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Thursday, 29 May 1997
Page: 4489

Mr ZAMMIT(10.24 a.m.) —I recall some years ago, at the sort of dinner we often have to go to as members of parliament, sitting next to a gentleman who was a solicitor employed by a very large firm of solicitors that specialised in company law. He not only specialised in company law but also in accountancy.

During the course of the evening I asked him what he did specifically. He said the only reason for his existence in that department of this very large firm of solicitors was to find loopholes in the taxation act. He said he had a group of three or four people working with him and his sole task, charged to him by his employers, was to pore over the company law act, look at the taxation act and just find holes where his clients could fit through. I think it does no good that some of these very large companies look for ways of circumventing the intention of the taxation act.

I am always very pleased to talk on bills such as the Taxation Laws Amendment Bill (No. 2) 1997, which is before us, because, frankly, the use of these tactics, whilst perfectly legal, I believe is not morally correct. Anyway, I am very pleased to speak on these bills when they mean that they will be closing off a lot of these loopholes that are being taken advantage of by people who are highly qualified in their field, but who are finding ways of circumventing the intention of the parliament.

Probably the most important initiative contained in this bill is in regard to withholding tax avoidance, which was flagged in last year's budget, referring specifically to part IVA of the Income Tax Assessment Act. These provisions will apply to non-resident interest, dividend and royalty withholding tax to greatly minimise the opportunities and, hopefully, eradicate the practices of withholding tax avoidance schemes. The government policy on withholding tax does not change. However, the loopholes will finally now be plugged.

Another important initiative contained in this bill refers to dual resident companies. The income tax law will be amended to stop dual resident companies that are in essence non-residents from taking advantage of their dual resident status by claiming specific tax concessions as a result of their discovering another loophole in the act, which ultimately costs the government and the people of Australia a great deal of lost revenue.

In relation to the leasing of luxury cars, the bill also makes necessary adjustments to the act that specifically address the issue of depreciation. I am also very pleased to see another loophole in the act referring to interest withholding tax and other related provisions that are long overdue included in this bill.

The other amendments in the bill refer to the transfer and carry forward of net capital losses. This amendment is intended to rectify an anomaly that exists whereby the intended purposes do not occur through the recoupment test for company taxpayers. In other words, as currently applies, capital losses are able to be recouped even though there has been a substantial change in the beneficial ownership of a company since the loss was sustained by that company and that company continues to trade but in a different business.

I support these long overdue provisions contained in this bill. I strongly support the minister in having brought forward these long overdue changes.