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Tuesday, 26 June 2012
Page: 7912


Mr VAN MANEN (Forde) (09:05): Once again we stand in this House discussing a piece of legislation that has an on-again off-again approach by the government to policy development. As I rise to speak on the Tax Laws Amendment (Managed Investment Trust Withholding Tax) Bill 2012, I think it is important to recognise the constant uncertainty that has been created by constant changes in tax policy and many other policies that this government seems to foist on the Australian public and the Australian business community.

The bill's explanatory memorandum states that the Income Tax (Managed Investment Trust Withholding Tax) Amendment Bill 2012 amends the Income Tax (Managed Investment Trust Withholding Tax) Act 2008 to increase the tax rate from 7½ per cent to 15 per cent on fund payments in relation to income years on or after 1 July 2012. It is instructive to note that it was only some three or four years ago that the rate was reduced to 7½ per cent, and at the time we as the coalition expressed concerns. Today we see a bill reintroduced to backtrack on that original reduction. The last time this bill was referred to committee to be reviewed we raised a number of concerns about its implementation which were largely due to the retrospective nature of the changes. However, thankfully, some of that appears to have been addressed within the bill's current form. However, retrospectivity aside, we remain concerned that billions of dollars of infrastructure investments already made, in addition to future investments, could potentially be put at risk as an implication of these changes.

An analysis conducted by the Allen Consulting Group for the Property Council showed that the proposed increase in the final withholding tax revenue from MITs would have a profound adverse affect on the economy without raising the expected revenue. It is instructive to note comments from Martin Codina of the Financial Services Council. He raises the concern that people have made investment decisions based on a tax rate of 7½ per cent and now the increase to 15 per cent is going to create increased uncertainty for those people in their investment-making decision. In addition, what does it say to investors about the Australian system when these things are constantly changed? Andrew Cannane, General Manager for Corporate Clients at the Trust Company, said in a recent interview:

We don't foresee there being the same amount of take up in MIT structures as there was. And ultimately, the net loser for that will be Australia. It will result in less foreign direct investment.

We all recognise in this House that we as a nation require foreign capital to build and grow our economy. Some 50 per cent of our financing and our loan books are funded from offshore funds. Andrew Cannane goes on to say that, in the calendar year 2011, foreign direct investment into Australian property rose some 50 per cent to $7.7 billion. He estimates that well over $5 billion of that would have been into managed investment trusts. He said:

The big concern for investors is the inconsistency. The 7.5 per cent rate has only been in place for two years and it's already changed.

To return to the Allen Consulting Group report, it noted that there was a billion-dollar drop in investment as a result of the increased tax. A net tax revenue for the period 2012-16 would be estimated at some $35 million due to decreased recipients, which is less than half the $75 million predicted by Treasurer. It also found that by 2015-16 the increased tax would reduce government direct inputs by $580 million and cost more than 4,600 jobs a year.

In addition to these concerns, the uncertainty this government has shown in dealing with the rate of the MIT withholding tax raises the issue of perceived sovereign risk. How will our relationship with our international business associates fare with the continued massive uncertainty caused by this government? The dissenting report by the coalition members of the economics committee stated:

The doubling of the withholding tax rate would also reduce Australia’s international competitiveness and reputation as an attractive and certain destination to invest in.

This is only made worse in light of other recent tax increases in the form of a carbon tax and a minerals resource rent tax. I am sure it is well and good that the Treasurer speaks about the $500 billion of investment in the pipeline, but the important part in that discussion is that it is pipeline investment. It has not been committed to works on the ground. It is work that is potentially planned yet has not come to fruition. This constant shifting of the goal posts, new taxes et cetera only makes it less certain that companies will proceed with those projected investments. What is the consequence to this country if that $500 billion of proposed pipeline investment turns out to be $250 billion or less? Attracting more foreign investment is important to achieve stronger economic growth leading to increased government revenue without the need for governments to hike taxes or introduce new taxes, like the carbon tax.

The carbon tax is only five days away and is the mother ship of the Labor-Greens government's poisonous policies. Yesterday I asked in question time about the fate of 800 workers at the local abattoir within my electorate. The plan there is to shut down the operations for up to 10 days to avoid going over the 25,000 tonne carbon tax threshold. The reason they even have to consider doing this to their loyal workers and their families is that they cannot afford to lose their competitiveness against other countries, like the USA, for example. We will certainly be in a league of our own once the carbon tax comes to town. What this example tells us is that this is a government that is not up to the job of protecting our future wealth, or economy for that matter. This bill, as I touched on earlier, has been outlined in a previous bill which was then excised from the bill by the government only to be reintroduced and debated once again here today. It is important for everybody's confidence in our economy that this ad hoc and piecemeal approach—to double the tax on managed investment trusts, but generally in relation to many legislative items over the term of this government—be reduced and that we have a more streamlined process so that people see a consistency and so that they can make long-term business and investment decisions and be confident that those decisions are going to allow them to grow and build their businesses and not be penalised due to increased tax rates and no ability to plan for that. Our focus should be on encouraging further investment from our foreign counterparts through internationally competitive taxation arrangements so that we can grow our economy more strongly and not just talk fluff about how great this economy is, when in reality the people of this country have had enough.

I support the comments from the member for North Sydney, who said yesterday in his contribution to this debate, 'Do not create uncertainty.' Uncertainty is the death knell of business. We need business certainty in all areas, whether it is taxation or regulation, because that allows businesses to make those long-term decisions to create wealth for the future of this country. It is our business community—it is ordinary Australians—that are the ones that go out and create the wealth for this country. It is not governments, of whatever persuasion. Governments do not create anything. More often than not they put roadblocks in the way of people's vision for what they would like to do for their lives and the future of this country.

So I call on this government to create, or seek to create, an atmosphere of trust so that people can trust this government and the direction it is going. But ultimately examples like this bill reduce that trust and create uncertainty. It is the consistent, coherent economic strategies that were employed under the Howard-Costello government that allowed our country to grow and prosper. I think this government has ably demonstrated that it is not able to produce and stick to a coherent economic strategy, and for the future of this country one is desperately, desperately needed. As the member for Ryan quite adequately pointed out in her contribution, it is really only a coalition government that can restore hope, reward and opportunity to all Australians for the future of this country.