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Wednesday, 27 March 1968

Mr PETERS (Scullin) - When the Petroleum (Submerged Lands) Bill was before this House last year, I remember, the Minister for National Development (Mr Fairbairn) said that the fixation of royalties took into consideration all the operating charges and taxation payable by the companies. He said that in those circumstances the royalties charged were justified. I have risen today in order to secure some information. I ask: If the Esso-BHP company that operates this particular concern in Bass Strait were a company that was owned by shareholders in West Germany or Japan and not the United States of America would the conditions be similar to the conditions that operate at present? This company is required to pay company taxation and it is also required to pay royalties, but considerable expenditure has been entered into by the Australian Government through the Bureau of Mineral Resources and through the provision of assistance to oil companies for exploration and other activities. Therefore the Australian Government has been of assistance to the Esso-BHP group. The Government would have been of assistance to a Japanese or West German company if it were operating in the same way as this company is operating in Bass Strait; but would the circumstances and the financial operation have been exactly the same?

A double taxation agreement operates with the USA but not with West Germany or Japan. The result of this double taxation agreement is that taxation upon dividends payable by shareholders in the United States is exactly half the rate of taxation upon dividends that would be payable by shareholders in West Germany or Japan to Australia. The flat rate of taxation upon dividends that are paid in New York is 15%, but it is 30% upon dividends paid in Berlin or Tokyo. Honourable members may point out that the United States Government has done nothing to improve the circumstances of Esso-BHP or the American shareholders in that company. That is perhaps correct, because presumably the American shareholders in EssoBHP would pay the full tax as citizens of the United States and that tax may be equivalent to the Australian rate of taxation. All that it would be doing would be to give a dividend to the United States Government. But these shareholders would have a remission of the amount that they had paid in taxation to the Australian Government. For example, if Sim profit is to be paid to shareholders in America then, say, $150,000 would be payable to the Australian Government and the difference between $150,000 and what under Ordinary circumstances would be paid to the United States Government by an American citizen would be payable in America. That may amount to $150,000 or it might amount to $400,000 or $500,000. I do not know what it would amount to.

The relevance to the legislation of what I have been saying is that determination of all conditions in regard to the operations of overseas companies should take into consideration the taxation that is payable to the Australian Government. If a company from West Germany, Japan or any other country comes to Australia and operates on our continental shelf, I see no reason why the shareholders of that company, if they live in countries other than those with which we have a double taxation agreement, should not pay twice the amount in taxation to the Australian Government that is paid by the Esso company. Because of that I say--

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