Barnaby Joyce (Queensland, National Party, Shadow Minister for Finance and Debt Reduction) Share this | Link to this | Hansard source

I rise once again to speak on the International Tax Agreements Amendment Bill (No. 1) 2009. This bill was introduced on 18 March 2009 and amends the International Tax Agreements Act 1953 to incorporate into Australian law the two separate tax agreements signed with the British Virgin Islands and the Isle of Man. The agreement with the British Virgin Islands was signed in London on 27 October 2008 and the agreement with the Isle of Man was signed in London on 29 January 2009. The provisions in these agreements are consistent with other bilateral tax treaties that Australia has signed with other countries.

I would like to say at the outset that the coalition will be supporting the passage of this bill through the Senate. The agreement with the British Virgin Islands provides for a complete exchange of tax information between the two countries in both criminal and civil tax matters. This will remove the ability for Australian taxpayers to use the British Virgin Islands as a tax haven. This expands the existing relationship, where both countries only share tax information for criminal matters. In addition to the exchange of tax information provisions, this agreement also ensures that certain income is not subject to double taxation.

Specifically, this applies to ensure that those employed by governments are not subject to double taxation. Under this agreement any income received from government service is taxable only by the country to which the services were provided. Currently, such income would be taxed in Australia and by the British Virgin Islands. This provision does not apply to those earning income from private business or commerce.

This agreement also ensures that education related payments received by students are exempt from taxable income. It also ensures that students from Australia or the British Virgin Islands do not have to pay income tax on any payments made from their resident country for the purpose of education and maintenance.

The agreement with the Isle of Man provides for a complete exchange of tax information between the two countries in both criminal and civil tax matters. This will remove the ability for Australian taxpayers to use the Isle of Man as a tax haven. Currently both countries only share tax information for criminal matters. This agreement also commits the revenue agencies in each country to assist taxpayers in resolving any disputes relating to transfer pricing.

In addition to the exchange of tax information provisions, this agreement also ensures that certain income is not subject to double taxation. It ensures that income received from pensions and retirement annuities will only be taxed in the individual’s country of residence. Currently, income received from a pension or retirement annuity may be taxed in the country of residence and in the country where the income is sourced.

As in the agreement with the British Virgin Islands, this agreement also ensures that those employed by governments are not subject to double taxation. Currently, such income would be taxed in Australia and by the Isle of Man. Again, as in the agreement with the British Virgin Islands, this provision does not apply to those earning income from private business or commerce. This agreement also contains the same exemption provisions relating to education purpose payments as the agreement with the British Virgin Islands. I commend the bill to the Senate.

Nick Sherry (Tasmania, Australian Labor Party, Assistant Treasurer) Share this | Link to this | Hansard source

The International Tax Agreements Amendment Bill (No. 2) 2009 gives force to a new tax treaty with New Zealand, a second protocol to the tax treaty with Belgium and an agreement on the allocation of tax rights over certain income with Jersey. Tax treaties facilitate trade and investment by reducing barriers caused by double taxation. The extremely close and significant economic relationship between Australia and New Zealand increases the importance of maintaining up-to-date tax arrangements between both countries. The new tax treaty, signed in Paris on 26 June 2009, strengthens and improves this relationship. The treaty updates and modernises the bilateral tax arrangements between Australia and New Zealand. The bill will insert the text of the new treaty into the International Tax Agreements Act 1953 and repeal the existing treaty.

Responding to the needs of both Australian and New Zealand taxpayers, the new treaty comprehensively updates the existing tax treaty arrangements with New Zealand. Key outcomes from the treaty include: reduced withholding taxes on certain intercorporate dividends and the complete removal on others; the removal of withholding tax on interest payments made to unrelated financial institutions or to the Australian and New Zealand governments; lower royalty withholding tax; the extension of treaty benefits to Australian managed investment trusts; the cross-recognition of the tax exempt status of pensions in both Australia and New Zealand; and a short-term secondment provision which will preclude individuals from being caught up in the other country’s tax system when they are seconded to that other country for fewer than 90 days.

Integrity provisions in the treaty will ensure that the reduced withholding tax rates are only available to those genuinely entitled to them. In addition, as New Zealand does not have a comprehensive capital gains tax, the treaty allows Australia to tax capital gains derived by Australian residents who relocate to New Zealand for up to six years after they cease to be an Australian resident, thereby preventing the double non-taxation of such capital gains.

The treaty will enter into force following the last notification that both countries have completed their domestic requirements, which, in the case of Australia, includes enactment of this bill. The bill will also amend the definition of ‘dual listed company arrangement’ in the income tax law to align it with the corresponding provision in the treaty with New Zealand.

The government is committed to the implementation of international standards of tax transparency. The second protocol to the tax treaty with Belgium upgrades the exchange of information provisions in the tax treaty between Australia and Belgium by enhancing the ability of the Belgian and Australian tax authorities to exchange taxpayer information and to exchange on a wider range of taxes. In particular, the new provisions provide that neither tax administration can refuse to provide information solely because they do not require the information for their own domestic purposes or because the information is held by a bank or similar institution.

The government is a global leader in combating cross-border tax evasion. The enhanced provisions with Belgium are an important tool in Australia’s efforts in this regard, by increasing the probability of detection when taxpayers participate in abusive tax arrangements. The tax information exchange agreement, together with the agreement for the allocation of certain taxing rights, signed with Jersey earlier this year are further evidence of the Rudd Labor government’s commitment in this area.

The bill gives effect to the agreement on the allocation of taxing rights between Australia and Jersey, which will help prevent double taxation of certain cross-border income derived by individuals who are residents of Australia or Jersey. The agreement also provides an administrative mechanism to help resolve transfer-pricing disputes that may arise between taxpayers and the revenue authorities of Australia or Jersey.

The Joint Standing Committee on Treaties has considered and recommended that binding treaty action be taken in respect of all three treaties. Full details of the amendments brought forward in the bill are contained in the explanatory memorandum. I thank Senator Joyce for his contribution and for the support of the Liberal-National Party. I had to go into that detail because I needed to ensure that there was clarification of the countries that we are dealing with in this legislation.

Question agreed to.

Bill read a second time.