Simon Crean (Hotham, Australian Labor Party, Shadow Minister for Trade and Regional Development) Share this | Hansard source

I rise to speak on the Tax Laws Amendment (2007 Measures No. 3) Bill 2007 to make a couple of observations about two of the schedules in particular but also to support the amendment moved by the member for Prospect. This TLAB 2007 measures No. 3 bill is an omnibus bill comprising 10 measures. It effectively amends five separate tax acts. Most of the amendments proposed are non-controversial and they make the tax system fairer. They are designed to cut down on tax avoidance and, as the member for Werriwa indicated, they very importantly recognise our defence force personnel killed in action.

The first schedule I wish to touch on is schedule 8, which deals with forestry managed investment schemes. Schedule 8 inserts a specific deduction into the tax law to provide that initial investors in forestry managed investment schemes receive a tax deduction for their contributions. Labor support this proposal. We think it strikes the right balance between ensuring that Australia has a sustainable plantation industry and addressing tax integrity. Forestry has a vital role to play in our approach to dealing with climate change, but we do have to recognise that there is a long lead time before people who invest in forests and carbon sinks get a return. In our view, the 70 per cent rule gets the balance right between maintaining integrity in the tax system and fostering sustainable plantations.

The 70 per cent requirement does impose some compliance and administrative burdens. We hope they will not prove unduly burdensome, but the importance of managed investment schemes to rural and regional communities is a terribly significant factor. There are a number of downstream jobs associated with the businesses that grow under managed investment schemes and, whilst we understand that these schemes have caused some controversy between competing interests in rural and regional Australia, we believe that the plantation and forestry industry attaining critical mass so that it can make its contribution to our sustainability is important. So we welcome those changes.

While I am on the subject of investment schemes, I note that the government consulted the forestry sector about these schemes. That is in stark contrast to managed investment schemes in other sectors where there has been a failure by the government to consult. The Minister for Revenue and Assistant Treasurer made an announcement in February this year that tax deductions would no longer be provided for non-forestry managed investment schemes, but those in the industry were not given adequate notice or appropriate consultation, and there was an inadequate transition period. That has created massive uncertainty in rural and regional Australia.

Clearly the government does not have any idea about the impact its decision will have in rural and regional Australia. Labor recognise the need to assess this impact. We called for a Senate inquiry into non-forestry MISs and a full and open analysis of the impact of the government’s decision on rural and regional Australia. We think that when these decisions are taken, whether by the tax office or as a result of lobbying the government, there has to be appropriate consultation. That has not happened. Labor will continue to consult on these issues and to discuss them with the agricultural sector and those affected in regional Australia.

The second schedule I want to go to is schedule 10, which deals with a decision made by the government last year to introduce a flat withholding tax from Australian managed investments to overseas residents. The member for Prospect has moved an amendment which embodies an announcement that the Leader of the Opposition made in his reply to the budget speech that Labor propose to halve the tax rate that this bill imposes. Schedule 10 enacts a flat 30 per cent withholding tax on distributions to foreign residents from managed investments. Under the law, all trustees must withhold an amount from distributions to nonresidents, the unit holders of the various trusts.

In essence, the law does that in order to require people to pay tax. A problem exists because the rate of tax that is withheld varies according to the entity receiving the dividend. That has caused a lot of complications and this bill seeks to address that by providing for a flat withholding tax. The problem is that the tax proposed to be imposed is a flat 30 per cent. Not only does that involve an increase in taxation—whatever happened to the commitment the government carries on about that it will never increase taxes? This schedule does that because it imposes a flat 30 per cent, and that involves increases for certain categories—but the worse problem is that the 30 per cent is well in excess of withholding tax rates in other countries. It is double that of Canada, France, Germany, the Netherlands, the United Kingdom and the United States. It is triple that of Singapore and more than four times that of Japan.

The problem should be obvious: a higher rate will be a deterrent from investing in management investment vehicles in Australia. That is what will happen, and what will that do in turn? It will impact on the ability of Australian fund managers to compete globally. It is a deterrent to investment in our financial services sector, which is highly regarded around the world and whose funds under management provide the largest saving pool in our region and the fourth largest in the world. Australia is the No. 2 property trust manager in the world. This nation pioneered real estate investment trusts. The Real Estate Institute has called for a lower rate of withholding tax, but that request has fallen on deaf ears as far as the government is concerned. You would think the government would want to support one of its champion industries, an industry that has actually gone out and made it and cut it in the world. But, no, not this government.

I might also say that funds under management, and the significant growth there, did not come about just by chance. Nor did it come about because of anything this government did. The fact of the matter is that it came about because of an initiative of the Hawke and Keating governments in the eighties and nineties to establish compulsory superannuation in this country. We faced up to one of the great intergenerational challenges of our time, and that was the ageing of the population and how to ensure that people can retire with economic dignity. We did not just commission an intergenerational report—this government commissions reports and then ignores them, and it leaves out things such as climate change when assessing what the intergenerational challenges are—we set about acting upon it. Labor in office in the eighties and nineties developed a compulsory superannuation scheme and a provision for retirement income savings that is the envy of the world. They did it with the cooperation of the trade union movement—that group of people that this government wants to pillory every occasion it gets.

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