HANSARD EXTRACT
|
Tax Laws Amendment (2005 Measures No.5) Bill 2005: Second
Reading |
| 7 September 2005 |
Mr
HAYES
(Werriwa)
(11.13
a.m.)—Despite
the
Tax Laws Amendment (2005 Measures No. 5) Bill
2005 containing yet another round of tax concessions and
handouts for a number of vocal lobby groups and some questionable
tax policy measures, I rise in general support of the bill and
specifically in support of the amendments proposed by the
opposition.
Tax is always one of those areas of public policy that is going to
be the subject of considerable debate, with pretty much everyone who
pays tax having a view on what the tax system should look like. We
only have to look at the last week or so of national political
debate when over 300 different versions of approaches to future
income tax regimes were raised by various people to prompt a public
debate. Granted, one person released 280 of them but the debate is
clearly designed to focus on tax.
The tax amendments that we have before us today do not deal with the
primary subject matter of the current debate—income tax—but they are
nevertheless amendments to our tax system that require consideration
and debate. Of course, at the moment, with the Treasurer overseas
trying to prove to members opposite that he is ready to take over
the reins of leadership, we could not have a real debate on income
tax, much to the disappointment of the man who would be Treasurer,
the member for
Wentworth. The bill before us seeks to: modify exemptions to foreign
earnings, extend the high-budget television series offset, clarify
the treatment of bad debt for head companies of consolidated groups,
provide time to adopt international accounting standards, extend the
forestry managed investment scheme for two years and deal with the
treatment of related party at-call loans. There is pretty much
something for everyone in this bill if you are a lobby group. It
contains more efforts by this government to clean up the compliance
nightmare it has created.
I would like to contain my comments to only a couple of the aspects
of the bill. Specifically, I would like to comment on the extension
of the forestry managed investment scheme and the deeming of related
party at-call loans. Forestry policy, much like tax policy, is
subject to considerable debate and a number of polarised views in
the community. Currently, a concession exists in the tax system for
seasonally dependent agronomic activities that allows a deduction
for prepaid expenditure of plantation forestry managed agreements.
This concession is a tax deferral mechanism. A deduction is brought
forward for an expense that has not yet been incurred—that is, an
immediate deduction is allowed even though the business may not
actually incur the expenditure for a number of years. As you would
expect, this is an important concession for an important industry.
The proposal before us extends the scheme by a further two years,
and Labor will not be opposing that measure.
The ongoing sustainability of the forestry industry is important to
us. However, the fact that Labor are not opposing the measure does
not automatically mean that it has our complete and absolute
support. The minister has managed to introduce this extension while
providing no real detail on the compliance measures that will be put
in place to support it. I, for one, will be keen to see this
extension take place—it is clearly a wink and a nod to members in
marginal seats. Nevertheless, it cannot be treated as yet another
blank cheque approach to compliance as we have seen from this
government in the past. I look forward to the minister detailing the
compliance measures that will support this extension.
The second matter I would like to comment on in this omnibus tax
bill is the measure on the tax treatment of debt and equity issues.
Quite frankly, I am surprised that we even find this in the bill, as
this schedule of the bill seeks to amend the minister’s own
legislation from last year. This really should not come as a
surprise, as well thought through public policy prescriptions are
not necessarily the strong suit of this government. The schedule is
an admission that the minister has made decisions in the past,
legislated for them in haste and, at some future time when he
finally conceded there were problems, come back into this place with
yet another piece of legislation to support a rather stunning
ministerial backflip.
This amendment abandons changes to tax laws implemented in late 2004
that have turned out to be nothing short of a stuff-up. While Labor
supports these measures, because Labor supports small business, the
fact that this measure appears again before the parliament is a
reflection of the ill-considered policy that found its way into
legislation at the hands of this government, policy which should
never have been here in the first place. In his second reading
speech the minister noted:
The final change recognises that the government is concerned about
imposing compliance costs unduly on small businesses and is acting
to keep compliance costs down.
If the approach of this government is to introduce new compliance
costs on small business, to backflip and to legislate to reverse
them, all the while claiming to be the greatest friend that small
business has ever had, it will be only a matter of time before we
see legislation before us to reverse the compliance costs created in
relation to issues such as choice of superannuation.
The minister’s backflip that appears in the bill is important to
small business. To that extent it is fully supported by the
opposition. Despite the best efforts of the government to change the
rules because of suggestions that there might be some kind of tax
dodge, allowing owners of small businesses to provide the capital
and cash flow to their companies as required by the business is
important. Small businesses have a tough enough time—having been in
small business myself, I know. When the opportunity comes along to
give them a break, I will be among the first to support them.
The fact that the government has completely abandoned measures that
it introduced in late 2004 is nevertheless telling. The fact that
the government clearly did not have any idea what impact its
previous changes would have on the small business community is also
quite telling, particularly from a government, as I said earlier,
that prides itself—or at least claims to pride itself—on being the
best friend that small business has ever had. For a government that
claims to be the great friend of business, it really does not seem
to understand how small business operates.
The entire premise for the original change was a suspicion on the
part of the Australian Taxation Office that related party loans were
a means of tax evasion. The government was obviously convinced by
the arguments of the tax office and set about introducing a regime
for small business such that, in the words of the minister:
…
subsequent treatment of a related party at-call loan as equity would
require the keeping of tax accounts. This means the compliance costs
can be relatively high compared to treating the loan as debt in
accordance with its legal form …
I simply cannot understand why the minister had not worked out that
the changes would produce the compliance costs that they did when he
first introduced these changes in late 2004. It amazes me that it
was not until after considerable lobbying by various sectors in the
industry that the minister finally realised what he had done.
I was reminded by the member for
Hunter a little earlier in the debate of the Prime Minister’s
commitment to small business in 1996 to reduce the level of red tape
by 50 per cent. I have to admit that this is a novel way of
achieving that target. I am sure the minister will be congratulated
by his colleagues for the innovative approach of firstly increasing
the level of compliance costs and red tape and then, less than a few
months later, removing it. Whether that is in keeping with the Prime
Minister’s commitment to small business one would have to wonder.
This is a reflection of a complete lack of commitment by the
government to keeping yet another promise. It is yet another breach
of faith to small business and its related community and a
reflection of the serious lack of commitment to improve the lot of
small business throughout the country.
There is no doubt that a number of compliance issues and tax
avoidance issues need to be dealt with in our tax system. Labor has
said consistently during the current debate on the future of income
tax that not only does it need to be reformed in relation to the
levels of rates and thresholds but concessions and compliance
measures also need to be dealt with. Given that the Minister for
Revenue and Assistant Treasurer has already had one go at dealing
with tax evasion and all that he managed to create is additional
costs for small businesses and that he then rushed in a second
attempt to get rid of them, let us hope he is not as involved when
the debate centralises on the reform of the income taxation system.
I support the amendments put forward by the opposition. I take the
opportunity to congratulate the minister for having the courage to
admit a mistake was made and to legislate to amend his own flawed
legislation.
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