Foreign Acquisitions and Takeovers Fees Imposition Amendment (Fee Streamlining and Other Measures) Bill 2017
Tuesday 20 June 2017
Foreign investment over the last two centuries has been important to Australia's economic prosperity. In the 19th century, foreign investment helped to build our wool industry. In 1855, CSR's investment helped to build the sugar industry. In 1877, we saw the United States firm Schweppes set up in Australia, followed by Kraft and Kellogg's. Indeed, Kraft's purchase of Vegemite in 1935 probably helped make that product the success story that it is.
There have, of course, been periodic controversies over foreign investment: the role of the Vestey family; the controversy over the withdrawal of foreign investment from Adelaide, with the former Treasurer, the then member for North Sydney, goading Holden to 'put up or pack up'. We have seen, under this government, a somewhat schizophrenic attitude to foreign investment. They continue to occasionally speak up about the benefits of foreign investment. But then, when Archer Daniels Midland made their bid for GrainCorp, for the first time a major United States foreign investment bid was blocked by then Treasurer Hockey. Australia's rules around foreign investment, compared to the OECD, are relatively restrictive. One index of foreign investment compiled by the OECD ranks Australia as the fifth most restrictive jurisdiction within the OECD for foreign investment.
This bill streamlines fees for foreign investment and Labor will be supporting the bill. It modifies a series of fee increases due to indexation, it creates new fee tier structures and there is some simplification of existing fee tier structures. The government claims that these changes will better align fees payable with consideration paid for the relevant acquisition. The government also claims that differing fees for different transaction categories have created complexities and caused delay in ascertaining the correct fee. For example, some acquisitions, such as agricultural land, are subject to multiple-tiered fees while others, such as business acquisitions or the acquisition of a mining or production tenement, are subject to flatter fee tiers.
The government notes in the explanatory memorandum that a number of low-value transactions are subject to fees disproportionate to the value of the transaction. The explanatory memorandum to the bill further states that amendments to streamline and simplify the commercial fee framework will not apply to the framework for residential property. But there are amendments that increase residential property fees, said to fund the implementation of the Critical Infrastructure Centre. Overall, the changes are broadly revenue neutral, with the cost to revenue of around $400,000 over the forward estimates.
While Labor supports this bill as it is somewhat of a simplification of foreign investment fees, we note that the government's history in this area has been one of increasing complexity. I spoke in this place on 16 September 2015 about the Foreign Acquisitions and Takeovers Legislation Amendment Bill, a bill which, as Senator Wong pointed out, had an exposure draft and regulations accounting for more than 170 pages and a 105-page explanatory guide. Indeed, one of the Minister for Trade's own investment specialists said:
… the new fees have fuelled the narrative around Australia being a high-cost destination to invest in.
The Office of Best Practice Regulation noted of that bill that the new red-tape burden that was being imposed by the government had been imposed without proper assessment of the regulatory burden. That is why those changes were criticised by the Business Council of Australia, the National Farmers' Federation, the Food and Grocery Council, the Queensland Farmers Federation and the Chamber of Commerce and Industry of Western Australian.
The government still maintains a plethora of screening thresholds—some 22 different screening thresholds, differing according to value and type of investment and the nationality of the investor—and 33 different levels and categories of application fees. This bill simplifies those application fees somewhat, but it does not simplify the differences in screening thresholds, which see, for example, a half a million dollar investment requiring scrutiny if it is to come in under one nationality but not under another. That level of inconsistency across our foreign investment laws does little to provide the reassurance that Australians seek that foreign investment is in the national interest. Australia has traditionally been a net importer of capital. It is what has allowed us over much of the past two and quarter centuries to consistently do more investment in Australia than our national savings would allow. Were foreign investment to dry up, Australians would have to consume less or invest less, and neither are those are choices that a capital-hungry nation seems eager to make.
If we are to have a better debate around foreign investment, it is important that we have greater transparency. The Deputy Prime Minister promised a transparent register of agricultural land but has delivered instead a collection of statistics on agricultural land. The government's plethora of screening thresholds and their willingness to turn away a United States foreign investment bid in GrainCorp have indeed raised concerns.
While we on this side of the House do support this modest simplification measure, we believe that there is more that can be done to ensure that the protections around foreign investments on issues of national security and other matters of national interest are protected and that there is not an unnecessary regulatory burden. Unnecessary regulatory burden does nothing to support Australian interests and does too much to increase the cost of investment for foreigners. As we increase the cost of those investments through unnecessary red tape, invariably we decrease the quantity of investment in Australia. Foreign investment has the potential to significantly boost Australian living standards and it is through that prism that Labor supports this bill.