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Thursday, 21 March 1985
Page: 607


Senator WALSH (Minister for Finance)(8.17) —I have not heard all of this debate but I understand that the Senate will divide in the way is has divided in the past, since this Government has been in office, on Bills to force tax evaders to pay the tax they ought to have paid long ago, with this minor variation: Because there are a few people in the Senate now who were not previously here and there is an increase in total numbers, whereas the vote in the previous Parliament had usually been tied on this sort of measure, the amendment moved by the Opposition is likely to be carried this time by two votes. Senator Harradine always exercised the crucial vote in the past to protect the tax evaders. He will not be in that position tonight.


Senator Peter Rae —I think you should withdraw that. Exception has been taken to it.


Senator WALSH —It is true. I shall withdraw it if the Deputy President instructs me to do so and certainly under no other circumstances.


The DEPUTY PRESIDENT —Senator Walsh, you should withdraw it. It was a reflection on Senator Harradine.


Senator WALSH —I withdraw if you tell me to, Mr Deputy President. The fact remains that Senator Harradine is the only person, apart from members of the Liberal and Country parties who were under party discipline at the time, who voted for the same clause in Malcolm Fraser's 1982 retrospective tax legislation and voted against it when it was reintroduced by this Government in 1983. That is a fact that the Hansard record will show. It was exactly the same proposition. He voted for it under the Fraser Government when his vote was not critical. He voted against it under this Government when his vote was critical, given the way it was known that other honourable senators would divide on that question; and members of the Liberal and Country parties who had voted for the Fraser Government legislation in 1982 were, of course, under party discipline to do so, which discipline not all of them accepted.


Senator Peter Rae —Some members of the Liberal Party voted against that.


Senator WALSH —I said that. The fact that Senator Harradine no longer exercises a crucial vote might lead some other people to reassess their position. The fact that this legislation has been introduced and, indeed, that a tax avoidance scheme has been uncovered and is known to have been operating subsequent to May 1981 demonstrates that Part IVA of the Act, passed by the Fraser Government in 1981, has not, as Mr Howard and the Government of the day asserted-I think the Opposition of today still asserts it-closed off income tax avoidance.

The very fact that this scheme has been uncovered and that because of its use some $9.5m had been lost in revenue prior to the former Treasurer identifying it in May 1982 demonstrates that Part IVA-the alleged grab-all, completely effective anti-tax avoidance provision-has not been effective. About $9.5m was lost in revenue because of the use of the contrived arrangements against which this legislation is directed before the former Treasurer made a public announcement that he would legislate against it. The defence of the former Government was that retrospective legislation against fraudulent schemes was not necessary because Part IVA had closed them off. It has now been demonstrated that Part IVA has done no such thing.

As I and my colleagues have said on many occasions, what will close off tax avoidance and tax evasion-and at the margin it is very hard to tell the difference-is a credible threat of retrospectivity. If the threat were credible it would not even have to be used because the would-be tax evaders and avoiders and the bevy of parasitic accountants and lawyers who support them now would not attempt to set up contrived arrangements to avoid paying tax if they knew that sooner or later the Parliament would legislate to force them to pay the taxes that they had avoided. There would be no incentive for that sort of activity. But as long as the Senate or, in this case, I expect, slightly more than half of the Senate continues to behave in the way that it has behaved since this Government came to office, the tax avoiders will know, and so will the bevy of parasitic accountants and lawyers who work for them, that if they can just devise some new scheme that has not been tried before, some contrived arrangement which manages to hide or turn taxable income into some form of non-taxable receipts, they will be able to avoid taxation. When the Senate votes the way it used to vote in 1982 when it passed one piece of retrospective tax legislation, that sort of anti-social activity will cease because it will be known that there can be no financial gains in the long term to those who perpetrate it.

Senator Watson asked a specific question which I did not hear properly and I did not understand, but I will endeavour to get him a reply in writing from the Treasurer (Mr Keating) or the Commissioner of Taxation at some time in the future, if that is satisfactory.

From what I have been told, the amendment to be moved by the Opposition tonight will be carried. That means that of the estimated $10m which this Bill would have recovered had it been passed as it was introduced into the Senate only $500,000 will now be recovered. It could be argued, of course, that it is not worth proceeding with legislation for only $500,000. In one sense that may be correct. However, unless the Act is amended retrospectively to May 1982-instead of July 1980 to which it should be amended retrospectively-there is no guarantee that these schemes will not be revived.

It might be worth putting on the record the essential elements of these sorts of schemes. They were schemes under which donations were made to charities, claimable in full against taxable income, but the money was not paid over for about 80 years. That meant that the value of the donations at the time of payment would be a very tiny fraction-something less than 1 per cent if immediate past rates of inflation continue-of the amount deducted from the taxable income at the time the donation was ostensibly made. The schemes provide that one makes a donation, claims the tax deduction and actually pays the money over in 80 years time when it is worth something less than 1 per cent of what it is worth today. Very clearly that is a highly contrived arrangement which the unholy coalition of three parties and, I expect, one Independent-although, since his vote is no longer crucial, perhaps Senator Harradine will not bother to vote on this occasion-will ensure that people who took advantage of that contrived arrangement will be allowed to keep the money.

Assuming the amendment is carried, I intend to proceed to move the third reading of the Bills. The Bills will then have to go back to the House of Representatives and the Government will have to reconsider its position. From my brief discussions today with the Treasurer's office it seems to me that the Government and the House of Representatives will, very reluctantly and under extreme protest, accept the amendment which I am informed is likely to be carried here tonight.

Question resolved in the affirmative.

Bills read a second time.