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Wednesday, 18 February 1987
Page: 238


Mr BRAITHWAITE(12.23) —I am pleased by the admonition that has just been issued by the previous speaker, the honourable member for Stirling (Mr Ronald Edwards), about being responsible in this matter of tax reform and in our statements made in connection with it. I well remember when the Minister for Foreign Affairs (Mr Hayden) was Leader of the Opposition. He came to this same dispatch box and said that there was a loss to the Australian economy of $8 billion worth of taxation, on an annual basis, from what he called tax evasion and tax avoidance. If honesty is to be the basis on which the Government presents its case on the Taxation Laws Amendment Bill (No. 5) 1986 and the Income Tax Amendment Bill 1986, maybe it will let me know to what extent it has tapped that $8 billion loss, whether it was a real loss, where it came from and what it is doing about it.

What is being put before us as tax reform at the moment is nothing like tax reform. As far as the Opposition is concerned, tax reform would involve a simple and very clear statement of an intention to have fewer taxes. That is exactly what tax reform is.

What do we have before us today? The Taxation Laws Amendment Bill (No. 5) 1986 will not increase the size of the tax Act, although there are 28 pages in the Bill. But if anybody thinks they are simple, fair or readable and will not involve some cost of compliance for the taxpayer he is being sadly misled. I certainly have misgivings about the Bill. It has been described as a nightmare. It lacks comprehension. No taxpayer in Australia can now afford to do his own tax return, particularly given the self-assessment provisions and the threat of penalties which will result. Each taxpayer in Australia is being forced to bear an extra cost of compliance just in the lodgment of a simple income tax return because he cannot afford to take the risk under self-assessment. The Bill introduces quarterly instalments for the payment of provisional tax, which is just another indication that the Government and the Australian Taxation Office have no consideration whatsoever of the additional costs that are going to be imposed on the taxpaying business sector in complying not only with his legislation but also with the whole raft of legislation that has been before this House over the last 12 months.

I am obliged to my colleague, the honourable member for Curtin (Mr Rocher), for indicating what the tax calendar means to a business person in regard to compliance. If I remember correctly, the honourable member mentioned 12 items of responsibility for a normal business person as far as the Commonwealth is concerned, disregarding altogether every other regulation and requirement of State governments. One can mention only a few. Each week a business in Australia is called upon to be a tax collector removing tax payments from an employee's salary. The employer is obliged, by a certain date the following month, to remit that tax to the Taxation Office under a threat of penalty for paying money that was not his in the first place and for which he acted in trust. Then there are the sales tax requirements. As I understand it, the tax has to be lodged 21 days after the preceding month with the threat of penalties if it is not lodged in time. In some cases it is money that is not received by the taxpayer or business person because of the accounts rendered system. He is paying tax in advance.

There is the quarterly collection of the fringe benefits tax. Thankfully-I say `thankfully' because the tax is taken out by the banks-the collection of bank accounts debit tax is not a cost to the business person. However, he finds the cost incorporated in the cost of his banking account in the quarterly periodic statement. There is the corporation tax, the quarterly taxation assessment, the payroll tax, and statistical returns. We are now to have a quarterly assessment for provisional tax. To add to that in the great uncertainty of the business world today, if a person does not want to pay more tax than he feels he is obligated to pay, he has to take a quarterly account of his books. Let us be fair about this. Big businesses in Australia can be incorporated in the Business Council of Australia. I understand that there are 85 members. But the person who earns a basic income in Australia and tries to keep the private enterprise system going is the small incorporated business, the small partnership, the individual. That is where the cost of compliance is badly felt.

In this area nothing is sacred to the Government. Witness the demands it makes on the business citizens of Australia. I have mentioned some of those demands as far as tax requirements are concerned. This Bill addresses some of the problems which are the creation of the Government, such as the imposition of additional costs on business people, quite apart from tax.

It is interesting to move away from provisional tax to foreign exchange losses. We see an Act being changed to accommodate the economic incompetence of a government. The explanation of this provision overlooks why it is necessary to take into account a loss or a gain on foreign exchange. The discredited economic policies of the Government have allowed the dollar to swing so violently in recent years. Businesses in Australia are going bankrupt because of the implications of the floating dollar. Some grace is going to be given to the taxpayer because of this, but let us look at the other cost to taxpayers so far as the exchange rate is concerned. There is the cost of interest rates. The Taxation Office is now obliged to give a deduction as a business expense for our high interest rates, interest rates which are high because we are propping up the dollar, because our deficit is running out of control and because Australia cannot afford to pay its own way on the international markets. This represents a loss to the contributions to the Taxation Office. High government and industry costs and a fixed wage system add burdens to business and are a tax deduction.

Last year the Government carefully introduced a non-deductible item in the cost of the fringe benefits tax. I have never heard of anything so scandalous or anything so contrary to the canons of taxation law as that, a cost to a business in paying a government charge, a tax, on a business expense which should be disallowed for taxation purposes. It is an absolute scandal. The Government will stand condemned, as it does now, at a future election for the way it has tried to subvert its principles to squeeze more out of the taxation lemon.

Where in all of this does the Taxation Office stand in regard to its collections, given the losses and the massive bankruptcies occurring in Australia today because businesses cannot cope? A question that was not answered yesterday concerned the record number of bankruptcies of the last six months which means that the Taxation Office will be caught without its proper income tax collections because creditors will not be paid and that will be a tax deduction. I am not saying that is not the case, but we ought to understand in any debate on tax reform or principle in this House that economic occurrences come back to tax.

I speak to the amendment moved by the honourable member for Mackellar (Mr Carlton) in relation to what the compliance costs of this legislation will do to Australia. It is revealed every day by the loss carried forward by our farmers. It is revealed by the bankruptcies, the liquidation of companies and the false assessments that are being made continually by the Government. The system is not new. At the moment I am reading a book called Great and Glorious Physician, written just after the birth of Christ. The tribune, in sending a letter to his stepson, St Luke, mentioned that the state of Rome was parlous. If I remember correctly, he said that a person could not afford to be an honest taxpayer because the tax officials would say that there was something wrong and demand more of the honest taxpayer. That is the squeeze that is going on in Australia at the moment. It is not the dishonest who are being squeezed; it is the honest taxpayer who is called to account. I do not believe that any legislation should be put before the Parliament in the form the present legislation takes without its compliance costs being considered carefully.

I want to deal also with the extra pressure this type of legislation places on the tax agents. I confess to having a particular interest in this matter, being a chartered accountant until I entered Parliament. I left the practice in 1975. I thought that things were bad in Australia then. I believe that the pressures that are on these people are infinitely worse now. It is not often that one is happy to say that one has changed profession. Even though the accounting profession is such an honourable profession, I am in this position. Let us take self-assessment. A tax agent is under an obligation to lodge a return. These payments will be demanded in the current year on 1 September and so on. Normally provisional tax is based on the return of the income of the previous year. That previous year's income is then taken as the standard and increased by 10 or 11 per cent for provisional tax. Unless the notional income is devised in some way that is favourable to taxpayers-and I cannot imagine that that is the Government's intention-there will be further pressure on tax agents to lodge returns where provisional tax is payable, if not by 1 September at least by 1 December.

I say to the Government and the people in the Taxation Office that they have pressured tax agents in this country far too long and far too hard to expect that type of compliance in regard to the lodgment of tax returns. I have some sympathy for those tax agents who consult on a daily basis not just on tax but on the requirements of the fringe benefits tax, the lodgment of returns and all the other requirements that are being forced on them. The Government is putting a penalty on tax agents which I think is far in excess of expectations. This Bill does that little bit extra. There will have to be quarterly accounts. I am not knocking the fact that businesses should have up to date accounts. All those people in the BCA would have up to date accounts, not on a quarterly basis but probably on a daily basis. But the people who make this country go round, who make it tick and who provide employment-the people who are struggling in service industries, shops or things such as that-while trying to stay ahead of the creditors are unable to bear the cost of an accountant to prepare their accounts, so they must suffer the consequences of overpayment.

Also, as the honourable member for Curtin said, it is just a sweet deal within the Government to rely on earlier collections to reduce the interest payment on Treasury bills. If the Government is proposing this on the basis of a saving to government, I think it also ought to take into account the cost of compliance by those people within the industry.

Departmental attitudes in regard to compliance are very important. I would not like to think that the type of departmental officers I dealt with 11 years ago, when assessors or inspectors were persons who had been through the ranks, knew the Act and knew the circumstances, were no longer available. It appears to me that we have in the Office at the moment officers who are academically qualified but who are not practically qualified to deal with people. That application is very necessary for an understanding by departmental officers of how businesses run. It is not good enough for an officer to be armed with the penalties under the Act and to demand rights and wrongs of a taxpayer who just cannot comply with its provisions. I would ask for some better understanding between the Government and its clientele-I regard the taxpayers as its clientele; if we did not have them, the country would run amok-of the supervisory aspects that we introduced last year and the penalties that go with them. It is very necessary to address the attitudes within the Office.

We know what the attitude of the Government is; it is to squeeze the last drop of taxation from individuals and to go merrily ahead with its spending spree. Tax reform is a matter of public expenditure reductions. The pivotal point of any tax reform is presenting a Budget before this House that balances. I applaud the Business Council of Australia, which only this week suggested that the maximum deficit that Australia can afford next year is $1.5 billion. I hope it is not the Government's intention to achieve that by screwing taxpayers more and more, creating a loss of incentive, and not looking at the alternative of reducing expenditures.

I refer to corporate taxation provisions and what some honourable members on the other side have said about dividend imputation. They falsely presented to this House a figure of 75c in the dollar being paid on dividends compared with the 49c it will be under imputation. If we take the figures into account and if we add into that comparison the cost of the fringe benefits tax, for instance, and some of the other concessions that are not allowed, that figure just does not add up. I think it is again very important that this House consider the statements made by the Government. It has been less than honest. The Treasurer was questioned yesterday about bankruptcies and we have been talking about tax figures and honesty in taxation along the line.

At the risk of offending the Minister for Local Government and Administrative Services (Mr Uren) who is at the table, I just want to say that I have had a neckful of the complicated mess which is wrapped up and presented to us as a tax package. The taxpayers of Australia have had a neckful of it and I believe that on the Government's tax record it will easily be defeated at the next election. If that is the case, it has only itself to blame for its gross incompetence in this area and its lack of understanding of taxpayers' requirements.


Mr DEPUTY SPEAKER —It being near 12.45 p.m., the debate is interrupted in accordance with sessional order 101A. The debate may be resumed at a later hour.

Sitting suspended from 12.41 to 2 p.m.