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CONTENTS
Passage History
Purpose
Background
Main Provisions
Concluding Comments
Endnotes
Contact Officer and Copyright Details
Appropriation (East Timor) Bill 1999-2000
Date
Introduced: 25
November 1999
House: House of Representatives
Portfolio: Finance and Administration
Commencement: Royal Assent
To appropriate $920 million from the
Consolidated Revenue Fund (CRF) in 1999-2000 for expenditure
associated with the support of Australia's military and civil
operations in East Timor.
Australia and East
Timor
The issue of the status of East Timor has been
of longstanding interest in Australia. Indonesia invaded the
territory in December 1975 and incorporated it as its
27th province in July 1976 but Indonesian rule was never
fully accepted and the ensuing conflict between the Indonesian
armed forces and resistance forces involved very heavy loss of
Timorese lives.
The resignation of President Soeharto in May
1998 opened the way for new approaches to the East Timor issue. On
27 January 1999, President B.J. Habibie's government announced that
Indonesia would now agree to an act of 'popular consultation' and
that if the East Timorese rejected an offer of autonomy within
Indonesia, the path would be cleared for independence. On 5 May
1999, tripartite agreements were signed between Indonesia, Portugal
and the United Nations to provide for a ballot, originally
scheduled for 8 August, but later put back to 30 August. Under the
agreement, a United Nations Mission in East Timor (UNAMET) was to
be established to organise a ballot but security was to remain the
responsibility of Indonesian forces.
From early 1999, a series of armed,
pro-integration militia groups expanded their activities, with
assistance from elements of Indonesia's military forces. The ballot
on 30 August resulted in a participation rate of over 98 percent of
registered voters of whom 78.5 percent rejected the autonomy offer
and effectively chose independence. The declaration of the results
on 4 September was followed by serious violence, in which many East
Timorese were killed, mass destruction of houses and other
facilities took place and over 230 000 people were deported, mostly
to West Timor, in many cases against their will.
The violence after 4 September prompted
Australia to lead efforts to organise an international force to
enter the territory to restore order and protect the population and
UN operations. On 12 September Indonesia consented to such a force
and on 15 September the UN Security Council voted unanimously to
establish an International Force for East Timor (INTERFET). The
force entered East Timor from 20 September under the command of
Australia's Major-General Peter Cosgrove. Under the terms of
another Security Council resolution adopted on 26 October, INTERFET
is to be replaced by a new multinational force as part of the
United Nations Transitional Authority in East Timor (UNTAET) which
is expected to be in operation in early 2000.
Australia has committed over 5 000 personnel to
INTERFET but its commitment to UNTAET is expected to be reduced to
about half this amount. Australia has incurred significant costs in
the East Timor commitment to INTERFET and is also contributing to
reconstruction effort in East Timor.
Estimates of the costs for Australia of efforts
to assist East Timor were provided by Prime Minister Howard in his
Ministerial Statement of 23 November 1999. The total East Timor
budgetary costs were given as $AUD 1028 million for 1999-00,
$AUD1089 million (2000-01), $AUD901 million (2001-02), and $AUD665
million (2002-03), constituting a total for 1999-00 to 2002-03 of
$AUD 3683 million.
Defence Issues
On 23 November 1999 the Minister for Defence
announced(1) that the number of combat ready infantry battalions
would be increased from 4 to 6 and as a result the Army's combat
strength would increase by 3 000 to 26 000. The additional strength
was regarded as necessary to ensure that Australia would be able to
maintain its commitment to:
-
- INTERFET
-
- UNTAET
-
- Sydney Olympics
-
- the Bougainville Peace Monitoring Group, and
-
- a rapid deployment capability.
In relation to INTERFET, the increase in combat
ready personnel was regarded as necessary to allow the rotation of
troops in the deployment. The new combat ready battalions will be
based on the existing:
-
- 6 Royal Australian Regiment (RAR), which will receive an
additional 350 personnel, bringing its strength to 706. When
combined with support units, the battalion group will have a
strength of approximately 1 200 and is expected to be ready for
deployment by the end of February 2000, and
-
- 4 RAR which will be the basis of a battalion group of
approximately 1 100 personnel and be ready for operations in June
2000.
The additional battalion groups will remain
combat ready for 2 years 'while the longer-term size of the
infantry force will be addressed in next year's Defence White
Paper.'(2)
Department of Defence: Clause 3
will appropriate from the CRF $860 million for 1999-2000 for
expenditure incurred before 1 July 2000 in relation to the
deployment of forces to East Timor and the additional forces to
support that deployment.
Australian Agency for International Development
(AusAid): $60 million will be appropriated from the CRF for
1999-2000 for expenditure through AusAid in the humanitarian,
reconstruction and development needs of East Timor and to support
the operations of UNTAET. The maximum amount that may be used for
departmental expenses, the acquisition of assets or the payment of
liabilities will be $728 000 (clause 4).
Clause 5 provides for an
advance of a maximum of $175 million to the Finance Minister for
the purposes contained in clauses 3 and 4 if the
amounts appropriated by those clauses prove insufficient. The
Minister must give Parliament details of any amounts advanced under
this proposed section.
While this Bill deals with the appropriation of
funds for operations in East Timor, the other side of the account
is the so called 'East Timor levy' which was announced by the Prime
Minister on 23 November 1999. The levy, which can be more
accurately classified as a tax increase, will apply for one year
from 1 July 2000. The levy will be at the rate of 0.5% for
individuals receiving assessable income above $50 000 per year and
1% for individuals with assessable income above $100 000 per year
(both thresholds will be subject to minor phasing-in). The increase
will be implemented through legislation to amend the Medicare
Levy Act 1986.
As the Medicare Levy was introduced to assist in
paying for the universal health insurance scheme (the levy does not
fully fund Medicare) it applies principally to natural persons and
not to most other entities, such as companies. As a result these
entities will not be liable for the increase in tax to support
Australia's efforts in East Timor regardless of their income. In
view of the Prime Minister's attempts to encourage greater business
philanthropy,(3) it will be interesting to see the level of
voluntary contributions made by such bodies.
Other equity matters that have been raised in
relation to the proposed levy (tax) increase include:
-
- The position of single income households relative to double or
more income households. For example, a household in receipt of two
incomes of $45 000 each will not be liable for the increase while
one with a single income of $55 000 will be (although this aspect
is prevalent in the current tax system where, in the above example,
the two income household would receive the benefit of two tax free
thresholds and lower marginal rates).
-
- For those in receipt of an assessable income of more than $50
000 the originally announced reduction in marginal rates forming
part of the GST package were reduced prior to that legislation
being passed and will be further reduced by this measure. However,
as reported by Ross Gittins, the median income is $37 000 per year,
so that an income of $50 000 a year places a recipient in the top
20% of taxpayers, while an income of $100 000 per year places the
recipient in the top 5% of taxpayers,(4) and
-
- The Medicare Levy is based on assessable income so that those
with a method of reducing their assessable income, eg through
deductions based on negative gearing while they acquire a capital
asset, may not be subject to the increase. As noted in the
Treasurer's Press Release of 25 November 1999, those in
receipt of fringe benefits are in the same advantaged position as
fringe benefits are not included in the calculation of assessable
income. In this regard, the Treasurer's Press Release
states: 'The government considers that the arrangements for the
levy as announced are fair.' (Again, this matter reflects the
current structure of the income tax system.)
The use of the Medicare Levy to finance projects
not connected with the provision of medical treatment can also be
regarded as misleading and, if it is to become more common as the
recent gun buy-back and this measure suggest, an alternative method
of increasing tax should be found. The obvious alternative would be
to increase the rates of tax contained in the Income Tax Rates
Act 1986, which would have the advantage of enabling the rates
to be increased for all classes of taxpayers, and not just
individuals. Both methods require legislative changes that are not
complex and, due to the wider range of taxpayers covered by the
alternative method, it can be argued that this would be more
equitable within the constraints of the income current tax system.
A further alternative would be to introduce a separate levy that
could be used for temporary tax increases. Such a levy could remain
on the statute books and only be activated when spending currently
funded through temporary increases in the Medicare Levy are
desired.
-
- Minister for Defence, Media Release, 23 November 1999.
- ibid.
- See The 1999 Corporate Affairs Oration, presented by
the Prime Minister to the Centre for Corporate Public Affairs, 26
March 1999 and Joint Press Release, Prime Minister,
Treasurer and Minister for Family and Community Services, Federal
Tax Measures to Encourage Philanthropy.
- Ross Gittins, The Sydney Morning Herald, 1 December
1999.
Chris Field and Frank Frost
7 December 1999
Bills Digest Service
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ISSN 1328-8091
© Commonwealth of Australia 1999
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