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Wednesday, 7 September 1983
Page: 492


Mr RONALD EDWARDS(4.02) —It is appropriate for me to be following the honourable member for North Sydney (Mr Spender) in the debate. Earlier we heard from the honourable member for Bennelong (Mr Howard). Much has to be made in this debate of the question of the intentions. I notice that the honourable member for North Sydney has just spent a lot of time talking about the fact that people were innocent with respect to the schemes that we are pursuing in these two items of legislation, the Taxation (Unpaid Company Tax) Assessment Amendment Bill 1983 [No. 2], and the Dividend Recoupment Tax Bill 1983. I should like to deal with that question of innocence in a moment. These measures were introduced in May. At that time, honourable members may be aware that, of course, they foundered in the Senate. The reason for that was that objections were raised by people in the other place that these measures would cause some financial damage in the community. With that in mind and with the benefit of further discussions, the Government has now reintroduced these measures.

The intention of the major Bill, which is the Taxation (Unpaid Company Tax) Assessment Amendment Bill 1983 [No. 2], has been to collect personal tax which was avoided by people who engaged in bottom of the harbour schemes. That brings me to my point. What were the intentions of those people who engaged in bottom of the harbour schemes? It is all very well for the honourable member for North Sydney to have spoken about the consequences of actions, and in legal terms one might deal with the consequences of actions; but if we look at the intentions, I think that we have a much clearer picture. I am very clear as to the intentions because I was addressing an accountants' conference in Perth in 1978 when people were marketing schemes that paralleled the Curran and Slutzkin arrangements, and those people were willingly participating in bottom of the harbour arrangements. It is not good enough to stand up in this House in 1983 and pretend that these things did not happen. They did happen. The intentions were clear and precise. It is not good enough to deal with consequences; one must go back and look at intentions, because when one is amassing an argument it is important to get clear what the intentions were.

Interestingly, the honourable member for Bennelong, with a great deal of foresight and accuracy, when he was Treasurer, had a speech delivered in 1978 to the Institute of Chartered Accountants in Perth. The honourable member for Balaclava (Mr Macphee) delivered that speech. In the speech, the then Treasurer spoke about these contrivances to deliberately evade and avoid paying tax. He suggested to the accounting profession at that time that if it did not get its house in order, it would be subject to government regulation. I believe that the then Treasurer was right: There were schemes that existed; those schemes were being marketed; there were people who were advertising those schemes in the Australian Financial Review and in financial newsletters to which one could subscribe. It is not good enough now to pretend that those actions did not take place and that those intentions were not there. They were very clear. Those intentions were very precise.

We have had discussion in this place about the questions of tax avoidance and tax evasion. Clearly, as the honourable member for North Sydney has mentioned in relation to the explanatory memorandum to the Bill, one speaks about tax avoidance as being the minimisation of the impact of tax by taking advantage of all lawful allowances and benefits. Tax evasion, in correct terms, about which the honourable member for North Sydney has spoken, refers to the wilful attempt to escape the impact of taxation through subterfuge or other infractions of the law; the wilful and unlawful activities involved in reducing one's liability to tax in a manner not intended by provision of the income tax legislation.

It is clear that a great deal of tax evasion was practised. It is also clear that tax avoidance was practised. However, as a consequence of a great deal of debate-some of that debate was initiated by the previous Government, and the debate has continued under the present Government-it is now much clearer in the minds of the public that to engage in certain activities of tax avoidance can also be deemed by the Australian Taxation Office to be the wilful minimisation of one's tax in a wrongful way. It is important to understand that, because in this legislation what we are saying is: What were the intentions of people at the time when they engaged in that practice? The intentions can be established. They can be established very clearly from the promoters of the schemes, with whom these people did business. There were attempts, through the efforts of stripping companies, to minimise people's tax commitments. I do not believe that it is good enough in 1983 to now say that those intentions were wholly honest and wholly open.

It is very difficult, in the Australian community, to sell the notion of equity when we are willing-as some members opposite seem to be-to turn a blind eye to the deliberate attempts by others to avoid and evade paying tax. It is interesting, in terms of the sort of equity about which we talk in this place, just to look at examples of the lack of equity from the previous Administration. I chose to get some examples of breaches of industrial awards that occurred under the previous Administration. There were 64 breaches of industrial awards in three years under the previous Government. The total amount of penalty that was exacted by that Government amounted to $7,931 out of 64 breaches. People on the other side of this chamber see fit to put the boots into the union movement and into the Australian community; but when it comes down to enforcing that practice of equity across the board they show a distinct lack of willingness to pursue that equity. That is something to which people here and in the broader community must pay attention.

It is not good enough to now say 'We are opposed to the practice of retrospectivity'. As I have already indicated, the then Treasurer knew about these practices in 1978. If he did not know about them, why did he have a speech delivered to the Institute of Chartered Accountants in Perth by the honourable member for Balaclava, saying that these unlawful contrivances should not be pursued by the accounting profession? They continued to be pursued by the accounting profession. The accounting profession knew about them in certain instances and it welcomed them in certain instances. I believe that the then Treasurer was correct in identifying it. But it is not good enough now to state that one cannot turn around and say that those practices were unlawful. He knew that they were unlawful then. They were deliberate contrivances to avoid paying tax, and they existed.

In the context of this debate it is important to reinforce another point in the minds of the electorate and in the minds of honourable members. This measure, within this Budget, represents an important item with respect to revenue raising . We have gone through an immense exercise in trying to contain our expenditure and in trying to minimise the impact of tax practices upon the community. This measure in the Budget aims to recoup a total of some $60m. It should aim to recoup some $270m over time. Now as a result of the amendment from the May statement we are forgoing some $280m, and that was because of obstruction in the other place. It seems that we are facing the same sort of obstruction again and, I believe, for equally dubious reasons. Those on the other side knew at the time that those practices being pursued were not in fact practices that either the accounting profession or the legal profession should have endorsed, nor should the business community have endorsed them.

I think it is very interesting to look at the business community of Western Australia. One of the awkward things that arose out of the continued turning of a blind eye to these practices by the previous Government was a distortion in the practice of the business community. I think it is interesting to speculate for a moment. There are many new members in the Federal Parliament from Western Australia. Why? The reason is that the tax rackets went not only into the business community but also into the Liberal Party in Western Australia; and the community knows it and the people on the other side know it. The damage that it wreaked has not been removed because the same old gang are still in charge, still with the belief that they can kick unions and the general community but cannot touch any of those whom they sought so desperately to protect.

I go back to this point again. Those on the other side have to know that in terms of equity we have to set standards. The standards set by the previous Government were not satisfactory. The standards, as acknowledged by the previous Treasurer, had to be changed; but the previous Government took so long to do it. Now the Opposition is saying to us: 'How dare you have the gall to come in and put through legislation which collects tax that we should have had the courage to collect but did not because we turned a blind eye to it.' As I have indicated here, clearly when it came to the matter of industrial law the previous administration did not have any courage.

I repeat: In the area of industrial law we look at breaches of awards and examples of people being underpaid; migrant women have worked long hours and are underpaid. The Opposition when in government sought to collect $7931 in breaches of industrial awards by employees in three years, yet this is the same crew who believe that they can come into this place-as Senator Dame Margaret Guilfoyle took a stand on principle yesterday with respect to retrospectivity-and say: ' What a terrible Government we have'. This is a Government which, incidentally, has before this House the report of the inquiry concerning the Deputy Crown Solicitor's Office in Perth. Why the Deputy Crown Solicitor's Office in Perth? That is where a lot of the tax rackets were pursued. There is no dispute about that; and the people on the other side know that. They also know that an Attorney-General suffered grievously because of the failure of that Office to pursue these matters.

I believe that, when we are looking at this matter, it is not good enough at this late time for people to say: 'We do not know why you are pursuing these matters in this way'. Honourable members know why. It is because our intention is to collect tax that the previous Government should have collected and did not collect. The only way in which we can collect it is through a retrospective measure. Why? It is because some of those companies that previously existed no longer exist. That is why, in the explanatory memorandum, we talk about an imputed value of dividends. Why? It is because there is no longer any company in which to look at the distribution of dividends, so one has to impute values to them. Why are there no companies? It is because there were promoters of phoney companies that disappeared. Where? The language is common; they disappeared to the bottom of the harbour.

That is very clear and very precise. I do not believe it is good enough to engage in arguments about consequences, as the honourable member for North Sydney has done. When we look at the question of intentions we see that the intentions of those who were promoting those schemes at the time were very clear . The intentions were to avoid and to evade paying tax. In these circumstances it is very important, as a Government trying to pursue the principle of equity, that we establish some principles of equity. With respect to these tax measures, these are the principles we are working towards. How can honourable members stand up in this place and say that we have to take some of the unpalatable measures that we were taking with respect to assets tests and superannuation and at the same time not pursue the principle of equity in taxation? It is very important to pursue the principle of equity in taxation.

We are pursuing that principle of equity, and the reason for that action is very clearly that it was not pursued by the previous Government. In the later days when that Government began to react and become concerned about the grievous impact of the tax avoidance industry upon business and upon itself, it acted. I believe credit has to be given for that. It did act. But, as I said earlier, if the speech given in Perth in 1978 by the honourable member for Balaclava on behalf of the Treasurer to the Institute of Chartered Accountants in Australia were to suggest that these artificial contrivances should not be pursued, why did it take so long for the then Treasurer and the then Government to act? The fact that the previous Government did not act has meant that we now have to act retrospectively.

One of the significant things about acting retrospectively, as honourable members well know, is that, if a person now engages in a scheme which is shown in the intentions of the legislation to have been an artificial contrivance, that scheme will be outlawed. The honourable member for Bennelong asked why we are not pursuing this wide spread of measures. It is quite clear that what we have done is to put the damper on the promoters of tax schemes; and that is very important. It is very interesting, when we look at the whole debate, Mr Deputy Speaker, with respect to budgetary strategy and equity, that this Government has sought through this legislation to introduce some measure of taxation equity. I believe I have to reinforce the point again concerning intentions. The intentions at the time of the people who engaged in those schemes were artificially and deliberately to avoid paying tax, that is, to engage in a wrong doing within the principles of taxation.

Honourable members cannot turn around at this time and say that everything those people did was lawful and honest. It was not. I was there when people were selling schemes at accountants' conventions. They cannot pretend to me; I know what they were on about. When I raised those matters with them and pointed out what the then Treasurer said about them, they said: 'We will do it while we can get away with it'. That is what occurred in Perth. It was the home of these schemes; and people well know it. It is not good enough to stand in this chamber in 1983 and say that this Government is a terrible government because it is pursuing those activities that were followed slavishly in the business newsletters, in the Australian Financial Review, in the National Times, and in the professions, and people did not stamp on them. It was very interesting that the newly elected President of the Australian Society of Accountants, Mr Millar, said that this society will have to pursue questions of upgrading its ethical standards with respect to tax practices. Why? It was because he could see that it was a cancer eating into that profession.

To the credit of those professions, they have recognised that fact, but I think it is a great shame that the damage that was done to the business community in Western Australia and to the business community generally was that tax avoidance and evasion became more profitable than legitimate business activity. There is something wrong when a government allows that to occur. Honourable members should try explaining that to people who legitimately pay their taxes. We have fostered a community, one of the great growth industries in Australia, the tax evasion industry. Try telling people that they should go ahead and perform legitimate manufacturing activities and that we will encourage them because we will turn a blind eye to it. Honourable members should try saying: 'We will encourage you to engage in tax evasion and avoidance'. That happened, and we know it happened.

I give credit where it is due; the previous Government began to act against these practices and we have continued that pursuit. But it is not good enough now to start splitting hairs and saying: 'What you are doing is wrong. What we were doing is right and what we were doing when we were not doing anything is also right? When the previous Government was not doing anything it did great damage to the business community, and we also know that it did great damage to the Liberal Party in Western Australia and the effect of that behaviour is still working through the Liberal Party.

To sum up, Mr Deputy Speaker, this is a very important matter with respect to budgetary stategy. It is a matter which we believe ought to be pursued. We would expect that people on the other side would have taken a positive attitude towards it because we are pursuing it in the interests of budgetary strategy. It is not good enough for people now to turn around and say, in terms of arguments about consequences, that they did not mean this or that. We know precisely what was intended. The intention of this legislation is to collect money that should previously have been collected. I commend this legislation to the House.