Joe Hockey (North Sydney, Liberal Party, Shadow Treasurer) Share this | Link to this | Hansard source

I rise to speak on both the Tax Laws Amendment (Managed Investment Trust Withholding Tax) Bill and the Income Tax Amendment (Managed Investment Trust Withholding Tax) Bill. This is the second time the government has introduced this bill into the parliament, following its stunning backflip on this issue last week. What an extraordinary moment.

Last week this exact provision the government excised from the bill, only to reintroduce exactly the same provision the following day—with no explanation. Unless the member for New England or the member for Lyne or the member for Kennedy or anyone else has an explanation, there is no explanation from the government as to why it dumped it last week and is reintroducing it this week. Last week the government moved an amendment to its own bill to excise the doubling of the final withholding tax on managed investment trusts from 7½ per cent to 15 per cent from 1 July this year. That move followed reports that the government was unable to gain the support of the Greens—and that only came about because the Minister for Finance, Senator Wong, in the Senate accidentally let slip that when they could not get the support of the Greens on this proposal they decided to excise it from the TLAB bill.

So now the government is reintroducing the measure. This is the third budget measure the government has now shown signs of backing down on. Why else would the government excise it from the TLAB last week? The first budget backdown was the government's decision to re-embrace the dumped company tax cut from budget night, which the Prime Minister now says is a priority—but does not have the money for. Secondly, the government backed away from the ongoing CPI increases to the passenger movement charge. Thirdly, just last week, the government backed away from its doubling of the final withholding tax on managed investment trusts from 7½ per cent to 15 per cent from 1 July 2012. That said, the coalition welcomed the backdown on the increase to the withholding tax on managed investment trusts. We thought it was something more significant. The Tourism and Transport Forum said the decision not to proceed with doubling the withholding tax rate for managed investment trusts 'will go some way to restoring foreign investor confidence'. Unfortunately, this backdown was not before the government's constant chopping and changing in relation to the MIT withholding tax. This again reduced our predictability in the eyes of international investors. The Tourism and Transport Forum went on to say:

While some damage has been done to Australia’s reputation as an investment destination, the decision not to proceed with doubling the withholding tax rate will help to restore investor confidence and renew interest in Australian tourism projects.

So the tourism taskforce is in exactly the same position as we are. You can imagine where international investors are at. We do not know what the government are planning.

The government originally announced that they were reducing the withholding tax on managed investment trusts from 30 per cent down to 7½ per cent, so they had a one-way trend. Then they announced on budget night that they were going to increase it from 7½ per cent to 15 per cent, which came as a shock to people, because investors had worked on the basis that there was a trend towards a lower level of tax. But then the flipside came last week, when the government simply removed it from one of their own bills, suggesting that they were now dumping the proposal in the face of our opposition and the opposition of a vast array of investors, only to reintroduce it again last Thursday and to rush through debate today. It is like groundhog day; this proposal has come back.

Well, the opposition is going to be entirely consistent. We will oppose this measure on the grounds that it unquestionably heightens sovereign risk perceptions of Australia and the change will have an adverse impact on infrastructure investment. The only thing consistent about this government is its inconsistency. It is the constant backflips, the twists and the turns that are creating the sovereign risk. In these pretty tough global economic conditions the government should be doing all it can to be stable and predictable. Unfortunately there are numerous examples where businesses are concerned about the sovereign risk that has developed towards Australia as a result of this government.

Ivan Glasenberg is the Chief Executive Officer of Glencore, which is currently in the middle of one of the biggest takeover-mergers in global history, with its attempt to take over Xstrata, which has a massive amount of investment here in Australia. Ivan Glasenberg said in London a few weeks ago:

At least in the Congo they need you, they want you there and if they start changing the rules on you, you may not continue investing.

…   …   …

So Australia does have its risk, yes. We saw the carbon tax, we saw the mineral resource tax. It is a First World country but is doing things that are making people cautious of investing, so Australia is becoming another country where you have got to make sure that the rules aren't going to change on you.

Ivan Glasenberg is saying that not as an outsider looking in, even though he lives overseas. He is also saying it as an Australian citizen.

At the dispatch box earlier today the Prime Minister was saying that it is the negativity of the opposition that is causing consternation. No, it is the incompetence of the Prime Minister, the incompetence of this government, that is causing consternation out there. We did not write Ivan Glasenberg's speech. We did not write the words of David Knox, Chief Executive Officer of Santos, when he said:

Governments must recognise what we all know … that investment in oil and gas is not a short-term game, but one based on a long-term outlook with returns over the long-term.

With such massive capital investment and therefore risk up-front, long-term investors like those in the oil and gas industry need stable, predictable, long-term rules.

My clear message to the Australian Government is: do not create uncertainty.

Instead provide our investors with the confidence in Australia as a stable fiscal and regulatory region—allow us to stay competitive.

'Allow us to stay competitive'—that is what they are saying.

Jack Nasser, Chairman of BHP and former global chief executive of Ford, who is on a number of global boards, including News Corporation, said:

I cannot overstate how the level of uncertainty about Australia's tax system is generating negative investor reaction. People don't know where it's going.

Here Jack Nasser is talking about the uncertainty coming out of Australia. These are people that have a propriety interest in the welfare of Australia, and they are saying, 'Hang on, why is Australia so unstable? Why are you making it harder for us to get global investment, to create jobs in Australia? Why are you doing this?'

John Stanhope, former Chief Financial Officer at Telstra and Director of AGL Energy, said:

… people looking outside at Australia think we're a sovereign risk because of the uncertainty created by policy fluctuation.

The difference is in the two parties, and that is very real. It struck me to hear from people who normally give Telstra a lot of money, 'No, we are not interested anymore.' To get rid of that uncertainty is very important.

In 2008, as I said earlier, this government moved to reduce the rate of withholding tax on managed investment trusts progressively from 30 per cent to 7½ per cent, a move which was not opposed by the coalition. But we did ask the question about whether the government was really committed to it. At the time, we expressed concerns that the reduction in the withholding tax rate was not a genuine reduction for international taxpayers due to the operation of double taxation agreements. Any reduction in taxation paid in Australia may simply have led to higher taxes being paid in other jurisdictions.

We expressed concerns that the bill had not been subject to proper scrutiny, as the government did not allow the bill to be considered by the Senate Standing Committee on Economics at the time. We raised serious concerns that the government's costings for the measure may have been underestimated. Today the government may try to use the previous arguments of the coalition against us in the current debate, but in the context of the current economic climate, including potential significant reductions in foreign investment and employment in the construction sector, the coalition does not view this as an appropriate time for the government to be doubling withholding tax on potential sources of investment that will help to drive economic growth and job creation. Continual change to our international taxation arrangements, coupled with the government's retrospective tax grabs on a variety of legislation, reduces international investor confidence and elevates concerns about our sovereign risk profile.

This instability in the government is creating greater uncertainty for investors and it is leaving Australian consumers, as well as Australian businesses, confused. There is a myriad of examples where the government says one thing and does another. As an example, I note an issue on which I have been criticised, the National Disability Insurance Scheme. The government has said it is absolutely committed to the NDIS—so committed, in fact, that it is going to bring forward, and accelerate, the implementation of the NDIS. The government is going to speed it up and, instead of committing $3.9 billion over the first three years, it is in fact only committing $1 billion. When I said it was a cruel hoax for the government to be claiming to speed up implementation of the NDIS when it was in fact massively underfunding it, people said: 'How dare you!' for saying that. 'How dare you suggest the government is not committed to it! How dare you suggest there is not bipartisan support!'

There is bipartisan support on the NDIS. However, buried in the last paragraph on page 3 of the Deputy Prime Minister and Treasurer's economic note that was published on Sunday, after three of the four headings, the government seemed to be boasting about its achievements in this regard. The Treasurer said:

That's been the focus of Labor since day one, it's been the focus of Julia Gillard since she became prime minister two years ago, and it's remained our focus as we've gone about getting the big reforms in place—

They love talking about big reforms. Everything is big, huge, monstrous—everything is enormous.

that will set us up for the future, like the pricing of carbon pollution, like introducing the Minerals Resource Rent Tax, like giving consumers a better deal in the banking system, and like beginning the long road towards a National Disability Insurance Scheme.

'The long road towards a National Disability Insurance Scheme.' I could have sworn it was a shortened road, because the government said that it was going to fast track the NDIS. The government was going to bring it forward. But what had become a fast track to bring forward the NDIS is now turning into 'the beginning of a long road' towards the NDIS. My goodness! Even the Prime Minister sought to list the NDIS as an achievement, and now, buried deep in the Treasurer's own economic note—which goes out on a Sunday—it is a long road to deliver that NDIS.

I wonder if the government is going to be here long enough to travel that long road. Perhaps it is like the original version of The Wizard of Oz, which I have just been reading to my children. I can tell you that the original version is a rather lengthy book—Dorothy seems to cross a lot of roads to get to Oz. I think the Labor Party's commitment to an NDIS is as topsy and turvy, and as wavy, and as fragile as Dorothy's trip along the yellow brick road, in its original version—which is sad, because in all of this the government is playing with people's hopes.

The Labor Party is hoping that people will ignore the travails of an incompetent government, but they cannot. Whether it be on social or health policy issues—like the NDIS; like the great big health reforms that the government said it was going to deliver as former Prime Minister Kevin Rudd sought to take over the hospitals and to form a joint partnership that is now mired in red tape; or like the national curriculum that the government has sought to claim as an achievement and that three years later still has not been rolled out—or on economic policy issues, like the bills before the House at this moment, this is a government that is inconsistent. It is a government that is fundamentally flawed in its ability to run an economy and to run a society.

It is a government that does not know whether it is Arthur or Martha, whether it is Wayne or Wendy, or whether it is Julia or John. But what I know, and what my colleagues know and what, I am sure, the Australian people know, is that this is a government that is not fit for office and that the Labor Party has truly lost its way. It has never recovered from the events of just over two years ago and, if you want a single contemporary illustration of the incompetence of the government, you need look no further than these bills that are before the House.

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

I spoke in relation to this particular legislation last week, from memory, on schedule 4. I rise to speak in support of the Tax Laws Amendment (Managed Investment Trust Withholding Tax) Bill 2012 and the Income Tax (Managed Investment Trust Withholding Tax) Amendment Bill 2012.

These bills implement a budget measure. We announced a particular measure in the budget that would lift the withholding tax rate applied to distributions for managed investments, to residents of a country that Australia had a tax information exchange agreement with, from 7½ per cent to 15 per cent, and it is commencing from 1 July 2012. The information I have received is that there is a total impact on the budget of about $260 million in revenue over the forward estimates. It is a not inconsiderable amount of money in relation to this measure, and it is part of our framework for ensuring that the budget gets back to surplus. The 15 per cent rate is still competitive with rates applying in other countries and brings us into line with the US, Canada, Hong Kong and the UK. For the information of those people who may be listening, in the UK the withholding treatment of distributions from MITs in relation to nonresidents is about 20 per cent and that rate may be reduced under certain treaties. In Japan it is 20 per cent generally and seven per cent for individuals listed in REITs, lifted to 15 per cent in 2014 unless extended. In South Korea, our fourth biggest trading partner, it is 22 per cent; in the United States, 30 per cent; in Canada, 25 per cent; in Belgium, 15 per cent; and in the Netherlands, 15 per cent. So when you look at what is happening around the world it is not unreasonable for our rate to be at 15 per cent.

The coalition have had every position possible in relation to this measure. When the coalition were in power, the rate was 30 per cent. It was an election commitment of ours back in 2007 to reduce the rate to 15 per cent, and we did that as part of our proposals to ensure more investment in this country and to make Australia a financial services and investment hub. The coalition have on numerous occasions criticised us over reducing it from 30 per cent to 15 per cent. They tried to refer the measure to the Senate Economics Committee for review but it did not vote against it. In the parliamentary debate they criticised the reduction to 7½ per cent, claiming it was a broken promise because it was a greater reduction than we had said we would do in the 2007 campaign.

The interesting question is what they would do if they returned to the treasury bench. If they are fair dinkum about opposing the increase to 15 per cent, then let us see them commit themselves to reversing that position. Let us see them make any public statements about that. Let us see them come clean about the issue. To date, they have not. If they are not going to do that, how are they going to save the $260 million across the forward estimates? What particular services in education, health and the like are they going to cut? How are they going to pay for it? Once again we see the coalition generally prepared to accept expenditure that we announce, rarely in support of the budget savings measures that we pursue and often against the revenue-raising measures that we undertake to make sure the budget is back in surplus and we have a viable budgetary position as a government.

From opposite we hear the nay-sayers and doomsayers. We heard the shadow treasury spokesperson talk down the economy and talk about sovereign risk. For heaven's sake! When we have government debt at about a 10th of the average in the OECD, inflation in the band expected by the Reserve Bank, interest rates much lower than they were under the Howard coalition government and unemployment at around five per cent, to go on about sovereign risk is simply a nonsense. We are talking about budget legislation that deals with about $260 million across the forward estimates. It flies in the face of all the economic indications and includes about half a billion dollars in investments in the mining sector alone—in coal, iron ore et cetera—in states such as Western Australia and Queensland, my home state.

If this is such a terrible measure that we are undertaking, you would expect the coalition, if they have any consistency, to come into this place and say where they would save the money, and they would eventually have to come into this place with a consistent policy. When we announced at one stage that we were going to cut the tax, the then doyen of economic responsibility for those opposite, the then Treasurer, called it a 'tax cut for foreigners'. We have had all kinds of positions on this matter from those opposite. They certainly have not been consistent in any way, shape or form. Even today there is umbrage and unction from those opposite but little evidence as to what their position is, except to say—as they traditionally do in this place—a simple no. Once again, I would like to know where they stand on this particular issue. I would like them to get rid of the histrionics, hysteria and hyperbole, and the over-the-top theatrics from the shadow Treasurer, that we see so often—designed in part to hide their embarrassment that we reduced the tax from 30 per cent to 15 per cent. Last week we saw grandiose statements and claims about us withdrawing this measure, and I think there is a degree of embarrassment from those opposite now that we have reintroduced it so quickly.

This is a sensible savings measure. It is consistent with the Henry review recommendations on location-specific rents. The government made the sensible commitment to bring the budget back to surplus and we are determined to do that on time and as promised. We are committed to making sure that the economy is strong and that we govern in a consistent way that gives certainty and security for those people who want to invest in this country. That is always the case: if the government keeps changing the rules and the laws and is inconsistent, then those who are in business are always worried about what might happen.

This is particularly important legislation. Those opposite have no consistency, and they have form on this issue: every sensible savings measure they block, or they pretend that they can find savings but they never articulate them. I think what they are doing here is simply adding to that $70 billion black hole which the shadow finance minister has admitted they have and the shadow Treasurer has also said they have. So this is another $260 million that they can add to that. If they want to be consistent, then let them come into this place tonight and support savings and our revenue-raising measures. Be consistent; do not just spend.

We know on this side of politics that we have been prudent with respect to revenue to the government. There is a lower tax-to-GDP ratio now than there was at any time under the Howard coalition government. All they did was engage in middle-class welfare, tax and spend. That was the Howard coalition government. There were rivers of gold coming in, but it was squandered and not invested in infrastructure and the kinds of things that lift productivity in places like Western Australia and Queensland.

I support this legislation. I think it is prudent. It is part of the government's overall strategy. It is consistent with the majority recommendations of the economics committee of this House. If those opposite would ditch the word 'irresponsibility' and add 'responsibility' to their economic framework and policy, they would support it as well.

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

I speak in praise of the shadow Treasurer when he criticises the government for changing the goalposts. I think that it is right for our overseas investors to have faith in the Australian government. Having said that, we are never going to be able to change anything if we take that principle to its logical conclusion. We would never be able to change anything. So I take the shadow Treasurer's remarks, but I think that you cannot just apply that rule to every single potential initiative by government—otherwise, we would never be able to take an initiative.

One of the many reasons that I am aggro to the ALP-NLP corporation that runs this place is that you have a management coup every six or seven years, it would appear. Having said that, I take the shadow Treasurer's argument. It is a valid argument and I praise him for putting it forward. But I have also got to say that you have to make some changes.

We have this extraordinary situation where Australian companies pay 30 per cent tax, but foreign corporations only pay, I think, 17 per cent tax. It is an extraordinary anomaly. You say, yes, but the agreement is that our companies in America pay only 17 per cent tax and then they have to pay the rest of it when they come back to Australia. How many companies do we own in America? How many do they own in Australia? This is a very lopsided deal, a very, very lopsided arrangement. It needs to be clawed back, and part of the clawing back is happening here today. From an overseas investor's point of view, this place is dreamland—and not dreamland in so far as being the land of dreams—it is paradise. You only have to pay 17 per cent interest. You have high interest rates and you can absolutely guarantee that the dollar is going to continue to ascend. You know that the ALP-NLP corporation that runs the country is very, very committed to the idea that overseas financiers should be given a rails run. Just look at your country. The supine attitude of the last government and the current government has resulted in many of our resources being foreign owned.

Fifteen years ago all of Australia's great mining companies were Australian owned—BHP, Western Mining Corporation, Normandy and Mount Isa Mines were all Australian owned. Eighty-five per cent of our mineral resources were under those great mining companies and all were Australian owned. Now they are all foreign owned.

The second biggest agricultural industry in this country is dairying and every single factory in Australia was Australian owned prior to deregulation in the year 2000. Now all the giant corporations in the dairy industry except Murray-Goulburn are foreign owned. All of our sugar mills with the exception of Mackay Sugar are foreign owned. Our airlines were all totally Australian owned and, thanks to the machinations of the head of Qantas and the board of Qantas, clearly, Qantas is going to be divided up into five companies and four those companies will be foreign owned. Is there anything that Australia still owns? Is there any significant company in this country that is still Australian owned? If there is, do not tell me about, Mr Acting Deputy Speaker Symon, because, if the overseas corporations find out, it will not be Australian owned for very long—that is for certain.

In this place we hear a lot about Moody's and Standard & Poor's. They do not run this country and their track record is absolutely appalling. I would urge Treasury officials, if they are sitting in the House here, to go and get out the three books on Enron. Standard & Poor's and Moody's and all the rest of them told us that Enron was a great, stable and wonderful company, just two months before Enron fell over, owing their shareholders and their creditors $64,000 million. They only made a little mistake—$64,000 million in one corporation.

It is an infinitely more complicated situation with governments. I am very worried about a tendency that governments have when they skite about not spending money. I belong to the biggest borrowing government in Australia's history. We did not borrow, as the current LNP government in Queensland is doing, to build pleasure domes in George Street—the parliamentary precinct—as the current newly appointed LNP government is doing in Queensland. We did not do that. We spent the money on building a railway line out to the middle of nowhere where there is a whole stack of coal reserves because a bloke called Les Thiess reckoned he could sell the coal to Japan. We did our homework and we reckoned he could, so we borrowed a king's ransom in money and spent it building that coal line. We had no guarantee of anyone using that line. They might have signed some agreements but they were only as good as the company. If the company fell over, we would have, so we took huge risks and we built this giant port at Gladstone, one of the six biggest ports in the world in that it could take 200,000-tonne vessels. There were only six ports in the world that could take 200,000-tonne vessels.

Not stopping there, we built one of the four biggest power stations in the world so we could have the cheapest electricity in the world. We gave those Utah coalminers a rail run, and we had a small clause which gave us the overburden coal. We drove this giant economies of scale power station on free coal because of the cunning deal we had done. We built a power station that we did not need. There were no users there for that power station. It was a huge risk that the great Ron Camm, who was more of a mentor than even my father, took in building that power station. He said, 'If we have the cheap electricity, the aluminium industry will come.' It was a huge risk. If they had gone bad with coal or aluminium they would have been annihilated as a government. Heaven only knows, they were ripped into continuously, all the time. They borrowed, spent all this money and put the state into hock. Yes, but the money was not spent on buying votes. Most of the expenditures in this place really amount to buying votes. You can say that the spending makes life more easy and more attractive for people. Well, we were hard people—13 of our cabinet had cut cane by hand as young men. We were not used to all the leisures and pleasures of life. We were used to making sacrifices, saving our money and investing it in the future in productivity.

We now spend $23,000 million every year, and three of the people on the boards of the superannuation companies that spend that money have been in to see me. They say, 'All we are doing is pumping up the balloon.' I say to Treasury, to ASIC and to all these other people who are supposed to be the prudential controllers, 'Don't you see that you are blowing up a balloon?' All of that $23,000 million is being spent on realty and on the share market and it is just blowing it up. There is nothing behind it at all, except the $23,000 million that is going to be invested next year. There is nothing actually being produced at all, and in the meantime we say, 'Oh, we have to get money from overseas to open up our coalmines and our iron mines.'

There was a 60-40 rule with superannuation in the days when I sold superannuation. I made a lot of money out of it, too. God bless all the people that I worked for, my clients. Sixty per cent of that money went into government securities, so what happened in 1998 and again with the GFC and things like the collapse of Storm Financial could not have happened under us. Sixty per cent of that money was government guaranteed. Let me give you just one example. You introduce ethanol, and then you know you have a market in Australia for ethanol. So you can go and put the money up to build a big dam to put in giant new sugar mill. It is going to produce ethanol and you know you have a market for it, and you have a guaranteed price because it is backed up by petrol prices throughout the world. It is a dwindling resource and will constantly increase in price. You know you have a beautiful lay-down misere investment here. Say the investment is in the dam and the delivery canal. Maybe we do not grow ethanol; we grow something else. But the government is in the position to be able to guarantee that sort of investment within reason.

I sit beneath a picture of the great Jack McEwen. He had many great sayings, but the one I liked best was that government is about getting it right and education is no replacement for hard work in getting it right. Sir Leo Hielscher put in time and effort and energy, and all those bridges across the Brisbane River are named after him. He was a very great man. He took risks as the Secretary of Treasury in Queensland with his advice to the government. There were the risks that men like Bjelke-Petersen and Ron Camm took. We are yielding the benefit of those to this very day. For the last 30 years the economy of this nation has been carried by the coal industry and the aluminium industry and they were both put there by huge risks being taken in investment. Sir Leo Hielscher was offered the Reserve Bank three times and offered the World Bank position once. He said: 'We did not really take a risk. We always knew that the aluminium would come. We always knew that we would be able to sell coal to Japan.' He could say that afterwards, but at the time I am sure he was sweating a little.

We have this huge resource of the $23,000 million. Why are we giving a free kick to every foreign corporation? I am very pleased to see the Treasurer moving today to take some of that money back. Mistakes have been made in the past. One of the ways of rectifying that is to get some of that money back through measures like the one he is moving tonight. I will be backing it even though I think we should all listen to what the shadow Treasurer said this evening as well.

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

In speaking on the Tax Laws Amendment (Managed Investment Trust Withholding Tax) Bill 2012 and the Income Tax (Managed Investment Trust Withholding Tax) Amendment Bill 2012 it is, as the shadow Treasurer said, a bit like groundhog day. The substance of these bills was included in separate tax law amendment bills last week. Those changes, which see a doubling of the relevant withholding tax from 7½ to 15 per cent, were announced suddenly on budget night. As the shadow Treasurer quite rightly pointed out, in so many respects this tax legislation before the House—yet again, as it turns out—sums up so much about the incompetence of this government, and not just on taxation policy. It really encapsulates and symbolises the government's failure to govern, and how its incompetence, at so many levels, creates a lack of confidence in the investment community. It leverages sovereign risk, as the shadow Treasurer so rightly said, and these tax bills really sum it up, on the second anniversary of the government's sudden change of Prime Minister.

It is worth recounting some of the history on this as a window into the damage the government's approach on taxation matters is doing, specifically with regard to these bills. As I pointed out last week, four years ago in June 2008 the government legislated with great fanfare that it was reducing the relevant tax rate in this legislation down to 7½ per cent. That had been announced in Labor's first budget, and following the then Assistant Treasurer, the member for Prospect, speaker after speaker on the other side lauded the reduction to 7½ per cent and pointed out that the reduction was designed to send a signal to international investors.

Of course, it follows that the sudden decision to double to 15 per cent the relevant rate also sends a signal. It sends a signal that this government cannot be trusted on matters of tax. This is the government that four years ago made so much of reducing the rate to 7½ per cent and then suddenly, in the budget, doubled that rate. The signal it sends is that this a government that cannot be trusted. This is a government that will chop and change. This is a government, as we have seen, that will say before an election, 'There will be no carbon tax under the government it leads,' to paraphrase, and after the election introduces one. This is a government that out of the blue produces a mining tax.

The message overseas, with the Labor government in Australia pricing our investment, is that investors must now take into account that taxes will increase suddenly. In luring investment here by sending that signal, which those opposite spoke so proudly about four years ago, it will have a retrospective effect. But on top of that it also has the effect of saying there is a sovereign risk of sudden changes. We do not need to take my word or the word of the shadow Treasurer on this matter. As I outlined in the debate last week, there are so many leaders in their fields representing international investors who made this very point just after the budget. We have had those statements quoted in this House about how very directly indeed the government's decision meant that investors would think twice in the future about the sorts of investments they made.

Just last Friday respected commentator Jennifer Hewett, from the Australian Financial Review, made this very point. Jennifer Hewett summed up so many of the quotes that had been put into the debate through the course of last week when she wrote:

Labor has developed an unenviable reputation for its willingness to change tax rates and structures for investments.

This completely undercuts faith in the permanence of reforms that do occur …

My friend and colleague the member for Wright, who will speak after me, knows that of all the quotes that members of this side, including myself, put forward, those statements by Jennifer Hewett in the Australian Financial Review last Friday sum up the words and the sentiment of the reaction. What it says is if you send a signal by reducing the rate to 7½ per cent you surely send an opposite signal by doubling it. You surely send a signal that when it comes to investment in Australia sudden tax changes are the order of the day. The shadow Treasurer rightly referred to the events of last week and I want to refer to them, too, because the way the government has gone about the doubling of this tax also leverages uncertainty. Suddenly, in the budget, as I said earlier in my contribution, the government doubled the rate to 15 per cent. Then we had the tax law amendment bill last week that included in, from memory, schedule 4 the very measure we are debating now. But without any announcement whatsoever the government tabled an amendment to simply delete that schedule. As the shadow Treasurer rightly pointed out, the initial reaction from industry was: 'They must have backed down. They must have seen sense.' That was the reaction from industry and some of the people the shadow Treasurer quoted. But, of course, the real point is that there was not any word from the government. There was no announcement from the Treasurer or the Assistant Treasurer—not only was there no announcement; there was no explanation at all.

The debate in Hansard of, I think, last Wednesday sums up the chaos that afflicts this government when it comes to taxation policy. You had an amendment before the House during the debate—let me give them a little wiggle room; maybe it was a minute or two before the debate began—but no announcement, just an amendment to delete the schedule that would give effect to what had been announced on budget night. When it came to the summing up and the consideration in detail of the bill, in concluding his five-minute speech the shadow Treasurer asked the Assistant Treasurer on three separate occasions, three times in a row, what the position was. It was greeted by silence. The Assistant Treasurer was absolutely mute. Here was a minister of the Crown in here handling legislation where an amendment to strip out a fundamental budget announcement is moved and not only is there no public announcement; there is no parliamentary justification—not a word.

Those actions of the Assistant Treasurer will stand as a symbol of this government's arrogance and incompetence. I am not quite sure what the balance was, but it was only after the third occasion—I think when the shadow minister for finance spoke during consideration in detail—that, finally, the Assistant Treasurer would say that there would be a separate piece of legislation. It was barely audible in this House. And so it was on the very next day, the last sitting day of last week, that this legislation we are debating today was introduced.

This reeks of chaos in the decision making in the government. They cut a tax to 7½ per cent; they double it to 15 per cent in the budget, with all the signals that sends. They decide they are going to strip it out of a TLA bill and put it as a stand-alone measure and they cannot even communicate it. I was thinking perhaps the Assistant Treasurer really did not know what was happening or why, but in parliamentary debate—and I have witnessed quite a bit of it—I have never seen such a spectacle.

It might surprise you, Mr Deputy Speaker, to hear me saying this, but I do not mind saying it. There are those opposite who follow these matters at a technical level pretty closely on the back bench. To be a backbencher and watch that spectacle must have been very frustrating because it was nothing short of a disgrace for decision making on the part of the government. It is, as the shadow Treasurer rightly pointed out at the beginning of this debate, a symbol of so much that is wrong with this government.

When this debate is over, every member on that side who was elected or re-elected in 2007 will be able to say that they voted to decrease the tax and they voted to increase the tax. That is what they will be able to do. The actions of the Assistant Treasurer last week do sum up the government's failure on tax. It is no wonder that the incompetence and the chopping and changing that is on display directly leverage the sort of uncertainty and sovereign risk that have been spoken about in this debate.

Scott Buchholz (Wright, Liberal Party) Share this | Link to this | Hansard source

I rise to speak on the Tax Laws Amendment (Managed Investment Trust Withholding Tax) Bill 2012 and the Income Tax (Managed Investment Trust Withholding Tax) Amendment Bill 2012. This bill epitomises the performance of this government in this parliament. This bill has had more starts than Black Caviar. It is like going to the tennis. I watched the women's tennis semi-final at Rafter Stadium last year. Watching this bill come in, go out, come in, go out, come in, go out is nothing short of a tennis match. I know deep in my heart that members opposite, members of this government, are embarrassed about the way this bill has been managed through this House—they must be, because there are a lot of things to be embarrassed about. Not only are we embarrassed by the way the government has conducted the transition of this bill through the House; when we speak in this House it is not just a local audience but a national and global audience. When a bill comes before the House that speaks to managed investment trusts and the imposition of tax on companies choosing to invest in this nation, it is a matter of national importance and a matter of sovereign risk.

The Income Tax (Managed Investment Trust Withholding Tax) Amendment Bill 2012 amends the managed investment trust final withholding tax from 7.5 per cent to 15 per cent on payments made in relation to income years commencing after 1 July 2012. There is one thing we can be thankful for: there is not an element of retrospectivity associated with this bill, as there are for many other pieces of legislation that come before this house. We can at least be thankful for that.

Schedule 1 to the Tax Laws Amendment (Managed Investment Trust Withholding Tax) Bill 2012 makes consequential amendments to the Taxation Administration Act 1953 to give effect to the increase in the consequential MIT final withholding tax rate imposed by the Income Tax (Managed Investment Trust Withholding Tax) Amendment Bill 2012. According to the budget, it is expected to generate approximately $260 million in revenue over the forward estimates. I suspect that the only reason we are having this debate is because of the $260 million this bill is forecasted to bring in.

During this debate I will bring evidence from the financial sector of this nation that says this government is prepared to blow-off $1 billion in lost revenue—flighted international revenue that would have come to this nation—to pick up $260 million. How does that work? The government are starting to make financial decisions because their political survival is so thinly strung that we have a forecasted $1.5 billion surplus. Their political decisions are built around that figure. This $260 million helps in generating that revenue, but in order to do it they are prepared to sacrifice $1 billion worth of revenue—and I will tell you who said that.

The MIT final withholding tax rate of 15 per cent will apply to fund payments made in relation to income years commencing on or after 1 July 2012. That seems like a special memorial date for this government. As we all know, the world's largest carbon tax kicks off on that date. We have the start of the investment withdrawal in Australia and yet another tax that will have a snowballing effect on investment and increase our exposure to sovereign risk. We have a two-tiered economy at the moment: we have the resources sector, which is considerably strong, and we have another sector of the community, including the electorate of Wright, which has no linkages into the resources sector. Economics 101 tells us that when you are trying to stimulate an economy there are two things that you do: decrease tax and increase government spending. We have got the increased government spending; we can go through the myriad wasteful spending activities that this government has participated in. We were supposed to see a reduction in a tax rate, and I believe that was the reduction in the company tax rate from 30 per cent to 29 per cent. That is like going to the tennis semifinals as well: it is in and out and in again and out again depending on where the polls are at the moment.

We recently had the Prime Minister up in Queensland telling business leaders they should be out there talking up the economy and saying how well things are going. When you walk up and down the streets of Beaudesert, when you walk up and down the streets of Gatton, which is predominantly a farming and rural precinct, or when you get up into the tourism sector of Mount Tamborine in my electorate, these people are doing it extremely tough. I forecast tonight that we are going to see double-digit figures of businesses exiting the market. If you want to get into a booming business at the moment, go and get yourself some shares in some receivables businesses or some administrators because they will be going gangbusters as result of some of this government's policies.

In 2008, when Labor previously reduced the withholding tax progressively from 30 per cent to 7.5 per cent the coalition did not oppose the relevant bill. We did not oppose it because it was done in an orderly fashion. We sent messages to the market in an orderly fashion and said that it would be staged down. We have this wake-up-and-get-out-of-bed type haphazard approach of saying: 'Today we might just double the withholding tax rate; that is a good idea, because we have run out of ideas.' As a government, they have run out of ideas. However, at the time, we did express concern that it was not a genuine reduction for international taxpayers because of the operational double taxation agreements, and any reduction in taxation paid in Australia may simply have led to higher taxes being paid to other jurisdictions.

At the time, the coalition also expressed concerns that the bill had not been subject to proper scrutiny as Labor had not allowed the bill to be considered by the Senate Economics Committee, that Labor's costings of the measures would be dubious and that Labor had delivered a tax cut to foreigners in the 2008 budget but had not delivered a tax cut to Australian citizens and taxpayers. When will this Labor government realise that continual changes to our international taxation arrangements, coupled with Labor's recent retrospective tax grabs, reduce international investor confidence and elevate concerns about Australia's sovereign risk profile?

I sit on the House of Representatives Standing Committee on Economics, and it was interesting to hear from industry and the private sector about their concerns with the proposed legislative changes. Treasury indicated it expected little negative influence on investment flows from the increase. This position was vigorously rejected by industry, and I will quote from the Hansard transcript of the inquiry.

But before I do that, how often do we see that happen, where we have Treasury come out with a position or a forecast and industry vigorously rejecting or opposing it? We do not have to look too much further than last year's forecast of what this deficit was going to be. Back before the last budget I think we had a forecast for this budget in the vicinity of $10 billion. Six months later and we are looking at a figure of $22.7 billion! This is from the same department—virtually double within a six-month period. And when the recent MYEFO documents came out it bounced out to $37 billion. This is Treasury, contrasting, again, with industry, which goes to the credibility of all forecasting. Of course, who knows what the budget deficit is going to end up at? I think it is going to be in the vicinity of $44 billion, but with this government cooking the books and trying to bring expenditure back from next year into this, who knows?

I opened my comments by saying that this bill was similar to Makybe Diva. I wouldn't be putting a punt on whichever figure—

Warren Snowdon (Lingiari, Australian Labor Party, Minister for Defence Science and Personnel) Share this | Link to this | Hansard source

You've changed horses!

Scott Buchholz (Wright, Liberal Party) Share this | Link to this | Hansard source

I have changed horses. Before I digressed, I was looking at conflicting views between Treasury and the industry. This is an exchange between Anthony McDonald of Treasury and Peter Verwer, Chief Executive, Property Council of Australia:

Mr McDonald: I am not aware; there probably would be. But in this instance, to the extent that we would have allowed for any reduction in this sector as a result of the budget measure, it would be fairly minimal.

Fairly minimal? For a $260 million pick-up in tax revenue? I ask you: how do you quantify what is 'fairly minimal'? He went on to say:

That I know might sound strange to those directly involved in the sector because we are looking at the net impact across the economy rather than just the impact in the sector.

So, don't look at it across the sector; look at it across the whole GDP. It is similar to what the government does with reference to rationalising its debt ratio and saying, 'It's only seven per cent or only 10 per cent of GDP.' If you take this as a rational comparison against not a number that should have been used as a common denominator but the whole economy, of course it is only minimal. This is the logic that they are using to try to rationalise the irrational. He went on to say:

Again, if we are looking at financial flows there would be a greater reduction in the flows that occur through managed investment trusts but what we are interested in is what happens to the aggregate base and that is a different thing.

Mr Verwer: The question was: where would that extra money come from in order to ensure that the aggregate basis remained in alignment? We are still waiting for the answer.

Mr McDonald: That is part of what being a small, open economy that is engaged in international capital markets with a freely floating exchange rate does.

There were some other comments from Mr Verwer:

In fact, these foreign investors have said to us quite clearly that some of them had already pulled out because we no longer meet their hurdle rate—it did not take long to do the sums; others said that they have frozen the negotiations.

To support those comments I draw your attention to the Hansard of the Economics Committee and questioning of Mr Martin Codina from the Financial Services Council. The member for Throsby asked him:

Is there any evidence for that flight of capital occurring?

That is, as a result of this legislation. This is where the $1 billion comes in. Mr Codina said:

There is absolute evidence of that. Collectively we have quantified in excess of $1 billion, some of which has been made public and some of which is highly sensitive, because of the nature of the foreign investors. In some cases you have sovereign funds—in other words, it would be akin to a foreign government being critical of the Australian government as a consequence of the change.

Why am I only hearing about this in Economics Committee hearings where the Financial Services Council of Australia is giving evidence? Why weren't these opinions sought in the consultation process? Why weren't these people consulted? When you talk to Treasury they always open up with, 'We've consulted with the industry; we've consulted with everyone; we've consulted this to death.' Mr Codina later went on to say:

Let me put it this way. We were disappointed that we were not consulted prior to the announcement being made on budget night. Since this government came into office in 2007, we have issued something like 10 media releases which were supportive of subsequent changes that have been made, either to our tax system or regulatory-wise, that essentially had their origins in the Johnson review. We were one of the leading participants in the Johnson review, involved in much of the work that was conducted there. So I guess all I can say is it did come as a surprise, as an organisation that is actively involved in assisting the government in this area, that the announcement was made without any prior consultation.

Why would a government not consult with major stakeholders on such a sensitive bill that has the capacity to generate $1 billion of flight in capital from this nation? I will tell you why. To save the budget bottom line—I can think of no other reason—of a measly $260 million.

The government's constant chopping and changing in relation to the MIT withholding tax has yet again reduced our predictability in the eyes of international investors. If passed, this bill would undermine Australia's objective of becoming a regional financial services hub in the Asia-Pacific region. Attracting more foreign investment is important to achieve stronger economic growth which would lead to increased government revenue without the need for many new or increased taxes. Industry was barely consulted; the Australian people are rarely consulted; and the coalition remains opposed to this bill. (Time expired)

Adam Bandt (Melbourne, Australian Greens) Share this | Link to this | Hansard source

I rise on behalf of the Australian Greens to raise a specific concern with this bill, the Tax Laws Amendment (Managed Investment Trust Withholding Tax) Bill 2012—that is, the potential impacts of the bill on investment in low-carbon and renewable energy projects. It does not appear from the terms of the bill that it would have a particular impact on this area, but there have been some significant representations made by many in the sector that the current arrangements have been attractive to those overseas funds that are particularly interested in investing in areas where there might be higher ethical and sustainability standards than one might find in an ordinary investment.

The Australian Greens have received a letter from the Green Building Council of Australia, and I would like, if I might, to relate a couple of the points it makes. The chief executive, Ms Romilly Madew, and the executive director of advocacy, Mr Robin Mellon, make the point that:

The current withholding tax rate of 7.5 per cent has supported Australia's economic growth by encouraging investments in commercial property construction and critical infrastructure including low-carbon and renewable energy projects. The Property Council of Australia has identified that a priority of foreign investors, attracted by the lower withholding tax rate, has been high-grade buildings with strong green credentials.

They give some examples and then go on to say:

The Green Building Council of Australia supports any initiatives, programs or campaigns that encourage Australia's green building and sustainable community industry. The PCA research indicates that the increase in the WHT rate is likely to harm investment into Australia's green building future. The GBCA urges the government to reconsider this action and examine the advantages and disadvantages, as well as the direct and indirect impacts on stakeholders, more closely.

We have been involved in some discussions over recent weeks, and these concerns remain unallayed for us. The Greens still have concerns that this bill might have a disproportionate impact on low-carbon and renewable energy projects. Senator Christine Milne, who is responsible for speaking on behalf of the Greens on Treasury matters, is taking carriage of this matter will not stand in the way of the bill passing through the House, but we are not yet in a position to give support for the passage of this bill in the Senate. Our concerns remain very real and have not yet been resolved. We understand that the government has set a self-imposed time line for getting this legislation through. On behalf of the Greens I can say that that may be the government's view but our concerns are yet to be resolved. On that basis, we will not stand in the way of its passage through the House, but that is without prejudice to the position we might take in the Senate. We feel that we have very clearly put on notice the concerns we want to see addressed.

Bob Baldwin (Paterson, Liberal Party, Shadow Minister for Tourism) Share this | Link to this | Hansard source

I rise to speak on the Tax Laws Amendment (Managed Investment Trust Withholding Tax) Bill 2012 and the Income Tax (Managed Investment Trust Withholding Tax) Amendment Bill 2012.

Since 2 May, the government has had more positions on the MIT withholding tax rate, and attracting investment, than I can count on one hand. The history is simply this: on 2 May, Minister Ferguson launched the Australian 'open for investment' campaign, designed to attract offshore investment in the 80 shovel-ready projects in Australia. Less than a week later, on 8 May, the budget was handed down, announcing the MIT would go from 7½ per cent to 15 per cent—effectively undermining the Australia 'open for investment' campaign.

On the evening of 9 May, 2012, Minister Ferguson told the National Tourism Alliance at an industry gathering that he appreciated there were people in the room who were unhappy but that his job was to defend the government, so he would defend the government. On 20 May, Minister Ferguson failed to appear in the House to defend the MIT withholding tax increase that he said he would defend at the NTA.

On 20 June, the government amended its own bill to take out the doubling of the MIT withholding tax rate. On 21 June, the very next day, the government reintroduced its own MIT withholding tax bill in exactly the same form to again raise the tax from 7½ per cent to 15 per cent—proving the often-made point that Labor cannot stick to a policy from lunchtime to Lateline. I note on the speakers list that Minister Ferguson is not going to come into this House and defend his government's decision to lift the MIT withholding tax rate which is effectively knocking over his campaign program for those 80 shovel-ready projects.

It is no wonder there is a crisis in confidence in the tourism industry. It appears that the government does not understand that international capital is very fluid and will flow wherever the best opportunity and returns are. I have to wonder what the Independents' price was when they sold out to approve this measure. I have just heard a member of the Greens say they are going to pass this bill in the House but reserve their opinion in the Senate. The place to block this bill is here and now, because it would not be back on the agenda without their support. If the Independents and the Greens support this legislation they will have gone from hero to zero in the tourism industry's opinion in a matter of days.

This measure will combine with nine other measures in the budget that will undermine the government's 2020 Tourism Industry Potential strategy, which was publicly released in November 2010. That strategy—or flyer, as some in the industry call it, given its lack of detail—has outlined an ambitious set of goals to promote the long-term, sustainable growth of the Australian tourism industry. According to Tourism Australia, realising this potential would mean 'doubling overnight expenditure for Australia’s tourism industry, from $70 billion to as much as $140 billion by 2020.' It would increase tourism's contribution to the GDP to up to three per cent in 2020 and increase tax revenue from tourism from $9.3 billion in 2009 to as high as $14.5 billion in 2020. The carbon tax alone makes this goal relatively unachievable. Taxing new hotel developments makes those goals even more impossible. In conceding the tourism industry's victory against Labor's departure-tax cash-grab, the government might have opted to repair some of the bridges along with other tourism infrastructure. Instead, it announced a reduction to the Asia Marketing Fund from $61 million to $48.5 million—that was in a press release that was hidden quietly on the Treasurer's website—and that was a payback for forcing government to back down on a budget measure. Such a childish response only adds to the chorus of calls for a grown-up government to get Australia back on track. The regional tourism infrastructure fund announced: firstly, has effectively reduced the Asia Marketing Fund by $12½ million; secondly, returns the industry the $11.5 million previously cut from Labor's first budget in 2008-09; and, thirdly, offers no detailed plan to deliver on either tourism demand drivers or tourism supporting infrastructure.

The tourism sector did not take lightly its huge step in launching full-blown advertising campaigns against the government in recent weeks. It did so to protect jobs and is looking forward to building what should be a normal relationship of mutual trust, full disclosure and, importantly, genuine consultation. It reflects well on tourism bodies that they did not respond to the petty slap of a reduced Asia Marketing Fund as a consequence of the government's reduced departure tax revenue. The sector might have highlighted that the government could easily have kept the Asia Marketing Fund intact since this investment was only 10 per cent of the projected revenue in the first place.

Yet this should not be confused with the tourism industry taking the hotel investments tax lying down. This is a vital issue for the tourism industry and the government's own words reinforce the point. Eleven months ago, the now former minister for tourism, the Hon. Nick Sherry, told industry leaders:

The sad fact is that much of Australia's accommodation is outmoded and outdated and Chinese visitors in particular … are used to very modern facilities in their own country. There is a great challenge in tourism to invest in the modernisation of facilities.

In the same meeting he said that we need to see an increase in investment to realise the potential, and added that the country would need between 40,000 and 70,000 additional hotel rooms by 2020 to cope with projected demand.

Individuals and trusts base their decisions on statements like these and like the twice-yearly releases from Australia's independent Tourism Forecasting Committee. Smart investors will always weigh potential returns with risk, and they look to the government to manage the economy according to a plan. This gives hotel investors confidence to sign on for the long-term investments in hotel developments that are typically delivered over a 10-year cycle.

In last week's debate I read into the Hansard the views of Tourism Accommodation Australia, the Tourism and Transport Forum and the Australian Federation of Travel Agents, amongst others. It would benefit the House to reflect today on the prebudget submission by the Accommodation Association of Australia, delivered well in advance of the budget—in fact, it was delivered the day after Australia Day in 2012. They say in their submission:

32. While accommodation rooms within Australia are, by and large, of a high standard in comparison to other countries, continual refurbishment is required for businesses and the broader industry for it to remain globally competitive.

33. The stagnation in the number of overseas visitor arrivals in the second half of the last decade, together with the drop in domestic tourism has created a difficult trading environment for accommodation businesses, notably those in locations outside Australia’s capital cities.

34. The returns for many investors in accommodation businesses have not been adequate enough for them to make major commitments to capital expenditure on upgrading existing rooms and other parts of their businesses (restaurants, function rooms, meeting/convention space, leisure facilities).

That was the AAA prebudget submission dated 27 January 2012, so the government is aware of these issues.

Credit should be given to Minister Ferguson in delivering a prospectus of unfunded hotel investments. It is no silver bullet for tourism investment, and it is useless unless matched by other government policies that work in the same direction. I welcomed the prospectus as a 'good first step to restoring tourism infrastructure' when it was announced on 2 May 2012. Yet it only took the government six days to undermine this potentially effective measure with plans to double hotel investment tax, and today they replicate that action. This confused and incoherent approach highlights a dysfunctional government with portfolios not delivering a whole-of-government approach. Otherwise, why would you launch a policy based on a 7½ per cent tax, a week ahead of the government, in its own budget, increasing that tax to 15 per cent? It flies in the face of logic, reasoning and, in particular, investor confidence.

We were all reminded of this last week when the government withdrew its hotel investment tax and reintroduced its bill the next day in exactly the same form. I say to you, Mr Deputy Speaker Scott: what sort of message does this send to potential investors? The opportunity for crossbenchers to deliver stability and certainty comes tonight with these very bills. In supporting the coalition's opposition to automatic CPI indexation of the departure tax last week, the Independents helped make Australia a more attractive tourism destination, to the tune of $125 million a year, and that is according to the government's figures. Yet fixing this demand challenge is pointless unless matched by a commitment to fix the supply-side challenges. And according to all of the tourism and accommodation sector peak bodies, the managed investment trust cash-grab is a key test for minority government to act responsibly.

Despite the government's own vacillation undermining investor confidence, the Property Council of Australia has indicated that the only hope Australia has for maintaining its reputation as a safe place to invest is for the parliament to firm its resolve and reject this bill. Independents cannot walk away from their responsibilities to regional tourism on the basis of an exaggerated regional assistance package, for this small amount of money will be spent in a meaningful way. It is vital to achieve the right mix of demand driver and supporting infrastructure allocations. Examples of demand drivers might be the Tasmanian Parks and Wildlife Service's Three Capes Track, or the redevelopment of the Tasmanian Museum and Art Gallery. Supporting infrastructure is the transport and accommodation you would use when going to see a tourist attraction, like the Spirit of Tasmania, or the Old Woolstore Apartment Hotel—something I thought the member for Bandt might be interested in. However, the money is allocated, Independents should demand accountability, planning, and an outcomes focus. As I write this, I think of the Clump Point marina and the jetty at Dunk Island—still in a state of disrepair 18 months after Cyclone Yasi, despite our Prime Minister approving money to fix this infrastructure.

I seek leave to table a photograph of the jetty at Dunk Island, still in a state of disrepair some two years after it was damaged by Cyclone Yasi.

Leave granted.

There are quite literally thousands of Australian restaurants, motels, hotels and other businesses that have not spruced up their properties since the Australian dollar approached parity with the US in 2008. With fewer customers comes less profit to reinvest in hotel upgrades to stay competitive with other markets. The crisis in both consumer and investor confidence in Australian tourism is not all because of unfortunate realities like the sluggish economic performance of our traditional markets, the high Australian dollar or natural disasters; it is also because of perfectly avoidable policies that damage tourism. The standout example, of course, is the world's largest carbon tax, which will make foreign destinations even more attractive to tourists and diminish even further returns on hotel investments.

Like potential investors, Independents must weigh the totality of government policy affecting returns on investment here compared to overseas. Doubling hotel investment tax will affect investment decisions yet so will the other nine budget measures that will damage the tourism industry. Australia should seek to grow tourism and enjoy the benefits that flow from higher employment, a diversified economy and improved ties with other nations. Overtaxing tourism will stunt this growth and is short-sighted in the extreme. For tourism there is no greater challenge facing the minority government than repairing the damage already done to investor confidence in this afternoon's debate.

So if the Independents who support the coalition and, more importantly, the industry in knocking over the CPI increases in the PMC want to remain the pin-up boys of the tourism industry then I say this to them: oppose this legislation, which will directly affect investment in your seats. It will directly destroy confidence in investment in Australia. It will destroy the concept that this is a good sovereign nation to invest in. And, importantly, think about your own electorate. Think about the employment figures in your own electorate. Think about how this investment could be placed in your electorate and you can take part in the journey.

By supporting this government, I say to them—and if indeed they do support this bill; the member for Bandt has already indicated that he will be supporting this bill in this House—at what price have you sold out your electorate? If you stood up for the tourism industry you would not be selling out the tourism industry, and those workers and those investors— (Time expired)

Jane Prentice (Ryan, Liberal Party) Share this | Link to this | Hansard source

I rise to speak on the Tax Laws Amendment (Managed Investment Trusts Withholding Tax) Bill 2012 and associated bill. This bill is once again before the House. As bill after bill is introduced into this House, the Australian community continues to be let down by this Gillard Labor government, which refuses to listen and refuses to consult. Just last week, the government decided to withdraw the bill before a vote. The coalition believed that finally the Gillard Labor government had woken up to reason and that the Gillard Labor government had finally listened to concerns in industry and the community. I thought at least that they had noticed the immovable outrage pouring from the financial, property and tourism industries about the measures in these bills. Yet here we are again debating bills which, if passed, will be another direct attack on the Australian economy.

I welcomed the decision not to pass the tax increase last week—a tacit admission that the government had not thought through their policy and an admission by the Gillard Labor government that they were completely wrong to introduce this measure in the first place. Their delay is yet another concerning sign that this government continues to develop policy on the run.

This scattered and confused approach does not, as they say, inspire consumer confidence. It was reported last week by Dun and Bradstreet that three-quarters of Australians are expressing concern about their financial situation and one in three Australians say they would be unable to cover basic expenses for longer than a few weeks if faced with sudden unemployment. As a result, consumers are saving. They are not spending, which poses significant risks for industries including construction and retail. Nor does this government encourage business confidence. Their incessant incompetence and their proclivity for new and increased taxes sends a signal to the international business community that Australia is not a good place in which to invest money.

Today's increase to the managed investment trust withholding tax, is yet another attack on business confidence. The Gillard government, on a whim, has decided that it will increase the withholding rate from 7.5 per cent to 15 per cent—double. This increase makes investment in Australia less viable and directly undermines the aim of maintaining our economic resilience and boosting Australia's international reputation as a financial services hub in our region. This increase directly contravenes the words of the current Assistant Treasurer, the member for Lindsay, when he said in 2008:

If we are to be internationally competitive then … we must have rates of taxation that are amongst the lowest in the world.

The Assistant Treasurer should heed his own advice, because this tax increase does make us less internationally competitive and it does makes foreign investment, using the MIT structure, less attractive. This policy translates to a disincentive for foreigners to invest in Australian infrastructure. Make no mistake: this move will damage Australia's reputation and will hurt our economy. Indeed, according to the Property Council of Australia, more than $1 billion of planned foreign investment has already been affected.

Maintaining the 7.5 per cent tax rate is important because it is of fundamental importance to attract foreign investors to invest in key Australian infrastructure. In particular, many institutional investors such as pension funds and sovereign wealth funds use the MIT structure to invest because they are specifically the types of organisations which are looking much longer into the future and have the capacity to invest billions of dollars in infrastructure projects which may not see a return for many years. They invest in the construction of buildings like electricity generation facilities, hotels and tourism facilities, hospitals, motorways and toll roads, green buildings, and other carbon dioxide abatement programs. Sometimes these projects require decades-long commitment to keeping their investment money in Australia. It is important to note that not only are these facilities crucial to the long-term benefit of the Australian economy but those institutional and pension fund investors are exactly the type of reliable and respected investors we can trust to stay here.

It has been only 48 days since the Treasurer delivered his budget—the budget of smoke and mirrors, broken promises and direct attacks on the fiscal bottom line of all Australians. After the Gillard government's apparent decision to drop the proposed increase in the managed investment trust withholding tax last week, we now have the fourth proposed change to a budget measure. The Treasurer announced that the government would be dumping their proposed company tax cuts, yet has more recently said they are now back on the table. Their second backflip was indexation of the passenger movement charge, which the government gagged debate on last week on the floor of the House because they did not want to hear how bad indexation would have been for the tourism industry.

Fortunately, the government backflipped and dumped the CPI increases that they had previously said were part of the budget. Last week we saw the dumping of the MIT withholding tax increase, and today—lo and behold—its reintroduction. As the Australian Financial Review reported today, the property and finance industries were shocked when this proposal was first put forward. Yet it is not a surprise that the Gillard Labor government is still going through with this policy. We have a government which time and time again refuses to conduct a thorough cost-benefit analysis on any of their bills. Yet here they are today, coming out and blasting an independent report compiled by the Allen Consulting Group.

And this report is damning. It highlights that the attempt to increase government revenue in the short term will raise $35 million but will be accompanied by a decline of $30 million in gross domestic product. This increase in federal government revenue will also be accompanied by a decrease in collections by state governments, which will further affect the financial viability of states like Queensland, still trying to overcome decades of poor and reckless financial mismanagement by state Labor governments.

Australians and international investors do not just want responsible economic management—they deserve responsible economic management. They want consistency in government and they want a government that will tell the truth, that will do what it says, and that will not expose this country to sovereign risk. The shadow Treasurer, the member for North Sydney, persistently reminds the Gillard Labor government that so much of their legislation is exposing Australia to sovereign risk. And what is the usual response from government ministers? It is to bury their heads in the sand and pretend that nothing bad is happening. They pretend that somehow the policies they introduce into this House will not act as a disincentive for foreign investment, despite it being the express intention of the Treasurer to come up with short-term bandaid fixes to cover up his gross economic mismanagement.

This toxic government can hide all they want from the concerns of Australians and Australian families, and pretend that they are not doing the best they can to wreck the long-term viability of the Australian economy, but the truth about the Treasurer's smoke and mirrors surplus will be revealed later this year in the Mid-Year Economic and Fiscal Outlook. Behind closed doors, the government provided a so-called protected briefing for senior public servants which reportedly forecast 'turbulence and disruption' in the Australian economy as a result of volatility in Europe and the United States. The Prime Minister and the Deputy Treasurer have the gall to come into this House with their never-ending accusations of negativity from the Leader of the Opposition and the shadow Treasurer—as if we are the ones who are introducing poorly designed legislation, as the Gillard government does so often.

Is it mindless negativity from Mr Ivan Glasenberg, Chief Executive Officer of one of the largest commodity trading companies in the world, who said, 'We are getting greater business certainty out of Congo than we are getting out of Australia'? Is it mindless negativity when Mr Marius Kloppers, CEO of BHP Billiton, says, 'Australia is risking foreign direct investment'? Is it mindless negativity when Steve McCann, Group CEO and Managing Director of Lend Lease, says, 'Foreign capital is very important in funding large nation building projects; the country's largest real estate and infrastructure projects can't be funded, even by the biggest Australian superannuation funds; it will be the competitiveness of our industry that will suffer'?

And was it mindless negativity when Mr David Denison of the Canada Pension Plan Investment Board said on 15 May this year:

Australia’s budget … doubled the tax burden on our real estate and infrastructure holdings in that country.

It cannot be expressed in plainer language than that. He said that increasing the risk of investing in Australia calls into question the predictability and stability of cash flows, and if the risk of investing in Australia becomes too high then their response would be very quick and rational—they would simply stop investing in Australia.

The coalition, as the opposition, must hold this Labor-Greens coalition government to account, because we know that members on the other side of the House do not know what they are doing and do not fully consider the planned and unplanned consequences of their policies. Their answer to political instability and to a minority government is not to reassess their policies or to recognise and acknowledge when they do not have the details correct. They do not change policy; they simply change leader and swap around their ministerial titles. We recently observed the two-year anniversary of when Prime Minister Gillard and the faceless men of the ALP betrayed the trust and the will of the Australian people.

What did the sacking of Prime Minister Rudd achieve? Nothing. We will soon have, from 1 July, the world's only economy-wide carbon tax that is hundreds of per cent higher than the average carbon trading price, a tax that will do nothing for the global environment. We will soon have the economically destructive minerals resource rent tax. We will soon witness a 17 per cent increase in the passenger movement charge, which directly threatens Australia's $73.3 billion tourism industry. These taxes, increased by the Labor government, have been enforced without any rational explanation. This year's budget was clearly just another ploy in the Gillard government's desperate attempt to try to achieve a paper-thin surplus—no matter the consequences for local industry.

This is a government that give on the one hand and take on the other. They introduce a tax on carbon dioxide, increasing the cost of living for all Australians, and pretend that out of the kindness of their self-righteous hearts they are giving cash to you to ease cost-of-living pressures. They claim on the one hand that they are supporters of the industry, but on the other hand they turn around and make it as difficult as they can for industry to survive and prosper.

The Leader of the Opposition noted in his budget reply on 10 May that there is nothing wrong with this country that a change of government cannot fix. Today my message to Australian industry is: only the coalition has the economic credentials to help business survive and prosper. The coalition is committed to lower taxes, to helping attract investment in critical infrastructure—

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

Order! The debate is interrupted in accordance with standing order 34. The debate is adjourned and the resumption of the debate will be made an order of the day for the next sitting. The member for Ryan will have leave to continue speaking when the debate is resumed.