House of Representatives

Second Reading Speech

Mr Shorten (Assistant Treasurer and Minister for Financial Services and Superannuation)

I move:

That this bill be now read a second time.

Today I introduce this bill which will amend the International Tax Agreements Act 1953 in two ways. Firstly, schedule 1 to the bill will modify and streamline the structure of the act and remove the majority of its existing schedules, which contain the texts of Australia's bilateral tax treaties. This will simplify the presentation of the operative provisions of the act and incorporate the treaty texts by reference to accessible online resources.

This amendment is not intended to alter the entry into force or application of Australia's tax treaties but it will substantially reduce the size of the act, which has become one of the largest acts on the Commonwealth's statute books.

Secondly, schedule 2 to the bill will give the force of law in Australia to new bilateral taxation agreements with Aruba, Chile, the Cook Islands, Guernsey, Malaysia, Samoa and Turkey.

Chile and Turkey

The agreements with Chile and Turkey are comprehensive tax treaties that will promote closer economic cooperation between Australia and Chile and Australia and Turkey, by reducing taxation barriers to bilateral trade and investment, in particular by eliminating double taxation of income arising from overlapping tax jurisdictions.

The Chilean and Turkish treaties will also improve the integrity of the tax system by providing the framework through which the Commissioner of Taxation can cooperate bilaterally with his Chilean and Turkish counterparts to prevent tax evasion.

The internationally accepted approach to meeting the above policy objectives is to conclude a bilateral tax treaty. These two treaties are largely based on the OECD Model Tax Convention on Income and on Capital and the United Nations Model Double Taxation Convention between Developed and Developing Countries, with some mutually agreed variations reflecting the economic, legal and cultural interests of Australia, Chile and Turkey.

Malaysia

The agreement with Malaysia is a protocol which will amend the current Australia-Malaysia tax treaty to update the exchange of information article in that treaty to the current international standard, as endorsed by the OECD, the G20 and the United Nations.

The updated exchange of information provisions are an important tool in Australia's efforts to combat offshore tax evasion and will make it harder for taxpayers to evade Australian tax by increasing the probability of detection of abusive tax arrangements.

Aruba, the Cook Islands, Guernsey and Samoa

The agreements with Aruba, the Cook Islands, Guernsey and Samoa seek to eliminate double taxation on certain income derived by individuals, in particular government workers, students and business apprentices, and pensioners and retirees. Aruba, the Cook Islands, Guernsey and Samoa are required to provide reciprocal taxation treatment in relation to Australian government employees, students and business apprentices, retirees and pensioners.

These four agreements will also provide a mutual agreement procedure for the resolution of taxpayer disputes involving transfer pricing adjustments. These agreements were prompted by Australia's desire to conclude tax information exchange agreements-TIEAs-with Aruba, the Cook Islands, Guernsey and Samoa. The TIEAs establish a legal basis for the exchange of taxpayer information between two countries and are an important tool in Australia's efforts to combat tax avoidance and evasion.

The agreements contained in this bill are part of a package of additional benefits offered to Aruba, the Cook Islands, Guernsey and Samoa in order to secure the TIEAs signed in 2009 with each of those jurisdictions.

Each of the new agreements with Aruba, Chile, the Cook Islands, Guernsey, Malaysia, Samoa and Turkey will enter into force after Australia exchanges diplomatic notes with each of the other countries advising of the completion of their respective domestic law requirements.

Debate (on motion by Ms Gambaro ) adjourned.