Daryl Melham (Banks, Australian Labor Party) Share this | Hansard source

On behalf of the Joint Standing Committee on Electoral Matters, I present the committee’s advisory report, incorporating a dissenting report, on schedule 1 of the Tax Laws Amendment (2008 Measures No. 1) Bill 2008, together with the minutes of proceedings.

Ordered that the report be made a parliamentary paper.

On behalf of the Joint Standing Committee on Electoral Matters, I have pleasure in presenting the committee’s report, entitled Advisory report on Schedule 1 of the Tax Laws Amendment (2008 Measures No. 1) Bill 2008. The Senate asked the committee to review the bill, which proposes to discontinue the tax deductability of political donations. The committee supports the discontinuation of tax deductability for political donations and recommends that schedule 1 of the Tax Laws Amendment (2008 Measures No. 1) Bill 2008 be passed by the Senate without amendment.

Discontinuing tax deductability for political contributions and gifts is estimated to save $31.4 million over the four years to 2011-12, with savings commencing in 2009-10. The policy of discontinuing tax deductibility for political donations was taken to the 2007 federal election by the Australian Labor Party. The bill will give effect to this pre-election commitment and deliver ongoing savings of over $10 million per year. Delaying the passage of this legislation will lead to these savings disappearing from the budget bottom line. The savings estimates prepared by Treasury represent the best available estimates, given the lack of information from tax returns, on donations to political parties and on political party membership. While some inquiry participants argue that tax deductability should be considered as part of a broader inquiry, it is doubtful that the future political financing landscape will retain such an unbalanced and inequitable scheme.

Tax deductability for political donations was introduced in an ad hoc way in 1991, following amendments to electoral legislation in the Senate by the coalition parties and the Australian Democrats. While initially only applying to donations by individuals and their party membership fees to a cap of $100 per year, in 2006 the government extended tax deductability to businesses and lifted the threshold to $1,500 per year. At the time, the then opposition members of the electoral matters committee expressed their concern that these changes would encourage individuals and other entities to make extensive political contributions in secret and at taxpayer expense. Discontinuing tax deductability for these payments will remove the inherent inequity of the tax system that provides higher income earners a larger subsidy for contributions to political parties. Abolishing tax deductability for business taxpayers will remove a loophole under which payments by businesses to political parties are subsidised by the taxpayer to the tune of 30 per cent. There is no evidence to suggest that removing tax deductability will necessarily lead to reduced participation in political activities. Members of the community can still join political parties, and individuals and businesses will still be able to donate to political parties and candidates for public office; however, the inequity created by the tax system will be removed and there will be a fairer basis for political participation.

I would like to take this opportunity to thank my fellow committee members for their contributions to the inquiry and to thank those who participated by making submissions or appearing at the public hearing. I would also like to thank the committee secretariat for their assistance.

I want to add a few extra words. We as political parties receive public funding. That is a transparent and open process. It is a public process. Tax deductability is frankly a form of double dipping by political parties. If pensioners and other people on low incomes were to give donations to political parties, they would not be subsidised by the taxpayer. Here, we are subsidising people on higher incomes and businesses to contribute to political parties. It is done in secret. It is not transparent; it is not open. My strong personal view is that this scheme needs to finish. The opposition may well argue: ‘Let’s look at it as part of a broader mix. Let’s look at other measures.’ That can be done by the government or by the electoral matters committee at a later date. But this political fix, which has been supported by the conservatives—as I outlined in the history—needs to come to an end, and $10 million is good reason why the bill should be passed by the Senate before the end of the financial year. I commend the report to the House.

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