Mathias Cormann (WA, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

I rise to speak on the Tax Laws Amendment (2010 Measures No. 4) Bill 2010. This is one of the many tax bills pursued by this government. Of course the Gillard government is, as was the Rudd government before it, a high-taxing, high-spending government which has delivered record levels of debt and record levels of deficit and which has been putting upward pressure on interest rates and inflation. This has been a government which is always casting around for more cash to feed its addiction to reckless spending, which is always borrowing more money to feed its reckless addiction to spending and which now wants to hit the states for another $50 billion worth of revenue. Over the last three budgets we have had more than $40 billion in new or increased taxes and we have had more than $90 billion worth of new net debt. Now the Gillard government wants to take another $50 billion over the forward estimates off the states by taking hold of $50 billion worth of their GST revenue.

In doing so, the government does not go through proper process. It does not comply with the deals that were entered into by the Commonwealth and in good faith by the state premiers and chief ministers. We all know that one of the very high profile features of the GST agreement in 1999 was that any changes required unanimous agreement. Of course there is no unanimous agreement. Western Australia is clearly opposed. In fact, not one single state premier or chief minister across Australia has signed on the dotted line to hand over $50 billion worth of GST to the Commonwealth over the forward estimates. The Prime Minister last week in parliament was trying to suggest that not even Colin Barnett wanted to hold up this Labor Party federal takeover of state GST revenue—that he was quite happy for everyone else to hand over the GST to the Commonwealth—but looking at the government’s own advice we know that that is not true. We know that the government has advice from its own Treasury—from, presumably, Dr Ken Henry, who would have signed off on the incoming government brief from Treasury, which is colloquially called the red book—that said:

Western Australia has indicated that it is not prepared to agree to proposed amendments to the IGA notwithstanding—

I emphasise ‘notwithstanding’—

that they preserve the current arrangements for Western Australia.

That directly contradicts the statements made by Prime Minister Gillard in the House of Representatives last week. It directly contradicts statements that were made by the Minister for Health and Ageing, Nicola Roxon, on Sky News this afternoon. Very clearly the Treasury advice to the government is that:

Western Australia has indicated that it is not prepared to agree to proposed amendments to the IGA notwithstanding that they preserve the current arrangements for Western Australia.

I continue with the advice from Treasury:

As changes can only be made to the IGA by unanimous agreement of all parties, alternative approaches may need to be considered to give effect to the financing arrangements for other jurisdictions.

That is polite bureaucratese for, ‘You might need to find the money elsewhere.’ It keeps going:

Ideally, these issues should be resolved before the reintroduction of’ the legislation.

That is not this particular piece of legislation, even though it does deal with the GST. That is a separate piece of legislation. But there is a connection there. There is this theme across this government where reckless levels of spending mean that this Gillard Labor government is always casting around for more cash. Any piece of legislation that is related to tax and introduced by this government invariably is focused on maximising, increasing or finding new ways of getting hold of more of taxpayers’ dollars for the government to pursue all the many examples of waste and mismanagement that we have witnessed from this government over the past three years.

This GST tax grab at the expense of the states is not an isolated example. This is a government which in the lead-up to the election in a press release from the Treasurer, Wayne Swan, and then Labor Party spokesman during the campaign, Mr Chris Bowen, claimed that over three budgets they had implemented $83.6 billion worth of savings. Mr Acting Deputy President Forshaw, if anybody spoke to you or me and talked about savings, we would think that the government has saved some money by cutting spending. But I am sure that you would be as surprised as I was when you realised that more than half of the $83.6 billion in savings claimed by the government in the lead-up to the election and again by the Treasurer as recently as a week ago are, in fact, tax increases. More than $40 billion in new and increased taxes have been pursued by this government over its first three budgets. We have had the alcopops tax. We have had the $2½ billion tax on the North West Shelf gas project. We have had the luxury car tax. We have had the reduction in income tax cuts. We have had the mining tax. We have had a whole plethora of increases in taxes and charges. And what does this government do? It categorises them as savings.

It is one thing to make people believe that somehow this government is fiscally prudent, that somehow this government is more fiscally prudent than any that have gone before; but, of course, when we look at the record of this government what we see is that budget after budget has dramatic increases in spending, even more dramatic increases in taxes, even more dramatic increases in debt and deficit and, now, an attempt to get $50 billion worth of additional revenue at the expense of the states and then sell it as health reform.

Remember the alcopops tax. I am sure that Senator Nash well remembers the alcopops tax. The government tried to sell it as a health measure because they know increased taxes are not popular, increased taxes have to be justified and increased taxes have to come with a high-moral-ground argument as to why they are necessary. So the government were going to stop binge drinking by increasing taxes. What happened? Have this government fixed binge drinking by increasing taxes? No, they have not. Binge drinking continues to get worse and we know, from looking at the fine print, that not only did this government not expect to fix binge drinking but also they were expecting binge drinking to continue because Treasury expected that that the consumption of alcopops would continue to increase at a dramatic rate in the out years of the forward budget estimates. There is a pattern here, a pattern of pursuing new and increased taxes wherever they can, of trying to come up with a high-moral-ground reason as to why they are justified and of forever casting around for more cash whatever the downstream consequences are for the economy, jobs, investment and Australians’ quality of life.

Furthermore, a significant theme that runs through all of this is that in Treasurer Wayne Swan we have the most secretive Treasurer in the history of the Commonwealth. He is a Treasurer that is always desperate to cover up yet another stuff-up, that does not want people to be able to scrutinise his activities and that does not want people to be able to check whether the facts and figures that are somehow presented have any foundation in fact. Whether it is the Treasury modelling of the emissions trading scheme, the alcopops tax or the impact of the mining tax, he keeps things secret. I guess there has not been any Treasury modelling of the National Broadband Network because the government does not really want to go anywhere near anything that resembles a cost-benefit analysis of that.

There is a purpose to my going through this background, and that is that I, on behalf of the opposition, will be moving an amendment which has also been moved by my colleague the shadow Treasurer in the House of Representatives, Mr Joe Hockey, the member for North Sydney. I represent Mr Hockey in this chamber in dealing with this legislation. I will be moving a series of amendments with the intention of increasing the accountability of government spending. We took a commitment to the last election to provide to taxpayers a receipt from the Commonwealth for how their money has been spent. We come at the issue of tax as the party that is committed to fairer, lower and simpler taxes. Kevin Rudd and Wayne Swan at some point said, ‘We need root-and-branch reform of our tax system; we want fairer and simpler taxes.’ This morning we had a discussion with Treasury secretary Ken Henry about the mining tax and even Ken Henry conceded that the mining tax is more complex than what was there before and, I would argue, less fair. It is a tax that was designed in secret by this secretive government with the three biggest taxpayers to be subject to the mining tax—BHP Billiton, Rio Tinto and Xstrata—excluding hundreds of mining companies that are going to be subject to this tax. It is a tax that was designed by this government in secret to suit the specific needs of multinational, multicommodity, multiproject companies with a reliable cash flow and equity finance. This tax has many features that will make it harder for small- to mid-tier companies to survive, to grow, to prosper and to become the next BHP, Rio or Xstrata, because this government has given a clear and unfair competitive advantage to those companies by negotiating the revised mining tax arrangement in the way that it did.

In fact, not only is the tax more complex and I believe less fair but also it is more distorting than Kevin Rudd’s superprofits tax, if you believe the Treasury secretary, because where Ken Henry suggested that the resource rent tax nationally would replace state government royalties the minerals resource rent tax does not do anything of the sort. The minerals resource rent tax will still see small- to mid-tier companies not subject to the mining tax continue to pay state royalties. Those mining projects that get to the end of their project life will again be paying state royalties and not be able to offset those against any minerals resource rent tax liability. So at the two ends of the project life, where concern about distortion of investment and production decisions is most acute, there will not be any change. Companies will be at least as badly off as they were before, if you agree with the government’s analysis of the impact of state royalties. The only projects that will not have to pay state royalties are those that will have to pay more tax overall by paying the minerals resource rent tax as a net contribution on top of state royalties. We have ended up in this situation because of the incompetent way in which this government has pursued the introduction of a proposed national tax on mining. The tax system is now more complex and less fair, and essentially it has descended into nothing more than yet another tax grab.

There are some specific features to this particular bill. The government is essentially doing some tinkering around the edges with eight measures in this bill, which include the GST on third-party payment adjustment provisions, the capital gains tax treatment of water entitlements and termination fees, financial arrangements provisions, scrip rollover provisions, medical expenses tax offset claim thresholds, deductable gift recipients and volunteer fire brigades. The opposition do not oppose these measures. However, we know that this is just some more tinkering at the edges. This government does not have the courage to pursue root and branch reform of our tax system. This government has not got the courage to pursue genuine tax reform. This government has not got the courage to go for lower taxes and smaller government. This government has not got the courage to start cutting spending. This is a high spending, high taxing, high debt, high deficit government which, through its failed fiscal and economic policies, is putting upward pressure on interest rates and inflation. This government has got a very, very bad record when it comes to economic management.

One measure the opposition committed to in the lead-up to the election was that we will recommend the Senate agree to an amendment that will ensure Australian taxpayers know how their money is spent. The coalition believe taxpayers should be aware of what governments are spending their money on. Ultimately it is the taxpayers’ money. The government tries to sell increased taxes as savings. The government seem to have the view that all the money is the government’s money and they have to make a decision on how much money people can keep. We on this side of the chamber have a very different attitude. We take the view that all the money is the people’s money and the government should take as little of it as possible but, yes, as much of it as is necessary to provide services for the good government of Australia. Individuals are the best equipped to make decisions on how best to spend their own money. This is a principle that the government does not understand. That is why the government is always looking for new ways to get additional cash from taxpayers to feed into its reckless and wasteful spending. Mr Acting Deputy President, I know that you have a great understanding of the excessive waste and mismanagement perpetrated by the government over its first three years.

There is much to be said about the high taxing, high spending, high debt and deficit bad track record of this government—

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

Senator Xenophon interjecting—

Mathias Cormann (WA, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

but, as Senator Xenophon, very helpfully points out, there is not much time left to really go through all the detail of it. So I will just confirm again that, when Dr Ken Henry started with his committee the process of what is colloquially called the Henry tax review, we were promised root and branch reform of our tax system; we were promised a fairer, simpler tax system. But what we have been delivered is more complex and less fair; it is essentially just another grab for cash at the expense of the Australian people complemented with another $50 billion grab for cash at the expense of the states and territories without the Treasurer doing his homework and getting the unanimous support of all states and territories as is required in the intergovernmental agreement on the GST—both the agreement signed by John Howard in 1999 and the agreement signed by Kevin Rudd in 2008. We know the government knows it has to comply with a requirement for unanimous agreement because the Treasury department told Julia Gillard and Wayne Swan they had a problem which they should resolve before trying to take away $50 billion of GST from the states and territories. I will make some more comments during the committee stage of this debate. I thank the Senate.

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

My comments on the Tax Laws Amendment (2010 Measures No. 4) Bill 2010 will be relatively brief and I will focus on those amendments relating to the irrigation community. Irrigators are facing tough times. Even though we have had higher than average rainfall this year, irrigators are still struggling to cope with reduced allocations and the fallout from a seven-year drought. The Murray-Darling Basin Authority’s guide to the draft basin plan, released a few weeks ago, has worried many irrigators. This is something I heard again when I was in the Riverland in South Australia just last Friday. I was fortunate enough to have my parliamentary colleague the member for Kennedy, the Hon. Bob Katter, come down to South Australia and go to the Riverland and the Lower Lakes with me to speak to irrigators and environmentalists. That was a very useful exercise, I believe, for both the South Australians who met Mr Katter and, I hope, for Mr Katter himself. I am very grateful to Mr Katter for his visit to South Australia at my invitation.

In relation to the bill, let us put this in context. All over the basin, irrigators are now facing further cuts to their entitlement and many are having to make tough decisions about their futures. In places like the Riverland, the cuts could be as high as 30 per cent, or more. That is fundamentally unfair in my home state of South Australia, given that they were early adopters of water efficiency savings measures. While we cannot always help irrigators to get their hands on more water, we can help them to work more efficiently with the water they have. Water saving measures such as drip-feed irrigation and evaporation prevention techniques and technologies mean irrigators can save the water they are entitled to and do more with less. This legislation will mean irrigators can have more flexibility in the entitlements themselves. Irrigators do not buy water entitlements as an investment; they buy them because it is the only way they can keep their plantings alive, particularly in the case of permanent plantings. Exempting the transfer of water entitlements from capital gains tax will mean irrigators will be free to shop around and find the best deals and tailor their entitlement to maximise water usage efficiencies. I strongly support this aspect of the legislation and thank the government for introducing this amendment.

Australia’s food security and the economic future of countless towns and communities rest on the irrigation industry, but there is no doubt that we also have to look at things from an environmental point of view. Keeping the basin healthy so that it can support controlled irrigation—with a vibrant, sustainable irrigation industry—and maintain its unique environment is vitally important, but allowing irrigators to make changes to their entitlements more easily will mean that the water market will be more flexible and better managed, so I support these amendments.

I note that Senator Cormann, in his usual innovative style—his dogged and persistent innovative style—has moved a number of amendments, which mirrors a policy of the coalition and, I think, the views of the shadow Treasurer. I am not attracted to some parts of the amendments, particularly the requirement to give, at the end of the financial year, the details of the taxpayer’s share of Australian net debt and how much taxation revenue raised under the assessment was expended to service public debt interest. Honestly, I think those amendments are quite mischievous. I have real concerns when even seasoned political operatives get tied up in knots as to what is net debt, gross debt and debt as a proportion of GDP—and I am sure the minister, Senator Sherry, can give other examples of different permutations in relation to this. I will listen to the debate on the other aspects and listen to the government’s point of view, but I can rule out supporting those items of the table that make reference to the whole issue of government debt. I think, in the way that they have been presented, they will simply confuse Australian taxpayers. I look forward to the committee stages of this bill.

Nick Sherry (Tasmania, Australian Labor Party, Minister Assisting on Deregulation) Share this | Link to this | Hansard source

Firstly, I would like to thank those senators who have contributed to this debate. Senator Xenophon, it seems to me that you never get tied up verbally; you are very good at your verbal gymnastics. I would like to thank both the senators who contributed to the debate. The bill itself contains a number of provisions, which I understand are supported by all sides of the chamber. There is a foreshadowed amendment in committee; we will deal with that when we get to the committee stage.

The amendments in schedule 1 ensure that recent changes to the GST act to create adjustments for third party payments deliver the appropriate outcomes in situations where there are payments between parties in a supply chain which indirectly alter the price received or paid for the things supplied. Where the taxable status of the supply alters as it moves through the supply chain, the payee obtains a refund under the Tourist Refund Scheme. These amendments take effect from 1 July 2010.

Schedule 2 amends the income tax laws to provide a capital gains tax rollover for taxpayers who replace an entitlement to water with one or more different water entitlements. This rollover ensures that capital gains tax is not a barrier to transformation. Transformation is the process by which an irrigator permanently changes their right to water against an operator into a statutory licence held by an entity other than the operator. Transformation facilitates water marketing and trading and the efficient use of water resources. Schedule 2 also allows termination fees to be recognised when calculating a capital gain or capital loss on an asset by including those costs in the asset’s cost base. This change applies to all assets and not just those relating to water.

The amendments in schedule 3 make minor policy changes and technical amendments to the taxation of financial arrangements provisions. The amendments provide certainty on the operation of the law and, in doing so, reduce compliance costs for taxpayers. The amendments in part 2 of schedule 3 extend the transitional arrangements for the application of debt and equity tax rules to 1 July 2010 for upper tier 2 capital instruments issued before 1 July 2001. The amendments in part 3 of schedule 3 extend the scope of a number of compliance-cost-saving measures and make technical amendments to ensure that foreign currency gains and losses provisions operate as intended. They are part of a package of amendments that was initially announced by the previous government on 5 August 2004, to apply from 1 July 2003. The amendments to the foreign currency gains and losses tax provisions will have retrospective application from 17 December 2003. However, affected taxpayers should not be disadvantaged by this as the initial announcement contained detailed information with respect to the amendments so that affected taxpayers could manage their tax affairs with the knowledge of the amendments and their impacts, beneficial and otherwise.

Schedule 4 amends the income tax laws to make it easier for takeovers and mergers regulated by the Corporations Act to qualify for the capital gains tax scrip-for-scrip rollover. These amendments carve out takeover bids that do not contravene key provisions of the Corporations Act, and approved schemes of arrangement, from having to meet the rollover requirement, but the target entity’s interest holders can participate in the arrangement on substantially the same terms. These amendments have been made in part because the income tax legislation does not need to regulate participation where the Australian Securities and Investments Commission already takes into account equality issues, including in administering its role in relation to the scheme of arrangement. These amendments ensure that the scrip-for-scrip rollover operates more effectively.

Schedule 5 implements the government’s 2010-11 budget measure to increase the threshold above which a taxpayer may claim the net medical expenses tax offset. From 1 July 2010 the claim threshold will increase from $1,500 to $2,000. It will thereafter be annually indexed to the consumer price index. The first indexation adjustment to the claim threshold will take place on 1 July 2011. These are important amendments which ensure the sustainability of support for taxpayers with higher unreimbursed medical expenses.

Schedule 6 amends division 30 of the Income Tax Assessment Act 1997 specifically to list two new organisations as deductible gift recipients—DGRs—extend the listing of one organisation and effect a name change for another. Taxpayers can claim an income tax deduction for certain gifts to organisations with DGR status. DGR status will assist the listed organisations to attract public support for their activities. This schedule specifically lists, or extends the listing of, the Mary McKillop Canonisation Gift Fund, the Xanana Vocational Education Trust and the One Laptop per Child Australia Ltd. The schedule also effects a name change for the Clontarf Foundation from the Clontarf Foundation Inc. to Clontarf Foundation.

Schedule 7 extends deductible gift recipient status to all volunteer fire brigades. Volunteer fire brigades aim to prevent, respond to and assist with recovery from a range of fire related emergencies, including preventing bushfires from reaching people in built-up communities. This legislation recognises the importance of the community service performed by volunteer fire brigades. This schedule allows all entities which provide volunteer based emergency services, including volunteer fire brigades, to access tax deductible donations and extends deductible gift recipient status to all state and territory government bodies that coordinate volunteer fire brigades and State Emergency Service units. I commend this bill to the Senate.

Question agreed to.

Bill read a second time.