Second Reading Speech
by the Minister for Higher Education and Employment Services and Minister assisting the Treasurer the Hon. Peter Baldwin, MPI move that the Bill now be read a second time.
This Bill will provide legislative authority for the entry into force of comprehensive double taxation agreements between Australia and Indonesia, Australia and Vietnam and Australia and Spain.
The Bill will insert the texts of the agreements into the Income Tax (International Agreements) Act 1953 as schedules to that Act.
The agreement with Indonesia was signed on 22 April 1992; the agreement with Vietnam was signed on 13 April 1992 and that with Spain was signed on 24 March 1992. The agreements allocate taxing rights over all substantial forms of income flowing between Australia and those countries. Details of each agreement were announced and copies made publicly available at the time of signature.
The agreements generally accord with the other comprehensive taxation agreements concluded by Australia in recent years.
A feature of the agreement with Vietnam is that it provides for "tax sparing" credit relief to be extended by Australia for tax forgone by Vietnam under specified development incentives for the encouragement of foreign investment.
Where income derived by an Australian resident taxpayer has benefited from the development incentives to be nominated under the agreement, a tax credit will be allowed by Australia for the Vietnamese tax forgone under those incentive measures. By this means, the development incentives will retain their attractions for Australian firms and allow them to compete for business in Vietnam on favourable terms with investors from other countries.
Each of the respective agreements will enter into force when diplomatic notes are exchanged advising that the necessary constitutional processes to give the agreement the force of law in the respective countries have been completed. The enactment of this Bill will complete the processes required of Australia for those purposes.
The Government believes that the agreements will contribute positively to the strengthening of trade, investment, and wider relationships between Australia and the treaty partner countries. I am pleased to be able to say that Australia is the first country with which Vietnam has entered into a double taxation agreement.
It is not possible to accurately predict the eventual effect of the three agreements on the revenue, but it is not expected to be significant.
I present the Explanatory Memorandum and commend the Bill to the House.