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Thursday, 3 December 1936

Senator Sir GEORGE PEARCE (Western Australia) (Minister for External Affairs) [5.25]. - I move -

That the bill be now read a second time.

This bill, which was forecast in the budget, is designed to alleviate some of the disabilities and difficulties of sales taxpayers, to simplify the sales tax law, and to remove certain weaknesses in the law that now make evasion possible. It will be observed that the measure is of a somewhat lengthy character. I may explain, however, that this is due to the fact that many of the amendments are repetitive in substance because of the necessity for amending each of the nine Sales Tax Acts, and also the Sales Tax Procedure Act. The amount of wheat in the bill is not to be judged by the quantity of chaff that accompanies it.

The first provision to which I desire to draw attention is clause 60, which provides for the curtailment of retrospective taxation. Briefly, the proposals of the bill in this connexion are -

(a)   that a three years' time limit is to be set on retrospective taxation; and

(b)   that no retrospective taxation is to be payable where taxpayers act in accordance with departmental rulings and advices.

The general effect of the first proposal is that sales taxpayers will not be called upon to pay tax more than three years after the close of the month in which a taxable transaction took place, unless they receive a specific notice from the department to pay tax on those sales, &c., within that period. The present law requires the Taxation Department to seek to collect the tax for a period reaching back to the date of the coming into force of the sales tax law, if it finds that a taxpayer has not complied with the full requirements of the law during that period. It may be that this requirement causes serious hardship to taxpayers who, through inadvertence, have not appreciated the incidence of the sales tax law on their business, and who, when required to pay the additional tax, are not in a position to recoup themselves by passing it on to their customers. For that reason, the Government takes the view that a time limit upon the retrospective application of an indirect tax, such as sales tax, is justifiable. As a necessary complement of this proposal, the bill provides for a three years' time limit upon the making of refunds to taxpayers.

The effect of the second proposal is that taxpayers who accept and act upon the rulings and advices of the Taxation Department will be absolved from any liability to pay retrospective taxation when those rulings or advices are subsequently altered. I think that point was raised when the sales tax legislation was discussed in this chamber some time ago.

A proposal contained in clause 11 of the bill, to empower the Taxation Department to enter into an agreement with a taxpayer for a specified period regarding the method of ascertaining his sales tax obligations, will, it is anticipated, eliminate much of the present cost and inconvenience in connexion with the collection of sales tax.

Clause 17 provides for the making of refunds to effectuate exemptions. Many exemptions are conditional upon the character of the ultimate consumer of the goods, whether government departments, public hospitals, or others. When the taxpayer, whether a manufacturer or wholesaler, sells the goods to a retailer, neither he nor his purchaser is aware that the goods will eventually be sold to a person or authority intended to receive them free of tax. Consequently, the manfacturer or wholesaler, when he sells the goods to the retailer, pays tax which is passed on to the government department, &c., and there is no provision in the law to authorize a refund of the tax. The result is that many hospitals are dealing directly with wholesalers or manufacturers, and cutting out their local retailers. The bill authorizes a refund, or payment equivalent to the amount of the tax, to be made -

(a)   To the retailer where he sells the goods free of tax to the person, or authority, intended tobe exempt ;

(b)   To the actual person, or authority, intended to be exempt where it is shown that tax was passed on to such person or authority.

The proposal is to enable cases to be prescribed, according to circumstances, in which such refunds or payments may be made.. It is necessary to limit this relief to cases to be prescribed by regulations, because a general statutory provision for that purpose would impose an impracticable task upon the Taxation Department. Only practical experience can determine the cases in which the intended relief can be given without the creation of insuperable administrative difficulties. The cases cited are only a few of those which can be provided for. One other important case is that of the taxpayer who either inadvertently, or unavoidably, pays, or bears, tax on goods which he uses as raw materials for the production of other goods. The general intention of the law is to exempt raw materials, whether used to produce either taxable or exempt goods. The existing regulations to prevent double taxation authorize refunds of tax paid on raw materials for the production of taxable goods, but they do not authorize refunds of tax paid on raw materials for the production of exempt goods. The bill will authorize regulations designed to correct that anomaly.

The granting of relief to certain retailers is provided for in clause 5. The proposals exclude from the category of wholesale, and include in the category of retail -

(a)   Sales of goods, to consumers, at a trade discount; and

(b)   Sales, by established retailers, of school requisites or sporting equipment to school authorities, or of sporting equipment to sporting clubs, for resale by the school authorities or clubs to their students or members.

Under the existing law, all sales of goods to consumers are retail, unless made at a trade discount. The exception is anomalous, and has proved to be the cause of many difficulties and of serious competitive anomalies. The bill makes provision for the removal of these difficulties and anomalies. It also makes provision for the exemption of goods manufactured wholly or principally from second-hand materials and sold as secondhand goods.

Under clause 14, refunds of tax are to be permitted where registered taxpayers have inadvertently failed to quote their certificates as required. Tax is payable wherever a registration certificate is not, in fact, quoted. Many taxpayers fail to quote their certificates because they are not aware that they are obliged to do so. Consequently, they have to pay, or bear, sales tax which they are not intended to payor bear; because the law contains no provision to authorize refunds of tax in such cases. The bill will authorize the making of refunds in these instances provided that the claimants have not passed the tax on to their customers.

Clause 51 provides for refunds where bad debts are incurred on the leasing of goods. The existing law authorizes refunds where bad debts are incurred in connexion with the sale of goods. Bad debts on leases of goods are equally deserving of this concession.

There are a few other minor provisions for the alleviation of the disabilities suffered by taxpayers. Other provisions relate to purely formal amendments, the curing of obvious defects in the law, and the ratification of the intention of the law in cases in which doubts have arisen.

It will be seen that the bill is substantially in the interests of taxpayers. Numerous complaints by taxpayers and others have been investigated, and the various amendments are now brought forward in order to remove genuine causes for complaint against the law imposing sales tax.

Question resolved in the affirmative.

Bill read a second time and passed through its remaining stages without amendment or debate.

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