Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Hansard source

I thank all those who have participated in what has, as always, been a lively and interesting debate on the Tax Laws Amendment (2006 Measures No. 4) Bill 2006. The bill has, I think, been adequately described by previous speakers. It contains some four schedules, all of which but for schedule 4 seem to have at least substantial support in this chamber. Schedule 4, as Senator Joyce in his contribution has just now made clear, is somewhat more controversial. Can I say on behalf of the government that we welcome the fact that the Labor Party is at least not going to oppose schedule 4. I welcome the fact that they have considered this properly and on its merits. The Labor Party, as the alternative government of this country, recognises the importance of this measure and of bringing Australia’s tax system properly into line with international tax arrangements. It is refreshing that at least on this issue the opposition does recognise the importance of having such consistent international tax arrangements.

Schedule 4 does do that. It is part of our ongoing efforts as a government to bring our tax system more into line with international norms and to ensure that the tax system does remain internationally competitive. The nation as a whole must remain internationally competitive. Our tax system must remain internationally competitive. The competition internationally for investment dollars is intense and immense and we must never ignore the critical importance of ensuring Australia’s policy framework is internationally competitive.

The reforms, as has been said, better target and strengthen the application of our capital gains tax regime to foreign residents. That is achieved firstly by narrowing the range of assets on which foreign residents are subject to Australian CGT, which will be restricted to Australian real property and the business assets of Australian branches of a foreign resident. As has been noted, it also strengthens the integrity of that narrower base. CGT will apply to non-portfolio interests in Australia and foreign interposed entities where more than half the value of the interposed entity’s assets is attributable to Australian real property.

It is of course one of the great virtues of the Liberal and National parties that, unlike the Labor Party, our members are free to exercise their will in relation to measures of this kind. I profoundly disagree with Senator Joyce on this issue. He and I share many views in common, and I enjoy siding with Senator Joyce on some of the great and important issues facing this country. But on this issue we do not agree, and the government party room does not agree. The government party room supports this measure for the reasons set out in the explanatory memoranda, in various government statements and in public statements as to why we should follow the international norms with respect to the way in which foreign entities are taxed on capital gains. That is what this bill seeks to do and, as I said, I am pleased that the Labor Party understands that.

I do not want to go into a particular critique of Senator Joyce’s difficulties with this bill. I do respect where he is coming from, but I do need to say that, overall, the history of this country is one that demonstrates the overwhelming virtue and importance of foreign investment. There is no way this country would have the development, extraordinary living standards and economic prosperity that we have without foreign investment.

As I said, the competition for investment dollars is extraordinarily intense. As many of the developing countries in the world improve their legal and regulatory frameworks, they will become increasingly attractive to investment. This country is one that, in its 200-year history, has never had a situation where its savings meet its investment requirements. There are a lot of reasons for that but we have always been—and, in my view, will always continue to be—reliant on foreign savings to provide the investment dollars that this country needs. To ensure that we continue to attract that foreign investment, which provides overwhelming benefits to the Australian economy, we do need an internationally competitive tax regime.

I do profoundly disagree with Senator Joyce in his assertions that foreign investment somehow costs jobs. Foreign investment creates jobs. Foreign investment in my own city of Adelaide creates thousands upon thousands of jobs in the defence and automotive industries. Without foreign investment we would not have anything like the industrial base or the employment prospects that we have in this country. So that is something with which I profoundly disagree and on all the evidence that I have ever seen those firms that are engaged internationally or are partly or wholly owned by foreign entities operating in Australia are among the most efficient. They are the companies that have most significant investments in R&D, they are the most innovative and they offer in many respects the best employment opportunities and conditions for their employees, so we do profoundly believe as a government that on balance foreign investment is good for this country and we want to continue to attract it. With those few remarks, I commend the bill to the Senate.

Question agreed to.

Bill read a second time.