Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
 Download Current HansardDownload Current Hansard   

Previous Fragment    Next Fragment
Wednesday, 18 February 1987
Page: 235

Mr RONALD EDWARDS(12.05) —I am pleased to rise in support of the Taxation Laws Amendment Bill (No. 5) 1986 and the Income Tax Amendment Bill 1986 and to oppose the amendment. It is good to have speakers on our side. Already I am supporting the remarks of the honourable member for McMillan (Mr Cunningham), and other supporting speakers on this side will be the honourable member for Chifley (Mr Price), the honourable member for Perth (Dr Charlesworth), who is with us, the honourable member for Lowe (Mr Maher), the honourable member for Capricornia (Mr Wright) and the honourable member for Streeton (Mr Lamb). They will bring a substantial body of knowledge and opinion to this debate as well as the experience of being in government and going through the process of tax reform. I am pleased to commend these honourable members to the House because they will add great substance and weight to today's debate.

As I have already said, we are speaking on the Taxation Laws Amendment Bill (No. 5) and the Income Tax Amendment Bill, and in one instance we are referring to the question of provisional tax. Clearly, when we talk about the whole structure of provisional tax and the whole structure of tax in this country, we open up a very wide debate. I would like to pay some attention to that. I would also like to talk about the general strategy of tax reform which this Government has pursued, because one of these pieces of legislation falls within that ambit. I think it is crucial to state that this Government regards the question of tax reform as being central to its economic strategy. In the light of that, I think it is useful to juxtapose some of the propositions being put by those opposite. I also recognise the amendment moved by the honourable member for Mackellar (Mr Carlton) in this instance.

What we are about here is saying: `Yes, there are proposals for tax reform. This Government has already implemented a substantial number of those proposals. One of these pieces of legislation goes down that path, but there are also some other issues that we ought to be addressing'. In terms of the other issues, I think it is true to say that one of the complaints that are raised by the electorate-here I take up a point made by the honourable member for Mackellar-is the excessive length and complication of the Income Tax Assessment Act. I think it is true to say that it is very difficult for professionals in the accounting field and for practitioners in the business community to grapple easily with the tax Act. In the context of this debate, that in part results from the failure of previous governments to bring in reform at the appropriate time. What has happened is that this Government has tried to take on board the whole issue of tax reform and the question of tax simplification. Both of those things are being addressed by this Government.

Whilst recognising the point made by the honourable member for Mackellar, that there is a difficulty in terms of the complexity and length of the tax Act, we, on this side, say that the issue of tax reform has been neglected for far too long. It was never properly grappled with by the previous Government. The Leader of the Opposition (Mr Howard), when he was Treasurer, did not completely come to grips with that, and I think we have inherited that situation.

Another point that I think is valid for many honourable members in this place relates to the role of the Australian Taxation Office. I think that the Tax Office, in its treatment of clients in tax matters, too often takes an adversarial role. Frequently businessmen and individual constituents complain to me that they are very often treated by the Tax Office as if they have deliberately sought to evade or avoid their tax liability, when in fact their mistake may well have been due to a change in interpretation. On that point, let me say that one of the difficulties I find is that very often someone has been given an assessment in a particular year, say in 1980 or 1981, and then, in subsequent years, the attitude towards that assessment is changed and, in a sense, there is a retrospective look at it. It does not matter who we are talking about. I find that objectionable if, in fact, the original assessment arose not out of a deliberate attempt to avoid or evade tax but due to an opinion that was given at the time by the Deputy Commission of Taxation. I think that is a very important issue that we need to be addressing constantly in this place.

My view is that down the track we shall need a higher level of support for the tax system by the broader community. We do not have that, largely for two reasons. One reason is that the reform that was necessary in the past was not undertaken. The second reason is that there developed a great degree of anger about the tax system, particularly amongst pay as you earn taxpayers who were paying excessively high rates. This Government has addressed both those questions. It has sought to reform the tax Act and all of the other regulations arising from that. It is also doing something about reducing the high marginal rates. But I think the ultimate goal of this Government-and, I would hope, of the community-is to get the tax system into such a state that a large part of the community will find that it can co-operate with it.

I want to make some comment shortly about full imputation, because I think that is central to this debate. I think what has happened over time is that previous governments have been unwilling to address the question of tax reform, so the Tax Office has been left with the tremendous burden of trying to deal with avoidance and evasion practices. It was too difficult for it to clean that all up, so, in a sense, some people were treated in relation to those matters as if they were adversaries when in fact they were not, but others were allowed to get away with tax rip-offs. I think a lot of the blame has to be laid at the feet of the honourable member for Bennelong (Mr Howard) for failing to come to grips with that when he was the Treasurer. I still think that while the people opposite are talking about tax reform, what they need to remember is that the broad base of the Australian community has not forgotten the fact that the Opposition, when in office, did allow the tax cheats to get away with it. It did allow very high marginal rates to persist. When the honourable member for Bennelong left the office of Treasurer, he left the 60c rate in place. While there is a lot of talk about tax at the moment, the Australian community still recognises that that was the situation in March 1983 when the Liberal-National Party Government was thrown out of office. We have attempted to address that circumstance with tax reform. But honourable members opposite must not forget that that was the prevailing condition, and they allowed it to exist. We now have these shadowy 25 faceless millionaires on the Gold Coast who are backing Sir Joh. Where have some of their funds come from?

Dr Charlesworth —What are they hoping for?

Mr Price —A good question.

Mr RONALD EDWARDS —What are they hoping for, as the honourable members for Perth and Chifley ask? What is the price of these faceless men? Is it, in fact, to get back to the old days of tax cheats?

Mr Braithwaite —Mr Deputy Speaker, I raise a point of order. This matter has nothing to do with the subject under discussion. It is a personal reflection and I ask that it be struck out.

Mr DEPUTY SPEAKER (Mr Millar) —There is no point of order, but I would ask the honourable member for Stirling to be more relevant to the Bills before the House.

Mr RONALD EDWARDS —Thank you for your guidance, Mr Deputy Speaker. I did want to make another point that I think is sensible in relation to this debate. As a government, we should be looking at the depreciation allowance on new capital investment in buildings. I would urge very strongly that we examine the question of increasing the depreciation allowance on new capital investment from 4 per cent to 8 per cent. I believe that would be a quite significant move and would do something in terms of putting further pressure on the commencement and approvals side of the building industry. I think that is a quite central issue that we ought to be addressing, and it is one to which we can return in subsequent debates.

I did want to say something else in relation to tax matters. One of the difficulties that we, as a government, are facing in having a tax debate, is that we do not know who we are arguing with.

Mr Price —That is right.

Mr RONALD EDWARDS —As the honourable member for Chifley says, that is right. The difficulty we have is that we do not know where the Liberal Party stands on tax. I know that the honourable member for Mackellar is putting some work together on that. But we do have that great difficulty. At the moment we are not really sure whether all of those tax promises about which the honourable member for Mackellar spoke are central to the Opposition's proposition about tax reform. That imposes quite a burden upon the community when it tries to make decisions.

Very clearly, we are of the view that tax reform must go ahead, and this legislation forms part of that general approach. Previous speakers have often ranged widely on the question of tax in this place. One of the issues that has to be addressed is what is the path of tax reform that is being proposed by those opposite and who are we addressing ourselves to? Our tax policy is very clear. We felt that there were some very important goals about tax reform, and one of those was to increase equity in the tax system. We believe that, by and large, we have gone a long way towards achieving that.

The previous speaker, the honourable member for Curtin (Mr Rocher), ranged across a number of things, such as the question of the fringe benefits tax and so on. I want to make one point about that. I think the problem that the Liberal Party faces on this is that too often it is going to be seen as the defender of the free lunch. But what about the real issue of tax reform in terms of the ordinary person? Why should ordinary people, who go to work with their lunch in a brown paper bag, feel that they have to subsidise those who might seek to have a very expensive lunch? There are many people in the Australian community who feel very strongly and angry about that. This issue has to be addressed by the Opposition. We have addressed it as a government. We felt that it was central to do something about that whole area of fringe benefits. By and large that has been put in place and there is broad community support for it.

On another question of tax reform, that of withholding tax, which was mentioned by the honourable member for Curtin, it is interesting that the Opposition opposes the prescribed payments system. When I speak to people in the building industry these days, they are very supportive of the prescribed payments system because they say that it brings some regularity into their tax practices. It enables them to be much clearer about their tax liability during the year. One of the other interesting things is that the tax rundown period from March to June was traditionally a very difficult period in financial markets because people were putting aside funds for their tax liability. With the prescribed payments system it is possible for them to spread that out during the year and their tax liability is more clearly understood.

Mr Price —The same with provisional tax arrangements.

Mr RONALD EDWARDS —It is the same with provisional tax arrangements; I thank the honourable member for Chifley for that.

Mr DEPUTY SPEAKER —Order! The Chair takes the opportunity of the interruption in the honourable member's remarks by a benign interjection to point out that the Chair has extended considerable latitude to the honourable member on the premise that the occupants who preceded my presence in the chair may have extended latitude. But I am obliged to invite the honourable member to address the Bill in more specific terms.

Mr RONALD EDWARDS —Thank you, Mr Deputy Speaker. What I am trying to do is to respond to a number of points made by previous speakers from the other side. I have listed them all here and I am in the process of doing that.

Mr DEPUTY SPEAKER —It is a persuasive argument. The honourable member suggests to me that two wrongs make a right. I will listen to him further.

Mr RONALD EDWARDS —Thank you, Mr Deputy Speaker. The question of provisional tax and of being sure of one's commitments and being able to spread them throughout the year is central to this legislation, as the honourable member for Chifley has pointed out.

I also add that one of the issues that we have addressed is that of tax averaging, which is embodied within this legislation. One thing that gives me great pleasure is to recognise that this Government understood its obligations on tax averaging for professional sports people, authors and artists. It was something that had not been addressed previously, except in the rural sector-and there was merit in that. This legislation has within it the issue of tax averaging. We regard it as important in terms of our equity goals for the tax system. I say to the House that this Government has done many things to address the issue of tax reform.

The honourable member for Curtin also spoke about interest rates when he was talking about expenditure. The second reading speech states:

Depending on interest rate assumptions, it is also estimated that annual expenditure savings of up to $100m will result from the need to issue fewer treasury notes.

I am disturbed that the Opposition does not recognise that there are savings to be made. One of the obligations that we regard as important is to try to reduce those expenditure commitments. I am disturbed that the Opposition is not wholeheartedly in support of that. The honourable member for Curtin spoke about interest rates and their application. One of the issues that we have sought to address is to allow market interest rates to have a greater play in these matters. It is disturbing to hear the Opposition in this place have a mixed voice on that. It has been our view that the market should play a greater role in the workings of the economy. I note that the honourable member for Curtin did speak about that. But we on this side of the House are happy to recognise the role of the market-place in the workings of the economy.

It is interesting to note that this Bill also provides for tax in relation to foreign exchange gains and losses. That is an important move. The second reading speech of the Minister Assisting the Treasurer (Mr Hurford) stated:

One of these gives effect to the decision of the Government announced by the Treasurer . . . on 18 February 1986 to treat as assessable income certain realised foreign exchange gains of a capital nature and to allow corresponding income tax deductions for foreign exchange losses.

That is very significant in relation to our attitude to tax reform. Let me say in this respect that this Government has been very clear about its decision to float the Australian dollar. We recognise that we are part of an international community and that we cannot simply isolate ourselves in relation to both our economic policy and our taxation policy. This is where this question of imputation that was referred to by previous speakers and that I foreshadowed at the outset comes in. One great reform that forms part of the tax reform package is the full imputation of company dividends. As the honourable member for McMillan said earlier, the business community is now paying a tax rate of 49 per cent instead of 78 per cent. The impact of that on business confidence and, over the long term, the willingness of people to invest in equities in this country is very significant. One thing that has been of great concern to people on this side has been the lack of incentive towards equity investment, except for tax avoidance purposes. It is necessary that we provide a positive stimulus so that that full imputation of company dividends which is provided for is very significant in terms of allowing equity investors to benefit from it. That is our attitude on it and we believe it is a very important part of tax reform in this country.

In my concluding remarks let me say that we on our side of the House have set about the business of tax reform recognising some objectives. Those objectives are to overcome the tax avoidance and evasion practices that preceded our coming to office. We have also recognised that there had been a substantial loss to revenue from the failure of previous governments to address the question of tax reform at the appropriate time. We believe we have done a lot to restore faith in, and support for, the tax system. That has to be said. When we look at the big cuts in marginal rates that came into effect on 1 December last year and will come into effect on 1 July this year, we are looking at a substantial improvement in the tax position of ordinary pay as you earn taxpayers. That is very central to the sorts of propositions that we are putting to the community.

Tax reform is central. We have gone a long way towards making substantial reforms. Tax reform is something on which the Australian community will have to make a choice. Cohesive tax reform, of which these Bills are part, has been gone into thoroughly by the Government in terms of both its revenue implications and the resulting expenditure possibilities for the Government. I believe we have been responsible in that. What the Opposition has to address is whether it wants the 25 per cent flat tax, the Milan Brych tax, that has been proposed or whether it wants a broad-based consumption tax and all the commitments to tax cuts made by the Leader of the Opposition. There is genuine reason for concern about the fact that we do not have a proper tax debate because as yet those opposite do not have a tax policy.

I am confident that the Australian community recognises that this Government has worked hard at tax reform. I am also confident that there will be increasing public support for our tax reform because it will be recognised that we have modernised the tax system. We have done a great deal towards increasing its equity and its fairness. We have done a great deal towards improving public support for the tax system. I say to honourable members opposite: `You have a responsibility to be responsible in your tax statements and your expenditure commitments. You also have a responsibility to try to bring those together. At this stage you have not done that'. We on this side of the House have done so and we are pleased to support these Bills.