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Thursday, 30 June 1994
Page: 2442

Senator KERNOT —My question is directed to the Minister representing the Treasurer. In the budget the government announced its intention to make employees' share ownership plans subject to fringe benefits tax. Is the government aware that the legislation could all but destroy existing employee share ownership programs for companies such as ANZ, BHP, Cadbury Schweppes, the Commonwealth Bank, CRA, CSR, Microsoft, Pacific Dunlop, Westpac, Amatil and Qantas? Is the minister aware that the new FBT liability for these and other companies could amount to more than $1 billion? Is the minister aware that, because of the uncertainty surrounding this tax, the Australian employees of the Lion Nathan group will be the only workers of that group in the world not to be included in a company-wide share plan? Are these unintended consequences? Should the plan be reworked immediately?

Senator COOK —As the Treasurer said on budget night when introducing the proposal to change employee share acquisition schemes, the purposes of the government's legislation were twofold. The first objective was to stop schemes which in many respects were tax dodges and enabled taxation obligations to be avoided. That is something that all honest taxpayers who meet their full taxation obligations would support. I note Senator Kernot's affirmative nod in that respect, and I know of her many statements of support in that respect. The second purpose was that many of those share acquisition schemes did not contribute to increased productivity or a greater sense of ownership of a company on the part of employees. That was a factor, although not a primary one, that needed to be addressed.

  Senator Kernot has mentioned a list of Australian companies that she believes will have their share ownership schemes adversely affected. I take on board that that is Senator Kernot's view.

Senator Kernot —It's their view too.

Senator COOK —I take on board that that may well be the view at this point of time of a number of those companies, although the language in which that point of view is expressed is more extravagant or more flamboyant than might be the case if one goes to the detail of the argument. Without questioning or criticising that, nonetheless I note the point that it is not something the government necessarily concedes. However, the Treasurer last evening issued a press release on employee share acquisition schemes transitional arrangements and certain superannuation aspects. That may well be the document Senator Kernot is waving around. My eyesight is not so good that I can read the fine print from this distance.

Senator Panizza —Put your glasses on!

Senator COOK —I do not think any optician manufactures a pair of glasses that would enable me to read the fine print from this distance. If such spectacles exist, I would be interested in them. The press release sets forth a series of proposals the Treasurer is prepared to invoke as transitional arrangements, which may go to the amelioration of the concerns of some of those companies.

  Obviously, the objectives for which we have announced these measures relate to the principal objective of the government—that is, to ensure that employee share acquisition schemes are not used as a tax dodge. Ideally, in a perfect world, they should contribute to a greater sense of ownership and fulfilment by employees. They are the intentions of the government. At this stage, if there are other views the government is prepared, as usual, to listen to them.

Senator KERNOT —Mr President, I ask a supplementary question. The transitional arrangements deal only with shareholders' decisions between April 1994 and May 1994. Therefore, the question remains: what will happen to those after 10 May 1994? How will the government decide on these competing principles in terms of the importance of employee share ownership—the importance of cracking down on tax avoidance but not wanting one to impact on the other adversely? Can one have both?

Senator COOK —Tax law is riddled with the conundrum: how does one achieve fair taxing obligations without injuring collaterally innocent parties or innocent objectives? It is the government's view that both are obtainable.

Senator Kernot —What is more important to you?

Senator COOK —Both are important. While it is the principal responsibility of the government to ensure that the tax base is fair and fairly implemented, obviously one would have to have regard to the social purpose of these schemes. That is the reason why the Treasurer in his budget night statement paid attention to whether they genuinely help productivity and go to a sense of employee ownership.

Senator Kernot —Do you think they do?

Senator COOK —In this answer I cannot enter into a question by question debate with Senator Kernot, but I will draw her question to the attention of the Treasurer. I will seek from him any further details that he may be able to supply and hope some time today to obtain an answer for Senator Kernot.