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Thursday, 19 March 1987
Page: 1026

Senator MESSNER(8.42) —The Taxation Laws Amendment Bill (No. 5) 1986 touches three important matters: First of all, it introduces a new system for the payment of provisional tax in quarterly instalments for taxpayers whose provisional tax liability exceeded $2,000 and who previously had paid on a lump sum basis, normally in the early part of April in the year following the year of assessment. The second aspect of the Bill relating to redeemable preference shares has been well treated by my colleague Senator Crichton-Browne. The third element relates to exchange gains and losses. I do not intend to go over the same ground that my colleagues have covered to point out the deficiencies in the legislation affecting the last two mentioned items that we believe cause difficulties not only to the professional community but also to taxpayers generally. We believe that the best course for handling this legislation is to refer the parts of the Bill relating to those matters to the Standing Committee on Finance and Government Operations for its inquiry and report.

The element of retrospectivity in respect of redeemable preference shares was well covered by my colleague Senator Crichton-Browne. When brought to the attention of the Standing Committee for the Scrutiny of Bills, the Committee commented on the matter. Consequently, we believe we are fully justified in pursuing that reference. I point out that that matter, which was essentially an anti-avoidance measure, was first announced by the Government on 7 April 1986-nearly one year ago. Of course, it is becoming common-place under this Government to expect that legislation takes an inordinate amount of time to get before the Parliament. That in itself is causing a great deal of concern in the community generally.

We have what is known as legislation by Press release whereby the Government makes its announcements and subsequently-some time well into the future-we receive the legislation and are forced to examine it against a time lag of some 12 months. In this case that has led to difficulties because, quite clearly, the legislation does not match the original Press release, as Senator Crichton-Browne pointed out during his address. That is to be deplored and I draw the attention of the Senate to the continuing practice of the Government of changing legislation by Press release. This leaves business and the community generally in a great state of uncertainty when dealing with matters set out in the Press releases. We do not condone that kind of activity, especially when there is such a long lead time from the date of announcement of the measure to the actual enactment of the legislation.

This problem also arises and is somewhat worse in the case of the foreign exchange gains and losses. That announcement was first made on 18 February last year. So it is now 13 months since that was first announced, during which time the community has been in blissful ignorance of the full details of the law. Consequently, we now find numerous discrepancies between the original intention, as stated in the Press release, and the legislation brought down by the Government a few weeks ago. Clearly, this is not good enough. Clearly, there are issues that need to be addressed. Again, we believe that this justifies our view that we should refer those parts of this Bill to the Standing Committee on Finance and Government Operations for report. That motion has not yet been moved, but will be moved at a later stage in the course of this debate, although it may be overcome by other events.

Senator Haines —You never know in this place, do you?

Senator MESSNER —We never know in this place; we will have to wait to see the outcome of those other events. The last item relates to provisional tax. Without going too deeply into this matter, it is quite clear that there is a vast amount of community concern about the Government's intention to move from a lump sum provisional tax system to a quarterly payments system. That has been noticed by the Opposition, and I understand particularly by the Australian Democrats. In the course of the last few weeks there has been a rising tide of concern about this matter.

Clearly, the Government will be disadvantaging the business community. There will be a transfer from business to the Government. There will be savings to the Government, but an extra cost on business, of more than $100m a year. This comes about because, while the Government will save some $100m in interest charges for the financing of its arrangements from the beginning of a financial year through to the normal time at which it would collect provisional tax payments, business will have to pay that amount. It will lose its access to that money in the whole scheme of things. So this is an extra cost on business, coming on top of the fringe benefits tax, on top of the capital gains tax, on top of the loss of deductions for entertainment expenses of a legitimate kind and on top of numerous other measures affecting business. This must add to the cost of living in this country and the cost of operating a business. It clearly raises the total tax take of the Government. We know that the tax take by this Government is now at the highest level ever since Federation and is approaching 28 per cent of gross domestic product. It has risen inexorably since this Government came to power in 1983. It seems to be part and parcel of this Government's approach to put higher and higher charges on business and the community generally. Of course, this is contributing greatly to the reduction in the standard of living of the Australian community.

I do not wish to go on at length about this matter. There will be a later discussion on the details of the problems that arise with provisional tax. I understand that the Australian Democrats, like ourselves, are contemplating amendments to ensure that primary producers and others who are on income averaging systems will be exempted from the quarterly instalment system. We support that. There are some differences of view between ourselves and the Democrats as to whether or not this should be open ended or whether there should be limitations on the amount of the provisional income.

The Democrats have a view, as I understand it, that the maximum provisional income should be $100,000 in order to allow people an election off the quarterly system so that they maintain their lump sum status. We say that people who earn incomes above that level are very few in number. On the latest statistics I think only about 500 people a year are affected. In our view that is not the point. Where we believe the Democrats are wrong is that clearly, by introducing such a blanket level at $100,000, that small number of income earners who have income above that level will seek to enter into avoidance schemes in order to reduce their incomes below $100,000 and consequently render themselves available for the concession that we have in mind. Consequently, that is a poor piece of legislation making, if I might say so, and for that reason we are not supportive of the Democrats' amendment. We believe that they are only opening up the law for further abuse.

I do understand, though, that the Democrats would like this legislation in toto-that includes the provisional tax part-to be sent to the Senate Standing Committee on Finance and Government Operations. If they are successful in having that motion carried in this place, we will not proceed with our Committee stage amendments to give effect to the scheme that I have just outlined. So at this stage it is premature to develop the arguments further until we see the outcome of the decision here on the motion for the second reading.

My colleague Senator Michael Baume has moved an amendment to the motion for the second reading. The remarks I addressed in my speech a little earlier referred to several of the matters raised in that second reading amendment, chief of which is the very considerable extra burden that this Government is seeking to impose on business through its various taxation measures. I instance those again: The fringe benefits tax; the new and increased amount of company tax, which is now to rise from 46 per cent to 49 per cent; the capital gains tax; the negative gearing proposition; and the abolition of the deduction for legitimate business expenses. I conclude there and await anxiously the outcome of the second reading deliberations.