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Tuesday, 3 February 2009
Page: 13

Senator XENOPHON (1:33 PM) —I indicate my support for the second reading of the Tax Laws Amendment (Political Contributions and Gifts) Bill 2008. Despite Senator Birmingham’s very articulate exposition of his and the Liberal Party’s views, my view is that we ought to deal with this piece of legislation. It contains some reforms that, with amendment, are potentially useful in the context of what needs to be done. I believe that this Senate has an opportunity in the coming months to deal comprehensively for the first time in many years with the whole issue of electoral reform, including funding, contributions and donations and above all the issue of disclosure and transparency. That is why I welcome the work that the Special Minister of State has done in the context of the electoral reform green paper. I believe that the minister is absolutely genuine in his desire to significantly reform our system.

I do not want us to go down the path of the United States, where you have the best democracy that money can buy. Senator Bishop outlined the many millions of dollars that were spent in the primaries in the last two years. Those amounts are simply mind-boggling. The amount that is spent in Senate races in the United States, for instance, is in the tens of millions of dollars. That is something that is fundamentally anti-democratic in its effect. It can taint a political system.

What we have to deal with today is the issue of the tax deductibility of political donations. While some would say that it would be preferable to deal with this holistically, I say that if there is scope for reform we should deal with it now on a transitional or interim basis pending a more comprehensive political funding and disclosure regime. In relation to the central basis of what the government is trying to do—wipe out the tax deductibility of political donations—I cannot accept that. It is important that there be a level of public participation. I believe that removing tax deductibility for any level of donation up to the current limit of $1,500 will discourage the participation of ordinary citizens in the political process. You will skew the process in favour of large corporations and unions. I do not think that that is desirable. Giving individuals an opportunity to have a deduction of up to $1,500 is not unreasonable. The revenue effect of continuing this deductibility is quite minimal in the scheme of things. It is about $30 million over three years. That is a relatively small price to pay for a greater degree of public participation. However, I believe it was a mistake of the Howard government to extend that deductibility from individuals to corporations. I believe it is appropriate that such deductibility be confined to individuals. It is individuals that participate in a direct sense. It is individuals that actually vote at the ballot box. I think that is a more appropriate approach. That is why I am particularly interested in the amendments tabled by the Greens in relation to this and am quite sympathetic to them.

I also think that there is an anomalous position that would arise should the government’s bill go through unamended. For instance, donations to Greenpeace would continue to be tax deductible. Greenpeace—and this is not a criticism—is very much a political organisation. It involves itself in political issues. If you consider Aristotle’s view of what politics is about, the affairs of the state, then having too narrow a definition and allowing deductions for an organisation such as Greenpeace but not for a political party or a political organisation seems to be anomalous. I also think that it would be anomalous under this government proposal for union dues and levies to be fully tax deductible but not donations to the Liberal Party, to other parties or to Independents. The fact is that the union movement makes significant financial contributions to the Labor Party. It seems that the deductibility of union dues would be a backdoor way of providing funding to the ALP. It would give them an unfair advantage. That would be the effect of this legislation. It is important to reflect on what Professor Graeme Orr of the Democratic Audit of Australia has said about these sorts of donations. He said that this would not be inconsistent with allowing for some broader fundamental reforms down the track. Tax deductibility of donations is entirely appropriate up to a reasonable level, and I believe $1,500 is reasonable, but I do not think it is appropriate that corporations continue to have that level of tax deductibility.

I note also that some would consider to be anomalous the fact that is that there is no attempt in this legislation to change the tax deductibility of levies that members of political parties have to pay to their party as a consequence of being endorsed or of being a member of that party. Fortunately, that is something that I do not have to worry about, but I understand that members of the Labor Party—I am not sure what the situation is for members of the Liberal Party or the Australian Greens—pay a levy in the order of eight per cent of their income, and that is deductible. Obviously, that is much more than $1,500. Some would say that is anomalous, but I can understand that it is part and parcel of being a member of a party and it is part of a pledge that some have to sign as part of getting an endorsement or of being in this place. So that sits at odds with what is being proposed.

I think that an appropriate balance in what I see as a transitional or interim measure in what I hope will be quite significant and far-reaching electoral reform in this country is to amend the tax deductibility of political donations so that it applies only to individuals and not to corporations. I believe that would be a step in the right direction. I look forward to the Senate dealing with comprehensive reform of electoral laws in this country, because I think it is long overdue. I hope that the green paper is part of the fruitful process of achieving those ends.