Senator CHRIS EVANS (11:57 AM) —I want to make a few remarks to respond to the comments of the minister and the Democrats and to put the Labor Party position on the record. I think it was important that we had that more general debate because of the history of this legislation and the changes that have occurred since its original introduction. Otherwise, I think people reading the second reading speeches might get completely the wrong impression of what we are passing here today. A lot has changed between then and now.

First of all, I would like to thank the minister and Senator Woodley for their kind remarks. I feel a bit out of sorts. I am much more used to being abused, and it is much more comfortable because you know where you stand. This is very unnerving. I knew when Senator Woodley made reference to me in his press release that it would cause me no end of grief with my colleagues. Thank you for that, Senator Woodley. I am not sure whether or not it was a calculated move to try to ensure Labor's support for the agreement, but I appreciate the remarks. Seriously, Senator Woodley and I have both had a long interest in this issue since we entered the parliament, and we both remarked on the old Productivity Commission report when it came down in 1995. I was one of those then urging the Labor government to do something about what was a potential explosion in these things. I have said that before. From that period on, we saw rapid growth in the use of the FBT concession. I think it is fair to say that it was a fairly small problem at that stage and it became a much bigger problem. That is why we have supported the government's attempt to put some accountability and transparency into the system, to put a cap on and to have proper reporting. The major flaw in what has occurred is the way it has been done. People got a wink and a nod from the tax office and thought that, provided they did not package more than 30 per cent, the tax office would not go through their books with too fine a toothcomb and that, if they went over that, they were fair game.

That is not a proper way to implement public policy. We needed transparency in the regulations and guidelines for not-for-profit and charitable organisations and anybody else eligible for concession. We did not have that. The key issue in this debate was that proper regulation. A whole range of people did not take advantage of some of the measures they could have taken advantage of, because it was not clear to them that it was legal or appropriate. Others quite frankly abused the opportunity by going through at a million miles an hour with all guns blazing to take full advantage of what was seen as a bit of a loophole. We had, therefore, an inconsistent application across the industry and a lot of concern from many people about whether they were doing something that was legally and morally appropriate. Organisations had real debates about that and, because of the squeeze on funding from both Commonwealth and state sources and because of the difficulties of fundraising, those were very difficult debates for a lot of organisations.

The key thing to come out of this is that we get some accountability and transparency, a cap and a proper regulation in the system. What has been lacking is proper information about what the appropriate cap is. While I accept that the Labor Party have moved from this position, since about August last year we argued for a full public inquiry. We are not able to get good hard information about the extent of the use of the FBT concession and the impact of the FBT concession's capping or removal on those organisations. There is not a lot of hard data around. There is not a lot of evidence to support the argument as to the various proposed caps. For instance, the government has moved from a $17,000 cap to a $30,000 cap on not-for-profit organisations. What is the justification for $17,000 versus $30,000? The point is that no-one really knows. I do not even think we are sure about what the impact of the Commonwealth's revenue will be as a result of these changes.

We always argued from the first principle of having an inquiry, which would establish the costs, the benefits, the current practice and the impact of various measures. That has not happened, and we are now dealing with the legislation without that proper information. That is just the way it has evolved. That is politics. We would have preferred that way; we argued for that approach. That has not occurred. We accept that the Democrats and the government came to an arrangement based on the need for the government to get on with the legislation, their need to progress, and the Democrats and others—like the Labor Party—were looking to protect the not-for-profit sector from what would have been quite adverse effects from the original proposition. We accepted that, after some evidence during the GST inquiry, there would be serious adverse effects for the not-for-profit and charitable sector as a result of the original proposition, and we accepted that we did need to move and that the Labor Party needed to change their policy and look at ways of protecting those organisations from adverse impacts.

It is not our preferred route, and we were not party to the final arrangement between the government and the Democrats. But I have, as Senator Woodley would acknowledge, tried to work with Senator Woodley to get a better outcome. I appreciate his cooperation, although I do want to put on the record that he did not breach any government confidentiality, despite my working hard on him. One of the key things that comes out of this is the delay until next year. That is important, because the not-for-profit sector were in a position of not knowing what was going to occur, and it would have been a complete shambles. A whole range of people who were salary packaged in both the public system and the not-for-profit system were going to have to have their whole salary arrangements renegotiated in a very short time and without proper information. It would have been very stressful for a lot of people, stressful on organisations and very poor industrial relations. So the delay is important. The one good argument against the inquiry, given the lateness of the debate, is that this now at least gives people almost a full year to plan for the changes. We would have preferred the inquiry route. We argued for it. We accept that is not going to occur.

I do acknowledge that the amendments moved today and the arrangement between the government and the Democrats have produced a better outcome for the not-for-profit sector. Whether it is the best public policy is the key issue, and I am not trying to be overcritical or make a political point. But, because we did not have the inquiry and because we did not have the full information, no-one knows the full public policy implications of this. That is, therefore, a bad public policy outcome. It would have been better to do it the other way around, but I do accept that this deal provides a much better outcome for charities and the not-for-profit sector. That is obvious. It takes the pressure off and gives them transparent and accountable guidelines for dealing with the concession.

I want to note that, with the arrangements for public hospitals, I share some of the concerns that Senator Lees just raised. I was a bit concerned when she raised them, because she signed up to the deal, and she seemed to be raising the very questions that I had about how it is all going to work. Given that the arrangements for the FBT concession's use in public hospitals has varied from state to state and hospital to hospital, we do need to understand—I am not clear in my own mind—how this compensation package is to be administered. I, like her, want to ensure that it does get through to the intended recipients and that it is used for the purposes identified—that is, to allow them to continue to employ good quality staff and to compete with other providers. I note that none of this money is for new services. This is purely a compensation package, partial compensation for the effect that the FBT concession proposal has on public hospitals. In no way can it be seen as adding to the provision of public health services in the country. It will go a long way towards alleviating the impact that otherwise would have occurred in reducing their capacity to provide services. I do think it is incumbent upon the government to provide some detail today as to how that is to work or at least some indication of what arrangements are in place to negotiate with the states about implementation. I look forward to the Assistant Treasurer's contribution on that.

Senator Woodley has mentioned that, as part of the arrangements between the government and the Democrats, there are two inquiries to be held. The first is dealing with the question of indigenous health organisations and the impact on them. I am very pleased that that issue has been identified. I have had a lot of representations from indigenous health organisations. I have recently visited the Kimberley since the announcement and again those organisations spoke to me about the particular problems they have in that regard. So I look forward to that being a positive inquiry. I also hope that we get some progress on that front well before 1 April next year when implementation commences, otherwise it will mean nothing. I am sure Senator Woodley's experience in making such arrangements will ensure that these arrangements are watertight in terms of the impact of the inquiry.

The second proposed inquiry will be into the definition of charities. I just make the point that we wanted a much broader inquiry and we wanted to look at the impact of the FBT on the charitable sector as part of that inquiry. That clearly now will not happen. In effect, what we are doing now is offering our solution to that problem in this legislation. Nevertheless, the definitions of charities and not-for-profit organisations and the taxation treatment of those are important issues. This government has gradually drawn the charitable and not-for-profit sector into the taxation net. I think that has had a range of adverse consequences for them. We need to examine how we treat charitable and not-for-profit organisations in terms of taxation and other arrangements.

It is a debate we need to have, particularly with the expansion of schemes like Job Network and the increasing role of not-for-profit organisations in providing what were formerly government and company provided services. There is a real question about what the appropriate roles of charitable and not-for-profit services in this country are, how they are funded and how they are taxed. Those issues go quite a way beyond what is proposed by the inquiry into the definition of charities and not-for-profit organisations. Nevertheless, I hope that makes a contribution to that debate and is a first step in that debate.

I know there is some anxiety on the part of some in the charitable and not-for-profit sector about opening up those issues, but they do need to be opened up. We have seen quite a change in the way the charitable and not-for-profit sector operate in this country, the services they provide and how they fund themselves. We need to have a public policy debate on what their appropriate role is, what their relationship to government is, and how we fund and tax those organisations. I for one constantly question some of the charitable and not-for-profit organisations about what they do differently from the for-profit sector in some of the service areas, because it is often claimed that they provide a qualitative difference. It is important that we examine what those differences are, how we value them and therefore how we structure regimes that encourage or promote their participation in servicing the needs of our community.

I am not opposed to that inquiry although I am a bit concerned that the detail is yet to come and, a few weeks on, we still have not had an announcement. I hope it is not something that drops off the agenda as the government basically gets its legislation through today. Maybe its commitment to, or enthusiasm for, the inquiry might wane if it is not held up to the mark, but I am sure Senator Woodley will keep the pressure on and make sure that the inquiry occurs. As I say, I would have preferred a broader scope but, as far as it goes, it is important that the inquiry does occur. I hope that adds to the debate.

I do not intend to oppose any of the amendments or the arrangements entered into between the government and the Democrats for changes to the A New Tax System (Fringe Benefits) Bill 2000. We accept the arrangement entered into, we accept it is a better package than was originally proposed, so we will not be opposing any of the measures. I do agree with the Treasurer in the sense that it is time for this matter to be brought to a head and it is time to allow the sector to have some certainty about where we go from here.