Senator WATSON —My question is directed to Senator Kemp, the Assistant Treasurer. Will the Assistant Treasurer inform the Senate how the government review of business taxation will provide Australia with an internationally competitive and fairer taxation system? Will he also inform the Senate how the government intends to combat taxation avoidance?

Senator KEMP (Assistant Treasurer) —I thank Senator Watson for that very important question. The coalition is equipping Australia with the tools of a modern and fair taxation system for the next century. This is part of the new business tax system. This includes lower company tax rates and a dramatic reduction in compliance costs, complemented by enhanced incentives for investment, which will make Australian more internationally competitive. Our business tax rate will be one of the lowest in our region—in fact, lower than countries such as Japan and Canada. I have to say it is no wonder that the package has received such a resounding endorsement from the business community—and in fact far wider, from various press commentators and others. We believe that our new business tax system will reinforce integrity and equity within the taxation system. The review's recommendations will make a significant contribution to reducing tax avoidance through the removal of complexities and anomalies from the legislation. There will be a more consistent approach to determining taxable income.

These changes will end many opportunities people have had to avoid taxation through exploiting unintended loopholes in the law. This government has acted on stopping tax avoidance. We have closed the infrastructure borrowing scheme, which was being increasingly used by financiers and high income earners for tax minimisation. We have also funded the high wealth individuals task force, which is already bearing fruit in tackling tax minimisation practises of high wealth individuals. It is clear that the government will not tolerate tax cheats.

There was another scheme, which would be well-known in the Senate and strongly supported by Senator Cook, the R&D syndicate scheme which, in many ways, put out the welcome mat for tax bludging. While there may have been some valid projects under the scheme, there was no doubt that R&D syndicates were becoming a major tax avoidance vehicle.

The integrity of the government's new business taxation system is secured with measures designed to deal with, among other things, lost duplication based on excess mining deductions, artificial debt forgiveness, tax avoidance by assigning leases and the use of non-commercial loans to closely held entities to disguise distributions. We are also tightening the 13-month prepayment rule. With our taxation reforms fully in place, the government will make greater inroads into the cash economy than ever before. The combined effect of the simplified business tax payments, the GST, the Australian business number and withholding arrangements will all help to end tax avoidance.

The government is not only introducing a new set of business tax proposals, which will make Australia more competitive, but also tidying up the loopholes for taxation avoidance so that every person and every business pays their fair share of tax. Our new tax system is fair; it is modern. It will make Australia more competitive and it deserves to be passed by this parliament.