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Thursday, 6 June 2002
Page: 3392

Mr LATHAM (10:14 AM) —The New Business Tax System (Imputation) Bill 2002 and related measures simplify the franking or imputation of tax paid on dividends to shareholders. Labor supports the principle that the tax system should be simple to apply, consistent with fairness and other objectives. For this reason we support the bill.

Aside from the general principles underpinning the bill, I want to address two important related issues. The first is this government's contempt for proper parliamentary processes. The first draft of the bill was released in late 2000. Then we heard nothing. The bills were not contained in the forward programs for this winter session of the parliament. Then the bills were introduced last Thursday, 30 May, and here we are debating them today, 6 June, seven days later.

The government knew that the bills were to come into effect on 1 July 2002. The government's inability to manage a program of legislation led to its failure to bring on the legislation during the last six parliamentary sitting weeks. This is an unrealistic timetable for the scrutiny of the legislation. The Labor Party finds it unsatisfactory; nonetheless, and despite the short time available, we are doing our best to make possible the passage of the legislation. I would urge the Parliamentary Secretary to the Minister for Finance and Administration, who is in the chamber, and the government to get their tax and economic legislation program together.

Yesterday, we had an abuse of the parliament. On a day on which interest rates rose, the Treasurer would not face the MPI in the House of Representatives. He left it to a National Party reject to do so. Billy Hughes always said that he would join any party but the Country Party. The parliamentary secretary was tossed out of the National Party. That is how badly he was doing. And he was left to answer the MPI yesterday: the Treasurer would not face up in the chamber to the vital matter of monetary policy.

The DEPUTY SPEAKER (Hon. I.R. Causley)—I fail to see how these remarks have anything to do with the bill. The member for Werriwa will come back to the bill.

Mr LATHAM —Now we have the abuse in this process where a bill that sat there at draft level doing nothing for two years was introduced into the parliament last Thursday, and here we are debating it today, just seven days later, without a proper opportunity for honourable members to scrutinise this detailed legislation. I note once more that it is not the Treasurer who is here to carry the legislation; it is a parliamentary secretary who has responsibilities outside the Treasury portfolio.

The second issue related to this bill is the revenue neutrality of business tax reform. The explanatory memorandum contains the bland statement that it has no revenue implications. That may well be, although the government's recent record of costing accuracy is not at all impressive. More broadly, the Labor Party is concerned that the government is walking away from its commitment that business tax reform should be revenue neutral. The Leader of the Opposition made this clear in his letter to the Treasurer agreeing to the business tax reform package. He said:

Labor is willing to pass the business tax package if it pays for itself. Labor will hold the Government to its promise on revenue neutrality. We cannot accept a reduction in business taxation at the expense of individuals and families who will bear the brunt of a GST, or the use of a Budget surplus to fund business tax reforms.

The opposition's position has not changed. We will continue to scrutinise the government's proposals for business tax reform on that basis. Business tax reform should not compromise the revenue of the Commonwealth.

This condition does not apply only to the proposals the government chooses to designate as new business tax system measures; the stated purpose of the government's reform was to achieve greater neutrality of tax treatment between sectors by replacing special concessions offered to particular companies and projects with a lower corporate tax rate. I have said before that there is a difference between the opposition being pro market and the way in which the government regards itself as pro business. In this case, the distinction is between the opposition, which wants what is good for all Australian businesses, and the government, which wants what is good for particular business interests, those interests that are close to the Liberal Party for a variety of reasons. The opposition supports Australian businesses which want only to benefit from their own enterprise and the lower corporate tax rate. We do not support particular business interests who want the lower rate and still continue to stroll around the corridors of this place seeking to retain their special concessions and special deals.

The bill has four key aspects: a flexible franking and new antistreaming rule, permission for private companies to frank retrospectively, a simpler franking account structure and, finally, consistent treatment of franked dividends received by entities. The proposed new antistreaming rule also involves some simplification as to requirements that all distributions of dividends made within any franking period—that is, generally within six months—be franked to the same extent and that the ATO be notified if the level of franking varies between franking periods by more than an amount of 20 per cent. This notification provision replaces an earlier proposal for penalties to apply automatically to such franking variations. This obviously involves a loosening of the rules, and thereby potentially costs revenue. We are surprised to see that this particular provision is uncosted in the explanatory memorandum to the bill.

Under the permission for private companies to frank retrospectively, companies will be allowed to frank dividends up to four months after the declaration date so that they can finalise their financial position before finalising their franking amount. This will make compliance with the antistreaming rules easier. Importantly, it also normalises what is a fairly widespread practice at the moment. The simpler franking account structure provisions allow a corporate tax entity to align its franking year with its income year and to maintain its franking account on a tax paid basis. This in turn should reduce the need for complex conversions to accommodate changes in the company tax rate or for the maintenance of different classes of franking accounts. This appears to be a genuine simplification, one that the opposition welcomes.

The new consistent treatment of franked dividends received by entities will remove the present distinction between companies that receive an intercorporate dividend rebate for franked dividends and individuals and other entities that apply a gross-up and credit imputation. This is a technical simplification which provides for greater integrity and consistency at law. Again, it is something that the opposition welcomes. Finally, some provisions in the bills are shifted from the Income Tax Assessment Act 1936 to the Income Tax Assessment Act 1997, achieving further simplification.

The opposition thinks the parliament deserves better than to have complex measures such as this dumped on it at a week's notice. We deserve better than having a spokesperson on the government side who has no direct responsibility within the Treasury portfolio. That said, and our grievances having been noted by the chamber, we support the principle of revenue neutral changes for a simpler tax system for business, and accordingly we support the bill.