House of Representatives

International Tax Agreements Amendment Bill 2014

Second Reading Speech

Senator Birmingham (Parliamentary Secretary to the Minister for the Environment)

I move:

That this bill be now read a second time.

I seek leave to have the second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows -

International Tax Agreements Amendment Bill 2014

This Bill will amend the International Tax Agreements Act 1953 to give the force of law to the new tax treaty signed by Australia and Switzerland on 30 July 2013.

Tax treaties facilitate trade and investment by reducing barriers caused by the double taxation of residents in the two countries. Australia has 44 bilateral tax treaties.

Australia and Switzerland share a close economic relationship and the new tax treaty - the Convention between Australia and the Swiss Confederation for the Avoidance of Double Taxation with Respect to Taxes on Income and its associated Protocol - will strengthen this relationship.

The new treaty will update the existing bilateral tax arrangements between Australia and Switzerland, to align them with current Australian and international tax treaty policy settings. This is expected to further encourage bilateral trade and investment.

The new treaty will fulfil Australia's 'most favoured nation' obligations, contained in the existing tax treaty with Switzerland, to reduce its withholding tax rates on dividends, interest and royalties paid by Australian residents to Swiss residents.

The new treaty will also modernise the bilateral taxpayer information sharing arrangements and permit, for the first time, the exchange of taxpayer information for the purpose of preventing tax evasion. This greater transparency includes access to Swiss bank information that could help Australia better enforce its tax laws.

Maintaining a secure and sustainable tax system is central to the Government's efforts to repair the budget and, consistent with this objective, the information sharing arrangements provided by the new treaty will enhance the integrity of Australia's tax system. The new arrangements are also consistent with the Government's ongoing engagement with international efforts to improve tax compliance globally.

In addition to updating the rules that allocate taxing rights over certain income derived by Australian and Swiss residents, the new treaty will provide a number of benefits for taxpayers. These include rules to:

help remove double taxation of transactions between associated entities;
prevent the double taxation of fringe benefits provided to employees;
prevent tax discrimination against Australian and Swiss nationals; and
provide taxpayers with the option of referring unresolved tax disputes to independent arbitration.

The new treaty will enter into force following the last notification that both countries have completed their domestic requirements which, in the case of Australia, includes the enactment of this Bill.

The Bill will also amend the International Tax Agreements Act1953 to clarify the meaning of the term 'immovable property' for the purposes of both the new treaty and any future Australian tax treaties that also use that term.

This will align the term 'immovable property' with the Australian domestic law term 'real property', and provide for consistent treatment of income and gains derived from such property across Australia's tax treaty network.

Full details of the measure are contained in the explanatory memorandum.