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Tuesday, 1 February 1994
Page: 101

(Question No. 670)

Mr Prosser asked the Minister representing the Minister for Science and Small Business, upon notice, on 22 November 1993:

  (1) Is Cathay Pacific to be allowed to import second hand computer equipment into Australia free of duty; if so, what will be the loss to Commonwealth revenue.

  (2) Has Cathay Pacific imported any other equipment, possessions or material free of duty; if so, (a) what were they and (b) what was the loss to revenue.

  (3) Did the Government offer the concession referred to in part (1); if not, was (a) the Government approached by Cathay Pacific or (b) the concession negotiated through a third party; if so, who was the third party.

  (4) Will the Government offer similar treatment to other companies wishing to relocate their regional headquarters to Australia; if not, why not; if so, what will be the loss to revenue.

Mr Griffiths —The Minister for Science and Small Business has provided the following answer to the honourable member's question:

  (1) There are no customs or import duties on complete computer equipment or units thereof. Therefore eligible computer products imported by Cathay Pacific would be duty free upon application. Telecommunications equipment is subject to a tariff of 12% in 1993/94, phasing down to 5% in 1996/97. However, the company has not yet applied to import any computer or telecommunications equipment.

  The Government has agreed to provide Wholesale Sales Tax (WST) relief for equipment owned for not less than nine months and imported as part of the relocation of Cathay Pacific's data communications centre to Australia. The WST would have made Sydney less competitive than Singapore and the other competing locations for the centre.

  The Government's decision was taken in the light of the perceived national benefits of Cathay Pacific's investment. There are significant spin-offs in terms of employment and industry development. Cathay Pacific's data communications centre will employ around 60 highly skilled workers directly by the time it is established in 1995. There would be many more jobs created indirectly. Cathay Pacific estimates that it will purchase new equipment between the value of $60 and $83 million in 1995. Other benefits to the Australian economy will include land purchase, building construction and significant revenue to Telstra/Optus.

  The concession is restricted to sales tax on used equipment to be relocated to Australia and which has been owned for not less than nine months. The equipment is to be used in the data communications centre. The WST relief is to be provided through an exemption in the sales tax legislation to be introduced in 1994. An interim mechanism has been established to provide this relief to similar proposals that involve importing the used equipment before the legislation is amended.

  The used IT&T equipment to be relocated for the hub may be worth up to $133m, resulting in relief totalling $26-30m depending on the equipment's final value and rate of WST at the time of importation, currently 21%, and scheduled to increase to 22% on 1 July 1995.

  (2) Cathay Pacific has not imported any other equipment, possessions or material free of duty.

  (3) Cathay asked the Commonwealth for advice of the duty status of the used equipment. They were duly informed of the duty free status of computer equipment and the process required to apply.

  Cathay requested WST exemption. Several other individuals and organisations involved in their bid also made representations on their behalf to my predecessor, the then Senator Button, and his Department, canvassing a number of issues including the WST issue. These individuals and organisations included:

  Telstra, who have been dealing with Cathay Pacific on this proposal for three years;

  The Hon Peter Collins, then NSW Minister for State Development; and

  John Swire & Son, Cathay Pacific's parent.

  Cathay has also engaged a Customs Agent, Bruce Patten Pty Ltd, to determine whether it is eligible for the Computer Bounty scheme.

  (4) The Government agreed to compensate Cathay Pacific for the WST levied on equipment owned by the airline for not less than nine months and imported to form part of the relocated data processing hub and for this benefit to be available to similar future proposals. This concession is available on a case by case basis. In each case a company must supply full details of the proposal and demonstrate the economic benefits of their proposal.

  A number of companies have had preliminary discussions regarding the relocation of regional operations to Australia and are requesting a similar concession to that extended to Cathay Pacific. An offer to extend WST relief on imported second hand equipment has recently been made to Data General, which has decided to establish its Asian Data Centre in Sydney. The provision of WST relief was an important element in establishing the Centre in Sydney rather than Hong Kong or Singapore. Data General will be provided relief using the interim mechanism.

  The loss to revenue in WST relief for Cathay Pacific is estimated at $20-$30 million and for Data General $170 000. In both these cases, however, WST relief was a contributing factor to an investment of over $200 million by Cathay Pacific and a $25 million investment by Data General. It is the Government's view that the benefits of this WST relief in terms of the investment and employment it will generate, will outweigh any revenue foregone.