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Tuesday, 15 November 1983
Page: 2656


Mr PEACOCK —I refer the Minister for Trade to moves by the Government of California to impose its new so-called unitary tax on foreign companies operating in that State, including Australian firms. What response has the Government had to the official protest that it made to the United States Government on this issue? Does the Minister agree that so-called unitary taxes, which are being considered in other American States as well, have serious implications for trade relations between Australia and the United States? What further action does the Government propose to protect Australian firms from such measures?


Mr LIONEL BOWEN —The matter raised by the Leader of the Opposition is a very important one indeed. The State of California has imposed what is called unitary tax. This means that, for the first time, Australian firms would be obliged to pay tax even if they are operating at a loss in that State. This new unitary tax mechanism means that where a company is operating not only in California but also elsewhere in the world, the earnings of the company across the world will be taken into consideration and a percentage of profit will be apportioned to it in respect of its operations in that State. The Australian Government has been very concerned. The Embassy of Australia made representations to the Department of State, if my memory serves me correctly, on 24 October or somewhere about that date. At this stage all I can say to the Leader of the Opposition is that the United States Government has replied that the matter is under consideration. I cannot offer anything more satisfactory than that. We are very concerned and we have made, through our Embassy in Washington, representations to the United States Government.


Mr Peacock —Will you follow up?


Mr LIONEL BOWEN —I undertake to do that. We will follow it up. It really amounts to what is called the double taxation of income derived from Australian sources of Australian companies carrying on business. We have a taxation agreement with the United States. This seems to be the problem. A decision in the American Supreme Court on this matter has been upheld. On that score we have the problem that a State instrumentality is deemed to be able to pass this mechanism. It would affect the whole concept of trade. It would certainly be aimed at Australian corporations in the United States. One would hope that the United States, particularly through its Treasury influences, would realise the serious implications that would flow from what the honourable gentleman has raised.