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Thursday, 20 May 1993
Page: 908


Senator BISHOP (10.36 a.m.) —I would like to pick up on the comment that my colleague Senator Panizza just made concerning those remarks by Sir Harry Gibbs. I think it has become quite well known that the complexity and the uncertainty within the taxation law make the law uncertain as a whole and, therefore, we are effectively reducing the major principle of the rule of law. I think it is not without significance that in looking at the Taxation Laws Amendment Bill 1993 and the Taxation Laws Amendment Bill (No. 2) 1993, which are before us, we find that the second Bill has 58 pages and the explanatory memorandum has 116 pages. Continually we are enacting legislation which means that there is more confusion in the system.

  In addressing the question of reducing the corporate rate, at the outset I think we can say it is a pea and thimble trick. It is proposed by the Government as bringing down a universal benefit on all people who are subject to paying corporate tax. In fact, that is just not the case. Some people will be worse off; some people will be better off. But at the end of the day what offends me most is a point that was raised by my colleague Senator Watson yesterday, which deals with the fact that what we are doing is giving an advantage to foreign companies. When we put this legislation together with the double tax agreements we see that if an Australian company becomes the subject of a takeover bid, and another Australian company wants to use its investing powers to take over that company in competition with a foreign company with foreign investment, the foreign investors have an advantage because the returns that will flow to them make it more attractive for the foreign investors to be able to bid more for that company.

  This legislation has been touted—first during the election period and now that it has been brought into the Parliament—as supposedly being of benefit to Australians. I think others of my colleagues have made the point that because of the manner of the collection of the taxation we will literally get to the stage where Australian residents can be paying more tax but foreign investors are paying less. That is not my idea of making laws for the Australian people.

  The disparity between the top rate of personal tax and the reduced rate of corporate tax again raises the question of whether or not it becomes attractive for people to incorporate and use the lower rate. In a press release put out by the Institute of Chartered Accountants in Australia the point is made that many small business people looking forward to the promised tax cut in company rates from the present 39 per cent to 33 per cent for the 1993-94 tax year will be disappointed because under current Tax Office practice they will end up distributing the after tax profits after dividend imputation at full individual marginal tax rates. According to the New South Wales chairman of the Institute of Chartered Accountants, the general anti-tax avoidance rules prevent individual taxpayers alienating income from personal exemption.

  In other words, a further element of confusion is put into the tax system. The Government purports to say that it is passing laws in the interest of Australian citizens; it purports to say that there are universal benefits being bestowed when there are not; and we see this downright un-Australian advantage being given to foreign investors.

  With the disparity between the top marginal rate and the corporate rate, there is a general expectation that some people will seek to incorporate. Business has queried whether the Government might not consider the reactivation of the old division 7, at least in relation to private companies that do not earn the majority of their income from active businesses. A significant report from the Economic Planning Advisory Council suggests that the reduction of the company tax rate will only deliver marginal benefit to local firms. The reduction will mean that Australia will become one of the cheapest countries in the developed world for foreigners to invest in, which is the point that I made earlier.

  The report notes that the promised six per cent cut to the company tax rate would reduce the final tax cost to foreigners for new investments in Australia by 5.2 percentage points to 28.1 per cent.  The lower company rate will only reduce the real tax costs to local investors by 1.5 percentage points to 31.8 per cent. In other words, the Government's own advisory council has spelt out the point that I made: that the Government is giving advantage to people who are not Australians.

  It is in the area of finance, tax and debt that the question of our independence as a nation is really relevant. By the year 2000 we will have an international debt of around $400 billion, largely because of the tax policy that this Government has pursued for the last 10 years. Because just over 60 per cent of all federal taxation revenue collected is personal income tax, we have seen a downgrading and a lessening of Australian savings. At the end of the day there are no savings against which Australian companies or individuals can borrow in order to expand or build new businesses. The result has been that we have had to go overseas to borrow other people's savings—hence the debt.

  If in our personal circumstances we had a huge debt on our house or business and we were not earning enough to meet the monthly repayments, we know what would happen to us: in would come the bailiff, we would be sold up, and down would go our standard of living. The situation is not much different for countries. We have an international debt and we are not earning enough to meet the monthly repayments.

  If we look at the balance of payment figures each month, we will see that the one consistent area where we continue to go into debt is the payments we have to make to service our international debt—somewhere between $1 billion and $1.4 billion a month. It is not our imports and exports that cause us great hardship. Over a 12-month period we export about as much as we import. We build that foreign debt every month because of the interest and dividend payments that we are obliged to make every month. On average, we are paying somewhere around 7.1 per cent on the money we are borrowing. Even the most optimistic figures published by the Government indicate that, of that gross international debt figure of $200 billion, about $86 billion is government sector debt on current figures. That is the debt racked up by State and Federal governments and their agencies.

  This situation cannot go on. Here again, we are not attacking the problem of how to create indigenous savings or how we are to encourage ordinary Australian taxpayers to invest their money. Ordinary Australian taxpayers who have invested in shares with an imputed dividend of 39c will have their income lessened again. Again, it will not be an attractive form of savings or investment.

  At every turn the Government seems to ignore the fact that our debt is getting greater and greater and hanging over our heads as a threat to our independence. I said that if it were in our personal circumstances it would be the bailiff who would come in. In other countries it is not the bailiff who comes in, it is the International Monetary Fund—it has already made a strong visit to Canada. If the International Monetary Fund decides that it is necessary to reschedule our debts, or take action with regard to Australia, it will simply say, `We will do it, but in turn you will have to put in place the following policies'. Then our standard of living goes down and our independence as a nation goes with it.

  To be an independent Australian nation we have to be in a position to make decisions for us and by us so that we control our own destiny. My colleagues, such as Senator Kemp, have raised the question of the way that the Government is using the external affairs power to make more and more Australian decisions subject to review by international bodies which are constituted by persons unknown to the Australian people, and certainly over whom we have no control. More and more this Government is exposing us to the likelihood of an intervention by the International Monetary Fund.

  We have to tackle the debt problem. We must have policies to increase savings by ordinary Australians. Unless we start to create that indigenous capital, unless we lessen the burden on ordinary Australians so that they are encouraged to save, we are putting our independence as a nation at risk. In this legislation—complicated by the explanatory memorandum having to be twice the size of the enacting legislation—we see foreign investors being advantaged over Australians. That is not my definition of a government that is governing in the interests of the Australian people.

  When we discuss the question of what it means to be Australian, we should start to look at the pea and thimble tricks that the Government tends to pull on the Australian people. We are dealing in areas of complexity. It is not good enough for a government which was elected on a scare campaign to turn round now, break its promises and try to implement ways and means of wrenching more money by way of taxation out of ordinary Australians to pay for the folly of its policies in the last 10 years. Debt is our major problem. Encouraging Australians to create indigenous savings so that we can again be independent and prosperous is the task that all of us have to address.