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

I rise to address the report of the Standing Committee on Electoral Matters entitled Advisory report on schedule 1 of the Tax Laws Amendment (2008 Measures No. 1) Bill 2008. Sadly it is a deeply disappointing piece of work—at least the majority report from the committee is. Political party fundraising in Australia is worthy of greater consideration than this report gives it. In recent times we have seen practices such as those at the Wollongong City Council, for instance, involving the intersection of money and influence with ALP donors and ALP councillors on Wollongong council. We have seen practices in Western Australia where fundraising intersects with the political process in a way that is deeply unhelpful; as a result, several ministers have resigned from the cabinet in Western Australia.

This report deals with political party fundraising, but I think it deals with it in a very inadequate way. Majority members who compiled this report have totally neglected the national interest in favour of the sectional interests of the ALP. Political party fundraising is an issue that is worthy of serious consideration by this parliament. The Australian people are rightly suspicious of the way that the political parties in Australia raise funds. I think that most members in this place would certainly not enjoy discussing the practices of political party fundraising in their entirety in a transparent way. If journalists were to ask questions of political parties about their fundraising processes, most of us would be reluctant to discuss it. I am not claiming the moral high ground personally on that issue; what I am saying is that it indicates that it is an issue that lacks certain transparency. The fundraising of Australian political parties in general is an issue that I think this parliament should take seriously.

The coalition parties do have a commitment to addressing this crisis of confidence in the fundraising of political parties within our political system. Many of the concerns of the public have been confirmed by the practices at the Wollongong City Council, which I referred to earlier, but such practices have also occurred in other jurisdictions, particularly in the Western Australian Labor Party. This makes people rightly suspicious of the way that political parties raise funds. It means that we need to have an urgent and sensible review of the way we finance campaigns at both the federal and the state level. A comprehensive inquiry should look at the way we do this. We should make sure that there are sufficient authorities, investigative powers and enforcement measures to prevent any illegal activity in the future. We also need to make sure that we have a framework that removes weaknesses within our regulatory system on these matters—a framework that gives us an environment where illegality will not take place in the future.

In pursuit of this the coalition has put forward a comprehensive reference to the Joint Standing Committee on Electoral Matters. It was moved in the other place by Senator Ronaldson. It asks that committee to undertake an extensive inquiry into campaign financing. Sadly, this motion was opposed by the government, but it was supported by every other political party in the Senate.

The coalition believes in confronting these issues head-on and dealing with them in a systematic and comprehensive fashion. We believe that we should address the challenges that have been thrown up by the illegal activity in Wollongong and by other practices in other parts of the country. By contrast, I think the government have shown their true colours by insisting on the progress of this bill in isolation from the other, broader issues and in refusing to support a comprehensive review in the other place. I think this shows that the government have no real interest in these issues. Now that they are in government they are really only concerned about maximising the power of their incumbency.

Coalition members of the Joint Standing Committee on Electoral Matters did put in a dissenting report. In that report they maintained their opposition to the progress of this bill until such time as it can be dealt with along with other issues that will arise when it comes to campaign finance. I think that is a reasonable position, and I think it shows a desire on their part to sensibly address these issues in a comprehensive fashion. Coalition members of the committee also believe that the inquiry failed to demonstrate the urgency of these matters and failed to demonstrate why this should be treated in isolation from other parts of the system.

I note that the majority report from the committee ignores the views that were put to the inquiry. Two-thirds of the submissions received by the inquiry either opposed the removal of tax deductability or required such changes to be counterbalanced by other measures. There was a significant question mark over the costings of the measure. Sadly, the government does not have a very good record on the costings of measures. Treasury came before the inquiry and said that the costings that they did on this measure were actually a bold guess. There is no reliable data on the claimed savings. This lack of data underlines the revenue estimates; therefore, the argument for urgency, based on fiscal necessity, is pretty empty and hollow.

In relation to donations, Treasury officials also confirmed in evidence the great difficulties in estimating revenue savings relating to claims for gifts and donations. You could say that Treasury really had no knowledge of the amount or the value of donations of less than $1,500, which, of course, is the subject of this bill. All they could really do was just give an estimate based on assumptions that they had made, and that makes for very unreliable costings. Coalition members did not dispute the internal logic of Treasury’s reasoning, but they did conclude that the results, based on a total lack of information, were by necessity totally arbitrary.

From the very start of this bill the Labor Party have been determined just to play politics as opposed to addressing the issues. They have been trying to push through measures within the bill that, without doubt, required further review. There is absolutely no reason why this measure for the tax deductability of political donations should have been included with other measures in this original TLAB legislation. I think it is cause for concern that they would include what was obviously going to be a controversial measure with other measures that were not controversial. When we have heard a lot of talk about open and accountable government, I hardly think that that is a very constructive way for the government to have proceeded with this measure.

I will go to the history of this measure, because there has been a substantial change of heart from the Labor Party in relation to the tax deductability of political donations. In fact, in the past the ALP has repeatedly supported tax deductability. Indeed, the initial bill that granted tax deductability for political donations was introduced by the Hawke government. As is proper, following every election the election process is reviewed by the Joint Standing Committee on Electoral Matters and obviously this matter has come up on a regular basis. In the reviews that were conducted after the 1987 and 1990 elections, the Australian Labor Party claimed that tax deductability for the additional funds that were raised by political parties would alleviate any pressure for increased levels of public funding, would encourage political parties to continue to seek support from the public and, very importantly—and these are the words of the ALP at the time—would help political parties more adequately fulfil their social functions. In December 1991, under the Hawke government, the House of Representatives had a vote along party lines that introduced tax deductability for political donations. In 1991 that level was $700. The bill was introduced by the then Minister for Transport and Communications, Kim Beazley.

When the ALP were in government during the Hawke and Keating years, they made up the majority on the Joint Standing Committee on Electoral Matters and they never had anything to say against the tax deductability of political donations. Reports were handed down after the 1990 and 1993 elections, and they made absolutely no mention of the tax deductability of contributions to political parties. But the 1996 report from the joint standing committee included a recommendation to make tax deductable donations of up to $1,500 annually. That is the exact measure in the report that we are discussing today. The committee’s report on the conduct of that election, the election that saw the Howard government come into office, nominated $1,500 as the maximum level of tax deductability. That is where the $1,500 figure comes from. That report was unanimously supported by all members of the committee. Of course, these committees are run on a bipartisan basis.

I would like to remind the House of the members of that committee, because they are now very senior people in the new government who apparently think this is a terrible measure. Members of that committee who supported the $1,500 level were: the now Deputy Leader of the Government in the Senate, Senator Conroy; the now Attorney-General, the member for Barton; and the now Parliamentary Secretary for Multicultural Affairs and Settlement Services, the member for Reid. These are heavy hitters in the new government, and they supported this measure. There are two cabinet ministers and one parliamentary secretary. It is not clear why they have had this change of heart. Really what we are discussing here is gross hypocrisy from the government. The coalition are very happy to have a sensible discussion about campaign finance. There is no doubt in my mind that the Australian people have very little faith in the way that political parties in Australia raise their money, and they have very little faith in it because it lacks transparency.

As I said in the opening part of my speech, I am not pretending to be an innocent party in this; I am not claiming the moral high ground. Like many members in this place, I engage regularly in fundraising. But that does not mean that we in this parliament should not have a good think about the way we go about it. The Australian people have concerns about it. What we do not need is a piecemeal approach, as evidenced by the introduction of one measure in a tax laws bill when it would be far more appropriately dealt with in a review of the entire campaign fundraising system.

I am particularly attracted to other examples that we see around the world. In Canada, as a result of very significant fundraising scandals, they comprehensively overhauled the way that political parties are financed. They have essentially taken money out of that process. Canadian political parties are publicly funded. There are limits on what individual members can spend in their seats; I think it is around Can$80,000. There are limits on what individuals and entities—whether they be unions or businesses—can donate to political parties, and those are set at a very low level. I would be very happy to have a conversation about that, but that should be a comprehensive conversation about the way we do it in Australia. There should not be a piecemeal approach, as advocated by the government and as condemned by the coalition members of the Joint Standing Committee on Electoral Matters.

I am deeply disappointed in this report; I am deeply disappointed that the government does not want to have a sensible discussion about what is a very important matter. I commend the dissenting report put in by members of the coalition on the joint standing committee, and I genuinely urge the government to rethink their approach to this because I do think that the Australian people deserve better. I think we need to look at the way things are done. I think that examples of illegal behaviour in Wollongong and in my home state of Western Australia give great urgency to these particular issues, and I urge the government to reconsider its approach.

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

I rise to add my comments to the discussion about the report by the Joint Standing Committee on Electoral Matters entitled Advisory report on schedule 1 of the Tax Laws Amendment (2008 Measures No. 1) Bill 2008, which has been presented. Indeed, I spoke on the Tax Laws Amendment (2008 Measures No. 1) Bill 2008 earlier in the life of the parliament and made a number of comments on that occasion in relation to schedule 1. Schedule 1 is the schedule that was the subject of this particular review.

I begin by making a couple of obvious points that need to be borne in mind in any discussion of schedule 1 of that bill—that is, first and foremost this was an election commitment. It was an election commitment that had been put on the public record and was before the Australian people well and truly in advance of the election. I note that this particular measure had been a part of the Australian Labor Party’s official platform since 2004, so it is not a measure that should have come as a surprise to anyone. For those who were not aware of that particular provision within the platform, I note that the then shadow finance minister, Lindsay Tanner, released a media statement on 2 March 2007 entitled ‘Labor’s $3 billion savings plan’. In that media release it was also made clear that it was a clear component of the Labor Party’s election manifesto that we would be going to the campaign with a view to removing the tax deductability of political contributions, so it should not have been a surprise to those on the other side when this was included in one of the first revenue bills to come before the new parliament. It was brought as a revenue measure, because quite frankly it is a significant revenue measure. We are talking about over $30 million, over $10 million in each year. That is why it was brought as a revenue measure, and that is why the position that has been taken by those on the other side really does reinforce the view that they are committed to playing the role of the economic vandal when it comes to this government’s budget.

We are all aware of the pressures on inflation and the pressures that those pressures place on interest rates. That is why this government has handed down a budget that has delivered a $21 billion surplus. Opposing this measure is just another example of how those on the other side are determined to punch a hole in that surplus. It is important that this measure go through on revenue grounds, but there are also other important reasons as to why these measures are important and should be supported. They go to the very heart of the operation of our democracy. They go towards issues of political participation and the right of all citizens to equally access the rights and obligations that come with political citizenship in this country. I note that in the report a number of significant points were set out in relation to a summary of a review that was undertaken in the United Kingdom in 1998. It went through and looked at the pros and cons in relation to this issue of the tax deductability of political contributions.

It has been suggested by the member for Stirling that there has been inconsistency on the part of the Labor Party over the years, and it is true that in the past the Labor Party in government and in opposition has supported measures to allow tax deductability—albeit in very limited circumstances—for political contributions, but I do not think the Labor Party, or any political party for that matter, should be bound by some previous position that it has held. Clearly, we would not advance any new positions if that were the logic that we were to follow. I should make the point that, on those occasions that the Labor Party has supported tax deductability for political contributions, it has been applied to a fairly low cap. In the original legislation the cap was imposed at $100. In effect the tax-deductibility provisions amounted to no more than a tax deduction for political party membership. In effect, most of the beneficiaries of those particular provisions were people that joined political parties and were able to claim a tax deduction on a decent part, if not all, of their membership fees.

We have seen the evolution of the provisions on tax deductability and the debate has moved on, particularly with the increase of that threshold from $100 to $1,500. I think most people would understand that that is well and truly greater than any amount that individuals would be required to pay to be active and paid-up members of political parties. That has taken this whole debate into a new realm, and that new realm is fairly and squarely in the domain of contributions by private donors to political parties. In our democracy, that is encouraged or at least not discouraged.

But, when we look at the contributions of private individuals to political parties, a very significant question has to be asked. The committee in considering these matters homed in on this question. In a context where public funding is provided for political parties, how appropriate is it that a private tax concession be provided to individuals who make campaign finance contributions? In an environment where there is significant public funding for political candidates and parties, why is additional tax relief—or additional public subsidy—required for those individuals? Firstly, they have the money to make contributions. On that point—and it is a significant point—in my electorate there many families and many individuals doing it tough at the moment. A lot of them, if they were listening to this debate, would be scratching their heads to think that someone has got $1,500 to spare to make a contribution to a political party. Many low-income workers in my electorate really would not be able to fathom the fact that someone might have that amount of money to just write a cheque and go down to a political fundraiser and hand it over to someone to assist them in their future campaign. That goes to the issue of whether or not you even have the capacity to make a contribution; there are many people that do not.

But, when we look at the way in which tax-deductibility provisions operate, by their nature they do provide a greater benefit to a higher income earner. As the opposition members of the committee indicated, that is the case with all tax-deductibility provisions, not just those applying to political contributions. It is important in the context of this debate to make the point that we are not just talking about a run-of-the-mill tax deduction; this is not an ordinary, plain, vanilla tax deduction. Most tax deductions are received as a result of expenses incurred by individuals in the course of deriving their assessable income. Most deductions relate to an expense that you incur in the course of producing your assessable income. The basic philosophy is that if you incur costs in order to make money then you should have some tax relief on those costs. That is a fundamental principle of taxation policy. Outside of those general principles, there are specific tax deduction provisions that relate to charities. Those provisions are grounded in the public policy attached to providing some benefit to those with a sense of philanthropy who want to make a contribution. Our system provides people, in limited circumstances, with tax deductions for those types of expenditure.

In relation to charities, I would just make this point: under the current system, if these changes are not made, you have a situation where on the one hand you have charities that are able to receive contributions from individuals that are tax deductable, provided they are a deductable gift recipient, while on the other hand you have political parties able to receive funds that are tax deductable up to the limit of $1,500. But there is a whole range of non-profit organisations out there that are currently denied the opportunity of being a deductable gift recipient. That means that only organisations that are deductable gift recipients or contributors are entitled to the benefit of a tax deduction if they make a contribution to those entities. Those particular organisations are denied the opportunity to be a deductable gift recipient organisation for the simple reason that they may have a political or quasi political purpose.

At one end of the spectrum you have the charities, at the other end of the spectrum you have the political parties that receive these contributions and in the middle you can have a series of non-profit organisations pursuing legitimate activities on a non-profit basis. In respect of those particular organisations, anyone making contributions to them is not given a tax deduction. I have to say, having dealt with many organisations in the non-profit sector in the past, there are many organisations out there engaged in legitimate beneficial activities to the community but because they have a political or quasi political purpose they are denied the benefit of any tax deductability. It stands to reason to me that, looking at the spectrum of organisations there, there is absolutely no justification for providing any tax deductability to contributions to political parties.

On the issue of equity, I make the very obvious point that low-income earners, in particular those not paying tax, will get no benefit out of provisions that provide tax deductability for contributions. To starkly illustrate this, we should have a look at some of the figures provided in the report. For someone who currently has a marginal tax rate of zero—they do not pay tax; there are plenty of tax exempt organisations, but also individuals who do not pay tax because they do not earn sufficient income in order to be required to pay tax—on a $1,500 donation or contribution to a political party in the course of the financial year, those individuals will not receive one cent in a tax subsidy from the government. So if they make a contribution of $1,500, their out-of-pocket expenses are $1,500. Let us look at the other end of the spectrum. If you earn over $150,000, on that $1,500 contribution the government, us as taxpayers, will put $825 back in the pocket of that person who made the contribution.

Those on the other side talk about the need to avoid influence peddling, and I totally agree. We need an up-front, transparent democracy where there is no incentive for people to try to buy influence. But why should those who have the capacity and who are high-income earners derive a significant benefit from contributing to a political party when those who do not pay tax—and they are not an insignificant number of people—do not? The report points out that 2.1 million individual taxpayers in the year 2005-06 had a taxable income of less than the tax-free threshold. So 2.1 million taxpayers in this country, and we can assume that the majority of them are citizens, are denied any benefits of political participation so far as these particular measures are concerned. I think it is a point worth making. It is not just simply one that can be disregarded, as those on the other side say, by simply saying that any tax deduction will suit higher income earners more than lower income earners. Clearly that is the case. But when it goes to the heart of someone’s ability to participate in the democracy then I think that, as a matter of public policy, it requires us to intervene.

I simply conclude by making this point: it is entirely appropriate for taxpayers to make a contribution to the health of their democracy, and that is why I am a great supporter of a system of public funding, but it is an entirely different proposition to expect the taxpayer to provide tax relief to those individuals that exercise choice in terms of where they are going to make their contributions. They exercise that choice and often derive a benefit from it. I am not suggesting that it is by way of anything illegitimate, but often in attending functions there is at least a minimal benefit associated with what they derive. Why should their political choices be subsidised when there is already a system of public funding in place? Surely taxpayers as a whole should be subsidising the political process rather than picking and choosing and allowing individuals to make their own choices and then derive a benefit out of our common stock of funds. (Time expired)

Debate (on motion by Mr Coulton) adjourned.