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Thursday, 26 May 1983
Page: 1080


Mr HOWARD(9.36) —As a final contribution to this Committee debate I go back to the point that was made so very well and so very clearly by my colleague, the honourable member for North Sydney (Mr Spender); that is, that this legislation is and has been dishonestly described by the Minister for Finance (Mr Dawkins). The pinnacle of that dishonest description is the employment of the words 'bottom-of-the-harbour' to describe this legislation. The use of that description in the whole debate about these dreadful bottom-of- the-harbour schemes that has gone on in Australia over the last 12 months has really got out of hand. My understanding is that the origin of the expression is the cases of a number of Sydney promoters of tax avoidance arrangements. After the companies were effectively denuded of assets, then left unable to meet their taxation liabilities, the records of the companies were thrown into Sydney harbour and presumably, as one commentator has it, got lodged in a reef somewhere between Manly and Dee Why. Be that as it may, that is the origin of the expression. There is nothing technical about the description 'bottom-of-the- harbour'.

What is dishonest about using that expression in relation to this legislation is that the assets which are attacked and which are subject to a capital gains tax, to the penalty of this legislation, are not assets that in any way can be described as having been transferred to vendor-shareholders in consequence of a transaction that really is in the nature of a bottom-of-the-harbour transaction, because that expression encompassed a situation in which a company was rendered unable to meet its tax liabilities. Because that was an illegal act it is only reasonable that the tax so evaded should be recouped. But what is happening here is that tax that has not been illegally evaded is to be recouped. So the colloquial expression 'bottom-of-the-harbour' has been used to describe a course of conduct which renders a company unable to meet its tax liability and, because that is illegal the tax thereby left unpaid should be recouped. To use that description to excuse a piece of legislation which, in reality, imposes a retrospective capital gains tax, is very dishonest of the Minister. If he is going to assign culpability for emotion in last year's debate he carries as much , if not more, culpability than anybody else in this chamber. He knows that by using that expression he will be able to gather support from many people in the community who, because of the inherently technical nature of this legislation, do not fully understand what is involved in it but say that if it has something to do with that wicked bottom-of-the-harbour business involving those people with criminal connections, of course, it must be justified and the Government must be doing the right thing.

This legislation does not just recoup taxation which has been evaded as a result of illegal conduct which was the subject matter of last year's legislation, it goes beyond that. It reaches into the assets of companies which could never, by any stretch of the imagination, be regarded, under the present laws of Australia, as being subject to legislation. As my colleague the honourable member for North Sydney said, it reaches to the capital assets of companies which, under a distribution under section 47 of the Income Tax Assessment Act-the present law-would not be liable for tax in the hands of the shareholders. Capital reserves of a company which, under no law in Australia at present could possibly be liable for income tax, by dint of the hypothetical contortions of this legislation are being made liable under this legislation for a penal rate of taxation.

The Government, through a Minister who, unless he turns on an absolute blinder in the next 10 minutes, manifestly does not fully understand the ramifications of this legislation in reality, is using this totally emotive expression. It is the old Goebbels technique. If something is said often enough eventually people will start to believe it. That is exactly what the Government is doing with this piece of legislation. It is saying 'bottom-of-the-harbour, bottom-of-the-harbour , bottom-of-the-harbour. Is it not terrible? Shock! Horror! We must do something about it.' The legislation that I introduced into this Parliament last year dealt with bottom-of-the-harbour schemes. It went no further than those. The amendments we put into that legislation guaranteed that it was restricted in its operation to bottom-of-the-harbour schemes. That is why we put those amendments in. We were determined to circumscribe that legislation so that it operated retrospectively only in respect of taxation that had been evaded as a result of illegal conduct.

I conclude my remarks on this legislation by saying that the most dishonest aspect of the Government's handling of it is its presumption, its thoroughly misleading behaviour in describing the legislation as being bottom-of-the- harbour legislation. That is a dishonest and inaccurate description but it has been deliberately used by the Minister to gather, in a thoroughly emotional and discreditable fashion, support for a thoroughly deplorable piece of legislation.