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Wednesday, 9 November 1983
Page: 2472


Mr BRUMBY(11.44) —I intend to speak briefly against the amendment moved by the Opposition to the Taxation (Unpaid Company Tax) Assessment Amendment Bill 1983 [No. 3]. During the second reading debate yesterday the Opposition made the point that it was concerned that in opposing this Bill it was not to be seen to be standing up continually for the interests of those who have avoided their taxation liability. While I certainly respect the views that are put forward from time to time by the Deputy Leader of the Opposition (Mr Howard), I say with respect that the Government in this legislation has done its utmost to accommodate the views of the Opposition parties in terms of recoupment tax legislation.

While my colleague the honourable member for Hawker (Mr Jacobi) gave an excellent summary of the history of this legislation in the House yesterday, I think it is worth while briefly recounting the efforts of this Government in attempting to regain avoided tax, tax that ought to have been paid in the past. The honourable member for Hawker made the point yesterday that this is our third legislative attempt to recoup that tax. In our first legislative attempt we retained the provision for 12 months in which to pay and removed the aspects of capital profits from the legislation. We did that because we sought to accommodate the widest possible range of views. In our second legislative attempt we announced further concessions in relation to personal income tax. We said that the personal tax measures were to apply only to current year profits and we also said that there would be no liability for personal tax where the only company tax evaded for that year was undistributed profits tax. In this, our third and final attempt to accommodate all possible views on this matter, the Government has said that we will not further attempt to recoup personal tax.

The Bill expands the anomalies relief provisions of the previous Government's legislation. As has been noted in debate, the new provisions of this Bill certainly assist public company shareholders who have been well removed from the actions giving rise to the recoupment tax liability. I emphasise that the Government has made every effort to accommodate views and to recover money which is rightfully owing. While the Opposition claims that it does not want to be seen to be protecting tax avoiders, I think its opposition to this legislation and the amendments it has moved show clearly that it is interested in protecting the interests of those who have avoided tax. I refer to the substantive aspects of the Bill, and the amendments moved by the Opposition, particularly in relation to section 3 (12) of the original Act, the innocence clause. That was introduced in the original legislation last year and was amended by a second Bill which was put through at a later stage. That exempted from liability shareholders in companies which had been sunk to the bottom of the harbour if those companies had been put into an unsuccessful tax avoidance scheme following the initial transaction, that is the sale from the directors who controlled the original companies and the first purchasers and directors in the line which ultimately led to the bottom of the harbour.


Mr Jacobi —Those people who dabble in shares know what it is all about.


Mr BRUMBY —That is right. There were a number of tests, of course to determine whether people would come within the provisions of section 3 (12) of that Act. Firstly, the scheme had to be entered into to eliminate or reduce the company's tax liability, ordinary and undistributed, for the year only in which the sale and purchase occurred. Secondly, the scheme had to be found to be unsuccessful in its purpose of creating deductions that would eliminate the company tax liability that had accrued to the date of the sale. Thirdly, the scheme had reasonably to have been expected to achieve its purpose. Fourthly, the scheme had to be unconnected with the stripping of a company and that the arrangement had not to be entered into for the purpose of securing the result that the company would be unable to pay its liabilities. That was the test of the innocence clause. In opposing this amendment in the Committee stage I bring to the attention of the Committee the letter from the Commissioner of Taxation dated 21 October 1982 to the then Treasurer in which the Commissioner said, amongst other things:

The Bill has been changed, as you have requested-

that is, the insertion of new section 3 (12)-

to exclude from its scope cases where there was a post-sale avoidance scheme which, though ultimately unsuccessful,was reasonably expected at the time to be effective.

The Commisioner went on to write:

I hope that I am wrong, but observe that this change must open up the possibility that some promoters will, even though backdating of documents and the like, now seek to establish that after their purchase of the shares they did in fact put the company into one of the ''reasonably expected to be successful'' avoidance schemes. It may not matter that in execution they botch it up, what will be important is that they can show they tried.

That was the advice that was received by the then Treasurer, the honourable member for Bennelong (Mr Howard) from the Commissioner of Taxation. It shows clearly that sub-section 3 (12) is both obnoxious and illogical and ought never to have been included in the legislation. The Commissioner said it all but, despite that, it is in the legislation. This Government is certainly committed to seeing that innocence clause, that sub-section 3 (12), removed.

The amendment also seeks to exclude from this legislation the naming of persons . I make some brief points on this. In this legislation the only people who are to be named are those who fail to pay a tax liability once it has been assessed. That is a consistent and similar treatment to that which applies to every other taxpayer. Why should the Opposition seek to make an exception in this case for people who have avoided a tax liability assessed by the Commissioner? If such people do not pay up when they are assessed, they ought to be treated equally with every other taxpayer. That is all that this legislation does and I find it extremely concerning that the Opposition seeks to oppose that.

I move to the third major substance of the amendment moved by the Opposition, that is, the question of anomalies relief being extended to private shareholders . It is my view that that is a totaly opportunistic position. The honourable member for Bennelong, when speaking in the House last night, said:

We are not trying to get a fast ball through on the subject. I understand that while there may be some administrative implications the revenue implications are fairly nominal. So there is no fast ball involved in it.

But, of course, that view is quite contrary to the one he expressed in Perth two weeks ago. For the benefit of honourable members, I will quote from a Press release issued by the Deputy Leader of the Opposition in which it is stated:

The government's decision to give the same exemption from bottom of the harbour tax to what could be thousands of mainly small shareholders in public companies, as has already been given to Finance Minister Mr John Dawkins, was welcomed in Perth today by the Deputy Opposition Leader, Mr John Howard, M.P.

. . . .

Mr Howard said it had always been the previous government's clear intention that the tax should apply only to those who receive the benefit of the evasion. He said that he believed there was sufficient discretion-

I repeat that: 'He said that he believed there was sufficient discretion'--

within the existing legislation to relieve small shareholders who derived no benefit or only a nominal benefit, from liability. This after all, had been the approach adopted in relation to Mr Dawkins' company.

As the honourable member for Bennelong said last night in the House, he understands that there may be some administrative implications in extending relief to private company shareholders. The simple fact is that the honourable member for Bennelong knows full well that if that exemption, that anomalies relief, were extended to all private company shareholders, there would be not only minor administrative difficulties but also a massive backlog and clogging up of the system. He knows that well. As I have already said, and he alluded to this in his Press release, the existing legislation has already provided relief in the case of Mr Dawkins and Coomel Pty Ltd. Sub-sections 5 (4) and 6 (18) of the Act already give the Commissioner the discretion, if he wishes it for a variety of reasons or if the amount is under $100, to waive totally the amount.


The DEPUTY CHAIRMAN (Mr Rocher) —Order! The honourable member's time has expired .