Daryl Melham (Banks, Australian Labor Party) Share this | Link to 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.

Scott Morrison (Cook, Liberal Party) Share this | Link to this | Hansard source

I also thank all members of the Joint Standing Committee on Electoral Matters for their participation in this inquiry. I thank the secretariat for their work and their assistance, particularly to opposition members, throughout the course of the inquiry. I also thank members of the public who came along to the hearings and made submissions. The reform of our electoral system, particularly as it relates to political donations, cannot be done in isolation. This specific measure smacks of a piecemeal approach. This point was made on many occasions as the bill passed through this chamber, and it was consistently raised by those who came before the committee. We on this side of the House—and I am encouraged by some but I hope to be encouraged by more on the other side—have a deep commitment to reform of this area. There is a crisis of confidence when it comes to political donations in this country. That crisis of confidence began and went into space—literally—with the illegal events at the Wollongong council involving ALP donors. That is what created this crisis of confidence. The community expects this issue to be addressed.

Senator Ronaldson in the Senate suggested—and the reference was made to the Joint Standing Committee on Electoral Matters—that we take a wide-ranging look at this issue. I commend the chair on allowing that reference to combine with the reference from the Special Minister of State and be taken on by the committee to look at these issues in detail. As was made clear in the course of the inquiry, when you look at issues like this bill you have to consider their broader impact on the system as a whole. On this occasion we have not had the opportunity to do that. We have not had the opportunity in changing this area to understand what other changes need to be made and how these things can be balanced off to provide a better system that the community can have greater confidence in. This view was supported in the hearings. I refer members of the House to the report, which quotes Associate Professor Graeme Orr from the Democratic Audit of Australia. He said:

... it is very premature to do away with a form of encouraging small-scale donating at the same time as seriously considering, in a few months time, the banning of large corporate and organisational donations. That is going to lead to serious questions as to where parties get the money from and deductibility, or matching funds, is something that needs to be kept in the mix.

This discussion of the mix came up quite frequently, and it is the mix we need to look at. We cannot pursue this issue in a piecemeal fashion. We need to consider the total package of reforms. The reforms that so far have been foreshadowed in the Senate are also concerning because they largely deal with small-beer issues. Increasing the regularity of disclosures and so on may be another way of watching donations. It would seem we in this place like to watch lots of things. But watching cannot be the answer. We are talking about some serious illegal activity that has created a crisis of confidence, and we need a package of measures that ensures the restoration of public confidence.

Not only was this bill put forward in a piecemeal approach; the case for that failed to be made in the course of the committee’s inquiries. First of all, Treasury officials who appeared before the committee were unable to substantiate in any meaningful way the $10 million of savings. The assumptions that they made, while possibly logical in their construction, relied on base information that just did not exist. So the revenue savings of this measure were simply pulled out of the air. Fiscal necessity was the reason the bill was rammed through this House and referred off to the Senate and ultimately to committee. That has not been justified. We simply do not know how much this measure is going to raise. As a number of submissions made very clear, the total revenue that has been assumed to come from this measure will never eventuate. Secondly, the argument has been made about equity, but the equity arguments that have been made about cash deductions are the same equity arguments that are made against any tax deduction. If you were to put forward the argument for equity of tax deductions then you would also be denying work related expense deductions, which are widely available in the tax act and are preserved by this bill. (Time expired)

Janelle Saffin (Page, Australian Labor Party) Share this | Link to this | Hansard source

Does the member for Banks wish to move a motion in connection with the report to enable it to be debated on a future occasion?

Ms Anna Burke (Chisholm, Deputy-Speaker) Share this | Link to this | Hansard source

I move:

That the House take note of the report.

In accordance with standing order 39, the debate is adjourned. The resumption of the debate will be made an order of the day for the next sitting.