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Wednesday, 9 May 1984
Page: 1790

Senator JACK EVANS(10.09) —by leave-I move:

That the Bill be now read a second time.

I seek leave to incorporate my second reading speech in Hansard.

Leave granted.

The speech read as follows:

Tax avoidance is a burden upon the honest taxpayer. It is a handicap for Government and it perpetuates inequities within society. Its investigation is expensive and time-consuming, as is its prosecution in the courts. It wastes resources which, otherwise, could be used for the good of society.

For that reason, I and my Australian Democrat colleagues are utterly opposed to tax avoidance!

Tax avoidance, together with the complex and often ambiguous nature of the various Tax Acts, creates problems for the honest, but diligent, businessman.

No-one would argue that every taxpayer has the right to minimize his tax liability before the law. It is the right of every business to do so and it is a commercial necessity which cannot be denied. The problem arises in that an honest, but diligent, business often does not know the legality of a tax minimisation scheme until it is tested in the courts.

There is a very thin line between tax avoidance and business acumen.

Consequently, the taxpayer is faced with uncertainty as to the legality of his actions. This involves cost, both in terms of legal advice and possible court costs. It is time consuming and it wastes resources. In addition, it creates artifical industries which thrive off the uncertainty.

It is for these reasons that Senator Mason and I have supported every piece of anti-tax avoidance legislation which has been introduced into this chamber.

The above problems are compounded when Governments implement retrospective anti -tax avoidance legislation.

It is for that reason, that my colleagues Senator Chipp, Haines and Macklin have remained true to their consciences and, while being utterly opposed to tax avoidance, have disallowed retrospective legislation. Their concern is shared by many Australians of all political persuasions.

This Bill seeks to reconcile the two principles which have clashed in the past: The need to prevent tax avoidance and the wish not to use retrospectivity in tax laws.

The Tax Avoidance Schemes Bill seems to fulfil two objects:

(a) To declare the opinion of the Parliament concerning the extent to which legislation for preventing the operation of blatant tax avoidance schemes can be expressed to apply retrospectively; and

(b) to provide a means whereby persons can guard themselves against entering into transactions that may later be affected by retrospective taxation legislation.

Under this Bill the Treasurer may, upon application, declare that a proposed scheme will not be treated as a blatant tax avoidance scheme. A person concerned in, or affected by, the scheme will be entitled to treat the declaration as a firm assurance that no government of the Commonwealth will propose or support legislation that would retrospectively alter adversely to that person the tax law relating to that scheme.

The Treasurer is required to formulate and publish the guidelines concerning the manner in which he proposes to exercise his powers.

Where an application is made, the Treasurer shall, within 90 days, either make a declaration or refuse the application. If the application is refused, then the reasons for refusal must be stated. Before deciding an application, the Treasurer may consult with the Commissioner of Taxation.

Upon declaration, notice of the declaration, including a description of the essential features of the scheme, will be published by the Treasurer in the Gazette.

If a person does not enter into, or does not carry out, the scheme in exact conformity with the particulars identified in the declaration, then that person cannot rely upon the declaration to protect them.

In addition, a declaration does not affect any liability in relation to a scheme under the law as in force when the scheme is entered or commenced. (This includes liability under Part IVA of the Income Tax Act).

This system of prior rulings, together with the prevention of retrospective action against those schemes declared not to be blatant tax avoidance schemes will do much to solve the anti-tax avoidance/retrospectivity dichotomy and will replace the current uncertainty in this area with some degree of stability and predictability.

The Australian Democrats are united in our attitude to destroying the tax avoidance industry and the prevention of any future tax avoidance schemes arising.

The line must be drawn clearly to distinguish an acceptable tax minimisation scheme from a blatant tax avoidance scheme.

This legislation provides the machinery to enable that line to be drawn and for the world to know precisely where the line is drawn and to have this knowledge before a scheme is implemented.

This Bill may well mark the end of the ugly era of the Australian tax bludger.

Debate (on motion by Senator Reid) adjourned.