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Thursday, 20 March 1997
Page: 2666

Mr TONY SMITH(11.28 a.m.) —In rising to speak on the Tax Law Improvement Project Bill, I say that there is a fairly hackneyed phrase that there is nothing more certain in life than death and taxes. What should be tacked onto that phrase is that nothing has been more certain in recent years than continuous additions to the Income Tax Assessment Act. The phrases that have been used expansively and colourfully over a number of years are certainly very appropriate. I am indebted to the member for Curtin (Mr Rocher) for some remarks that he has made. In general, I agree with what he says. He did speak about the need for bipartisan support for tax reform. I endorse that sentiment wholeheartedly. Indeed, I commend the initiatives of the member for O'Connor (Mr Tuckey) in trying to get an all-party committee together to address this situation.

But always lurking in any initiative of that kind are the opportunistic in the community, particularly on the other side of politics, but it is not necessarily confined to the other side either if a situation arises. However, in recent times the opportunistic approach has been confined exclusively to the other side. The Leader of the Opposition exemplified that during the Western Australian election campaign when he suggested, in a somewhat contorted fashion, that the Western Australian government was trying to implement some sort of GST. Yet again, the initiatives that need to be taken are constantly being mired by opportunistic politicians, particularly in the opposition.

The comments by the honourable member for Curtin (Mr Rocher) about treating the symptoms rather than effecting a cure are very appropriate. The failure of fundamental reform has spawned the burgeoning act. The burgeoning act did not come about because of technical problems; it came about because of the underlying problems. In fact, the feet on the act have never really been properly addressed. It is the top-heavy nature of the act that is constantly being played with: it is rickety, it is rumbling and it is falling. Consequently, although this piece of legislation does go some way in the right direction to try and redress some of the problems, the underlying problems are the ones that ultimately must be addressed because they form the base upon which the act is erected.

The comments by the honourable member for Curtin are relevant to consider in relation to the need for professional assistance and I will do that shortly. Not only is there the need for professional accountancy assistance to about 70 per cent of the population but frequently taxpayers have to seek counsel's advice, in addition to their accountant's advice, because the accountants cannot provide the sort of advice necessary in some areas because of the complexity of the act. So that tacks on an additional cost.

The act, as has been said in the parliamentary secretary's second reading speech, is on the verge of collapsing under the weight of constant piecemeal amendment. It is true that the rewrite will make the act more user-friendly, more understandable, hopefully shorter, clearer and less burdensome. The amendments include the rewrite of assessable and exempt income, deductions, trading stock, depreciation and gifts. Other rules included in the bill are entertainment expenses, primary production deductions, the recoupment of deductible expenses and the sale of leased cars.

There are about 30 minor policy changes. I need not go through those in whole other than to mention references made to replacing impractical rules with ones which facilitate taxpayer compliance, the simplification of rules, deleting of unnecessary rules, the removal of anomalies and clarifying of ambiguities.

The valuation methods for livestock will bring them in line with those for other kinds of trading stock. The change will have a revenue cost of up to $10 million in most years, and over $25 million in the occasional year where there is a large fall in stock prices. The proposed change in the use of trading stock taken for personal use will result in a gain to the revenue of about $30 million in 1998-99 and $25 million in each subsequent year.

When I was studying taxation law in 1980 I can remember carrying around a CCH version of the act but I needed a reasonably strong wrist to do so, and the paper was not much thicker than rice paper at that time. Having observed a very strong table on which my accountant's Income Tax Assessment Act sits, and being reminded that he needs to take weight lifting lessons to carry it around, one can see and feel the enormity of the problem. I would hate to be a law student trying to wield that act between lecture theatres. I am told by a law student that in 1994 at the QUT the sections of the act that the students used—it was just too heavy to carry around—were about the same size of the act that I was using. That was not the complete act—the relevant sections that they were focusing on in their studies were a microcosm of the act itself. If only those sections were relevant to a law course, it makes me ask the question as to what use the other sections were to the public, but that is probably another manifestation of the great debate about the Income Tax Assessment Act.

It is interesting that the complexity of the act is causing more and more members of the public with taxation problems which, on the face of it, are relatively easy, to resort to the assistance of an accountant. Yet again you can see an anachronism in that sort of approach. People have to go to their accountant, they are in effect taxed again—they have to pay a fee to do that, so that is a form of tax out of their money—and then they get a deduction for doing so. So the revenue is depleted by that very complexity. Then you see the seeds of the problem.

Why are we not looking at a situation where the tax rate is dropped and there are no deductions? Would that not make it easier for everybody? We would probably drop half the act in the process and we would drop the necessity for all of this resort to advice and professional assistance. Maybe it is too simple, but it seems an obvious way of addressing the problem: take out the deductions and drop the tax. In the process, we would eliminate much heartache and anguish, the problems that go with that, the resentment that is felt by the community and the resorting to tax avoidance.

Sure, we are always going to have people who will try to avoid tax. But when you are looking at compliance costs, when you are looking at the keeping of records and so forth, you realise that all of that impacts on the Australian community. All of that hurts small business. All of that, in my view, is grinding our economy in a negative direction when we should be looking at turning it in a positive direction. We need to do that by the simplification of our tax laws. I say again that this is a step in the right direction but we certainly need to go much further.

I can recall the Tax Pack in the 1970s being a couple of pages. Look at it now. The Tax Pack is now an enormously complex document in itself, for some people. Admittedly it is a question of time for many people, but I would not fancy having to go through the Tax Pack to see precisely where I, as a taxpayer, am at with it. When one looks at the reasons for the complexity, one could spend a long time in this debate. Let us, however, look at the methodology in calculating depreciation, as just one example.

We are, in effect, so concerned with deductions that we are losing sight of what the act should be doing. It is there to make a simple, just, fair and equitable collection for income tax, and to provide a system that will assist the community in developing an economy that is generating income, employment, adventurism in decision making and an entrepreneurial spirit, not stifling it—not providing the plethora of rules and regulations and exceptions that stifle the movement in the economy that is needed to get the country going.

While again I emphasise my support for the proposal in principle, as one that will get us one step along the way, I shiver at the thought that it is one step in a 25-year process, as the member for Curtin mentioned. I do think that, with the enormous support in the community, right through from practising accountants to ACOSS itself, the messages are there. They can no longer be ignored; we can no longer fudge the issue. We have to tackle tax reform. We have to have bipartisan support. That is why the initiatives of the member for O'Connor are to be commended.

In essence, I support these measures. I hope that contributions that have been made to this debate will be looked at by those who should finally convince themselves that the messages are loud and clear and it is time to start a full and thorough reform of the system.