David Leyonhjelm (NSW, Liberal Democratic Party) Share this | Hansard source

I oppose the foreign investment bills before us today—the Foreign Acquisitions and Takeovers Legislation Amendment Bill 2015, the Foreign Acquisitions and Takeovers Fees Imposition Bill 2015 and the Register of Foreign Ownership of Agricultural Land Bill 2015. These bills will hurt Australians who want to sell their property, by scaring away potential buyers. All Australians who will one day want to sell their property should see their bills as a violation of their property rights that will make them poorer. The bills scare away potential buyers by raising the hurdles that foreign investors need to jump in order to invest in Australia. There is no valid reason for this. Indeed, there is no valid reason for the existence of the hurdles at all. The government's explanatory memorandum states:

… there is a need to review foreign investment proposals to ensure proposals are consistent with Australia’s interests.

But the explanatory memorandum fails to identify one cost or risk of foreign investment. The lack of costs and the preponderance of benefits from foreign investment suggests that foreign investment is always consistent with Australia's interests and the entire foreign investment review process is a farce.

We do not need to hinder foreign investment for national security reasons. If there is a risk from a Chinese government investor owning a shipbuilding or internet company operating in Australia, then the same risk is present if a disloyal Australian investor owns the same shipbuilding or internet company. Thinking that we can achieve national security by keeping out Chinese government investors is naive. If a shipbuilding or internet company operating in Australia needs to be managed in a specific way to protect our national security, then we should regulate the company accordingly, regardless of who owns it. For similar reasons, we do not need to hinder foreign investment to achieve industry development. The Australian government may hope that key companies in Australia expand their operations, use local suppliers and sell to local distributors. But an Australian owned company is just as likely to disappoint on this front as a foreign owned company. Foreign investment has nothing to do with food security or energy security. A company may want to export its products rather than service the domestic market, regardless of who owns the company. That is fine, as Australia is not at risk of going without food or energy. We are a net exporter of both food and energy, and both are readily imported.

Some people are concerned that foreign companies could sell Australian-made food or energy back to their home countries for below-market prices. But the ATO's transfer pricing rules are designed to ensure that this practice would have no impact on the contribution that foreign companies pay to us in tax. We do not need to hinder foreign investment to ensure a competitive market. The ACCC can rule out acquisitions it deems to be anticompetitive, regardless of whether or not the prospective acquirer is a foreigner.

Finally, the idea that we should restrict foreign investment in housing in order to suppress house prices is absurd. Foreign investors help Australian sellers, and their investment encourages an expansion of housing supply. So there is no valid reason to put any hurdles in the way of foreign investors. Instead, it boils down to xenophobia. There is as much logic in restricting foreign investors as there would be in restricting gay investors or black investors. These bills will raise the hurdles that foreign investors need to jump in a number of ways. The bills introduce foreign investment application taxes. The government is calling them fees, but the legislation makes it clear that they are taxes. The taxes are substantial, ranging from $5,000 to $100,000. The taxes apply to each purchase and can also apply when an attempted purchase falls through.

These taxes, like all other taxes on international capital flows, will have two effects. First, they will reduce the supply of foreign capital to Australia, making us poorer. That some foreigners will be dissuaded from investing in Australia because of these taxes is undeniable. Second, these taxes will hurt the Australians wanting to do business with foreign investors. The taxes will be physically paid by the foreigners buying assets in Australia. But because foreigners have literally a world of investment options before them, they will not cop any attempt to make them pay more than the going rate for an asset. So the taxes will effectively be paid by Australians, because they will have to accept a lower price when selling their asset to compensate for the new tax.

The government estimates that this tax hike will generate more than $700 million by June 2019. This will far exceed the costs of regulating foreign investment. So there is no avoiding the conclusion that this is a blatant and economically irresponsible tax grab. The bills provide the Treasurer with the discretion to waive the payment of these taxes. The Treasurer will effectively be unconstrained in the use of this discretion as he need only be satisfied that a waiver is not contrary to the national interest. No guidance on the circumstances in which a waiver should or should not apply is provided. This is astonishing. It is a licence for arbitrariness and uncertainty, for favourable treatment of mates and for corruption.

Another way these bills discourage foreign investment is by facilitating more rigorous enforcement of the ban on foreign investment in existing residential real estate. This ban is nonsensical, particularly as real estate cannot be shipped off like the family silver. The government justifies the ban by saying it wants to promote Australia's housing stock. But allowing foreigners to buy existing residences would encourage the building of new residences. The bills facilitate more rigorous enforcement of the ban by making the ATO responsible for enforcing it. Fans of The Untouchables might find it romantic to empower our own internal revenue service with bringing down gangsters, but a foreigner who buys residential real estate is no Al Capone. Prohibition was and always will be a terrible policy.

The bills before us today raise the hurdles foreign investors need to jump by extending foreign investment restrictions to a broader range of agricultural investments. This means that foreigners will need to get the Treasurer's approval before buying an agribusiness or a certain amount of agricultural land. Foreigners will be charged taxes of up to $100,000 each time a decision from the Treasurer is sought, and decisions can be delayed for up to four months. Any foreigner who buys an agricultural asset without the Treasurer's approval will face penalties including fines of up to $135,000, jail of up to three years, orders to sell the asset in question to certain buyers or the seizure of the asset by the Commonwealth. All of this will send a very clear signal to prospective foreign investors in Australian agriculture: 'You are not welcome.'

An agribusiness will be defined as a business where a currently unknown share of its revenue, profit or assets relates to agriculture, forestry, fishing or food manufacturing. However, manufacturers of cured meat, smallgoods, ice-cream, cereal, pasta and confectionery will be excluded. Also, those businesses lucky enough to be classified as manufacturers of 'other' foods will be excluded. This is all as clear as mud.

Similar clarity applies in relation to which agricultural land transactions will be subject to the foreign investment restrictions. The details are not included in the bills, but the government have suggested that they will regulate to exclude agricultural land transactions where the foreigner ends up with less than $15 million worth of agricultural land. The government have provided no detail on how and when holdings are to be valued. The upshot of this is that foreigners who already own agricultural land will be able to bid freely for agricultural land only up to a vague range. Once bidding reaches this vague range, foreigners will presumably have to withdraw from bidding. Only if they get a valuation for their existing holdings, pay a tax to the Treasurer and get his eventual approval will the foreigners be able to re-enter the bidding. A more sure-fire way to scare away buyers is hard to imagine.

The government estimates that 125 agricultural land transactions a year will be threatened by this extension of the foreign investment restrictions. The government estimates that complying with these restrictions will cost foreigners $10,000 per transaction over and above the new taxes that need to be paid. This will not only scare away buyers but also ensure that the prices that Australian farmers receive will be severely depressed. This is a policy that hurts rather than helps farmers. The only potential beneficiaries are hangers-on in farming who want nothing to ever change. But pandering to these fuddy-duddies will only condemn our farming communities to a slow, grey decline into backwardness. Labor have an amendment to exclude agribusiness from this regulatory nightmare and to lift the threshold on the value of agricultural land beyond which the screening processes kick in. Labor should be congratulated for this amendment, although I wish they did not support the rest of the government's bill.

These bills ramp up criminal penalties for the sin of investing in Australia. This is completely unwarranted, and existing penalties have never even been imposed. The bills also introduce civil penalties. For instance, a foreigner who commits the sin of buying residential land from a willing seller can be hit with a civil fine equal to 10 per cent of the land's value. Some of the civil penalties can be imposed through the issuing of infringement notices. This means that if people believe they have done nothing wrong they will have to prove their innocence. The fines set out in these bills are well in excess of the levels recommended in the government's own guide to framing Commonwealth offences. The government justifies this by saying that the fines must counteract the large financial gain a foreigner can get from holding an Australian asset without approval. But the financial gain is marginal. The foreigners are not stealing multimillion dollar assets; they are paying willing sellers for them.

These bills also discourage foreign investment by requiring foreign holders of agricultural land to report to the ATO so it can create a register. The government does not explain why we need to keep a list of foreigners who own a parcel of land. Perhaps we need to know when a foreigner is walking down the street, perhaps by passing a law requiring them to wear a yellow badge. Or how about a register of landowners who are female, gay, black or disabled? This would be no more idiotic than having a register of foreigners.

The government intends to separate the register into a basic part and a published part. There is no requirement to confidentialise the part to be published. The government will demand the contact details of the foreigner, the value of their land and the purpose for buying the land. Such prying into private affairs is far from welcoming. The government has also left open the option of seeking and publishing the nationality of the foreigners. This would seem a distinct possibility, given that pandering to fears about a yellow peril is surely what this register is all about. Foreigners will need to report to the ATO the agricultural land they hold and also report their purchases of agricultural land. It is not hard to envisage how this register might be used. Imagine an increase in foreign ownership from, say, eight per cent to 10 per cent. It will be said that this is a 25 per cent increase and the country will soon be overrun by foreigners—to which, I might add, the Aborigines have an obvious rejoinder. Of course, nobody mentions that many of those foreigners from New Zealand rather than a country where the people do not look or speak like most of us, such as China.

Determining whether land is deemed to be agricultural land will be a bureaucratic minefield of arbitrariness and uncertainty. Land not currently used for agriculture but which could reasonably be used for agriculture will be covered, even if the land could only partially be used for agriculture. So if you could put a beehive on your land, it might be covered. Even a mine site could be deemed to be agricultural land if you expect the land to be eventually remediated. If you think your land somehow ceases to be agricultural, or if you think it somehow becomes agricultural, you will need to report the change to the ATO. People will need to report their agricultural land holdings to the ATO if they become a foreigner. When this will occur to an Australian citizen who is living overseas is not clear. When this will occur to a non-citizen permanent resident is also not clear—perhaps on their 165th day out of the country.

Foreigners who hold agricultural land will also need to report to the ATO if they cease to be a foreigner. When this will occur with an Australian citizen is not clear—perhaps when they come back to Australia for good. For a non-citizen, they will cease to be a foreigner on their 200th day in the country. So they will need to mark off their days on a calendar—just as a prisoner etches the days on their cell wall. This is not the most welcoming way to treat the skilled migrants we need for our 21st century economy. If you fail to report any of this to the ATO, you will be hit with a fine. It may come as a surprise that Australian citizens living overseas are treated as foreigners under our foreign investment restrictions. Aussies such as Mark Webber could easily be wrapped up in the red tape.

When Malcolm Turnbull announced his push to become Prime Minister, he said that a change in leadership was needed for our country's sake, that we cannot be defensive, that we need to respect the intelligence of the Australian people and that we need to seize the enormous opportunities the world offers. I agree. We cannot be defensive and we must reject the politics of fear surrounding foreign investment. We need to respect the intelligence of the Australian people, which means that if we cannot list a single cost from foreign investment then we should not argue for foreign investment to be restricted. Above all, we need to seize the enormous opportunities the world offers. And one of the greatest opportunities the world offers is the opportunity of foreign investment. This will add to our capital and infrastructure, improve competition and consumer choice, introduce new technology and global access, and boost jobs and skills.

I end my speech with an appeal to all senators: let these foreign investment proposals of the former Prime Minister quietly slide into your huge pile of un-enacted bills. They do not serve an Australia of free enterprise, individual initiative and freedom.