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Wednesday, 3 December 1986
Page: 3300


Senator WALSH (Minister for Finance)(8.21) —I shall deal later with the spurious amendment which the Opposition has moved to the motion for the second reading of this legislation. But I think it might help to put in its historical context the reason for this legislation. In the late 1970s, paper tax avoidance schemes-that is, the setting up of contrived arrangements to claim shonky deductions from taxable income that wiped out taxable income liability, had they been allowed-proliferated. They proliferated for two reasons: Firstly, because the High Court of Australia at that time was under the domination of Garfield Barwick. It certainly does no credit to the rest of the judges who sat on the High Court at that time, or to the majority of them, that they so often--


Senator Chaney —Madam Acting Deputy President, I draw your attention to the state of the House.


Senator WALSH —You do not want to hear this, do you? You stand here protecting the tax evaders, as you have always done.


Senator Chaney —You can call me what you like, but you will have an audience.


The ACTING DEPUTY PRESIDENT (Senator Giles) —Order! A quorum is not present. Ring the bells.

A quorum having been called for, and the bells being rung-


Senator WALSH —How much will the Western Australia Liberal Party finance committee get out of this if the amendment passes? How much will you get, Senator Crichton-Browne?


Senator Crichton-Browne —What are you on about, you poor morally bankrupt dill?


Senator WALSH —How much will you get if the Opposition's amendment succeeds?


Senator Crichton-Browne —What are you suggesting?


Senator Chaney —Madam Acting Deputy President, I take a point of order. The Minister is making a thoroughly objectionable accusation. He should be told to withdraw.


The ACTING DEPUTY PRESIDENT —Senator Walsh, I think it might be--


Senator WALSH —Coming from the scumbag who is the Leader of the Opposition and who accused the Treasurer yesterday of being a tax fraud, I find that a bit rich.


The ACTING DEPUTY PRESIDENT —Senator Walsh, will you please withdraw that unreservedly and immediately?


Senator WALSH —Withdraw what, Madam Acting Deputy President?


The ACTING DEPUTY PRESIDENT —Both references that you made to members of the Opposition.


Senator WALSH —I simply asked a question. I asked Senator Crichton-Browne how much he would personally get out of this if the Opposition got its way.


Senator Chaney —On a point of order, Madam Acting Deputy President: The Minister is clearly defying you and is repeating--


Senator Robertson —How can you take a point of order if the Senate is not in session?


Senator Chaney —I will hold the paper over my head. That is a great custom.


The ACTING DEPUTY PRESIDENT —There is a point of order, Senator Robertson. I would like to hear it.


Senator Chaney —Senator Walsh is clearly defying your ruling and is behaving in a contemptuous way. I ask that you seek his immediate withdrawal of both the reference to me and the reference to Senator Crichton-Browne.


The ACTING DEPUTY PRESIDENT —I have requested that Senator Walsh withdraw both the allegation against Senator Crichton-Browne and his reference to the Leader of the Opposition. I ask that he do so unreservedly.


Senator WALSH —I am not sure whether the Senate is technically in session, but I will withdraw that allegation, as I am conscious of the fact that the test of acceptability here is not the truth but the Standing Orders.


The ACTING DEPUTY PRESIDENT —Senator Walsh, will you please withdraw those remarks. A quorum is present.


Senator Chaney —On a point of order, Madam Acting Deputy President: Again, the Minister did not make an unqualified withdrawal, and I seek that with respect to both remarks. If he does not do so, he should be disciplined.


The ACTING DEPUTY PRESIDENT —I have also sought that. Senator Walsh, would you please withdraw unreservedly?


Senator WALSH —I withdraw. I was giving the historical context from which the need for this legislation arose. In the late 1970s paper tax avoidance schemes were proliferating. They were proliferating for two reasons: Firstly, because the Barwick-dominated High Court of Australia had consistently given absurd interpretations of the Income Tax Assessment Act in such a way that the Commonwealth was defrauded of hundreds of millions of dollars worth of revenue annually; and, secondly, because there was in office at that time a government which was at best negligent and a Treasurer who was at best negligent, who habitually ignored the pleas from the Commissioner of Taxation for amendments to the law to stop the income tax base being further eroded. At that time it was the practice of the Australian Taxation Office, when disputing these paper schemes, which sought basically to wipe out taxable income through claiming absurd deductions against that taxable income-or even more simply, I suppose, they sought to define taxable income out of existence-to disallow the returns and the deductions which had been claimed by the taxpayer and then to select test cases, because these schemes were so widespread that they involved literally tens of thousands of taxpayers. So, rather than taking to court all of those taxpayers, the practice of the Tax Office at that time was to select two or three test cases. The legal proceedings pursuant to that, of course, could be dragged out for a considerable time.

It was very common at that same time for those taxpayers who had been selected as test cases to withdraw from the action and pay up literally minutes or hours before the case was actually to come before the court. The Tax Office at that time took the view that there was no need actually to require the money to be paid in. As Senator Messner and Senator Michael Baume have both pointed out, the Commissioner, had he in the harshest way enforced the law, could have required that the Commissioner's assessment of the tax liability actually be paid and initiated immediately action for recovery. The Commissioner chose not to take that action because at that stage there was absolutely no reason to believe that there was a limit on the time during which the Commissioner could subsequently issue a writ for recovery of the tax liability which the Commissioner had assessed. There was no reason to believe, right up until the Queensland Supreme Court case of a couple of months ago, that there was any time limit on the Commissioner's issuing that writ for recovery of the liability which the Commissioner had assessed as being due. Of course, had the Commissioner at that time issued writs actually to recover the money--(Quorum formed)

I think it should be noted for the record that the Opposition is attempting to bring quite improper pressure to bear to silence me from revealing the facts about this issue and the Opposition's attitude to it. Members of the Opposition know that there is an event of special significance to the Australian Labor Party Senate Caucus on tonight and they are habitually calling quorums in order to require people to leave that special event. They then threaten members of the Labor Party that unless I cease dropping the truth on the Opposition they will continue to do so. I was saying that had the Tax Commissioner in the late 1970s chosen to issue writs to recover the tax which the Commissioner had assessed as being due, the very first people to complain about it would have been the same people who are complaining about this legislation. They would have complained that it was unduly harsh and so on. Since there has been reference to the judiciary in this case, it is pertinent at this time to quote the Acting Chief Justice of the High Court of Australia. In October 1982 Justice Mason said:

I was informed that it is a somewhat unusual course for the Deputy Commissioner to commence proceedings for recovery in a Court relying on a notice of Assessment which is under challenge in proceedings under Pt. V of the Assessment Act. It is to be hoped that this is so.


Senator Messner —Who said that?


Senator WALSH —Mason, in October 1982. He continued:

The institution of proceedings for recovery on a notice of assessment which is challenged in proceedings under Part V may operate oppressively and unfairly to a taxpayer.

That is the signal that was coming from the court at the time. If the charge is being made that the administration of the Tax Office was negligent in the late 1970s, whose ultimate responsibility was that? Of course the answer to that is beyond dispute: The ultimate responsibility rested with the then Treasurer, John Howard, who is now the Leader of the Opposition. So if there is any validity in the charge that the administration of the tax law was slovenly at that time, the ultimate responsibility for that rested fairly and squarely with the then Treasurer, John Howard.

Another spurious point raised by the Opposition is that it is improper for the Government to legislate on a matter which could still conceivably be resolved by the present appeal to the High Court. Unfortunately for the Opposition, there is a precedent for legislation dealing with matters prior to their determination by the High Court. It concerns the Nilsen case in 1978. The then Treasurer was none other than the same John Howard who has been implicitly accused of slothful oversight of the administration of the Income Tax Assessment Act by his colleagues in the Opposition. For those honourable senators who are interested, his speech can be found on page 2953 of the Hansard of 16 November 1978 and relates to the case on appeal to the High Court of Australia regarding Nilsen Development Laboratories Pty Limited. He stated:

. . . the action of the Government in this area was one of those unfortunate things that, because of potential revenue consequences, governments find it necessary to do.

He continued later:

Very simply, the Government was faced with the real dilemma that in a freak fashion a quite major threat to the revenue was involved.

He continued that the Government had the option:

. . . either to act as it has done or to find some alternative revenue raising measure, which, I put to the House, would have been a lot less equitable than the decision that was ultimately taken.

That is what John Howard said in 1978. I do not know how many members of the Opposition who are across the isle at the moment want to join the rest of their colleagues who have been publicly bucketing the present Leader of the Opposition and the direction which policy is taking under him.


Senator Walters —Nobody is bucketing John Howard.


Senator WALSH —If Senator Puplick had said that, I might accept it, Senator Walters, but I do not accept it from you. I want now to deal with the amendment moved by the Opposition to the motion for the second reading which, if I may say so, displays intellectual sloth and moral humbug to an unusual degree, even for the Opposition, wrapped up, of course, especially in the debate in the House of Representatives, by sanctimonious rhetoric from some of the more pompous members of the legal profession-a profession, incidentally, sections of which have undoubtedly facilitated tax evasion to an alarming degree over the last 10 years and which has a great deal to answer for. The amendment moved by the Opposition is in three parts. The first part states:

. . . Commissioner of Taxation should be subject to the statutes of limitations in the same way as any other citizen of Australia.

The fact is that, under this legislation, the Commissioner of Taxation will still be subject to a statute of limitation. The effect of the Bill is that from the time any disputed tax matter has been finalised-that means, conceivably, in the High Court-the Commissioner would have six years, not an unlimited time, as the Opposition asserts, in which to issue a writ for the recovery of the debt which would then be legally settled. The legislation does not, as the Opposition has repeatedly claimed, enshrine an unlimited recovery time.

The effective running of the limitation period from the date any dispute as to liability is finalised will more closely equate the position of the Commissioner with that of the ordinary citizen who wishes to recover money owing to him or her. The reason for that, of course, is that when a private citizen takes action to recover money the establishment of proof and the legal machinery actually to recover the debt run in tandem. They are part of the same court action. With respect to taxation liabilities the position is different. Firstly, if there is an appeal a court, or some lower legal body, must make a ruling on whether the Commissioner's assessment is correct or whether the taxpayer's objection is correct. After, and only after, that is done, and on the assumption that the judgment is awarded in favour of the Commissioner, can action for the recovery of the debt owed be taken. So the Opposition's argument is false. The second part of the Opposition's amendment states:

. . . a 6 year period from the date of liability falling due should be sufficient time for the Commissioner of Taxation to initiate action for recovery of tax or to take appropriate legal action to safeguard his rights . . .

The Bill does not seek to alter the period in which to recover tax debts under State Acts if the High Court holds that the Commissioner is subject to such a limitation period. If the limitation period is held to apply to tax recovery actions, the effect of the amendment is that this period will commence at the time the issue of liability to pay the tax is finally settled. It ties in very closely with the first point. Of course, there is $900m at risk. The reason it is at risk and the reason that phrase is used is the uncertainty as to what final determination the High Court will bring down. That is why the phrase `at risk' is used.

Before leaving the second point-I did touch on this before-the Opposition said: `Why didn't the Commissioner use the power available to him under section 204?' That is, why did the Commissioner not take action immediately to recover the money, to collect the debt which he had assessed as being due-that is, the tax liability-prior to the legal resolution of the claim? The answer to that is that there was no perceived legal need to do that at the time these actions were taken and because at that time and afterwards such action was clearly being discouraged by the High Court and would have drawn squeals of outrage from the members of the Opposition who are now purporting to oppose this Bill on principle grounds. The third part of the Opposition's amendment is the silliest and most erroneous of the lot. It asserts:

The Bill retrospectively applies an unlimited time for taxation liability to a certain group of taxpayers.

It is wrong on a number of grounds. Firstly, because the question of a tax liability is determined in the first instance by the Commissioner and ultimately on appeal by the courts, running as far as the High Court, the question of tax liability is not affected by this legislation at all. What is affected by this legislation is that people who have been found by the Commissioner initially and by the court subsequently to have a tax liability will actually have to pay up pursuant to that tax liability. That is the Government's position-that there should be no doubt that people who have gone through all the legal processes and who have been legally and un- equivocally established to have a tax liability should have to pay. The position of the Opposition is that people who have run through all that, because of some capricious ruling from a court in Queensland, some fortuitous decision that, contrary to all previous experience and expectation, there is a time limit on the issue of a writ for recovery of debt by the Commissioner, should be able to get away with evading the liability which had long been assessed. Indeed, one might question what is meant by an unlimited time for tax liability. This Bill does not retrospectively or prospectively apply any taxation liability.

I have two final points. I note with satisfaction and thank the Australian Democrats for their support of the Government on this, thereby ensuring that the Opposition will not get away with it. I also commend Senator Haines for having given a very lucid exposition of what this Bill is about. If the Opposition were to get away with what it is attempting to do tonight there can be no guarantee that at some time in the future in the case of the State of Queensland a special Act might not be slipped through the Queensland Parliament at 24 hours notice limiting to two weeks, two hours or two minutes the time period, the statute of limitations, which is allowable and specifically aimed at the Taxation Commissioner.


Senator Watson —Oh, come on.


Senator WALSH —I say to the honourable senator that when we are talking about the Parliament in Queensland that is not a possibility which should be ruled out. Legislation has been rammed through the Parliament in Queensland before in a matter of hours. If there are a number of major donors to the Bjelke-Petersen Foundation who would benefit from such legislation, I do not think any sensible person could rule out the possibility of such action being taken; in other words, of the Commonwealth being hostage to the caprice or malevolence of a particular State parliament.

Finally, the effect of the Opposition's amendment, if it succeeded, would be that people who devised and used shonky paper tax avoidance schemes in the late 1970s which subsequently were disallowed by the Australian Taxation Office and who were assessed by the Commissioner of Taxation to have a tax liability, who following assessment abused and misused all avenues of appeal and who finally lost in those avenues of appeal and had established incontrovertibly in the legal sense that they had a liability to pay tax, and against whom the Australian Taxation Office is now taking action to recover that debt, would get out of paying the debt which the courts had determined was due. In short, this is a shoddy attempt by the Opposition to rationalise the protection of its friends. It would be extremely naive to believe that the Opposition's stance is not a function of its desire to protect the late 1970s tax avoiders who abound in the Liberal Party from finally having to pay the liabilities which they should have paid years ago.

Question put:

That the words proposed to be left out (Senator Messner's amendment) be left out.