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Tuesday, 3 February 2009
Page: 6

Senator MARK BISHOP (12:59 PM) —I rise in support of the Tax Laws Amendment (Political Contributions and Gifts) Bill 2008. As we all know, the measures in this bill were previously contained in the Tax Laws Amendment (2008 Measures No. 1) Bill 2008. That bill was not supported by those opposite when it was introduced in the Senate in June last year and, as we are all well aware, the bill was sent off to the Joint Standing Committee on Electoral Matters for investigation and review. The committee is due to report to the Senate in June this year, a full 12 months after having received the reference.

Why has it taken so long? One has to posit the argument that those opposite are being deliberately obstructive in reviewing that bill. After all, it was relatively straightforward and by no means could be regarded as a complex, complicated or detailed piece of legislation. I find it absolutely extraordinary that those opposite could not, and refuse to, get their heads around the content of a relatively simple bill in a short period of time.

But maybe that is not the point of the debate. The purpose of the Tax Laws Amendment (Political Contributions and Gifts) Bill 2008, along with that of its predecessor, is to remove tax deductibility from contributions and gifts to political parties. It will also remove tax deductibility from donations to Independent candidates and members. The bill has its genesis in the actions and behaviour of the previous government in 2006. At that time, the previous government took a fairly innocuous tax deduction for membership fees of political parties and turned it into a giant, growing tax loophole. Because of that legislation in 2006, a tax deduction of up to $1,500 can now be claimed for contributions and gifts to politicians in each and every year. It was then and remains now a significant increase on the previous maximum deduction of $100 up to $1,500.

But the previous government went much further. They extended, and this is the critical point, tax deductions by individuals to include corporations. The result is that an individual donation, together with a donation through a family business, will attract a tax deduction of up to $3,000. Today, because of that amendment moved in 2006, we have taxpayer subsidies of around $10 million per annum, and growing. Those subsidies are available to businesses and individuals who donate to political parties. But wait, there’s more! At the same time the previous government also increased reporting requirements for political donations, from $1,500 to $10,000. The disclosure threshold of $10,000 was, of course, indexed to the CPI, which was somewhat surprising given that the Medicare surcharge threshold is not indexed. But that is another debate—what the government achieved was a tax trap in that area for working families. Coalition donors are obviously in need of extra protection against inflation!

What was the rationale behind the 2006 changes introduced by the previous government? What value did those changes add to the transparency and accountability of our candidates for, and members of, public office? The answer to that is probably zero, but at best not much at all in terms of transparency, accountability and responsibility. As a device to encourage greater participation by individuals in the political process, it has little or no merit. Certainly corporations, legal entities created by statute, do not have any role in the political process and therefore do not need incentives. So the real question is: why are taxpayers funding donations made by individuals and companies to candidates and members of parliament? Clearly tax deductibility for not-for-profit and charitable organisations is completely logical and completely understandable. There is a sound public purpose behind assisting those organisations to assist themselves and assist the community. Any device that encourages philanthropic donation is worthy of serious review and consideration. Donations made to members of our community and organisations who work tirelessly day in, day out to support those most in need are worthy of support.

Tax deductibility for the cost of doing business is also logical and understandable. But as political parties and candidates for office are neither of the above it begs the question: why extend the concession into a rort for corporations? Why are taxpayers required to support and fund these deductions? Those opposite cannot seriously argue that a donation to a political party is a cost of doing business; candidates for public office are hardly charitable cases. The electorate has a right to expect that contributions to political parties are not treated by the Australian Taxation Office as a cost of doing business or a work related expense. It simply sends the wrong message. It degrades the electorate’s trust in the integrity of our system of government.

As I said, the bill was referred to the Joint Standing Committee on Electoral Matters. The majority recommendation from the committee was that the bill be passed unamended. Unsurprisingly, the architects of the tax loophole did not support the change at that time. Their minority report proposed that the measures be deferred and assessed as part of the committee’s review of campaign finance as if tax deductibility for corporations were a subset of campaign finance. Further deliberations by the committee will not cover up this rort and make a silk purse out of a sow’s ear. Each and every member of this chamber and of the House of Representatives has a responsibility to those who elect them. They have entrusted us with upholding the traditions of our system of government and governance. We have an obligation to ensure that higher standards apply in the funding, spending and disclosure of election contributions. The 2006 rules governing tax deductibility and disclosure bring no credit to our system. They should be scrapped. They should be removed, and that should be done forthwith.

The bill before the chamber today represents a step in the electoral reform promised by the government openly and publicly in the lead-up to the last election. Our government is committed to, firstly, reducing the disclosure threshold for donors from $10,000 to a flat rate of $1,000 and, secondly, to ensuring donations made to different branches of a political party are treated as donations to the same party. A donation to the West Australian branch of the Labor Party, for example, is no different to a donation to the Labor Party in Queensland or New South Wales. They are all part of the same overall national organisation. Thirdly, the government is committed to reducing time frames for lodgement of disclosure returns by political parties to six months, so that released public information is up to date and cogent and discloses to the public the detail of contributions and donations made. Fourthly, the government is committed to making it unlawful for registered political parties, candidates and members of a Senate group to accept overseas donations. Finally, the government is committed to tying public funding for elections to genuine election expenditure. Each of the above five points will ensure that there is transparency and accountability in our electoral system and in the tax rules and disclosure regime that applies to same. They will start the process of rebuilding trust between public officials and the electorate.

In the few moments remaining to me I want to make some comment on an example of a worst-case scenario. It is to be found in the contemporary home of democracy, the United States of America. I would like to talk about the pervasive influence of political action committees, or PACs, as they are commonly known. Essentially PACs in the United States are action committees created and designed for making financial contributions to politicians. There are three types of PACs in that country. The first group are those connected with corporations and labour groups. An example would be Microsoft or a trade union entity. The second group are non-connected or ideological committees such as the National Rifle Association. More important are the third group, known as leadership committees. Leadership committees are formed by politicians to help fund candidates. Funding of these PACs may be made through foundations which can offer tax deductibility on donations. PACs raise and spend money to elect candidates to public office.

There is a limit to how much can be donated by a PAC to an individual. There is a limit to how much can be contributed by a PAC to a candidate’s committee. However, there is no limit on how much a PAC can spend on advertising in support of their particular preferred candidate. There is also no limit on how much can be spent on promoting their particular agenda. There is no limit on how much they can spend on attacking and denigrating an opponent of their candidate. Whilst some members of congress, it must be said, make a point of not accepting any PAC money, they are few and far between.

A case in point is the recent presidential and congressional elections in the United States. The cost of two years of campaigning can be financially debilitating. I understand from public documentation that there is little change left over from $5 million or $10 million in Senate elections. Federal Election Commission data in November 2008, available on the Centre for Responsive Politics website, shows the cost of Senate, house and presidential election campaigns. It shows that in November last year PAC contributions to house candidates were around $287 million, from a total of $884 million raised to that date; PAC contributions to Senate candidates were around $74 million, from a total of $374 million raised to that date; and PAC contributions to presidential candidates were of a similar order of magnitude.

The point I am coming to, the point I wish to make in this debate, is that large amounts of money directed to particular interests can overwhelm the political process. As a result of the PAC system in the United States there is now a new class of lobbyists and apparatchiks active in Washington and other centres of influence in that country. This new class of individuals has immense influence on public policy and public officials. It has become a growth industry, with thousands and thousands of committees now operating legally and under the law in the United States.

PACs, of course, are required to identify their sponsors. However, I note in passing that many choose not to. The law has not apparently been enforced, and the Centre for Responsive Politics is asking for help to identify ‘mystery’ PACs. So, even with all the regulations governing public disclosure of contributions, spending and sponsorship, it is still possible to conceal from the electorate how vast sums of money are used to affect political outcomes. We do not have PACs in Australia, and that is a very useful thing. But we need to be vigilant in seeking to eliminate the influence of money and donations in our political system.

Those opposite have demonstrated time and time again their commitment to hiding political donors in the shadows. Well, this government will not. Every Australian has a right to know who is giving what to particular candidates or political parties and for what purpose. The government is committed to electoral disclosure reform. We are committed to improving the integrity of the electoral system. This is one of a number of measures that will help to restore confidence in both government and governance. The minister has already commissioned a green paper on electoral reform, which I am informed is proceeding quite nicely, and introduced a lobbyists register and a code of conduct for ministerial staff—all about reinstating standards in public life.

Our political system is based on equality of participation and representation by the party of a person’s choice with neither fear nor favour. This bill will strengthen the integrity of our political system as well as, just by the by, delivering savings of some $30 million over the forward estimates. I commend the bill to the Senate.