Mr KELVIN THOMSON (10:56 AM) —I move as an amendment to the motion for the second reading:

Labor supports the closure of any loophole that allows tax avoidance of any sort, particularly when it involves non-residents of Australia. We encourage overseas investment, but the same rules that apply to resident Australians should apply to non-residents. Therefore, we do strongly support the integrity measures concerning alienation of Australian real property by non-residents. The provisions in this section of the bill seek to overcome the decision in the Lamesa Holdings case in 1997. There, the full Federal Court decided that real property held by a non-resident through a chain of companies did not fall within the terms of the alienation of real property provision in the Australia-Netherlands double tax agreement. The Treasurer announced in a release on 27 April 1998 that:

The decision of the court posed a significant threat to the Australian revenue base. This type of structure could be used to avoid tax on all Australian real property. However, rather than acting quickly, the Treasurer waited many months and finally issued a press release on 27 April 1998 announcing that intention to legislate to overcome the Lamesa decision.

We obviously support the decision to close the loophole, but the handling of this issue by the Treasurer has been a disgrace. Legislation was not introduced until almost 20 months after the announcement. Also, it has had such low priority that it is only scheduled for debate in the House this week, after being introduced four months ago. The impact of this is that the legislation is very retrospective. If passed in its proposed form, it will operate at least two years retrospectively. So, if it does not get priority and does not get passed until June this year, that would mean it will be passed around 26 months after the original announcement. The Senate Standing Committee for the Scrutiny of Bills examined the legislation and reported that the retrospectivity of the legislation contravenes the Senate resolution of 8 November 1988, which states that:

Also, they seek to get responses from ministers, such as the Treasurer, when this situation of highly retrospective legislation arises. If the Treasurer did respond to the committee's report, it was not published by the committee. It is quite normal for legislation to take some months after a press release before being presented to the Senate, but it is quite another matter when that delay is more than two years. While we support these measures which shore up the Australian tax base, we are highly critical of the severe retrospectivity of these proposals.

There are some other issues in the bill which I will briefly touch on—income tax deductions for gifts and extending the period of deductibility for certain donations. So the St Patrick's Cathedral Parramatta Rebuilding Fund will be extended by two years to 25 February 2002, the Australian National Korean War Memorial Trust Fund by one year to 2 September 2000 and the Shrine of Remembrance Restoration and Development Trust by five years to 1 July 2005. Labor has supported the provision of tax deductible status to these funds and will support these amendments which lengthen the period of deductibility.

The third part of the legislation deals with the income tax exemption termination for non-resident sports persons, clubs and associations. The bill proposes to repeal two old provisions which provide exemptions for non-resident sporting persons if they represent the controlling body of their outdoor athletic sport or game and also non-resident sporting clubs or associations if they are from a Commonwealth country, if they are representing the controlling body of the sport or if the team representing the association or club plays cricket, football or other similar matches. I do observe that these provisions which are being repealed give rise to some pretty substantial anomalies. So if you are a non-resident 100-metre runner you would be tax exempt, but if you are a 100-metre swimmer from the same country you would be subject to the tax. So, as the shadow Treasurer has observed, he does not know where this quite leaves you if you are a triathlete, to say nothing of a beach volleyball player if the tide comes in. This bill is proposing to remove the existing exemptions, and Labor will not oppose those amendments.

The bill also contains in relation to the capital gains tax a number of technical amendments and corrections of errors. According to the explanatory memorandum, none of the amendments change the policy reflected in the 1936 act. On that basis, Labor will not be opposing this measure either.

Yesterday, in relation to the Taxation Laws Amendment Bill (No. 10) 1999, I expressed a series of concerns about the administration of the Taxation Office, and I wish to speak to my second reading amendment concerning those matters. Amongst other things, I expressed concern about allegations concerning the role of the New South Wales opposition leader in relation to the issue of private binding rulings and representations made to the former Assistant Treasurer, former Senator Jim Short, back in 1996. In response to these allegations, Kerry Chikarovski has said that her only recollection of dealings with Mr Short was in 1996 when she arranged a meeting in relation to a taxation ruling on child care, and her denial further consists of her saying:

And she says she did not think this was inappropriate. She also says:

This is a very unconvincing denial indeed. On her own admission and that of her ex-husband, he runs a company that is involved in tax minimisation schemes. You would have to ask and wonder for how many other meetings Mrs Chikarovski has used her influence to arrange meetings with government ministers. I would also note that tax office rulings are signed by the Commissioner of Taxation. Why would a company want to meet with the minister in relation to these matters rather than meet with the commissioner? The allegation that I made yesterday—the allegation that was passed on to me—is well and truly alive. We on this side of the House want to know what private binding rulings did the Remuneration Planning Corporation receive after the change of government from 1996 onwards—and we regard that as a matter of great importance. There was also a response from Mr Chikarovski to this matter. In his response, he said:

Mr Deputy Speaker, I never said anything different—you got me. The whole point of raising this matter is to express concern that there have been people using these kinds of schemes to essentially make the payment of tax optional. We have seen changes between the draft and the final binding rulings concerning the issue of employee benefit schemes. I indicated yesterday to the House that the tax office had issued in October 1998 a draft binding ruling concerning employee benefits schemes and, between the time that was issued and May 1999, the tax office added to its final public ruling on this matter:

Given the massive controversy concerning the misuse of private binding rulings that has arisen following the arrest of Mr Petroulias, I believe the tax office must disclose the representations it received concerning its draft ruling. It is necessary, in order to restore public confidence in the tax office, that we get to the bottom of this matter and identify who has really been involved in it and what their role was. Mr Chikarovski said, and I quote him again:

I want to say to the House that this company—notwithstanding the fact that the tax office says that it has cracked down on these employee benefit schemes—is still at it. I have here a copy of a document from what is known as the Kenneths Group. The document is described as a `Proposal for employee participation plan and remuneration planning', prepared by Mr John Day on behalf of the Kenneths Group and the Trinity Management Group. Information concerning the structure of this company is on page 19 of this plan. It says:

It indicates:

Further into the document, on page 28, it notes that the Trinity Management Group is the body to implement this particular plan. It says:

This company is clearly a related company to the Remuneration Planning Corporation. If we look at the nature of this plan, we can see, for example, on page 9 that it has devised a scheme for bonuses and for substantial parts of salary to be paid as bonuses. These become tax deductible with no fringe benefits tax or on-costs, payroll tax or WorkCover or superannuation guarantee payments to be made. The annual bonus goes towards acquiring shares in the company. On page 13, there is a reference to contributions to the employee incentive plans being tax deductible, having no fringe benefits tax, no surcharge or contributions tax, no superannuation guarantee charge, no payroll tax or no WorkCover payments. Again, on page 18, there is reference to salary sacrifice arrangements so that funds made available from salary sacrifice can be contributed by the company to the employee incentive plan. On page 26 of the document, there is reference to what is called the `fair market remuneration payment', which once again will not be subject to fringe benefits tax, surcharge or contributions tax, payroll tax or WorkCover.

Make no mistake, Mr Deputy Speaker, this is all about high wealth individuals and big end of town tax avoidance. It is still going on via Mr Chikarovski's company, and no doubt others, even though the tax office is supposed to be cracking down on it. This is a matter of great concern to the opposition and is one of the reasons why we are convinced that there needs to be a proper inquiry into the tax office's rulings and the tax office's handling of this area.

I will also comment further on the observations I made in the parliament yesterday concerning the role of the Commissioner of Taxation, Michael Carmody, about these issues. There was a joint statement by the Taxation Office and the Australian Federal Police yesterday which, amongst other things, said:

into the Nick Petroulias matter—

It goes on to say:

It is apparent from this joint statement that Commissioner Carmody provided no advice to the Treasurer concerning the issue of the police investigation during 1999, prior to his reappointment for a seven-year period. The question that arises here is: did the commissioner provide any advice at all to Treasurer Costello about the problems in the tax office concerning the issue of private binding rulings during 1999? I think we are all entitled to an answer to that question, and that remains a very significant question indeed.

I also go to the question of the cost of tax avoidance identified through these employee benefit non-complying superannuation, offshore superannuation and similar schemes. To try to answer that question, I refer to a submission put by the Taxation Office itself to the House of Representatives Standing Committee on Employment, Education and Workplace Relations. That submission says:

Let me note that this is dated 30 April 1999, so it will be very interesting to see what sort of data the tax office has for 1999-2000. It says:

It goes on to say:

$1.5 billion! The tax office goes on to say:

that is, the $1.5 billion. It goes on to say:

That submission was put forward in April last year. Yet, as I have just indicated to the House, we still see evidence that these schemes are being promoted. We still see evidence of widespread tax avoidance from high wealth individuals. So it is blindingly obvious that the tax office has not got on top of this problem.

I also refer to reports in the Business Review Weekly just a week or so ago concerning rulings that, in the words of the Business Review Weekly, `made tax optional'. They refer to a ruling on 29 September 1998 which gives a favourable private ruling to Sydney solicitor and tax adviser David Bonnell. The ruling carries the stamped signature of a former deputy tax commissioner David Butler. But it is the case that, once armed with a private ruling in his own name, Mr Bonnell has admitted to the Business Review Weekly that he began to mass produce the schemes from his office word processor. This ruling has, in effect, enabled Mr Bonnell to claim unlimited deductions for 1999-2000.

Again, on 21 October 1998 there was an advance opinion, which was stamped by the deputy commissioner in charge of large business and international tax, Mr Jim Killaly, but said by Business Review Weekly to be processed by a middle ranking officer named Emmanuel Aivaliotes. Mr Aivaliotes was involved in providing favourable advance opinions, two of them on 18 December 1998. Again, on 15 February 1999, the superannuation technical unit at Bankstown issued a letter to a specific taxpayer regarding controlling shareholder superannuation. It indicated:

The letter goes on to say that those contributions are not subject to the standard superannuation contributions tax or to the superannuation surcharge. At the same time as we have this draft ruling cracking down on employee benefit trusts and non-complying superannuation funds, the tax office was giving favourable rulings concerning controlling shareholder superannuation, creating, in the words of Business Review Weekly, a `dual tax system where it was optional to pay tax'.

All of this raises a whole series of questions for the government and for the tax office—questions about what action it has taken to crack down on employee benefit trusts and when; what action it has taken to crack down on non-complying superannuation funds and when; what action it has taken to crack down on controlling shareholder superannuation schemes and when; and, if there is no difference in terms of tax legitimacy between controlling shareholder superannuation and the employee benefit trusts and non-complying superannuation funds, how it is that the rulings I have just referred to were being issued at exactly the same time as the tax office said it was cracking down on employee benefit trusts and the non-complying superannuation funds.

There are many other questions we could ask of the government and the tax office concerning the handling of this issue. Just what is the status of those private binding rulings that have been issued by the tax office? Are they still binding? Is that former tax officer who was quoted recently as saying `Tax avoidance is still widespread, but we are just not tackling it' correct? Why was there no central registry in the tax office to keep track of private binding rulings, thereby allowing tax minimisers to shop around tax offices around the country for the most favourable private rulings? We would ask the government and the tax office: is it still their intention to extend the system of private binding rulings, as was proposed by the government's response to the Ralph report? If so, do they intend to do this before the commissioner's review of private binding rulings is complete?

There were media claims that tax office rulings stamped with a signature of a high ranking tax office official were sold to investors for up to $20,000. We need to know whether that is correct. We want to know about the role of the commissioner in approving or vetting the appointment of Mr Petroulias as first assistant commissioner in the tax office. We want to know about those reports that a second tax official named in police warrants who was under investigation for corruptly accepting benefits for tax rulings is apparently still working in a key position in the Sydney tax office. We want to know just when the tax office became aware of the practice that some of those tax avoidance scheme promoters were attempting to use a single private binding ruling many times for many different taxpayers and what they have been doing about it.

Clearly, the problem here is that the tax office has been preoccupied with the introduction of the goods and services tax and that it has been overworked and underresourced. An example of this was reported just this morning where the chairman of a parliamentary committee, the member for Wannon, David Hawker, opened a parliamentary hearing yesterday by telling tax office officials that evidence to date had alleged `systemic failings in ATO data and systems quality' in the administration of the tax file number system. Indeed, it is reported that, according to the tax office, the National Crime Authority is investigating a widespread scam involving unlawful purchase of tax file numbers for money laundering. The response to this by the ATO deputy commissioner, Dr Bob Webb, was to admit that.

Mr Ross Cameron —I raise a point of order on relevance, Mr Deputy Speaker. You have been very gracious to date. The shadow minister wants to go into a wide-ranging discussion of ATO policy in relation to tax avoidance. It has no bearing on the relevance of the bill. I suggest the honourable member be brought back to the bill

Mr DEPUTY SPEAKER (Mr Nehl)—I thank the honourable member for Parramatta. I do point out to him that the operative area here is the long title of the bill which says: `relating to taxation and for related purposes'. That generally covers a wide range.

Mr KELVIN THOMSON —Thank you, Mr Deputy Speaker. I am happy to provide the member with a copy of my second reading amendment which goes exactly to the issue to which I am speaking. In his admission, Dr Bob Webb said pressures of introducing the new tax system had prevented the tax office from improving its data collection. `We have given priority to tax reform,' he said. That is the cat being let out of the bag. We have a tax office which is focused on the introduction of GST, PAYG and the Ralph business tax changes, to the exclusion of other priorities. Whether it be a scam involving the unlawful purchase of tax file numbers, whether it be the controversy concerning private binding rulings, whether it be the way in which they have handled the fuel substitution scandal—dropping the ball for collecting excise after it was passed to them from Customs, whether it be the way they are handling superannuation guarantee compliance—where many workers are missing out on superannuation when companies become insolvent because the tax office has not got the resources to properly follow up superannuation guarantee compliance, in all these areas the tax office has dropped the ball and is not focusing on the integrity of the taxation system. It is not ensuring that we do not have tax avoidance and that all taxpayers are dealt with fairly, because the government have fitted them up with an unworkable, incredibly complex GST and have not given them sufficient resources to do their job properly. Indeed, there are plenty of reports around about tax office employees leaving the tax office to work in the private sector for significantly higher salaries and, accordingly, staffing problems and other chaos occurring within the tax office. For these reasons, there needs to be an inquiry into the tax office's administration. (Time expired)

Mr DEPUTY SPEAKER (Mr Nehl)—Is the amendment seconded?

Mr Martin Ferguson —I have pleasure in seconding this amendment. It is an appropriate amendment in the light of the issues raised by the shadow minister. I reserve my right to speak.