House debates

Wednesday, 10 February 2016

Bills

Tax Laws Amendment (New Tax System for Managed Investment Trusts) Bill 2015, Income Tax Rates Amendment (Managed Investment Trusts) Bill 2015, Medicare Levy Amendment (Attribution Managed Investment Trusts) Bill 2015, Income Tax (Attribution Managed Investment Trusts — Offsets) Bill 2015; Second Reading

12:00 pm

Photo of Andrew LeighAndrew Leigh (Fraser, Australian Labor Party, Shadow Assistant Treasurer) Share this | | Hansard source

Labor announced its intention for a new tax regime for managed investment trusts in 2010, and with the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Bill 2015 the Abbott-Turnbull government is proceeding with work started under Labor. Because this bill advances work that was commenced under the Labor government, we support its intent and many aspects of it. However, we are concerned about a number of specific provisions following our consultations with stakeholders since the tabling of the bill. We therefore refer the bill to the Senate Economics Legislation Committee for further scrutiny. Labor reserves our final position on this package until the Senate Economics Legislation Committee reports. We leave open the possibility of moving amendments in the Senate.

Labor welcomes the potential for changes in the tax treatment of managed investment trusts that can help grow the managed funds sector. Appropriate changes could make Australian trusts more attractive for both local investors and foreign investors. As a capital importing nation, that is absolutely critical for Australia. The Australian finance and insurance sector employs in excess of 400,000 people. To put it in perspective: that is around twice as many people as the mining industry employs. The value of funds managed in Australia is about $2.6 trillion. Within that pool, approximately $92 billion is managed by Australian fund managers on behalf of overseas investors. The proportion of foreign funds being managed may appear small, given the sheer scale of funds managed under our compulsory superannuation scheme; but, nonetheless, it is an area that has significant room for growth.

Managed investment trusts pool funds to generate financial returns for investors who do not have day-to-day control over the trust—that means typical investors are superannuation funds, life insurance companies and sovereign wealth funds. In 2010, when former Assistant Treasurer Nick Sherry was originally proposing the changes that we are considering in this bill, he said:

Many millions of Australians are investors in MITs, either directly or indirectly through their retirement savings.

In 2010 the Labor government introduced an amendment to expand the definition of a 'managed investment trust' in relation to withholding tax rules. In the subsequent three years, the funds flowing into the managed investment trust sector increased by 78 per cent—demonstrating that clear and well-developed policy can have excellent results. Two-thirds of the funds flowing in came from the Asia-Pacific region—yet another reminder of the role that the region plays in Australia's success, as epitomized in the former government's 'Australia in the Asian Century' white paper.

Former Assistant Treasurer Sherry knew from extensive discussions that Australia's tax rules around managed investment trusts were 'complex, uncertain and unsustainable in the modern economy'. Currently, managed investment trust income is allocated and taxed in aggregate. At the end of the financial year, members of a trust receive an allocation of the net income a trust earns relative to their stake in the trust. This amount is then added to their individual taxable income. The trustee of a trust is then taxed on any remaining net income that has not been distributed to members.

In essence, the package we are considering provides flow-through tax treatment for different types of income in a way that means investors in a trust receive broadly the same benefits they would have if they held the trust assets directly. It is a good example of an area in which government can simplify rules in a way that benefits industry, investors and the economy. That is certainly the intention of the bill, but we have to get the detail right to make sure that intent becomes a reality and does not create unintended consequences.

We are disappointed on this side of the House that the submissions made to Treasury's consultations and the exposure draft to the bill have not been released. We know that, while some stakeholders broadly support the intent of the bill, concerns remain about several provisions that could undermine the intent of the tax regime. Without public access to these submissions, those sitting on this side of the House cannot clearly gauge how widely held concerns with this bill are. This goes to the heart of a cause that Labor has been fighting hard for: making sure everyone pays their fair share of tax. Thanks to Labor's tax transparency laws, we now know that one in four big public companies are not paying any tax. There is serious concern about the tax practices of high net worth individuals. Labor is therefore keen to ensure that this new tax system does not open up another loophole for revenue to drain away through.

According to some stakeholders consulted by Labor, there is a risk that the current drafting of provisions relating to the treatment of trusts with different classes of membership interests creates scope for abuse of the managed investment trust withholding tax regime by large foreign investors. The explanatory memorandum for the bill acknowledges that this is a possibility, stating:

An attribution MIT may have more than one class of membership interests if, for example, different members have exposure to different groups of assets of the attribution MIT. As a result, the tax attributes of a particular class of assets can effectively be ring-fenced to a particular class of membership interests. In this regard, it is possible for a class to have just one member.

When it comes to tax, Labor has a strong record of closing loopholes. We introduced measures to plug loopholes in Australia's transfer pricing rules and anti-avoidance provisions. The Liberals by contrast voted against the countering tax avoidance and multinational profit shifting bill 2013. When the current Leader of the Opposition, Bill Shorten, was Minister for Financial Services and Superannuation, he championed the cross-border transfer pricing bill 2012

The Liberals by contrast tried to block that measure, which was designed to crack down on companies that overvalued assets in international transactions. One of the Abbott-Turnbull government's first actions upon returning to office was to set about dismantling the good work that Labor had done to improve the offshore banking unit regime and tackle excessive debt loading. By ditching Labor's proposals, in effect one of the first acts in government of the Abbott-Turnbull government was to hand $1.1 billion back to giant multinational firms.

On this side of the House, we are determined to make sure that we reduce the number of loopholes and that we do not create new ones. Stakeholders have also raised concerns about the obligations this package places on custodians to pay withholding tax liabilities when no actual cash distributions have taken place. It is another issue that deserves a second look. There is no requirement in the draft bill for AMIT trustees to distribute enough cash to cover tax liabilities arising from attributed income. Stakeholders have asserted that this can create unacceptable risk for custodians, as they may be faced with tax liabilities, which they cannot later recover from their clients and which may inadvertently lead to fewer custodians engaging with the AMIT regime. As we started the process to create attributed managed investment trusts, we are all too aware of how keen the financial services sector is to have this new regime running. On this side of the House, Labor also understands that it would be hasty and irresponsible to proceed without ensuring that this new regime has the necessary integrity and functions that are intended. That is what good tax reform requires.

Australia has come to a time when we need good economic leadership. One of the promises of Prime Minister Turnbull when he deposed Prime Minister Abbott was that he would put in place economic leadership. If you look at the economic challenges that Australia faces, you can see the need for that. Consumer sentiment has fallen; we have seen downgrades on growth since the last election; unemployment is up; and public sector construction has fallen every quarter since the election and is now near an all-time low. We have per capita Australian incomes down two per cent since 2013. This is not a widely recognised fact because we tend to use GDP to measure living standards. But GDP does not divide by population and, as the country in the advanced world with the most rapid population growth, that means that GDP can be a misleading measure of living standards. Simply look at disposable per capita income: it is lower now than when the Abbott-Turnbull government won office. We look across the ASX and we see dividend payout ratios in excess of 60 per cent—well above the ratios that you see in similar advanced countries. Only six per cent of ASX 300 firms believe Australia is a highly innovative nation.

Looking globally, we face challenges such as the one of what happens when interest rates begin to rise from their 5,000-year lows. We have unprecedented levels of instability in certain parts of the world. Geopolitical instability and economic fragility demand a government with a long-term vision for tax reform, but instead we have seen the junking of the tax reform process from this government. The Re:think discussion paper, brought down last year, called on community groups, regular Australians and business groups to put in their submissions. More than 800 did so, costing thousands of hours of time and millions of dollars—the secretariat alone cost over $600,000—and yet the Prime Minister has now junked all of that process. The promised tax white paper, which was supposed to be delivered within the first two years of the Abbott-Turnbull government, now looks as though it will not be delivered at all. We do not even know when the green paper—which is supposed to precede a white paper—is coming.

In place of careful and consistent tax reform we are instead getting ad hoc thought bubbles. The latest one today comes from the Assistant Treasurer—the third Assistant Treasurer in just two years. Instead of cracking down on multinational tax, the Assistant Treasurer has suggested that perhaps employees should snitch on their bosses in return for a cut of the tax take. A government which has cut 4,700 jobs out of the tax office, which rejects Labor's multinational tax plan and which does not believe in tax transparency instead suggests that we are going to garner more tax by encouraging employees to snitch on their bosses. It is indeed bizarre that a government which voted for less tax transparency last year now has plans for employees to spill tax secrets in exchange for cash.

Getting tough on multinational taxation requires robust tax laws—tax laws such as the proposal produced by Labor, informed by work from the OECD, costed by the Parliamentary Budget Office, adding $7.2 billion to the budget bottom line over the course of the decade and grounded in good economic intuition. If you are deducting debt, you should do it based on sound economics, rather than ad hoc thresholds. That is what good multinational tax reform requires, rather than a dibber-dobber plan.

We also have the GST debate rolling on. On Sunday we had the Prime Minister say 'maybe not' and the cabinet secretary say 'maybe'. We know there are plenty of those in the coalition party room who would like to see the GST basal rate increased. In 2005 the member for Wentworth, then a backbencher, proposed 281 tax ideas. We are still having that same philosophy today from the member for Wentworth. The 281 ideas from 2005 have translated a decade later into a 'let every flower bloom' approach to tax reform. The philosophy of tax reform requires careful and coherent engagement with business and community groups—the sort of process that Labor engaged in through the Henry tax review. The stock market may be back to where it was a decade ago, but surely the member for Wentworth's thoughts on tax reform might have moved on since then.

On this side of the House we are deeply committed to tax reform. We support the intent of this legislation but we have concerns about the design. By airing our concern that stakeholder submissions have not been made public we are demonstrating our willingness to have a constructive and credible conversation about tax reform. It is absolutely incumbent on the government to be transparent with this parliament about the ramifications these changes to the managed investment trust regime will have. The last thing Labor wants is another tax loophole that can be exploited to deny the Australian community a fair share of tax. In keeping with our longstanding campaign for more integrity in the tax system, we will refer this bill to the Senate Economics Legislation Committee and we reserve the right to seek appropriate amendments in the Senate after the committee reports.

12:16 pm

Photo of Bert Van ManenBert Van Manen (Forde, Liberal Party) Share this | | Hansard source

It is always a pleasure to follow the member for Fraser in this House. It is interesting to listen to his contribution and reflect on the record of those opposite on tax reform in their time in government. What the member for Fraser neglected to tell the Australian people is that their record of tax reform involved increasing all sorts of taxes, fees and charges. It did not involve reducing them, it involved increasing them. And from what we have seen in the last little while with Labor's various policies going forward to try and fund some of their unfunded promises, again we are not going to see any reduction in taxes, we are going to see increases to fund more and more spending. What this country needs is a debate about reducing the level of government spending and reducing the level of tax that we collect as a result so we can free up our economy to be productive and grow and be competitive on the world stage.

I rise today to speak in support of the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Bill 2015, and related bills, which seeks to introduce a new tax system for taxing managed investment trusts. This bill plays an important role in providing the right domestic platform to enable the financial services sector to expand and grow. We all recognise that in this country we have a history of being able to develop and grow our economy based on the investment of foreign capital. According to the Financial Services Council this new regime will provide certainty and clarity for eligible managed investment trusts and their investors in relation to many longstanding technical taxation issues.

The implementation of a new tax system follows recommendations made by the Board of Taxation in its report on the review of tax arrangements applying to MITs. In November 2013 the coalition government announced it would progress the new tax system for MITs, which was actually one of Labor's 92 announced but unlegislated taxation measures. A managed investment trust is a collective investment vehicle. It allows investors to pool their funds and have that pool of funds invested by a professional fund manager. To be a managed investment trust the trust must meet certain criteria. It must be widely held and it must be a managed investment scheme under the Corporations Act 2001 and invest in assets that earn mainly passive income—for example, rent, dividends and interest.

The coalition government is introducing these bills to modernise the tax rules for managed investment trusts. The new tax system will address longstanding uncertainty and complexity in the rules applying to managed investment trusts and, by extension, investors in those trusts. It will significantly reduce compliance costs for managed investment trusts by $30 million per year and also make compliance for investors more streamlined and straightforward.

In developing the new tax system, extensive consultation was undertaken with representatives from the funds management industry, the property sector, the custodian service industry, the legal profession and the taxation advisory firms on the draft legislation and guidance material from the Australian Taxation Office. In this instance, it has demonstrated again that, through a consultative process, you can come up with good policy. Maybe those opposite could learn from that and their time in government. The ATO will issue finalised guidance material when the new rules commence to provide industry with greater level of certainty on the practical tax implications arising from the new tax system.

The Tax Law Amendment (New Tax System for Managed Investment Trusts) Bill 2015 and related bills will make it easier for managed investment trusts to offer different investment products through a single trust and give trustees practical options for reporting income to members.

Introducing this new tax system will not only enhance the competitiveness of Australia's funds management industry but will also help attract more investment in Australia, including in the area of infrastructure. So why is this important? It is important because will help make Australian fund managers more internationally competitive and promote the greater export of their funds management expertise. And we would note in this House that one of the key outcomes of the free trade agreements with Japan, Korea and China is the access that our services sector has got to those economies. We lead the world in some of these areas—funds management, aged care and professional advice. This whole new area of business has been opened up by this government through its ability to negotiate these free trade agreements.

And this piece of legislation helps to provide even greater access and opportunities for foreign investors to invest in this country and also for us to export our expertise in this sector. The managed investment trust system will encourage Australia's managed investment funds industry to grow not only by developing it locally but by exporting more of its expertise and attracting additional inflows of investment. This in turn creates the opportunity for greater economic growth here in Australia and that greater economic growth creates the opportunity for jobs for Australians.

These new rules recognise the commercial needs of the industry by more closely aligning the commercial and tax consequences of the activity of the managed investment trust. This allows managed funds to operate more flexibly through these trust structures. The new rules will apply from 1 July 2016; however, trusts can choose to opt in early and apply the rules for the income years starting on or after 1 July 2015. The new tax system will apply where the members of the trust have clearly defined interests in relation to income and capital of the trust and the trustee of the managed investment trust makes a choice to apply the new rules. This requirement ensures that the new rules can operate transparently and with integrity.

It is expected that some MITs will choose to apply the new rules from 1 July 2015. A number of stakeholders have indicated that they typically will need between 12 and 18 months from the time the bills are passed through the parliament to update their systems and trust deeds. The elective nature of this regime provides MITs with the flexibility to manage their transition in a sensible way. Trusts that are not eligible or choose not to apply the new tax system will continue to have the general trust tax rules applied.

The reforms in these bills have been carefully designed to ensure an appropriate balance between simplifying the tax arrangements applying to trusts and the continuing need to maintain the integrity of our taxation system. This new taxation system is estimated to have a cost to revenue of about $125 million over the forward estimates but stakeholder comments have been very positive. This series of bills is just another example of this government having listened to stakeholder feedback and taken the time to get the new bills right. These new rules and the increased incentive for our managed investment trusts and our professional financial services industry to expand their opportunities give great opportunities for our economy to grow and prosper for the future. I commend these bills to the House.

12:25 pm

Photo of Angus TaylorAngus Taylor (Hume, Liberal Party) Share this | | Hansard source

I rise to speak in support of the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Bill 2015 and associated bills. As we have heard, these bills introduce a new tax system for managed investment trusts following the important recommendations that were made by the Board of Taxation in its report on the review of the tax arrangements applying to MITs, as they are known. The important point here is that the new rules will modernise the tax rules applying to eligible managed investment trusts, increasing certainty for those trusts and investors, and reducing complexity.

There are many things government can do from time to time that encourage more activity, more investment and more job creation, and that is good for everybody. The reality of tax is that tax inherently discourages activity. If you tax income, it discourages people from generating income. If you tax savings, it discourages people from saving. If you tax payroll, it discourages people from employing. So whatever you tax you discourage. That is the reality of taxation. We know that a certain amount of taxation is a necessary evil. It is a necessary evil because it will always be bad to discourage activity and it is necessary because we have to fund our schools, hospitals, roads, national security and so on. But we should do everything we can with our tax system to discourage activity as little as possible.

The tax debate that has been ensuing in recent weeks and months has been all about how we formulate a tax system that discourages activity as little as possible and gets the right activity happening. Where we do have a tax we need to discourage activity as little as we possibly can. Of course, the debate has largely been about what the Prime Minister calls the tax-mix switch. He says, 'It might be better to discourage consumption than to discourage income or company activity.' Another way of thinking about that in taxation terms is that it might be better to have a slightly higher GST and a lower company tax rate and lower income tax rates. That is a very important debate and it has been going on now for some time, and I am sure we have not seen the end of the tax-mix debate because there are a whole series of tax-mix switches we can make to encourage activity as much as we possibly can in this country.

In any tax system there are some things you can do that do not involve a trade-off. There are some things you can do that just make the tax system work better without any real cost at all. As a government we should be constantly looking for those opportunities. The good news is that, if you do get your tax system working well and you take out the inhibitors, the red tape and the unnecessary taxation, you can encourage people to participate more in the workforce and businesses can make investment and grow their businesses more than they otherwise might have.

So this legislation is one very important way in which government can reduce complexity, reduce red tape, increase efficiency, make us more internationally competitive and, most importantly, make our financial services sector more internationally competitive and better positioned to take on the extraordinary opportunities that we are seeing in Asia. The ANZ Bank has told us on a number of occasions that the opportunities for Australian financial services providers in Asia are unprecedented. We are going to see a switch in capital from the Chinese and other Asian countries circulating their money through the United States, through bonds, back into other opportunities. We are going to see that change where they will create their own capital markets, their own managed funds industry, their own bond markets and their own equity markets. And we are perfectly positioned to chase those.

To do that, we must have the most competitive financial services sector possible. That is exactly what we are trying to achieve with this legislation. As of 30 June we had $2.6 trillion in funds under management in Australia, which is almost double Australia's GDP and the capitalisation of the Australian stock exchange. Even with all the gyrations we have had, it is significantly larger. That is a huge industry. It not only does us a great service as investors—all of us—in that industry but also provides a great entree into rapidly growing opportunities to our north.

Indeed, it is one of the largest pools of managed funds in the world and contributes jobs to the broader financial and insurance services industry, employing over 400,000 people in Australia, many of whom are in my electorate. Increasingly, we are seeing people involved in trading and financial services living in regional centres and in the bush, trading online. This is a sector that permeates every part of Australia, including regional and rural Australia. And they all use managed investment trusts. This is a ubiquitous vehicle for investment because it is a convenient vehicle. But what we are here, today, to debate how we can make it even more efficient and more convenient.

The real problem we are trying to solve, here, is: the current taxation arrangements applying to trusts are extremely complex and extremely uncertain. That is unacceptable, for all the reasons I have laid out. Back in November 2013, soon after we came to government we announced that we would progress a new tax system for managed investment trusts, MITs—being one of the former government's 92 announced but unlegislated taxation measures. That government was clogged up. Its arteries were clogged—I suppose, when you had a Prime Minister like Kevin Rudd, you announced a hell of a lot and did not deliver much of it. This is a perfect example of that.

Since December 2013 we have undertaken extensive consultation to ensure that the new rules will operate as we intend and make sure that our funds managers are more internationally competitive than they would have been. We listened to a great deal of feedback and took the view that it was better to take that time and ensure that we get the rules right rather than rush implementation. We have done that. As we will hear in a moment, it is very clear from those stakeholders that they agree this is a package that will have a very positive impact on their competitiveness.

The bills modernise the tax rules for MITs and will undress that longstanding uncertainty and complexity in the tax rules. We expect the compliance costs for MITs will fall by $30 million a year. That compliance will also be simpler. Anyone who has been in business knows that when you make things simpler you make fewer errors, and that takes up less of your time. Your biggest asset in any business is the time of your senior people. If you are wasting it on errors, bureaucracy and red tape every business is distracted and loses the sharp focus on the strategy they, ultimately, need to succeed.

The new rules recognise the commercial needs of the industry by closely aligning the commercial and tax consequences of the activities of an MIT. All of us in business know that there is nothing worse than having to have management accounts and taxation accounts that are separate and different and trying to serve different masters. There is a whole lot of complexity that we prefer not to have. What we are proposing, here, will allow managed funds to work more flexibly through their tax structures. As we heard from the previous speaker, they will prior apply from 1 July 2016, although there is an opt-in for applying the rules 12 months earlier. That is a voluntary component of the legislation.

The new tax system will apply where the members of the trust have clearly defined interests, in relation to income and capital of the trust, and the trustee of the MIT makes the choice to apply the new rules. This requirement ensures that the new rules can operate transparently and with integrity. It is expected that some MITs will opt in for the earlier option. Many will need to update their systems, though, before they are ready to make an election. That is an investment they need to make. They have said it is an investment worthwhile for what they are getting in return from this legislation. The trusts that are not eligible or choose not to apply the new tax system will continue to apply the general trust tax rules. As I said, there is a voluntary component to this. The new tax system is estimated to have a cost to revenue of $125 million over the forward estimates.

From my experience, anything that reduces bureaucracy, anything that makes the tax system simpler and easier to use, is a very big bonus to businesses. Typically, we underestimate how valuable it is for senior people in any business to be able to spend more of their time on their business and less of their time on red tape and bureaucracy. That is something that cannot usually be quantified but, in 25 years of advising businesses and working in businesses myself, I think that is the great intangible that every government should be focusing on helping with. There is so much we can do. If government is difficult to work with, we waste business people's time. That is why I think this is so valuable.

We have heard some comments on this legislation from a number of stakeholders. The AFR, based on interviews with stakeholders, has said that the government's proposed changes have met with cheers from the investment community as they welcome the boost in certainty and tax treatment. I really think a set of bills that gets cheers from stakeholders has something going for it.

Andrew Clements, a partner at legal firm King & Wood Mallesons, said of the new treatments:

It may be one of the single greatest tax reforms in the industry since the introduction of capital gains tax.

That is pretty substantial praise. He goes on to say:

It will provide much greater flexibility in terms of the distribution of income and the allocation of tax liabilities to unit holders.

…   …   …

It will allow much more flexibility to create new product opportunities.

So, not only are we getting more efficiency, simplicity and streamlining, we are actually getting a platform here for more innovation, and in financial services we know innovation is the lifeblood of a successful industry. The Financial Services Council on 3 December said:

The new regime will provide certainty and clarity for eligible Managed Investment Trusts and their investors in relation to many longstanding technical taxation issues.

That is high praise as well. The Property Council of Australia said late last year:

These reforms meet all the objectives industry put forward by increasing certainty and flexibility while also streamlining compliance to reduce unnecessary costs.

This is a resounding endorsement from the business community. I thoroughly commend these bills to the House.

12:38 pm

Photo of Kelly O'DwyerKelly O'Dwyer (Higgins, Liberal Party, Minister for Small Business) Share this | | Hansard source

First, I would like to thank those members who have contributed so eloquently to this debate on the Tax Laws Amendment (New Tax System for Managed Investment Trusts) Bill 2015, the Income Tax Rates Amendment (Managed Investment Trusts) Bill 2015, the Medicare Levy Amendment (Attribution Managed Investment Trusts) Bill 2015 and the Income Tax (Attribution Managed Investment Trusts—Offsets) Bill 2015. This package of bills creates a dedicated new tax system for eligible managed investment trusts that will remove longstanding uncertainty in the interaction between Australian tax and trust law. This amending legislation will improve the competitiveness of the managed funds industry by reducing complexity, increasing certainty and minimising compliance costs.

Australia's funds management industry is one of the largest and most sophisticated in the world and as at 30 June 2015 had $2.6 trillion in funds under management. Importantly, this package of bills modernises the tax law applying to eligible MITs. It replaces the general trust tax rules, which were not designed for the use of trusts as collective investment vehicles. The new tax system will apply tax at the investor level rather than the entity level. Members will be taxed as if they had derived that income directly.

Additional new rules contained in these bills will reduce compliance costs by $30 million per year for trustees and investors by better aligning the commercial and tax consequences of MIT activities. Trustees will be permitted to account for variances in income attributed to members in the income year in which it is discovered or reissue statements to its members for the income year to which the variance relates. Trustees can now also treat classes within multiclass MITs as separate trusts, expanding their capacity to offer additional investment options without having to incur the cost of establishing separate trusts to achieve the same outcome. The bills also contain measures to strengthen the integrity of the MIT regime.

This package of bills has been long awaited and is widely supported by the industry. This package of bills will benefit the millions of Australians who invest in MITs, either directly or indirectly, through their superannuation. It will also ensure that Australia's MIT industry remains efficient and competitive and is better placed to export its expertise and attract funds from overseas. I commend this package of bills to the House.

Photo of Ian GoodenoughIan Goodenough (Moore, Liberal Party) Share this | | Hansard source

The question is that this bill be now read a second time.

Question agreed to.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.