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Thursday, 25 September 2008
Page: 19


Mr MORRISON (11:03 AM) —The Tax Laws Amendment (Political Contributions and Gifts) Bill 2008, which we now see in this place in a different form but really for the second time, goes to matters that are quite dear to my heart—not because I am terribly fascinated with the inner workings of these types of issues but because it goes to the heart of what we need to do in this country to ensure that we protect our democracy from the excesses of campaign finance and fundraising that we are seeing at a state level and a federal level. If we look to the evidence and experience of what is happening overseas, particularly in the United States, we see it is not something we want to happen here in Australia. In our democracy we do not want the same sort of excessive spending in elections and we do not want corruption in the way donations are handled, particularly in relation to members who sit in this place.

Our objection to this bill is its timing. Currently, a significant review of these matters is being undertaken, and what we have seen from those opposite is the cherry picking of issues of campaign finance reform. They have been finding little bits and pieces here and there and looking to sneak them through before they are subjected to the full force of a comparative assessment of all measures in one go.

The coalition parties, in contrast, have a deep and genuine commitment to addressing what I believe is a crisis of confidence. Those opposite like to talk about crises. I will offer one crisis that they should think about: the crisis of confidence in the Australian political system caused by revelations involving ALP donors and ALP councillors on Wollongong council. To address this we must put our campaign finance regime under the microscope at both state and federal levels. There are two things I think we need to take into account when we do that. There need to be sufficient authorities, investigatory powers and enforcement measures in the future to prevent such illegal acts as we have seen in Wollongong. Secondly, we need to remove weaknesses in our legislative and regulatory frameworks that may give rise to an environment where such illegality could take place in the future. We should not delude ourselves that what took place in Wollongong was necessarily the fault of something such as tax deductibility. Of course it was not. We are talking about illegal acts. People are appearing before inquiries and ultimately before courts because of illegal acts. There is an issue of illegality at play here, and we need to ensure that when we look at the overall system of campaign finance we look not only at the framework and the regulatory structure but at how these matters are enforced.

The coalition successfully referred the matters relating to campaign finance to the Joint Standing Committee on Electoral Matters when the government failed to take the initiative. After an election it is common practice for the government to make a reference to the Joint Standing Committee on Electoral Matters, but when the government did it on this occasion they refused to make any reference to the issue of campaign finance. Being aware this was the government’s intention, Senator Ronaldson put forward in the other place a reference to the Joint Standing Committee on Electoral Matters that put on the table all the issues relating to reform of campaign finance.

Not only was it not good enough for the government to fail to go there themselves, but the motion to refer these matters to the joint standing committee was actually opposed by the government. They did not want to have a warts-and-all look. This government like to take a good look at a few things but they were not too keen on having a good, hard look at what was happening with our system of campaign finance reform. They want to have this committee talk about all sorts of matters relating to squeezing in votes where numbers are not put in correctly, and have long debates on those sorts of issues, but one thing they did not want to have a good look at when they put forward this reference was campaign finance reform.

To the great credit of the committee—and I pay tribute to the committee chair, the member for Banks, who agreed with other government committee members—it agreed that this reference provided from the Senate should be taken concurrently with the reference from the Special Minister of State. We do have, as a result of the goodwill that exists in the Joint Standing Committee on Electoral Matters, a genuine and very serious inquiry going into the matters of electoral reform.

By contrast, in putting forward these measures, the government has taken a very piecemeal approach. There is also going to be a green paper. We look forward to that green paper. I look forward to it with a lot of enthusiasm because it is my sincere hope that the Special Minister of State will be taking these matters seriously and putting serious measures of reform on the table. Why we are looking at individual items in this place in advance of a green paper where we can look at these matters altogether continues to puzzle me.

My colleague the member for Casey made some points about the real origin of the measures in this bill. He made reference to a previous gathering of the Joint Standing Committee on Electoral Matters that had actually been in favour of having tax deductibility where it currently rests. The previous speaker, the member for Parramatta, indicated this was an election policy commitment. I am a keen observer of politics and campaigns but it was a very quiet morning when that press release was put out. It did not tend to get the coverage which most major election commitments are given. As a result, I think it is a bit rich for the government to stand there and say: ‘This is our mandate. We have a mandate for this and it is going to save all of this money.’

The real origin of this measure was the ALP’s policy platform at the national convention in Sydney in 2004. That is when the decision was made by the Labor Party to walk away from a bipartisan commitment to improving these arrangements. They walked away in 2004, and there was no discussion in that context of savings measures or how much money would be saved by removing tax deductibility. No, it was all about trying to entrench an advantage. What we have here is a bill which effectively implements the decision of the Labor Party delegates, more than half of whom are from the union movement, who decided that political donations made by people who pay taxes and who are contributing to the political party of their choice should not be tax deductible but—of course—union fees, levies and so on should continue to be.

No reference was made to revenue savings at that time. The government has definitely failed to demonstrate the urgency of this matter, and why it should be treated in isolation. That is not just my view. In the course of the inquiry it was not only the view of the opposition members on that committee that this matter should be dealt with concurrently with all the other matters before the committee but also the view supported by Associate Professor Graeme Orr from the Democratic Audit of Australia, who said:

... it is very premature to do away with a form of encouraging small-scale donating at the same time as seriously considering, in a few months time, the banning of large corporate and organisational donations. That is going to lead to serious questions as to where parties get the money from and deductibility, or matching funds, is something that needs to be kept in the mix.

In other words, we should not proceed with these measures in isolation. We must assess the comparative benefits or otherwise of these measures.

But there are other defects with this bill. The estimates of revenue savings are overstated and, at best, represent a bold guess. In their appearance before the committee, Treasury officials confirmed that the costing comprised two components: (1) savings achieved by the removal of deductions for party membership subscriptions and (2) contributions. According to officials, the membership component of the costing is $4.3 million in each year, yet in evidence, Treasury officials qualified the veracity of these estimates, saying:

… the thesis … is that parties do not give out numbers, because membership may be declining and they do not want to reveal that. I do not know whether that is true or not.

That is how confident that Treasury officials were in the estimates of savings to be achieved regarding memberships. Furthermore, in response to questions by the government chair of the committee about the $4.3 million figure used by Treasury being based on estimates of a 90 per cent claim rate, Treasury was unable to provide any evidence as to what that 90 per cent claim rate was based upon. In fact, in response to a question on notice inquiring as to the behaviour of taxpayers in relation to making claims for political deductions, Treasury officials confirmed:

The Australian Taxation Office does not have data on the median deduction claimed for gifts and contributions, or the number of taxpayers claiming any deduction.

In relation to donations, Treasury officials confirmed in evidence the difficulties of estimating revenue savings relating also to the claims for gifts and donations:

In the data we have from the Australian Electoral Commission website for 2003-04 and 2004-05, the $1,500 disclosure threshold was already in place, and there were very few donations disclosed below that level; therefore, we have had to make assumptions about what the potential level of donations below that level was in order to take up that distribution to probably being about the actual size that it was.

In other words, Treasury had no knowledge of the amount or value of donations less than $1,500, which is the subject of this bill. They derived an estimate based on a series of assumptions to arrive at a figure. While I do not doubt the internal logic of Treasury’s reasoning, the result is totally arbitrary as it relies completely on the base data, which in this case was completely nonexistent.

Treasury officials similarly acknowledged this point by drawing attention to their qualifications noted in the officially published release of the election costings, namely:

Given the range of implicit and explicit assumptions used to produce these revenue estimates it should be noted that actual outcomes may vary from these estimates if assumptions or behaviour change from our expectation. In particular, data on political party membership fees received is poor, and data on donations below the AEC disclosure threshold is also poor.

So Treasury officials have basically made it very clear that they frankly have no idea how much money this is going to save. The previous speaker made quite a point of saying that these measures would add $10 million a year to the surplus, but they cannot justify the claim for one cent of that saving. This is what has been put forward as the cause for urgency to bring in this bill. The bill does contain measures that should be considered as part of a very serious and broader inquiry, and there are, I believe, some very genuine bipartisan and cross-party efforts to try and arrive at a better system. But, no, those in the executive ranks do not want to allow that process to be given too much air. ‘We need to get these measures in quickly, so we’ll trump up some idea of saving $10 million a year that even the smart minds of Treasury cannot substantiate.’ I have to tell you, Mr Deputy Speaker, I listened to the Treasury evidence about this bill and they were trying very hard to give some substantiation to the figures in the bill—and they were shuffling, not through any lack of capacity on their part but because the savings which are projected here are basically fiction.

Arguments were also advanced—as the reason why tax deductibility should be abandoned—that tax deductions confer greater value to people on higher taxable incomes and are generic and not specific to this measure. Such arguments could be used to argue against every single tax-deductibility measure that sits within the tax act. So the reason we have to abolish tax deductions for political donations is that a tax deduction is of greater value to someone on a higher income? If that is what the government seriously think, they should remove every single tax deduction from the tax act—which is an absolute nonsense. This is a further pretext for bringing this bill into this place at this time which is exposed as being complete nonsense.

The bill fails to deal with the real issue of the culture of fostering influence and influence procurement, preferring to penalise small business donors while allowing unions and other non-taxpaying entities to channel funds, tax free, to their political parties of choice. The nature of illegal activity involving donors and councillors from Wollongong City Council will not be impacted on by the measures in this bill. The bill will have not a jot of influence on these types of activities—not one. Those are the issues that I believe are creating the crisis of confidence out there, but this bill is not seeking in any way to address that crisis of confidence. Treasury officials confirmed that those involved in the business of securing influence with this government—lobbyists—will continue to be able to claim deductions under the general provisions, while small businesses who are not seeking to procure such influence will be denied.

Senator Birmingham asked, in the committee inquiry into schedule 1 of this bill:

If a lobbying company attends a function with the Prime Minister or a premier—

and plenty of them are doing that around the country—

are they able to claim as an expense the entirety of that cost and up to what reasonable limit?

The response from the witness, Mr Hardy, was:

Basically, yes. If their business role is lobbying, networking and advocacy and they go to a function with political leaders in order to network, advocate and lobby, that will be just a business deduction for their business activity. There is no cap to that expense.

So Treasury have confirmed that this great initiative to introduce greater transparency and participation and remove the culture of influence that allegedly exists with political donations continues to have a provision which actually allows those whose business it is to procure influence to continue to claim a tax deduction. The mum or dad who makes a contribution of $200 to support a candidate that they believe is doing a good job will be denied that opportunity. But when the big Labor lobbying firms come to Canberra and they nosh up over in the Great Hall, they will be able to claim every single cent as a tax deduction.


Mr Keenan —Hawker Britton.


Mr MORRISON —Hawker Britton will be filling out the claims now in their massive accounts departments as their business has grown with the influence of this government.

The other matter I wish to draw the House’s attention to is that Treasury also confirmed that, while the bill will deny business tax deductibility for donations, non-taxpaying entities such as unions and charitable organisations will be permitted to secure contributions from taxpayers on a deductible basis and pass these resources on to a political party, non-capped and tax free, in the form of a donation. So they still get the money from their mates through their lunches, they still get their money from the unions and they are able to procure that money in a way that does not offend the tax act, but we are going to clamp down on those who are simply trying to make a donation to the political party or candidate of their choice.

These issues are incredibly serious and I am, frankly, offended by the way that the executive of the government is bringing these matters into this House without allowing a proper assessment really to be done to look at all of the measures that need to be on the table. We need to deal with the real problems in our campaign finance system, and this bill does not address them. One of the most fundamental truths in modern politics—and I would be surprised if any member disagreed with this statement—is that political parties enjoy raising money to fund their campaigns about as much as the public enjoys being subjected to them. Being able to provide support in our political process is a democratic right, whether it is through voting, volunteering or donating. This is far better than the alternative—just ask anyone living in Zimbabwe; however, no such rights are ever absolute, especially when they compromise the broader liberty of our system. While some believe the answer is just in greater transparency and banning certain donations from people they do not like, I believe that these measures simply do not go far enough. On their own, they fail to deal with the real problem: the need for so much money. They are part of a solution, arguably, but they are certainly not the solution.

A former Federal Director of the Liberal Party and a person of great standing in the Australian community, Lynton Crosby, once told me that money alone can never buy you an election, but not having enough money can certainly lose you one, in the context of campaigning. That used to be true in Australia, because in New South Wales I have seen the most comprehensively incompetent government re-elected on so many occasions it defies belief. They did it on the back of a $12 million fund in 2003 and a $16 million fund in 2007. The Labor Party of New South Wales have demonstrated you can buy any election you want if you can raise enough money. Labor’s big money club in New South Wales certainly does that. Then there was the $30 million war chest delivered by the unions to the current Prime Minister and the ALP at the last federal election. These experiences demonstrate a very unhealthy thirst for funds in our political process.

It is important that we consider real measures to address these campaign finance reforms. Foremost amongst those is the idea of a cap on election expenditure, as applies in Canada, and the registering of third parties to ensure that they are similarly involved in a cap and have to disclose where they get their money from. It is not good enough for just a political party to disclose donations; those channelling funds into the parties, particularly the union movement, need to disclose where they are getting their money from also. We cannot afford to go down the American road. This bill does nothing to stop us from going down that road. I call on the government to put some serious reform on the table.