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Tuesday, 3 December 1974
Page: 3068

Senator COTTON (New South Wales) - I suggest to the Minister for Agriculture (Senator Wriedt) that it would be appropriate to take this measure and the Taxation Administration Bill 1974 together in a joint debate. I will refer to them separately.

Senator Wriedt - The Government will support that proposal.

The ACTING DEPUTY PRESIDENT-Is leave granted? There being no objection, it is so ordered.

Senator COTTON -The Banking Bill 1974 was not opposed in the House of Representatives by the Opposition. Indeed it was met there with approval and the measure as such receives the same support here from the Opposition as it had in the House of Representatives. However, it is fair to say that since it passed through the House of Representatives many of us had a number of representations on this Bill from various legal people, from quite a lot of financial people and from one or two associations of people involved in trade, in particular in the area of trade between Australia and the United Kingdom, and quite a number of us have discussed this Bill with these various people. We in the Opposition also have talked with Treasury officials about these 2 Bills and some of the problems people have raised in connection with them. In one case we arranged for some of those people who made representations to confer with Treasury officials and discuss the problems. We have since then talked on, I think, 2 occasions with Treasury officials about this legislation.

It has become fashionable in Australia for some people to knock off Treasury at regular intervals. For myself and for the Opposition I want to say that we have always had most courteous treatment from Treasury and its officials and we have a fairly substantial regard for their bona fides and hard work. I just wanted to make that observation.

Senator McAuliffe - What did John Gorton say?

Senator COTTON - I am speaking for myself. I want you to understand that.

Senator McAuliffe - I thought you said 'we'.

Senator COTTON - I was using the royal plural. I think it is fair that that should be said of them and the good work they do. An explanatory memorandum was put out with the measure and we are given to understand quite clearly by a further explanatory memorandum that came out this morning that the Government proposes amendments to meet some of these problems and to overcome some of the objections people have raised. It will never be possible to overcome all the objections people raise to measures with such ramifications and of the order of importance of these. There will without any doubt be some people who will be worse off as a result of this legislation but the Australian community in total in my view will be better off and that is in accordance with the principal purpose of the Parliament. Other honourable senators have concerns to express about one or two extra factors in the debate in the Committee stage when the Government's amendments are moved. I hope that the Minister will take these seriously, give due weight to them and consider whether they might be worth further attention.

As stated in the second reading speech of the Minister, the Banking Bill 1974 has 4 main purposes. The first is to take full advantage of the constitutional powers of the Australian Government, particularly in relation to exchange control regulations where they have regard to financial transactions overseas. The second is to provide for extra-territorial application of the Banking (Foreign Exchange) Regulations. The third is to validate civil proceedings or acts or transactions entered into or which might be entered into without the proper exchange control authority. The fourth is to provide a more comprehensive legislative basis for tax screening arrangements. An observation in the second reading speech that is interesting to those of us who follow this subject a little is that the present section 39 of the Banking Act has been on the statute books for about 30 years with only very minor amendments having been made to it during those years. I am one of those people who have believed for a long time, both when we were in government and now when we are in opposition, that the whole of the Banking Act is in substantial need of reconsideration, review and updating. This legislation is just part of a small process of change.

The comment has been made that governments need to have full legal powers to control financial aspects of all the various types of transactions which may be entered into between residents of Australia and residents of overseas countries. That general proposition was raised by the Government in the Financial Corporations Bill which the Senate agreed to and which is now part of the law of the country. As one observed then, one similarly observes now that this again gives the Government a greater area of authority over the monetary, tax and financial scene and with that, of course, goes a greater level of responsibility. Flowing out of that, the Senate Opposition is most anxious to watch very carefully the progress of the Government in its handling of the finances of the country, in its monetary position, in its exchange position and the broad ramifications of all that with the expanded authority that the Government now has.

Reference is also made to section 39 of the Act which deals with exchange control regulations. It is stated that the wording in that section, which has been for a long time in need of change, has given rise to some uncertainty and the proposed amendments which are the original ones, not the new ones that have come forward, should ensure that the regulations may be made to control the financial aspects of all overseas transactions entered into in modern economies. It is said that the wording in section 39 is a little uncertain, and the changes proposed in the amendment contained in this legislation are aimed at removing that uncertainty.

Clause 5 of the Bill will validate for civil purposes acts or transactions entered into prior to the commencement of the Act without exchange control approval, and also for exchange transactions entered into in future without the appropriate approval but in no way does it prevent a person being convicted if he is found guilty of any offence that arises under this Act. Those of us who were involved in this legislation last December, nearly 12 months ago, will remember that we did approve amendments to the Banking Act 1959-1973. They were proposed at the time to deal shortly and fairly urgently with the problem of tax payments. It is now necessary as the second reading speech states- one accepts this to be the fact- to set out rules in a much more comprehensive form. The responsibility really will now principally rest with the Commissioner of Taxation and not fundamentally with the Reserve Bank of Australia. There is, in effect, a formal move of power. The two are joined together but it is the Commissioner of Taxation who will be expected to make perhaps a wider surveillance under the broad lines of policy.

New section 39b requires or allows in certain cases the Bank to refuse applications for exchange control approval unless the Commissioner of Taxation certifies there is no avoidance or evasion. A lot of this, of course, is related to this general proposition of tax havens and the difficulties they present to countries like our own where we may be in a more favourable exchange position from one time or another and perhaps people may be induced to get money out of the country for speculative gain, and one would want to be doing everything possible to avoid that occurring. In the earlier measures referred to and again in this measure the New Hebrides is particularly mentioned as a place regarded as a potential tax haven. There are other potential tax havens around the world. I think we have to accept the fact that in a modern world like the one in which we live a good deal of loose money is moving around and it tends to find a home in places where it has a substantial tax advantage. There are some people who claim this is a beneficial thing for the country which can attract this sort of floating money by making tax concessions. Principally they are countries which are looking to attract capital for development programs. Australia is really not in that position. It is a bona fide country. It has its own resources, capacities and sophisticated methods of handling things, but it does have to watch the problem that there may be people who wish to speculate in Australian currency by taking various measures to get money out of the country in various forms and put it into places where they may think that they may have some gain. What that really does, of course, in the society in which we live is to advantage some people at the expense of others and that is not something which the Opposition Parties are in the least interested in supporting. They are interested in supporting any changes to the law that will make it perhaps less onerous and fairer but at the same time still operate in the public interest. It is in the light of this that we understand these 2 amendments are coming forward from the Government. I understand from one of my colleagues that he has some further concern that he wishes to express in an amendment which he will put to the Minister to consider. I will be waiting to hear the general observations of the Minister and the advice from his officials in regard to the comments that one of my colleagues will make.

These Bills really put beyond doubt the power of the Australian Government to make regulations in respect of all types of overseas transactions. The legislation brings within the ambit of exchange control financial action transactions of Australian residents which take place overseas. The validation for civil purposes has been stated. The Reserve Bank can, as we have stated, refuse applications if the applicant has not satisfied the tax authorities. As I have stated, we support the amendments that are proposed in this Bill. We will be supporting the amendments as they have come forward and will come forward from the Minister as we understand them to read in the memorandum which has been circulated.

We would look at this legislation in the broad and say that it would appear to us to be a further extension of the necessary legislation to protect the Australian revenue and to prevent abuse by unscrupulous persons. We hope it will fall fairly upon all people and that genuine people will in no way be harmed. There is, I think, one thing that can usefully be said. There is a state of great uncertainty in Australia at the present time in many areas of finance. There are a lot of very unhappy and very worried people and this is a product of other things the Government has done. There is a tendency for some Australian people to be saying: ' We have to get our money out of the country'. That is a very unhappy thing to hear. The only way to fix that is to run the country efficiently, well and sensibly and not have it put under these excessive financial and monetary strains. I have a view in the broad that one day Australia is going to have to grow up in the international financial world. It is going to have to learn to handle the problem of its own citizens who have genuine needs and wishes to invest abroad for genuine Australian purposes. I have always felt that we had learned to be a trading country of some consequence, but equally I have felt that we have failed to come to grips with the financing problems that are associated with an expanding trade position like ours. I believe the future will hold for us the need to invest Australian money overseas in alliances with people who buy our products and for market opportunities. We need to become more sophisticated and to have a greater understanding of the problems of international financing as they affect the broad Australian public interest. I think this legislation is leading in that direction, but we have a long way to go.

The Taxation Administration Bill to which I referred earlier is fairly simple. It is an associated measure. It also is supported by the Opposition. It also is referred to in the original explanatory memorandum. Classes of transactions are nominated, and authorised issue of a clearance certificate is necessary for people wishing to take money out of Australia for various purposes. Equally if those persons feel they have been improperly dealt with they have an opportunity to seek redress. I think that the proposed new sub-section ought to be referred to because it is important for those people who are going to be affected by this provision to know that if they feel the Commissioner has dealt unfairly or improperly with them they have redress. The proposed new sub-section quite clearly states that should the Commissioner decline to issue tax clearance certificates he is to advise the applicant accordingly. The applicant will have the right of formal objection against this refusal. If the Commissioner does not then issue a certificate the applicant may then have the matter referred to a taxation board of review set up under the income tax law. There will be a right of appeal to the High Court on any question of law involved in a decision of a board of review. In short there will be rights to independent review of the Commissioner's decisions under this Bill as is the case under other legislation administered by the Commissioner. It would seem to the Opposition that, providing it is administered wisely and sensibly, the legislation provides for safeguards, provides for proper measures of control, puts the responsibility upon the Government to run the thing properly and allows a right of appeal to people who feel they have been unfairly dealt with by the Commissioner of Taxation. I concede there may be some people who will say: 'The delays and costs that are involved make it something I cannot afford '.

In this general area of tax avoidance and evasion by transferring Australian resources overseas we are dealing with huge sums of money. Australia needs to protect itself. The people who are endeavouring to do these things for purposes which are not the right purposes will have to suffer the penalty. Those people who are doing them for a good, sensible and wise Australian purpose, I feel myself, should be able to do so. I hope the Government will aid them to do so. The only other part of the Bill contains a necessary reference to secrecy by taxation officers. Accordingly, as I have said, the Opposition supports the Bill as it is before us. We have read in the memoranda the details of the Government's own amendments and we feel that they are worth supporting. We wait for our colleague, Senator Missen, to raise another matter that he feels ought to be brought up in this debate.

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