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Friday, 28 June 1996
Page: 2535

Senator SHORT (Assistant Treasurer)(10.11 a.m.) —I see no relevance between the east-west runway and this matter. I will make two points in response to Senator Kernot's questions and comments. I make this response in reply to the Labor Party's comments and criticisms as well. The fact is that when the former government introduced this identical bill late last year—and I do not have the exact date—the then government did not include anything to do with the roads issue. That is why I am saying it is hypocritical.

The Labor government introduced a bill which we have followed almost to the letter. It had nothing to do with the question of the inclusion or exclusion of roads. As we all acknowledge, it is true that subsequently the then Treasurer made a statement which was not followed up in legislation, presumably because of the electoral timetable. Senators might recall that there was a great deal of debate at the time as to whether it would exclude the City Link project or not. As I said earlier in this debate, the then government and the former Treasurer, Mr Willis, deliberately allowed City Link to be included in the provisions of the Development Allowance Authority. The real reason why this has all come about, and the only reason why Labor made the policy decision that it did towards the end of last year, was the political embarrassment that was occurring as a result of the actions of Bob Carr in New South Wales. That was the basis for everything that has gone on subsequently so far as Labor is concerned in this matter.

I will return to a couple of the points made by Senator Kernot concerning the taxation position of the Development Allowance Authority. If Senator Kernot is concerned about the tax concessionality element contained in the bill concerning roads and if she follows that through consistently, she should be saying that the whole of the Development Allowance Authority ought to be abolished because the same principle in terms of the tax concessionality applies to any project, whether it is a road, mining or electricity project. Why is Senator Kernot drawing a distinction between roads and everything else? She might care to answer that question for me. She cannot hang it on the EPAC report because that report does not give her strong supporting evidence to mount that proposition.

The Australian Democrats and opponents in this area claim that there are excessive tax benefits to the rich at the expense of the general taxpayer through Develop Australia Bonds. This seems to be what Senator Kernot and Labor, so far as roads but not anything else, seem to be saying. They claim that no tax is charged on the interest received. They also claim that the size of the parcel of bonds issued is such that only the very rich can afford them.

Quite frankly, claims of that nature cannot be sustained. The cost to revenue of Develop Australia Bonds is relatively small. Under the infrastructure borrowings legislation, the revenue cost on non-assessable interest payments to investors is offset by recouping most of that cost directly from the infrastructure borrower, who loses his tax deductibility on the interest paid. That is the point I made to Senator Kernot earlier.

The Develop Australia Bonds do not result to any significant extent in an increase in the quantum of tax deductions over time. Rather, some deductions are obtained earlier at a higher marginal rate. Forgone revenue is, for the greater part, clawed back in the longer term as the infrastructure projects start to generate net taxable income at an earlier point than would have been the case without Develop Australia Bonds. In the short term, the cost to revenue of the program is relatively modest. The revenue cap ensures that, in the short term, revenue forgone does not exceed the limits set by government regulation.

Develop Australia Bonds are, in the light of our experience of them over recent years, a particular—

Senator Cook —You opposed them in opposition and now you are supporting them.

Senator SHORT —Yes. I am talking in the light of experience in recent years. We believe that they are an effective way to encourage private sector investment in public sector infrastructure.

Senator Cook —We were right.

Senator SHORT —You and your party thought that the inclusion of roads in the act was a pretty good thing. Then, because Bob Carr started to cause you huge embarrassment, you did a 180 degree backflip and suddenly changed your policy. Do not talk to me about consistency in policy. This debate could go on interminably. I am not sure that it really gets to the heart of the issue. The issue is that the government believes very strongly indeed that the bill as introduced should stand unamended. It is an identical bill to the one that was introduced by the former government. That bill had bipartisan support. This bill, until recent days, had bipartisan support.

I urge the opposition to reconsider its position. The implications of not passing this bill as introduced are very significant. As I have said, 40 projects involving $2.5 billion of investment could be put at very significant risk by this. In that context, I draw as an example the fact, which was reported by the Victorian Auditor-General when he was looking at the City Link project, that there is no doubt that project would not have gone ahead had the then government excluded it from the provisions of the development allowance. There is no doubt that many of the projects which will now be affected by the intransigence of the opposition on this matter may very well fall into precisely the same situation. I do not think I have anything else to add, unless people want to ask specific questions. It is pretty clear where we all are. We should get on with the business of the Senate.