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Thursday, 21 March 1985
Page: 603


Senator MACKLIN(6.15) —We are debating the Trust Recoupment Tax Assessment Bill 1985, the Trust Recoupment Tax Bill 1985 and the Trust Recoupment Tax (Consequential Amendments) Bill 1985. The controversial retrospectivity of these Bills to 1 July 1980 has already been dealt with in the debate that has taken place so far. The Bills have a considerable revenue expectation, about $10m, and hence are important Bills. They have been introduced previously. In fact, they were introduced into the House of Representatives on 9 October last year but did not reach the Senate and lapsed when the Houses were dissolved.

The Australian Democrats will support the actual policy content of the Bills in that they deal with new generation trust stripping schemes which allocate income from a family trust to a tax exempt charity. However, the income is not payable to the charity for some time-often, in some of the more extreme circumstances, after 80 years-and thus I think it can be fairly seen by most people that by that time the donation at present values would be absolutely worthless. Yet the trust beneficiaries in the present circumstances have a considerable tax advantage. I think most people would say that the scheme represents a way around the existing legislation and that consequent amending legislation needs to be passed.

Part IVA of the Income Tax Assessment Act, which is the new anti-avoidance section of that Act, is to be applied under this legislation from May 1981. Section 260 of that Act, the old anti-avoidance section which Gyles in his report believes should be used against blatant tax avoidance schemes, has not been tested against these schemes; neither has Part IVA, to which I have just alluded, been tested against these schemes. In other words, the suggestion made in Gyles's report, that he believed there would be every prospect of success if section 260 were used, has not yet been tried. In fact, I believe and all my colleagues believe that both this Government and previous governments have been negligent in not making use of those sections. Of course, for quite some time the stated proposition was that they could not be used.


Senator Peter Rae —Don't you think that the change in the constitution of the High Court has made some changes to the prospect of success of 260?


Senator MACKLIN —I am not about to embark on a social analysis of the High Court of Australia and its political or other judgments. Indeed, I believe it would be disorderly for me to do so and I will not be disorderly and go against the Standing Orders.


The ACTING DEPUTY PRESIDENT (Senator Haines) —Thank you, Senator Macklin.


Senator MACKLIN —Madam Acting Deputy President, I would not be disorderly while you are in the chair. The situation is clear that we should take Gyles's recommendation at face value. We should proceed to use those sections, which he maintains are available to us under the current Act against these types of schemes. Relying on his judgment-his was a very extensive judgment-action against many of the schemes which the Government had hoped to catch by the retrospective legislation, both this legislation and other retrospective legislation, would be successful. Indeed, as honourable senators know, I have stated that in every speech I have made on these issues, even prior to the Gyles report being submitted to this House.

Governments as early as the 1970s, and this includes the Whitlam Government, have been aware of the need to legislate against the tax avoidance industry. It is their neglect that has been the major cause of the lost revenue. This Government has sought to make amends by retrospective taxation. The point at issue is that if this Government had been really serious with regard to the other tax Bills-it certainly is not with these tax Bills-it would have called a double dissolution. It was open to the Government to call a double dissolution on the other Bills. As we now know, if the Government had done so this chamber would have seen the second joint sitting in the Federation's history. It would have passed those Bills because the extra numbers in the House of Representatives would have overwhelmed the Opposition.That is the settled fact. If the Hawke Government really had been serious about the whole exercise it would have called a double dissolution. It would have had the numbers to pass the legislation at a joint sitting. Let us be very clear that the exercise with these Bills-not with the other Bills-is a political exercise. It is not an exercise with regard to tax recoupment. The report of the Special Prosecutor, R. V. Gyles, QC, attacked governments for not using section 260 of the Income Tax Assessment Act to prosecute those who use-


Senator Watson —Not the Government; the Tax Office.


Senator MACKLIN —It attacked the Australian Taxation Office, then, for not using that section to prosecute those who used blatant and contrived tax avoidance schemes. I believe that this vindicates our belief that existing anti-avoidance sections of the income tax Acts have not been properly tested in the courts.


Senator Watson —They are doing it now.


Senator MACKLIN —They are doing it now, but they have not done it in the past. We believe that testing in the courts ought to take place. In order to fight tax avoidance it is not sufficient to pass legislation and use it. We also need the staff to be able to carry out those tasks. We know now from reports that the Australian Taxation Office is a good, income-returning operation. We have a fair indication that each extra member of staff will pay for himself by the work that he does. I am not quite sure we could say that with equanimity about many other areas. The Treasurer (Mr Keating) has announced an increase in the number of staff for the Taxation Office. That increase ought to have occurred earlier, but we certainly applaud the increase the Government has announced.

The only question that we believe arises seriously with regard to these Bills is whether the Commissioner of Taxation should be given additional weapons in this area, including retrospective powers, to pursue tax evaders. As is well known, a number of my colleagues believe that the types of tax avoidance schemes covered by these and other Bills justify retrospective legislation to enable the Commissioner to collect those taxes which have been so blatantly evaded. Others amongst us believe that legislation which retrospectively makes illegal an act which was legal when it was carried out is offensive and reprehensible. Our colleagues have been consistent in that. Those who have voted with me have been consistent on every retrospective tax Bill that has come forward, as have a number of others, such as Senator MacGibbon, who is in the chamber at the moment. For that reason, some Democrats will be supporting this Bill and some opposing it.

In many ways the division in our Party and in other parties reflects the division that undoubtedly exists within the community. Our parliamentarians, as always, will vote in accordance with their consciences and will not leap from one side to the other in this debate, as have quite a number of honourable senators who are still in this chamber and who have managed to satisfy themselves that they can vote both for and against the legislation according to a variety of principles.

Undoubtedly, if the amendment which is to be moved during the Committee stage by the Opposition were successful and were accepted by the Government, the revenue which would be collected would be very small indeed. The reason for that is very clear. When the then Treasurer, Mr Howard, made his announcement people took heed. At least, most people took heed; some fools did not. Hence, if the Liberal amendment is adopted, one will find that very little revenue will be raised.


Senator Watson —That should not be the principle.


Senator MACKLIN —No, it should not be the principle. However, it seems to be a factor supporting the proposition I put forward, that is, that when people are acquainted with the fact that the law is to be changed they are then in a position of knowledge and understanding. They are in a position to take action. If they fail to take action, that is their problem. If they continue with tax evasion exercises which the Government has clearly indicated it will legislate against, legislation which on past record the Parliament would support, that is their problem. It is up to them to do what they will. However, until such announcements are made I will continue to oppose the retrospective nature of this legislation. While it certainly is very tempting to go down that track, I believe that the ultimate effect would be to bring the law into disrepute. As I say, that view is not held by all of my colleagues. They will be pursuing what has been their consistent vote. Unfortunately we are still reflecting in that the deep divisions on this issue which exist within the community.

Sitting suspended from 6.28 to 8 p.m.