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Wednesday, 3 December 1986
Page: 3295

Senator HAINES (Leader of the Australian Democrats)(6.09) —The legislation that we are debating at the moment, the Taxation Administration Amendment (Recovery of Tax Debts) Bill 1986, is, I gather, an attempt by the Government to clarify and regularise a situation which has arisen as a result of a Queensland Supreme Court decision in the Deputy Commissioner of Taxation v. Moorebank Pty Ltd. I think it is worth while remembering exactly how the relationship that exists between the Commissioner of Taxation, the Deputy Commissioners of Taxation and taxpayers operates, at least in most instances, in this country. For many years in this country we have had a system in which a review of assessment is done essentially at the option of the taxpayer, that is, the taxpayer has the right to instigate a review of the assessment that is made of his or her or of a company's tax requirement. That system has operated in Australia certainly as long as I can remember. It is quite proper-nobody is disputing this-that taxpayers should be able to challenge assessments. We could not have the situation in which a Deputy Commissioner of Taxation in any given State could assess a taxpayer's liability and then insist that the money be handed over willy-nilly. I am sure that from time to time governments facing deficits would rather like it, but it has never applied in this country, nor should it. It is quite appropriate that taxpayers be able to challenge assessments while proceedings for review are pending. Sometimes they take quite a deal of time. In this country it has also been the practice of the Commissioner not to enforce the debt. It is worth noting, as the Opposition spokesman in another place pointed out, that the debt is probably capable of enforcement within weeks of issue of the assessment. (Quorum formed)

Senator Walsh —Wouldn't they be complaining if it were actually done?

Senator HAINES —I will get to that. In another place a couple of months ago Mr Carlton had this to say:

There does not have to be a resolution of a dispute before action is taken. The Commissioner can take action before a court at any time . . . The Revenue can be got in and action can be taken at any time within six years. The action does not have to be completed within six years; only begun. If the Taxation Commissioner had been taking action in any of the matters that are outstanding within six years, the alleged problem would not have arisen.

I echo the comments that were just made by Senator Walsh: What an outcry there would have been if that were the sort of behaviour of the Taxation Commissioner. It certainly seems to me and to many other people to be a trifle unfair at least to take the revenue away from the taxpayer before all legal appeals have been dealt with. I would have thought that if the Tax Commissioner had been in the habit of issuing an assessment, asking the taxpayer to hand over the money and then doing the appeals-a sort of Alice in Wonderland sentence first, verdict afterwards type of thing-the loudest screams, and quite rightly so, would have come from the people who are now suggesting that the Commissioner need not wait until all the appeal provisions have been dealt with before he puts his hand in the taxpayer's pocket.

In any event, it has been acceded under various administrations for many years that tax debts are Crown debts and that it was believed that the old prerogative of immunity of the Crown from limitation laws protected the proceedings for the recovery of tax from any limitation period. Whether or not that is the case, it certainly was believed to be and was the basis on which the Commissioner did not do what Mr Carlton suggested could be done-that is, instigate proceedings at any time, no matter what else was happening.

As I said a moment ago, the problem has arisen as a result of the Moorebank decision in the Queensland Supreme Court. If this decision is upheld-the Government has an appeal before the High Court of Australia at the moment-it means that the Tax Commissioner cannot recover tax owing because more than six years have passed since the liability first arose. Again, that is a trifle like Alice in Wonderland. I mean no disrespect to the judges, but it does not seem to be a terribly logical way of approaching it. After all, the reason that six years had expired was that the Commissioner did not sue for recovery as a matter of course until after challenges to liability had been settled. In the sort of democratic country in which we are supposed to be it seems to me that that is a fairly reasonable manner of behaviour for somebody in the position of the Tax Commissioner. The effect of the decision in the Moorebank case is that tax avoiders can drag out their disputes about liability until the six-year limitation period has expired and, in doing so, they can avoid paying their tax debts. The only alternative is for the Commissioner to step in and say: `Hand over the money now. Finish your appeals after that.' It is worth noting here, too, that, according to Mr Carlton, the Queensland decision is `contrary to decisions taken previously by supreme courts in Western Australia and New South Wales'. We have the Opposition spokesman admitting that the Queensland decision was at variance with decisions taken in supreme courts in two other States. It is by no means a fixed piece of law, except maybe in Queensland.

As we in this place are all aware, the Commissioner is, as I said, seeking to appeal the Queensland decision in the High Court, and in the meantime the Government has taken the step of introducing this piece of legislation to remedy the problem that was caused by the Moorebank decision. I can only repeat that in my view and in that of my colleagues it seems to be quite unreasonable for the Commissioner to sue for recovery without waiting until after challenges to liability have been settled and equally unreasonable for tax avoiders to use delaying tactics and, in doing so, not avoid the assessment but avoid having to pay up, no matter what ultimate decision is taken. The taxpayer's indebtedness, if confirmed after review, does not, nor should it, expire. The application of State laws of limitation simply means using a technicality to avoid payment. Given the actual and the always potential variation in the laws of limitation in Australian States, a very real question arises as to whether allowing this Moorebank decision to stand would not be in breach of say, section 117 of the Constitution which quite clearly states:

A subject of the Queen, resident in any State, shall not be subject in any other State to any disability or discrimination which would not be equally applicable to him if he were a subject of the Queen resident in such other State.

When we play around with variations in the laws of limitations from State to State one questions whether this sort of decision is not in conflict with the intention of section 117. Much has been made by the Opposition about the question of retrospectivity. I think it is important to make two points in particular: First, the amendments in the Bill do not apply-and the Government has made that clear-to cases already decided by the courts, hence there is no real issue of retrospectivity; and, secondly, the Bill certainly makes the fresh limitation period applicable to current assessments. But, given the previous understanding that no limitation period applied, it does not seem to me, or to my colleagues, to be retrospective in the sense that says attempts in the bottom of the harbour legislation were retrospective.

It is worth while noting at this point the report on this Bill from the Scrutiny of Bills Committee. That Committee said that it did not consider that this was retrospective in that sense. I remind the Senate that the Committee is particularly sensitive about legislation which is deemed to trespass unduly on personal rights and liberties. That report stated:


The Committee recognises that the new section 14zka deals only with the time at which a claim for recovery of tax debt may be lodged and that it does not alter in any way the substance of the taxation law. It also recognises that the new section cannot be said to work any injustice insofar as it merely restores the law to what it was thought to be prior to the decision in the Deputy Commission of Taxation v Moorebank Pty Ltd.

In that way it is significantly different from other pieces of legislation that, in fact, I have objected to on the grounds of retrospectivity. It does not change the law or alter in any way, as the Committee said, the substance of the tax law. It attempts to settle a problem that arose because the Queensland Supreme Court chose to treat the statute of limitation as applying in this case.

The only alternative to the approach taken by the Tax Commissioner in the past, and which is confirmed in the piece of legislation before us today, would be for the Commissioner to enforce the debt before any challenge to the assessment. As we have already said, that would cause a justifiable cry of outrage from honourable senators at least on this side of the chamber and, I would hope, from the other side as well. Many people would quite rightly see it as grossly unfair and it is certainly a less attractive proposition than the traditional approach taken by the Commissioner.

Given the expressions of outrage at the lateness of the Treasurer's tax return by some honourable members on this side of the chamber when he is allegedly owed money, I find it totally bemusing that these same people can treat with some enthusiasm the idea of supporting people who owe the Commissioner but are attempting not to pay that money by stringing out their appeals beyond the statute of limitations that applies in Queensland. We cannot have it both ways; either the deputy commissioners of taxation demand payment of the assessed tax owed immediately it is assessed and then repay it if on appeal the assessment is reduced, or the deputy commissioners of taxation allow time for appeal and wait more or less patiently for the conclusion of those appeals. I would have thought that the latter is the more appropriate system in a democracy. The public outrage at the alternative that presents itself would be more than justified, and I think it would be only slightly less than the outrage from the public if this Bill is defeated since essentially it will allow people who have taken advantage of the system to avoid paying assessed tax provided, of course, they live in Queensland, presumably. I do not believe that this artificial wriggling out of a commitment by some taxpayers can be condoned. Not only will we be supporting the Bill in order to ensure that the statutes of limitations are not artificially used by some taxpayers to avoid the commitment they have to Consolidated Revenue but also the Democrats, the Government and the ordinary taxpayers will be opposing the amendment that has been removed by the Opposition since its effect essentially is to gut the Bill and to allow the current situation essentially to proceed. (Quorum formed)