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Monday, 25 June 2012
Page: 7728

Mr TONY SMITH (Casey) (18:59): In speaking on the Tax Laws Amendment (Managed Investment Trust Withholding Tax) Bill 2012 and the Income Tax (Managed Investment Trust Withholding Tax) Amendment Bill 2012 it is, as the shadow Treasurer said, a bit like groundhog day. The substance of these bills was included in separate tax law amendment bills last week. Those changes, which see a doubling of the relevant withholding tax from 7½ to 15 per cent, were announced suddenly on budget night. As the shadow Treasurer quite rightly pointed out, in so many respects this tax legislation before the House—yet again, as it turns out—sums up so much about the incompetence of this government, and not just on taxation policy. It really encapsulates and symbolises the government's failure to govern, and how its incompetence, at so many levels, creates a lack of confidence in the investment community. It leverages sovereign risk, as the shadow Treasurer so rightly said, and these tax bills really sum it up, on the second anniversary of the government's sudden change of Prime Minister.

It is worth recounting some of the history on this as a window into the damage the government's approach on taxation matters is doing, specifically with regard to these bills. As I pointed out last week, four years ago in June 2008 the government legislated with great fanfare that it was reducing the relevant tax rate in this legislation down to 7½ per cent. That had been announced in Labor's first budget, and following the then Assistant Treasurer, the member for Prospect, speaker after speaker on the other side lauded the reduction to 7½ per cent and pointed out that the reduction was designed to send a signal to international investors.

Of course, it follows that the sudden decision to double to 15 per cent the relevant rate also sends a signal. It sends a signal that this government cannot be trusted on matters of tax. This is the government that four years ago made so much of reducing the rate to 7½ per cent and then suddenly, in the budget, doubled that rate. The signal it sends is that this a government that cannot be trusted. This is a government that will chop and change. This is a government, as we have seen, that will say before an election, 'There will be no carbon tax under the government it leads,' to paraphrase, and after the election introduces one. This is a government that out of the blue produces a mining tax.

The message overseas, with the Labor government in Australia pricing our investment, is that investors must now take into account that taxes will increase suddenly. In luring investment here by sending that signal, which those opposite spoke so proudly about four years ago, it will have a retrospective effect. But on top of that it also has the effect of saying there is a sovereign risk of sudden changes. We do not need to take my word or the word of the shadow Treasurer on this matter. As I outlined in the debate last week, there are so many leaders in their fields representing international investors who made this very point just after the budget. We have had those statements quoted in this House about how very directly indeed the government's decision meant that investors would think twice in the future about the sorts of investments they made.

Just last Friday respected commentator Jennifer Hewett, from the Australian Financial Review, made this very point. Jennifer Hewett summed up so many of the quotes that had been put into the debate through the course of last week when she wrote:

Labor has developed an unenviable reputation for its willingness to change tax rates and structures for investments.

This completely undercuts faith in the permanence of reforms that do occur …

My friend and colleague the member for Wright, who will speak after me, knows that of all the quotes that members of this side, including myself, put forward, those statements by Jennifer Hewett in the Australian Financial Review last Friday sum up the words and the sentiment of the reaction. What it says is if you send a signal by reducing the rate to 7½ per cent you surely send an opposite signal by doubling it. You surely send a signal that when it comes to investment in Australia sudden tax changes are the order of the day. The shadow Treasurer rightly referred to the events of last week and I want to refer to them, too, because the way the government has gone about the doubling of this tax also leverages uncertainty. Suddenly, in the budget, as I said earlier in my contribution, the government doubled the rate to 15 per cent. Then we had the tax law amendment bill last week that included in, from memory, schedule 4 the very measure we are debating now. But without any announcement whatsoever the government tabled an amendment to simply delete that schedule. As the shadow Treasurer rightly pointed out, the initial reaction from industry was: 'They must have backed down. They must have seen sense.' That was the reaction from industry and some of the people the shadow Treasurer quoted. But, of course, the real point is that there was not any word from the government. There was no announcement from the Treasurer or the Assistant Treasurer—not only was there no announcement; there was no explanation at all.

The debate in Hansard of, I think, last Wednesday sums up the chaos that afflicts this government when it comes to taxation policy. You had an amendment before the House during the debate—let me give them a little wiggle room; maybe it was a minute or two before the debate began—but no announcement, just an amendment to delete the schedule that would give effect to what had been announced on budget night. When it came to the summing up and the consideration in detail of the bill, in concluding his five-minute speech the shadow Treasurer asked the Assistant Treasurer on three separate occasions, three times in a row, what the position was. It was greeted by silence. The Assistant Treasurer was absolutely mute. Here was a minister of the Crown in here handling legislation where an amendment to strip out a fundamental budget announcement is moved and not only is there no public announcement; there is no parliamentary justification—not a word.

Those actions of the Assistant Treasurer will stand as a symbol of this government's arrogance and incompetence. I am not quite sure what the balance was, but it was only after the third occasion—I think when the shadow minister for finance spoke during consideration in detail—that, finally, the Assistant Treasurer would say that there would be a separate piece of legislation. It was barely audible in this House. And so it was on the very next day, the last sitting day of last week, that this legislation we are debating today was introduced.

This reeks of chaos in the decision making in the government. They cut a tax to 7½ per cent; they double it to 15 per cent in the budget, with all the signals that sends. They decide they are going to strip it out of a TLA bill and put it as a stand-alone measure and they cannot even communicate it. I was thinking perhaps the Assistant Treasurer really did not know what was happening or why, but in parliamentary debate—and I have witnessed quite a bit of it—I have never seen such a spectacle.

It might surprise you, Mr Deputy Speaker, to hear me saying this, but I do not mind saying it. There are those opposite who follow these matters at a technical level pretty closely on the back bench. To be a backbencher and watch that spectacle must have been very frustrating because it was nothing short of a disgrace for decision making on the part of the government. It is, as the shadow Treasurer rightly pointed out at the beginning of this debate, a symbol of so much that is wrong with this government.

When this debate is over, every member on that side who was elected or re-elected in 2007 will be able to say that they voted to decrease the tax and they voted to increase the tax. That is what they will be able to do. The actions of the Assistant Treasurer last week do sum up the government's failure on tax. It is no wonder that the incompetence and the chopping and changing that is on display directly leverage the sort of uncertainty and sovereign risk that have been spoken about in this debate.