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Wednesday, 20 May 1942

Mr BRENNAN - If the donor hands over the documents, how is it possible for him to do anything further in order to make the title perfect?

Mr SPENDER - He could, before the document was handed over to the donee. Whether or not it is a gift which escapes the impost must be determined according to the provisions of this clause, by whether the donor has done not only what is necessary, but also what is possible. Because of the addition of the words " and possible it seems to me that difficulties are likely to arise. I understand the point which the honorable member is putting. The point should be and would be completely met by the words " what was necessary to be done ". I am satisfied that the addition of the words " and possible" will lead only to confusion, and exclude some of the cases which the Treasurer has in mind, and which should come under the provisions of this clause.

Mr Brennan - I suggest that it is not possible for the donor to do anything further if he hands over the documents, as one does in a transfer of land, or a transfer of shares in a company.

Mr SPENDER - Obviously, when that has been done it is not possible for him to do anything further, apart from reclaiming, or, in respect of a transfer of shares, going to the company and ensuring that the transfer, when presented, will be accepted by the directors of the company. There are many other instances that could be debated if one had the nature of the property under consideration. I suggest to the Treasurer that the wording of the clause should be altered, so as to read " everything which was necessary to be done to divest himself of all beneficial interest in the property, the subject of the gift ". That would place the matter beyond doubt. I apprehend that, if the matter be not dealt with in that or some similar way, this provision will be a fruitful cause of litigation

Quite apart from the substance of that argument, there is a second matter to which I desire to draw attention If the Commissioner were not satisfied, then, although he might not be able to support his contention in a court of law, I think that no appeal from that conclusion would lie under this measure. Although it might be clearly established before a court of law that no duty was payable, the essential condition would be that before advantage could be taken of the clause, the Commissioner must be satisfied. If the law were to provide that it shall be open to the donor to challenge before a proper tribunal the contention that a gift has not. been effected and completed before the commencement of the act, payment of the rebate should not be dependent upon the view of the Commissioner. I deprecate the tendency in all taxation measures to throw as great a burden as possible on the taxpayer, and to preclude him from challenging what in point of fact he should be entitled to challenge, namely, whether his obligation to pay, as alleged by the Commissioner, is properly imposed or not. I am glad that the right honorable member for Kooyong (Mr. Menzies) is in the chamber, because I think that this is a matter of importance to which members with legal training might give consideration. The words "where the Commissioner is satisfied that" rob the clause of a great deal of its value, because, if the Commissioner says that he is not satisfied, that disposes of the matter and there is no right of appeal.

No reference has been made by the honorable member for Robertson (Mr. Spooner) to clause 7 of the bill, and J understand that none was made by the special committee. The clause states: -

Clause Id of the principal act is amended by omitting the words " that property is also included in the estate of a deceased person ", and inserting in their stead the words " the donor dies and that property is also included in his estate ".

That is substantially merely an alteration of verbiage. I draw the attention of the Government to a matter that is germane to this clause. Section 8 of the Estate Duty Act provides that, if property passes from a deceased person, either by gift made during the lifetime of the donor or by a settlement made before or after the commencement of the act within one year before his or her decease, such property is to be included in the dutiable estate of that person. Under clause 3 of the Estate Duty Assessment Bill the period of one year has been increased to three years. Gifts are now subject to Commonwealth gift duty, and it is now proposed that a gift duty and also an estate duty shall bo imposed in respect of a single disposition of property. In other words, when the gift is made it is subject to the gift duty, and, if the donor dies within three years of making the gift, it is then subject to the estate duty. T!he object of this clause is to provide that a rebate be made. It is obvious that the Government does not desire, and I do not think this House would desire, the imposition of two levies upon a single transaction. Section 15 of the principal act, which is proposed to be amended, provides -

Where a gift of .property is liable to gift duty and that property is also included in the estate of a deceased person for the purposes of the Estate Duty Assessment Act 1914-1040, the Commissioner may grant a rebate of the amount of gift duty payable in respect of that gift or so much of that gift duty as is equal to the amount by which the estate duty is increased by reason of the inclusion of that property, whichever is the lesser amount.

I do not know why the word " may " is used, if it be intended that the rebate should be made because of the death. ,Mr. Menzies. - There could be no other circumstance.

Mr SPENDER - I think not. If the word " may " is included, the implication is that in certain circumstances the rebate will be made and, in certain other circumstances, it will not. Since, in point of fact, the amount of gift duty is substantially the same as the amount of estate duty, it seems to me that, when we are dealing with this matter in committee, the word " may " should be altered to " shall ", unless it can be shown by the Treasurer that in certain cases the rebate should not be granted. I draw the attention of the committee to section 178 of the Administration and Probate Act 1928 of Victoria -

Any person paying the duty payable under this act upon property comprised in a settlement or deed of gift may deduct the amount of the duty paid in respect of such property by virtue of the Stamps Ac- 1928 notwithstanding anything to the contrary in section seventy-eight of the said act.

The word "may" is employed in thai section, but in an entirely different context. Therefore, I suggest that there is justification for altering the word " may " in section 15 of the Gift Duty Assessment Act to " shall ". Unless it be altered we shall vest in the Commissioner the right to say whether a rebate shall be made in the case of a double levy.

Mr Brennan - An option is given in section 15 of the principal act which seems to justify the use of the word "may".

Mr SPENDER - I fail to see that. There may be circumstances in which a rebate should be refused, but I have yet to learn what those circumstances are. I agree with what was said by the honorable member for Robertson (Mr. Spooner) regarding paragraph / of clause S. I believe it to be quite wrong to have alternative methods of valuation in respect of shares. The normal, longstanding practice is for the personal representative to appoint recognized valuators, and to submit their valuation to the income tax commissioner in the case of the Commonwealth or, in the case of a State, to the commissioner of stamps. Under this bill, the taxing authority is to have power to disregard the valuation so made, and to say that the shares shall be valued upon what the holder would receive if the company were voluntarily wound up at the date upon which the gif,t was made. Paragraph / was not included among the recommendations of the Royal Commission on Taxation, as were paragraphs d and e. Parliament should adhere closely to the principle of a fixed method for determining what -an impost shall be, and for that reason, paragraph / should be omitted.

Mr Menzies - The taxpayer should be able to know his liability.

Mr SPENDER - Precisely. We know the difficulties of the taxation branch, but we represent the people, and it is a primary rule that the taxpayer's obligations shall be . precisely defined. It should not be left to the discretion of the taxing authority. I cannot reconcile myself with the principle embodied in paragraphs d and e even though it has the approval of the Royal Commission on Taxation. Those paragraphs are as follows : -

(e)   No regard shall, in determining the value of any such shares or stock, be had to any provision in the memorandum or articles of association or rules of the company whereby or whereunder the value of the shares or stock of a deceased or other member is to be determined; and (/) Where a gift includes any shares or stock in any company the shares or stock of which are not or is not quoted in the official list of any Stock Exchange, the Commissioner may, in his discretion, notwithstanding anything contained in the last two preceding paragraphs, adopt as the value of any such shares or stock such sum as in the opinion of the Commissioner, the holder thereof would receive in the event of the company being voluntarily wound up on the date when the gift was made.

Lt appears to me that those factors, which are specifically excluded in paragraph c, must necessarily bs taken into consideration when determining the value of shares. In the case of leasehold land over which the lessee holds an option of purchase, that option constitutes an essential ingredient of the value of the lease. In the same way, if a property be subject to an easement or right-of-way or rent charge, those limitations upon the complete enjoyment of the property must be taken into consideration in determining its value. In the ease of shares, however, because of the difficulties inherent in arriving at a valuation, the Government is seeking to exclude relevant factors. If there be conditions which prevent the holder of shares from selling to more than a limited number of people or from selling them how and when he pleases, or which give an option over them to some person, then those shares cannot have the same value as other shares in respect of which no such conditions are imposed. We are inclined to go too far in seeking to overcome the difficulties of the taxing authority. The Treasurer, no doubt, will point out that the Government has the support of the Royal Commission on Taxation in this regard, and there the matter will probably rest, hut I felt it my duty to express my views on the subject.

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