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Friday, 22 March 1985
Page: 640

Senator JACK EVANS(10.12) —by leave-I move:

That the Bill be now read a second time.

I seek leave to have my second reading speech incorporated in Hansard.

Leave granted.

The speech read as follows-

Tax avoidance is a cancer that has eaten into Australian society and has created hardships, inequities, and personal bitterness in the minds of thousands of Australian taxpayers. While a selfish few have profited from ripping off their fellow Australians, the vast majority of honest taxpayers have had to shoulder the resulting increased burden. The tide, however, is turning. Tax avoidance is no longer socially acceptable, if it ever was, and the person on the street is clamouring for the tax cheats to be attacked. Consequently, the past several years have seen a concerted attack upon the tax avoidance industry that blossomed in the seventies. As evidenced by the annual reports of the Commissioner of Taxation, tax avoidance as an industry is dying.

The Australian Democrats welcome this development. We are utterly opposed to tax avoidance and, like other Australians, we are heartened by the success of the various pieces of anti-avoidance legislation that have been introduced. Although tax avoidance as an industry is dying, tax avoidance of various kinds still flourishes. It is for this reason that the Parliament continues to introduce further legislative deterrents, remedies and penalties. Consequently, the environment for those engaging in tax avoidance is becoming distinctly hostile. This is welcomed. There is, however, one major drawback with this ever tightening net. The complex and often ambiguous nature of the various tax Acts creates problems for the honest but diligent businessman.

Every taxpayer has the right to minimise 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 responsible business practice. 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 artificial industries which thrive off the uncertainty. It is for these reasons that I have supported every piece of anti-tax avoidance legislation which has been introduced into this chamber. For the same reasons, I introduced the only tax avoidance Bill to be passed in the last Parliament-the Bill to outlaw the 23F cherry pickers scheme.

There are two conflicting principles involved when one endeavours to catch the tax avoider with retroactive legislation. 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 seeks 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 Commonwealth of Australia 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 Kilgariff) adjourned.