Michael Ronaldson (Victoria, Liberal Party, Shadow Special Minister of State) Share this | Link to this | Hansard source

I suppose I am pleased to be speaking on the Tax Laws Amendment (Political Contributions and Gifts) Bill 2008 today, and there are a number of matters that I would like to go through. The first thing I would like to do is to put to bed, once and for all, the notion that this effectively resubmitted bill has anything to do with campaign finance reform. It should have, but it does not, and I will elaborate on that now. This actually had its origins in 2004 at the ALP national conference when it was a platform to do away with tax deductibility for donations. It lapsed for some reason at that stage. It then came back into being some time later, on 2 March 2007, when it formed part of Labor’s $3 billion savings plan. In 2004 at the national conference—you may well have been there, Mr Acting Deputy President Marshall—there was no mention, on my understanding, about this being part of campaign finance reform. There were no figures done in relation to revenue savings; there was no mention of campaign finance reform. Then we fast-forward to March 2007, when it reared its head under the banner of what was called Labor’s $3 billion savings plan. Again, there was not one word about this being premised on the back of campaign finance reform.

So in 2004 there was no reference to campaign finance reform. In 2007 there was no mention of campaign finance reform under the $3 billion so-called savings plan. If we fast-forward to the second reading speech of the Assistant Treasurer, Mr Bowen, we see no word about this being premised on the back of campaign finance reform. I am sure honourable senators would be interested to know what Mr Bowen actually said when talking about this bill, acknowledging that it is not about campaign finance reform. Had it been about that, one would think he would have made some mention of it. He said in his second reading speech:

I strongly urge the opposition to reconsider their approach to this measure which forms part of the government’s response to inflationary pressures in the economy and our savings plan. This measure and other savings measures are an important component of our effort to put downward pressure on inflation and interest rates.

There was not a word about campaign finance reform. Of course, that was when the inflation genie was apparently out of the bottle. That was at the time when the Australian Labor Party were still running the cheap political stunt about inflation, knowing full well—or they should have known full well—that the inflation genie was well and truly in the bottle. Their goading of the Reserve Bank to put up interest rates again after February of last year has in no small part contributed to the situation we are in at the moment. Mr Bowen knew the inflation genie was well and truly in the bottle at that stage. But I will get back to the point: there was no mention at all of campaign finance reform—no mention at all.

I hope some in the gallery—all of whom I have enormous admiration for, as they all well know—will actually see this for the cheap stunt that it is. It is a cheap stunt. As my colleague in the other place Mr Morrison said in his speech on this matter, this is only, if you like, to reinforce an advantage. That is how the Australian Labor Party see this matter. I am not going to go in great depth into the minority report of the Joint Standing Committee on Electoral Matters on the first incarnation of this bill, because my colleagues Senator Birmingham and Senator Ryan will be doing that, but I will go back to what Mr Morrison said in the other place. He said:

… it was all about trying to entrench an advantage.

And I want to refer to one or two matters in that report.

I pose this question to the chamber and to those listening: how is it that an Australian who wants to participate in the Australian political process by making a donation to a political party or an Independent will under this bill no longer be able to get a tax deduction for that but if one of those opposite in the Australian Labor Party or Australian Labor Party members in the other place want to provide a donation to the Australian Labor Party to entrench their re-nomination they are able to get a tax deduction for that? How is it that an ordinary Australian who wants to participate in the political process is unable to do so as a result of this bill that abolishes tax deductibility but those sitting opposite are able to provide their own political party with as much money as is required to make sure they get re-endorsed and are able to get a deduction for that? How can that possibly be equitable? I will be interested to hear from the parliamentary secretary what the explanation is for that.

I want to turn now to the joint standing committee inquiry. This is as much for the benefit of Senator Bob Brown. The coalition and Senator Brown wanted the inquiry into this bill’s initial incarnation deferred because Senator Brown and the coalition members viewed this as being part of campaign finance reform and thought it should not be treated in isolation. On the casting vote of the ALP chairman that very strong, realistic and sound view was defeated. The minority report states:

In fact two thirds of the submissions received by the Inquiry either opposed the removal of tax deductibility or required such changes to be counterbalanced by other measures. In evidence before the Committee this position was well summarised by Associate Professor Graeme Orr from the Democratic Audit of Australia who said:

… it is very premature to do away with a form of encouraging small scale donating at the same time as seriously considering, in a few months time, the banning of large corporate and organisational donations. That is going to lead to serious questions as to where parties get the money from and deductibility, or matching funds, is something that needs to be kept in the mix.

In other words, you cannot treat these measures in isolation.

There is a green paper process that most honourable senators would be aware of. Our very strong view is that we should do this properly. The coalition emphatically endorses campaign finance reform taking place. It is long overdue. It is worth reflecting that we actually started this process in early March last year when a reference went from this Senate to the Joint Standing Committee on Electoral Matters. It was a very detailed reference with 10 points, I think from recollection. We said that every single aspect of this debate needed to be put on the table. It was supported by the opposition, the Greens, the then Democrats and Family First. Which political party refused to send off a comprehensive reform proposal to the Joint Standing Committee on Electoral Matters? The Australian Labor Party—the same party that are now alleging that this bill is part of campaign finance reform when clearly they have done and said nothing which would indicate that. As I said, it is; but if you look at what they have said and done, there is no indication of that at all.

The most interesting aspect of the figures of those who had donated to all political parties in the 2007-08 year in the announcement yesterday by the AEC—and I released some figures in relation to this yesterday—was the massive contribution of the union movement to Labor Party coffers. I want to go through those figures because they are breathtaking. Unions donated directly $9.2 million and $26.8 million in direct campaign finance. The interesting part about that is that those funds were, in the main, raised by union subscriptions and passed on to the Australian Labor Party. When those funds were donated, when they were given to their respective unions as subscriptions, they were tax deductible in the hand of the union member who made them. So they have gone via subscriptions, which are tax deductible to those individuals, through to the Australian Labor Party. But if someone sitting in the gallery today who did not pay a union subscription that went through the Australian Labor Party just wanted to make a straight donation to the Australian Labor Party, the Liberal Party of Australia, the Nationals, Family First, the Greens or Senator Xenophon they would not get a tax deduction. So you have got the tax deduction here siphoned through the union movement into the ALP. This argument about equity which we constantly hear from those on the other side is completely and utterly farcical.

I will briefly go through some of these figures. The Shop, Distributive and Allied Employees Association donated $1.5 million; CFMEU, $1.3 million; Communications, Electrical and Plumbing Union, $1 million; Liquor, Hospitality and Miscellaneous Workers Union, $765,000; Electrical Trades Union, $674,000—and it goes on and on. The Australian Workers Union, the Health Services Union, the Transport Workers Union, the ASU and the National Union of Workers are also listed. The Australian Labor Party is utterly beholden to the union movement. As I said yesterday, whoever pays the piper still calls the tune. There are some 35 million reasons why the Australian Labor Party is totally beholden to the trade union movement. When it says jump, this government will jump. We have started to see it already—and hang on for the ride because we have only just seen the start of it.

The other interesting aspect of this deal is that we believe—and I will repeat it ad nauseam—it should be part of comprehensive campaign finance reform and not cherry-picked for cheap political purposes. It should be part of real reform. The question I want to ask today is: what in this bill would stop another Wollongong sex and bribery scandal? How does this bill address the nefarious and appalling behaviour of ALP members in New South Wales, not just in Wollongong, involved in that fundraising? The clear answer to that is that it does not at all. This bill does not address the fundamental issues of comprehensive campaign finance reform. It is long overdue. As I said before, we started this process, we support the green paper process, but if the government is serious about this it will pull this bill—clearly that is too late—and make it part of the process. But the government refuses to acknowledge that it is part of campaign finance reform. Minister Bowen did not mention it, the $3 billion Labor savings plan did not mention it and the 2004 national conference policy platform did not mention it, but it is interesting that in 2004 the ALP actually realised that it had a great opportunity to entrench an advantage. It is very interesting to see who supported the current levels of tax deductibility back in 1996 in a majority report of the Joint Standing Committee on Electoral Matters. Its membership included Senator Stephen Conroy as deputy chair, now a cabinet minister, Mr Robert McClelland MP, now Attorney-General, and Mr Laurie Ferguson MP, now a parliamentary secretary—the utter hypocrisy of those opposite.

Someone told you it was a great idea to entrench an advantage, and that is why you are trying to disenfranchise ordinary Australians from participating in the political process by ensuring that their contributions are not tax-deductible, but others, via the union movement and elsewhere, are able to obtain a tax advantage. Those who want to re-elect the ALP can put as much as they want into the Labor Party. It is deductible for them but no-one else.

The reality is that the Australian community is expecting us to act in relation to this matter. I put on the public record again that the coalition is determined to participate in the overhaul of campaign financing, but we are not prepared to sit back and let the Australian Labor Party cherry-pick aspects of what should be comprehensive campaign finance reform for their own cheap political purposes. I hope the Greens will stick to their guns in relation to this matter and insist that it be part of a comprehensive campaign finance reform. I hope that Senator Xenophon and Senator Fielding will also defeat this bill today to ensure that we put some pressure on the government to make all these issues part of this overdue reform.

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

This is a time when all Australians are tightening their belts. Politicians should share the burden and demonstrate to the public that sometimes turkeys do vote for Christmas. The Tax Laws Amendment (Political Contributions and Gifts) Bill 2008 is a piece of legislation to stop tax deductions for people and organisations that pay membership fees or make donations to political parties and politicians. Two and a half years ago Family First moved an amendment in the Senate to abolish tax deductibility status for political parties. The then government increased the tax deductibility amount from $100 to $1,500, which was just a rort. Family First argued that political parties were not charities; they are self-interested organisations pushing their own agendas. Community groups and lobby groups that push political agendas do not and should not have tax deductibility status, and neither should political parties.

While Family First agrees with the thrust of the bill, Family First wants to move an amendment to get rid of yet another rort where the major political parties are clawing back more and more funding for their excessive election campaigns. Public funding of federal election campaigns began for a legitimate reason: to provide for a reimbursement of legitimate campaign expenses, and people would say that is fair enough. The key word here, of course, is ‘legitimate’. But since this legislation was introduced in 1984 it has been rife with rorting—rife to the degree that public funding of federal election campaigns has skyrocketed more than 55 per cent over the last four elections. In real terms that means that public funding for the major political parties has spiralled. It was $28 million—excessive enough—but it has jumped to an obscene $43 million. That is $43 million of hard earned taxes paid by ordinary Australians that is spent by political parties to brag about themselves—to brag about what they have done and what they are going to do.

Times are enormously tough for so many in Australia, and our leaders are telling us to expect tough times to continue. So how can political parties justify taking that money given to them by hardworking Australians and then spending that money telling those same Australians how fantastic their political parties are? If political parties want to spend huge amounts on election campaigns, they can dig into their own pockets and get their hands out of the public purse. Australian families should not be expected to fund excessive spending by the major political parties.

We are all sick and tired of being bombarded every election with campaign mail and political TV ads every night, especially when we are paying for it. Family First will be moving an amendment to cap the amount that each major political party can claim from the public to fund their election campaigns to a maximum of $10 million. Ten million dollars for each major political party in each election is more than enough. That is a saving to taxpayers of more than $20 million each election. We must ask ourselves: do the public want their hard earned money spent on political junk mail when it could provide real services? Think about it. That is $20 million that could provide 57 dedicated breast cancer nurses. That $20 million that is saved could be used to invest in teachers. That is $20 million that could be used to help the poor and disadvantaged in our community, who are already struggling to survive.

I know what ordinary hardworking Australian families would choose. If we get it wrong today the public will remember how we gave priority to our own needs instead of the community’s needs, especially when times are so tough. Ten million dollars is more than enough money for any political party to spend on junk mail. Let’s use the rest for something much more important.

Gavin Marshall (Victoria, Australian Labor Party) Share this | Link to this | Hansard source

Senator Fielding, you indicated you had an amendment. Is that foreshadowing an amendment for the committee stage, or do you have one to move now?

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

That is foreshadowing an amendment.

Mark Bishop (WA, Australian Labor Party) Share this | Link to this | Hansard source

I rise in support of the Tax Laws Amendment (Political Contributions and Gifts) Bill 2008. As we all know, the measures in this bill were previously contained in the Tax Laws Amendment (2008 Measures No. 1) Bill 2008. That bill was not supported by those opposite when it was introduced in the Senate in June last year and, as we are all well aware, the bill was sent off to the Joint Standing Committee on Electoral Matters for investigation and review. The committee is due to report to the Senate in June this year, a full 12 months after having received the reference.

Why has it taken so long? One has to posit the argument that those opposite are being deliberately obstructive in reviewing that bill. After all, it was relatively straightforward and by no means could be regarded as a complex, complicated or detailed piece of legislation. I find it absolutely extraordinary that those opposite could not, and refuse to, get their heads around the content of a relatively simple bill in a short period of time.

But maybe that is not the point of the debate. The purpose of the Tax Laws Amendment (Political Contributions and Gifts) Bill 2008, along with that of its predecessor, is to remove tax deductibility from contributions and gifts to political parties. It will also remove tax deductibility from donations to Independent candidates and members. The bill has its genesis in the actions and behaviour of the previous government in 2006. At that time, the previous government took a fairly innocuous tax deduction for membership fees of political parties and turned it into a giant, growing tax loophole. Because of that legislation in 2006, a tax deduction of up to $1,500 can now be claimed for contributions and gifts to politicians in each and every year. It was then and remains now a significant increase on the previous maximum deduction of $100 up to $1,500.

But the previous government went much further. They extended, and this is the critical point, tax deductions by individuals to include corporations. The result is that an individual donation, together with a donation through a family business, will attract a tax deduction of up to $3,000. Today, because of that amendment moved in 2006, we have taxpayer subsidies of around $10 million per annum, and growing. Those subsidies are available to businesses and individuals who donate to political parties. But wait, there’s more! At the same time the previous government also increased reporting requirements for political donations, from $1,500 to $10,000. The disclosure threshold of $10,000 was, of course, indexed to the CPI, which was somewhat surprising given that the Medicare surcharge threshold is not indexed. But that is another debate—what the government achieved was a tax trap in that area for working families. Coalition donors are obviously in need of extra protection against inflation!

What was the rationale behind the 2006 changes introduced by the previous government? What value did those changes add to the transparency and accountability of our candidates for, and members of, public office? The answer to that is probably zero, but at best not much at all in terms of transparency, accountability and responsibility. As a device to encourage greater participation by individuals in the political process, it has little or no merit. Certainly corporations, legal entities created by statute, do not have any role in the political process and therefore do not need incentives. So the real question is: why are taxpayers funding donations made by individuals and companies to candidates and members of parliament? Clearly tax deductibility for not-for-profit and charitable organisations is completely logical and completely understandable. There is a sound public purpose behind assisting those organisations to assist themselves and assist the community. Any device that encourages philanthropic donation is worthy of serious review and consideration. Donations made to members of our community and organisations who work tirelessly day in, day out to support those most in need are worthy of support.

Tax deductibility for the cost of doing business is also logical and understandable. But as political parties and candidates for office are neither of the above it begs the question: why extend the concession into a rort for corporations? Why are taxpayers required to support and fund these deductions? Those opposite cannot seriously argue that a donation to a political party is a cost of doing business; candidates for public office are hardly charitable cases. The electorate has a right to expect that contributions to political parties are not treated by the Australian Taxation Office as a cost of doing business or a work related expense. It simply sends the wrong message. It degrades the electorate’s trust in the integrity of our system of government.

As I said, the bill was referred to the Joint Standing Committee on Electoral Matters. The majority recommendation from the committee was that the bill be passed unamended. Unsurprisingly, the architects of the tax loophole did not support the change at that time. Their minority report proposed that the measures be deferred and assessed as part of the committee’s review of campaign finance as if tax deductibility for corporations were a subset of campaign finance. Further deliberations by the committee will not cover up this rort and make a silk purse out of a sow’s ear. Each and every member of this chamber and of the House of Representatives has a responsibility to those who elect them. They have entrusted us with upholding the traditions of our system of government and governance. We have an obligation to ensure that higher standards apply in the funding, spending and disclosure of election contributions. The 2006 rules governing tax deductibility and disclosure bring no credit to our system. They should be scrapped. They should be removed, and that should be done forthwith.

The bill before the chamber today represents a step in the electoral reform promised by the government openly and publicly in the lead-up to the last election. Our government is committed to, firstly, reducing the disclosure threshold for donors from $10,000 to a flat rate of $1,000 and, secondly, to ensuring donations made to different branches of a political party are treated as donations to the same party. A donation to the West Australian branch of the Labor Party, for example, is no different to a donation to the Labor Party in Queensland or New South Wales. They are all part of the same overall national organisation. Thirdly, the government is committed to reducing time frames for lodgement of disclosure returns by political parties to six months, so that released public information is up to date and cogent and discloses to the public the detail of contributions and donations made. Fourthly, the government is committed to making it unlawful for registered political parties, candidates and members of a Senate group to accept overseas donations. Finally, the government is committed to tying public funding for elections to genuine election expenditure. Each of the above five points will ensure that there is transparency and accountability in our electoral system and in the tax rules and disclosure regime that applies to same. They will start the process of rebuilding trust between public officials and the electorate.

In the few moments remaining to me I want to make some comment on an example of a worst-case scenario. It is to be found in the contemporary home of democracy, the United States of America. I would like to talk about the pervasive influence of political action committees, or PACs, as they are commonly known. Essentially PACs in the United States are action committees created and designed for making financial contributions to politicians. There are three types of PACs in that country. The first group are those connected with corporations and labour groups. An example would be Microsoft or a trade union entity. The second group are non-connected or ideological committees such as the National Rifle Association. More important are the third group, known as leadership committees. Leadership committees are formed by politicians to help fund candidates. Funding of these PACs may be made through foundations which can offer tax deductibility on donations. PACs raise and spend money to elect candidates to public office.

There is a limit to how much can be donated by a PAC to an individual. There is a limit to how much can be contributed by a PAC to a candidate’s committee. However, there is no limit on how much a PAC can spend on advertising in support of their particular preferred candidate. There is also no limit on how much can be spent on promoting their particular agenda. There is no limit on how much they can spend on attacking and denigrating an opponent of their candidate. Whilst some members of congress, it must be said, make a point of not accepting any PAC money, they are few and far between.

A case in point is the recent presidential and congressional elections in the United States. The cost of two years of campaigning can be financially debilitating. I understand from public documentation that there is little change left over from $5 million or $10 million in Senate elections. Federal Election Commission data in November 2008, available on the Centre for Responsive Politics website, shows the cost of Senate, house and presidential election campaigns. It shows that in November last year PAC contributions to house candidates were around $287 million, from a total of $884 million raised to that date; PAC contributions to Senate candidates were around $74 million, from a total of $374 million raised to that date; and PAC contributions to presidential candidates were of a similar order of magnitude.

The point I am coming to, the point I wish to make in this debate, is that large amounts of money directed to particular interests can overwhelm the political process. As a result of the PAC system in the United States there is now a new class of lobbyists and apparatchiks active in Washington and other centres of influence in that country. This new class of individuals has immense influence on public policy and public officials. It has become a growth industry, with thousands and thousands of committees now operating legally and under the law in the United States.

PACs, of course, are required to identify their sponsors. However, I note in passing that many choose not to. The law has not apparently been enforced, and the Centre for Responsive Politics is asking for help to identify ‘mystery’ PACs. So, even with all the regulations governing public disclosure of contributions, spending and sponsorship, it is still possible to conceal from the electorate how vast sums of money are used to affect political outcomes. We do not have PACs in Australia, and that is a very useful thing. But we need to be vigilant in seeking to eliminate the influence of money and donations in our political system.

Those opposite have demonstrated time and time again their commitment to hiding political donors in the shadows. Well, this government will not. Every Australian has a right to know who is giving what to particular candidates or political parties and for what purpose. The government is committed to electoral disclosure reform. We are committed to improving the integrity of the electoral system. This is one of a number of measures that will help to restore confidence in both government and governance. The minister has already commissioned a green paper on electoral reform, which I am informed is proceeding quite nicely, and introduced a lobbyists register and a code of conduct for ministerial staff—all about reinstating standards in public life.

Our political system is based on equality of participation and representation by the party of a person’s choice with neither fear nor favour. This bill will strengthen the integrity of our political system as well as, just by the by, delivering savings of some $30 million over the forward estimates. I commend the bill to the Senate.

Simon Birmingham (SA, Liberal Party) Share this | Link to this | Hansard source

It is my pleasure to rise to make a contribution to the debate on the Tax Laws Amendment (Political Contributions and Gifts) Bill 2008 and I do so not wishing to beat about the bush. Let us be entirely honest: there are grave concerns in the public arena about the nature and operation of political donations in Australia and about our political system and its interaction with those who fund its operation. There is, as some wish to put it, a crisis of confidence—driven, as some say, by almost a cold war spending, arms race type of approach to see who can manage to outraise, outspend and outbid the other side.

That sort of crisis of confidence is certainly not helped by headlines that we have splattered across all of today’s newspapers such as ‘Hong Kong tycoon tops ALP donors’ and ‘Labor at odds over billionaire’s advances’. These are the types of things that hurt public confidence in the system. Then people go on to read the figures that are in the newspapers. They read that some $83.9 million was funnelled through the Labor Party and its state branches around Australia last year. That does not include the $27 million spent by the trade union movement on top of that to help engineer a change of government last year. So we had a $110 million plus spend or funding binge on changing the government, driven primarily by its trade union basis, coming from the Labor Party. Little wonder there are concerns given these types of headlines talking about casino tycoons and overseas investments! These are the things that bring about serious concerns in the public arena, and justifiably so.

What do we have before us today? We have a bill that deals with small contributors—those who donate less than $1,500. Well, whoopty-do! What a great achievement by Special Minister of State Faulkner and the so-called reforming Rudd government, whose members come in here and dare to suggest that this is about cleaning up the Australian electoral system and political donations in Australia! Their claims are rubbish. The media and the public are not concerned about mums and dads claiming a $1,500 tax deduction because they want to support their political party. They are not even concerned about businesses that might be claiming a $100, $1,000 or $1,500 tax deduction to support the political party of their choice. Those are not their concerns. That is not where people think undue influence is coming into the political system. They think it comes from property developers like those associated with the Wollongong council whom Senator Ronaldson spoke about earlier and from the dirty politics that those types of things have seen emanate. They think it comes from casino licence operators. They might see money coming into and money going out of the one political party at the same time—the types of strange arrangements that are like a revolving door at the bank of the New South Wales branch of the ALP. Maybe the new Rudd bank system that is going to help banks to fund commercial property developers could just funnel the money through the New South Wales ALP. That would be a good way to fund property developers. Right now they are all funding the New South Wales ALP, so why not do it in reverse! This legislation does nothing to restore public confidence in the political system. It does nothing to avert the crisis of confidence in public donations that we have in Australia. It tackles the small fry donors. It tackles those who are making a genuine contribution to be involved in politics, rather than those whose contribution could be perceived as having influence over the political process—and that is where people’s concerns lie.

The coalition has been extremely consistent on this. This is, of course, a series of measures that have come before this chamber for the second time. It has already been inquired into by the Joint Standing Committee on Electoral Matters, where the coalition and minor parties, particularly the Greens, made it clear that we stood as one believing that these types of piecemeal reforms should be considered as part of the overall picture and that we needed the big-picture approach to this, not just some piecemeal—‘We’ll pick a little bit off here and a little bit off there’—approach as the government seemed to be pursuing. We heard from eminently qualified witnesses, during the initial inquiry into the initial bill that sought to make these changes, such as Professor Graeme Orr from Democratic Audit of Australia, whose evidence stated:

… it is very premature to do away with a form of encouraging small-scale donating at the same time as seriously considering, in a few months time, the banning of large corporate and organisational donations.

Let us home in on the key word ‘premature’. It is premature to screw down the little guys before you start tackling the bigger ones. That is what this bill does. It is premature to try to tackle these small contributions before you get into where the real estimates and issues are. It is premature because we are waiting for the document I have in my hand, the electoral reform green paper, to reach its final place. I welcome this document. I welcome the government’s commitment to produce this document and I hope that I can take the government on trust that there will be a full and open process that leads to some comprehensive reforms, stemming from the electoral reform green paper, that will actually help to avert the crisis of confidence in our electoral system and actually help to ensure that the public has confidence that money is not having undue influence over it. The problem, though, is that this paper was released only in December last year. It was released after this parliament had finished sitting. There has been no opportunity to consider the changes in this legislation within the context of the comprehensive electoral reform green paper on donations funding and expenditure that the government has released. There has been no opportunity whatsoever.

That is why, when this issue originally came up, the coalition stood as one with the Greens to say it should be part of the big-picture reform process—we still believe it should be a part of that process—and that this reform process should be completed before the next election. We should see reform that restores confidence for all Australians. One hopes that the parties of the government, the opposition and the crossbenches can reach agreement on this reform. If this chamber could reach consensus on true electoral reform rather than the government’s piecemeal approach, that would be a true sign of serious steps forward.

The lack of preparation by the government—the lack of real consideration of what might be done in this regard—becomes evident when you look at the further evidence taken by the Joint Standing Committee on Electoral Matters in its assessment of these measures. The government claims this is a savings measure. It claims there will be revenue savings. Treasury estimates that the bill—in its original form, at least, when it was considered by JSCEM, noting that it is now some time down the track and that it is in a different form—will save $31.4 million by stripping tax deductibility for small contributions to political parties. We asked for a justification for those estimations—how the government came up with a $30-odd million saving—and we got the following evidence provided back to us by the Treasury:

The Australian Taxation Office does not have data on the median deduction claimed for gifts and contributions or the number of taxpayers claiming any deduction.

They do not have any data. The Australian tax office—the people who are processing these claims for deductibility; the people upon whom presumably Treasury and the government have relied on to come up with their $31.4 million estimate—have no data. So we have the government jumping at this, trying to proclaim it as a revenue savings measure when it has absolutely no idea of how the tax office have constructed the figures it is talking about. It has no idea at all.

In his evidence, Professor Orr again highlighted the unreliability of these types of revenue estimates, particularly given the uncertainty around the numbers of members of political parties in Australia. Certainly most of us know that most of the speculation is that those numbers are declining, especially in the major parties. Professor Orr said:

… if you are talking about $10 million per year you are talking about $30 million of donations at, say, a marginal rate of 30 per cent, which is roughly the corporate rate. Thirty million dollars is a lot of $1,500 contributions or party memberships. I do not want to criticise the Treasury modelling without seeing it—

of course, we know that it was based on zero data—

but part of the problem we have is that we have not had a system where it is itemised on tax forms and we do not really have enough data on claiming, on where people’s donations are going and so on.

So Professor Orr was quite clear that the data was not there and the estimate seemed to be grossly overstated given that many of the types of contributions claimed would be political party memberships. Memberships are usually in the order of $50 or $60—maybe a little bit more for some parties, but that is certainly what it is in my home division of the Liberal Party in South Australia. Sometimes there are contributions in addition to that, but we are certainly not talking about everyone making their donation and then making a deduction of $1,500—far from it. I would hypothesise that the overwhelming majority of people making deductions in Australia are making deductions of about $100. These are people who genuinely wish to support a political organisation—who genuinely wish to be involved. I would have thought that, at a time of concern about the level of support and involvement in political organisations around Australia, the last thing a government that might wish to encourage further involvement in the political process would be doing is making it harder and more expensive for people. That, of course, is what this measure does.

In his comments, Senator Ronaldson also struck upon the fact that, if passed, this measure provides certain advantages to some party structures, given their funding base, over others. It provides particular advantages to those who generate and derive large parts of their funding from trade unions, because the memberships and subscriptions to trade unions will remain tax deductible under this legislation. So you will still be able to join a trade union and claim your tax deduction for membership of that union—the union could possibly even increase its fees as a result of the Labor Party losing tax deductibility for membership—and then the union can funnel the money off to whomever they choose to donate to. Of course, we know who they are likely to donate to from today’s newspapers, because we see that there are millions of dollars funnelled annually from the union movement into the Australian Labor Party and its branches around Australia. So we know that this measure, if passed, will allow that to continue unfettered. It will provide a backdoor for people to make donations through the trade union movement. Get the donations deducted and they will end up in the Labor Party coffers, having been deducted from people’s incomes in any event.

No other party is going to benefit from similar sorts of arrangements, I suggest. But the government will. So it is little wonder that, again, they are focused in here on where they can cut out those smaller contributions from individuals, small businesses and corporations. It does nothing to fix the significant multimillion dollar influence the union movement has on the Australian political system. This measure does nothing to address the overseas donors who are splashed across the front pages of today’s newspapers. It does nothing to address donations, ranging into the hundreds of thousands of dollars, from big business, from lobbyists or from developers.

It does not even do anything to address potentially the deductibility to lobbyists’ operations. The government likes to pride itself on the operation of its code of conduct for lobbyists. But a lobbying business, whose area of business is lobbying, can pay as much as they want to attend a stand-up networking function of any political party and claim it as a legitimate business expense. People will still be able to attend Labor Party national conferences as business observers from any number of lobbyist businesses on the governments lobbyist register, and pay their $7,000, $8,000 or $10,000 a head—whatever it is—and that will still be a deductible expense. Mums and dads will not be able to pay $50 to join their local political party branch and claim that as deductible expense. But a lobbying company will be able to claim $10,000 as a deductible expense for attending a political party conference.

The evidence from Treasury officials on this was quite clear:

… yes. If their business role is lobbying, networking and advocacy and they go to a function with political leaders in order to network, advocate and lobby, that will be just a business deduction for their business activity. There is no cap to that expense.

That was Treasury evidence given to the JSCEM inquiry into this matter. So we still get big donors, we still get overseas donors, we still get lobbyists and lobbying companies with unlimited tax deductibility and we still get unions deducting their contributions. All this does is hurt ordinary Australians who wish to join a political party.

This is a rubbish piece of piecemeal legislation designed to target, frankly, the government’s political opponents. There are very clear motives behind this. Nowadays, to be quite frank, the government party, the Labor Party and its branches, is by and large funded by the big end of town—by big contributions, either from the trade union movement or from developers, casino operators or others. It is funded by those groups. The Labor Party knows full well that, as a proportion of income, those smaller parties—Family First, the Greens and others—and the Liberal Party and the National Party receive a higher proportion of their income from smaller scale donors, such as smaller businesses or individuals who choose to be members and who choose to make individual contributions.

They know that this legislation will hurt every other party in this chamber more than it will hurt them. That is the motive behind this. There is nothing holy about this. No matter how much the government want to hide behind their green paper on electoral reform, there is nothing holy about that process if they are jumping the gun and pushing ahead with these types of reforms, reforms that, frankly, will be implemented to the harm of every other political party represented in this chamber.

That is why I urge the Senate to do what it has done before on this measure and to tell the government, ‘No.’ The Senate should say that this is not good enough in isolation and must be part of the holistic approach to electoral funding reform that the government piously say is being undertaken. If they are committed to that holistic approach, they should be happy to wrap this issue up in it. If so, perhaps we can emerge with the type of outcome that gives Australians confidence and ensures that all Australians believe that our political system is free of the type of big-money influence that has concerned so many people. That is why I urge the Senate to reject this bill this time, as it has in the past, and make sure that we undertake a proper process: a wholesale and holistic review that looks at every area of campaign funding and does not just pick on the little guys.

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

I indicate my support for the second reading of the Tax Laws Amendment (Political Contributions and Gifts) Bill 2008. Despite Senator Birmingham’s very articulate exposition of his and the Liberal Party’s views, my view is that we ought to deal with this piece of legislation. It contains some reforms that, with amendment, are potentially useful in the context of what needs to be done. I believe that this Senate has an opportunity in the coming months to deal comprehensively for the first time in many years with the whole issue of electoral reform, including funding, contributions and donations and above all the issue of disclosure and transparency. That is why I welcome the work that the Special Minister of State has done in the context of the electoral reform green paper. I believe that the minister is absolutely genuine in his desire to significantly reform our system.

I do not want us to go down the path of the United States, where you have the best democracy that money can buy. Senator Bishop outlined the many millions of dollars that were spent in the primaries in the last two years. Those amounts are simply mind-boggling. The amount that is spent in Senate races in the United States, for instance, is in the tens of millions of dollars. That is something that is fundamentally anti-democratic in its effect. It can taint a political system.

What we have to deal with today is the issue of the tax deductibility of political donations. While some would say that it would be preferable to deal with this holistically, I say that if there is scope for reform we should deal with it now on a transitional or interim basis pending a more comprehensive political funding and disclosure regime. In relation to the central basis of what the government is trying to do—wipe out the tax deductibility of political donations—I cannot accept that. It is important that there be a level of public participation. I believe that removing tax deductibility for any level of donation up to the current limit of $1,500 will discourage the participation of ordinary citizens in the political process. You will skew the process in favour of large corporations and unions. I do not think that that is desirable. Giving individuals an opportunity to have a deduction of up to $1,500 is not unreasonable. The revenue effect of continuing this deductibility is quite minimal in the scheme of things. It is about $30 million over three years. That is a relatively small price to pay for a greater degree of public participation. However, I believe it was a mistake of the Howard government to extend that deductibility from individuals to corporations. I believe it is appropriate that such deductibility be confined to individuals. It is individuals that participate in a direct sense. It is individuals that actually vote at the ballot box. I think that is a more appropriate approach. That is why I am particularly interested in the amendments tabled by the Greens in relation to this and am quite sympathetic to them.

I also think that there is an anomalous position that would arise should the government’s bill go through unamended. For instance, donations to Greenpeace would continue to be tax deductible. Greenpeace—and this is not a criticism—is very much a political organisation. It involves itself in political issues. If you consider Aristotle’s view of what politics is about, the affairs of the state, then having too narrow a definition and allowing deductions for an organisation such as Greenpeace but not for a political party or a political organisation seems to be anomalous. I also think that it would be anomalous under this government proposal for union dues and levies to be fully tax deductible but not donations to the Liberal Party, to other parties or to Independents. The fact is that the union movement makes significant financial contributions to the Labor Party. It seems that the deductibility of union dues would be a backdoor way of providing funding to the ALP. It would give them an unfair advantage. That would be the effect of this legislation. It is important to reflect on what Professor Graeme Orr of the Democratic Audit of Australia has said about these sorts of donations. He said that this would not be inconsistent with allowing for some broader fundamental reforms down the track. Tax deductibility of donations is entirely appropriate up to a reasonable level, and I believe $1,500 is reasonable, but I do not think it is appropriate that corporations continue to have that level of tax deductibility.

I note also that some would consider to be anomalous the fact that is that there is no attempt in this legislation to change the tax deductibility of levies that members of political parties have to pay to their party as a consequence of being endorsed or of being a member of that party. Fortunately, that is something that I do not have to worry about, but I understand that members of the Labor Party—I am not sure what the situation is for members of the Liberal Party or the Australian Greens—pay a levy in the order of eight per cent of their income, and that is deductible. Obviously, that is much more than $1,500. Some would say that is anomalous, but I can understand that it is part and parcel of being a member of a party and it is part of a pledge that some have to sign as part of getting an endorsement or of being in this place. So that sits at odds with what is being proposed.

I think that an appropriate balance in what I see as a transitional or interim measure in what I hope will be quite significant and far-reaching electoral reform in this country is to amend the tax deductibility of political donations so that it applies only to individuals and not to corporations. I believe that would be a step in the right direction. I look forward to the Senate dealing with comprehensive reform of electoral laws in this country, because I think it is long overdue. I hope that the green paper is part of the fruitful process of achieving those ends.

Scott Ludlam (WA, Australian Greens) Share this | Link to this | Hansard source

I rise to speak briefly about the position of the Greens on the Tax Laws Amendment (Political Contributions and Gifts) Bill 2008 that is before us today and also to foreshadow the amendments which we will move in the committee stage, which a number of other senators have already referred to. Firstly, I will go to the issue of whether we should be moving now or whether we should wait for the outcome of the green paper process that is afoot. The Greens will be supporting this bill with the amendment that I will speak to because it essentially removes something that to us is a no-brainer. Tax deductions for corporations to participate in the electoral process are clearly unacceptable. It is not something that the public should be supporting. We believe that there probably is merit in waiting for the consultation process to wind up before progressing with a comprehensive electoral reform package, but these are measures that are entirely appropriate to proceed with today rather than just maintaining the status quo, which is quite clearly unacceptable.

The Greens believe—and we are firmly on the record as putting this position in state and federal parliaments—that elections should be publicly funded. It creates a much fairer and more democratic system for the public to fund political parties, independents and people seeking to express a point of view through our electoral system than the heavily out-of-balance system we have at the moment where, in a sense, corporate free speech is privileged above that of citizens. Private money plays an enormous and out-of-balance role in our political system today. Some donors, and particularly private donors—referring to some of the headlines that Senator Birmingham referred to before—are using financial assets to buy access to the political system. Current requirements for disclosure of these donations are clearly unacceptable, and that is one of the reasons we are here today. There is a perception, which I think is probably well founded, that corporate money buys political influence. That is not only damaging to our political system but also damaging to public confidence in the political system, which winds up being much the same thing. So I think there is certainly a case for the moves that the government has proposed and has put before us today to restrict tax deductibility—that is, public support—for corporations’ perceived rights to buy influence amongst decision-makers.

We believe that the case for restricting donations from individuals is actually much less clear. In essence, we are arguing that public participation in the political process is a public good and is therefore entirely worth supporting—with some caveats. Small donations from individuals will encourage parties to reach out to their grassroots rather than relying on very large corporate donations. So there is certainly a case for retaining tax deductibility for personal donations up to a threshold of $1,500.

I will now go to the make-up of funding for political parties when they run elections. The major parties receive, roughly, 80 per cent of their funding through private sources and receive the balance through public sources. The major parties receive significantly more in larger donations: roughly 80 per cent of donations are $10,000 or more, 60 per cent of donations are over $40,000 and 45 per cent of donations are $100,000 or more. There is a break-up of the way funding was received for the major and minor political parties and for Independents in the last election, and it shows quite clearly that the balance of private donations overwhelmingly favours the major parties. That profoundly unbalances the playing field. It means that some voices are much louder than others by being able to afford electoral advertising, campaign staff, administration costs and so on.

The Greens support strong requirements for funding disclosure. We are very keen on exploring any other options and will be proposing other options to improve the transparency, the accountability and the equity in our electoral system. The current system, I believe, is failing Australian democracy and is probably not as good as we think it is. I will speak briefly again when we move amendments in the committee stage.

Scott Ryan (Victoria, Liberal Party) Share this | Link to this | Hansard source

I rise to speak on the Tax Laws Amendment (Political Contributions and Gifts) Bill 2008. I was not in this chamber when the bill first came before the Senate in June last year. The substance of the bill is the same and can be summed up as the government trying to kick with a 10-goal breeze for all four quarters of the grand final, because it is a blatant and disgraceful exercise in self-interest by the Australian Labor Party.

This so-called piece of reform achieves nothing in the way of substantive reform. It cherry-picks key measures that will avoid significantly damaging or limiting the electoral chances of the Australian Labor Party and their opportunity to raise funds at the expense of the taxpayer, assisting their re-election chances while doing much to harm the involvement of ordinary citizens in the political process and to damage the interests of other political parties. An unfair playing field is against the interests of all Australians, it is against the interests of all political parties and this bill should be treated with the contempt it deserves.

As I mentioned, this is not the first time it has been before this chamber and it appeared as Tax Laws Amendment (2008 Measures No. 1) Bill 2008 last June. It will amend the Income Tax Assessment Act to remove tax deductibility of contributions or gifts to political parties, Independent members of parliament and Independent candidates for parliament. It will also ensure that GST treatment of candidates is altered to reflect the government’s policy. The coalition in the past opposed this bill because tax deductibility of political contributions was an ongoing part of a broader inquiry by the Joint Standing Committee on Electoral Matters into the 2007 election and, generally, into political funding. Senator Ronaldson commented extensively on the importance of this broader reform process and on how the government had claimed to be interested in broader reform.

As indicated by the minority report of the Joint Standing Committee on Electoral Matters into the original bill, the coalition strongly believes this issue should be deferred to become part of a broad based comprehensive reform when the committee’s full report comes out. I understand that the committee is meeting at the moment or was meeting at the commencement of this debate. It has released an interim report, but it is still months off its final report and the Senate does not have all the information. Senator Birmingham outlined that the tax deductibility information and the cost of that are very difficult to ascertain. The information about who donates and who makes the claims is very difficult to ascertain, and that is currently before the joint standing committee. Furthermore, it is absurd in the extreme on the government’s part to be bringing a substantive change of this nature before we have actually seen the final report of the joint standing committee and, indeed, the government’s white paper into electoral reform.

What we actually have at the moment, as Senator Birmingham and Senator Ronaldson have outlined, and what we saw over the last two days have had much more dramatic impact on people’s faith in the political system than anything that Senator Faulkner or the government have raised. We have seen an extraordinary amount of money spent over the last 12 months by the government. It was over $100 million and the only way to describe it is ‘American in scale’. The returns were delivered yesterday and were covered in today’s press. As has been mentioned elsewhere, the unions gave Labor $9.2 million in donations and a total of $37.6 million in overall campaign funding—indeed, the direction of the trade unions’ spending was very clear during the campaign.

It takes a degree of ridiculousness, if I could use that word, to actually say that the coalition is holding up electoral reform only a day after the Australian Electoral Commission released such extraordinary numbers to show the impact of trade unions on the last election. Given the lack of adequate or appropriate information about what individuals below that threshold have done, we need to have all that before the Senate.

This legislation has very important ramifications. The rules need to be fair in politics for them to be widely accepted and to generate public faith. There are some very serious impacts in this bill that I would like to cover. We all know that the trade union movement is the industrial wing of the Labor Party or, as it was historically described, ‘the Labor Party was the political wing of the trade union movement’. While it might occasionally, in my home state of Victoria, throw a bit of money towards the Greens it is nothing but scraps off the table compared to what the ALP gets from the trade union movement.

Trade unions do not exist nor funnel their money to support the Liberal Party, the National Party, the Greens, Family First or any Independents. What they do is collect money from their members—in certain sectors, interestingly, through compulsory levies for members—in order to fund political campaigns to see the election of their political wing, from the ranks of which so many members of this government have been drawn.

The removal of tax deductibility entrenches a massive advantage to the Labor Party through the unique position of trade unions. The disadvantage is straightforward and I will provide some numbers: $100 donated from a union to a political party or a candidate is effectively tax free because a union is an exempt body and the money from the member to the union is considered a tax deduction. But if an individual wanted to donate that money and they were on the 30 per cent marginal tax rate it would actually cost them $146. If a business that was paying the corporate tax rate wanted to provide that money it would be $142. It would not matter to whom they wanted to give the money. The point here is the difference in status between trade unions and everyone else in the community because of the unique tax exemption enjoyed by trade unions.

If we apply some of these numbers to the extraordinary numbers we saw released in yesterday’s press, they are even more significant. If we talk about a premium of $46 for individuals, that may not sound like much. But, when we see trade union members from all around Australia being levied $100 here and $200 there to fund political campaigns which are openly partisan and not just political in their nature, these insignificant amounts of money add up. If we actually go through the figures recently released by the Australian Electoral Commission, we have $9.2 million in donations from the various unions: $1.5 million from the Shop, Distributive and Allied Employees Association; $1.3 million from the Construction, Forestry, Mining and Energy Union; $1 million from the Communications Electrical Plumbing Union; $765,000 from the Australian Liquor, Hospitality and Miscellaneous Workers Union; $674,000 from the Electrical Trades Union; and significant sums from the Australian Manufacturing Workers Union, the Maritime Union of Australia, the Australian Workers Union, the Health Services Union, the Transport Workers Union, the Australian Services Union and the National Union of Workers.

We heard Senator Bishop talk, without any sense of irony, about the impact in the United States of setting up tax preferred political action committees, which are allowed to exert influence on the political process. We have those groups in Australia. We call them trade union officials. No-one else has a tax exempt status that allows them to collect millions of dollars to spend on a campaign or donate to their preferred candidates. And let us not forget that with that money come votes on the conference floor of the Labor Party. With the trade unions and the millions of dollars they collect might come 10 per cent of the delegates on a conference floor and a seat at the factional negotiating table, particularly around the Victorian ALP at the moment, where they carve up the seats in parliament—there will be a shoppie here and someone from the NUW there. Even the newspapers now describe members of the Labor Party not just as Socialist Left or Labor Unity but as representing a trade union. In fact, people in this chamber have done that themselves. No other organisation in Australia has this benefit. And let us not let the Labor Party dismiss this: the only groups in Australia that are the equivalent of American political action committees are the executives of our trade unions, who sit around doling out millions of dollars to their preferred candidates, factions and parties. Nothing has been mentioned about the money that we know exists in brown paper bags to pay for the other activities that happen within the ALP.

I would now like to provide an example of what might happen if trade unions were taxed. They donated just over $9 million to the Labor Party. If they had had to pay tax like any other corporate entity at the corporate tax rate or like any individual, they would have paid 30 per cent tax on that money and would have only been able to donate $6.4 million. That nearly $3 million, or $2.8 million, is in effect a subsidy from the Australian taxpayer, not to the political process—I note the comments of Senator Ludlam and Senator Xenophon about public funding—and nor is it a subsidy to all political parties or even to all members of this place; it is a subsidy to the Australian Labor Party. And that is what this bill entrenches.

This bill entrenches a tax advantage for the Australian Labor Party and their industrial wing. If individuals and businesses had got together and tried to run a campaign of the scale of the trade unions’ campaigns in the lead-up to the last election, it would have cost them over $38 million, if you assume a 30 per cent tax rate. Again, this is effectively a $10 million-plus subsidy to the Labor Party or a $10 million disincentive to individuals and other organisations in this country to participate politically, purely because they are not a trade union.

Senator Birmingham outlined the ridiculous argument put by the government that somehow public trust in Australian politics has been reduced by my mother or someone else or by a small businessman coughing up $500 to the local candidate whom they have known for a few years. Yet they are not concerned about the million dollars that the shoppies handed over. It is utterly ridiculous in the extreme to make that accusation.

Senator Birmingham also raised an issue about lobbyists, and again Senator Bishop referred to the power of lobbyists in the American system. We have evidence in the minority report, which Senator Birmingham highlighted, that if you are a lobbyist you can shell out all the money you want if it is an expense you have incurred in business. Is this just an official way of selling access? All this does is say that, if you are buying access as a lobbyist, you get to claim a tax deduction. But if mum and dad who own the local milk bar or the local newsagency or the local pharmacy want to cough up $1,000 to someone they have known for 10 or 15 years who is involved in the community, then they do not get a tax deduction. This is ridiculous in the extreme. This actually skews the political field so far in favour of corporatism that it goes against the little person. It does not matter whether you are an individual, whether you are a small business person or whether you are a shareholder of a company, for some reason under this bill they all get a status in the political process different to that of individuals who happen to be members of a trade union. I know trade union membership has been collapsing, but I did not realise that trade unions would go to this extreme to skew our political process to bring their membership back to higher levels.

I will conclude my remarks. Senator Faulkner talks about ending the arms race. Senator Faulkner is acting like the Kremlin in Soviet Union days. They went around the world preaching disarmament and funding disarmament groups, but what they were doing at the time was amassing arms. Labor want a tax advantage to magnify the outrageous figures we saw yesterday coming from large organisations. They also want to say to Mr and Mrs Australia: ‘You have no role in our political process. The union gets a donation but you don’t.’ This bill should be rejected for the extreme and outrageous proposal that it is, which is to skew the Australian political process in favour of one side at the expense of all citizens.

Ursula Stephens (NSW, Australian Labor Party, Parliamentary Secretary Assisting the Prime Minister for Social Inclusion) Share this | Link to this | Hansard source

In summing up the debate on the Tax Laws Amendment (Political Contributions and Gifts) Bill 2008, I thank all the senators who contributed. I will go right back to the facts, if I may. The bill honours the government’s election commitment to remove tax deductibility for donations made to political parties, candidates and members. It was a commitment made as part of Labor’s $3 billion saving plan announced by the current Minister for Finance and Deregulation on 2 March 2007.

Currently, as we all know, deductions are allowed for donations to political parties, members of parliaments and candidates, including Independents, up to a maximum of $1,500. Donations and membership fees used to be deductible up to the lower $100 threshold prior to 2006, when the former government implemented an increase up to the current $1,500 and then expanded the deduction to donations to Independent candidates and members. However, the current measure maintains access to the GST concessions for political parties, Independent members and Independent candidates that were available to them as gift deductibility entities. This will prevent the GST compliance costs of these entities from increasing as a result of removing the income tax deductibility for political donations. The measure itself is estimated to save $10 million per annum. On the basis of that, I commend the bill to the Senate.

Debate interrupted.