Senator MURRAY (5:09 PM) —I support the rationalising and reduction of managed investment scheme tax concessions, and I do not oppose their being phased out altogether. With that position, you would have to ask: why would I support this reference to a committee? I want to explain those reasons.

As a member of the Senate economics committee, I had the unfortunate experience of spending several years examining the issue of all those people who had been affected and hurt by the tax-effective managed investment schemes that had to be closed down because they were essentially tax lurks, to use the language of Senator Heffernan; they were being promoted by dodgy promoters, spiv lawyers and spiv accountants and they were making victims of innocent and unsophisticated Australians.

I have never forgotten going to Kalgoorlie to hear from these people and holding the hands of weeping men and women—working men and women; ordinary folk who had, by the sweat of their brow, made a few bob—who had lost their savings in these schemes which had been perverted for purely tax benefit reasons and were not productive enterprises in the sense of commercial enterprises. Of course, that was not true of every managed investment scheme but it was true of the abuse of those schemes.

If we fast-forward to now, my own belief has long been that the tax office and the government need to be far stricter and stronger about the rules as to when a tax concession should be allowed, and should be based on the commercial operation that is in play. I am concerned that what has happened in the latest exercise is that the tax office has acted properly and the government has acted improperly, because I see a false distinction between the forestry managed investment schemes and the non-forestry managed investment schemes. There is not a distinction between trees. I fail to see, from a greenhouse and environmental point of view, why a gum tree is any different from a walnut tree, but I am not a biologist; maybe some scientist can explain it to me. I am a tax man and I cannot explain it. It sounds very odd.

The reason I welcome the proposal for an inquiry is that it could sort out these issues. It could try to develop a policy which would show some consistency and which would attack this issue on the basis of policy principles rather than political principles. I think, as a person who deals with tax and finance all the time, that we have to continue to strive to make sure that policy principles are rational and transparent. For instance, if the community, the parliament and the government decide that trees are good—and I use ‘good’ in the sense of an economic good—environmentally and economically then all trees, not just some trees, should be supported with tax concessions.

To my mind—and I might have designed these terms of reference a little differently but I still think these issues would flow—the principles surrounding such tax concessions need to be explored and examined. I think, in terms of my own tax philosophy, that tax concessions are indeed appropriate for infant industries but should be time limited and phased out on a set timetable, unless an industry is of national strategic significance or of national economic or national environmental significance. For instance, if we want to ensure a better water supply in this country, we might decide to subsidise water pipelines by way of a tax concession. That is perfectly reasonable; it is an environmental argument, not an economic argument.

But any industry that is not viable, profitable or sustainable without tax concessions should not be given tax concessions in the first place. It is as simple as that. You have to have a good, sound, consistent policy reason for giving tax concessions. I think the proposed committee would need to examine the history, nature, extent and cost of managed investment schemes; the arguments for and against them; the economic, social and environmental consequences of managed investment scheme tax concessions; the dangers for the current government; ATO decisions; the fact that there is no transition period; and proposed remedies and policies.

The matter of a transition period is quite important. If you go back full circle to my opening remarks, when I described to the chamber what was going on with the tax-effective managed investment schemes that the Senate Standing Committee on Economics examined, you will recall that I said they were pushed by dodgy promoters and so on. The point behind that is that many investors would have entered those schemes in good faith, trusting the tax advice and the legal advice that they got. The fact that they might have been conned or gulled or taken advantage of to get them into these schemes needs to be recognised, and that is why you need a transition period—to ensure that such persons can get out with some of their financial skin intact.

In conclusion, I will say again that I support the rationalisation and reduction of these tax concessions and do not oppose them being phased out altogether. That is my policy position. But I support the Labor Party’s initiative in wishing to have this matter properly and forensically examined so that a better policy picture can emerge. It is for that reason that I would suggest that the chamber support Senator O’Brien’s motion.