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Tuesday, 21 March 1972
Page: 742

Senator COTTON (New South WalesMinister for Civil Aviation) - The Income Tax Assessment Bill 1972 deals fundamentally with the restoration of the 20 per cent investment allowance. People have commented on the fact that this allowance has been started, taken away, and started again. This is regarded as something that is to be highly criticised. Investment allowances, by their character, are not unusually fairly flexible. It is not unusual in other countries to bring them in, to alter them, sometimes to stop them and to start them again. They are part of the process of economic management where it is desired from time to time to stimulate capital investment and sometimes, if anything, to diminish it. A fairly useful explanatory memorandum was circulated with the Bill and gave details of its introduction and its various clauses. It also gave details of the deductions. I do not think these need to be dealt with in any precise detail. The Australian Labor Party has proposed an amendment which seeks substantially to broaden the whole matter considerably. Without wishing to give any offence to people on the other side of the Senate who take these things seriously, I think one might perhaps say that the amendment did not really sensibly call for this to be done in this area.

The allowance which the Bill will restore will apply throughout manufacturing as defined for the purposes of the provision. A parallel provision in the law authorises a comparable allowance for primary production. Within these broad sectors the allowance does not seek to select between particular industries. It is difficult to see how a basis for selection within the manufacturing sector could be arrived at. It is not clear that there is any reason why the Government should try to be selective or why it should extend the concession to other industries. The aim of the Bill is to restore the allowance which was suspended last year and to restore some confidence and remove some uncertainty .in the area of the economy which it covered. The idea that there should be a selection of industries within the manufacturing sector which would have the allowance while others did not is not one which commends itself to the Government. If the aim were to balance country and city industries there would be some substantial constitutional difficulties. If it were desired to pick declining industries from growing industries there would be no way of providing for that in the law. One would have to pick by dangerous arbitrary judgment the industries which were believed to bc in those categories. But the condition of an industry today need not be the same as its condition In the near future. So the Government is not persuaded that there is any virtue at all in the amendment moved by Senator Willesee.

Supporters of the Government have, both in this debate and in general discussions, made some fairly useful comments on the various problems that they see in this Bill. Senator Dame Nancy Buttfield and other honourable senators on this side of the chamber indicated in their speeches the concern that they have with one or two aspects of this legislation. They said that this favoured those manufacturers who installed production machinery during the period of the suspension of the allowance and who decided to fund the payment for the equipment over a period of time which extended beyond 14th February 1972. They felt that at the same time its benefits were denied to those manufacturers who decided to install equipment before 14th February 1972 and to fund their investments by cash or by bank overdrafts. When the Government came to restore the allowance the question naturally arose as to whether the restored allowance should be granted in respect of expenditure after 1 4th February 1972 or only in respect of contracts entered into after that date. The Government recognises that some anomalies will occur with the concessions, but it has decided that this allowance would be more effective as a restorer of confidence in the private sector if granted in respect of expenditure rather than contract.

Another matter referred to was in respect of those manufacturers who were specifically excluded from the benefits of the original Bill. Senator Dame Nancy Buttfield touched on this matter in her speech tonight. In particular, there was reference to those manufacturers who manufacture for their own use in the building and construction industries. Industry spokesmen have stated that during the last 10 years major changes have occurred in the operation of those industries to the extent that manufacturing in a genuine sense on or off the site is now quite a common part of their operations. I think many of us have witnessed this. In the light of the comments that have been made in relation to this matter the Treasurer (Mr Snedden) has undertaken to consider a study which the industry is making and when the report on it is completed to consult further with the representatives of the industry concerned.

I have one or two other very brief comments that 1 wish to make. A subsidiary company set up to carry out the manufacturing activities of a building and construction contractor could qualify for the investment allowance in respect of expenditure on new manufacturing plant for use primarily and principally in a manufacturing process. That merely recognises that a company which is wholly owned by another company is nevertheless a separate entity and is entitled to whatever concessions the law provides for the industry in which it is engaged. I am unable to go beyond that, but I hope that that will satisfy the concern some honourable senators have in relation to this matter. As 1 have said, the Government has not been persuaded that there is any wisdom at all in accepting the Australian Labor Party's amendment, but it has undertaken through the Treasurer to examine critically the particular matters referred to in regard to the building industry. I do not think that there is anything further that I can usefully add to the debate.

Question put:

That the words proposed to be left out (Senator Willesee's amendment) be left out.

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