Senator IAN CAMPBELL (5:33 PM) —I table a replacement explanatory memorandum relating to the Taxation Laws Amendment (Political Donations) Bill 1998 and move:

That these bills be now read a second time.

I seek leave to have the second reading speeches incorporated in Hansard .

Leave granted.

The speeches read as follows—

TAXATION LAWS AMENDMENT (POLITICAL DONATIONS) BILL 1998

The bill will implement the Government's recently announced response to the taxation-related recommendations of the Joint Standing Committee on Electoral Matters, following its inquiry into the conduct of the 1996 Federal Election. This bill complements other legislation currently before the Parliament which implements the Government's response to the other recommendations of the Joint Standing Committee—the Electoral and Referendum Amendment Bill 1998 and the Electoral and Referendum Amendment Bill (No. 2) 1998.

Currently, the income tax law allows a non-corporate taxpayer to deduct a contribution (which includes a membership subscription as well as a gift) of $2 or more to political parties registered under Part XI of the Commonwealth Electoral Act 1918. The total deductions allowable to a taxpayer are subject to a maximum level of $100 in an income year. Testamentary gifts or contributions are not deductible.

The Joint Standing Committee recommended that the income tax law be amended so that the maximum annual tax deductibility threshold for donations to political parties be increased from $100 to $1500, and that companies be allowed to make tax deductible donations. The word "donation" is a general term which covers contributions as well as gifts.

The Government has accepted that recommendation. The Government agrees with the Joint Standing Committee that an increase in the threshold will encourage small to medium donations, thereby increasing the number of Australians (including companies) involved in the democratic process and reducing a political party's reliance on a small number of large donations.

The Joint Standing Committee also recommended that the income tax law be amended to provide that donations to an independent candidate at a Federal or State election are tax deductible, at the same level as donations to registered political parties.

The Government has also accepted this recommendation. This will provide an equivalence of treatment between independent candidates and members and political parties.

To implement these recommendations the bill repeals the existing provisions of the Income Tax Assessment Act 1997 that apply to contributions to political parties and inserts a new Subdivision that applies to both contributions to political parties and gifts to independent members and candidates

The bill also allows taxpayers to make tax deductible contributions to political parties that are registered under State or Territory electoral legislation. This expansion will complement the tax concession afforded to independent candidates and members.

The amendments made by the bill will apply to contributions to political parties and gifts to independent candidates and members made on or after 1 July 1998.

It is anticipated that implementation of these recommendations of the Joint Standing Committee will increase the number of Australians involved in the democratic process and reduce a political party's reliance on large donations. The measures contained in the bill complement the election funding of political parties and provide an equivalence of treatment between donations to political parties and donations to independents.

Full details of the measures in the bill are contained in the explanatory memorandum circulated to honourable senators.

CUSTOMS TARIFF AMENDMENT BILL (No. 2) 1998

Customs Tariff Amendment Bill (No. 2) 1998, which is now before the chamber gives effect to the government's commitment to remove tariffs on inputs to the manufacture of information industries equipment. The initiatives were announced by the Treasurer in the 1998/1999 Budget.

The Prime Minister made the "investing for growth" industry statement of the eighth of December 1997. In it he announced the government would remove tariffs on inputs to the manufacture of information industries equipment, after consulting with local component suppliers to assess the likely impact on them. The Prime Minister also said that whenever doubts over classification of information technology equipment arise, the lowest tariff will be applied.

We are now taking action to address these matters. The issue with tariffs on inputs is one of negative assistance. Most fully assembled information industries equipment is imported duty free. However, many of the chemical products, mechanical parts, electronic components and sub-assemblies that are used in local production of the same equipment attract either a 3 per cent or 5 per cent tariff.

This represents a situation of "negative assistance" in an industry which is highly competitive and in which margins are often small.

There has also been an issue within the industry whereby goods classified as information technology equipment are duty free, and goods classified as telecommunications equipment carry a duty of 5 per cent. This duty differential means that there has been incentive for importers to seek to have goods classified to an information technology item, rather than a telecommunications item.

Following consultation with industry, we are taking action on two fronts. The central element is an acceleration of duty reductions already scheduled under the Information Technology Agreement (ITA). Australia, along with forty-two other countries, is a signatory to the ita which covers ninety-three per cent of world trade in information technology products. This agreement produced a list of goods in the information technology industries on which tariffs are being phased to zero on the first of January 2000.

With the exception of a small range of finished goods, we will be bringing forward by eighteen months the tariff reductions to which Australia is committed under the ita. A zero duty rate will now apply from the first of July 1998. The goods that will be excluded, and for which the first of January 2000 will remain the operative date for a zero rate, include: line telephone, cordless, mobile and other telephone sets, facsimile and telephone answering machines, digital still image cameras, pagers, antennas and aerial reflectors.

The classification issue has been resolved by reducing, to free, the duty on goods which were considered contentious at the time of the "investing for growth" statement.

Madam President, the second element of the approach is the establishment of a new schedule 4 item in the customs tariff for those inputs not covered by the ITA. This will allow duty free entry for other inputs which are currently subject to a Tariff Concession Order (TCO).

The new item will cover inputs to the manufacture of information industries equipment. Information industries equipment will be defined in terms of a series of tariff items within the by-laws written to the new schedule 4 item. If the coverage of goods contained in the ita expands over time, this listing of tariff items will be altered appropriately. Inputs to manufacture are goods that are an integral part of the manufacturing process for this equipment, and include goods that are incorporated into the equipment or consumed during the manufacture of the equipment, as well as certain capital equipment utilised in the manufacturing process.

In consultation with industry, an initial list of tcos covering relevant inputs has been developed. The coverage for the new schedule will be expanded as new TCOs are established for other inputs to information industry equipment manufacture.

Australian information technology manufacturers will benefit from duty free access to key inputs which will strengthen the competitive base of Australia's information technology industry. The cost to government is estimated at $80 million over the next eighteen months, and this should translate directly to reduced costs for industry, and ultimately flow through to lower prices for consumers.

Australia's position in the context of the ita will also be enhanced, at a time when some countries are calling for accelerated action on trade liberalisation. I commend the bill.

Ordered that the further consideration of the second reading of these bills be adjourned to the first day of sitting in the Spring sittings 1998 in accordance with standing order 111.

Ordered that the bills be listed on the Notice Paper as separate orders of the day.