HANSARD EXTRACT
|
Tax Laws Amendment (2006 Measures No.4) Bill 2006: Second
Reading |
| 9 October 2006 |
Mr HAYES
(Werriwa)
(7.41
p.m.)—I
rise to support the second reading amendment moved by the member for
Hunter, Mr Fitzgibbon. Generally, Labor is supportive of the
provisions of the
Tax Laws Amendment (2006 Measures No. 4) Bill
2006. We support the provisions of schedules 1, 2 and 3
of the bill, but I have to say that I do have concerns, which I will
raise, with respect to schedule 4. That is something that I will
return to later, but I would like to make some comments now about
the other schedules.
Schedule 1 deals with the capital gains tax rollovers in the event
of the sale of a property caused by a court order resulting from the
breakdown of a marriage. This schedule is a necessary policy change
that reflects the financial elements of marriage breakdown. The tax
amendment in schedule 1 has been introduced so that the situation
for both parties is taken into account when calculating how much of
the property is capital gains tax free when a marriage is dissolved.
The amendment clarifies the fact that marriage breakdown settlements
do not give rise to capital gains tax liabilities.
Schedule 2 is aimed at addressing the possibility that a remerger of
demerged companies does not trigger anti-avoidance provisions. The
consolidation regime applies when two associated companies elect to
be treated as a single entity for tax purposes. Companies can
sometimes split or demerge. However, to protect against tax
avoidance current law provides that major transfers of assets just
prior to the demerger are ignored. This was to ensure that the
demerger was not used to manipulate the cost-setting rules that
value assets of the group and reduce tax. In this case the demerger
would be unwound and the previous position apply for tax purposes.
However, if the demerged entity, or parts of it, then remerge they
would be captured by this integrity provision and the whole
transaction would be unwound for tax purposes. However, the remerger
is not tax avoidance and should not be part of the integrity
measures.
The changes before the House modify the integrity rules to ensure
that the remerger cannot be caught by this provision. While very few
taxpayers are covered by these provisions, it is interesting to note
that this is the 12th time that these measures have had to be
redefined since their initial introduction. The government have
tinkered with these laws over and over again and, hopefully, they
have got them right this time so that the confusion in this process
may be lessened or removed.
Tinkering has become the hallmark of this government when it comes
to tax. It has tinkered with many tax laws over its decade in
office. For a government that prides itself on reducing the levels
of government intervention in the economy, it vigorously defends its
position as the highest taxing government in
Australia’s history. It is a government that has always talked about
tax reform but has, quite frankly, all but managed to do nothing
about it, particularly when it comes to introducing new measures. It
sets about reforming taxes and does it by introducing new ones.
This government has set about reforming the Australian tax system
and lowering the burden on Australian families by increasing the
number of taxes and the amount of taxes that are collected. A
cursory examination of its record on tax bears this out: this
government have introduced and increased, as I understand it, 187
new taxes and charges over the 10 years it has been in office. From
these 187 new taxes or charges, it has raised an extra $18.6
billion.
Before the members opposite try to tell us that this is GST revenue,
the $18.6 billion figure that I quoted does not include the GST. As
I am sure members opposite would be aware, the GST costs taxpayers
about $40 billion a year, not $18.6 billion over the 10 years. This
is a staggering result. When you do the maths, you work out that the
Treasurer’s 10-year tax grab has raised almost $930 for every man,
woman and child in this country. What is worse is: who is paying the
tax?
The tax system presided over by this government is slugging low- and
middle-income earners. Effective marginal tax rates have crippled
household budgets of Australian families. While it is bad enough
that they have to deal with the broken interest rates promise of
this government, the effective marginal tax rates faced by
single-income families on the average wage has increased to more
than 50c in the dollar under this government. It has risen to a
level where many families on the average wage are paying a higher
effective marginal tax rate than a single person earning in the
vicinity of $150,000 per year.
It is patently obvious that this government is the best friend that
high-income earners have ever had and the worst enemy of middle
Australia.
There is no doubt that the time has come for a reform of Australia’s
personal tax system. When you have a result where those who are on
vastly lower incomes are facing higher effective marginal tax rates
than higher income earners, you know there is something patently
wrong with the tax system. The government’s approach of tinkering at
the margins to satisfy various groups of voters—in marginal seats,
presumably—coupled with the extension of welfare to middle- and
high-income earners is starting to cause the problem that most
people expected would emerge at some point in time. Low- and
middle-income earners have missed out and will continue to miss out
on tax relief under this government.
The government has set up new welfare payments and other rebates and
refunds but it avoids giving real tax relief to middle-income
earners. For its entire decade in office, this government has
treated tax and social security payments as two separate things,
either choosing to ignore or failing to realise the fact that they
often come together, particularly when they meet in the average
Australian household. They come together with many low- and
middle-income earners and with devastating effect, causing high
effective marginal tax rates. They come together to produce the
worst possible incentive for increasing workforce participation.
Many of my constituents tell me that they wonder why they continue
to work when they are often worse off financially by the end of the
week. Even if you rely on grandparents, once you take out childcare
costs, uniforms, transport costs and other necessities of the
workplace, many families are right when they tell me that at the end
of the week they are worse off than if they were not in work at all.
It is a staggering position to have developed, particularly when it
impacts on low- to middle-income earners; I do not think that it
would be all that novel a position to them. I dare say, many members
if they chose to go out and about in their electorates would
probably find that it is a common theme amongst low- to
middle-income earners across the country. Therefore it is about time
that this mess was cleaned up. For far too long the situation has
been allowed to persist to the detriment of low- and middle-income
families in this country.
Under this government, if you are at the bottom of the income scale,
you face the highest effective marginal tax rates and the lowest
real chance of taking advantage of the loopholes that have been
allowed to develop. When faced with such a system, it is little
wonder that there are problems with workforce participation. How can
anyone seriously expect low-income families to try and get
themselves up the ladder when they are faced with oppressive
effective marginal tax rates and a system in which they will, quite
frankly, keep little additional income as a result of their
earnings? The time has come for a serious look at personal income
tax. It is about time this government got serious, as opposed to
tinkering at the edges, and undertook some targeted reform within
the tax system, particularly in terms of the system of transfer
payments. Of itself, reform of the transfer payments system will not
achieve the same reduction in disincentives and potential for
increased participation in the workforce that reforms in the tax
would, but it would nevertheless assist.
I now turn to the provisions of schedule 4 of the bill, which relate
to non-resident capital gains tax. This schedule represents a major
reduction in the capital gains tax base for non-residents and is
expected to cost, I think, in the order of $65 million per year.
Schedule 4 is both controversial and expensive. It is noted that the
cost of these proposals needs to be considered in light of
Australia’s relative attractiveness as a source of international
capital. The measures involve a significant tax concession for
foreign residents operating in Australia, mostly companies, by
restricting the capital gains tax base to real property—that is,
land and income derived from land. Capital gains on non-resident
shares are therefore, as I understand it, now to be excluded. It is
noted that the government has argued that this treatment is
consistent with other OECD nations and certainly compliant with the
OECD tax model treatment. The government has also argued that this
approach is sought by other jurisdictions in tax treaty
negotiations.
That said, there is certainly potential for the cost of this charge
to grow significantly through time and there is concern that should
also be expressed about some of the problems that may arise as a
result of these changes. It is recognised that the basic principle
of international taxation is that the host country taxes income that
relates to operation in the host country, irrespective of where the
company’s headquarters are located. Accordingly, income from
operations conducted in
Australia is taxed here. If a foreign company has a subsidiary with
operations here, it pays capital gains tax. However, if the assets
are held by an intermediary company then the claim by
Australia
to obtain the tax is, quite frankly, suspect—even if in reality the
operator’s real operations are in fact conducted in
Australia.
The Senate economics committee examined the provisions of this bill
and its findings were handed down on 5 October. It would come as no
surprise to anyone that the government senators arrived at the
following conclusion:
The committee considers that the bill adequately addresses anomalies
in
Australia’s
international taxation system as it relates to the treatment of
capital gains tax and non-residents. The committee is convinced that
the amendments to the taxation system will reap important benefits
to the Australian economy and to the people of
Australia.
Naturally, following such a glowing report, the committee
recommended that the Senate pass the bill. One element that concerns
me is the fact that the Labor senators in their additional remarks
indicated that they had not received the analysis that they
considered necessary to examine this bill thoroughly. As the Labor
senators noted:
Decisions of this nature by the Parliament require the highest
levels of analysis this country can afford. In this case, the
Government has not put its argument with sufficient economic rigour.
The Labor senators went on to note:
Treasury officials have indicated that two amendments will be made
to the
Bill.
This is a disturbing trend—amendments upon amendments. That is what
we have seen from this government on many occasions and this is just
another example of that. Imperfect legislation presented for
consideration and passage through this parliament is becoming the
hallmark of the
Howard government.
The government is getting sloppy when it comes to a number of tax
bills. It gets the ones right that it introduces that either raise
or introduce a new tax or charge, but it seems to struggle with the
amendments to existing laws. I do not know if this is a result of a
government that is trying to tread a fine line and not impact on any
of its friends or, if that is not the case, that it is simply a lack
of information being provided to senators or members on that side of
the House who are considering the bill. However, the work and the
analysis that should underlie any proposal coming to this parliament
are not being done appropriately and accurately to justify the
proper consideration of the matters at hand.
It is for this reason that the member for
Hunter has moved his second reading amendment. It is in the
interests of making sure that the right information and the right
analysis is available to decision makers. While this might not be a
bill that is foremost in the public mind and which the public would
consider to be of particular significance, this bill will affect
many people. It is yet another example of a government which is
arrogant in its approach and sloppy when it comes to public policy
and presenting detail in legislation for consideration by this
parliament. It controls both the House of Representatives and the
Senate now, and it exercises unprecedented arrogance, particularly
in the way its members operate in considering matters which will
impact across wide sections of the community.
The tax system, the level of taxation and the relative contribution
of individual taxpayers will always be a source of debate, and there
will be differing opinions. While there are taxpayers, there will be
a debate about the level of tax and, quite frankly, this parliament
should not shy away from it. However, this is a debate that must be
based on good information and good analysis. Good information and
good analysis does not seem to have been available when this bill
was considered by the Senate and are certainly not contained in the
bill or the supporting material that has been presented to this
House. I hope that this is an aberration, but I have to say, as I
made the point earlier— (Time expired)
Return
to Speeches Menu.
