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Thursday, 14 May 1987
Page: 3262

Mr BLUNT(8.18) —It is a great pity to have to speak after the honourable member for Calwell (Dr Theophanous), because all we ever get from him is the claptrap of the old Left and its discredited ideas.

Mr DEPUTY SPEAKER —The honourable member for Richmond was assiduous in drawing my attention to the fact that the honourable member for Calwell was not addressing the legislation. I hope that the honourable member for Richmond will not progress down that track himself.

Mr BLUNT —I assure you, Mr Deputy Speaker, that everything I say here tonight will be directly relevant to the legislation before the House. Unfortunately, part of my remarks will now have to be directed to correcting the impression created in the mind of anyone listening to the honourable member for Calwell because, frankly, the honourable member does not know what dividend imputation is about. He maintains that this is a gift, a benefit, to the corporate sector. It has nothing to do with the corporate sector. It is a benefit to shareholders-not corporate directors, but shareholders.

Let me explain to the honourable member for Calwell how dividend imputation works. Prior to the Government's decision to introduce a dividend imputation system in Australia, we actually had double taxation of corporate profits. Maybe the honourable member for Calwell and the honourable member for Melbourne (Mr Hand), being members of the Left, approve of double taxation but I do not and obviously the Treasurer (Mr Keating) does not. The Treasurer obviously has the numbers in Caucus to overcome the ideology of the Left. The effect of dividend imputation is that when a company pays a dividend the person who receives the dividend-that is, the shareholder-gets a credit for the tax paid by the company. The shareholder-not the directors of the company-or the executives of the company, but the shareholder. That is what we are talking about. We are talking about the elimination of double taxation of company profits distributed to shareholders. That is what this legislation is about. It is about encouraging investment in Australia's stock exchanges; about encouraging capital formation; about encouraging capital investment in productive assets; and about encouraging capitalism by people and not pension funds, which is a direct contrast with the Labor Party's policy on, for example, the lump sum taxation of superannuation fund payments.

Let me explain the contrast. We have, under this Government, a lump sum tax on superannuation payouts except if a person invests his lump sum with a large insurance company to buy an annuity. That concentrates the control of capital in Australia in the hands of a relatively small number of people-the large institutional investors. This has probably escaped the attention of the honourable member for Calwell, because I am quite sure he would be totally opposed to the concentration of the control of capital in the hands of relatively few people, some of whom are even overseas controlled. That, of course, would be anathema to anyone who had true left wing principles and did not sell them out at the change of the wind every time a little bit of heat was applied to him in Caucus.

The Labor Party is running a tax policy on lump sum superannuation which encourages the concentration of capital in the hands of the pension funds, so that we do not have a situation where people who have worked for 40 years in Australia and contributed to their superannuation schemes get their lump sum-maybe $100,000 cash in the hand-and have the opportunity to pay off their mortgage, maybe buy a new car, take a trip around the world, invest the residue and live off the interest for the rest of their lives and maybe have some security in their old age. What they have to do is buy an annuity. Who do they pay the money to when they buy the annuity? It is paid to one of the large institutional investors, which further concentrates the control of Australia's capital markets. As I said, some of them are overseas owned.

Contrasting that position of the Labor Party-that tax was introduced by the very same Treasurer and obviously supported by members of the Left-we now have a bit of economic enlightenment. I support dividend imputation. It is something that is long overdue in Australia. The previous Liberal-National Party Government was moving in that direction and had provided an exemption for $1,000 worth of dividends in the hands of individual shareholders. We would have moved for a full, proper, equitable and efficient system of imputation. But the real problem with the scheme that the Government has introduced is that its imputation-

Dr Theophanous —You had seven years. Why didn't you do anything?

Mr DEPUTY SPEAKER (Mr Leo McLeay) —Order! The honourable member for Calwell will cease interjecting.

Mr BLUNT —Thank you, Mr Deputy Speaker. I really do not need your protection. I find his interjections quite stimulating, even amusing.

Mr Beale —And irrelevant.

Mr BLUNT —And irrelevant. What we have is imputation on the cheap. It is not an effective system of imputation; it is a system of imputation which is riddled with anomalies and inefficiencies. It was introduced this way because the Government could not afford to do it properly. In fact, the price paid by the corporate sector for dividend imputation has been an increase in the corporate tax rate. While the rest of the world is decreasing corporate tax rates and personal tax rates also-the United Kingdom is down to 35 per cent-the Treasurer and the Labor Party generally in this country are moving taxes up. So we have dividend imputation, which is of benefit to shareholders, and companies pay for it by having an increased corporate tax rate, from 46c to 49c. The rest of the world is going down and Australia is going up. The rest of the world's inflation is down, but ours is up. The rest of the world's interest rates are down, but our interest rates are up.

Dr Theophanous —Mr Deputy Speaker, I raise a point of order. I fail to see what this has to do with imputation.

Mr DEPUTY SPEAKER —Order! There is no point of order.

Mr BLUNT —Mr Deputy Speaker, I ask you to rule that that was a frivolous point of order.

Mr DEPUTY SPEAKER —Order! In this debate there have been a number of people attempting to raise points of order and interjections. We might now cease all that and get on to the legislation.

Mr BLUNT —As I said, the Labor Party in its tax policy is totally out of step with the rest of the world, and Australia's potential to get back into step with the rest of the world is significantly--

Mr Hand —What rate would you give?

Mr DEPUTY SPEAKER —Order! The honourable member for Melbourne will cease interjecting.

Mr BLUNT —As I was saying, the Labor Party is significantly out of step with the rest of the world. It cannot even introduce an effective system of dividend imputation. The present scheme just will not work. In fact, it is a great con.

Let me point out some of the anomalies that exist within the present scheme. What happens is that a person gets a credit for the tax paid on the dividends he receives. Unfortunately, he cannot get that credit paid back to him unless he has additional taxable income to offset his tax liability against the credit for the tax paid on the dividend.

Mr Cobb —It hurts the poor.

Mr BLUNT —It hurts the poor, as the honourable member for Parkes says. If a person has a small shareholding, is paid a dividend on which tax has been paid and has no other taxable income-and many widows and orphans living in the electorate of the honourable member for Melbourne would be in that situation; it is about time he raised it with the Minister for Social Security (Mr Howe)-that person has a tax credit. But if he has no tax liability to offset that tax credit against, he cannot get it refunded to him. That is inequitable.

The second thing that is significantly inequitable about what this Government is proposing is that the Medicare levy at 1 1/4 per cent is calculated on the gross value of the dividends. So if the total dividend is $100 and the tax payable on it by the company is 49 per cent, the Medicare levy is calculated in the hands of the shareholder on the $100. Since the person gets in his hands only 51c in the dollar, that is a doubling of the Medicare levy from 1 1/4 per cent to 2 1/2 per cent. One cannot offset the tax paid on the dividend against one's Medicare levy. That is really an underhand way of doubling the Medicare levy for a certain section of our community.

This dividend imputation scheme that the Government has introduced starts to rationalise corporate tax in Australia. We need to reduce the tax rate. We need to do away with the anomalies. We need to make sure not only that the anomalies that I have mentioned are eliminated, but also that the credit for tax paid can be carried forward. What of the situation of a person who is engaged in a business and also has a number of investments in public companies that are eligible for dividend imputation? The person, in a given trading year, may incur a loss. The loss, under Australia's tax law, can be carried forward for up to seven years, but the credit on the dividend paid on his investments in the corporate sector cannot be carried forward. That tax paid in that year is lost. There is no justification for that. If we had a fair dinkum attempt to introduce an equitable system of imputation in this country, we would give tax paid on dividends the same status as other tax credits that are available in Australia, including the capacity to carry forward losses. This Government is not fair dinkum. It is, as usual, trying to create an impression that it is moving in the correct direction, and it is to some extent but, as usual, it has not done so properly. The price paid by the corporate sector in increasing the tax rate from 46c to 49c in the dollar is far too high.

Our time tonight is limited. I would like to speak at greater length about dividend imputation. Unfortunately, I had to correct the false impressions created in many people's minds by the totally inaccurate comments made by the honourable member for Calwell. However, I would like to address two other aspects of the legislation that is being considered by the House tonight. One relates to an amendment which proposes to give the Commissioner of Taxation power to require reasonable access to records and facilities. At present, under section 264 of the Income Tax Assessment Act, the Commissioner has a right to require the provision of information relating to a taxpayer's returns.

The amendment that is contained within the legislation that the House is considering tonight allows the Commissioner to require access to records-reasonable access; I concede that the word `reasonable' is there-and facilities. It does not require the giving of notice. What it really means is that the Commissioner can arrive at the taxpayer's door, ask for access and reasonable access must be granted. I consider that that is not an appropriate position for this Government to advocate on behalf of the Taxation Office. It is, in many cases, an attempt to separate the taxpayer from his tax agent. The Government should recognise that when a taxpayer uses the services of a tax agent all questions and queries relating to the tax return should, in the first instance, go to the tax agent. There should be no attempt to separate the taxpayer from his agent. I note advisers in the gallery shaking their heads. If they sat in an honourable member's electorate office, they would understand how field audits operate.

Mr Cobb —The real world.

Mr BLUNT —Yes, we are talking about the real world tonight; we are talking about the attitude of officers of the Australian Taxation Office who go out into the field and do nothing short of harass taxpayers. To give them power to arrive without notice, without reference to the tax agent, and to require reasonable access to facilities, is wholly unnecessary. Section 264 is adequate.

`Reasonable access' requires definition. I have constituents who tell me that they have been called at 9 p.m. by officers of the Tax Office saying that they will require access to records the next morning. I do not think that calling at 9 p.m. to require access at 9 a.m. is reasonable. What are `facilities' in this modern day and age? Are they a desk and chair, a photocopier or access to the company computer? We need some qualifications and limitations on this very broad-ranging power.

Over the past few years there has been a considerable increase in power of the Australian Taxation Office to collect tax in Australia. The Government will argue that it is appropriate to crack down on the tax cheats and dodgers, and I could not agree more. However, it is not appropriate to harass small businesses that compensate for the administrative inefficiency of the Australian Taxation Office. Unfortunately, there is not an honourable member of this House who is not aware of the inefficiencies of the ATO. They have been documented by everybody, from the Auditor-General to parliamentary committees of inquiry. The solution to the problems of the ATO is not more and more power, not more and more weapons to use against taxpayers, but a good hard look at the way that the office operates, some decent internal management, some control, a simplification of the tax system, a reduction in the tax rates, and a more realistic approach to the collection of tax in Australia. Rather than using the heavy hand, what we need is a simple tax system.

In the other aspects of the legislation on which I wish to comment tonight, there is a classic example of overkill by the Government, and the ATO that advises it. There are changes in the requirement for motor vehicle log-books-and about time too! On 19 September, the Treasurer waltzed into this place and announced the Government's tax package-14 or 16 measures, most of which have been dramatically changed, altered, rearranged or not implemented. Part of the original proposal was nothing short of a draconian requirement to keep a log-book on vehicles used for business. The requirements to maintain that log-book were incredibly onerous. After massive community protest, they were changed-like so many other parts of this Government's incoherent and often incomprehensible tax policy-so that there was a requirement only to maintain a log-book for 12 weeks. However, as part and parcel of that original proposal, one had to decide how one was going to claim the deduction for motor vehicle expenses-whether it would be actual milage or percentage of usage. There would have been no opportunity to change from one system to another.

The business community and members of the National Party of Australia told the Government that that was crazy, wholly inflexible and that there was a need for change. Tonight, the Government is backing down, recognising that what it was told by the business community, the National Party and the Opposition generally was true. I congratulate the Government for coming to its senses nine months after the event.

Later tonight my colleague the honourable member for Parkes (Mr Cobb) will move amendments to sections of this legislation. The National Party believes that section 263 is wholly inappropriate in the context of the Australian tax laws. We believe that it is more appropriate to get off the backs of small businesses. It is wholly inappropriate to provide more and more power to the Australian Tax Office.