industry to attract greater capital inflows through a sharpened competitive edge.

And Mr Peter Verwer, the Chief Executive of the Property Council of Australia, said:

This reform has come at a critical time for the real estate funds industry, which is facing increased global competition for capital and a tightening market.

That is a point worth reflecting on: significant changes are proposed in these bills, but they are also timely in the sense that there is a squeeze out there for funds. It is a tight market and we hope, and we certainly believe, that this measure will go some way towards increasing the pool of funds available for investment here in Australia.

Significant benefits flow from having Australia as a serious player in financial services. The ambition that the government has of creating some of the big cities in Australia in particular as hubs for financial services and managed funds is an ambition that we are very much committed to. This particular range of proposals is one of the first instalments towards trying to achieve that ambition. The significance of this, of course, is having more money flowing into this country for investment and more money flowing into managed investment trusts in this country. We heard from previous speakers—the member for Corio and the member for Charlton—that in Australia we have a managed funds industry that is first rate. We are punching well and truly above our weight internationally. This is an area in which we have a comparative advantage in terms of the skills of our local residents, but that also begs the question: what do we need to do in order to consolidate that industry? What do we need to do in order to expand the range of opportunities in that particular space, in that particular industry?

An initiative such as this will not only bring more capital into this country; it will provide more jobs, and those jobs will be in a highly skilled sector of the global economy. That is an important point to make because, from my observations over the many years that I have been both a participant and an observer of the public policy debate in this country, the perils of globalisation have been much lamented by people on all sides of the House and, indeed, by many beyond the walls of this House.

With globalisation there clearly come many challenges but also some great opportunities. In providing an internationally competitive tax regime in relation to withholding tax in respect of distributions from managed investment trusts, as a nation we are able to position ourselves in such a way as to take advantage of some of those potential benefits of globalisation. In essence, that is what this is about. It is about investing in our nation’s future and investing in our capacity as a nation to become a regional hub when it comes to financial services, managed funds and the managed funds sector.

I would like to turn my attention to some of the comments that were made, in particular, by the opposition spokesperson on these matters, the member for Stirling. I note that the member for Stirling concentrated in large part in his speech on a very simple proposition: how can this government come forward, after providing very little tax relief to Australians, and offer this huge tax windfall to foreigners? That is, in essence, the major critique that has been put forward by the opposition. Thankfully, when they were in government, in some respects they took a more far-sighted approach to these things. They were a little more cognisant of our national interest and they were a little more broad-minded when it came to having genuine debate about how we as a nation can invest in our future and secure a future for ourselves in the global economy. Unfortunately, as with many things we have seen from the coalition since they have been in opposition, they really have been forced to revert to the populist pit that many oppositions that have preceded them have fallen into.

In relation to those criticisms about taxation, I have to say that it is slightly more than a minor oversight on the part of the member for Stirling to ignore the fact that the budget will deliver $46.7 billion worth of tax cuts to Australians. The sort of money we are talking about in these bills is approximately $600 million over the next four years. Just to debunk this argument that all the freebies and concessions are being offered to foreigners and that local people do not get a cent, let us just focus on the facts. Commencing on 1 July, $46.7 billion in income tax cuts alone will be delivered to Australian families.

There are a range of other measures—depending on how you define a tax concession or preferential tax treatment—that clearly would fall within the scope of the budget that we have just handed down that deliver additional benefits to Australian people, to many working families and to many people in need throughout our community. For example, there are the childcare tax rebate and the education tax refund. Rebates and refunds of this nature, in large part, are to be characterised as providing tax relief. In addition to that, we have the first home saver accounts. Apart from delivering a co-contribution in respect of savings put aside by first home buyers, this initiative also provides a tax incentive, a tax concession, in terms of the tax treatment of the earnings on the funds set aside in the first home saver accounts. In total, the first home saver account initiative involves a commitment of $1.2 billion over four years. So there is $46.7 billion for the tax cuts, $1.6 billion for the childcare tax rebate, $4.4 billion for the education tax refund and $1.2 billion for the first home saver accounts. In fact, there were additional tax initiatives that provided tax relief to Australian people. The National Rental Affordability Scheme is an initiative that delivers tax concessions, or tax credits, to investors who invest in providing affordable housing, delivering rental housing at 20 per cent less than the market value. There are other initiatives, but that particular initiative means another $623 million.

We are talking about billions and billions of dollars worth of tax relief that has been delivered. And that does not take into account some of the other initiatives that this government has supported in terms of transfer payments and direct payments into the pockets of pensioners, carers, seniors and many other Australians in need. The reality is that the budget just handed down has delivered a significant amount of the wealth that has been collected by government back into the hands of the people who put it there in the first place—and that is predominantly Australian taxpayers. So to come into this place and suggest that a $600 million initiative over four years is somehow the only contribution that this government is making to providing any tax relief is not only disingenuous; it is just plain wrong. The member for Stirling knows it. But I have noticed that he has been rather lax when it comes to the truth on these matters in relation to a number of these bills that have come forward in his portfolio area.

I want to address another issue that was raised—that is, the critique brought forward by the member for Stirling. It had, perhaps, a little more substance than the earlier critique. He said that some of our trading partners are not listed in the draft regulations so therefore this is just a sham—there is no way at all that this could possibly be a measure involved in making Australia some financial services hub. The reality is that he is right—there are some jurisdictions within our region that are not listed in that draft regulation. The reason they are not listed in the draft regulation comes back to one of the really important aspects of these bills—that is, these bills are directed towards also improving overall levels of information exchange between jurisdictions when it comes to tax matters. We are determined to make sure that, in our dealings with other countries, whether it be through bilateral means—and traditionally that is the way in which we deliver greater certainty when it comes to information exchange—whether it be through information exchange protocols or whether it be through the double tax agreements themselves, we are committed to delivering robust information exchange procedures.

It is our expectation that the extent to which we as a nation are prepared to share information with other jurisdictions should be the benchmark that others reach. If they are not prepared to reach that then the disadvantage to their residents will be that they will not get the benefit of the reductions in withholding tax that are proposed under these bills. That seems pretty fair to me, and I think most fair-minded Australians would say that that is fair. We want an initiative that brings more money into this country and provides more jobs—more high-skill jobs—but at the same time we do not want to be giving a free ride to investors abroad who may be involved in practices that are not necessarily above board or the most scrupulous. The best way to ensure that is to make sure that there is some sort of oversight. The best way of achieving that is to have information exchange that is rigorous.

Another criticism brought forward by the member for Stirling was that he said this delivers no real benefit in tax terms to the investor so therefore it is a tax concession that does not and will not achieve any additional inflow of capital into this country. His argument for that is that if you are paying less tax here then ultimately the money in the hands of the nonresident investor will be taxable within their home jurisdiction. Well, that is true but there is a false premise upon which that assertion rests—that is, that all taxpayers are paying tax within other jurisdictions and in particular within their home jurisdiction. What it ignores is that many of the pension funds—and, let us be realistic about it, they are one of the targets when it comes to this legislation; we are looking to target some of those big pension funds around the world that are cashed up and looking to invest; they are the principal targets of this legislation—are either taxed at a low rate or tax exempt within their own jurisdiction. So the argument brought forward has absolutely no application at all when it comes to these particular entities. It might be a subtle point but it is a really significant one when we have a look at the impact of this measure and whether or not it will deliver on the government’s ambitions, and I believe that it will.

In closing, I wish to conclude by saying that this is an important plank in the government’s attempts to establish Australia as a financial services hub. We have the expertise. We are strategically located within the Asian time zone, or sufficiently proximate to most of those time zones in order to be a regional hub. In addition to that, we have a robust regulatory regime and a very stable economic and political context within which investment can occur. These are some of the selling points on which we must compete with the rest of the world. There are other players within our region that are actively pursuing the title of being the regional hub when it comes to financial services and the managed funds sector. If we are to compete with those, we need to be proactive; and these are proactive measures that will deliver real gains in our efforts to secure our place as a regional hub when it comes to financial services and the funds management sector in the global economy.

Andrew Laming (Bowman, Liberal Party) Share this | Link to this | Hansard source

To summarise as I close the debate today on the Tax Laws Amendment (Election Commitments No. 1) Bill 2008 and cognate bills, we are effectively considering the reduction of withholding tax from the 30 per cent that it is at the moment down to 22½ per cent, 15 per cent and, curiously—and this is what this debate has focused on—7.5 per cent from 2011. I know that we are all very busy and that the member for Lindsay will be departing shortly. I think he succinctly stated where much of this debate has focused: why are we reducing taxes on foreign entities investing in Australian property trusts to the extraordinarily low level of 7.5 per cent? His answer to that very key question put by the member for Stirling was that many of these investors are pension funds who are low-tax or no tax entities from other countries. That is correct. So any investor who effectively moves into the Australian market gets a credit for the tax that they are paying, once back in their home country. Many of those institutions as described, pension funds, are exempt. But effectively they are extensions—many of them publicly owned, publicly controlled or quasi-controlled—of foreign treasuries. That is the very point that the member for Lindsay arrived at. If we are trying to attract foreign investors into the managed trust sector in Australia, which is very significant but at the moment 97 per cent Australian, will they be attracted by this measure?

There are two types of entities out there. One of them, as the member for Lindsay described, is predominantly tax-favoured overseas pension funds, which are effectively sending back, in many cases, the profits of their enterprises to maintain pensions in overseas countries. They are an extension of government. This is the very point. In this global tax debate where we are looking for some form of level playing field, IFSA and the Property Council of Australia just said, ‘Get us to 15 per cent, where we can be globally competitive and where we are roughly the same as other competing sectors.’ What we on this side of the House do not understand is why you would drop the tax rate to 7½ per cent by 2011. At that rate of dropping tax you might as well move it the following year to zero, because that is what has happened in the three previous years. This may well be a $630,000 tax expenditure by this government, having already in just six months instituted some extraordinarily painful taxes to raise about that much revenue, but, in this tax expenditure on forgone collection to Treasury, we need to be asking exactly why in an international tax environment we need to do it at all.

Who are we helping here? With any policy change, we start by defining the problem. Is our property sector struggling? Is our property sector not overheating? Is there a skills crisis for people in the construction industry that could be aggravated by expanding that sector? I will accept that a $1.3 trillion property sector could move to $2.5 trillion, but is it the intent of the legislation to further overheat that sector? Most of these investors do not go into residential property, I accept, but it is one sector, be it residential or commercial. We are yet to even define the problem that this legislation is fixing. Everyone here agreed to drop withholding tax to 15 per cent; there is no quarrel. My question is about dropping it further to 7.5 per cent.

I think we have to rewind to April last year when the then Labor opposition costings were around $15 million for this. But that has now been disputed by Treasury. There is this regular revision when the government realise that their figures do not match up with Treasury’s figures. We saw this with private health insurance. We saw this with the alcopops minute that was dutifully sold by the health minister as a health initiative when it was just a tax grab.

For those who are tuning in, we are talking about charging 7.5 per cent withholding tax in 2011 to entities that invest in Australian property trusts. I sure wish I could get 7½ per cent. There are a lot of working Australian families who would like to pay 7½ per cent. The whole intention of the election campaign last year was to find ways of helping working families, but this is something that actually takes money out of their hands. It is $630 million over four years that is not being collected for working families.

You can almost see the strategists sitting in a circle, the member for Charlton among them, thinking, ‘How can we intellectually distort this debate and turn it into an argument about the labour movement?’ And he almost succeeded. But it is the labour movement that sees $630 million evaporate from the pockets of working families through this simple measure, and it has virtually gone unnoticed and unreported. Can you imagine sitting down and saying, ‘We may well be helping Japanese working families to invest in our managed investment funds—Japanese millionaire families may well be benefiting’? But now we have had the admission that most of the investors are pension funds that often have extraordinarily close and quasi connections to their own treasuries.

So this tax expenditure just transfers money that should be collected in Australia but is not, and then the entities that should have paid the tax simply go home and get a credit. They say, ‘Before you tax me, I get a credit on everything that I’ve left behind in Australia.’ Whether it is 15 per cent, 10 per cent or seven per cent, it does not matter: they still pay tax on the difference at home. So, instead of collecting it for Australians, you are giving it away to the South-East Asian economies. I am not talking about Singapore, Malaysia and Korea, which already have direct tax agreements with us; I am talking about all the others with whom we have these understandings to exchange information on tax. To me, that is just not smart.

As a humble backbencher I come in here to hear the contributions of those in the government just to try and understand why you would want to tax these kinds of transactions at 7½ per cent. The case that has been prosecuted so far is: ‘We need to grow this nation as a financial hub.’ That is a very hard thing with which to disagree. You will get everyone agreeing on that. But if you truly wanted to achieve that then I think you would want to reduce the tax on dividends, interest and royalties. This is a discount on tax upon income, and income is basically rent and capital gain. That is not going to be of enormous interest. What is going to be of enormous interest to investors are the dividends, the interest and the royalties. Why not have the legislation pertaining to those areas? It does not and that defies explanation.

We know that here in Australia we have a booming housing and commercial property sector. It is going strong. The member for Macarthur, here in front of me, is from a part of Western Sydney where you can barely find a builder, where rates for people in construction—and I do not begrudge that—are at all-time highs. We do not have a problem to fix here. We already have a booming property sector which will expand simply by dropping the rate to 15 per cent. The debate today is about the need to move it to 7.5 per cent, creating an enormous tax distortion.

The forward estimates that were rolled out today do not even account for secondary effects. They only account for the tax that is not collected by dropping the rate. They do not account at all for the distortions that will be achieved by lowering these rates to 7½ per cent. Now, you may well have more entities wanting to invest, and I put it to the government: do we really desperately need that in the property sector at the moment? I am all for foreign investment—there is no problem with that—but I have to keep the whole thing in balance.

In the tax system, you need to be looking at areas in which there are tax expenditures and lost opportunity. With this legislation, you are simply creating one such area. You are creating a loophole for others to scratch their heads about in the years after 2011 when these very low tax rates will remain for foreign entities from South-East Asian countries to invest in the property market. That is the simple question that I would really like someone from the government benches to answer.

Six hundred and thirty million dollars is nothing to sneeze at. That is the kind of tax measure that has already been introduced with the famous or ill-fated alcopops tax. Was it really necessary to slug every single trackie- and singlet-wearing worker who loves a Bundy and Coke in the name of stopping binge drinking and yet forgo the same amount of money in this barely publicised measure? The answer is no. The answer is that the government did not need to give it away. It did not need to make this foolish slip from 15 per cent to 7½ per cent. I challenge anyone on the other side right now to tell me anything else that is taxed at 7.5 per cent, apart from some minor state duties. If you are fishing around and looking for a favourable tax rate, one has just been created by the government with barely a whimper.

We had the member for Charlton linking the labour movement to the important growth of compulsory super savings, but at the same time they are bleeding out the back door in payments to foreign treasuries. That is where this money ends up. I respectfully differ and say we could do a lot with that money here in Australia. We could do a lot for working families. I did not see, last year, bumper stickers on the backs of utes saying, ‘you’ll rate a tax discount if you’re a foreign investor in our managed trusts’. I did not see that bumper sticker. So why don’t we look at this level again and ask if there is any need to go beyond the international standard of between 10 and 15 per cent? Finding a rate below 10 per cent is extraordinarily difficult. Mr Deputy Speaker, you need to go to one country and one country only, and that is Singapore, to find that they are actually moving their rate up from 10 per cent, not down. Their listed trusts, a small number of them, are taxed at 10 per cent but they are actually going to move to 20 per cent.

So what kind of signal is this? Is it a signal to say that we are a financial hub? If it is, you need to rewrite the legislation and incorporate dividends, interest and royalties. If you are serious about making Australia a financial hub, I will give you a list of 50 things, which will be non-controversial on both sides of the House, to do to achieve that. There is no disagreement on the need to set the rate at 15 per cent.

There has been a lot of discussion in the last six months about overpromising and underdelivering. I wonder if this is a tiny hoax being run by the government to give themselves a moment of space to be able to debate that fairly superficial argument that they are now the economic managers of choice and that they are about being pro-globalisation, acting in the national interest and being progressive about tax policy. If the government are serious about that, I would respectfully put this suggestion to them: let us start working on Australian company taxes for small businesses out there which still pay 30 per cent; let us start working on income tax, which the Howard government, over 10 years, ramped down to record low levels with strong economic management; let us start working with ordinary Australian families and reducing tax there. With the greatest respect, I see nothing here but an exercise in tax flight and the earnings from the Australian managed property fund sector going directly to the coffers of other countries and their treasuries.

If we are going to drive the demand side by dropping tax rates to 7.5 per cent, we are going to encounter a few other issues as well. These are natural distortions, so that those who seek out the lowest tax rates merely move into a sector that, I have already made the case, is completely overheated. It is not that I do not want to see a strong property sector, but the way to do it is not by creating a 7.5 per cent tax level. All that the government had to do was to take the Treasury advice and accept that they got their figures wrong in April last year. Then we would not even be having this debate today. You would probably find that there would be no disagreement and that you could not even find speakers to talk about the bill, it would be so non-controversial. There is no doubt that we support the move to 15 per cent. You only have to go onto the web and have a look at the royalty percentages set by each of the economies in our region to know that 15 per cent fixes the problem. So I find it absolutely unbelievable that we come to the end of this debate and that that simple proposition has not been contested. That proposition is that we simply move funds to near neighbours and sovereign states and to their treasuries, because that is effectively what is going to happen. The other thing that has not been modelled at all by the government is whether even one extra dollar will arrive in our sector from overseas investors under this measure. I have made the case already. These investors effectively gain a credit for whatever tax they pay in Australia, so moving it below 15 per cent may well be utterly futile.

In the last couple of weeks we have heard about an Asian union from the Prime Minister, something akin to the EU. It was timed just prior to a visit to Japan. We have heard about eliminating nuclear weapons from the globe, another massive project from the Prime Minister. There may well be coming, in the next week or so, plans for the first Australian to land on the moon or the first manned project to Jupiter. What is the next really big-ticket item from the government? We have had these completely defocused thought bubbles on global issues, and yet we see money leaching out through the back door in measures such as this. Right now, what we are looking for, I think, is just something that helps Australian working families and not something that helps Japanese working families or Japanese retirees. It is a simple proposition, and I challenge the government to answer that simple question.

There is something we also had from the previous speakers on the other side. I have to quote the member for Charlton: ‘You really have to ask why more emphasis was not placed on this issue by the Howard government.’ I think that the tax record of the Howard government speaks for itself. I think that the evolution of Australia as a financial hub and the fact that the member for Corio has acknowledged that Australia is the fourth largest onshore fund management sector in the world is evidence of that. Allow me to ask the question: where is the problem once we move these levels to 15 per cent, a move which was completely non-controversial? I do not see a reason for going below 15 per cent. Those on this side see significant challenges and distortions and, effectively, a tax loophole from doing so. I would put it to the other side that the only way to truly understand the implications of this decision is to refer it to a Senate committee for further analysis, and it would be that movement that I would support.

Damian Hale (Solomon, Australian Labor Party) Share this | Link to this | Hansard source

I rise today to make my contribution to this debate on the Tax Laws Amendment (Election Commitments No. 1) Bill 2008, the Income Tax (Managed Investment Trust Transitional) Bill 2008 and the Income Tax (Managed Investment Trust Withholding Tax) Bill 2008. On the night of the budget the Treasurer outlined clearly to the people of Australia that this budget has been designed to meet the somewhat big challenges that we face. He went on to say:

It is a Budget that strengthens Australia’s economic foundations, and delivers for working families under pressure.

It was paramount that this budget be:

… the responsible Budget our nation needs at this time of international turbulence, and—

inflationary pressures—

at home.

A Budget carefully designed to fight inflation, and ensure we meet the uncertainties of the future from a position of strength.

We have the highest inflation in 16 years, and those opposite still do not acknowledge that. They still do not acknowledge that this is a problem. It is amazing that the member for Bowman singled out comments made by the member for Charlton. The member for Bowman just said that the government should take advice from Treasury. That is an amazing thing to say because the former government would not listen to advice on inflation. They would not listen to advice from the Reserve Bank on spending.

This legislation is very important. As part of its commitment to establish Australia as a regional financial hub, the Rudd government has acted to dramati-cally improve the competitiveness of Australia’s managed funds industry. This legislation will substantially reduce the level of withholding tax from a non-final rate of 30 per cent to a final rate of 7.5 per cent on certain distributions from Australia’s managed investment trusts to foreign-resident investors. These arrangements will make Australia’s withholding tax rate one of the most competitive in the world and provide a significant boost to Australia’s ability to compete globally. They will ensure that Australia’s property trusts are well placed to attract foreign investment now and into the future. This will provide a major boost to Australia’s goal of becoming a financial hub of the Asia-Pacific region and goes beyond the commitment made during the election.

This bill is extremely important for the people of Solomon, the people I represent. It is vitally important because of our ideal geographical proximity to these markets. As I said in my first speech about the people of Darwin and Palmerston, Solomon is home to people from all corners of the globe, and this diversity has shaped our part of the world for the better. People of 80 or more different nationalities live in my electorate. The influence that Territorians of Chinese origin have had in Darwin and Palmerston is profound. With a history in the Territory stretching back over 100 years, one has only to take a walk around Darwin or visit any of the many markets to understand how this presence has enriched Darwin and Palmerston. I had the pleasure of having the Prime Minister at the Rapid Creek markets on Sunday and his reception was something akin to that of a rock star. We had one protester and probably about 1,000 or more people turn up just to see him. It is through encouraging and fostering relationships that we maintain and build on our business community.

The Solomon business community is a perfect example of fostering and building business relationships. At any business function in Darwin there is truly a multicultural mix of individuals—people of Chinese, Greek, Italian and Indonesian backgrounds, to name but a few—and the creative juices often flow when trying to cater for a function. This type of coming together of the business community and building on existing relationships and forging new partnerships is how we can improve the managed funds sector and our place in the financial world.

Australia is internationally recognised as one of the major markets for managed funds. The Australian funds managed industry manages more than $1.4 trillion in assets. The industry is expected to continue its strong growth, with assets under management estimated to exceed $2.5 trillion by 2015. The Australian property sector is a key part of this industry. In spite of Australia’s strong regulatory regime and reputation for funds management, less than three per cent of industry fees are derived from exports—that is, from foreign residents investing in Australia’s managed funds. Industry has advised that this is in part due to the existing non-final withholding tax rate predominantly applying to rental income and capital gains from taxable Australian properties, which is higher on average than withholding rates imposed by other countries. In order to improve the industry’s export ability, the government is introducing a new withholding tax regime. The new withholding tax regime will apply to fund payments that are distri-butions of Australia’s source net income, other than dividends, interest and royalties, of Australian managed investment trusts to foreign residents. It will cover distributions made directly from the managed funds to foreign residents, as well as distributions made through other intermediaries. Distribution of dividends, interest and royalties will continue to be covered by the existing final withholding tax arrangements. However, to support the integrity of the arrangements, and in keeping with the government’s commitments to minimise international tax evasion and avoidance, the nature of the new withholding tax regime will vary depending on whether the foreign investor is resident in a jurisdiction with which Australia has effective exchange of information arrangements on tax matters. Residents of these jurisdictions will be subject to a 22.5 per cent non-final withholding tax for fund payments of the first income year, a 15 per cent final withholding tax fund for payments of the second income year and a 7.5 per cent withholding tax for fund payments of the third and later income years.

For the first income year, as an interim measure, investors resident in the exchange of information jurisdictions will be eligible to claim a deduction for expenses relating to fund payments. The net amount will be subject to tax at a new rate of 22.5 per cent. The list of jurisdictions with which Australia has an effective exchange of information will be outlined in the regulations. Residents of other jurisdictions where we do not have an effective exchange of information will be subject to a 30 per cent final withholding tax, with effect for fund payments in the first income year. Restricting the reduced withholding rate to countries with which Australia has exchange of information agreements will ensure that the reduced rate is not abused. It will also encourage foreign jurisdictions to enter into information exchange agreements with Australia—an encouragement for them to get on board.

Australia may never be a London or a New York, but we can be an Asian financial hub if we make the most of our advantages and get serious about reforming uncompetitive and complex tax and regulatory rules. Doing this will ensure that Australia becomes a world leader in financial services into the future. It shows we are serious about combating international tax evasion and avoidance. As I have highlighted previously, Darwin is ideally located to be in the front line of the push to a major boost to Australia’s goal of becoming a financial hub in the Asia-Pacific region. This budget, unlike the previous government’s budget, provides a strong emphasis on Northern Australia, on business and on the role we play as a nation in boosting Australia’s goal of becoming a financial hub in the Asia-Pacific region.

It was quite interesting on Sunday that the Prime Minister did meet with 35 or so local businessmen in a casual environment in Parliament House in Darwin, and the interaction of ideas was amazing. The Prime Minister spent an hour with these people and they really did appreciate his interest in the north of our country. It is about his third visit since becoming Prime Minister and, from my point of view, I hope that he pulls in on his way back from Asia on all occasions. He is very well received by the business community up there. This is the first Labor budget in 12 years and the Prime Minister and the Treasurer have delivered for the people of Solomon in this budget. This budget will be good for families and this bill is good for business.

Schedule 2 to this bill amends the Income Tax Assessment Act 1997 to exempt from income tax the Prime Minister’s Literary Awards. On 22 February 2008 the Minister for the Environment, Heritage and the Arts called for entries for the inaugural Prime Minister’s Literary Awards and announced that these awards would be tax exempt. This amendment ensures that no income tax is payable on the Prime Minister’s Literary Awards. The 2008 Prime Minister’s Literary Awards are a new initiative that will be held annually. The Prime Minister’s Literary Awards are a way of celebrating the contribution of Australian literature to the nation’s cultural and intellectual life. This measure will ensure that the prize is tax free. We cannot really expect the winner of an award not to receive the full benefit of the award. The Prime Minister’s Literary Awards provide an annual cash prize of $100,000 in each of the two literary award categories, for a published fiction book and for a published non-fiction book—fantastic awards that recognise the importance of literature to the nation’s cultural and intellectual life, an importance I know only too well.

Both my parents and my sister are teachers, a combined teaching experience of over 80 years. It has not always been good for me, particularly growing up, when as a young fella I might have wanted to slack off a bit on my school work. I was always kept in line and it was not always easy for me to break away to go and have a kick of the football. I was able to at times, but I certainly grew up in a household that greatly valued education. I think we need to recognise the contribution that people make to education and they should not be taxed for that contribution.

It is really important that we receive a good education, and this award recognises the importance of writing and encourages people to engage in the craft of writing. Books are an integral part of our society; they are the legacy that authors leave to the world. This schedule needs to be passed to ensure the winners of the Prime Minister’s Literary Awards are not financially disadvantaged for winning the award. And as I have said, the new managed investment arrangements will dramatically improve the competitiveness of the Australian managed investment trusts and also emphasise our government’s commitment to combating international tax evasion and avoidance. I commend this bill to the House.

Chris Hayes (Werriwa, Australian Labor Party) Share this | Link to this | Hansard source

Before I commence to speak on the Tax Laws Amendment (Election Commitments No. 1) Bill 2008 and related bills, let me compliment the member for Solomon on his contribution. From what I have seen on the paddock so far, I can attest that he has gone out to play football on more than one occasion.

This bill delivers on a very important election commitment, one that will slash the withholding tax rate that applies to non-resident investors. Schedule 1 of this bill will replace the existing 30 per cent non-final withholding tax regime applying to certain distributions from Australian managed investment trusts to foreign investors with a new final withholding tax regime. It is the final stage in the implementation of an election commitment first announced in last year’s budget reply by the now Prime Minister. This is the final stage in implementing what was then discussed as being a positive development of sound industry within this country.

The importance of this measure to Australia’s future prosperity should not be underestimated. This measure aims to help Australia become a funds management hub in the Asia-Pacific region. It will certainly do a wonderful job in boosting our export earnings and in further developing an industry that we are excelling in at the present time. It will ensure that Australia remains a world leader and at the cutting edge of funds management. The financial services industry makes a large contribution to Australia’s wealth and has the potential to contribute even more to our economy.

I recall that back in 1992 there was a hue and cry—and you will recall it too, Mr Deputy Speaker—when negotiations took place between the Keating government and the ACTU associated with the introduction of compulsory superannuation. You will recall, Mr Deputy Speaker, that that was based on a trade-off of a three per cent gain in lieu of a four per cent productivity rise. I know there was a hue and cry about that and I know the now opposition—and they were in opposition then, too, by the way—opposed it every step of the way. They thought it was huge impost on the economy. We have heard the doom and gloom speeches before, but they resounded back in 1992.

Let me tell you what has occurred since then. By 2007 this country had amassed almost $1.4 trillion in consolidated funds under management, including around $128 billion in Australian property trusts due to the compulsory superannuation which was introduced by the Keating government. Much of our economy—much of our future and our kids’ futures—was very much built on those decisions back in 1992 to go forward in this country; not to simply be a country built on mining and on resources but to be a country built on the intelligence of being able to manage funds, develop our infrastructure as a consequence and provide well-paying jobs, professional positions in many cases, for our kids. Australia has built up a fantastic reputation in funds management with a well-respected and experienced regulatory regime. We have certainly developed a skilled and professional workforce. Australia is geographically very well strategically placed in the Asian time zone to capitalise on this for the benefit of this industry.

Amazingly for a country of its size, Australia has a number of natural advantages in funds management. We are the fourth largest onshore managed fund market in the world. This puts us in a reasonably unique position due to the huge size of funds under management. However, regrettably, less than three per cent of funds derived from Australian managed funds are attributable to foreign investment. This small amount is mostly derived from investors from a very narrow base of funds, particularly from the United States and the United Kingdom. The current high 30 per cent withholding tax, which was imposed by the former government, is one of the reasons why Australian managed funds struggle to attract foreign investment. It very much acts as a disincentive for using the professional facilities of our funds management. It is ‘lead in the saddle’ when it comes to developing this industry to truly international proportions.

The financial services sector has an immense untapped potential for growth, particularly in the Asian region. Just consider that we have many Asian economies which are booming at the moment. Many of their industries and certainly many of their people are looking for investment opportunities. Australia sits well to receive those funds and manage their money. This measure will make our managed funds more competitive by giving Australia one of the lowest withholding tax rates in the world and by boosting foreign funds under management in this country. Apart from creating professional accounting and legal jobs in this country, managing these funds will also create downstream investment opportunities and property based infrastructure.

This new regime applies to funds payments—broadly, the distribution of finances sourced as income in this country, other than the dividends, interest and royalties—and will be managed by Australian based and operated funds. It will primarily apply to the distribution of Australian sourced rental income and capital gains, ostensibly from Australian property trusts. The rate of withholding tax under this new regime will depend on the residency of the foreign investor. Where a foreign investor is a resident of a country with which Australia has an effective exchange of information on tax matters, the tax rates will be 22.5 per cent for funds payments for the first income year following royal assent, 15 per cent for funds payments for the second year of income and 7.5 per cent for funds payments in the third and later years of income. For the first income year, as a transitional measure of this arrangement, foreign investors resident in EOI countries will be eligible to claim deductions for expenses associated with deriving their income.

Residents of countries with which Australia does not have effective exchange of information will be subject to the 30 per cent withholding tax. That is designed to ensure and encourage integrity of the measures of taxation and, quite frankly, it sends a very clear message to those governments that we will not tolerate tax evasion and avoidance and we will not be a centre for that. However, we will move to build up our industries to a proportion where they justifiably have the reputation of being internationally competitive and are also internationally renowned as the best fund managers.

Restricting the reduced withholding tax to countries with which Australia has an exchange of information agreement really does ensure that funds invested in Australian managed funds will not be abused. It ensures that there are appropriate compliance regimes for the management of these funds and it opens us up to be internationally competitive in a part of the world in which we think we can make a very solid contribution in funds management.

This week I had the opportunity to visit a number of the schools in my electorate to talk about another part of opening up the future for young people. The Rudd Labor government has committed $1.2 billion for computers in our schools as part of the digital education revolution. This is about providing students with the appropriate technologies they need to use as learning tools to equip them to go into the modern workplace in a vastly modern world. As a matter of fact, today the student leaders from Macquarie Fields High School, James Meehan High School and the Lurnea High School are visiting me and I hope to show them around Parliament House. But, more importantly, I hope to impress upon them that the decisions we are making in government are not just for the here and now but, like the decisions that Paul Keating made in 1992 in opening up the prospect of compulsory superannuation, for the future. We are making decisions with a view to giving this country a very clear future. In the case of the withholding tax, we are making a decision which will create an internationally based industry of massive proportion.

The position of funds management is crucial. As I said, it is the final stage of a commitment that was given in the budget reply in 2007. This now brings this matter to fruition. Unlike what was put up by the other side, this is about developing the unique characteristics of the Australian based funds management industry. We are well placed to extend that industry and we are well respected in that area. This bill will be responsible for the growth of many professional jobs into the future. This will see the Australian industry not only managing the $1.4 trillion that it has now as a result of compulsory superannuation but also growing astronomically based on the reputation that we have already established. I commend the bill to the House.

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

I thank all honourable members who have contributed in this debate. However, I am particularly disappointed and surprised by the response of the opposition on this measure. I had thought that the opposition might use this as an opportunity to recant their opposition to the cut in the withholding tax rate. I had thought that they might come in here and say on reflection that they support this measure to build Australia as a financial services hub. I had thought they might take a sensible approach. I was wrong and I am disappointed about that. The opposition have shown a particularly inward-looking, short-sighted and, frankly, xenophobic approach. If they had welcomed the government’s measures I would have welcomed their support in a bipartisan fashion. If they had welcomed these measures, I would have invited them to join with the government in promoting Australia as a financial services hub. Instead, they have chosen to play politics on this matter. They have chosen to take a cheap and populist road and not a forward-looking and visionary road.

It is little wonder that they have lost the mantle of the more economically responsible party in Australia. There is little doubt that they are no longer seen as the party best able to manage Australia’s long-term economic future when they engage in stunts and rhetoric like they have this morning. I will deal specifically with the matters raised by the shadow Assistant Treasurer, who joins us in the chamber.

The shadow Assistant Treasurer made much of the fact that this is a tax cut for foreigners—and that is right: it is a tax cut for people choosing to invest money through Australian financial services. He chooses to engage in the cheap, populist line that this is a tax cut for foreigners, and shame on the opposition for doing so. We could all do that. We could all engage in cheap populism. When the previous government removed capital gains tax for foreign investors in Australia the then opposition—the Labor Party—could have engaged in a cheap, populist attack on that. We did not. This opposition has sold out its economic credibility for a cheap, populist attack. That is particularly disappointing. I had expected better from the opposition.

Michael Keenan (Stirling, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

Mr Keenan interjecting

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

I will be dealing with costings. Providing leadership means taking a long-term view that we need a competitive tax regime. The previous government gave Australia the highest withholding tax rate in the world—30 per cent. They thought that was competitive. We took the view that that was unacceptable. The opposition seems to have the view that that continues to be acceptable. It is completely unacceptable to the government. Australia should not have the highest withholding tax rate in the world. We went to the election with a commitment to reduce the withholding tax to a rate more in line with world standards—15 per cent. During the budget we decided we could do better. We decided we could take Australia from the highest withholding tax rate in the world to effectively the lowest in the space of three years. Why did we do that? Because you do not create a financial services hub with tinkering. You do not create a major policy reform by working around the edges. We took the view that if we could give Australia the lowest withholding tax rate in the world this would be a major advance in making Australia the financial services hub of Asia. We took the view that a withholding tax rate of 7½ per cent was an appropriate way to promote Australia as a financial services hub.

The shadow Assistant Treasurer, the member for Stirling, had this to say about the 7½ per cent rate:

As far as I am aware, nobody within the industry was actually calling for the rate to be 7½ per cent and I would be fascinated if the government could actually provide any evidence of anybody who thinks that this was an appropriate response.

The member for Stirling said:

... I would be fascinated if the government could actually provide any evidence of anybody who thinks that this was an appropriate response.

I am more than happy to assist the member for Stirling, because this is what he has asked for:

... nobody within the industry was ... calling for ... 7½ per cent and I would be fascinated if the government could actually provide any evidence of anybody who thinks that this was an appropriate response.

He has asked the question; he will get the answer.

Michael Keenan (Stirling, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

Mr Keenan interjecting

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

You cannot ask a question and then say you do not want to hear the answer. This is what the Investment and Financial Services Association had to say about the 7½ per cent rate:

The decision to lower the withholding tax rate is critical to the maintenance of high levels of long-term, offshore capital flows into Australia. The management of these flows by Australian funds managers will enable additional investment into Australian infrastructure and property assets. The clear message to the world is that the new government is serious in working to enable Australia to continue to develop as a major financial services centre in the region.

Vanguard Investments said:

‘Vanguard is pleased to hear the Treasurer, the Hon. Wayne Swan, has announced a significant phased reduction in the withholding tax rate. This single initiative delivers a vital fillip to Australia’s credentials as a regional investment centre, allowing our local industry to attract greater capital inflows through a sharpened competitive edge,’ said Mr Jeremy Duffield, Managing Director of Vanguard.

AMP Capital said:

AMP Capital Investors Managing Director Stephen Dunne said the Government’s plan to reduce the withholding tax from 30 per cent to 7.5 per cent will enhance the continued growth of the Australian funds management industry.

“Reducing the withholding tax for foreign residents will strengthen Australia’s competitiveness as an international investment centre.”

That is just a sample. The shadow Assistant Treasurer asked the question. Now he has received the answer. He said that nobody from industry had said that 7½ per cent was an appropriate response. He asked for anybody who thinks this was an appropriate response. The shadow Assistant Treasurer asked the question. Now he has received the answer.

The opposition have engaged in a number of other elements in their debate today, which I am more than happy to deal with. Firstly, the shadow Assistant Treasurer said the previous government had a policy of a financial services hub and that we had plagiarised it. But he searched and searched for a policy initiative to back that up. A financial services hub is not a slogan. You need a program. You need a policy; you need more than a slogan. They had a slogan; we actually have a policy and a program. They opposed our proposals to reduce the withholding tax rate against all the evidence that that was an appropriate and necessary policy initiative to promote Australia as a financial services hub. The other thing that the honourable member for Stirling said was, ‘This is all they’ve got: they’re going to reduce the withholding tax rate and that’s it.’ He showed his woeful ignorance of the government’s initiatives. He forgot, chose not to mention or does not know that the government has sent a reference to the Board of Taxation for a managed investments tax regime. That will be one of the most substantial rewrites in Australia’s history of this part of the tax act.

Other countries have developed a specifically designed, fit-for-purpose managed investments tax regime. The previous government failed to do so. We have acted. In the meantime, the Treasury has been consulting with industry on dealing with some of the more anomalous and troublesome elements of division 6C of the act. A discussion paper was issued, and we will be releasing shortly the results of that discussion paper and the government’s proposed policy response. That, again, has been broadly welcomed. The shadow Assistant Treasurer said this would provide not just a tax cut for foreigners but a boost to foreign treasuries. Again, the shadow Assistant Treasurer has shown he is not on top of his brief—unfortunately. The vast majority of people—including the big institutions that we are seeking to gain and the big overseas pension funds—generally speaking do not pay tax in their home institution. Generally, big pension funds do not receive any tax credit for the withholding tax paid from Australia. The shadow Assistant Treasurer is, unfortunately, not on top of his brief. Basic research would have corrected that anomaly in his understanding.

The opposition has, justifiably, raised the question of costings. What it has not outlined is this. Firstly, this is a different measure from what was proposed by the opposition. We are going to 7½ per cent—so, yes, it is more expensive. I do accept that. And I do accept there are other issues. I do accept this is a very difficult area for anybody to cost, as the Treasury itself indicates.

Michael Keenan (Stirling, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

Mr Keenan interjecting

Dick Adams (Lyons, Australian Labor Party) Share this | Link to this | Hansard source

Member for Stirling, this is not a committee!

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

The Treasury has appropriately taken a very conservative view of the costings. It is true to say the industry has a very different view of what the costings will be. The Treasury has assumed in its costings a gearing rate of zero, as is appropriate that the Treasury do. The industry has a very different view of the gearing rate. Time will tell what the costings will sort out. As is noted in the budget papers—and the shadow Assistant Treasurer may or may not have read the particular budget paper—the Treasury acknowledges that this costing does not take into account increased investment that would flow out of the withholding tax cut. It does not take into account second-round effects. Of course we stand by the Treasury costings. Treasury has taken a very conservative approach, and it is appropriate the government adopts a very conservative approach. Others take the view that the cost will be much lower. I pass no judgement. Time will tell what the costing will be. The government looked very closely at the costings and took the view that, even with the more expensive costing, this was an appropriate and necessary policy response and we are very proud of it. We are very disappointed that the opposition has taken such a Hansonesque, narrow, inward-looking and shameful approach to this matter.

I will refer now to the opposition’s call for this legislation to be referred to a Senate committee. Again, the shadow Assistant Treasurer appears ignorant of the fact that the Senate economics committee has already looked at it in some detail. The Senate economics committee members said that, according to the transcript of the evidence, their analysis of the previous government’s changes was one of the most worth while and interesting they had done. The shadow Assistant Treasurer appears ignorant of the fact that the Senate economics committee has already examined the rates of withholding tax in Australia in some considerable amount of detail. We are normally more than happy for our policy proposals to be examined by the Senate economics committee. But the opposition are proposing, by referring this to a Senate economics committee, to abandon the 1 July start date. It would be impossible, in my mind, to have the Senate economics committee examine the case and still have a 1 July start date. If the opposition want to put in jeopardy the 1 July start date, it is their decision. Be it on their heads. They will have to justify to the funds management industry and to the Australian people why they are delaying this very important initiative in making Australia the financial services hub of Asia. If they wish to do that, they will have the power if they can convince their Senate colleagues to support it. It will be up to them. But they will have to justify it. I am not going to justify it. I want to see it in place on 1 July. They have to justify it.

Can I also refer to the opposition’s request to the government to split this bill in two—that is, ‘We accept that the Prime Minister’s Literary Awards should not be taxed and that that should be in place by 1 July, so please split the bill in two.’ We have a different view. We have the view that both measures should be in by 1 July, so will not be agreeing to the opposition’s request.

Michael Keenan (Stirling, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

We gave you the opportunity. You didn’t even respond.

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

I am responding now. They both should be in place by 1 July. The opposition says it is appropriate that we not tax the Prime Minister’s Literary Awards. We obviously agree; it is our legislation. The Commissioner of Taxation will not seek to collect tax on the Prime Minister’s Literary Awards, even if this bill has not passed the parliament by 1 July. As is always the case, the tax commissioner takes the view that, if legislation is before the parliament and both sides have indicated they will support it, the fact it has not passed will not mean he will actively seek to collect the tax. There will be no real time effects of the delay on the Prime Minister’s Literary Awards being made tax free. If anything, it is frankly much more important that the withholding tax cuts be passed by 1 July. We will pursue this. We will press vigorously in this place and in the other place for this to be in place by 1 July. If the opposition wishes to take a different view, I am sure it will be more than happy to explain to everybody interested in this matter why it is proposing to hold up this very important tax reform.

Australia as a financial services hub is more than a slogan. It takes hard work, it takes initiative, it takes boldness and it takes a government prepared to make the tough decisions and not to take the cheap, populist Hansonesque route that the opposition appears to be taking. What we can do is make Australia a place where young people who are thinking about a job in the financial services sector or thinking about playing a role in a major financial services hub do not feel obliged to move to New York or London. We will not be New York or London—we are not suggesting we will be. If people wish to move to New York or London to work in a major financial services hub, that is great. I hope they bring their skills back to Australia when they are finished. But a young person should not feel obliged to do that. They should feel that they can work in Australia, which is on a par with Hong Kong, Singapore, Dublin or Luxembourg as a financial services centre.

We have an industry in Australia which has been built up. We have an industry in Australia which is very good at this. It has the fourth largest pool of funds under management in the world—not per capita but in the world—because of the superannuation reforms of the Hawke and Keating government. We have an industry which has built up great skills but which does not export those skills, because we have an industry which has been saddled with an uncompetitive tax regime which the party of free enterprise over there chose to give them. We have an uncompetitive tax regime where we have big superannuation funds and pension funds around the world looking at where to invest their money and they say: ‘Well, Australia is pretty good at this. They have got a well-developed superannuation system. Australia is in a strategic time zone, placed between the United States and Asia. Australia has a well-respected prudential regulation system. Australia has stable government and a stable democracy. It is a good place to invest. Why don’t we invest our money in Australia? Because the withholding tax rate is 30 per cent.’ Yet around the world the average is 15 per cent, and some countries are as low as 10 or 7½ per cent.

Why don’t we give this industry a break? Why don’t we say to this industry: ‘We will give you a level playing field’? Why don’t we say to this industry: ‘You go out and win the business; why don’t you export more than 2½ per cent of your capacity?’ Why don’t we say to this industry: ‘It is up to you, you go and do your job, but we’ll give you a level playing field; we’ll give you a tax system which allows you to compete’? Those opposite will give them a tax rate of 30 per cent—and shame on them! Shame on them for holding back an industry that wants to compete on its own. It is not asking for government assistance, it is not asking for special favours, but it is asking for a tax regime which allows them to be competitive. That is exactly the tax regime this government will give them and it is a tax regime that those opposite stand against.

Dick Adams (Lyons, Australian Labor Party) Share this | Link to this | Hansard source

The original question was that this bill be now read a second time. To this the honourable member for Stirling has moved as an amendment that all words after ‘That’ be omitted with a view to substituting other words. The question now is that the words proposed to be omitted stand part of the question.

Question agreed to.

Original question agreed to.

Bill read a second time.