Mr LATHAM (10:16 PM) —The Taxation Laws Amendment Bill (No. 4) 2002 contains four significant provisions: schedule 1 seeks to tighten some provisions concerning so-called `thin capitalisation' to prevent revenue loss; schedule 2 offers tax concessions to trusts restructuring into companies; schedule 3 would give temporary residents of Australia a tax exemption for income sourced outside the country; and schedule 4 is designed to legislate for caps on the effective life of certain assets—that is, to provide a type of accelerated depreciation in the form of legislative caps on assets used in gas transmission and distribution, oil and gas production, and for aeroplanes and helicopters.

The thin capitalisation provisions are not controversial. Thin capitalisation rules limit the proportion of total capital that foreign owned or internationally operating Australian companies can carry as tax advantaged debt funding. The rules limit opportunities to base such debt funding in Australian based companies in order to limit opportunities to minimise tax. The amendments in this bill include a tightening of the treatment of interest-free loans as equity and a redefinition of the exemption for Australian companies with small overseas operations. The changes protect existing revenue, preventing losses of $50 million in 2002-03 and $30 million in 2003-04 and subsequent years. As a result, Labor supports this particular measure.

The trust to company rollover provisions legislate to provide capital gains tax rollover relief for trusts to become companies while retaining the same beneficial ownership structure. The proposal is costed at zero on the basis that the provision is already contained in the forward estimates. We have already asked the ATO and Treasury to provide a nominal costing of the value of the tax relief and Labor will be pursuing this question further. Of course, there is something farcical about the introduction of these provisions right now. The logic of the changes is that, as the government moves to harmonise taxation of trusts and companies, the transition from trust to company status should be tax neutral. It is just that the Treasurer did not have the bottle to go ahead with changes to the taxation of trusts, which had bipartisan support in this parliament.

It needs to be noted by the parliament that there was a time when there was bipartisan support to move forward on the taxation of trusts and that, in effect, the Treasurer broke the deal that had been entered into with the opposition at the time of business tax reform. As a result, we now find ourselves voting for what are effectively transitional measures—measures to ease the transition to a reform that may never happen. In fact, if one takes the broken word of the Treasurer, it is likely to never happen on that side of the parliament. Nonetheless, even if the government and the Treasurer have not acted in good faith, taxpayers who acted on the basis of the Treasurer's statement of October last year have actually done the right thing. The changes reflect those announced by the Treasurer on 5 October 2001. Noting that we await full information on the nominal cost, the changes are sensible ones which the opposition supports. It is just a shame that the changes are made necessary by the Treasurer's breach of faith.

The proposal to give temporary residents of Australia a tax exemption on foreign sourced income is extraordinary and not one that the Labor Party can support. If this becomes law it would mean that temporary residents in Australia pay no Australian tax on most foreign sourced income and capital gains, and their banks would be exempt from paying withholding tax on residents' interest payments on overseas borrowings. The cost of this tax cut would be $200 million over four years. This is a $200 million tax cut for corporate high flyers—`key personnel' as the parliamentary secretary puts it. According to the government, this is needed so that business can attract key personnel.

The opposition has sought answers to two simple questions: first, which sectors are finding it difficult to attract key personnel and, second, which of our international competitors has an exemption for foreign source income? To date, unhappily, there have been no answers. The government cannot even explain what problem this $200 million measure is supposed to solve—much less whether this money would solve the problem. Even by the government's measure, there is no good reason to believe this money would make any contribution to the public good. Of course, the opposition is also concerned about the distributional effects of this tax cut. The government evidently has not even thought about whether the people who would get this tax cut really need it; it has not even entered their consideration. But on this side of the parliament, we think it is important to ask where the money is going and to ask some basic questions in the good interests of public finance and public concern. When this measure comes before the Senate we will be asking the Treasury and the Australian Taxation Office to tell us what the average person who would benefit from this tax cut actually earns.

This government has a dismal record on regressive taxation measures. There is the so-called baby bonus, where the more you earn, the more you get from the government. Then there are the superannuation surcharge changes worth $370 million, where the government is cutting tax for the top three per cent of employed Australians. Now it turns out the government is not content with cutting tax for rich Australians; it is actually cutting tax for rich foreigners. This is the ultimate in elitist policy—a $200 million tax break for transnational elites. It is not even what you would classify as a middle-class tax cut; it is a massive tax break for transnational elites. Labor will be opposing amendments in the Senate to remove this regressive tax cut.

We need to examine the sort of transnational elites who will benefit from the government's measure. One of them is Malcolm Turnbull. We saw some evidence of this in the Australian just last Monday, in the column by Glenn Milne. Mr Turnbull, as a transnational elite, is the sort of person who regrets that he was not born on the east coast of the United States, shoehorned into fundraising for the Republican Party and then drafted as an under assistant secretary to the Treasurer. This is the sort of fantasy world in which Mr Turnbull lives. It is the sort of fantasy that was played out in the Milne article on Monday: three great delusions under which the transnational elite Mr Turnbull operates. The first delusion is that he thinks it is influential to be rubbing shoulders with Condoleezza Rice engaged in a conversation with a Russian IDU delegate—even though Mr Turnbull did not even know that they were speaking in Russian. There he is, engaged in a conversation that he could not understand. He did not know the language in which the conversation was being conducted, but he thinks that is being a big shot. In fact that is being what I call a transnational elite: someone who is out of his depth and who just lives this tourist's view of the world as a way of engaging in some form of politics.

The second great delusion outlined in this article is the idea that bumping into a deputy secretary of the US treasury—perhaps while Mr Dam was out walking his dog—is another form of geopolitical influence. In fact it is another form of delusion on the part of Mr Turnbull. The final delusion is his idea to establish a permanent Australian economic and political think tank outside the Australian Embassy which would lobby administrations. Why have an Australian Embassy in Washington if we also need an economic and political think tank to lobby the American government? This is just a massive waste of public money. It is duplication of public resources and it is also a slur on the foreign service, on the diplomats of this nation who do their best at our American post in Washington.

These are the delusions of Mr Turnbull. It is not influence; it is a state of delusion. It is a problem that one of these transnational elites lives out in his own little fantasy world. This is the sort of person the Liberal tax policy is all about. This is the sort of person that this $200 million tax cut is directed towards: the Walter Mitty types, the born to rule, rich elites of Tory Australia. All I can conclude in relation to Mr Turnbull is that it is no wonder we lost the republic referendum. We should not have relied on the views of a delusional transnational elite. We should not have relied on the perspective of this Liberal Party treasurer, someone who wishes he was actually born on the east coast of the United States and was operating out of the Republican Party. We should not have relied on those particular views to lead the charge towards an Australian republic.

Schedule 4 of the bill provides for legislative caps on the effective life of assets used for gas transmission and distribution, oil and gas production companies and companies operating aeroplanes and helicopters. As part of business tax reform, the old system of sector specific accelerated depreciation provisions, and some other sectoral subsidies, was replaced by a lower corporate tax rate across the board. The period over which tax deductions could be claimed for the depreciation of income-producing assets was to be decided on their real working life. It was clearly understood during the process of business tax reform that the underlying depreciation schedules then in place were to be reviewed by the Commissioner of Taxation on an `effective life' basis. As the Ralph report stated:

Labor supported this sound reform. We believe as a basic economic proposition that investment should be driven by economic return, not by taxation advantage. Now the Commissioner of Taxation is due to issue the new determinations on the effective life of a number of asset types including aeroplanes, helicopters, gas transmission and distribution assets and oil and gas production assets including offshore oil and gas platforms. The provisions in the bill would legislate a statutory cap on the effective life of these assets—in other words, it would legislate a form of accelerated depreciation—at a significant cost of $1.9 billion over the next 10 years. In principle, Labor does not oppose a legislative override of the commissioner's ruling on effective life. That is the principle by which we are guided. However, we have a note of caution: the parliament needs to assess this significant expenditure proposal carefully. We need to give it full and thorough assessment, particularly against other spending priorities. There are reasonable arguments on both sides of this debate, but the most important thing is that we need more information, especially on the cost to revenue of the particular caps that are proposed under the provisions.

Labor acknowledges that the oil and gas sectors need to be internationally competitive if they are to make a strong contribution to Australia's national development. We want to support these sectors, but we also want to support prudent budget management. We want to support an element of caution and prudence in these bills. I see the member for Solomon muttering away opposite: he would not know any of the provisions. Mr Tollner is muttering away: maybe he can provide the House with the information that has not been provided by the government itself. While the explanatory memorandum provides a detailed listing of the proposed new caps for each asset type, the financial impact statement only gives a total figure. It only gives a gross figure of $315 million for the four years 2002-03 to 2005-06 and a figure of $1.9 billion for the 10 years 2002-03 to 2011-12. Maybe the member opposite has more detailed information that he is going to provide to the House because, quite frankly, you would not be proceeding on the basis of the information that has been provided so far.

It is not sufficient for the House to have confidence in these measures until we get a breakdown of the financial impact sector by sector. All we have is a gross figure. All we have is a bottom line, aggregated figure and we obviously as a parliament need more information with which we can move forward with confidence on these measures. In order to make the judgment about the detail of these caps, the parliament needs to seek a breakdown of the cost for each of the specific caps that are proposed. We also need to see the cost of alternative caps that are being considered. It would also make sense to know what the commissioner's decision actually is before the parliament overrides him. I am particularly interested to know the source of the figures for the `ATO's proposed new effective new life or range (years)' contained in the explanatory memorandum to the bill as part of table 4.2 on page 79. As far as we are aware, these figures have not been made public. We would like to know where they have come from. We would like to know the detailed breakdown. We would like to know much more information than the government has so far provided to the House.

Debate interrupted.