Deborah O'Neill (NSW, Australian Labor Party, Shadow Assistant Minister for Innovation) Share this | Link to this | Hansard source

I rise to make a contribution on the Treasury Laws Amendment (Tax Integrity and Other Measures No. 2) Bill 2018. Labor moved an amendment to the start date of schedule 3 in the House, and Labor will support this bill. The bill contains a series of tax integrity measures. I will note now that the shadow Assistant Treasurer moved an amendment to the bill in the House, which I will detail later in my remarks after discussing the other schedules.

Schedules 1 and 2 to the bill implement parts of the OECD hybrid mismatch rules. The OECD hybrid mismatch rules are designed to prevent entities that are liable for income tax in Australia from being able to avoid income taxation or obtain a double non-taxation benefit by exploiting differences between the tax treatment of entities and instruments across different countries. As detailed in the explanatory memorandum, the new amendments involve limiting the scope of the exemption for foreign branch income and preventing a deduction from arising for payments made by an Australian branch of a foreign bank to its head office, in some circumstances, and denying imputation benefits on franked distributions made by an Australian corporate tax entity if all or part of the distribution gives rise to a foreign income tax deduction, and preventing foreign equity distributions received directly or indirectly by an Australian tax entity from being non-assessable non-exempt income if all or part of the distribution gives rise to a foreign income tax donation.

It appears that delays between announcement and legislation mean the government has missed its originally proposed implementation date of 1 July 2018. The implementation date is now 1 July 2019. The measures have an unquantifiable gain to revenue. Labor has led the multinational taxation debate. Our transfer pricing laws, introduced in 2012 and 2013, were instrumental in delivering the tax office's High Court victory against Chevron. Labor in opposition carried the torch further by announcing a comprehensive package that included closing debt deduction loopholes and sweeping transparency measures around the use of tax havens. We welcome the government implementing the OECD rules and urge them to adopt Labor's package.

Schedule 4 to this bill amends the two income tax assessment acts to provide an income tax exemption for the IBC, the International Cricket Council Business Corporation, and to exempt from withholding tax payments of interest, dividend and royalties made to the IBC. This provides support to the International Cricket Council staging the ICC World Twenty20 in Australia in 2020. The measure applies to assessable income derived on and from 1 July 2018 and to interest, dividend and royalty withholding tax liabilities arising on and from 1 July 2018. This measure was announced by the Treasurer on 8 May 2018 as part of the 2018-19 budget. It's common for major events to receive this tax treatment, and it is consistent with what the previous Labor government did in relation to the Cricket World Cup held here in Australia in 2015.

Schedule 5 to this bill amends the Income Tax Assessment Act 1997 to list Melbourne Korean War Memorial Committee Inc as a DGR under the income tax law. This means donations of more than $2 given to the memorial between January 2018 and 31 December 2019 inclusive are tax deductible. This was announced as part of a measure contained in the 2017-18 MYEFO to list a number of DGRs. The total cost to revenue of that measure was $1.1 million in the forward estimates to 2021.

Schedule 3 to this bill amends the Income Tax Assessment Act 1997 to ensure that the producer offset is better targeted to support the Australian film industry when an offshore location is used for principal photography. The amendment, as originally drafted, applied to expenditure incurred in relation to films that commenced principal photography on or after 1 July 2017. The government argues that the measure means the offset works as intended. The measure reduces expenditure by $6 million over the forward estimates. We appreciate the briefing from Treasury on the matter, which followed our request. However, the legislation itself came as somewhat of a surprise to many. Multiple film sector stakeholders contacted the shadow Assistant Treasurer and the shadow minister for the arts about the measure, citing concerns about a lack of consultation, about retrospectivity and about the lack of a regulatory impact statement. Labor is happy to lend its support to tax integrity measures, particularly so that certain concessions work as intended. However, noting the lack of sector consultation and the retrospective aspect of the legislation's start date, Labor moved a detailed amendment in the house to make the start date 1 July, 2018. The government supported that amendment, which we think is a good outcome for the parliament and for the sector. As such, we reiterate our support for the bill.

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

I rise to oppose the misnamed Treasury Laws Amendment (Tax Integrity and Other Measures No. 2) Bill 2018. It's not about tax integrity; it's about tax increases, and specifically about corporate tax increases. The coalition government pretends to be a low-tax party by calling for modest reductions in the corporate tax rate, but what it does on the quiet is regularly ramp up corporate tax, such as through this bill.

For instance, when there are various interpretations about how the tax regimes of different countries interact, the bill requires that the interpretation that leads to the highest tax being payable is the interpretation that must apply. The bill denies imputation credits in certain circumstances. The bill reduces access to a film producer offset. The bill reduces access to an exemption for foreign branch income. The bill denies deductions for certain payments made by banks. The bill removes a provision that treated certain income received by Australian companies as non-assessable.

This all represents a creeping corporate tax hike and makes the tax law that little bit more complicated. This all makes it less and less likely that global businesses will establish operations in Australia, will invest in Australia and will employ Australians. Those who hate business, particularly those businesses that dare to look beyond national borders, will cheer this bill—or they would if they bothered to turn up to this empty Senate chamber. But those people are unwittingly driving us slowly to oblivion.

Anne Ruston (SA, Liberal Party, Assistant Minister for Agriculture and Water Resources) Share this | Link to this | Hansard source

I thank senators for their contribution to this debate and commend the bill to the Senate.

Question agreed to.

Bill read a second time.