Mr FITZGIBBON (12:13 PM) —Once again the opposition are being forced—not asked but forced—to debate and give passage through this place to a very complex tax bill on very short notice. The Tax Laws Amendment (2005 Measures No. 1) Bill 2005 was only introduced into this House last Thursday morning and here we are once again being expected to not only debate it but support it. The government is becoming serial in this offence. The opposition can only conclude one of two things: either this serial offending has its roots in complete arrogance and hubris or, indeed, it has its roots in total incompetence. I am not sure which it is but I suspect it is a bit of both.

We have been vindicated in this place in raising our concerns about these rushed measures. The House will be reminded that late last year the Assistant Treasurer introduced in this place a bill dealing with the application of the GST on unreviewable medium- to long-term contracts, expecting us to give passage to that bill in both houses of this parliament by the very next day. A lengthy and complex bill, which the government had had five years to prepare—it has been five years since the introduction of the GST—it was rushed into this place in one day with the expectation that it would be passed by both houses of the parliament the next day. We were vindicated on that occasion in not allowing ourselves to be bullied in that way. Having taken the period over the Christmas break to further consult industry, we were able to determine that there were flaws in that bill, particularly in relation to the arbitration period for the negotiation of those contracts. We were able to determine that there needed to be a time limit on the arbitration period and we were further vindicated when the government accepted our amendments in the Senate on those provisions. So we are right to be concerned about the way the government keeps imposing upon us and rushing in these complex tax bills. That sort of rushed treatment of our taxation laws does not provide for good taxation law in this country, and we will continue to hold the government to account in these terms.

The bill before the House today, the Tax Laws Amendment (2005 Measures No. 1) Bill 2005, contains four measures. It extends some exemptions from the provisions of the fringe benefits tax. It makes some changes to the capital allowances regimes. It introduces changes to the application of the GST for some inbound tourists. Finally, it introduces the government's so-called `mature age offset' or, in other words, rebate. The opposition will be supporting each of these measures, in some cases, I should say, reluctantly, and in all cases without any great enthusiasm.

We think the FBT changes are highly concessional and are potentially open to abuse. We are concerned about the pattern developing with respect to capital allowances. The year before last we had the government come to us seeking to depart from its commitment to effective life and to give a further time frame to certain gas infrastructure in the oil and gas industry. Here it is this year again seeking to depart from effective life with respect to some transport issues. We will all recall that a commitment to the reform of our capital allowance regimes was an important part of the Ralph reforms, part of the trade-off between a lower corporate tax rate and the very generous capital allowance regimes that were in place prior to those changes—and here we are with the government slowly but surely creeping that back in. So we have got the lower corporate tax rate, which we all invite, but here we have got a form of industry welfare potentially as the government seeks to claw back that commitment. We are also concerned that the GST amendments, while they are well intentioned and we support them, are potentially poorly drafted. We will be seeking to further investigate those matters by way of a Senate committee.

On the fourth measure in the bill, frankly, we do not have any confidence at all that it will do anything to address all of those very important issues raised within the Intergenerational report. It will do nothing increase work force participation amongst more mature Australians. Indeed, I suspect that not one over 55-year-old person will be basing his or her decision to stay or not stay in the work force on this $500 annual rebate. Here is a $500 gift from the government, costing around a billion dollars over four years, and I suspect that not one decision will be based in the end on that $500 amount.

On that basis I move the amendment circulated in my name and seconded by the member for Rankin:

That all words after “That” be omitted with a view to substituting the following words:

“whilst not declining to give the bill a second reading, the House condemns the Government for:

(1) failing to embrace real and meaningful tax reform; and

(2) failing to develop effective tax and related policies to address the problem of Australia's ageing population”.

What we have before us is another tax amendment which seeks to do some important things, but what we are still lacking in this place is any real commitment to real tax reform. No wonder that the government's back bench is becoming so frustrated and so agitated. No wonder the business community is becoming so frustrated and so agitated. No wonder so many in our community are still concerned about the high marginal tax rates they face and, indeed, the high effective marginal tax rates that they face.

Throughout the eighties and the nineties Labor governments tackled front-on tax reform in this country. There were dramatic reductions in marginal tax rates—not just compensation for consumption taxes but real reductions in marginal tax rates, returning the proceeds of bracket creep. There was the introduction of capital gains tax. There was the extension of superannuation for all Australians. Not only did this benefit those Australians contributing but it also had important positive implications for Australian savings generally and, of course, the current account. There was dividend imputation. These are just some examples of the tough reforms Labor took on in the eighties and the nineties, the very measures that laid the platform for the 14 years of consecutive economic growth we have enjoyed over the last period.

This government wants to rest on its laurels. It likes to claim to be a tax reformer because it introduced a GST. It is simply not enough. The government gets no credit from me, personally, for introducing something which I think was an inevitability in this country, given the rise and the strength of the services sector which we have in Australia. It certainly does not deserve credit, given the hash that it made of its design, in particular the unnecessary complexity of the GST and the mountains of additional compliance and paperwork burden it has placed not only on the business community generally but, in particular, on the small business community.

The GST is now growing by more than nine per cent annually, reminding us, even though it is an orphan child to the government, that this is now officially the highest taxing government in Australia's history. Regardless of the merits or otherwise of the GST, it represents no excuse to sit on your hands and to ignore the other pressing taxation reform needs of this country. It certainly is a reminder of the government's failure to fully embrace the reforms put forward in the Ralph report on reform of taxation in this country. What is happening with capital allowances today is a perfect example of that, but so too is the government's failure to take on trusts. The opposition signed up to Ralph and agreed with the reforms but only on the basis that all the reforms would be adopted, including those that sought to address discretionary trusts and the tax avoidance which relates to them. But they were all dropped, so it is no wonder that the so-called `ginger group' over there is agitating around the place. It is no wonder that it has become frustrated and it is no wonder that the government is finding more and more on a daily basis that it is getting pressure from its back bench to do something about those things it has been unprepared to do.

I do note that the ginger group is not so much about tax reform but about tax cuts. That is not what real reform is all about. Real reform is promoting the effectiveness and efficiency of our taxation system, increasing our competitiveness in an increasingly global economy, and basically making sure that our tax system is fair and makes us competitive in the world. I have not seen too much of that from the so-called `ginger group'. Their real motive is to ingratiate themselves with certain sections of the community, in particular the business community, and of course this partly reflects the nature of the constituencies many of them represent.

Tax reform is also about maintaining appropriate fiscal discipline. That is something we all now know that the government failed to do in the lead-up to the 2004 federal election—a reckless spending spree we now know has implications for interest rates, as has been effectively conceded by the Reserve Bank of Australia in its recent statement on monetary policy. Some members of this House will be taking the opportunity this coming Friday to flesh out some of those issues when we meet with the Reserve Bank at a hearing in Sydney. It was a reckless spending spree which also has opportunity costs. I have been around this place long enough to know that policies developed, produced and announced during the heat of an election campaign are likely not to be very good public policy. I think there is at least one example of that before us today, that being the mature age tax offset. But every dollar spent on poor policy is one dollar less available to spend on good public policy. It is one dollar less for the budget surplus, with all the implications that has for the broader economy, including interest rates and our current account deficit. Further, every dollar spent is one less available for investing in skills, one of the very things that both the Reserve Bank and the OECD have nominated as real warnings—red flags—to the Australian economy.

Every dollar spent on bad public policy is one dollar less to spend on addressing our infrastructure bottlenecks in this country. This is another matter which both the OECD and the RBA have identified as a real problem, not just emerging in our economy but placing capacity constraints on our economy which will inevitably lead, as the RBA governor has foreshadowed, to higher interest rates in this country—something the Prime Minister unequivocally said would not be the case under his administration. That was the key plank in the election campaign as created by the Prime Minister. We now know without any doubt whatsoever that these constraints, both in skills shortages and in infrastructure bottlenecks, will result in upward pressure on interest rates and, indeed, will result in increases in interest rates in this country over the next little while.

These are important issues. And, of course, every dollar spent is a dollar not available to real tax reform—to getting rid of those high effective marginal tax rates, to making our taxation system more globally competitive and to ensuring that our tax system is available as a tool for redistributing wealth in this country—an important matter that this government has conveniently forgotten about. It is important in the context of the mature age tax offset that we are discussing today and in the context of the small business initiative that we saw last week, which was just another tax offset. I remind the House that it is important to remember that it is not the revenue side of the budget that does most to reduce the gap between the haves and have-nots in this country. Indeed, it is the spending side of the budget that makes the greatest contribution towards promoting equality in this country. On the spending side, it is not the cash benefits that make the greatest difference. It is not the constant, well-targeted, politically driven handouts that we see from this government, not only throughout the election campaign but even more recently—matters like the tax offset and the small business tax offset for very small firms. And it is not family tax benefits A and B either that made the greatest contribution towards equality. It is the non-cash benefits that come from government.

What are the non-cash benefits? The non-cash benefits are, of course, government investment in important infrastructure. What are these important vehicles of infrastructure? They are our schools, our hospitals, our child-care centres, they are investment in education and training—the very things that should have overcome some of the capacity constraints we are facing at the moment, the very things that are leading to an increase in interest rates, the very things the government has failed to invest in over the course of the last nine years and the very things the broader Australian public can look towards for an explanation of why their mortgage interest rates are about to go higher under this government. These are the matters that are all forgotten.

I just had a meeting with representatives of the Commonwealth Bank, and there I was reminded of an initiative taken by them not all that long ago and that is still ongoing which seeks to increase the level of financial literacy in this country. They are doing some very good work in modelling the positive impact that can have on GDP. We can never underestimate the return on our investment in skills and education and the benefits of that to this country, and we have to see a little bit more of it around this place.

I want to go to the provisions of the bill. Schedule 1 amends the Fringe Benefits Tax Assessment Act to (1) provide a fringe benefits tax exemption to cover the engagement of a relocation consultant to assist in the relocation of an employee; (2) broaden the FBT exemption for eligible work related items that currently include laptops and mobiles et cetera to include personal digital assistants and portable printers designed for use with portable computers; and (3) broaden the FBT extension for remote area housing to cover employers in industries where employer provided housing is not customary. The opposition acknowledge that, in the past, these concessions for remote area housing have been important for regional development, but I am concerned that these extensions to non-customary industries may give the opportunity for exploitation of these provisions. The opposition are indicating that we will allow these measures to pass but we will be keeping a watching brief on them.

Schedule 2 of the bill is one I referred to in my earlier comments. The Commissioner of Taxation progressively updates the effective life rules of assets for depreciation purposes. A significant review that occurred last year came into effect on 1 January and was announced in a recent determination by the commissioner. This significantly increased the effective life of buses, light commercial vehicles, trucks and trailers, on average to 15 years. This means that, since an asset is allowed to be depreciated over a longer period, a smaller annual deduction will apply. This is neutral tax treatment which enhances economic efficiency and is good practice.

But in an election context the government moved to override this determination through legislation. As I said earlier, this was not for the first time; it did so a year or two ago for gas pipelines. On that occasion the government argued, rightly or wrongly—and I should say that Labor supported the change at that time—that the departure from the effective life regime was a means to increasing investment in the gas pipeline network in this country. That was a good cause the opposition was prepared to acknowledge. On this occasion the government is arguing that this is an environmental and safety measure, an attempt to get older heavy vehicles off the road. Again, arguably, the government has a strong case, and the opposition will be supporting the measure on those economic, environmental and safety grounds. But, again, we are nervous about what appears to be the government's constant determination to depart from its commitment to the effective life regime, something which I remind the House was an integral part of the Ralph reforms and very much part of the trade-off between a lower corporate tax rate and accelerated depreciation.

One wonders what comes next. Is it the mining industry next? Is it a return to the attractive and generous capital allowance regimes the industry enjoyed in the past? We shall wait and see. We will deal with each of those measures on their merits as they arise. The other point I would like to make about this provision is to pose a question as to whether this change should have a sunset clause. If it has the effect it is intended to have, then one would like to think that the necessity to address this issue—that is, older vehicles on the road—may decline over time. That is another matter on which we shall keep a watching brief. Labor are concerned this bill was not introduced earlier as it is retrospective. As I said earlier, the government is foisting these bills on us at short notice.

Schedule 3 seeks to close a loophole that allowed an option to purchase certain services, most commonly bed nights—accommodation in hotels—to be available to offshore wholesalers without the imposition of the GST. This effectively means that a package of tourism services can be constructed GST free for foreign tourists. The main group of nonresidents who are able to make supplies in these circumstances are nonresident tour operators. Typically, these operators acquire Australian package holidays from resident tour wholesalers and then on-supply them to tourists. If these supplies constitute supplies of rights or options to acquire things to be consumed in Australia, they will not be connected with Australia as required under the GST act. This is contrary to the policy intent that GST should be paid on supplies of Australian package holidays to both Australian residents and nonresidents. On that basis Labor will support the amendment.

Again, we will be seeking to send the provisions of this amendment to a short Senate inquiry to ensure that there are no unintended consequences. Most GST regimes in other countries tax the services of an enterprise that operates in the host country. Australian tax law operates rather strangely in imposing a different test: the services need to have a sufficient connection to Australia. The need to legislate this issue is one of the outcomes of this definitional approach. Notwithstanding the numerous uncertainties that this definitional approach entails, Labor supports the broad measures of the government to close this loophole. We do not believe that foreign tour operators should be able to claim input tax credits, as some appear to be doing, while not paying the GST. However, the government may have been somewhat overzealous in its approach and this is why we are seeking to refer the bill to a Senate committee.

Labor have consulted with experts on this schedule, even though time has been short. We have been advised that the approach in the bill is highly deficient in that it may mean that foreign contracts between countries and clients with nothing to do with Australia are caught by the GST. For example, some contracts that relate to services that have at best a very weak connection to Australia may have to pay GST as well as UK VAT, and neither of these parties may be enterprises that operate in Australia. We have been advised that this measure may not be welcomed by other nations, as it seems to impose tax outside our national jurisdiction. Indeed, there are concerns within the ATO and they should be addressed by the government. There is a concern that the ATO may have to vet all these foreign contracts, which would effectively make the law totally unenforceable. Unenforceable laws are, of course, bad jurisprudence.

In terms of the local industry, there is a concern that the bill will not simply tax the supplies of the services but will also tax the overseas wholesalers' margins. This may drive up the price of the service. In tax terms, this has the effect of disadvantaging Australian inbound tourism relative to other markets.

While recognising the constraints on the Senate's resources at this stage, this issue is too complex and important to deal with outside the context of a Senate committee. Again, Labor will appropriately be referring it to a Senate committee.

Schedule 4 deals with the introduction of the mature aged worker tax offset. I think I have said enough already, and I know that other members on this side of the House will be taking the opportunity to speak more broadly about the inadequacy of this measure, but I want to mention a couple of things in more detail. Eligibility for the offset will, of course, be based on age and net income from working—that is, income that is mainly a reward for the taxpayer's personal effort or skills, or income from a business that the taxpayer conducts, less any relevant deductions. Certain amounts of income are specifically excluded from the definition of `net income from working'. These amounts relate to eligible termination payments and payments in lieu of long service leave and the like.

There are a number of important points to be made in relation to schedule 4. Labor does not seek to oppose those measures in which the government can legitimately claim to have an election mandate. The basic policy intent of the mature aged offset is an election commitment. However, it is clear that the government have introduced a number of new elements to the proposal that were not announced in the election context. This can be clearly seen in the increased costings for the overall measure. The costings exceed the estimates by at least 25 per cent. When the minister closes this debate, we will be providing him an opportunity to explain why that is the case. The government want to do something about work force participation amongst people over 55, but it seems to me they do not know how many of them there are. I invite the minister to give some explanation on those concerns. Again, we will be asking a Senate committee to look at the integrity of the bill and the efficacy of the measures in schedule 4.

The government has extended the measure to include in the means testing measure not just gross income but also net income from work after tax is deducted. This a strange way to construct a means test; it is almost unprecedented in the income transfer system. To base a means test on net income after tax deductions adds to the complexity of the whole system; it is a basis that is inconsistent with measures adopted in the family payments system and other elements of the tax system. This is another example of how the government adds layers to the overall income transfer system in a haphazard way. The whole system looks like a house under constant renovation: there is no blueprint and no coherent architectural plan—just another dodgy extension. As these new layers are added to the whole structure, it begins to look increasingly unwieldy.

The government has also extended the measure to include partnership income—a further extension for which it has no mandate and to which it made no reference in the election campaign. Treasury has been consulted as to whether the measure included an estimate of the gains from labour market participation by mature Australians. Labor sought some indication of the dynamic gains of the measure. We have been told that Treasury has not calculated any such gains. So we can but conclude that there are no such gains associated with this measure.

The basic rationale for the offset is to increase labour market participation and thus drive up economic growth. But, if Treasury cannot quantify any such dynamic gains, it appears that the measure is bereft of any real public policy justification, goal or objective and is simply another pre-election promise to one sector of the community. Again, I express a lack of confidence in these promises, which were made in the context of a heated election debate. In the absence of any evidence of these dynamic gains, Labor will be supporting the bill, but we will be asking a Senate committee to have a look at them and inquire of Treasury how they justify this measure in public policy terms. Again, Labor supports the four measures with qualification and without enthusiasm, and we will be having a closer look at them in the Senate.

The DEPUTY SPEAKER (Mr Hatton)—Is the amendment seconded?

Dr Emerson —I second the amendment and reserve my right to speak.

The DEPUTY SPEAKER —The original question was that this bill be now read a second time. To this the honourable member for Hunter has moved as an amendment that all words after `That' be omitted with a view to substituting other words. The question now is that the words proposed to be omitted stand part of the question.