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Thursday, 13 April 2000
Page: 15956

Mr BAIRD (3:07 PM) —My question is addressed to the Treasurer. How is business tax reform making Australia more competitive? What investment opportunities does it open up?

Mr COSTELLO (Treasurer) —I thank the honourable member for Cook for his question. The government is not only reforming the indirect tax system in Australia to take place on 1 July, reforming family payments to take place on 1 July and cutting income taxes in Australia's largest ever income tax cut on 1 July but also reforming the business taxation system. That has involved cuts in capital gains tax, particularly of benefit to small business. The cuts in capital gains tax and company tax have given Australia a new international competitiveness and have made Australia a good destination for foreign investment.

First of all, on capital gains tax, prior to the government's reforms, the top rate of capital gains tax in Australia was 48.5 per cent compared with 34 per cent in the UK and 18 per cent in the US. That top rate has been cut to 24¼ per cent, which is lower than the UK top rate at 34 per cent and only slightly above the US rate at 18 per cent. Our bottom rate of capital gains tax now at 15 per cent is again lower than the UK and slightly above that of the US. In relation to company tax, however, the government's reforms, the first instalment of which takes place on 1 July—cutting the company tax rate from 36 per cent to 34 per cent, and then a year later from 34 per cent to 30 per cent—will mean that Australia has a lower company tax rate than the United States, New Zealand, Japan and Korea; will be on a par with rates in Germany and the United Kingdom; and will be, outside of Hong Kong and Singapore, the lowest company tax rate in the Asia region.

This means that Australia is now an attractive destination for foreign investment. I read some statements, which were put out earlier in the week by some foreign analysts, saying that one of the key things you could do to improve the investment climate in Australia was the privatisation of Telstra. I think that point was being made by Mr Hale. We know that, by having a telecommunications sector in our stock exchange, we have been able to hook that stock exchange into new high-tech indexes, which have put Australia on the map in relation to foreign investment. We would not have had a telecommunications sector on the Australian Stock Exchange if it had not been for this government's effort for the privatisation of Telstra.

For foreign investors, we now have arguably one of the most competitive capital gains tax regimes amongst developed countries. We now have a low rate by regional standards. Australia is a good destination for investment. That means more jobs for young Australians. This means that this government is about building an internationally competitive business taxation system for the future in this country.