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Monday, 25 June 2012
Page: 7719

Mr HOCKEY (North Sydney) (18:18): I rise to speak on both the Tax Laws Amendment (Managed Investment Trust Withholding Tax) Bill and the Income Tax Amendment (Managed Investment Trust Withholding Tax) Bill. This is the second time the government has introduced this bill into the parliament, following its stunning backflip on this issue last week. What an extraordinary moment.

Last week this exact provision the government excised from the bill, only to reintroduce exactly the same provision the following day—with no explanation. Unless the member for New England or the member for Lyne or the member for Kennedy or anyone else has an explanation, there is no explanation from the government as to why it dumped it last week and is reintroducing it this week. Last week the government moved an amendment to its own bill to excise the doubling of the final withholding tax on managed investment trusts from 7½ per cent to 15 per cent from 1 July this year. That move followed reports that the government was unable to gain the support of the Greens—and that only came about because the Minister for Finance, Senator Wong, in the Senate accidentally let slip that when they could not get the support of the Greens on this proposal they decided to excise it from the TLAB bill.

So now the government is reintroducing the measure. This is the third budget measure the government has now shown signs of backing down on. Why else would the government excise it from the TLAB last week? The first budget backdown was the government's decision to re-embrace the dumped company tax cut from budget night, which the Prime Minister now says is a priority—but does not have the money for. Secondly, the government backed away from the ongoing CPI increases to the passenger movement charge. Thirdly, just last week, the government backed away from its doubling of the final withholding tax on managed investment trusts from 7½ per cent to 15 per cent from 1 July 2012. That said, the coalition welcomed the backdown on the increase to the withholding tax on managed investment trusts. We thought it was something more significant. The Tourism and Transport Forum said the decision not to proceed with doubling the withholding tax rate for managed investment trusts 'will go some way to restoring foreign investor confidence'. Unfortunately, this backdown was not before the government's constant chopping and changing in relation to the MIT withholding tax. This again reduced our predictability in the eyes of international investors. The Tourism and Transport Forum went on to say:

While some damage has been done to Australia’s reputation as an investment destination, the decision not to proceed with doubling the withholding tax rate will help to restore investor confidence and renew interest in Australian tourism projects.

So the tourism taskforce is in exactly the same position as we are. You can imagine where international investors are at. We do not know what the government are planning.

The government originally announced that they were reducing the withholding tax on managed investment trusts from 30 per cent down to 7½ per cent, so they had a one-way trend. Then they announced on budget night that they were going to increase it from 7½ per cent to 15 per cent, which came as a shock to people, because investors had worked on the basis that there was a trend towards a lower level of tax. But then the flipside came last week, when the government simply removed it from one of their own bills, suggesting that they were now dumping the proposal in the face of our opposition and the opposition of a vast array of investors, only to reintroduce it again last Thursday and to rush through debate today. It is like groundhog day; this proposal has come back.

Well, the opposition is going to be entirely consistent. We will oppose this measure on the grounds that it unquestionably heightens sovereign risk perceptions of Australia and the change will have an adverse impact on infrastructure investment. The only thing consistent about this government is its inconsistency. It is the constant backflips, the twists and the turns that are creating the sovereign risk. In these pretty tough global economic conditions the government should be doing all it can to be stable and predictable. Unfortunately there are numerous examples where businesses are concerned about the sovereign risk that has developed towards Australia as a result of this government.

Ivan Glasenberg is the Chief Executive Officer of Glencore, which is currently in the middle of one of the biggest takeover-mergers in global history, with its attempt to take over Xstrata, which has a massive amount of investment here in Australia. Ivan Glasenberg said in London a few weeks ago:

At least in the Congo they need you, they want you there and if they start changing the rules on you, you may not continue investing.

…   …   …

So Australia does have its risk, yes. We saw the carbon tax, we saw the mineral resource tax. It is a First World country but is doing things that are making people cautious of investing, so Australia is becoming another country where you have got to make sure that the rules aren't going to change on you.

Ivan Glasenberg is saying that not as an outsider looking in, even though he lives overseas. He is also saying it as an Australian citizen.

At the dispatch box earlier today the Prime Minister was saying that it is the negativity of the opposition that is causing consternation. No, it is the incompetence of the Prime Minister, the incompetence of this government, that is causing consternation out there. We did not write Ivan Glasenberg's speech. We did not write the words of David Knox, Chief Executive Officer of Santos, when he said:

Governments must recognise what we all know … that investment in oil and gas is not a short-term game, but one based on a long-term outlook with returns over the long-term.

With such massive capital investment and therefore risk up-front, long-term investors like those in the oil and gas industry need stable, predictable, long-term rules.

My clear message to the Australian Government is: do not create uncertainty.

Instead provide our investors with the confidence in Australia as a stable fiscal and regulatory region—allow us to stay competitive.

'Allow us to stay competitive'—that is what they are saying.

Jack Nasser, Chairman of BHP and former global chief executive of Ford, who is on a number of global boards, including News Corporation, said:

I cannot overstate how the level of uncertainty about Australia's tax system is generating negative investor reaction. People don't know where it's going.

Here Jack Nasser is talking about the uncertainty coming out of Australia. These are people that have a propriety interest in the welfare of Australia, and they are saying, 'Hang on, why is Australia so unstable? Why are you making it harder for us to get global investment, to create jobs in Australia? Why are you doing this?'

John Stanhope, former Chief Financial Officer at Telstra and Director of AGL Energy, said:

… people looking outside at Australia think we're a sovereign risk because of the uncertainty created by policy fluctuation.

The difference is in the two parties, and that is very real. It struck me to hear from people who normally give Telstra a lot of money, 'No, we are not interested anymore.' To get rid of that uncertainty is very important.

In 2008, as I said earlier, this government moved to reduce the rate of withholding tax on managed investment trusts progressively from 30 per cent to 7½ per cent, a move which was not opposed by the coalition. But we did ask the question about whether the government was really committed to it. At the time, we expressed concerns that the reduction in the withholding tax rate was not a genuine reduction for international taxpayers due to the operation of double taxation agreements. Any reduction in taxation paid in Australia may simply have led to higher taxes being paid in other jurisdictions.

We expressed concerns that the bill had not been subject to proper scrutiny, as the government did not allow the bill to be considered by the Senate Standing Committee on Economics at the time. We raised serious concerns that the government's costings for the measure may have been underestimated. Today the government may try to use the previous arguments of the coalition against us in the current debate, but in the context of the current economic climate, including potential significant reductions in foreign investment and employment in the construction sector, the coalition does not view this as an appropriate time for the government to be doubling withholding tax on potential sources of investment that will help to drive economic growth and job creation. Continual change to our international taxation arrangements, coupled with the government's retrospective tax grabs on a variety of legislation, reduces international investor confidence and elevates concerns about our sovereign risk profile.

This instability in the government is creating greater uncertainty for investors and it is leaving Australian consumers, as well as Australian businesses, confused. There is a myriad of examples where the government says one thing and does another. As an example, I note an issue on which I have been criticised, the National Disability Insurance Scheme. The government has said it is absolutely committed to the NDIS—so committed, in fact, that it is going to bring forward, and accelerate, the implementation of the NDIS. The government is going to speed it up and, instead of committing $3.9 billion over the first three years, it is in fact only committing $1 billion. When I said it was a cruel hoax for the government to be claiming to speed up implementation of the NDIS when it was in fact massively underfunding it, people said: 'How dare you!' for saying that. 'How dare you suggest the government is not committed to it! How dare you suggest there is not bipartisan support!'

There is bipartisan support on the NDIS. However, buried in the last paragraph on page 3 of the Deputy Prime Minister and Treasurer's economic note that was published on Sunday, after three of the four headings, the government seemed to be boasting about its achievements in this regard. The Treasurer said:

That's been the focus of Labor since day one, it's been the focus of Julia Gillard since she became prime minister two years ago, and it's remained our focus as we've gone about getting the big reforms in place—

They love talking about big reforms. Everything is big, huge, monstrous—everything is enormous.

that will set us up for the future, like the pricing of carbon pollution, like introducing the Minerals Resource Rent Tax, like giving consumers a better deal in the banking system, and like beginning the long road towards a National Disability Insurance Scheme.

'The long road towards a National Disability Insurance Scheme.' I could have sworn it was a shortened road, because the government said that it was going to fast track the NDIS. The government was going to bring it forward. But what had become a fast track to bring forward the NDIS is now turning into 'the beginning of a long road' towards the NDIS. My goodness! Even the Prime Minister sought to list the NDIS as an achievement, and now, buried deep in the Treasurer's own economic note—which goes out on a Sunday—it is a long road to deliver that NDIS.

I wonder if the government is going to be here long enough to travel that long road. Perhaps it is like the original version of The Wizard of Oz, which I have just been reading to my children. I can tell you that the original version is a rather lengthy book—Dorothy seems to cross a lot of roads to get to Oz. I think the Labor Party's commitment to an NDIS is as topsy and turvy, and as wavy, and as fragile as Dorothy's trip along the yellow brick road, in its original version—which is sad, because in all of this the government is playing with people's hopes.

The Labor Party is hoping that people will ignore the travails of an incompetent government, but they cannot. Whether it be on social or health policy issues—like the NDIS; like the great big health reforms that the government said it was going to deliver as former Prime Minister Kevin Rudd sought to take over the hospitals and to form a joint partnership that is now mired in red tape; or like the national curriculum that the government has sought to claim as an achievement and that three years later still has not been rolled out—or on economic policy issues, like the bills before the House at this moment, this is a government that is inconsistent. It is a government that is fundamentally flawed in its ability to run an economy and to run a society.

It is a government that does not know whether it is Arthur or Martha, whether it is Wayne or Wendy, or whether it is Julia or John. But what I know, and what my colleagues know and what, I am sure, the Australian people know, is that this is a government that is not fit for office and that the Labor Party has truly lost its way. It has never recovered from the events of just over two years ago and, if you want a single contemporary illustration of the incompetence of the government, you need look no further than these bills that are before the House.