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Thursday, 4 December 1986
Page: 3343

Senator MESSNER(11.35) —Four Bills are being taken together in this debate. I would like to address my remarks to the Taxation Laws Amendment Bill (No. 4) 1986 and the Sales Tax (Exemptions and Classifications) Amendment Bill (No. 2) 1986. I observe firstly that the Taxation Laws Amendment Bill (No. 4) incorporates quite a number of amendments, some of which were to be introduced as new measures in the Budget. The Opposition has no particular quarrel with most of them. Indeed, numerous other matters of a drafting correction type are also incorporated in the Bill. Accordingly, we have no particular trouble with those, either. There are one or two matters that do require comment. I suppose the first observation that ought to be made about one of the more substantive changes incorporated in the Bill is the very interesting move by the Government to correct some of the more obvious problems with the handling of unit trust investments under the new capital gains tax.

To set the scene, I observe that on 10 October 1986 in the House of Representatives the then Acting Treasurer, the Hon. Chris Hurford-known as Scoop to his friends-observed that it was not his intention to introduce substantial changes to the capital gains tax. That was stated on a Friday afternoon. The Acting Treasurer, in answer to a question addressed to him by the honourable member for Wakefield (Mr Andrew), stated:

But the Government does not resile one iota from the capital gains tax. I have been across a lot of the problems in imposing it and I am very pleased to say that there are very few. If indeed later it is found that some changes need to be made, they will be made, but not in these early days.

That statement was made by the Acting Treasurer in the House of Representatives on 10 October 1986. That was a clear indication that the Government was quite happy with the way in which the capital gains tax was operating and that there were few problems that would have to be addressed. Approximately six days later the Government introduced this piece of legislation in the House of Representatives, which substantially changed the capital gains tax in respect of the operation of it in regard to unit trust investments.

The first observation that must be made is that, as was made quite clear during the debate on the legislation in this chamber in the very early stages-some six or eight months ago-the Government had absolutely no idea what it was doing when it introduced the legislation. Quite clearly, it was full of errors, mistakes and unintended consequences-which was the euphemism defined by the Prime Minister (Mr Hawke). Quite clearly, the Government had not examined the legislation in detail. That point was made by the Opposition during debate in the Senate at the time. It follows the usual pattern of this Government being so negligent in handling these matters. Of course, it follows the typical example of the disastrous fringe benefits tax, where the same kind of pattern developed. These points had to be addressed by the Minister Assisting the Treasurer when he introduced this Bill in the House of Representatives. But the point that must be made, of course, is that whereas, on the one hand, on a Friday afternoon he said that the capital gains tax was beaut and there were no problems, suddenly, on the other, six days later, after we had been told there would not be any early changes, very substantial changes to the law were introduced. The Opposition welcomes the changes because we had been bringing these matters to the attention of the Senate and of the electorate generally through Press releases and also through a substantive notice of motion here in the Senate. Quite clearly the Government was getting advice from some sections of the financial community drawing attention to the problems as well. We welcome the changes, notwithstanding the fact that quite clearly the Minister Assisting the Treasurer at the time had no idea of what he was actually doing in trying to fix up the problem.

One of the other matters of some import in the Bill is the very substantial change to give effect to a Budget decision to raise the filing fee for an appeal to the Administrative Appeals Tribunal from $2, as it has been in the past, to $200. That is a very substantial change which, of course, has very serious effects on taxpayers generally. I would just like to focus on those effects for a moment. Previously, taxpayers requesting an appeal against a tax assessment or other decision of the Commissioner of Taxation, as I have just observed, paid only a filing fee of $2 when they sent their matters to the boards of review. The effect of this measure will be to raise that amount to the very substantial level of $200. This measure also comes along at a time when the Government is raising to $500-a further $300 on top of that $200 fee-the charge which it imposes for references to a court other than the Administrative Appeals Tribunal.

People with very small problems and disputes with the Australian Taxation Office will now be forced to lodge a fee of some $200 if they want to have their matter fixed up before the Administrative Appeals Tribunal. If that fails, and they still want to continue their dispute, it will cost an extra $300 when they go to another court. The amount in dispute may be very small. For instance, a person may have a disputed claim for $50 or $100 in respect of his work clothing that the Commissioner of Taxation has disallowed. Yet he will now be required under this legislation to lodge $200 if he wants to have his appeal heard by the Administrative Appeals Tribunal. This really is outrageous an denied justice to the ordinary citizen of Australia.

The larger taxpayers with substantial incomes who may have very complex and legalistic disputes with the Taxation Commission, of course, will not have to worry about this measure. The $200 or $500 fee-whatever it is-is of no import for a person who has many hundreds of thousands of dollars hanging on the decision of a court, but a small taxpayer with relatively low levels of income and small disputes will find himself or herself put to substantial disadvantage. This decision obviously has been taken without any regard to the rights of the ordinary Australian citizen. In fact, I cannot understand the rationale of the Government in instituting such a measure which is clearly designed to restrict the number of people who are able to bring their cases in dispute before the appropriate authorities. Clearly that is a denial of justice and it must be very concerning to the back bench members of the Australian Labor Party that their Treasurer (Mr Keating) has seen fit to introduce such a measure. It simply means that in these cases there will be a pruning of the lists of outstanding appeals and consequently ordinary taxpayers will have justice denied. The Government will win; ordinary taxpayers will clearly lose.

This is, of course, fairly typical now of the way this Government is developing its handling of the taxation legislation. We are seeing more and more the situation develop where draconian penalties and laws are being imposed on ordinary taxpayers in such a way as to ensure that the Tax Commissioner gains firmly the upper ground in dealing with the taxpayer to the eventual effect of denying the taxpayer his proper rights. This is just another example of what I think is happening in the area of tax legislation generally.

Another matter to which I want to refer is the Sales Tax (Exemptions and Classifications) Amendment Bill (No. 2). This piece of legislation is very interesting when we get into the detailed study of it. I refer to the explanatory memorandum tabled by the Acting Treasurer, Mr Hurford, when he gave his second reading speech to the House of Representatives. The Bill will amend the Sales Tax (Exemptions and Classifications) Act to make it clear that a specific taxing item prevails over a general exemption item in the law. Specifically, clause 3 of the Bill will amend the principal Act by inserting a new sub-section in section 5 of the Act to clarify beyond doubt that, where goods are described in clear terms in an item or a sub-item contained in a taxing schedule of the Act and might be argued as being also covered by a general description of goods in an item or sub-item contained in the exemption schedule of the same Act, the goods are not covered by the item or sub-item, as the case may be, in the exemption schedule. In other words, the taxing schedule overrides the exemption schedule.

I think we have to conclude that the Minister, in setting out his argument on this matter in the Parliament, really did mislead the Parliament as to the effect, because he said in that second reading speech that the Bill and this particular amendment were merely to clarify a long-standing principle of statutory interpretation with regard to the administration of the sales tax law. This has been substantially challenged by a number of practitioners in this area-and, indeed, it has been challenged by individual members of the Senate-as to its being a true statement of the position. In fact, it is quite clear now that the Acting Treasurer was, indeed, misleading the Parliament in making those erroneous statements.

I refer to an example of the problem that occurs in this respect. The first sales tax Bill that was put through the Parliament some weeks ago repealed item 90d of the Sales Tax (Exemptions and Classifications) Act for bathroom fittings from the 10 per cent exemption schedule and included it in item 14 in the third 10 per cent taxing schedule. However, other exemption provisions of the Act covered bathroom fittings and, arising from this arrangement, was the apparently ambiguous treatment of bathroom fittings for sales tax purposes. The situation now arises that, because of the doubt that arose from those amendments, we are uncertain as to the proper treatment of some kinds of bathroom fittings. Hence, this is an example of the sort of thing that the Government is seeking to fix up by this amendment.

The point I would make is that it is not right to say that this is merely a clarification of the existing law. I say that because the Taxation Office in the various tax rulings it has issued, at least until 1985, has given us the impression that sales tax exemptions necessarily overrode, or did override, the provisions regarding taxing items. While it is a departure from the long-established principle of statutory interpretation that a specific legislative provision overrides a general one, this has not been the approach taken with regard to the administration of the sales tax law by virtue of the peculiar nature of the drafting of this particular legislation. On the question of the sales tax law, the traditional and long-established principle of the Tax Office, I believe, has, in fact, been to acknowledge that, because of the specific nature of the exemption clause, an item or sub-item contained in the exemption schedule will necessarily override even a specific provision relating to an item or sub-item contained in the taxing schedule. This amendment is not just some mere clarification of existing or past procedures or anything else; rather it constitutes a major change to the way in which items have been treated in the past.

The Liberal Party of Australia and the National Party of Australia will support the Australian Democrats' amendment to have the Sales Tax (Exemptions and Classifications) Amendment Bill (No. 2) Bill referred to the Senate Standing Committee on Finance and Government Operations to have these questions examined. There is sufficient doubt about and lack of clarity in the interpretation of the present situation and the law for this examination to be appropriately undertaken by a Senate committee. We believe matters of principle have not been made clear and indeed there is evidence that we were misled by the then Acting Treasurer (Mr Hurford) as to the real import of these changes. For that reason we believe that the Committee can best undertake an examination of the issues and bring down a report for the Senate to consider the matter at some later time. The legislation, excluding the part that I have just referred to, is unexceptionable. We support the provision with regard to the Governor-General having to pay sales tax on any private items he imports. We do not expect that it will cause any trouble either to the revenue or to the Governor-General if this Bill is not raced through in the dying days of the sitting. We have no doubt that His Excellency, the present incumbent, would not take advantage of the situation if the legislation were not passed. As I said, we certainly believe that examination by a Senate committee is warranted and we will support the reference to the Committee.

There are no revenue effects from the delaying of this legislation as the Government, of course, has already said that it is only a clarification measure anyway. We will not support the Committee stage amendments that have been proposed by Senator Siddons and the Democrats to the Taxation Laws Amendment Bill (No. 4) 1986 for reasons I shall give at the Committee stage of the debate.