SENATE

Thursday, 13 October 2016 SENATE 39
The new Agreement will enter into force following the enactment of this Bill.
Senator GALLAGHER (Australian Capital Territory—Manager of Opposition Business in the Senate)
(12:46): I rise to speak in support of the International Tax Agreements Amendments Bill 2016. This bill seeks to
give force of law to the tax treaty signed by the Australian and German governments on 12 November 2015 by
amending the International Tax Agreements Act 1953. The intention of the treaty is to reduce barriers to bilateral
trade and investment between Australia and Germany, particularly in relation to taxation issues. It seeks to
achieve this by reducing source-country taxes on cross-border payments of dividends, interest and royalties. It
also seeks to facilitate the exchange of information and mutual assistance in the collection of outstanding debts.
Doing so will encourage a further expansion of trade and capital exchange between our two countries.
As noted in Treasury's evidence to the Joint Standing Committee on Treaties, our existing tax treaty with
Germany, signed in 1972 and in operation since 1975, is Australia's oldest unamended tax treaty. By all measures
we now live in markedly different times. This is particularly true with regard to how Australia engages
economically with the rest of the world. But it is also true that this engagement involves increasingly complex and
sophisticated arrangements in international trade and taxation.
For contrast, when the original treaty with Germany was signed in 1972, Australia's population had only just
nudged over 13 million people and our estimated GDP was $51 billion. State-owned banks proliferated, our
exchange rate and wages were set centrally and high tariffs insulated our domestic market, in an economy where
agriculture and industry predominated. But in 1972 we were also seeing the foundations of a radically different
Australia being laid. The recently elected Whitlam government was sweeping away the last vestiges of the White
Australia policy, and, in a move that would have far-reaching consequences for our economic future, our
government formally recognised the People's Republic of China.
Fast-forward to 2016, and Australia's population has close to doubled, with more than 24 million people. Our
economy, now dominated by services, has grown to $1.6 trillion, and the focus of our trade has shifted to the
Asia-Pacific region. If one fact typifies the radically transformed nature of our economic relationship with the
world since that time, it is that, since starting with virtually no two-way trade in 1972, China has grown to become
our largest trading partner by a clear margin, with more than $140 billion in two-way trade in 2014.
Acknowledging that we now live in a very different world, it is important that the Commonwealth is prepared to
modernise our tax and trade relations with the rest of the world. This bill would give effect to that, updating and
modernising the arrangements between Australia and Germany and bringing our bilateral tax arrangements into
the 21st century.
Germany is an important trade and investment partner for Australia. Indeed, it is one of our top 10 trading
partners, with just shy of $17 billion in two-way trade in 2014, according to figures from the Department of
Foreign Affairs and Trade. Germany is also a very important destination for Australian investment. It may
surprise some in the chamber to learn that Germany is actually the fifth-largest destination for Australian
investment abroad, with outbound Australian investment in Germany valued at $65 billion in 2014. A range of our
largest Australian companies have a significant footprint in Germany. Sonic Healthcare and CSL Behring, both in
the advanced medical sector, employ about 7,000 people in Germany. Australian superannuation funds and
investment firms similarly have a broad range of interests in Germany, from electricity transmission and wind
farms to internet start-ups.
The new provisions in the treaty broadly follow the OECD's Model Tax Convention on Income and on Capital
and, in doing so, broadly reflect current Australian and international tax policy settings. Importantly, in evidence
to the Joint Standing Committee on Treaties, officials from Treasury stated that there was nothing within the
agreement that prevents either Australia or Germany from enacting domestic laws related to tax evasion or
avoidance. Labor welcomes that the agreement also establishes a framework to address international tax evasion
by allowing the exchange of relevant information and enabling mutual assistance in the collection of outstanding
tax debts.
While the government is talking up the elements of this treaty that address multinational tax avoidance, it must
be noted that the government stubbornly refuses to close tax loopholes and increase transparency in Australia. We
support the modest measures contained in this bill, but we remain convinced of the need for additional action by
the Australian government to crack down on multinational tax avoidance—and we certainly welcome the
unprecedented support in the House yesterday for our second reading amendment calling on the government to
explain why it has failed to close tax loopholes and increase transparency in Australia.
Ultimately, Labor supports trade and investment between Australia and the rest of the world because, done
fairly and sustainably, it helps generates economic growth, creates jobs, improves living standards and reduces
CHAMBER