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Thursday, 14 May 1987
Page: 3274


Mr BRAITHWAITE(9.24) —The honourable member for Streeton (Mr Lamb) not only used the wrong arguments in his contribution but also referred in his analogy to the wrong football code, so he stands doubly condemned. We have heard so much tonight about tax reform, equity and everything else. This great debate started at the National Taxation Summit, where decisions were made and propositions were put by the Treasurer (Mr Keating) and others. What came out of that tax reform summit is hotch potch. Band-aid remedies have been applied. That Tax Summit was a lost battle for the Treasurer for two basic reasons. Firstly, the Tax Summit denied that tax expenditures were a vital part of tax reform. The Government still does not understand that argument. Secondly, the union power in the long run determined the tax package that we were to have. What happened there was an absolute failure by the Treasurer.

Mention has been made of what effect this raft of legislation will have on business. Before we talk of tax rates, let me say that compliance with this whole tax package has put a mammoth cost on business. If honourable members do not believe me, they should just look at the increase in the size of the Income Tax Assessment Act from the time of the Tax Summit until now and they will realise that it is more complicated, it is inequitable and it is a nightmare. The only persons who have profited from this arrangement have been the public accountants throughout Australia, who have been given an unlimited amount of work for the rest of the time they will practise. I will deal with that aspect later.

How can the Government say that there is equity when tax rates are being increased from 46 per cent to 49 per cent and when businessmen are affected by that increase, in addition to the fringe benefits tax? I know that the argument has been used here and everywhere else-to the extent that the Treasurer now firmly believes it-that what the Treasurer did was equitable. But people should refer back to the time when he first made the announcement about a fringe benefits tax, when he said that the fringe benefits tax would be paid by employees. I remember his making that statement in January 1985. Within a day the unions had told him that that would not be the case and the following day the Treasurer turned around to say that the fringe benefits tax would be imposed on employers. Nobody in this House can tell me that we can upset common law, the canons of tax practice which have been in existence in British law for hundreds of years, by making one person pay tax on another person's earnings. That is what the fringe benefits tax does. Where is the equity of a capital gains tax at 49c in the dollar? Because of the abolition of negative gearing, a proper business cost is not allowed. There is nothing fair in this legislation. The cost of compliance with it is absolutely astronomical, which is something the Australian Taxation Office and the Government do not take into account.

A lot has been said tonight about imputation. I just want to mention a few things. I acknowledge that the provisions of Division 7 will go out of the back door. It is something that the previous Government worked on, although I must say probably not fast enough.


Mr Robert Brown —And did nothing.


Mr BRAITHWAITE —I did something. I am sorry, but that interjection is quite ill-informed.


Mr Shack —And totally wrong.


Mr BRAITHWAITE —It is totally wrong. The limit in respect of Division 7 taxation was raised from 50 per cent to 80 per cent. Why we did not take the other 20 per cent off, I am not quite sure. But something was done. I also add that the previous Government worked on the double taxation of dividends by allowing a $1,000 dividend income credit for tax purposes. What was the first thing that this Government did when it came to office? It wiped that; it removed it. So Government members should not come in here and tell me what was done, what was not done, what is fair and what is not fair. What they say is not quite true. I am glad for the intervention that was made by the honourable member for Charlton (Mr Robert Brown). I thank him very much. He should stay there-he might learn a bit more.

I do not want to mention much more about imputation, but it is a fact that as a result of imputation and the franking credits there will be a windfall to the Government from the institutional investors who do not pay tax on their dividends at the moment. I understand that they represent 20 per cent of investment throughout Australia in companies. There are other occasions when those credits will be forgone to the taxpayer and the windfall will again be to the Government. Perhaps the Government may care to quantify that amount before it starts making its rash argument that the system costs the Government so much, that the Government is giving away so much and getting only so much back in return. I just remind everybody that a taxpayer's dollar is a consumer dollar. It is a consumer dollar that will be forfeited to the Government, which will keep spending more and more and demanding more and more in tax revenue. Let us not hear about what the Government is forfeiting; let us think for a moment about what the taxpayer is forfeiting in return.

I just want to mention log-books because, after many months of turmoil within private enterprise, it has now come to the attention of the Government that the substantiation effort that was to be put into keeping log-books by the self-employed just will not work. Advice was not taken initially and, at long last, because of pressure that was evident right from the beginning, the Government caved in. One had to consider the practicality of a log-book having to be kept in the car, with the owner having to record various items. I have had to do these things myself. It is not something that comes naturally; it involves effort that costs both money and time.


Mr Cobb —Nine entries each time.


Mr BRAITHWAITE —Yes, nine entries each time, and that certainly applied to the record I kept. It is not easy, when one's wife attends to electorate duties on one's behalf and uses the car, to prevail upon her and to ask her to keep a record in the log-book, too. Therefore, the cost of compliance has not been taken into account. In regard to substantiation, one has to consider the fringe benefit aspect in respect to the use of a car. In my own case the effect of the fringe benefits tax has meant that many privileges given in the normal course of work to employees have now been withdrawn. The fringe benefit tax is paid irrespective of whether a company makes profits. Some companies I know have no profit, yet they are asked to pay fringe benefits tax. Therefore, they have had to reduce the benefits they make available to employees and consequently the employees are out of pocket.

Let me turn to the subject of audit, a matter that is close to my heart. It is a pity that the Treasurer is not here to listen to my criticisms, but I presume that those who are advising him in this House will take note of my remarks. Section 263 of the Act relates to the reasonable use of an office. I understand that the Full High Court held on one occasion that the Australian Taxation Office did not have unlimited entry to property. Therefore, the Government has sought to ensure that the legislation allows the authorities access to an office. I do not believe that the Government will not apply the same draconian penalties in pursuit of the Taxation Office's normal activities in this regard, too. I ask what is the meaning of the provision in the legislation which reads:

The occupier of a building or place entered or proposed to be entered by the Commissioner, or by an officer, under subsection (1) shall provide the Commissioner or the officer with all reasonable facilities and assistance for the effective exercise of powers under this section.

I have never yet heard of a man condemned to an audit having to pay for the cost of his execution. This is basically what the Taxation Office is implying in this provision.


Mr Cobb —Criminals do better than taxpayers.


Mr BRAITHWAITE —Yes, criminals will do better than taxpayers in this regard. The Taxation Office has long lost sight of the fact that those whom it is persecuting in this regard are not criminals, not those who provide the underground economy, but they are basically honest taxpayers, the people who are paying the salaries of officials in the Taxation Office. As a matter of public relations, I feel that section 263 of the Act should be repealed. This would allow the Taxation Office to deal with the ordinary taxpayer on a decent basis. If I may go a step further, I believe that the first point of contact in an audit should not be with the taxpayer at 7 or 9 o'clock at night or with the taxpayer's wife under threat, but with the tax agent at the address to which notices should be sent.


Mr Cobb —The professional end of it.


Mr BRAITHWAITE —At the professional end, yes. How many times has a tax inspector-many of them do not know the practicalities of what they are doing-arrived at a taxpayer's office and, under threats or bluff, extracted information, with the result that the taxpayer has probably paid sums he or she should not have paid? I believe that personal or even legal representation should be available in the case of audits. It is time that the Taxation Office gave more consideration to taxpayers and also to public accountants. I mention public accountants as that was my previous profession. At the time I practised I was under a lot of pressure because of demands by the Taxation Office. Eleven years later, the type of pressure being used can only be described as Gestapo tactics. Tax agents in this country have had a double work load forced upon them. In my city of Mackay one person has left the profession by taking early retirement and another has left the profession to go and lecture university graduates who may go on to become tax inspectors. That is a high fatality rate in a city such as Mackay but it has occurred because of the pressure being exerted on public accountants at this stage. They are being harassed by nothing short of Gestapo tactics. As far as they are concerned, it is not a matter of crashing or crashing through, it is a matter of trying to get public relations into a little more order, instead of using the present bloody-mindedness. I say that with all sincerity. Until the Taxation Office starts treating the taxpayer as a client and not as a criminal, this type of reaction will continue.

I will outline a case which was brought to my attention by a tax agent recently. A series of audits were being conducted, not through the tax agent's office but directly with the tax agent. It was suggested to me that the agents picked a very nice part of the north coast in the winter time and were prepared to pay for the accommodation of the tax inspectors who were able to enjoy a leisurely holiday on the coast while they were supposed to be engaged in a tax audit. I could mention many other matters. As far as I am concerned, it is not a question of `do as I say'; it is a question of `do as I do'. If the Taxation Office does not want this type of reaction from taxpayers to continue, it is time that it started to respond to the requirements of tax agents and taxpayers.

I remind the Treasurer and the Commissioner of Taxation of a letter I wrote asking for particulars of the travel allowance for members of Parliament which, after five months, has not been answered. I believe that that is a gross inefficiency in an office that is practising reverse tactics. How could the Commissioner penalise a taxpayer, who was in credit, for the late lodgment of his tax return, when he allowed the Treasurer, who did a similar thing, to get off scot free? The Treasurer has a lot to explain. How can he say that the taxation system that is practised in Australia today is fair and equitable and that Australians are treated equally?