Tony Smith (Casey, Liberal Party, Deputy Chairman , Coalition Policy Development Committee) Share this | Link to this | Hansard source

I rise to speak ever so briefly—I alert those opposite—to the International Tax Agreements Amendment Bill (No. 1) 2011. This bill has two schedules, dealing with separate issues. It amends the International Tax Agreements Act 1953 to modify and streamline the structure of that act. The act will, as a consequence of this bill, be shortened. It will omit almost all of the schedules to the act and instead incorporate treaties by reference to other accessible resources, principally the Australian Treaty Series online database of treaties. This was outlined with great clarity by the Assistant Treasurer in his second reading speech on 23 March 2007, and I am quite happy to point that out. It was outlined by the Assistant Treasurer with great clarity, and we recognise him for that on the basis that it happens ever so rarely.

This schedule will substantially reduce the size of the act and is a sensible housekeeping measure. Schedule 2 of the bill amends the same act to give force of law in Australia to new taxation arrangements with Aruba, Chile, the Cook Islands, Guernsey, Malaysia, Samoa and Turkey. It does so in those cases to cover the allocation of taxing rights and transfer pricing adjustments. With respect to Chile, Malaysia and Turkey, the agreements deal with different issues; they will cover the avoidance of double taxation and tax evasion.

Legislation in this area is a regular feature. Australia is participating in these types of agreements all the time for the betterment of the tax system. This legislation like so many others is representative of Australia's commitment to international agreements to avoid double taxation, to codify tax allocations and to combat international tax avoidance. It has the support of the coalition.

Dennis Jensen (Tangney, Liberal Party) Share this | Link to this | Hansard source

I rise to discuss some of the issues arising from the International Tax Agreements Amendment Bill (No. 1) 2011. While seemingly innocuous and straightforward, the bill touches on some broader issues regarding taxation in Australia, and I would like to expand on these issues. The bill broadly solidifies the agreement between Australia and a number of other nations to avoid double taxation. This is a step in the right direction. After all, lower tax is always the preferred scenario. I encourage this government to minimise taxation where at all possible. The bill is also designed to crack down on tax evasion with respect to taxes on income, the aim being to ensure that the government continues to collect income tax earned overseas at all costs.

Reform elicited by this bill will go some small way to ensuring that people like Mr Parishan, in my electorate of Tangney, are no longer unfairly targeted through double taxation—but, sadly, only in a handful of nations. Mr Parishan is on the verge of selling his family home in order to pay a $250,000 tax bill. This retrospective tax bill is on income earned during two of the five years he worked in both Qatar and Dubai as a structural engineer. While Mr Parishan paid various duty, tariff, import and export taxes, the fact that his income was not directly taxed in the United Arab Emirates nations means that Australia's Treasury is within its right to effectively take my constituent to the cleaners. While income earned by Mr Parishan in Dubai and Qatar is not subject to an income tax, other receipts including money, duty, tariff, import and export taxes—paid in addition to the cost of living burden in these countries, must surely, in any just taxation assessment, be taken into consideration when making any rulings on whether income has been fairly taxed overseas.

While a selective focus by the Australian Treasury on income tax is unfair, it is also a lost opportunity for our federal government coffers. Tax receipts from other streams of income earned overseas are largely ignored or only minimally taxed. A focus on the single income tax model narrows the federal government's receipts and pressure to meet mounting deficits forces drastic and overzealous actions when chasing taxes the government believes they are owed. This can only be to the detriment of our citizens. There is not an agreement between Australia and either Qatar or Dubai for the avoidance of double taxation and the prevention of fiscal evasion with respect to withholding tax, tax on income or in respect of administrative provisions.

At present, the general proposition under Australian law is that treaties which Australia has joined are not directly and automatically incorporated into Australian law. While amendments contained in this bill will give Australia's tax treaties the force of law through streamlined arrangements, the fact that we are not reciprocal signatories with countries of significant Australian expatriate investment and development is of most concern. Why are our citizens who work in countries with no income tax, but with other excises and tariffs, attacked by the Australian Taxation Office? Let us look at whether it is even necessary to have an income tax at current indexation levels—or indeed an income tax at all. Should we look at a greater focus on consumption taxes and the like to improve efficiencies and drive down bureaucratic waste? I believe that income tax and the money it generates for the government is the facilitator of government growth and waste, including those moneys earned overseas. The Treasury will tell us that an income tax is imperative. After all, it addresses what would inevitably be a shrinking revenue base. However, this is what Treasury is tasked to do. It is their job to ensure that government spending can be met by reciprocal taxation receipts. This relationship is fundamentally flawed. It places the onus on the government of the day to constantly keep a check on its budget growth. This trust that we have placed in the federal government to self-regulate its spending has been betrayed, with both parties massively increasing the size of the federal government over successive governments. Real issues arise from this growth in the federal government, most importantly the issues of economic and social freedoms. The federal government has expanded far beyond its proper constitutional limits, regulating virtually every aspect of our lives. There is no real argument about whether we live in an over-regulated society; the fact is readily accepted and backed up by numerous studies. Big government and numerous departments and bureaucracies take billions of dollars out of the legitimate private economy and penalise productive behaviour, with most Australians giving a large chunk of their income and other monies to the federal government. Philosophically this is taking money directly from some Australians to give to others, with inefficiencies resulting from bureaucratic process. The ridiculous complexity of our tax laws makes tax time a nightmare for both individuals and businesses. These factors are made worse by our electoral cycle. Come election time Australians are given the false choice between bigger and bigger government; between which party can promise and redistribute wealth to a greater extent while maintaining a facade of fiscal responsibility. These are two choices from the same side of the coin.

The Australian people need to grasp the concept that the more government spends, the more freedom they lose—both personal and economic. All things considered, Australians should be dismayed by the income tax mess and the tragic loss of liberty and freedom which has ensued. Yes, reductions in income taxation would force the federal government to be massively reduced, but that is a good thing. It would force a debate on spending levels. Again this is a good thing, but we ought not to be debating whether we can save a million here or a million there; we should be debating whether whole departments, agencies, and programs funded by the budget should exist at all. Little cuts here and there do not address the big picture problem. To get to this small government place we need to get away from the idea that big government makes our lives better, that government can do anything other than redistribute and then waste economic resources from the productive private sector and citizenry.

Examples of government overreach are everywhere. The hot button issue at the moment is cost of living pressures. It is a problem government cannot make better, but can make infinitely worse by meddling in the affairs of private citizens. Every attempt at providing handouts and stimulus merely inflates the economy and makes life harder for everyone. So why not try the opposite; why not less government, less tax and reduced expenditure? If the average Australian was to look at how much they pay in tax and then cut that number in half, this would go a long way to solving the cost of living pressures and inflation in the economy. The answer is less, not more. Perhaps US Congressman Ron Paul said it best:

I believe income taxes are responsible for the transformation of the federal government from one of limited powers into a vast leviathan whose tentacles reach into almost every aspect of American life.

In our case, all that needs to change in that statement is to substitute 'Australian' for 'American'. Money, duty, tariffs and import and export taxes must also be considered when making judgment on taxation owed to the government to ensure double taxation does not occur even under amendments contained in this bill. Most tax discussions are based around simplification for taxpayers and ensuring a solid revenue base for the government. But we also need to discuss how much of our private citizens' money should be entrusted to a government and for what purposes. This inevitably will require a review of the way taxes are collected. While amendments contained in this bill will give Australia's tax treaties the force of law through streamlined arrangements, a discussion of the fact that Australia is not a reciprocal signatory with countries of significant Australian expatriate investment and development is an issue that must be placed on the table.

Shayne Neumann (Blair, Australian Labor Party) Share this | Link to this | Hansard source

I speak in support of the International Tax Agreements Amendment Bill (No. 1) 2011. I expected my speech to be short, somewhat lukewarm and even turgid and it probably will be, but I cannot resist responding to the member for Tangney. They are a broad church, those Western Australian Liberals, aren't they? The member for Tangney talked about a false choice; the only false choice we have are those opposite who claim that they are supporters of the market, free enterprise and small government. But John Howard never found a rort for the middle class that he did not want to fund. He funded them in every chance he got.

They were the architects of big government. In the mid-2000s the proportion of tax to GDP under the Howard coalition government was way above this government. In fact, one of the first things we did was reduce the size of government compared to tax revenue and GDP. It is extraordinary that the member for Tangney could come in here and say that. I thought he might be starting to go on as an apostle of Reaganomics, but he is even quoting Ron Paul. Not even mainstream Republicans would quote Ron Paul as someone in the mainstream of conservative thought.

The member for Tangney would have us believe that we should get rid of taxation. The income taxation system, as cumbersome and as difficult as it is—and I studied the Income Tax Assessment Act when I was at law school all those years ago; you had to virtually weigh it because it was so heavy, you could not read it—it is the method by which we civilise this country. It is the way in which we provide for education, health, roads, infrastructure and community grants. It is the way we support the poor, the weak, the oppressed, the disadvantaged and the disabled. We do it through the Income Tax Assessment Act and the taxation system. In the dog-eat-dog world of the member for Tangney and those opposite they would not even provide for these people. They do not want the government to civilise.

I actually do believe the member for Tangney, having listened to his speech on this bill, is a devotee of Margaret Thatcher. He said there was no such thing as society, only families and individuals. There is a community, there is a society and the Income Tax Assessment Act helps us to provide for health and hospital funding in our electorates and schools, roads and the kinds of things that our communities expect and, I think, our nation expects as well. What we do with the Income Tax Assessment Act and taxation income helps fund our prosperity and economic development because the market cannot provide for everything. Those caucus colleagues of yours in the National Party, those Queensland Nationals, will tell you how important it is to fund those areas that the market cannot provide for. I reckon if he goes into the National Party caucus room any time when parliament sits in May with that sort of speech they would probably chuck him out. Having heard his speech, there is probably not a party in parliament that the member for Tangney feels comfortable in. We know that those opposite tried to get rid of him a couple of times, but they just could not do it.

I speak in support of this legislation and I will be turgid and brief now. It will come as no surprise to anyone that, like the Income Tax Assessment Act, the International Tax Agreements Act 1953 is a pretty cumbersome piece of legislation. The bill before the chamber fulfils two important agendas. I think it modifies and streamlines the structure of the act and it provides a legal basis to combat tax avoidance and evasion in a number of different jurisdictions: Aruba, Chile, the Cook Islands, Malaysia, Guernsey and Samoa. The bill will simplify the presentation of the operative provisions of the act and incorporate the treaties that we have undertaken with these foreign entities by reference to accessible online resources. Schedule 2—and this bill, like a lot of bills, provides for schedules by which we pass the legislation—gives the force of law in Australia to new bilateral taxation agreements with Aruba, Chile, the Cook Islands, Guernsey, Malaysia, Samoa and Turkey. The Chilean and Turkish treaties reduce taxation barriers to bilateral trade and investment and that is a very good thing. These treaties will improve the integrity of the taxation system by providing a framework through which the Commissioner of Taxation can have cooperative bilateral arrangements with his counterparts to prevent taxation evasion in other jurisdictions. That is also a good thing, because the Department of Homeland Security in the US has said that the flow of offshore money between countries in a way that prevents proper taxation is a $16.2 trillion industry; they hide it in tax havens all over the place. This accountability, this idea of the commissioners speaking to one another, is a very important thing.

The agreement with Malaysia will amend the current Australia-Malaysia tax treaty to update the exchange-of-information article in that treaty to the current international standards endorsed by the OECD, the G20 and the United Nations. Malaysia is a neighbour. It is growing in importance to Australia. Certainly on our side of politics we think that, when it comes to border protection, asylum seekers and refugees, Malaysia is not just an economic partner but a cooperative regional partner in the regional framework we have for dealing with these issues.

The other agreements with Aruba, the Cook Islands, Guernsey and Samoa seek to eliminate double taxation on certain income derived by individuals such as government workers, students, business apprentices, pensioners and retirees. These four agreements also provide a mutually agreed procedure for the resolution of taxation disputes involving transfer pricing adjustments.

This is another example of the federal Labor government's commitment to improving and streamlining the taxation system. It is not something you might take to the gym every morning but it is something that might assist the Australian public. With this bill it becomes even harder for those who seek to deny our nations a share of the prosperity of their companies and to avoid paying tax. We do not mind if people make the arrangements lawfully and legitimately but we do not want them engaged in tax evasion. That is a problem across not just our country but our region and the world. Taxation, as I said, contributes to the health, education, wellbeing and prosperity of the whole country, including the people in the electorate of Blair, in Ipswich and the Somerset region. This legislation is an example of our commitment to ensuring accountability in the national interest, and I commend the bill to the House.

Bill Shorten (Maribyrnong, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

First of all, I would like to thank the members who participated in the debate on the International Tax Agreements Amendment Bill (No. 1) 2011. The government is committed to the removal of taxation barriers that could impede Australia's bilateral trade and investment relationships with other countries. Australia is also committed to international cooperation between revenue authorities to combat tax avoidance and evasion. This bill will give effect to both of these commitments by giving the force of law to new bilateral taxation agreements between Australia and Aruba, Chile, the Cook Islands, Guernsey, Malaysia, Samoa and Turkey. Each of these agreements will strengthen Australia's bilateral economic relationships with these jurisdictions and, directly or indirectly, will help to discourage taxpayers from seeking to use offshore arrangements to avoid Australian tax by increasing the probability of detection.

Question agreed to.

Bill read a second time.

Ordered that this bill be reported to the House without amendment.

Main Committee adjourned at 18:59