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Wednesday, 11 August 2004
Page: 2125

Mr BROUGH (Minister for Revenue and Assistant Treasurer) (6:21 PM) —I thank the members for Forrest and Hotham for their comments on the New International Tax Arrangements (Managed Funds and Other Measures) Bill 2004. In the 2003 budget, the Treasurer announced the outcome of the review of international tax arrangements, foreshadowing over 30 initiatives designed to modernise Australia's international tax system. In a statement at the time, the Treasurer said:

To maintain Australia's status as an attractive place for business and investment, the tax system needs continually to adapt to the increasingly integrated global business environment.

... ... ...

The package of reforms announced by the Government will improve the competitiveness of Australian companies with offshore operations. These reforms will reduce the costs of complying with the controlled foreign company (CFC) rules, reduce tax on foreign `active' business income, and effectively reduce foreign taxes by modernising Australia's tax treaties.

The reforms will encourage the establishment in Australia of regional headquarters for foreign groups and improve Australia's attractiveness as a continuing base for our multinational companies. The reforms will also enhance the competitiveness and reduce the compliance costs of Australian based managed funds.

The government first delivered on those announced reforms with the signing of the new tax treaty with the United Kingdom. That treaty was enacted last year. It provided significant benefits for Australian based multinationals operating in the United Kingdom. The New International Tax Arrangements Act 2004 and the New International Tax Arrangements (Participation and Exemption) (Other Measures) Act 2004 implemented many more of these initiatives. The changes reduce compliance costs and minimise the tax burden on the offshore operation of Australia's multinationals.

The bill before the House is a further instalment of these ongoing and important international tax reforms. This bill focuses on making the Australian managed fund industry more attractive to foreign clients. Australia has a significant managed fund industry facilitated by strong economic performance, a highly educated work force, low-cost infrastructure, advanced regulatory systems and sophisticated financial markets. Reforms in the bill reduce taxation impediments to further growth in this area. These changes allow Australia's managed funds to become more internationally competitive, increasing their attractiveness to nonresidents. Under current capital gains tax arrangements, nonresidents investing in assets through an Australian managed fund may be taxed more heavily than if they invested in those assets directly or through a foreign fund. Measures in this bill will eliminate these distortions. The size of Australia's fund management pool and its prospects for continued growth are drawing global firms to establish operations here in Australia. The resultant clustering of activities and concentration of expertise have created a robust domestic industry. This infrastructure provides a framework for Australia to become the funds management hub for the Asia-Pacific region, and these reforms will remove impediments to achieving this goal.

This bill has strong business support. As with all the international tax changes, I understand that the business community have played a valuable and constructive role in helping develop the proposed legislation. I look forward to their continuing involvement into the future. The future of the Australian economy is fundamentally linked to global prosperity and to Australia being part of that prosperity. This bill is an important part of the modernising of Australia's international tax system to make the most of Australia's potential to market financial products to foreign investors. I commend the bill to the House.

Question agreed to.

Bill read a second time.