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Tuesday, 24 November 1959


Sir WILFRID KENT HUGHES (Chisholm) . - There is only one point concerning which I should like to ask the Minister a question. I agree with the honorable member for Wentworth (Mr. Bury) that the Government's action in bringing about an agreement to avoid double taxation has brought an inflow of capital to Australia for the establishment of new businesses, and has conferred other benefits of that nature which have been of great value to us. Of course, everybody wants to avoid double taxation, which is the payment of full taxation both in Australia and in the country from which capital comes. But is it wise or equitable that we should set the rate of 30 per cent, for taxation payable on the earnings of capital from countries with which we do not have this agreement? The flat rate of tax in relation to countries with which we have no agreement is 30 per cent., and it is 15 per cent, in relation to those countries with which the agreement exists.

The position as I understand it is this: If an Australian has an investment in the

United Kingdom, or the United States of America, he pays the non-resident alien taxation, less 50 per cent. If the maximum flat rate of tax is 30 per cent:-6s. in the £1- sunder the double taxation agreement he pays only 3s. in the £1. In Australia, however, the investor is assessed on the full amount of income which he drew in Australia plus the income that he earned overseas. The amount of taxation paid overseas is then deducted from the full taxation that he would have had to pay on that amount in Australia.

I do not suppose that many Australians have money invested in Canada, the United Kingdom or the United States of America because, at the beginning of the war, all our overseas investments were taken over by the Commonwealth Government. On the other hand, we have a very large amount of overseas investment here. Instead of drawing the 30 per cent, tax on the nonresident alien dividends here, the Government receives only 15 per cent, as far as United Kingdom and United States of America investors are concerned. Therefore, we must lose a large amount. I can see no reason why the tax of 30 per cent., or 6s. in the £1, should not be imposed on dividends in respect of all countries concerned. The avoidance of double taxation under the agreement could continue. In other words, Australians should not have to pay tax in Australia and in other countries. I suppose that, under the circumstances, other countries would not agree with this, but it seems to me that we are paying a high price to bring overseas capital into Australia. As the honorable member for Reid pointed out, at present, the amount of money that goes out each year as a result of this payment of only 3s. in the £1 practically balances the capital that is coming in and if the capital ceases to come in we will still have large amounts going out. I think that the Government should look at the problem from that point of view.







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