Mr ROCHER(6.21) —Madam Deputy Speaker, I did intend to comment on the Bills in the order in which they are listed on the Notice Paper, but I am afraid time might prevent me from getting through all the material which I wish to canvass.

The Taxation Laws Amendment Bill (No. 4) 1990 tackles a number of consequential matters. The coalition generally welcomes measures affecting gold mining and quarrying expenditure. The same response is accorded alterations to zone rebates and the additions to the list of tax deductible gifts. While we disagree with the impost itself, we will not oppose the amendment to clarify the date on which the first instalment of annual company tax is to be paid. The Bill will also make a minor technical amendment to subsection 36aaa (24) to allow an election for a year of income to be made when contaminated livestock is disposed of rather than when destroyed-and it has our support.

A couple of other minor and seemingly unobjectionable amendments are included. However, provisions affecting minimum equity companies and the so-called thin capitalisation rules are worthy of special mention. The first point to note about them is that there is some retrospectivity involved. However, as it will presumably confer a benefit, we raise no objection in accordance with our longstanding policy on the coalition benches. However, we deplore the fact that, once again, the intention to legislate was the subject of an announcement by press release, issued as long ago as 30 March 1989. Nineteen months have elapsed between the announced intention and the presentation of a Bill to the Parliament. It is just a further example of this Government's inability to get the job done expeditiously, no matter how long it might have taken to take some action in the first place. What is more, some of the provisions in the Bill are in conflict with what was said in the press release.

Generally, the amendments to these capitalisation rules will disallow as a deduction the amounts of interest paid by some on debts to related offshore entities where the ratio of foreign debt to foreign equity exceeds 3:1. However, the corresponding ratio for financial institutions is 6:1. Exempted will be certain balances in the clearing accounts of some financial institutions. These balances reside in what are called `nostro' and `vostro' accounts. Apparently, it is normal banking practice for Australian financial institutions to maintain foreign currency accounts with related foreign banks in vostro accounts. While there seems to be no need to discuss the types of transactions facilitated by nostro accounts, it is relevant to note that they are usually in surplus-but sometimes human error on the part of an operator puts them briefly in the red. An overdraft advance by the offshore entity is then needed to ensure payment to a third party. The reverse is the case for vostro accounts.

Australian dollar accounts held by foreign banks are vostro accounts in the eyes of the Australian counterparts. A point of contention arises whereby, under current practice, interest is not paid on vostro accounts in credit. The Bill rather presumptuously anticipates that will always be the case, despite advice to the Government to the contrary. Not surprisingly, being unable to grasp that progress is possible, an opportunity has not been taken to accommodate such an eventuality.

Also, the period of 10 days allowed to clear nostro and vostro transactions is far too restrictive. A surplus could and apparently does occur when a third party fails to claim prompt payment. Such occurrences will create problems under this legislation which could easily have been forestalled. Some bankers and financial institutions have difficulty with Bill provisions to amend section 128f. It seems that interest on certain widely held debentures is presently exempted from withholding tax by this section.

An effect of the Bill's proposed changes will be an inequitable outcome in the calculation establishing the foreign equity component in the calculation of the ratio of foreign debt to foreign equity. Short term credit amounts, partly owned foreign banks and an averaging formula for foreign debt are also dealt with to a varying extent in the Bill.

The Opposition will not oppose the Bill, although we have and will make constructive criticisms. One is that, even as we discuss these proposals to change thin capitalisation legislation enacted in 1987, more amendments are in the pipeline. We will probably be talking about amendments to these amendments before us today within 12 months. Three years experience with a particular tax would seem to be enough to put the legislation right and remove any anomalies. Sadly though, that is not the case.

These amendments will not mollify our concerns about the complexity, uncertainty and the far reaching effects of the original legislation that, back in 1987, was regarded by many as the most difficult to understand inserted into the Income Tax Assessment Act during the then past five years. Since 1987, of course, there has been an abundance of complex, uncertain and far reaching tax law. All have taken tax law far beyond what is or was necessary to achieve the stated or apparent purposes of the Government. Nor should it be forgotten that this and other tax legislation is only needed because of relatively high rates of Australian income taxes in general and corporate taxes in particular.

The purpose of the Debits Tax Termination Bill 1990 is to facilitate future collection of bank account debits taxes-aptly known as the BAD tax-by State and Territory governments. It is claimed that the transfer of this tax from the Commonwealth will confer on State and Territory governments an opportunity to rationalise taxation of financial services, as well as giving those governments an additional revenue source. Financial assistance given by the Commonwealth to the States and Territories will be reduced accordingly to neutralise the loss of revenue by a matching reduction in spending.

It is understood that the Commissioner of Taxation will continue to collect the tax, for the time being at least, and disburse it to the States and Territories. Although not said, the Commissioner will probably charge for the service to be provided by the Australian Taxation Office. By some queer twist of logic, the Minister for Science and Technology (Mr Crean) claimed in his second reading speech that this proposal follows, as a matter of inevitable consequence, a speech by the Prime Minister (Mr Hawke) given on 19 July 1990 which was rather pretentiously titled `Towards a Closer Partnership'-this, from the Prime Minister. That the speech was a belated attempt to recover lost ground after the Leader of the Opposition (Dr Hewson) took the initiative and called for more and closer cooperation with the States is probably neither here nor there. However, to pretend that the measure was the result of some grand plan announced on 19 July is blatant deceit.

The truth is that the decision to transfer the bank account debits tax to the States and Territories was stitched up at the Premiers Conference a couple of months earlier. So much for a grand new world, as the Prime Minister would have had us believe on 19 July! It is just one further example of how this Government tries to attract fawning publicity from a largely misguided media by dressing up earlier decisions as wonderful new initiatives.

All that said, questions arise about whether the tax should be the prerogative of any government. The Treasurer (Mr Keating), when it suits his purpose, reminds us of the advantages attaching to his deregulation of the financial system. If we are to believe him, the wonderful economic progress he says Australia has enjoyed since deregulation of the financial system in the mid 1980s is all too awful to contemplate. Despite all the evidence to the contrary, he maintains the untenable position that, even when forced occasionally to admit that the economic picture is not as rosy as he would normally paint it, his vision for Australia is somehow right. His defence of the current taxation system is part of the hoax. His having dictated the introduction of more new taxing measures than any Treasurer in our history, it might have been expected that the bank accounts debits tax deserved to be scrapped. Not so.

As an impost that has the potential to become as unpopular and notorious as the nefarious payroll tax, the escape plan is to do as was done with it and give it to the States. Then, picture it as potentially an additional source of revenue. That is the plot. Even better and as an afterthought, claim it as hard evidence of a commitment to a new era of Commonwealth-State relations. Never mind the adoption of major new taxes such as capital gains tax, fringe benefits tax, the Medicare tax, superannuation fund taxes and the earlier collection of other taxes such as provisional taxes, prescribed payment taxes and company taxes. With total tax revenues up by 136 per cent over eight years, with measures such as those mentioned and the ramshackle wholesale sales tax base widened enormously, a golden opportunity to get rid of this BAD tax was there for the taking. The fact is that it should be abolished.

Sitting suspended from 6.30 to 8 p.m.

Mr ROCHER —The BAD tax distorts the financial system and is a form of regulation. The addition of it to the battery of taxes already levied by the States is hardly wise on other grounds. Already the States impose bank charges of one kind or another, as well as land tax and stamp duty which have a heavy bearing on commercial decisions and decision taking. One of those State-based bank charges already in place is a financial institutions duty (FID), or similar. With both BAD and FID taxes, the States and Territories will have the equivalents of both a tax on turnover and a tax on net incomes.

A distinguishing feature of these taxes is that they are payable by virtually all and sundry, not just by businesses. Any imposts more calculated to distort the financial system are hard to imagine. For the time being, FID and BAD taxes might be thought to raise comparatively minor amounts when compared with other taxes. Even so, last year the Hawke Government collected $378m from the BAD tax. One could easily reckon that was matched by the FID in the States and Territories. It may even go far beyond that figure for the BAD.

The Sales Tax Laws Amendment Bill (No. 3) 1990 will amend the principal Act and relevant regulations to exempt from sales tax certain items of computer equipment. To qualify for exemption, each item will need to satisfy the Bill's definition of `eligible computer equipment', or the equipment which falls within the ordinary meaning of the term `item of computer equipment'.

Fifty per cent or more of the use of a qualifying item must fall within four broad categories. These will be for use in the engineering or technical design of goods for manufacture; production related activities such as to scheduling of production, the purchasing of materials, the storage, handling and dispatch of certain finished goods; the finalising of text or artwork to be printed; and a combination of the above together with use as aids to manufacture.

Aids to manufacture are defined to comprise the use of computers in engineering design; the use of computers in production scheduling, sequencing, monitoring, controlling and costing of the processes of manufacture; and the use of computer equipment in printing, including finalisation of text for typewriting, artwork, advertisements, subediting and production.

Broadly, four groups of manufacturers will be eligible to claim exemptions. Practitioners in certain activities who will not benefit include those involved with audio visual production; architectural-structural design; and the work of secretaries and certain authors. Interestingly and broadly speaking, marketing, sales and management accounting activities will not qualify as production related activities.

It may also be useful to note that currently, computer hardware used directly and principally in manufacturing activities covered by the aids to manufacture provision generally qualifies for sales tax exemption. However, certain activities relating to manufacturing have not been recognised in these provisions, in part because the activities represent new manufacturing technologies. These changes are generally welcome, because they offer some relief from a ramshackle and piecemeal sales tax regime, which has been expanded during the terms of this Government, to an extent that wholesale sales taxes have increased in total by more than 200 per cent to $10,668m.

On the other hand, these measures go no way at all towards satisfying the Government's undertaking to simplify the wholesale sales tax system. Unarguably, we are being taken in the other direction, towards even greater complexity, confusion and costs of compliance.

This Bill only gives further weight to the coalition's contention that a broad-based consumption tax is needed to replace the present dog's breakfast that is the wholesale sales tax mess. It is relief on taxes on all business inputs, such as is being given to a very short list of specialised items in the Bill, which is an essential feature of our goods and services tax (GST). That is only one reason that our GST is superior to either wholesale sales taxes or other types of broad-based consumption taxes which are, in reality, only generalised retail sales taxes on goods and services.