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Friday, 19 April 1985
Page: 1242

Senator Dame MARGARET GUILFOYLE(11.00) —As many of the speakers in this debate have said, we are debating for about the fifth time the matters to which the Bills that are before us-the Taxation (Unpaid Company Tax) Assessment Amendment Bill 1985 and the Dividend Recoupment Tax Bill 1985-relate. It does make one ask why they are introduced again and again when the attitude of the Parliament with regard to retrospective legislation has been made perfectly clear. We have had from the Government a number of different Bills which have a retrospective effect. On some occasions the Senate has made it clear that it would accept those measures prospectively and in some cases it has taken action to ensure that Bills that would have that effect have been passed. These Bills are part of a series of Bills that have been introduced in different forms since the Government was first elected in 1983. The Government's approach to retrospectivity is not consistent in the matters that are covered by these Bills.

The Government keeps changing the Bills. It will be recalled that the first Bills of this type that were introduced were so draconian that we did not hear much about them at all after the Senate rejected them. I doubt whether the Government even understood the severity of the measures that were proposed. It went very quietly when the first group of Bills were rejected in this place. The Government has made a series of attempts to get this type of legislation passed. I note that the figures that are given with regard to these Bills total several hundreds of millions of dollars and the description of the Bills is that they will extend the scope of the legislation so that personal income tax avoided by former owners of companies stripped of pre-tax profits will be subject to recoupment.

I have to ask whether the Government is really serious about regaining tax revenue under the circumstances that it claims, because it has certain powers with regard to Bills of this kind and those that were rejected throughout last year. It could be said that it had the double dissolution machinery whereby it could have taken constitutional steps to have had Bills for retrospective tax passed following a double dissolution. The Government chose not to do that and to that extent one has to question the sincerity of the Government or the urgency in the mind of the Government with regard to its so-called recoupment tax Bills.

Senator Brownhill, who has just spoken, asked why the Government keeps bringing the Bills in; it knows the views of members and senators in the Parliament. The easy answer to that is that it is because of a commitment that it gave under the prices and incomes accord to the trade union movement, that it would introduce retrospective tax Bills. An attitude was expressed by the trade union movement that pay as you earn taxpayers did not have the options to manage their tax affairs and minimise their tax that others who were in business or who were in other associations had, so part of the commitment under the prices and incomes accord is that the Government will introduce retrospective legislation.

The Government talked about it at the last election when it did not have a tax policy and when the Prime Minister (Mr Hawke) stumbled into a commitment to hold the summit that will be held in a month or two. As I said, at the time that it was talking about its prices and incomes accord and a tax summit it had the option of a double dissolution of the Parliament and of then putting its Bills to a joint sitting of the Parliament, thereby making a really strenuous effort to get them passed by the Parliament. I think the Government is quite relaxed when we reject the Bills for it, because it is then able to say that it has given some weight to the commitment it made to the trade union movement under the accord and it also gives it someone to blame for the size of the deficit and its own inability to control the growth of Government expenditure. That is not government; that is just passing the buck to a group of people here whom it chooses to call friends of tax cheats.

Each time it brings in these Bills it uses them as a vehicle to continue the myth that the former Government failed to stop the tax avoidance industry. As someone who acted for the former Treasurer (Mr Howard) in this place, I have to say that time and time again Bills were brought in to amend the tax law in order to stop contrived and artificial schemes that avoided tax, sometimes on a general basis, sometimes for specific schemes. It was well known that throughout the five-year period when John Howard was Treasurer more Bills were brought in to amend the tax law to stop artificial schemes than were brought in at any other time. For it to be said in Parliament that these Bills are the only way in which any attempt has been made to stop the artificial contrived tax schemes or tax avoidance schemes is quite misleading and quite dishonest.

Mr Dawkins, as Minister for Finance, made the public comment that the tax avoidance industry is dead. That is so, not because of any legislation of the present Government but because the series of changes made by the former Government to ensure that any of the contrived schemes that were able to be stopped by legislation or by the criminal penal legislation had the effect that was expected. These schemes have been stopped. The Hawke Government has attempted to bring in this type of legislation time and time again. It is sheer hypocrisy for it to present this legislation as an attempt to do something that had not been attempted to be done and something that needs to be done, thereby justifying penalising a selective group of people for schemes that go back over a decade.

Senator Mason presented a very circuitous argument about retrospectivity and his view that these were not retrospective tax Bills. It seemed to me to be a very confused argument, but he perhaps made it clearer when he talked about the changes that were recently announced by the Government to the homes savings grant scheme. This is a perfect example of the point that has been contended by the speakers for the Opposition with regard to retrospective legislation. In the past few days the Government has announced changes to the homes savings grant scheme-as a government is perfectly entitled to do-which will reduce the benefit that is to be paid in the future to people who are eligible to receive a benefit under that scheme. It is a scheme that has been extremely helpful to many thousands of people who have purchased homes under the scheme. The Government has announced that in future there will be a reduction or a change in the basis on which these grants will be made. The Government did not, in the last few days, bring in a Bill that retrospectively changed the homes savings grants scheme date from when it first instituted it in 1983. It did not bring in a Bill that required people who had a grant to repay that grant after they had purchased their home and after they had had the expectation of the use of the funds. That is the analogy that Senator Mason ought to see if he is talking about the retrospectivity of the Bills that are before us. It is changing the rules a long time after the transactions have occurred. In this case it is asking for a repayment of tax on a basis that did not exist at the time that these schemes were entered into.

We have heard some comment about the tax summit. Like, I am sure, most of my colleagues, I have received a number of submissions from organisations which intend to make representations to the tax summit. I have looked through the submissions that I have received and none of them mentions retrospectivity as a subject for urgent debate at the tax summit. A lot of the submissions talk about a tax system that ought to have equity, efficiency and simplicity. I think that we would all agree that those elements are desirable and necessary for compliance with any tax system. If one is looking for equitable tax system, I think one must look for fairness, justice and some certainty for the people who have to comply with it. I fail to see that there can be any fairness, equity or justice in a system that embarks in a general way on retrospective legislation. Such a system has been advocated by some speakers from the Government Party. Senator Elstob considers that retrospective tax legislation is quite desirable. Senator Mason on the one hand does not seem to believe that what is before us is retrospective and on the other hand believes that it is quite all right to bring forward legislation to change the law retrospectively after decisions that have been made in a court. Therefore, a person who has won a case in the court can be affected retrospectively by some change in tax law. I think the path advocated by Senator Mason would lead to a rather peculiar system of justice, given the court's role of interpreting legislation.

Many aspects of the Australian taxation system will undoubtedly be focused on in the tax summit. However, it perhaps would be desirable if the tax summit were preceded by a discussion on the level of government spending. One cannot look at taxation without looking at government expenditure. It is the essence of government to withdraw from the people the funds that are required to pursue government programs on behalf of the Australian people. An element of disquiet enters into that relationship when government expenditure reaches a punitive level and government gives people little choice in or does not allow them to meet their personal commitments and aspirations. The summit when considering tax as a matter of importance ought to be looking at the level of government spending and what people expect the Government to do on their behalf.

Points have been put forward with regard to what is at present the normal process of government expenditure, the review and effectiveness of programs and the reduction of expenditure wherever that is possible. I think public discussion so that people can have a complete understanding about this matter is a very healthy way to go about the pre-Budget stage. However, the situation is not helped when a government rejects immediately the undertaking of any sort of review in regard to changes that might be desirable. I know that it is very difficult for a government to look at the level of expenditure and go into the pre-Budget stage with so many commitments that seem to be inescapable and unavoidable-commitments to State governments, local government and organisations; commitments to cash payments under much of its social welfare legislation and things of that kind which lead to a high level of government expenditure in this country and which result only in what people might think of as a high level of taxation. So the prerequisite to looking at changes to the tax system when this matter is being discussed at the summit is a consideration of government programs and people's expectations of what government should do for them with their taxes.

Many proposals have been put forward suggesting that it will be easy to move to a system of broader indirect taxes and that somehow this will mean that there will be no more tax avoidance. That does not necessarily follow. Whatever system of tax, excise or collection by government is instituted, there will always be the requirement for compliance; there will always be the tendency for people to minimise the taxes or charges which they have to pay. That is why it is important that fairness and justice be readily seen. People who are being asked to comply with a system for the valid reason that a government is undertaking programs on their behalf should be able to understand the system. They should be confident that the system will not change after they have paid tax for a financial year.

The Australian Taxpayers Association is a broadly representative body of Australian taxpayers in the sense that it undertakes to put forward views of taxpayers throughout this country. That body says that tax avoidance 1970 style is virtually dead. It said that higher penalties and the specific changes to the law have achieved that. I have been making that point when I have talked of the changes that were made particularly during the five years when John Howard was the Treasurer of this country. We want to see such a situation. We would have expected the Government at that time to have reacted and brought in legislation that stopped tax avoidance schemes. Higher penalties and specific changes to the law have achieved that. The extra weapons that have been given to the Commissioner of Taxation to enable him to seek compliance with resources and to act in other ways have also been important elements in ensuring that tax avoidance 1970 style is dead.

The Australian Taxpayers Association went on to mention that the Commonwealth Auditor-General recently disclosed that about $1,000m of tax is being evaded because some people leave interest and dividends out of tax returns. That is another area in which compliance needs to be undertaken. People are aware that they should disclose their income from all sources. However, they evade tax by leaving details of money earned from interest and dividends out of their tax returns.

Another big area, of course, is the cash economy which has been partially dealt with by legislation and the prescribed payments scheme. I do not believe that anyone would assert that that legislation has been able to eliminate the cash economy and that tax is not being evaded because of non-disclosure. Therefore, we would see that further legislation is required in certain areas. We believe that further attempts should be made to gain compliance, to achieve the equity and fairness that I mentioned earlier and to get a simple and efficient taxation system. I do not believe that the only way to do this is to introduce retrospective legislation. Opposition speakers, not only in this debate but also in all the previous debates that have taken place on retrospective legislation, have stressed that fairness in the payment of tax, equity in the system and a fair sharing of the tax burden are all elements that they would wish to see in the taxation system. However, we cannot accept that retrospective legislation is the way in which this should be achieved.

As I said earlier, I cannot accept the deep sincerity that the Government has shown in this matter because it did not take the ultimate step to prove to everybody its belief in retrospective legislation. The Government could have had a double dissolution. It could have sought a joint sitting of the Parliament to make this the hallmark of its approach to tax legislation. But it did not do that. Again with barely a whimper, the Government has brought in retrospective legislation to this Parliament. It expects that the Senate will reject that legislation. I believe that that again will be the fate of these Bills when the vote is taken shortly.

Again, I put the proposition: If the Government is so serious about the legislation let it bring the Bills back again and let us reject them again. The Government will then have the double dissolution machinery on which it can be tested on a second occasion. Many speakers in this debate, including Senator Peter Rae who led for the Opposition, have indicated that the Opposition does not support the legislation. I feel very confident that our reasons for rejecting these Bills are understood by the Australian people. As I have said, the Government has certainly not made the point in its approach to the summit that it would accept or expect retrospective legislation to deal with matters of compliance or that the rules should be changed because of the detection of some scheme. I suggest that this debate shows again that prospective legislation to assist our taxation system is always considered sensibly and seriously by the Senate. However, I think the continued attempts to bring in retrospective legislation will result in the same sort of vote, certainly from members of the Opposition parties.