Katy Gallagher (ACT, Australian Labor Party) Share this | Hansard source

It is good to have the opportunity to speak to the Income Tax Rates Amendment (Working Holiday Maker Reform) Bill 2016. It is worth having a look at the history of elements of this package. The so-called backpacker tax first appeared in Joe Hockey's last budget in 2015. The government failed to introduce legislation enacting this original measure prior to the last election. That measure, if implemented, would have treated most people temporarily in Australia for a working holiday as nonresidents for tax purposes. They would have been taxed at 32.5 per cent from their first dollar of income.

It was not surprising that this was met with a wave a criticism. The government's own 2015 budget papers made clear that many backpackers were paying tax at the same rates as residents. The budget measure marked a significant increase in the tax rates on backpackers, and it was not surprising that the agriculture and tourism sectors recoiled at this change. What was surprising was how long the government took to heed their concerns. Given that the reforms were originally set to commence on 1 July 2016, it is amazing that this issue was left unresolved a year later, in the 2016 budget.

We then got to the election campaign, where, after months of criticism from outside and from within, the government announced a review of the backpacker tax. And then, just over a month ago, the Treasurer announced a compromise: instead of the proposed 32.5 per cent tax rate from their first dollar of income, a lower rate of 19 per cent was proposed from the first dollar of income up to $37,000, which is still a significant hike on the tax that many backpackers are currently paying. Above this level, marginal tax rates would apply. The government also proposed to raise the passenger movement charge by $5 and to increase the tax on the departing Australia superannuation payment to 95 per cent.

We referred the package to the Senate Economics Legislation Committee to give the industries that the government had ignored a voice in this debate. Given the government had nearly 1½ years to sort this matter out, it was more than reasonable that we took a closer look at what the government have proposed here. The government were not listening to the industries that had a stake in this debate. They wanted to avoid scrutiny, just as they wanted to avoid scrutiny when they silenced debate on this package of bills in the House of Representatives. Unlike the review conducted by the government, which did not consider all the tax measures, the Senate committee was able to consider the package as a whole and was able to hear directly from farmers and tourism operators on the ground. It is also important to note that the authors of the Deloitte report, commissioned by the government prior to the announcement of the legislative package, acknowledged:

Deloitte has not undertaken any additional research or analysis, and the information contained in this report is reflected as it has been provided by the stakeholders engaged through this process. Deloitte has also not reviewed the quality or validity of the information presented to us.

These two points are critical as to why Labor has undertaken the responsible position of further scrutinising the legislation currently before the parliament.

By contrast, the government resisted these calls for consultation with stakeholders. This was despite the fact that the government had announced new measures not previously put forward to stakeholders. Adding insult to injury, the inquiry process has also revealed that the government are already spruiking the 19 per cent tax rate in the United Kingdom, regardless of the fact that this legislation has not passed the parliament. It is worth reflecting on the sheer arrogance that was on show: poor consultation with stakeholders and with the industries affected, and then, in the name of giving people certainty, the Treasurer demands that the parliament pass legislation. Not only does the Treasurer demand that this parliament come to heel, but the government then goes and gags debate in the House of Representatives, preventing members in the House from speaking on the legislation. Their disregard for this parliament is matched only by their disregard for the industries affected by some of the measures contained in these bills.

Let me now turn to the bills in this package. The bills, as they currently stand, would apply a 19 per cent income tax rate to working holiday-maker taxable income on amounts up to $37,000, with ordinary tax rates for taxable income exceeding this amount; allow the Commissioner of Taxation to disclose certain information to the Fair Work Ombudsman; require employers of working holiday-makers to register with the commissioner; require the commissioner to give a report on working holiday-makers; reduce the visa application charge for working holiday visas and work and holiday visas; increase the rate of the departing Australia superannuation payments tax to 95 per cent for working holiday-makers; and increase the passenger movement charge from $55 to $60.

Parts of this package of bills attempt to address issues in relation to the working holiday visa system and the treatment of workers on working holiday visas. Here it is worth mentioning the recent report released by the Fair Work Ombudsman. The report detailed exploitation of working holiday visa holders, including underpayment or nonpayment of wages, workplace health and safety issues, and other significant exploitation. Labor took to the election a policy for a fairer system that would ensure working holiday-maker visa holders were afforded proper pay and conditions. Our proposed review would have looked at the effectiveness of the current visa programs, the effect on the labour market and the instances of exploitation and abuse.

Labor wanted to give affected sectors and affected people the opportunity to make a submission through the Senate Economics Legislation Committee. This was to give them what they had so far been denied: a chance to have their say. We wanted to wait until the bills had been subjected to the scrutiny and the consultation that the Senate committee process provides. The Senate Economics Legislation Committee gave these industries the opportunity to have that say. There were three public hearings on the working holiday-maker reform package—in Canberra, in Cairns and in Tasmania. Fifty-three submissions were received and, of those submissions, by our count, 16 supported the tax package, 28 opposed the tax package and nine supported only certain aspects of the tax package. Many of those nine were opposed to the increase in the passenger movement charge.

The concerns in the submissions centred on ensuring that Australia remains internationally competitive in being able to attract backpackers, who do crucial work for our agriculture sector and who provide crucial income for our tourism sector. It also became apparent that none of the second-round negative effects were properly taken into account with regard to the impact of the tax measures. It came out that the National Farmers Federation believes that there has been a decline of up to 40 to 90 percent in backpacker numbers while this issue has remained unresolved. The inquiry also showed that the labour shortages caused by the drop-off in backpackers will hit rural and regional Australia much harder than our capital cities.

The evidence from the Senate inquiry on the government's backpacker tax shambles is clear: Australia needs a lower tax rate to remain internationally competitive and to ensure rural and regional businesses can continue to attract the seasonal workers they need. Labor believes that the government should compromise on the 10.5 per cent tax rate that industry, regional communities and members of the Senate crossbench are calling for. Labor will guarantee that, through this package, any changes will not disadvantage Australian workers. The government should stop misleading Australians to cover up for their continued failure to get this tax right after almost two years. Our farmers need a competitive rate and they need certainty.

Labor will oppose the increase to the passenger movement charge, and I turn now to our reasons for doing so. Through the inquiry process, it became apparent that the passenger movement charge increase was introduced with no meaningful consultation. The passenger movement charge is a $55 impost on every traveller leaving Australia. It is embedded in the cost of air and sea tickets. As part of the working holiday-maker reform package, the government wants to raise this charge by $5, which is an increase of nine per cent.

Australia already has the second highest departure tax in the developed world after the UK air passenger duty. However, the UK air passenger duty applies at different rates. There is a lower rate for short-haul flights. Australia's passenger movement charge applies to all outbound overseas flights. This means that Australia's passenger movement charge is in fact higher than the UK's with respect to short-haul flights. Our passenger movement charge applies to flights departing to overseas countries, regardless of distance. It applies to travellers going to family reunions in New Zealand or taking advantage of discount flights to go to Fiji or Bali. On trans-Tasman routes, the passenger movement charge can represent nearly 10 per cent of the average return fare.

Despite the government's abysmal approach to consultation and despite the gagging of debate in the other place, we gave the industry a chance to be heard with a Senate inquiry. That inquiry encouraged interested industries to make submissions. It held hearings in Canberra, Cairns and Launceston. Overwhelmingly, stakeholders across the tourism and aviation sectors have rejected the proposed passenger movement charge increase. The submissions to the Senate inquiry raise serious concerns about increases to the passenger movement charge.

The Qantas Group submission to the Senate inquiry highlights the disproportionate impact an increase in the passenger movement charge will have on Australian airlines. They argue that it is not as simple as passing increases on to passengers through airfares, as that has an impact on competition. The Qantas Group also points out that the 'structure and level of the passenger movement charge is inequitable for price sensitive Australian travellers and international tourists'. For example, Jetstar's fares on some international routes start at $130, which means the passenger movement charge alone already represents 46 per cent of that fare.

The Tourism and Transport Forum argues that an increase in the passenger movement charge will have a serious impact on Australia's ability to compete with other destinations, because when you 'add to the PMC the high visa costs and complicated visa processes applied to visitors from our key Asian markets, Australia is a less attractive option'. Similarly, the Australian Chamber—Tourism believes that, without proper modelling, an increase in the passenger movement charge should not be introduced. Their submission states:

… there is far greater potential for revenue growth from a policy focus on increasing passenger numbers by removing up front barriers to travel than there is by imposing a demand dampening 9 per cent increase on this charge.

The International Air Transport Association believes that increasing the passenger movement charge would create significant harm for consumers as a consequence of higher fares. It would harm Australian exporters through 'higher travel costs and reduced competitiveness', which will also act as a 'brake on the Australian aviation sector'.

What is becoming clear is just how little consultation was undertaken with the tourism industry before the increase to the charge was announced. This is consultation that should have occurred before this industry was blindsided by this poorly thought out measure, because this announcement from the coalition came as a complete surprise. I want to quote from the head of the Tourism & Transport Forum. She said:

Industry has been completely blindsided by this decision to increase the PMC by $5—a 9 per cent hike in the rate. At no point was it flagged in any discussions in which we took part and is a bitter disappointment that we’ve been slapped with this tax hike on every traveller—Australian or international visitor—heading overseas.

This is a bill from a government that is always saying how it never increases taxes. Well, this is a tax increase on travellers, it is a tax increase on tourism, and it is a tax increase on holidays. This is an increase that impacts industries that are crucial to Australia's economic prosperity. The passenger movement charge is an entirely separate issue to working holiday-maker reform and should be treated as such. The original package did not touch the passenger movement charge.

In our economy's transition from the mining boom, we are going to depend on industries like tourism to provide Australians with jobs and prosperity. As the Queensland tourism minister noted recently, 'Tourism in Queensland is booming.' Her government has been working closely with the industry to achieve double-digit growth in tourism arrivals from overseas. This bill will no doubt hamper these efforts. In Tasmania, the state government has set ambitious targets for growth in the tourism industry. This bill will make meeting these targets more difficult.

We should remember this government's history in relation to the passenger movement charge. The Treasurer used to be a vocal opponent of increases to the passenger movement charge. Then there is the Minister for Trade, Tourism and Investment, a minister who, until recently, was a trenchant critic of increases to the passenger movement charge. In question time in the other place on 31 August this year, the member for Bowman asked him:

… how is the tourism industry supporting the transitioning Australian economy? Are there any policies that could put the growth of the tourism industry at risk in my electorate of Bowman and South-East Queensland?

The minister responded by boasting about how his government had frozen the passenger movement charge so that Australia was a more competitive destination.

We had the minister for tourism, the member for Moncrieff, saying that increasing the passenger movement charge was akin to 'choking the golden goose that is Australia's tourism industry' just weeks before his own government announced an increase to the passenger movement charge. The minister represents an electorate on the Gold Coast. As the Queensland minister for tourism has noted:

Brisbane and the Gold Coast had the largest international visitation numbers on record, reaching 1.17 million and 984,000 visitors respectively.

Overnight visitor expenditure on the Gold Coast reached a record $1.3 billion …

Given how important the tourism industry is to the electorates like that of the member for Moncrieff, it is unfortunate that his government was unwilling even to properly consult the industry on this issue.

So, here we are. After 18 months of dithering, after 18 months of uncertainty, the government have demanded that we accept their poorly thought out package without amendment. Their message is that it is all right for the government to take 18 months to sort themselves out and to keep the farmers, growers and tourism operators in the lurch for 18 months. But they demand that this parliament fall into line and then they expect this parliament to congratulate them. Well, industries like the tourism industry deserve much better than what they got in relation to this increase in the passenger movement charge. In their own words, they were completely blindsided for no reason other than this government was too discourteous to pick up the phone and engage in meaningful consultation with them.

We will oppose the Passenger Movement Charge Amendment Bill 2016. Given the effect it will have on Australian travellers and on our tourism industry, it deserves meaningful consultation and proper consideration. Given the alarming facts that have come to light about the absence of that proper consultation with the industry, given the absence of a full and proper debate in the House and given the effect that this increase will have on our tourism sector, this parliament should not allow this increase to the passenger movement charge to pass.

I foreshadow that, when the question is put on the second reading of these bills, the opposition will ask for the question to be divided to enable us to oppose the Passenger Movement Charge Amendment Bill 2016 whilst supporting the remaining bills at that stage, with support for further amendments from Senator Lambie.