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Tuesday, 24 March 1987
Page: 1428

Mr JACOBI(9.34) —The Australia Card is but another weapon in this Government's armouring in the perpetual war against tax cheats and those who rip off the social security system, or those who trample on our immigration laws. We knew from the outset that this attack would create controversy and the fallout would be diversity, but surely as a government we are obliged to put in place a tax system based on fairness and equity and to ensure that we extend benefits only to those who deserve them. Obviously the Government is faced with the need to balance that against any possible threat to civil liberties and privacy that could be created by the introduction of a universal identification system. Poll after poll has shown that this initiative is long overdue and there is wide public support. After all, the public has been taken to the cleaners for nearly 30 years. It clearly reflects the community's concern about tax cheats who have been protected by those opposite when in government, whose philosophy of tax reform was clearly predicted on the very simple dictum that tax was made optional for the rich.

Let me destroy some sacred myths revered by my friends opposite, who claim to be the custodians of our civil liberties and guardians of our privacy. It is sheer hypocrisy. I put one pertinent question: Where do they stand, for instance, on the issue of private data banks, particularly those relating to credit reference information? We are all aware of the massive growth of data bases in the private enterprise area. For example, banks routinely double check with other banks information given on loan applications, without customer approval. We are all aware of the two-way trading of credit information that occurs within the computer system.

The minority report of the Joint Select Committee on an Australia Card, referring to the question of technology, had this to say:

In short absolute privacy does not exist in a society which has up-to-date technology and accepts the use of that technology. If one is born, marries or begets children, if one buys or sells a house or land, if one borrows money, if one votes or receives an award wage, and if one pays tax, one is on a file somewhere and technology is already being used to draw those separate items of information together.

This Government's decision to establish a data protection agency to protect individual privacy against the misuse of government files is a step in the right direction. Similarly, logging access of the Australia Card Register is a new element in privacy protection. It will require a public servant wanting to see a person's Australia Card file to record each request, together with the reason for wanting that access. Access to the Register cannot be obtained until those requirements have been met. Professor Whalan of the Australian National University, a noted civil libertarian, said in evidence to the Committee:

Perhaps one irony would be that if we do have an Australia Card with all those protections . . . our privacy may be better protected than it is now.

When opponents talk about the capacity of criminals to defeat the challenge posed by the card, they forget one consistent trait of those who reap high financial rewards from all illegal activities. That trait is the compulsion to maintain a lifestyle commensurate with the rewards. Real estate is bought, legal investments are made and cash is generally converted to assets or investments, all creating a money trail that will be easy to follow with a universal identification system such as that proposed by the card. The Australian Taxation Office will then be able to link all sources of income to one number. My friend Commissioner Costigan put it perhaps more cogently when he said:

Criminals seek to possess wealthy homes, land, expensive cars, yachts and incur high living expenses . . . They may pay for much much by cash; but ultimately . . . they find the normal financial institutions far more convenient and seemingly no less safe to use . . . this leads to the creation of large accounts with many taxation vouchers. Once located, those vouchers provide a fertile source of intelligence to the investigator.

I say to honourable members opposite that we want to follow the money trail. That will take a lot of courage, physically and legislatively.

Mr Aldred —Costigan opposes the Australia Card because he believes it is ineffective.

Mr JACOBI —I disagree with him on that but I respect his opinion. Let me separate fact from fiction. We have not had too much fact tonight from the Opposition. In simple terms, the Australia Card is the medium on which a person's Australia Card number will be recorded. The card will be used in the verification of identity of all persons. That is the key to it. It will apply in the following: Opening and operating accounts with financial institutions; making investments; receiving income from cash management, property and unit trusts; receiving primary production income through produce agents and marketing authorities; receiving rents through real estate agents; making foreign remittances; buying real estate; operating safe deposit boxes; buying shares and receiving dividends; dealing in futures contracts; receiving salaries or wages; and receiving income subject to the prescribed payments system.

This measure is long overdue. The wage and salary earners in this country have carried the load for far too long. This measure will lead to greater levels of compliance with taxation laws by ensuring that persons cannot open accounts or transact business in false names. Evasion of tax by the use of accounts in false names is not limited to tax on interest received. The capital often comes from a taxable source. By reason of the card having to be produced when a person opens an account or continues an account beyond the second relevant day, the opening of accounts in false names will be blocked off. Existing identification procedures by banks have failed-I stress that-to prevent the widespread use of accounts in false names.

Other critical areas include the matching of information reports to the Tax Office. The card number will facilitate efficient matching of information received by the Tax Office with taxpayers' records. Information reported to the Tax Office is currently based on names and addresses. That requires significant resources to enable the matching of the information with returns of taxpayers. The problem in the area of information relating to interest, for example, lies not in ensuring that all interest payments are reported but in correctly matching reported interest payments with the returns of the taxpayers who derived interest. I do not know how many years I have been battling for that. Only about one-half of the interest reported to the Tax Office is correctly matched with taxpayers' returns. Matching problems arise not only because of accounts in false names but also because of spelling errors, transposition errors, use of abbreviated names, different forms of persons' names, common names, name changes and differing addresses. These problems can be overcome only by a unique identifier.

What are the alternatives peddled by Opposition members. One is to upgrade the tax file number. This was at best an innovative and shoddy alternative useful only to get them off the hook when they realised just how popular the Australia Card was in the general community. Another alternative peddled by the Opposition is the hullabaloo we heard tonight from every Opposition speaker of improving the Tax Office, making it `do its job'. I have been here quite a while. I suppose there is nobody in this Parliament who has done more to try to reform the tax system than I have in my humble way. For 30 out of the last 36 years the people opposite were in government and in the specific area of reform in the Tax Office the Opposition has a track record as barren as the Saraha Desert. It is an appalling record.

No doubt my friends opposite have applied their minds to the following messy and unpalatable alternatives to overcome tax evasion. Let us have a look at the proposal the Opposition has floated to some extent concerning the withholding tax system. It will be necessary to look at each category of income to which withholding tax arrangements could apply-for example, interest, the most readily adaptable of all categories of income-to a withholding tax system. However, there are still some problems to consider. For example, there would still be an incentive to evade tax unless tax was withheld at the highest marginal rate. I would like some discussion opposite on that. Extension of the withholding tax system to rental income would result in tenants being required to deduct tax from rent due to their landlord and to remit that tax to the Taxation Office.

As we all know, a withholding tax system presently applies in the case of salaries and wages and prescribed payments. However, the Australia Card will result in a further $142m tax being collected in respect of these categories of income. It has been estimated that the Australia Card program, when fully operational, will recover $724m which would otherwise be evaded. I refer to three components of that. For instance, it is anticipated that from accounts with financial institutions there will be a recovery of $190m; from business income, primary producers and rental income, $119m; and from employment, including the prescribed payment system, about $142m. What has not been touched on by many speakers tonight but what is of vital interest to many people in the community is that the Australia Card will be an invaluable weapon in the armoury against the appalling escalation of illicit drug trafficking in this country.

I wish to take a few minutes to quote an extract from a speech I made on income tax Bills last year. I say to my friends opposite that the Australia Card is nothing more than one weapon in the armoury against tax cheats but I say sincerely that what is needed in the whole area is a multifaceted approach. It is not just a question of tidying up the Tax Office; it is not just a question of putting an ID card in place; it stretches right across the whole judicial system and the legislative system. We have taken a long time in this country to get a Commonwealth evidentiary Act. It is one of the weaknesses of the system. We ought to have a special division of the Federal Court to deal with breaches of commercial law.

Mr McGauran —Why?

Mr JACOBI —That is a very interesting question. In this country there has been an appalling record of dealing with pin-stripe crime in the corporate area.

Mr McGauran —But the courts have dealt with it.

Mr JACOBI —Have they? I shall give a classic example. I remember when the collapse of the Cambridge Credit Corporation Ltd took place 11 years ago. We say that the laws are in place. It has taken us more than eight years to get a common accounting standards procedure. We are still struggling to get that.

Mr McGauran —But it is not the courts.

Mr JACOBI —It is the laws.

Mr McGauran —Yes, it's the laws, not the courts.

Mr JACOBI —State courts invested with Federal jurisdiction, judges that sit on complex commercial fraud cases, are not really skilled to deal with complex fraud cases. That is one of the reasons why the banks in England went to the Government and asked the Roskill committee to look at the problem of spivs and charlatans ripping off the system because the court system could not cope with it. There is a lot of discussion in this country on the need for what we are talking about tonight. We need a multifaceted approach. We need effective legislation at a Federal level to deal with pin-stripe crime. We will not do that with the current co-operative system that is based on the lowest common denominator approach.

There was an appalling spectacle with Cambridge Credit 11 years ago-the biggest corporate collapse that I can remember in recent years. It has taken the Corporate Affairs Commission in New South Wales 11 years to put its act together. Three weeks or a month ago we saw the appalling spectacle of a judge-I would not criticise the decision-ruling the case out on the basis of the 11 years it took the Corporate Affairs Commission to compile the case against the directors of the company. I think that is a travesty of justice. We cannot do much for shareholders in Cambridge Credit, but surely we have an obligation to protect debenture holders and creditors. There is a whole stream of cases in this country which we have failed to do anything about at a Federal level. My view is that the sooner we bring in Federal legislation in the companies, securities and takeovers areas and the futures market, the sooner we will bring stability to the system and stamp out a whole variety of rorts and ramps in it.

Getting back to the identity card, why do we always demand accreditation from those who go to social service offices to get social service benefits? Why do we always put stringencies on the poor, but never demand accreditation from the rich? I could never understand that. I do not know for how many years we have tried to get bank regulations tightened up to ensure that every person pays his reasonable level of tax. We have had nothing but struggle with the banks, for as long as I have been here, to update regulations and make them more effective. The one thing that will make them more effective is matching between the two groups, the Australian Taxation Office and the banks. We will have to come around to that. I hope that we finally get it. The answers provided to questions on the Notice Paper the other day shows that at least we have come some of the way.

Insofar as opposition to this card in this Parliament is concerned, tax evaders, welfare cheats, drug traffickers and illegal immigrants will applaud the Opposition from one end of the country to the other. But the ordinary taxpayers and the honest citizens of this country will regard the Opposition with the contempt it deserves. For far too long the taxpayers, the ordinary wage and salary earners, have carried the burden. The fight in the community about tax reform is squarely about the question of tax equity. For as long as I have been in this Parliament the philosophies of the conservatives have been predicated on one simple dictum: They believe in reform, provided it changes nothing. They are great on tax reform but very weak on specific tax reform measures. I have a very simple dictum that I apply to tax reform, which has stood the test of time well. My friends opposite have never liked it. I have always believed in the very simple dictum: To afflict the comfortable and comfort the afflicted. It is with pleasure that I support this legislation.