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Tuesday, 8 November 1983
Page: 2421

Mr SPENDER(9.20) —Listening to the last speaker, the honourable member for Hawker (Mr Jacobi), for whose concern for company law I have a sincere respect, and for whose views on tax avoidance I have also a sincere respect-I do not agree with him on all matters, but I respect him in that he holds those views and expresses them very honestly and directly-one would have thought he would have acknowledged the record of the previous Government in wiping out tax avoidance. It is very easy for Government members to say what they would have done if they were in power when in fact they were not in power. It is simple to reinvent the world when we know we will never have the task of reinventing it.

The honourable member and speakers from the Government benches could have pointed out that about 28 specific schemes were legislated against by the previous Government. The speakers on the Government side could also point out that the Crimes (Taxation Offences) Act was introduced in 1980 by the previous Government under the previous Treasurer. It was under the previous Treasurer that the great majority of the specific legislative reprisals against tax avoidance schemes were brought into being. Speakers on the other side could also acknowledge that Part IVA of the Income Tax Assessment Act which came into effect in about May 1981 coupled with the Crimes (Taxation Offences) Act has effectively stopped tax avoidance. If anyone disputes the accuracy of that proposition the simple test is to ask this question: What additional weapons has this Government given to the Commissioner of Taxation? The answer is none.

This Government has now been in power for seven or eight months. It came into power making the most stringent and vituperative criticisms of the actions of the previous Government in the field of tax avoidance. It came into power exercising its prerogative in electoral terms to parade the big lie. What is the big lie? It was identified by the honourable member for Bennelong (Mr Howard). It is simply this: Anyone who speaks against legislation which is to hit people who are described as tax avoiders, rip-off merchants or bottom of the harbour merchants, anybody who believes that there should be some kind of balance in terms of justice in the operation of the law is probably a crook and, at the very least, the friend of crooks. We all know how one of the present Ministers of the Government used to attack people on this side of the table. He did so on the basis that I have described, that those who opposed anything which was proposed by the then Opposition did so for the most base of reasons.

As I say, I would have thought that in honesty members of the Government would concede that a great deal of work was done under the previous Government and no further work needs to be done in terms of general remedial, anti-avoidance legislation. If it does we have not heard a word from the Treasurer (Mr Keating) or from the Minister for Finance (Mr Dawkins) as to what loopholes may still be there. The truth is everybody in this chamber accepts that tax avoidance has been effectively killed although it will never be completely killed. If it has not been killed off, the Government has been in dereliction of its duty since day one when it came into power and it remains in dereliction of its duty and it is either dishonest in what it says or incompetent in the way in which it administers government.

That being said, let me just take up one or two of the other things that the honourable member for Hawker said. He referred to the possibility that one might face a hostile High Court of Australia. I have heard this kind of criticism made again and again. I point one thing out to him-the Court is there to form a view about legislation. One may disagree with the conclusions that courts reach. I frequently have disagreed, particularly when my own arguments were not accepted by the courts. But disagree as one must if one is dissatisfied as part of a legislature, one legislates to overcome what one thinks is wrong in the court's thinking.

However, the honourable member for Hawker very honestly identified the kinds of transactions that this legislation was originally concerned with. I refer to the Act which was brought in under the previous Treasurer with which these amendments should be concerned. In one of the phrases in his speech he said that after the stripping, company records are disposed of. He referred to companies stripped of assets and dumped. On a number of occasions he used the expression ' the stripped company'. I think that identifies the kinds of transactions with which the legislation was originally concerned; that is transactions which involved deliberate evasion at the end of the day and from which persons benefited whether knowing of evasion or not knowing of it. I accept that as the basis on which legislation was put to the House and it is the basis on which this debate should proceed.

If one looks to what the Government now proposes, one sees, first of all, a proposal which we support, to relieve from liability to vendors recoupment tax persons who held shares in public companies but received effectively no benefit. I will return to that in a minute. Secondly, the Government proposes and we do not support, in particular, proposals to remove essential elements of the Act; that is, the element which focuses on the stripping of the company so that it was deliberately denuded of any capacity to pay tax without any concern being given to its liability and without any concern lawfully to minimise its liability. The other of the two essential elements is to seek to remove attempts at lawful avoidance.

The other element of the Taxation (Unpaid Company Tax) Assessment Amendment Bill that concerns me is the proposal to name persons in the reports of the Commissioner who have become liable to a tax liability under the 1982 Act. I will return to that as well in a few minutes. But first of all I will deal briefly with the amendments which concern persons who have not effectively received a benefit and who are shareholders in a public company. The honourable member for Bennelong has proposed that the provision which is before the House now should be extended to include private companies. We support that measure because we think it is fundamentally just that if a person has not received a benefit he should not pay tax. The tests which are laid out in the section concentrate attention upon improvement, if any, of financial position, liability to tax, payments of tax, and the nature and degree of any connection between the person who may be liable to tax and other persons such as vendor shareholders, directors of companies which were involved, and the like. There would appear to be no good reason why the same criteria cannot be applied to private companies. In saying that, I acknowledge that the shareholders in some private companies would have a very much harder task of getting themselves within that exemption, and so be it.

Mr Hurford —Have you any evidence that there are any?

Mr SPENDER —The Minister for Housing and Construction and Minister Assisting the Treasurer asks me whether I have any evidence that there are any. He should be saying 'I have no evidence that there are any', because he is the person who has access to the information; we do not. I would be perfectly astonished if such cases did not exist. He will recall-or he should recall-that there is a distinction for the purposes of tax law between private and public companies which does not mirror the distinction between proprietary and public companies in the companies law.

Mr Hurford —Why do you waste the time of the House when you have no examples?

Mr SPENDER —The Minister asks me why I waste the time of the House, because I have no examples. If he is not concerned with justice and equity, we on this side of the House are concerned. Let this Uriah Heep, as he has been so accurately described, justify to the House the reasons why he will not accede to the Opposition's amendment. Let it be said that in this instance the Minister for Finance has unwittingly done a service to the House because, quite properly, he has been given certain treatment by the Commissioner of Taxation and that has illuminated the problem that people can face under this legislation. Therefore, there is no possible reason why, so long as the same criteria are employed, shareholders in private companies should not be in the same position as shareholders in public companies.

Let me come now to the removal of the essential elements to which I referred. They include the fact that a company has been stripped and the elimination of post-sale or pre-sale transactions where there has been an attempt before the sale or after the sale lawfully to avoid tax. We are concerned in this House to distinguish between evasion and avoidance. Avoidance amounts to the legal rearrangement of a taxpayer's affairs to avoid attracting a tax liability or to reduce the amount of that liability. Whether one likes it or not, the law allows people to do that, and so long as the law allows people to do that, it is a matter that must be judged by the law. We should not be seeking retrospectively to alter the position. Evasion involves intentional wrongdoing and that, of course, brings into play quite different considerations. Those considerations are quite fundamental.

If we do-as is now sought to do-take out of the Act the provisions which focus upon stripping, effectively we are taking away the rationale of the previous Act . If, coupled with that, we take away the need or the requirement that in certain circumstances where there has been a fair attempt to avoid tax before the sale, or a fair attempt to avoid tax after the sale, we are saying: 'We are not concerned with your intentions; we are not concerned whether beforehand you sought to arrange matters so that there was a lawful avoidance of tax; we are not concerned whether afterwards you sought to arrange matters so that there was a lawful avoidance of tax; nor are we concerned with whether the company has been stripped. We do not care whether it is unable to pay tax because of commercial misadventure, because a sale price in a purely commercial situation may have been miscalculated in terms of the amount that was left over to meet a tax liability, if any'-honourable members will recall that most companies sold in commercial situations are sold during the tax year; very few people wait until 30 June for the purposes of entering into commercial transactions-'We do not care about those matters. The fact that you have acted honestly, the fact that the persons who received the company have acted honestly is to be entirely beside the point. Nevertheless, we will for presentational purposes, continue to categorise what you have done and the benefit you may have received as something which has been received from evasion or from bottom of the harbour activities'. This is, as was put by the honourable member for Bennelong, the classic McCarthyist tactic. The Government is saying that anyone who seeks to advance reasons why certain persons should not be caught-anybody who opposes this legislation-is, as I said earlier, a friend of the tax avoidance industry and probably a crook as well.

A campaign of disinformation has been put before the Australian people. If the Government wishes to change the law so that those who acted honestly are to be caught, let it do so and state its intensions openly. If the Government proposes that, regardless of innocence, regardless of a person's attempts to ensure that a company met its tax liabilities, that person is to be caught, let it state its position very clearly so that we understand what the Government is about. Let us not have these explanations which are put on the basis that what we are here concerned about is evasion, when the Government is removing from the previous legislation tests which were critical to it, tests which focused attention upon the element of evasion.

Returning again to what the honourable member for Hawker said, if a company has been stripped and deliberately denuded of its assets, that is one thing. If it has not, it seems to me that that is an entirely different proposition. If persons involved acted in accordance with what they conceived the law to be, that seems to me to be one thing, regardless of what one's social or political judgments may be upon it. If they have not so acted, that is another thing. They should not be subjugated to liabilities when they acted within the law as they conceived it, and as it was then conceived to be, so long as they acted honestly and so long as at the end of the day they did not benefit from evasion. Nor should they be placed in the position where the Commissioner of Taxation can name persons in a report, persons who may be entirely divorced from any element of fraud.

Mr DEPUTY SPEAKER (Mr Rocher) — Order! The honourable gentleman's time has expired.