The parliamentary House Economic Committee has failed to reach a bipartisan decision on amendments to the Australian tax system, including an increase in the managed investment trust (MIT) withholding tax.
In lieu of a joint decision, committee members were forced to deliver two separate reports on the issue.
While Labor members of the committee took into account the reservations industry stakeholders put forward regarding the negative impact an increase in the MIT from 7.5 per cent to 15 per cent would have on foreign investors, the committee held steadfast to the government’s proposal.
“The committee noted that the industry sector was concerned about how the change would affect it,” Labor member for Parramatta Julie Ann Owens said in her final report to government on the matter.
“However, the committee accepts the government’s argument of the wider macroeconomic importance of Australia having a sound fiscal strategy, an important driver for the whole economy.”
Opposition members of the committee, lead by member of parliament Steven Ciobo, said the increase placed the investment reputation of Australia at risk.
“Both investments made, especially in infrastructure, and the reputation of Australia as a safe and stable place will now be placed at risk because of the facilitation of the government,” Ciobo said in the opposition’s dissenting report.
“Taxpayers who made a sound effort to comply with the prevailing law as it was when they entered into financial arrangements are particularly affected.
“In submissions made to the committee there were instances of entities that, with these changes in place, may not have entered into financial agreements outlined.
“Fundamentally it is a function of the mismanagement and, in our view, incompetence of the government that only serves to encourage the lack of certainty that already plagues public confidence.”
Under measures in the 2012 federal budget, the government announced it would lift the withholding tax rate applying to distributions from managed investments to residents of a country that Australia had a tax information exchange agreement with, from 7.5 per cent to 15 per cent.
Last month, the House of Representatives referred changes to the Income Tax (Managed Investment Trust Withholding Tax) Amendment Bill 2012 to the house economics review.
