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Monday, 23 June 2003
Page: 17253


Mr HATTON (8:01 PM) —I second the second reading amendment to the Taxation Laws Amendment Bill (No. 5) 2003 moved by my colleague the member for Kingston. What we are dealing with here is a range of what are, to most people in Australian society, quite arcane matters. These tax matters are not the normal bread and butter of the Australian population. They are quite particular, they are detailed and they are difficult for most people to come to terms with. I commend the shadow minister for the way in which he has dealt with the material in the bill in his attempt to make some commonsense out of them, explain them to us within caucus and, in his speech in the second reading debate, explain them to people at large.

Later I will go to some of the matters contained in the bill, but the amendments need to be understood in the broader context of the bill, because the matters that are dealt with—questions of thin capitalisation, offshore tax havens and a series of other matters—are encompassed in the amendments.

Schedules 1, 2 and 3 deal with thin capitalisation. This is a favourite of treasurers or assistant treasurers. Usually the assistant treasurer gets the job of carrying through the legislation in this area. The issue is quite complex and detailed; it demands a fairly comprehensive control and understanding of various aspects of the tax act. Schedule 4 of the bill deals with foreign dividend accounts, schedule 5 with FBT exemption for public hospitals, schedule 6 with reducing tax on ETPs, and schedule 7 with the application of the same business test. Schedule 8 deals with tax losses.

If we look at those globally, trying to seek a context, when we go to the amendment put forward by the shadow minister, we can see that he is trying to put a broad case that the various matters dealt with in this bill should have a broader context. The amendment says:

(1) condemns the Howard Government for its lack of fiscal control, having increased both outlays and tax substantially ...

From a Labor point of view, looking at the past seven years and the difference between rhetoric and what has actually been done in this area, Labor has consistently said that this government has taxed highly compared to all previous governments. At question time and when he deigns to debate particular bills, the Treasurer has argued the opposite—that his government is not high taxing. The shadow minister makes the argument that the reason that tax has increased substantially is that the government has chosen to increase it. What is not mentioned in the amendment is that that has been done by a series of different measures undertaken by this government.

Today in question time we again saw interjections when the opposition argued that the series of levies brought in by this Treasurer are in fact taxes. One set of levies was going to be imposed, but, the member for Kooyong tells me, and it is quite true, the Timor war tax levy was withdrawn. In its place, we have a series of industry specific levies, the most important being the levy in relation to the dairy industry. We also have a levy because of the problems people have had in the sugar industry. For every major industry specific problem that has been brought to the attention of the government, it seems that the easiest course has been not to look to the general revenue or measures to be taken from within that general revenue but to strike yet another separate source of income which will have a life of its own.

As I have argued before, you can go to other jurisdictions in Australia for easy parallels. For instance, there is the New South Wales state government and what was supposed to be a short-term levy, the 3x3 levy on petrol—3c by three years—introduced by the Greiner government. That is still in play. I think it was introduced in 1988. From then until now, it has run for about 14 years. It is hardly 3c by three years. It is in fact three cents by about 14 years, and there is no end of the levy in sight. Governments that have come in after the levy was introduced have argued that it served a social purpose and that, because that social purpose was there, it was important to interact in a different way from the way one might expect. However, given the nature of levies themselves—


Ms Ley —Mr Speaker, I rise on a point of order. If the member for Blaxland is moving a specific amendment to the Taxation Laws Amendment Bill (No. 5) 2003, why is he not talking about that bill?


The DEPUTY SPEAKER (Mr Lindsay)—The member for Blaxland is not moving the amendment; he has seconded the amendment and I believe he is talking to it. I am listening carefully.


Mr HATTON —I am dealing with this more pertinently than the Treasurer deals with questions that he is asked. What I am arguing here has contextual relevance. As you will see when you look at examples elsewhere and in state jurisdictions, when a government determines to lay on a series of levies those levies may not be short term but may be imposed for a long period of time so that the amount of taxation thereby levied is increased not only over the short term but also over the long term. We have seen that already with the dairy levy, the sugar levy and the levies relating to ethanol. With the ethanol bounty we are looking at hundreds of millions of dollars a year. What has been argued by the shadow minister and what I am quite properly arguing in seconding and speaking to the amendment is that, if you add together the levies, taxes, charges and bounties, you will find that taxation has increased substantially under this government. The government have attempted to worm their way out of that by saying, `We are not really taking account of what is has happened with levies and charges.'

The shadow minister has argued that there has been an increase in outflows as well. If we look at particular outlays over particular periods of time, we can see that a series of measures was brought in prior to the Novem-ber 2001 election, in the six months after February 2001. An amount of the order of $20,000 million was outlayed in different areas. The government attempted to use that out-lay to garner support within the community, particularly among retirees and various other groups. That helped to lay the foundation for their winning the last election. So, on the first point of the amendment, the shadow minister has argued that not only increased taxes—and I would say charges and levies as well—but also increased outlays have created a particular set of problems for the budget which we have been debating for some time now and on which I have spoken previously. The budget was enormously constrained and the level of surplus was extremely low because of that set of circumstances.

The second point the shadow minister makes in his amendment is that the House:

... notes that the Government has also allowed the budget position to materially deteriorate by failing to deliver its own stated objective of a revenue neutral outcome on the Review of Business Taxation and its failure to confront major threats to the revenue through a growing tax avoidance industry including through the use of offshore tax havens ...

I will not go to the first part of that, but the second part is extremely important. I had the experience of working both in this House and in the old House for the former member for Blaxland, who was Treasurer and then Prime Minister. The whole question of dealing with offshore tax havens and the threat to the revenue that they pose was enormously instructive. What was done during the Hawke-Keating period with Mr Keating as Treasurer demonstrates just how enormously difficult it is to deal appropriately with offshore tax havens to try to lock down the leakage of Australian tax revenue and stop the haemorrhaging or sieving of income out of the tax system and overseas, thereby protecting that revenue for use by the government—then our Labor government and eventually the coalition government which took over.

It took a number of years to put forward the initial legislation because, although the government was entirely aware of the fact that so much was being lost to Australia's tax revenue, its key problem was that it needed to gain the support and cooperation of a number of international jurisdictions in order to take effective action. It first had to deal with the question of gaining assistance from New Zealand and the United States and then had to seek to put legislation together that would not just be adequate but would ensure that ready access to a series of tax havens was not available to people in Australia. That legislation took, I think, two to three years to put together and then get through the parliament. The problem you then face is that, once you have a set of legislation in place, the tax avoidance industry is such that it arises in another place with another set of modes, circumstances and ways in which it can attempt to suborn the collection of tax.

We have seen over a number of years a series of attempts by people in the tax industry to work their way through not only onshore but also, latterly in particular, offshore tax havens. In this regard I commend Mr Carmody, the Commissioner of Taxation, and the people from the Australian Taxation Office who have sought to do their fundamental duty of trying to secure Australia's tax revenue and ensure that not only it but also the purposes to which it will eventually be put are safeguarded. Whoever is in government, this parliament cannot pass budget bills, tax laws and associated laws to substantially change the way things are done in Australia unless the revenue is there in the first place. The shadow minister points to this in particular because it is in the charge of the Treasurer and the Assistant Treasurer to ensure that every resource possible is given to the Australian Taxation Office to make sure that internal and external haemorrhaging is staunched.

Paragraph (3) of this amendment states that the House:

... notes that, as a result of these failures, the Government lacks the capacity to enhance the international competitiveness of Australia's taxation system, return the full value of bracket creep either through tax cuts or services, provide the health and education services needed by low and middle income Australians, and support the provision of retirement incomes for all Australians.

The latter part of that goes to questions that I have just been dealing with—the fundamental functions of the federal government: providing health and education services needed by low- and middle-income earners directly through the TAFE system and tertiary education and indirectly through the revenue passed on to the states to provide for those services; and, most importantly, the provision of retirement incomes for all Australians either directly through the social security system or through supplementation for people on superannuation payments. The core of the argument that the shadow Assistant Treasurer has put is encapsulated in the first part:

... the Government lacks the capacity to enhance the international competitiveness of Australia's taxation system ...

If we cannot compete effectively with other countries in the market we cannot ensure that we attract international businesses to Australia—that they will decide to set up regional headquarters, which we have been encouraging now for more than a decade and a half, or a substantial part of their business—or that those businesses will feel that they have been fairly treated in terms of an international tax regime. They need to have the absolute certainty that we (1) are competitive, (2) are in this game for the long term and (3) will ensure that they will continue to be properly treated. While in government we did everything in our power to ensure that we opened Australia's economy to the world. We opened Australia's doors to companies that were willing to relocate their regional headquarters and/or create a more vibrant, efficient, effective and creative Australia by bringing their expertise, skills and investment moneys to provide jobs for Australians and build their industries in combination with Australia. The fundamental platform that one can provide is to have an internationally competitive Australian taxation system.

The other key point that is pertinent now relates to the Treasurer's announcement that there were to be tax cuts and the partial hand-back of bracket creep. Today in question time the Treasurer again referred to it, announcing that those tax cuts were due to start from 1 July. He then went on to say that someone on about $25,000 a year could expect $300 or so in tax cuts. The shadow Assistant Treasurer, however, has argued that the return of the full value of bracket creep through either tax cuts or services is what the game should be about. We have seen the Treasurer argue on budget night and shortly thereafter that, in the future, the government may have a mind, after it has ensured that there is an adequate surplus, to return some of the bracket creep to people as tax cuts or, indeed, as other services. This is a fairly large change in the approach of this government. Even with $10 billion worth of tax cuts, even with tax cuts which are minor, mean and meagre on any scale and run to the smallest we have seen being given, it is extremely novel for the Treasurer to say that in the future he might even look at services or other things that might need to be done.

In arguing that, he has said that it may be appropriate in the future to look to other means of paying Australians back for the extra amount of tax they have paid as a result of bracket creep. Traditionally, governments have given that back. Labor gave it back four or five times during the 13 years it was in government. Tranches of bracket creep were given back and we combined that with the changes we made in superannuation. The Treasurer has erroneously in the past argued that we did not pay the l-a-w tax cuts. The first tranche of that was paid nine months early and the second tranche was legislated to be commuted into superannuation and to be paid one year later as compensation. Maybe the Treasurer has taken the leaf from Labor's book here. He has said that people were not paid, but it was a coalition government that did not pay the second part of that into superannuation. A re-elected Labor govern-ment in 1996 would have done so, and we would be looking at 12 per cent and then 15 per cent superannuation input rather than nine per cent, which is where it has been capped.

I commend the amendment put by the shadow Assistant Treasurer to this omnibus bill of a range of measures dealing with thin capitalisation, offshore accounts, FBT payments through hospitals and others. The tax revenue needs to be protected by measures such as these, but it also needs to be protected against the depredations of those who, either onshore or offshore, would seek to destroy it.


The DEPUTY SPEAKER (Mr Lindsay)—I indicate to the member for Farrer that the previous occupant of the chair apologises that the order of speakers became out of synchronisation.