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Tuesday, 21 May 1985
Page: 2210

Senator PARER —I direct my question to the Minister for Finance. I remind the Minister that at the last election the Opposition presented a taxation policy which contained specific initiatives aimed at providing tax justice to families with children. Can the Minister say whether Cabinet, in the course of its discussions on the White Paper on taxation, has considered two proposals put forward by the Liberal and National parties, namely, income splitting for pay as you earn taxpayer couples with children and the introduction of child care tax rebates for two-income families and single parents? Will the White Paper contain any reference to either of these proposals?

Senator WALSH —I do not think Senator Parer can seriously expect that I will have a discussion here about what might have been discussed in Cabinet about tax reform. If he is particularly interested in the view of the Liberal Party being presented at the summit I suggest he ask his leader to reconsider his decision not to participate in the summit despite having an invitation to do so.

On the question of income splitting, however, independent of any Cabinet discussion, this was one of the issues raised by the Opposition during the last election campaign. Precisely what it meant was very hard to determine and, indeed, it was a shifting target depending on whether one was listening to Mr Peacock, Mr Howard or Mr Sinclair. Mr Howard, who is the most responsible of that trio, was proposing a somewhat lower cost option.

The big hit income splitting arrangement which had been proposed by Mr Peacock and Mr Sinclair would have cost the revenue $1,800m-$1,800m. That is equal to about 6.5 per cent of total tax revenue which would have had to have been recovered from other taxpayers.

The tax question is a zero sum game as long as the fiddling and distributing of the income and other tax burden between existing taxpayers are the limits of the adjustments made. The only way it ceases to become a zero sum game for present taxpayers collectively is if the tax base is broadened to bring in people who are currently in one way or another evading or avoiding taxation.

If Senator Parer is interested in closing off completely the sorts of contrived neo-fraudulent tax avoidance schemes for which Australia has become notorious in recent years, I suggest he change his vote on the retrospective tax legislation which this Government from time to time brings into the Senate in order to deter for ever this practice. It has been demonstrated that Part IVA of the 1981 Act is not entirely effective or watertight in relation to the charity trust stripping case. It does not impose a prohibition on highly contrived and neo-fraudulent tax avoidance schemes. That has been shown in the trust stripping charity case.

Underlining the argument which has been used by the Australian Labor Party for many years, the one action which would kill that sort of tax avoidance, theft or near-theft stone dead was a credible threat of retrospective legislation to ensure that people who indulged in those practices sooner or later would be forced to repay the money which they had effectively stolen from other taxpayers in the first place.