Nick Xenophon (SA, Independent) Share this | Hansard source

I too have significant concerns about the Tax Laws Amendment (Cross-Border Transfer Pricing) Bill 2012 in its current form. It seems that the nub of the argument here is in relation to the whole issue of retrospectivity. I note that Senator Macdonald has carefully canvassed that, as has Senator Bushby.

I understand and support the government's intention in relation to this bill in broad terms but I am very concerned about the retrospectivity clause. I acknowledge the government's explanation that the intention of the bill is merely to clarify what has been the parliament's and the ATO's position since 2004. But the government's argument seems to be quite circuitous, because if this has always been the acknowledged interpretation of these laws then why is there a need for this bill, unless the laws have not been enforced in the way that the government intended? If this is the case, if there is any room at all for misunderstanding or inconsistencies, then backdating these changes to 2004 is unfair. Businesses who acted in good faith and obeyed the law as it seemed to be then and who were not told differently by parliament or by the ATO do not deserve to be hit with what could be an excessive tax bill now. However, if there are corporations who have deliberately exploited loopholes or taken advantage of miscommunications then they need to be brought to account.

It is worth noting that it was the Fraser government who brought in retrospective legislation in relation to the bottom-of-the-harbour tax schemes. But that was a case where it was obvious from a public policy point of view that what was being done was an abuse of the tax system. It was clearly a rort. It was clearly a contrived mechanism to try to avoid tax, and so that retrospective legislation was justified. In this case, if the government is aware of any examples of deliberate exploitation or loopholes, it would go some way towards explaining the need for retrospectivity. But without any evidence to indicate that this is the case, it is hard to see how retrospectivity is either fair or in accordance with the spirit of the law.

I would like to put on the record that I have met with the Federal Chamber of Automotive Industries. They have made submissions to the inquiries into this bill and have approached Treasury with their concerns, and I think they have been quite well articulated by the chamber. The FCAI is concerned that the retrospectivity in this bill will provide uncertainty for the tax years since 2004 and will potentially not only land their member organisations with larger tax bills but also lead to issues with foreign taxation offices. So it will have a cascading effect in terms of its impact on other tax offices.

FCAI represents the automotive industry in Australia, which we all know is facing significant challenges—the high Australian dollar being one of them. The government has spoken many times about the importance of this industry to Australia, and I support those comments. But now the government is potentially placing that industry at risk with these amendments. In the FCAI's submission to the exposure draft of this bill, Chief Executive Ian Chalmers wrote:

FCAI members do not believe it is good tax policy to empower the Commissioner of Taxation to apply the new rules retrospectively to 2004, as advised in the Assistant Treasurer's Press Release. FCAI members have complied with tax legislation in accordance with the tax laws as enacted at the time. Applying the proposed changes retrospectively may result in some members being placed in unfavourable tax positions through no fault of their own. In practice, revenue officials in the foreign jurisdiction may not agree to amend prior year assessments or those assessments may be out of time for amendment. This will result in double taxation without treaty relief.

These are legitimate concerns, and if the government has reasons to believe that businesses, particularly in manufacturing, will not be negatively affected by this legislation then it needs to be open and transparent about that and to share those reasons during this debate; otherwise, I cannot support the retrospective aspect of this bill without safeguards in place.

While I support in general terms what the bill is trying to achieve, the retrospectivity part of it is, for me, a deal breaker. I think it is something that needs to be taken into account. The government has not made a case for retrospectivity. If it is going to pass retrospective legislation then there needs to be a much heavier onus on that, and I do not think that onus has been discharged by the government to date.