House of Representatives

International Tax Agreements Amendment Bill (No. 1) 2009

Second Reading Speech

Mr Bowen (Minister for Competition Policy and Consumer Affairs, and Assistant Treasurer)

I move:

That this bill be now read a second time.

This bill gives the force of law to two taxation agreements, with the British Virgin Islands and the Isle of Man. The agreements were signed in London on 27 October 2008 and 29 January 2009 respectively, and this bill will insert the text of both agreements into the International Tax Agreements Act 1953.

The agreements provide for the allocation of taxing rights between Australia and the British Virgin Islands, and Australia and the Isle of Man, over certain income of individuals who are residents of Australia or the British Virgin Islands, or the Isle of Man, thereby helping to prevent double taxation.

These agreements are the first two of their type between Australia and low-tax jurisdictions. Their operative provisions are consistent with corresponding provisions contained in Australia's bilateral tax treaties.

The key outcomes from these agreements are:

Australia, the British Virgin Islands and the Isle of Man will have sole taxing rights over the salaries they pay to individuals undertaking governmental functions; and
Certain payments received by visiting students and business apprentices will be exempt from tax in the country visited.
Further, in the case of the Isle of Man agreement:
income from pensions and retirement annuities will be taxed only in the country of residence of the recipient, provided that country taxes such income; and
a non-binding administrative mechanism will be established to assist taxpayers to seek resolution of transfer pricing disputes.

These two agreements were signed in conjunction with tax information exchange agreements between Australia and the British Virgin Islands, and Australia and the Isle of Man.

Together, these two agreements and the related tax information exchange agreements support Australia's efforts to combat tax avoidance and evasion through the establishment of a transparent and effective exchange of information for tax purposes. They will promote fairness and enhance the integrity of Australia's tax system.

Negotiating tax information exchange agreements is an important part of the government's efforts to combat international tax evasion. It is pleasing to see that Hong Kong, Liechtenstein and Singapore have recently agreed to adopt OECD standards of transparency and effective exchange of information for taxation purposes. We look forward to implementing effective exchange of information arrangements with each of those countries at the earliest opportunity.

Earlier this week there were reports that Switzerland, Luxembourg and Austria will also review their position on bank secrecy for tax information exchange purposes. I look forward to further developments in relation to this. Australia has been at the forefront of global action to enhance tax transparency and information exchange, having demonstrated strong support at the finance ministers' meeting hosted by France and Germany in October 2008.

In relation to the two agreements in this particular bill, each agreement will enter into force after Australia, the British Virgin Islands and the Isle of Man advise that they have completed their domestic requirements which, in the case of Australia, include enactment of this bill.

The agreements have been considered by the Joint Standing Committee on Treaties, which has recommended that binding treaty action be taken.

Full details of the amendments brought forward in this bill are contained in the explanatory memorandum. I commend the bill to the House.

Debate (on motion by Mr Wood ) adjourned.