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

asked the Minister representing the Treasurer, upon notice, on 10 March 2011:

With reference to Taxation Determination 2010/D7 (Australian source income):

(1) What is the policy intention of the proposed measure.

(2) How does the proposed measure enable the policy intention to be achieved.

(3) Is the effect of the proposed measure revenue neutral:

(a) if so, how has revenue neutrality been achieved;

(b) have other saving measures been needed to achieve revenue neutrality;

(c) if not, how much revenue is expected to be raised as a result of the measure; and

(d) can the annual numbers for the forward estimates period be provided, and any further information covering the longer term.

(4) Have the likely administrative and compliance costs of implementing the proposed measure been assessed; if so, what are they.

(5) (a) What stakeholders will be directly affected by the measure;

(b) have these stakeholders been involved in consultation prior to and during the development of the measure;

(c) what consultation has the Government been engaged in; and

(d) have independent bodies or experts been involved in the consultation process.

(6) Is this proposed measure a government response to an identified problem; if so, what problem is it addressing.

(7) Were any alternatives considered before this approach was proposed, if so:

(a) can details of those alternatives be provided; and

(b) why was it decided that those options would not be implemented.

(8) Will inaction pose a risk to the integrity of the tax system or broader government administration; if so, how would you rate that risk.

(9) What modelling has been carried out in developing the proposed measure.

(10) Have the broader implications of the implementation of the measure on the economy been forecast; if so, what are they.

(11) Have international comparisons been considered and does the proposed measure accord with international 'best practice'.

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

The Treasurer has provided the following answer to the honourable senator's question:

Taxation Determination 2010/D7 is not a proposed measure. Taxation determinations do not alter the existing tax law, but rather set out the Commissioner of Taxation's interpretation of how the existing law works. In a determination, the Commissioner is simply expressing his view of the law enacted by Parliament and he applies accepted principles of statutory interpretation in doing so.

Determinations are not legally binding on taxpayers (that is, they do not create legal obligations under the tax law for them). Once finalised, they are only binding on the Commissioner. Their legal effect is to protect taxpayers who choose to follow the Commissioner's views expressed in them. Taxation determinations have no policy intent, and the government has no involvement in the issuing of taxation determinations. The Commissioner releases draft taxation determinations for public comment before finalising them.

Many taxation determinations are considered by the ATO's Public Rulings Panel. The Panel advises the Commissioner on the issues proposed to be dealt with in taxation rulings and determinations and is made up of senior ATO officers and external experts.

Taxation determinations do not have a revenue impact on the forward estimates because, as far as the law allows, the Commissioner interprets the law consistent with policy intent on which revenue estimates were based. However, they may have a compliance leverage impact by protecting the forward estimates to the extent that revenue is at risk from taxpayers not applying the law properly.

The ATO is therefore unable to provide an answer to questions (1), (2), (3), (5) (c), (6), (7), (8), (9), (10) and (11).

(4) Yes. Some taxpayers might currently operate on the basis that profits on the sale of private equity investments will invariably constitute non-Australian sourced capital gains and be exempt from tax in Australia. Such taxpayers will need to re-examine their own circumstances in light of this draft Determination.

(5) (a) The private equity industry and non-resident investors will be affected if they mischaracterise their profits as non-Australian sourced capital gains.

(5) (b) The normal consultation process for Determinations was followed and the draft Determination was also discussed at National Tax Liaison Group meetings in 2010. In addition, meetings have been held with private equity firms, their advisers and their association. The draft determination was published on www.ato.gov.au on 1 December 2010and public consultation closed on 28 January 2011.

(5) (d) The Public Rulings Panel provided advice in the development of this draft Determination.