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Tuesday, 8 November 1983
Page: 2413


Mr HOWARD(8.30) —This legislation, the Taxation (Unpaid Company Tax) Assessment Amendment Bill (No. 3) 1983, must surely qualify for the description of the Blue Hills legislation of the Commonwealth Parliament. This represents the third occasion during the lifetime of this Government and the fourth occasion, if one includes the lifetime of the previous Government, that the Australian Labor Party has endeavoured to persuade this Parliament to accept the notion that legislation described as applying to so-called bottom of the harbour tax evasion arrangements, but which does not in fact apply to such arrangements, should be accepted by this Parliament in the name of recouping company tax evaded under those arrangements. I believe that this debate has gone on for so long and has become so confused in the minds of many people that it is worth while taking just a moment to restate the principles that are involved, to remind the Parliament of what was done by the former Government and to remind the Parliament why, again, the coalition parties, as we did in government and twice previously in opposition, will oppose certain of the measures put forward by the Government at present.


Mr Hurford —Shame! You ought to be thoroughly ashamed of yourself.


Mr HOWARD —I remind the House and, in particular, the Minister Assisting the Treasurer (Mr Hurford) that the purpose of the 1982 legislation was very limited indeed. It was designed to do one thing and one thing alone and that was to recoup unpaid company tax without penalty and without descrimination from those people who had derived a financial benefit from its non-payment. That legislation was designed to go no further than that. It was designed to recover an unpaid taxation liability. It did so by attaching that liability to the person or persons who had derived a financial benefit from the non-payment of that taxation.

It was, therefore, from the very outset quite fundamental to the legislation passed by this Parliament at the behest of the Fraser Government last year that if one did not derive a benefit from the tax evasion one ought not to receive an assessment. That notion is very relevant to some things I shall say in a moment about certain provisions of the Bill which is now before the Parliament. It is my understanding that in terms of collections and recovery the legislation passed by this Parliament last year is operating satisfactorily. I understand that, for example, about $180m of a projected recoupment of about $590m has already been collected. It is also my understanding that despite the presence in the legislation now before the Parliament of a provision to delete sub-section 3 (12) of the principal Act, the alleged let-out in that sub-section, which was the subject of some comment during the recent election campaign, has not proved to be an avenue of escape to companies which would otherwise be caught by this legislation. In other words, a case has not been very strongly made by the Government, in terms of the experience it has had with the administration of this legislation, for the deletion of that clause.

This measure does a number of things. According to the explanatory memorandum it repeats some provisions in earlier legislation which ensure that liability for recoupment tax will not be escaped by reason of an ultimately unsuccessful post-sale or pre-sale tax avoidance scheme. Secondly, it authorises the Commissioner of Taxation to name in his annual report persons who fail to pay an assessed recoupment tax liability in respect of unpaid company tax. Thirdly, it purports to remove the test which requires that an arrangement which rendered a company unable to pay its tax must be identified before a recoupment tax liability can be established. Fourthly, it provides relief from liabilty to vendors recoupment tax in certain anomalous public company cases. Fifthly, it varies the evidentiary provision to ensure the constitutional validity of the legislation. Finally, it corrects minor tehnical defects.

I inform the House on behalf of the coalition parties that we will vote against the provisions I have enumerated under points one, two, three, five and six. The provision providing relief from liability to vendors recoupment tax in certain anomalous public company cases is a proposal we will support. We will be proposing an amendment in the Committee stage to the effect that that provision be extended to private companies as well as to public companies on the simple basis that the existing discretionary provision in section 6 (18) is available to both private and public company shareholders. We on this side of the House see no reason why the like proviso put forward by the Government should not also apply to private company shareholders. In those circumstances, it will not be the intention of the Opposition to vote against the motion for the second reading of this Bill. The Bill shall go into the Committee stage and in the event that our amendments in the Committee stage are not accepted by the House the Opposition will vote against the motion for the third reading of this measure in this Parliament.

Let me go back now to the first of the measures proposed by this legislation. That measure simply proposes that liability for recoupment tax will not be escaped by reason of an ultimately unsuccessful post-sale of pre-sale tax avoidance scheme. That measure is designed to delete from the principal Act sub- section 3 (12). Sub-clause 3 (12) was inserted by the former Government last year. We resisted then Opposition amendments to have it taken out which were moved by the Labor Party Opposition in the Senate on the basis of one very simple proposition-that unless we leave sub-section 3 (12) in the legislation we will have situations where companies which, to use the colloquialism, have not been sent to the bottom of the harbour, are, in fact, caught by the legislation.

Far from the Treasurer (Mr Keating) being justified in saying that it defies logic for sub-section 3 (12) to be in the Act, if this Bill is about bottom of the harbour tax evasion it defies logic to take sub-section 3 (12) out. That sub -section was put in the Act to ensure that a company rendered unable to meet its tax liabilities other than through a bottoming exercise in fact is not caught by the legislation.

I remind the Government and, in particular, the Minister Assisting the Treasurer that the purpose of the provisons to recoup unpaid company tax evaded by arrangements which were the subject of the Crimes (Taxation Offences) Act passed by this Parliament in December 1980. I put it to the House and to the Minister that if the Government takes out sub-section 3(12) it will catch arrangements which are beyond the reach of the Crimes (Taxation Offences) Act. That is why the then Government opposed its deletion last year; that is why we opposed it in May; that is why we opposed it a few weeks ago; and that is why we are opposing it again tonight. Let me take the opportunity of emphasising at this stage that that in no way illustrates any kind of inconsistency, hypocrisy or change of mind. How on earth can we be inconsistent if we have voted the same way in government and in opposition on no less than four occasions, if one counts tonight? I dismiss immediately the charge that may be made by the Government to the effect that we are in some way behaving in a hypocritical fashion on this issue.


Mr Hurford —It just means you have been wrong three times.


Mr HOWARD —No, it means that the Government has been wrong on four occasions. The Government cannot describe something by a definition which this legislation goes far beyond and accuse us of defying logic. It is the Government which is defying logic and the meaning of the English language by describing these practices as being within the purview of the Crimes (Taxation Offences) Act.

Secondly, the design of this Bill is to authorise the Commissioner of Taxation to name in his annual report persons who fail to pay an assessed recoupment tax liability in respect of unpaid company tax. We believe that it is an unnecessary provision. We believe that people, having been obligated to pay up under the 1982 legislation, certainly are obliged to pay a taxation liability that has always been there but which has shifted to them through the operation of retrospective legislation. Frankly that is enough. It smacks of the discriminatory and penal provisions for people to want those persons to be named by the Commissioner of Taxation in his annual report. In those terms, as on earlier occasions, we will not have a bar of it.

Thirdly, the design of this legislation is to remove the test which requires that an arrangement which rendered a company unable to pay its tax must be identified before a recoupment tax liability can be established. In other words, the purpose of this amendment is to apply a less strict test on companies, the possible target of this legislation, than is implied under the Crimes (Taxation Offences) Act. That has only to be stated to show the inconsistency which is being argued by the Government. If in fact the purpose of the 1982 legislation were to recoup tax evaded by arrangements, the target of the Crimes (Taxation Offences) Act, how can we justify a measure which waters down the test contained in the Crimes (Taxation Offences) Act? That is precisely what this provision does. In those circumstances the Opposition proposes again to vote against that legislation.

The fourth provision which provides relief from liability to vendors' recoupment tax in certain anomalous public company cases is a measure which the Opposition will support. We will support it because it underpins the original intention of the 1982 legislation. There is some argument as to whether the amendment is strictly necessary, but if it is the Government's advice that it is necessary to give effect to the intention of the 1982 legislation regarding benefit, the Opposition has no quarrel with that proposition and will certainly support it. The Government is proposing that the Commissioner of Taxation be given the capacity to vary in part or in whole the liability of certain public company shareholders who may be within the reach of the recoupment legislation. We will not only support that measure but also propose an amendment to provide that the benefit of the same provision be extended to private company shareholders as well.

Under the existing Taxation (Unpaid Company Tax) Assessment Act-that is, the Act passed by the Fraser Government last year-there is a wide discretion in the Commissioner of Taxation under section 6 (18) to excuse from recoupment tax liability any person if in the Commissioner's view it is unreasonable that that person should meet that recoupment tax liability.


Mr Hurford —Yes, but it has been redrafted.


Mr HOWARD —I accept the good faith of what is proposed by the Government. I frankly have no quarrel with it. I take the opportunity to draw to the attention of the House the significance of section 6 (18). We all know, of course, that the celebrated beneficiary of section 6 (18) was the family company of the Minister for Finance (Mr Dawkins). As the Minister for Housing and Construction (Mr Hurford) knows, I have at no stage said that the Minister for Finance should not have had the benefit of that section. That clause was inserted by the former Government to ensure that if a person in effect received no benefit or a purely nominal benefit, in accordance with what I said at the commencement of my remarks there ought not to be a recoupment tax liability. I say quite openly that the Deputy Commissioner of Taxation in Perth correctly applied the 1982 legislation by giving the dispensation. That was what it was, because there was a prima facie liability by Coomel Pty Ltd under the legislation.

It follows from that dispensation that there must be literally hundreds of other public company shareholders in a similar position to that of Coomel Pty Ltd. I should imagine that many of those people have already paid their taxation assessments. I should further imagine that during the next few weeks the Commissioner of Taxation will start to make refunds to quite a number of people who have already made their payments. I hope that during this debate the Minister for Housing and Construction will take the opportunity to give an assurance to the Parliament that that course of action will be followed. I know that it would be the intention of the Commissioner of Taxation to ensure that all taxpayers in a similar position receive similar treatment. I think it is also fair to assert that there may not have been many public company shareholders-if any at all-who had received the Dawkins treatment prior to the time at which the dispensation was given by the Deputy Commissioner of Taxation.

I make no further comment except to say that one of the beneficial results of the Opposition having questioned the Minister for Finance about his nominal connection and not his beneficial connection with these taxation arrangements is that the availability of this provision under the legislation has been flushed out. I say again to the Minister for Housing and Construction that what happened in relation to Mr Dawkins's company was absolutely correct. It was in accordance with the 1982 legislation. It follows that there must be hundreds of people connected with the small number of public companies involved who are in a similar position and are entitled to get their refunds. I hope that during this debate the Minister can give us an assurance that they will get their refunds. I should like to make it absolutely clear that if those people get refunds in the course of the next few weeks they will be refunds under the Fraser Government legislation and not as a consequence of the amendments which the Government now proposes and which we are prepared to support. The Dawkins let-out was provided under the 1982 legislation, not under the amendments that are now being proposed . Equally, the refunds that I expect people will start to receive in the next few weeks must also be provided under the 1982 legislation.

The Opposition believes that there is no good reason why the amendment the Government is now proposing in respect of what it calls anomalous cases in relation to public company shareholders ought not to be applied to shareholders in private companies on the same terms. I understand that that may involve some administrative hassles and that from an administrative point of view it may well be easier for the measure proposed by the Government to be left as it is, but I hope the Minister Assisting the Treasurer might agree that if it is fair enough for the general discretion under section 6 (18) to be available to both private and public company shareholders it is also fair enough that the new let-out which enables the Commissioner to refund in part as well as in whole and to refund overpayments also be available to private company shareholders as well as well to public company shareholders. If the Minister dissents I would be very interested to know the basis in principle, bearing in mind that in no case are we talking about circumstances other than those in which a benefit is derived. I say again that I support the attitude taken by the Deputy Commissioner of Taxation in Perth. This 1982 legislation was predicated entirely upon the receipt of a benefit. By going down that path the Government is giving effect to the intention. That was what it did in relation to the Dawkins let-out, and of course that is what must occur in relation to the refunds. I hope that the Government will see its way clear to support that provision.

The fifth element of this Bill varies the evidentiary provision to ensure the constitutional validity of the legislation. I understand that this derives from a concern on the part of the Government that the conclusive evidentiary nature of the certificate of the Commissioner of Taxation which is conferred by the 1982 Act may, in the eyes of some, cause some constitutional problems. The matter has been litigated before the High Court of Australia. I think the normal practice of the Parliament is not to anticipate court decisions. Obviously, all parties would need to give consideration to the situation in the event of the High Court deciding against the validity of the existing legislation. In those circumstances we do not think it is appropriate at this stage for the Parliament to be considering this proposition. A couple of weeks ago we voted against this clause and we shall again vote against it. Likewise, we shall vote against the remaining provisions of the legislation.

In the time that remains to me I will say a couple of things about the campaign which is being waged by the Government in the wake of the Opposition's defeat of this legislation in the Senate and which no doubt will be waged by the Minister for Housing and Construction, who is sitting at the table, and others in the light of the Opposition having said again that it will oppose this legislation. The Government has adopted the McCarthyist tactic of saying that anybody who is in any way opposed to anything which it chooses to label as being an anti-tax avoidance measure is automatically and by definition a friend of the tax avoidance industry.


Mr Hurford —Hear, hear!


Mr HOWARD —The Minister says 'Hear, hear!' and again endorses it. Let him not be heard to complain if, because he may have any kind of nominal association with anybody who has any connection at all with any kind of extreme left wing politics in Australia, people call him a friend of that left wing organisation. Government members react pretty badly to that sort of description. People who pride themselves on being in the centre of the road of Australian Labor Party politics get pretty worked up if people say that they are a friend of the communists, the left wing or some other organisation. Honourable members can equally understand that there may be some people on this side of the House who are just as worked up about tax avoidance as Government members are but who happen to think that the way the Government is going about it is wrong.

I say to all Government members that they can scream until their hearts are content about friends of the tax avoidance industry. We demonstrated our position very clearly in the legislation that was passed last year. As I said in the debate this afternoon, in August last year the then Leader of the Opposition and the honourable member for Gellibrand, who was the Treasury spokesman for the Labor Party, said: 'As soon as we get into government we are going to do 15 things that are necessary to smash the tax avoidance industry'. The Government has attempted to do one of them which is absurd and unjustified. The Government has done nothing else. Of course, what that demonstrates is that the tax avoidance industry was well and truly dead by the time honourable members opposite came into government. It was put into that state by the legislation passed by the former Government-and not the 1982 legislation. It is part of the great myth about the tax avoidance debate that the really effective legislation of the former Government was the 1982 recoupment legislation. That was not the case at all. The two pieces of legislation of the former Government that had a dramatic effect on the tax avoidance industry were the new Part IVA, with the general anti-avoidance provision, put into the Income Tax Assessment Act in May 1982 and the Crimes (Taxation Offences) Act passed in 1980. The 1982 legislation was limited to the recoupment of about $600m of evaded company tax left unpaid as a result of arrangements which were the target of the Crimes (Taxation Offences) Act.

The second lamentation of the Government has been that as a result of the wicked Senate knocking back this legislation we will have to put up everybody's tax. The Prime Minister (Mr Hawke) came into this House and said: 'We are going to put up your tax because you have knocked this legislation back'. The Treasurer said: 'Oh, no we are not. We are only thinking about it'. The Prime Minister went to Moreton, suddenly remembered he was facing a by-election and said: 'Maybe we will put up your tax'. For a couple of days we had glorious confusion between the Prime Minister and the Treasurer. The Government has no warrant at all for arguing that taxation must rise as a result of this legislation and its predecessor being defeated by the Senate. More revenue is being lost by the Government's own decisions within a week of this year's Budget than will be lost this year through the Senate's rejection of the legislation a couple of weeks ago. By your own decisions you threw away $80m of revenue within a week of the Budget having been brought down. Yet you have the audacity to say that this legislation which costs --


Mr DEPUTY SPEAKER (Mr Mildren) —Order! I ask that the honourable member address his remarks through the Chair.


Mr HOWARD —The Government has the audacity to say that rejection of this legislation, which could cost about $60m, is in some way a shock horror and will force this Government to raise taxation. That is an absurd proposition. It only has to be stated for any objective person to understand how completely absurd that notion is. Let us put aside for all time the argument that because people are concerned about the justice of the Government's proposals and because people believe that the purpose of legislation is to recoup company tax evaded as a result of the stripping of companies having current year profits and that it goes beyond that it cannot correctly parade under that description, they ought to be regarded automatically as friends and supporters of the tax avoidance industry. I think that fair-minded Australian people will understand that.

Of equal importance is the absolutely sham claim of the Government that because of the blocking of this legislation it has been forced to resort to less popular measures; it has been forced to throw the burden on to other honest taxpaying Australian citizens. That was not the song of the Labor Party in 1981 when it was busily blocking the sales tax legislation. I have looked through Hansard and I have read the speeches that were made by the Attorney-General, Senator Evans; the Minister for Industry and Commerce, Senator Button, and the Minister for Resources and Energy, Senator Walsh. They said: 'What is $135m? It is nothing. Forget about it. It does not mean a thing in the overall collection of revenues in a Budget of $40,000m to $45,000m'. However, dramatically two years later $60m is a matter of life and death. It warrants the Prime Minister coming in here in all this trumped up indignity saying: 'It is absolutely dreadful; it is outrageous and we will have to do something to stop it occurring. We will have to impose some kind of savage income tax'. However, do not worry about 1981. I will bring honourable members more up to date, to a few weeks after the Budget, when Senator Walsh, the Treasurer's representative in the Senate, was asked a very simple question. He was asked: 'Firstly, was it true that post-Budget decisions of the Government had cost revenue $80m to $90m and, secondly, did that have a harmful effect on the Government's economic strategy?' Senator Walsh said: 'What is $80m or $90m? Forget about it. It is nothing in the overall totality of things. It has absolutely no impact at all on the Government's economic strategy'. No doubt the Minister Assisting the Treasurer will say in his Uriah Heep fashion: 'It is absolutely terrible that these people have been denied $60m and we are going to have to put a savage income tax impost on the Australian people. It is all the previous Government's fault'. I think he protesteth too much. The Prime Minister's excuses on this matter are wearing a little thin. The Government cannot have it both ways. It cannot say that its $ 80m or $135m is nothing but that our $60m means that it must increase income tax . It is an absurd proposition. It will not be sustained. We reject it and I believe that the Australian people will reject it.

The Opposition, for the fourth time-once in government and on the third occasion in opposition-will vote against, in a thoroughly consistent manner, the bad proposals that are contained in this Bill. Everybody in this Parliament knows that the legislation passed last year by the former Government had elements of controversy about it. It involved a considerable degree of agonising on the part of the then Government parties. I make no apology for it. Our Party went through a proper debate on that issue. It was a difficult debate and many people had proper reservations about that legislation. In those circumstances for the then Opposition-the present Government-to seek to extend that legislation in the manner proposed is quite unfair. It goes beyond the concept of recoupment. This measure cannot properly, by any use of the English language and the understanding of the taxation arrangements involved, be described as either recoupment legislation or bottom of the harbour legislation. It is for that reason that we will vote against the bad provisions that I have outlined. We will not divide on the second reading of the Bill. We will attempt to amend the Bill in the Committee stage. If that attempt is unsuccessful we shall vote against the third reading of the legislation.