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Thursday, 28 May 1987
Page: 3593

Mr REITH(10.52) —The matter I raise tonight concerns the foreign tax credit scheme which comes into operation on 1 July for professional sportsmen and sportswomen. The implications of the scheme will be quite significant and could be reasonably described as the equivalent of what used to be referred to as the brain drain. This matter was referred to in the House during Question Time on 29 April when my predecessor as the shadow Minister for Sport, Recreation and Tourism, the honourable member for McPherson (Mr White), addressed a question to the Minister for Sport, Recreation and Tourism (Mr John Brown) concerning the implications of the foreign tax credit scheme. In part, the question stated:

Is the Minister aware that an Australian resident sportsman who, after 1 July, wins a major tournament overseas and pays tax in that country will then pay additional Australian tax? What will the Minister do about the sportsmen and women who are contemplating leaving Australia and basing themselves overseas because of Australia's high taxes, together with the new foreign tax credit scheme that will operate after 1 July?

The Minister then replied that he would take up the matter with the Treasurer (Mr Keating) to check the fine detail. Essentially, he suggested that the implication in the question was incorrect. The Minster then came into the House the next day after Question Time and said:

I was not quite sure of the answer yesterday and did not want to give the honourable member inaccurate information. But I am pleased to tell the House that, as usual, he was wrong. Honourable members will not be surprised about that-he was wrong again.

There was then some interjection between the Minister and the honourable member for McPherson. The honourable member for McPherson said by way of interjection: `They have to pay again'. The Minister responded: `They do not pay again. They get a credit for the tax that they pay overseas'. The interjections continued, but the Minister completely refuted the implication of the question. The Minister then provided the honourable member for McPherson with a more detailed response, part of which included the statement:

If the foreign country is one with which Australia has a double tax treaty then this is not a new tax treatment; it was a feature of the former Government's tax system.

Whilst the Minister may have checked his facts to some degree, I say that I have checked the matter further and have found the Minister's answer is in fact quite wrong. The Minister said that when an Australian sports professional wins a professional event and pays tax in a foreign country that tax would be calculated as a credit against the total tax bill for which that person would be liable in Australia. He said that there was nothing new about that. Of course he was referring to the situation that will pertain after 1 July. The fact is that prior to 1 July a professional sports man or woman who won an event and received prize money overseas would not have to pay additional tax in Australia. I refer the Minister to Article 13 of the tax treaty between, for example, Australia and the United Kingdom. I refer to the CCH publication, which I think is generally highly regarded. It states:

If the United Kingdom earnings of Australian entertainers and athletes touring the United Kingdom are subjected to tax in the United Kingdom, Australia would exempt those earnings from its tax under sec. 23 (q) of the Assessment Act.

In other words, if one wins the British Open and pays #20,000 in tax, when one gets home one will pay no more tax. However, after 1 July that person will pay the Australian tax. Because we have internationally high tax levels more tax will have to be paid here than would have to be paid in most of the overseas countries that sports men or women, for example, would compete within. It means that in Australia after 1 July a person will have to top up in relation to payment of tax, and I point out that in this regard the Minister was completely wrong.

Madam SPEAKER —Order! The honourable member's time has expired.