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Monday, 23 March 1987
Page: 1277

Mr SINCLAIR —I ask a question of the Treasurer. Given his sensitivity on matters affecting the lodgment of tax returns, can he advise the House when the imputation of dividends and foreign tax credits legislation will be introduced, and what changes are there to be to the policy announcements that he made earlier this year, given that each are to apply to taxpayers' dividends from 1 July 1986?

Mr KEATING —Let me use this opportunity to repeat the glowing reference in the Economist last week to the Government's imputation legislation. It said, and it is right, that it is the purest and most effective imputation system in the world. What it will do is, for the first time, remove the impediment to the formation of equity in this country where we have been taxing equity twice and debt once.

Mr N.A. Brown —Where is the Bill?

Mr KEATING —Hang on; the honourable member will get an answer. Would not one think that the so-called party of free enterprise-the coalition-would have thought that there was some justice in removing the double taxation of dividends; that if one set oneself up as a partnership, a trust or an individual one does not pay tax twice on the earnings of a business but, if one happens to incorporate, one does?

Australia, under this Government, will be the second country in the world to have a full imputation system. We will do it for a corporate rate of 49 per cent. The Germans do it for a corporate rate of 56 per cent. It needs to be well understood that not only will our imputation system be superior to that which operates in Germany but also we will do it with a company tax rate seven percentage points lower than that which applies in West Germany.

It will be one of the major factors in improving capital formation in this country and will lift the capital stock which was disastrously smashed and hit when the Opposition was in government. How can honourable members opposite raise their heads, when we saw the massive destruction of capital assets through the 1970s, particularly in the manufacturing sector? I can understand the Opposition's embarrassment when we talk about bringing forward legislation. It will be in this session. The system will begin on 1 July this year.

I was at a dinner on Friday night and people in the financial markets and the stockbroking industry are just starting to comprehend the importance of imputation. What a revolutionary change. It is the revolutionary change to the business tax system. I hope those opposite are embarrassed about it, because they ought to be. All they ever did when they were around was hand out protection.

Mr Sinclair —What are you going to do about it?

Madam SPEAKER —Order! The Leader of the National Party will cease interjecting.

Mr KEATING —That will be legislated as well. All that happened on the other side was that members of the Opposition doled out protection to these industries so they became inefficient and, finally, with their manipulation of the exchange rate, by overvaluing the exchange rate, there was a flood of imports. Not only did it wreck farmers' incomes and rob farmers of their just returns, but at the same time it decimated our industries with a flood of imports. This is the first Government that has come along and decided to fix the basic fundamentals of capital formation so that we have not got a massive impediment to the stock exchange of mobilising funds against the acquisition of debt. For the first time ever from a Labor government we have got the basis for the proper formation of capital in the economy. So we can see a higher level of investment and a better performance on our current account. If those opposite are embarrassed about it--

Mr Hurford —Sinclair is opposing it.

Mr KEATING —Is he opposing it? It will be interesting if those opposite oppose it, because if they oppose it they will be running true to form; that is basically giving the lurk merchants a go while refusing the legitimate people in business. That is why business has seen right through them and that is why business will never have them. Talk about deck chairs on the Titanic; it does not matter who leads those opposite, they will be washed to one side by business as quick as a flash because the business community realises that their election would simply be an attack upon its earnings and upon its longevity.