Steve Fielding (Victoria, Family First Party) Share this | Hansard source

What a rort. The Tax Laws Amendment (2006 Measures No. 4) Bill 2006 would exempt foreign residents from paying capital gains tax unless they are selling what are called ‘real property assets’ or taxable Australian property. The government says that this will make Australia a more attractive place for foreign investors. That is no surprise, when foreign investors are getting a special tax break. Using the same argument, we could make Australia a more attractive place for Australian investors if we were to abolish capital gains tax altogether. But the government is not proposing that.

The practical effect of this bill will be to give foreign companies an unfair advantage over Australian companies. I will say that again: the practical effect of this bill will be to give foreign companies an unfair advantage over Australian companies. It will give individual people from other countries a tax break that is not available to people in our own country. Australians have a very keen sense of fairness. They are prepared to give people a fair go if they follow the rules and if everyone is treated equally. But they do not like rorts, and this is a rort—where they are taxed and their government gives noncitizens a tax break. What is fair in that? What is fair when your own government taxes you for exactly the same transaction that someone else can make tax free? Ask ordinary Australians what they would think of giving special tax breaks to foreigners while continuing to tax Australians for the same thing, and they would say it is wrong, it is wrong and it is wrong. One of the government’s arguments is that the laws fit with the standards set by the Organisation for Economic Cooperation and Development. But we should never adopt laws that do not make sense. And we should never adopt laws just because some group tells us to.

So what would the practical effect of these laws be? If this rort is allowed we can expect to see a wave of international money hitting Australia in search of a fast buck. We have already seen in the last year the impact of private equity funds in Australia. For example, Kohlberg Kravis Roberts made an $18.2 billion bid for Coles Myer, which was rejected by the board. If this rort is allowed, expect to see KKR back for another go. With the sale of assets like Coles Myer, worth billions of taxpayers’ dollars, how much revenue would the Australian taxpayer lose if this rort is allowed? We do not know.

It is worth focusing for a moment on private equity funds—what are they and what do they do? Private equity funds typically look for companies they can quickly overhaul for a quick profit. They take on huge debt to make takeover bids for listed companies. They do not create and develop businesses; they simply restructure them for profit. Restructuring companies involves major changes, including cost cutting—and that means Australian jobs will go. Of course private equity funds want to make big profits. They increase company profits by fair means or foul then sell the asset. Under the rort—and it is a rort—in this bill foreign investors could pocket the capital gains as profit. Where is the fairness in that? Finance commentator Alan Kohler suggests a KKR takeover of Coles Myer would lead to thousands of Australian jobs disappearing. He has also predicted the break-up of the company, with the sale of divisions like Target and Officeworks.

Does this sort of behaviour sound familiar? It should. Private equity funds are simply leveraged buyout funds by another name. Leveraged buyouts are a familiar term from the 1980s. The character Gordon Gekko, who senators may remember from the 1987 movie Wall Street, accurately depicted 1980s corporate raiders who bought companies to strip them for their assets. With this bill to slash tax for foreign raids on companies, it is no surprise that private equity funds are interested in Australia. A representative of the Institute of Chartered Accountants told the Financial Review last month that ‘there is certainly merger and acquisition activity being delayed’ in anticipation of this bill.

Obviously this rort, handing out tax exemptions to overseas investors, will also have a financial impact on our budget. But the full financial impact is unknown. The government estimates a loss of revenue of $65 million a year, but I understand from the committee report that they have not done modelling on what the benefits would be. If the government only knows the cost and not the benefits, that suggests this bill is no more than another way to continue its ideological crusade for free market economics.

Family First supports free enterprise but not the unfettered free market. Family First will not agree to a situation where we are taxing Australians for capital gains but giving foreign investors a tax break. That is not fair. That is a rort, and Australians will not buy it. As I said before, a representative of the Institute of Chartered Accountants told the Financial Review last month that ‘there is certainly merger and acquisition activity being delayed’ in anticipation of this bill. Family First will not agree to a situation where we are taxing Australians for capital gains but giving foreign investors a tax break and I urge Labor to reconsider its position, given that, in terms of fairness and a fair go for Australian families, this is a rort. I urge senators to vote against this bill.