Senate debates

Tuesday, 28 November 2006

Questions without Notice

Oil for Food Program

2:18 pm

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

My question is to Senator Coonan, representing the Minister for Revenue and Assistant Treasurer. I refer the minister to the $300 million in kickbacks that AWB paid to the former Iraqi regime. Can the minister confirm that AWB were able to claim so-called ‘facilitation payments’ as a tax deduction? Doesn’t that mean that Australian taxpayers subsidised AWB’s bribes to Saddam Hussein to an amount of $90 million? Hasn’t the government’s failure to align the definition of ‘facilitation payments’ in the tax act and the Criminal Code allowed this to happen and placed legal doubt on the ATO’s power to reassess AWB for $90 million in unpaid tax? Given that the Commissioner of Taxation has now called for the law to be clarified, will the government reverse its position and support changes to the tax act to ensure that AWB-type payments are not tax deductible in the future?

Photo of Helen CoonanHelen 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.

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

Mr President, I ask a supplementary question. Given the minister’s confidence, will she guarantee that the $90 million in bribes and back taxes will be paid to the Australian Taxation Office? Why didn’t the government support Labor amendments to the tax act on 27 February this year which would have removed any doubt that a facilitation payment is in fact a bribe? If the penalties in the Tax Administration Act were now able to be applied properly, wouldn’t AWB now be liable for a tax debt of $250 million? Hasn’t this $250 million been put in jeopardy by the government’s failure to take action to clarify and clear up the anomalies and doubts about this issue and to stop AWB’s bribes to Saddam Hussein being able to be claimed as a tax deduction?

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

I am touched that Senator Sherry feels that I can give a guarantee as to what investigations the tax office is going to be carrying out. Secondly, Senator Sherry is of the view that it is entirely appropriate for a taxpayer to be slugged retrospectively—and I make no comment whatsoever—

Opposition Senators:

Opposition senators interjecting

Photo of Paul CalvertPaul Calvert (President) Share this | | Hansard source

Order! Senator Ray, Senator Evans and Senator Sherry, shouting across the chamber is disorderly.

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

I was in the course of saying—mid-sentence—that I make no comment as to the appropriateness or otherwise of what may happen in respect of investigations by the tax office of AWB payments. It clearly may raise different considerations, but investigations are a matter for the tax commission. It would certainly not be appropriate for me to comment on behalf of the government on this matter. As I have said very clearly, the ATO has said that it regards the matter as clear, and it is implementing guidelines—(Time expired)