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Tax Laws Amendment (2012 Measures No. 2) Bill 2012, Pay As You Go Withholding Non-compliance Tax Bill 2012
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Edwards, Sen Sean
Tax Laws Amendment (2012 Measures No. 2) Bill 2012, Pay As You Go Withholding Non-compliance Tax Bill 2012
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- Start of Business
- PARLIAMENTARY OFFICE HOLDERS
- Paid Parental Leave and Other Legislation Amendment (Dad and Partner Pay and Other Measures) Bill 2012
- Passenger Movement Charge Amendment Bill 2012
- Tax Laws Amendment (2012 Measures No. 2) Bill 2012, Pay As You Go Withholding Non-compliance Tax Bill 2012
- Financial Framework Legislation Amendment Bill (No. 3) 2012
- MINISTERIAL ARRANGEMENTS
QUESTIONS WITHOUT NOTICE
(Ronaldson, Sen Michael, Carr, Sen Bob)
Vocational Education and Training
(Marshall, Sen Gavin, Evans, Sen Christopher)
(Birmingham, Sen Simon, Wong, Sen Penny)
(Milne, Sen Christine, Lundy, Sen Kate)
(Williams, Sen John, Wong, Sen Penny)
Agriculture, Fisheries and Forestry
(Moore, Sen Claire, Ludwig, Sen Joe)
(Nash, Sen Fiona, Wong, Sen Penny)
(Madigan, Sen John, Wong, Sen Penny)
- Carbon Pricing
- QUESTIONS WITHOUT NOTICE: ADDITIONAL ANSWERS
- QUESTIONS WITHOUT NOTICE: TAKE NOTE OF ANSWERS
- PERSONAL EXPLANATIONS
- MATTERS OF PUBLIC IMPORTANCE
- FIRST SPEECH
- AUDITOR-GENERAL'S REPORTS
- Legislative Instruments Amendment (Sunsetting Measures) Bill 2012
- Higher Education Support Amendment (Student Contribution Amounts and Other Measures) Bill 2012, Statute Stocktake (Appropriations) Bill (No. 1) 2012, Tax Laws Amendment (Investment Manager Regime) Bill 2012
- National Broadcasting Legislation Amendment Bill 2010
- QUESTIONS ON NOTICE
Wednesday, 27 June 2012
Senator EDWARDS (South Australia) (11:37): I thank my colleague Senator Macdonald for making some time available before the time comes to truncate this debate. I rise today to speak on the Tax Laws Amendment (2012 Measures No. 2) Bill 2012 and the Pay As You Go Withholding Non-compliance Tax Bill 2012. This legislation will add to the sense of confusion and the lack of confidence that now hangs over much of our economy because of this government's mismanagement. With the introduction of an economy-wide carbon tax, what Australia does not need is more legislation to weigh down our economy. We in the coalition do not support passing these bills in their current form.
I would like to first turn to the issue of adding indiscriminate liability to all of Australia's directors and the considerable burden to business that this obviously represents. Included among the measures of this legislation is making directors personally liable for unpaid superannuation. This legislation extends director penalties that cannot be discharged by placing a company into administration. It would also make directors and associates liable for PAYG withholding non-compliance tax where a company has failed to pay.
The key issue is the manner in which protective action can be undertaken which is specifically directed at and focused on phoenix activity. In this sense, the government's current bills continue to be flawed with their broad based, non-targeted approach. This government are refusing to change the legislation because of their own political agenda. They have pushed on with these measures despite the widespread concerns from many key stakeholders. Poor consultation has been a hallmark of this government and this is no exception.
For instance, on 4 June 2012, which was only a matter of weeks ago, Mr John Colvin of the Australian Institute of Company Directors made a great contribution to this discussion; however, it has gone unheeded. I note his comments to a House of Representatives committee on that day. He said:
We are disappointed that since the last time the Australian Institute of Company Directors appeared before the committee on the same issue, the government has not made significant changes to the original bill, nor has it picked up all of the recommendations of this committee, particularly the phoenixing recommendation.
That is very clear. I will refer to some of his other comments a little bit later. The measures intended to address phoenix activity have not appropriately targeted that activity. The liability would indiscriminately apply to all directors across the board. We in the coalition are very concerned about this.
Unfortunately, it is typical of this government to burden all directors with liability and shift off the responsibility and make everybody accountable and say: 'For the limited activity that takes place in the bad sector of any industry, we will apply it to the whole of industry. We will apply it to all of commerce.' This is regardless of their guilt and due to an unsuitable definition of the activity that would appropriate it. Again, Mr Colvin raised this point:
… as we have said on numerous occasions, the problem with this bill is it is not confined to fraudulent phoenix operators. By failing to define fraudulent phoenix activity, it instead targets all of Australia's 2.2 million directors including those who volunteer their time to work for charities and community organisations. Following submissions to this committee last year, it recommended the government investigate whether it was possible to amend the bills to better target phoenix activity. Yet the government has made virtually no attempt to target phoenix activity in revising the bill.
The most glaring error in this legislation is the indiscriminate proportioning of liability and the possibility of holding new directors liable after the fact.
Again, I will refer to comments made by Mr Colvin of the Institute of Company Directors. He said:
No person in Australia in any occupation should commence a new job or a new position only to find that within 30 days they become personally liable for a breach that occurred before they commenced work in the role, which involve acts which they, by definition, cannot have taken part in and cannot be held culpable for. We are of the view that applying automatic liability on new directors for acts of the company which occurred before they were a director is particularly offensive to the rule of law.
Yet we see no accommodation of those comments from an organisation representing 2.2 million directors around this country. It is an abrogation of what is a commercial responsibility. This government's measures will make potential directors think twice about taking up a position on a board. These measures ignore the fact that the recruitment of highly skilled directors is an internationally competitive process. Inevitably, this will have long-term ramifications for Australia and the calibre of directors that we attract to this country. This liability for the past would serve to discourage potential directors and pose burdensome requirements on businesses, especially charities and not-for-profits that are limited by guarantee. In fact, there are around 11,700 companies in Australia that are limited by guarantee. It is not surprising that this Labor government wants to lump directors of companies, even those where there is no illegitimate activity, with undue liability. I see Senator Sinodinos has joined us for the discussion. I look forward to his contribution and his input into this policy, because surely he will have something that the government can learn about from his many years in this sector. We in the coalition are concerned about phoenixing activity. 'Activity' is the key word. We support targeted legislative initiatives that are efficient and effective in dealing with the problem; however, this Labor government bill is neither efficient nor effective. Again, lack of efficiency and effectiveness are hallmarks of much of this government's legislative agenda. I think we are up to the guillotining of 125 bills today, which certainly marks a record not to be proud of.
As someone with a background in business, it is important I now discuss the significant costs in the proposed regulatory compliance. Through massive increases in red and green tape, this government has been holding Australia back. This legislation imposes exactly the sort of blunt compliance that distracts directors from concentrating on the performance of their companies. Australia cannot afford more regulatory costs right now; we are on the eve of introducing one of the most fraudulent taxes this country has ever seen. We in the coalition are not convinced that the government has adequately checked parts of this legislation. Specifically, I refer to the productivity costs associated with the additional indiscriminate duties imposed on directors who are not involved in phoenixing activity. This government has not produced a regulatory impact statement which analyses the costs of these measures in how they may impact on these companies, nor has it produced one for the economy as a whole. It is: grab a handful of wheat and throw it at the side of the barn. Yes, sure, it will all hit the barn, but it will not make any difference. You will spray it—you will achieve the objective; you will hit the barn—but you will have sprayed it right across with a handful of wheat. It just shows how insincere they on the other side are about managing business effectively and economically.
That brings me to the issue of retrospective taxation. We on this side of the chamber have a very strong in-principle opposition to retrospective taxation. If it is to happen at all it must have incredibly strong justification. This government has not made a strong enough justification for the retrospective application of the proposed changes contained in schedules 2 and 3 of the Tax Laws Amendment (2012 Measures No. 2) Bill 2012, which is in relation to consolidation of tax cost-setting arrangements and related charges to taxation of financial arrangements. Schedules 2 and 3 show the laziness of this government. The government is attempting to use the legislation to retrospectively extract taxation from past years, reaching into our lives backwards and forwards, anywhere it can. These government measures will, sometimes years later, persecute those who acted lawfully and in compliance with the prevailing laws of the time, which creates great uncertainty for business and increases Australia's risk profile as a good place to do business.
We work in a global economy. The legislation as it currently exists is out of step with legislation around the world. There is the irony of introducing an NBN so we can be at the so-called world's edge of all the magical and wonderful things that it is going to bring to us, yet at our core, in our structure, all we are doing in the way we regulate business is throwing out a boat anchor to drag business down even harder and further. Those on the other side just do not understand business. If you asked those people on the other side who had had more than five years in a private enterprise business to put their hands up there would not be one hand go up—certainly not in this chamber at the moment.
This Labor Party policy will impact on the financial viability of investment decisions, with all of the serious negative flow-on effects this will have for jobs and the economy as a whole. That leads me to my concerns about the increased perceptions of sovereign risk. How can the erratic behaviour of this government inspire confidence? It is the rabbits in the headlights approach, which says, 'Which way did they go? What are we going to do? We'll go retrospective. We'll do this—actually, we'll ignore that. We'll ignore these amendments—actually, they're good amendments but they're from the opposition. No, we can't do that; that'll look bad. It'll be good for Australia but we won't do it. We just won't do it.' How can overseas investors trust a government that promised never to introduce a carbon tax? 'There will be no carbon tax under a government I lead.' Every time you on the other side hear that it must chill you to the bone. And, for that matter, why would ordinary Australians trust a government that promised never to introduce a carbon tax? How can the mining industry trust it? Labor was not going to have a Minerals Resource Rent Tax. Let us also not forget the great uncertainty the government's mining tax is creating around investment by miners in this country and around attracting foreign capital to this country to start mines. The Labor government's application of retrospective taxation, and the breaking of key promises, totally undermines Australia's economic credibility. In international forums people must sit around and giggle about all the resources and all the capacity we have in this country, yet we seem to be governed by the Gillard Labor government's undisciplined, unthinking, uncaring approach to business. The government is also showing that it is unconcerned about Australia's international competitiveness. Along those same lines, we still have to compete with countries in South America and all over the world that have also got quarries, IT industries and manufacturing. On top of the world's biggest carbon tax, it is using this legislation to double the withholding tax rate. Again, this undermines Australia's reputation as an attractive destination to invest in with certainty. It puts Australia out of step with comparable rates in the Asia-Pacific region. It sends offshore based companies with investments in Australia down tax-haven rabbit holes in an effort to search out ways of minimising their tax so that they can at least justify to their boards, located elsewhere around the world, why they are doing business in this country.
These measures by the Labor Party would see Australia lose its position as 'the leader of the pack' when it comes to the headline rate of tax. This government seems as though it is trying to derail our long-held objective of becoming a leading regional financial services hub in the Asia-Pacific region. This brings me to my next point, and it is a very important one for those opposite. This legislation presents a risk to billions of dollars in existing investment and subsequent government revenue.
The government asserts that this measure would raise $260 million over the next four years. Yet this has been brought into serious doubt in the analysis conducted by the Allen Consulting Group—not some fly-by-night consulting group but a very well respected commentator on these matters—for the Property Council of Australia. This was provided to the House of Representatives Standing Committee on Economics as a confidential submission. This analysis showed that the proposed increase in the final withholding tax revenue from MITs would have a 'profound adverse impact' on the economy, without raising the expected revenue. It was also found that, if there were a $1 billion drop in investment as a result of the increased tax, the net tax revenue in 2015-16 would be $35 million. This would be due to decreased receipts. This is less than half the $75 million predicted by Treasury. It again raises questions about the unforseen implications that this government's policy would have on Australia. And I do not need to go into the Treasurer's forecast budget surplus, which is so finely balanced and yet we see bills like this, ones that without the amendments that the coalition are going to put up would put all of these things in peril. But I guess you on the other side all know that and you just think you will manage it then: 'We'll get some spin doctors out and we'll manage this as to the surplus so that it will be somebody else's fault.' So it will be somebody else's fault, won't it? It will be the fault of somebody in Asia or somebody in South America. It will be: 'We didn't plan on this. We didn't plan on that.' So that $1.4 billion surplus due to be coming to fruition next year will evaporate.
I go back to the Allen Consulting Group analysis. They also found that by 2015-16 the increased tax would reduce GDP by $580 million and cost more than 4,600 jobs a year. Is there nothing that this government cannot put its hand on that reduces employment in this country? It just attacks everything in industry. What did they ever do to this government that it would keep putting the dead hand of bureaucracy across them wherever they go? Surely the government cannot proceed when there is strong evidence of the adverse impact of these measures on our economy?
In summary, I have outlined how these bills must be opposed. This is on the basis that they unduly increase taxation, propose retrospective measures without proper justification and give rise to automatic and indiscriminate liability to directors. I hope that the government will swallow its pride and suck it in and say, 'Well, the grown-ups in the room are the ones that actually understand business and they've got a few reasonable suggestions and we'll take them on board and we'll do the right thing by Australia.' I hope that this government will just get on with it and say, 'We shouldn't ignore Senator Cormann's good work on this,' and that there is a bit of goodwill. I hope that they understand that these bills in their current form are just not going to cut it when it comes to serving Australia's best commercial interests. I will sit and let my other colleagues, who are plentiful, take the debate further.