Nick Sherry (Tasmania, Australian Labor Party, Shadow Minister for Banking and Financial Services) Share this | Hansard source

Senator Kemp is groaning because he well remembers that star appearance. The next day the word went out from the Treasurer and the Prime Minister, and Senator Kemp was never to appear on The 7.30 Report again. I digress, but only as a consequence of the unruly interjections from Senator Kemp. He is now the minister for sport and culture and, I am sure, thoroughly enjoying it.

The Tax Laws Amendment (2005 Measures No. 6) Bill 2005, which the Senate is considering today, contains five schedules for consideration. The first section of amendments relate to a very important issue, and one that is rightly preoccupying public debate at the present time. It relates to the convention that obliges Australia to make bribery an offence and to eliminate the tax deduction for bribery. You could not have a more important tax amendment before the Senate, given the current public debate about the activities of the Australian Wheat Board. You could not have a more appropriate context in which to be considering this particular amendment.

These legislative changes were undertaken with the Labor opposition’s support in 2000. However, in the process of the changes being made a major anomaly occurred. The OECD convention does allow for facilitation payments to occur. Such a payment is effectively a minor bribe to expedite routine and minor government decisions. The OECD convention describes these payments as a corrosive phenomenon and has called on governments world wide to seek to reduce them by developing much tougher corporate responsibility and governance environs. The convention requires that they be minor in value. Those restrictions found their way into the changes to the Criminal Code in 2000 but are not fully in the current tax act. The tax act does not require that facilitation payments be minor in value, although they should pertain to minor decisions. Also, the tax act does not require record keeping in the same way as the Criminal Code. This disparity has led the OECD to suggest that it is possible that facilitation payments may be abused. In the current context of the wheat scandal, we have not seen minor abuse; we have seen absolutely massive and major abuses, which would have to constitute bribes.

In addition to tougher record keeping, the OECD report seeks to encourage Australia to reduce the disparity between the Criminal Code and the tax act. The government should now accept this finding of the OECD report and be doing much more about this particular issue. Labor believes that the loophole that exists at the present time, the absence of the words ‘minor in value’ from the tax act, is a problem. That was explored extensively with the Taxation Office at the recent estimates. Theoretically, it would permit AWB type payments, which are essentially bribes, to be facilitation payments and thus tax deductible. As I have said, we have the enormous scandal of the Australian Wheat Board at the present time. Although we cannot get the details from the tax office because there are secrecy provisions, I do not have any doubt that AWB was claiming the transport costs, which were effectively bribes, as tax deductions as facilitation payments. They were claiming kickbacks as tax deductions. I have no doubt that that is what the Wheat Board was doing. As a consequence, it will be necessary, I believe, for the tax office to go back over the Wheat Board’s tax statements, over the years since those payments started occurring, and make corrective assessments. Indeed, it was useful to note that the tax office had sent an officer down to the royal commission hearings, at least for the first few days, to keep an eye on the evidence. As I have said, it is covered by secrecy provisions, but I have no doubt the tax office will carry out a reassessment of the Wheat Board’s financial statements. With penalties, I suspect that it will be a very substantial sum of money indeed that the AWB will be required to pay in back tax. But that will come publicly to light in the fullness of time.

Schedule 1 of the bill recognises the losses for merging companies based on the proportion of the company’s market value. When companies merge the issue of the carrying forward of losses is vital. If the new company is less than half a per cent of the total group value then the losses cannot be recouped. This is the 12th amendment to the consolidation rules in two years. It has been a very messy process. It has been complex. The government has created uncertainty by failing to deal with the consolidation measures in a single and comprehensive bill.

The second schedule is vital for the survival of the clubs industry. It retrospectively restores the tax-free status of clubs and other not-for-profit groups, which was taken away by a recent court decision. Up until that Federal Court decision, which is spelt—