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Tuesday, 25 November 1986
Page: 2656

Senator McKIERNAN —Has the Minister for Industry, Technology and Commerce seen a report in today's Australian which claims that Australian companies are moving their factories off-shore in order to establish operations in markets far larger than the Australian market? Does the Minister agree with the view of Mr John Elliott quoted in the article that it is Australia's harsh tax rates which are pushing our firms off-shore?

Senator BUTTON —I have indicated publicly that I disagree with Mr Elliott's view on this matter and I do not see why I should not do so again here. The question comes as no particular surprise. I have said in the Senate before that Australia's business tax regime compares very favourably with those of other industrial countries. Taxation paid as a proportion of gross operating profit is 18 per cent below the Organisation for Economic Co-operation and Development average of 21 per cent. There have been major reforms of the Australian taxation system which include new measures to encourage productive investment-I think that is the important point-and these reforms have enhanced Australia's attractiveness to foreign investors at a time when other countries, such as the United States of America and Canada, are taking away tax concessions currently enjoyed by business. The Australian corporate tax rate will increase next year to a flat rate of 49 per cent but the overall burden of corporate taxation will fall with the introduction of an imputation system to abolish double taxation of company profits, the abolition of the 15 per cent withholding tax on dividends repatriated overseas and the abolition of branch profits tax. These reforms offer particular benefits to overseas investors and are favourable to Australian industrial activity. There are other features of the tax system, including the tax concession for research and development, the depreciation allowances and so on, which I could elaborate on at length but I will not.

Mr Elliott has made a number of comments about this, some of which are quite inconsistent. At the time of the August Budget he was saying things which were inconsistent with what he was saying a fortnight ago in relation to the investment environment in Australia. Sir James Balderstone, the Chairman of Broken Hill Proprietary Co. Ltd, put another view last week. He said that Australia had become attractive for foreign investment, particularly in export oriented manufacturing industries. Last Friday I had a discussion with the managing director of a very big Australian company who told me that in 1987 his company would invest more in manufacturing in Australia than it had in its whole history in Australia. There are different views within the business community about this. That said, I agree with one comment which is made in the article in the Australian. It points to the relatively small size of the Australian market. That is why the Government is targeting its industry, technology and trade policies towards expansion of Australia's export capacity in markets. That is why a number of significant companies in Australia have made overseas investments, in order to provide linkages with substantial overseas markets which are not presently available.