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Thursday, 29 May 1997
Page: 3975

Senator SHERRY (Deputy Leader of the Opposition in the Senate)(12.45 p.m.) —The International Tax Agree ments Amendment Bill (No. 1) proposes to give legal force to the amendment of the double tax agreement between Australia and Vietnam, which was agreed by exchange of notes on 22 November 1996. This exchange of notes was undertaken pursuant to a commitment given by Australia in 1992, when the double tax agreement was entered into. The undertaking related to Australia granting tax sparing for specific Vietnamese tax concession.

Tax sparing occurs when the tax forgone by a country in providing certain tax concessions to Australian investors is deemed to have been paid for the purposes of the Australian tax system. That is, tax sparing allows Australian investors to invest in another jurisdiction—in this case Vietnam—and obtain the tax concession provided by the other jurisdiction without having to pay the equivalent amount of the Vietnamese tax concession to the Australian government when the profits are repatriated to Australia.

This agreement lasts for 10 years from the commencement of the double tax agreement on 1 July 1993. There is no provision for it to be extended at the end of the 10-year period. I am aware that there were some recent announcements in respect of this in the budget in the broader context of the taxation of foreign source income. We will deal with that at the appropriate time. It is noteworthy that Australia provides tax sparing to nations other than Vietnam, namely, Malaysia, Singapore, Sri Lanka, China, Kiribati and Korea. We regard this as non-controversial legislation. Labor will be supporting the bill.