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Wednesday, 11 November 1964

Senator HENTY (Tasmania) (Minister for Civil Aviation) . - in reply - Doubtless all honorable senators will concur in the views that have been expressed by many honorable senators about the complexity of the Bill. Unquestionably, normal taxation bills are very complex. But when we try to deal with the devious but legal methods by which taxation has been avoided, we enter upon a very complex field indeed. It is difficult for other than the experts to unravel the complexities. In preparing this legislation, the Government has taken up the recommendations of the Ligertwood Committee and an honest effort has been made to stop the leak.

I was impressed by one or two statements' made by Senator McKenna. He referred to the discretions that will be available to the Commissioner of Taxation. Of course, decisions made by the Commissioner may be referred to a Taxation Board of Review. Moreover, as Senator McKenna said, the taxpayer has the safeguard of being able to appeal to a Supreme Court or the High Court of Australia.

Senator Wright - A decision based on the exercise of a discretion cannot be appealed against.

Senator HENTY - No. I stand corrected there. Senator McKenna asked whether, as provision is made in this legislation for additional discretions, the Government would strengthen the Boards of Review. I tell the honorable senator that, if in the future there is need for an additional board, one will be set up. I thank the honorable senator for raising that point, because it is relevant. It is of particular interest to taxpayers to know that an additional Board of Review would be set up if the exercise of these additional discretions made that course desirable.

Senator Ormonde - The Board would be a committee of inquiry?

Senator HENTY - A Board of Review is a body to which taxpayers may appeal against the Commissioner's decision. A

Board of Review can set aside the Commissioner's decision and substitute its own finding.

It has been suggested that vesting the Commissioner of Taxation with a discretion as to whether certain provisions should apply involves the abandonment of parliamentary responsibility. In other words, it has been suggested that in every case the Parliament should spell out precisely in the legislation the particular circumstances in which various provisions apply. The Government has approached the task of formulating the provisions from the viewpoint that wherever possible the taxation obligations of the taxpayer in any given set of circumstances should be stated with precision and certainty. Departures from this approach are mainly for the purpose of protecting the interests of taxpayers who are not involved in tax avoidance. The tax avoidance arrangements of the ordinary business and family arrangements are often identical in form. To be effective the proposed measures must be comprehensive; but there are areas in which, as measures directed against tax avoidance, it would be unjust for them to apply. For those reasons, certain discretions have been given to the Commissioner.

The discretions that the Commissioner is to have will not be uncontrolled by any means. In many instances specific guide lines are set out in the legislation, and the Commissioner will be obliged to follow those lines in exercising his discretion. In all cases the Commissioner's opinion will be open to review by an independent Taxation Board of Review which can substitute its own opinion for that of the Commissioner. The discretions are not unprecedented. It has long been the practice of the Parliament to vest important discretions in the Commissioner subject to the taxpayer's right of reference to an independent tribunal.

I have noted the amendment that has been foreshadowed by Senator Wright for the appointment of a select committee. The Government cannot accept this proposition. I agree with the comments of Senator Benn, who stated the position adequately. If a select committee were appointed, that committee in turn would present a comprehensive report.

Senator Cooke - This is something like the Government's handling of the wool situation.

Senator HENTY - Let me develop my own point of view. Knowing what has been * done by select committees in the past, such a committee would pay great attention to the responsibility given to it by the Parliament and a voluminous report covering all aspects of the subject would be presented. That report would have to be investigated by every section of the Treasury. As Senator Benn pointed out, no one person deals with all the divisions concerned. So we would have a further delay which would probably run over another year and thus allow another year's escape from the provisions of the taxation law. I am sure the honorable senator has advanced his proposal in good faith, but I must say that I completely disagree with any proposal that would lead to further delay. Because of the complexities of the situation the preparation of this legislation has already extended over a considerable period. If a comprehensive report submitted by a select committee had to be investigated, there would be considerable further delay in implementing the necessary legislation. We would do much better to pass this Bill, with the qualifications that were expressed by the Treasurer (Mr. Harold Holt) and about which I shall have something more to say a little later.

A number of honorable senators have mentioned the exemption from taxation of premiums on leases. The present position is that the lessor is taxed on a premium at the rate applicable to his income and the lessee is allowed a deduction which saves him the payment of tax at the rate applicable to the lessee. The rates payable by the two parties might be the same; both parties might be public companies. In other cases the rates might differ. In some cases the rate of tax payable by the lessor might be higher than that of the lessee. In other cases the position might be the reverse, the overall result perhaps being unfavorable to revenue. But there is no rule which suggests that the present position favours revenue or that the amendments will be unfavorable to revenue in their overall effect. The overall effect depends upon the facts in each case. These premiums would not, without special pro visions, enter into income tax assessments, except perhaps in very isolated cases in which there is trading in leases. This is because lease premiums are, apart from exceptional cases,, capital payments on the one hand and capital receipts on the other hand, for income tax purposes. The general effect of the Bill will be, therefore, to allow general legal considerations to apply.

Reference has been made to " chain " companies. I point out to honorable senators that while there have been instances such as those to which Senator Wright referred there are many more genuine commercial leases amongst people of modest or wealthy means, which were contracted in good faith. These people would suffer great hardship and I believe would consider themselves unduly and unfairly treated if their genuine commercial contracts were affected. Following investigation into the broad picture of commercial leases it was found that so many genuine commercial contracts would be damaged by retrospective action that it was decided that the appropriate date to set for. all future leasehold undertakings to be covered should be the day following the date of introduction of the legislation - 23rd October. This decision was made after full investigation. The Treasurer has pointed out that deferment would leave persons in doubt whether the legislation applied to them. Even those persons who expected the legislation to affect them would not know its effect until the Bill was ultimately passed. Those persons who quite appropriately wished to confirm that the legislation could affect their affairs accordingly would be prejudiced. They would not know what action to take. I have in mind a number of superannuation funds which may be willing - even anxious - to accept the principles of this Bill but cannot do so until the law is enacted. Similarly, partnerships who wish to remove the features at which the legislation is directed should know as soon as possible where they stand. They will not know their position unless the Bill is passed at this stage.

This morning representatives of three of the great insurance companies in Australia interviewed Treasury officials. These companies conduct superannuation schemes. No request was made for deferment. The companies wished only to know the provisions of the legislation. Their representatives were quite satisfied with the assurances of the Treasurer that expert bodies had found it was necessary to overhaul the legislation. The Treasurer pointed out that following reports in the next few months he would be prepared to listen, to- their representations. lt has been mentioned that the Treasurer has given some undertakings. I want to repeat them in this chamber. It is fully appreciated that the Bill is one of great complexity and that many honorable senators are worried about some of its aspects. There will be a breathing space of some months before any of the measures are given practical effect in the assessments of taxpayers. There will also be during this period opportunities to consider reports that may be made by interested organisations and by honorable senators. The Treasurer has already indicated in very clear terms that all such reports will be carefully considered. He has also said that any amendments judged to be necessary in the light of matters raised by persons having an interest in the effects of the measures can be attended to in the coming autumn sessional period of Parliament. All matters raised by honorable senators in the course of the debate and any matters raised by honorable senators after further consideration of the provisions of the Bill will be dealt with in accordance with the undertakings given by the Treasurer.

Question resolved in the affirmative.

Bill read a second time.

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