Mr KELVIN THOMSON (10:39 AM) —The member for Dickson (Mr Tony Smith) referred, in his discussion of taxation issues, to the problem of the taxation treatment of overtime. I have to say, from a personal point of view, that I think it would be much better if employers, rather than encouraging workers to work overtime, in fact took on new employees. My own view is that a situation where some workers, as in the example he gave, are working 60 or 70 hours a week, while others are completely without work and unemployed, is not in fact a good piece of social policy. That would be my own view of that matter.

The member for Dickson did ask for discussion and debate about his alternative tax model. I guess it will be interesting to see if the Treasurer (Mr Costello) affords him the same courtesy as he affords, for example, the member for Werriwa (Mr Latham) when he comes up with policy proposals. I guess time will tell in relation to that.

The Tax Law Improvement Bill (No. 2) 1997 continues the tax law improvement project process of rewriting the income tax legislation. This TLIP process was instituted by Labor to address the constant and reasonable criticism that the income tax legislation had become too long and too complex.

It is important to realise the underlying reason for the constant increase in the complexity of income tax legislation. It is quite simply a function of the increasing complexity of business and the constant practice of tax avoidance. The law has been constantly updated to attempt to ensure that all taxpayers can continue to contribute a fair share of income tax. Unfortunately, no matter how many loopholes are identified and closed, there are always new avenues being developed and new anomalies which need to be addressed.

The TLIP process is one method by which this issue is being addressed. Due to the sheer scale of the task—as others have pointed out, the legislation covers many thousands of pages—it is not feasible to rewrite the 1936 legislation in its entirety in one fell swoop. Accordingly, the TLIP process has proceeded on the basis of redrafting discrete portions of the legislation. This, in itself, does raise problems. However, as it is not possible to achieve the task in one package, there is really no option but to continue on a staged basis.

The bill is the third instalment of the rewrite legislation. The major areas covered in the rewrite are capital gains tax, company bad debts, intellectual property, and environmental expenditure, including environmental impact statements. These are all important areas of business taxation and, hopefully, the redrafted provisions will improve the ease with which business interprets, and complies with, these areas of the law.

As well as rewriting the law, the legislation takes the opportunity to effect minor policy changes to make the law clearer and simpler. This is not an attempt to significantly change the policy governing these areas; rather, the objective is limited to replacing impractical rules with ones that are easier to comply with, simplifying the rules that are retained, deleting the unnecessary ones, removing anomalies and clarifying ambiguities as much as possible. Without commenting on any particular examples, this approach seems reasonable to the opposition, and we are not opposed to this general course of action.

Consistent with the practice of the prior TLIP bills, the Joint Committee of Public Accounts and Audit has examined the bill and reported earlier this month, in Report No. 356. The report canvasses the usual range of concerns raised in the TLIP process, such as that there has been inadequate time for proper consideration by industry of the ramifications of the new wording; that the commencement date for the new provisions should be delayed beyond the 1 July proposal; and that therefore there should be a no detriment rule introduced, so that taxpayers can choose either the existing law or the new law.

While there is some substance to these concerns, the problem is that, if the parliament were to agree to the no detriment rules, the whole rewriting process would be effectively rendered worthless. There would be the impossible situation of two parallel sets of income tax law operating, with taxpayers being able to choose the particular wording from either the old legislation or the new legislation—whichever suits them. Obviously that would encourage aggressive tax planning activity, especially by those with considerable means, and that would inevitably result in lower revenue collections than would otherwise be the case. Clearly, that would be an undesirable and an unfair outcome, and, accordingly, Labor will not support such a proposition.

That said, we are concerned about a number of the specific issues that were brought to the attention of the Joint Committee of Public Accounts and Audit by various witnesses. There are various situations where the Joint Committee of Public Accounts and Audit is concerned about the potential for double taxation, including those provisions mentioned in recommendations 6 and 9 of the report. In addition, recommendation 8 touches on the very complex issue of the taxation of compensation payments received where an asset is destroyed.

The joint committee makes the sensible point that, if a ruling on the operation of the provisions is 355 paragraphs long, then there must be a great deal of uncertainty surrounding the operation of the provisions, and this uncertainty should be addressed. There were many other technical issues highlighted by the Joint Committee of Public Accounts and Audit report, and I indicate now that the opposition will support the government amendments that will be moved later in the debate to address the issues raised in the report.

Simplification of tax law is clearly no easy matter. We have thousands of pages of tax law. We endeavour to condense them to fewer thousands of pages of tax law. The problem is of course that some bright sparks—and there are certainly plenty in the taxation advice industry—will want to say that these words now mean different things from what the previous words meant. We can expect some new litigation and testing of the meaning of the words that are passed by the parliament.

It is a difficult area in which to achieve simplicity. That leads some people to say that we could achieve greater simplicity of the taxation system, for example, through the introduction of a goods and services tax. If you believe that, you will believe anything. The present situation for small businesses, for example, is that some 75,000 of them are collectors for the wholesale sales tax system. If a goods and services tax were to be introduced, more like one million small businesses would become collectors of the goods and services tax. That comes to us from the government, which proposes that red tape for small business ought to be reduced by 50 per cent.

We have a situation where we could be looking forward to new computer systems, new cash registers, calculations being required which previously were not required and a whole series of transactions, particularly in the services field, which were not previously subject to or part of the taxation net, becoming part of the taxation net. This would mean all kinds of services—visits to the theatre, visits to the footy, haircuts, all sorts of things—becoming part of the taxation net, and the system accordingly would become more complex. Certainly, from the opposition point of view, we reject the notion that that would provide for a simpler taxation system.

As I indicated at the outset, we are supporting the government's bill and believe that this is part of an appropriate process of taxation law improvement. We look forward to its continuation.