Andrew Murray (WA, Australian Democrats) Share this | Hansard source

I want to recap the three main propositions which we are dealing with in respect of this debate. The first is whether a flat and final rate is better than a nominal rate, the second is what the rate should be and the third is whether there is a cost or gain to revenue. The problem for the government is that it has not dealt with the fundamental proposition that a flat and final rate is more attractive to investors than a nominal rate. The reason for this is that, on the basis of a nominal rate, to get a reduced rate from the 30 per cent you have to put in tax returns and you have to structure. It could take 12 to 18 months before those matters are resolved, and there are complexity and cost consequences to that. My view is that, in these circumstances of investment in a fast-moving capital market by foreign investors and Australian investors, a flat and final rate is probably the preferable way to go. That is the first proposition. I think the government has made a mistake in staying with the nominal rate.

The second issue which Senator Ronaldson focused on—and indeed Labor focused on—is what the rate should be. The 30 per cent nominal withholding tax rate is the same in numerical terms as the 30 per cent corporate tax rate. You would ask the question automatically of whether, if there were a reduction to 15 per cent as Labor proposes, there would be a capacity for arbitrage. I asked that question at the hearing and the evidence was that there was no capacity for arbitrage. So your next question is: what is the rate that will make us most competitive? It does seem that in this is fast-moving capital market—which is adjusting—15 per cent would be at the upper end that would make us competitive. I think Labor has a valid economic and competitive case.

The third area which Senator Ronaldson quite rightly draws attention to is the matter of the cost or gain to revenue. One set of estimates is that the cost to revenue would be $30 million; the Treasury estimate is that it would be $100 million.