Senator CONROY (1:51 AM) —Given the hour, I am, once again, happy to speed our journey by incorporating my speech to the second reading debate.

Leave granted.

The speech read as follows—

The Taxation Laws Amendment Bill (No 4) is made up of four distinct schedules.

The first two schedules are not controversial.

Schedule 1 to the Bill tightens some of the provisions of the thin capitalisation regime.

The Bill redefines the exemption from the thin capitalisation regime for companies with minor overseas operations.

It ensures that interest-free loans are considered as equity for the purposes of the regime.

At the same time, the Bill excludes some private assets and liabilities from thin capitalisation rules.

Labor supports this measure.

Schedule 2 to the Bill contains the trust to company roll-over provisions.

These provisions provide a concession on capital gains tax as it would apply to trusts which restructure as companies, so that where there is no change in the beneficial ownership structure of the trust through the restructure into a company, the transfer can be made without any capital gains tax impact.

Labor will not oppose this measure.

The Proposal in Schedule 3 to give temporary residents of Australia a tax exemption on foreign sourced income is extraordinary.

Labor opposes this provision.

If this becomes law, this would mean that temporary residents in Australia pay no Australian tax on most foreign-source income and capital gains, and their banks would be exempt from paying withholding tax on residents' interest payments on overseas borrowings.

The cost of this tax cut would be $200 million over four years.

We have a serious concern about the distributional effects of this tax cut.

The Parliamentary Secretary to the Minister for Finance has already said that this measure is designed to attract “key personnel” for Australian companies.

In other words, it is a tax cut for corporate high fliers.

The foreign income tax cut is totally regressive.

Labor opposes the provision.

I foreshadow that Labor will be moving an amendment to remove this regressive tax cut from the Bill.

Finally, let me come to Schedule 4 of the Bill.

The schedule provides for legislative caps on the effective life of assets used for gas transmission and distribution, oil and gas production companies and companies operating aeroplanes and helicopters.

The Commissioner of Taxation has announced his determination on the effective life of a number of asset types; aeroplanes; helicopters; gas transmission and distribution assets; and oil and gas production assets, including offshore oil and gas platforms.

The provisions in the Bill would legislate a form of accelerated depreciation—in other words, would legislate a statutory cap on the effective life of these assets.

The cost to revenue of these caps is very significant, $1.9 billion over ten years.

Of course Labor does not oppose a legislative override of the Commissioner's ruling on effective life in principle.

However, the Senate needs to assess this very significant expenditure proposal carefully against other priorities.

As part of business tax reform, a whole raft of accelerated depreciation provisions for particular sectors, along with a range of other sectoral subsidies, were replaced by a lower corporate tax rate across the board.

A central part of that trade-off was that the old underlying depreciation schedules would be reviewed by the Commissioner of Taxation on an “effective life” basis.

As the Ralph Report said:

The accelerated depreciation/company tax rate reduction trade-off is the key issue.

Labor supported this sound reform.

We argue that investment should be driven by economic return, not tax advantage.

We are pro-market, not pro- any particular business interest.

It is a good reform and we supported it.

Frankly, these effective life caps have finally killed off the idea that the Ralph reforms would be revenue neutral.

Some of those companies that will benefit from this Bill are flagrantly double dipping.

Some of those companies told the Government, the Opposition, and indeed through the Business Coalition for Tax Reform they told the whole country that they supported a cut in the corporate tax rate to be funded by getting rid of accelerated depreciation.

Well here we are, just a few years later, and who would have thought it. Capital-intensive companies are walking around these corridors pleading for accelerated depreciation to be reinstated under the new badge of effective life caps and threatening to quit the country if they don't get their way.

There is a serious issue here about corporate responsibility.

The Government loves to apply mutual obligation to the poor and the weak.

This is a massive tax expenditure on the rich and the strong, and it comes with no strings attached.

A huge corporate subsidy like this should be conditional upon the corporations that benefit from it.

There should be commitments to jobs, to training, to apprenticeships.

Corporations must accept the responsibilities that come with a huge subsidy of this kind.

In conclusion, the Opposition is not opposed to the thin capitalisation provisions and the trust to company roll-over provisions of Schedule 1 and 2 of this Bill.

With regard to the effective life caps, I register the Opposition's serious misgivings about the process that the Government has followed and the substantive outcome that the Government has arrived at.

However it is not possible to unpick the provisions of the Bill and on balance the package is important to the national interest.

However the Opposition is completely opposed to the Government's $50 million tax cut for rich foreigners.

We propose an amendment in the Senate to oppose that tax cut.

Question agreed to.

Bill read a second time.