Helen Coonan (NSW, Liberal Party, Minister for Communications, Information Technology and the Arts) Share this | Hansard source

I thank Senator Sherry for the question. The government is of the view that the income tax law in this particular area is clear. I appreciate that Labor argues that tax law should mirror the Criminal Code and specify that facilitation payments need to be minor in both nature and value; however, we think it is clear. Facilitation payments are allowed only if they do not breach the law of the foreign country and are designed solely to speed up or secure a routine, minor government action.

The amount paid as a facilitation payment is a factor in determining if a payment is minor in nature. The Commissioner of Taxation’s comments at Senate estimates acknowledged that there may be scope for someone to argue, otherwise, that a large payment could be considered minor. However, the tax office’s view, on my advice, is and has always been that a payment of a substantial amount would not fall within the definition. The tax office is, on my advice, working on guidelines regarding facilitation payments, with a view to collecting information as part of next year’s returns. Investigations are a matter for the tax office, and it certainly would not be appropriate—certainly not in question time—for the government to comment. The ATO’s new guidelines for auditors will help them to distinguish between facilitation payments and illegal bribes. The tax office will also be checking businesses with particular international profiles to ascertain if they are maintaining appropriate systems to detect international facilitation payments so that deductions for expenses and input tax credits are properly claimed. The tax office is also proposing to include a new label on the 2007 company income tax return that will require reporting of facilitation payments.

In summary: we think that there are clear and limited circumstances where facilitation payments may be tax deductible. To repeat, for the benefit of anyone in doubt: facilitation payments are allowed only if they do not breach the law of the foreign country and are designed solely to speed up or secure a routine, minor government action.