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Thursday, 30 June 1994
Page: 2404


Senator CHAMARETTE (11.06 a.m.) —by leave—I move:

1.Clause 5, page 24, proposed subsection 446(8), line 14, omit "Imprisonment for 6 months", substitute "A pecuniary penalty of 30 penalty units".

2.Clause 5, page 24, proposed subsection 446(8), lines 15 and 16, omit the Note, substitute the following Note:

"Note: Under subsection 4AA(1) of the Crimes Act 1914, as in force at the commencement of this subsection, a penalty unit means $100.".

3.Clause 5, page 25, proposed subsection 447 (6), line 9, omit "Imprisonment for 6 months", substitute "A pecuniary penalty of 30 penalty units".

4.Clause 5, page 25, proposed subsection 447(6), lines 10 and 11, omit the Note, substitute the following Note:

"Note: Under subsection 4AA(1) of the Crimes Act 1914, as in force at the commencement of this subsection, a penalty unit means $100.".

The aim of amendments Nos 1 to 4 is to do away with the imprisonment provisions in the penalty clause relating to provision of information to the Department of Social Security. In the first two amendments, the clause that is being addressed is part of the disability wage supplement provision being created by this bill and has been drafted to bring it into conformity with the other benefit and pension sections of the Social Security Act. Proposed subsection 446(8) allows for the courts to imprison a person receiving disability wage supplement for up to six months for failing to provide information when required to do so.

  The Greens do not object to the imposition of penalties for those who contravene the Social Security Act, although it has to be said that the history of prosecutions in recent years leaves a great deal to be desired when examined for issues of equity and justice from state to state. Clearly, when parliament, on behalf of the Australian people, creates laws, it intends the laws to be observed. What we oppose in this bill is the creation of imprisonment as the possible outcome of conviction. Within every jurisdiction in Australia governments have said that imprisonment is to be the option of last resort. Sadly, the last resort seems to be reached for first in far too many pieces of legislation. A very useful debate has arisen lately about the inadequacy of understanding of the concept of deterrents. We have a lot to learn from criminologists about when to apply penalties as a matter of sheer justice and when applying them with an illusion that a deterrent effect will result actually leads to injustice.

  When we questioned this subsection in a briefing with ministerial and departmental people we were told, `Of course, it is not intended that people would be imprisoned. The note referring to the Crimes Act says that the courts can impose a fine.' That really begs the question. If people do not intend the measure to be used, why allow for it? The amendment replaces the imprisonment provision with a fine. The level of the fine has been chosen for its equivalence in the Crimes Act, hence these amendments I have moved in relation to the same subsection and to subsection 447(6); that is, to remove the note referring to the Crimes Act because that now will be superfluous.

  All the rationales underlying the four amendments are the same, but I point out, as I did in my speech during the second reading debate, that I am putting the government on notice that each time an opportunity presents itself to amend legislation in relation to inappropriate penalties in the form of imprisonment I will seek to so amend. I realise that it is not likely to be supported at this time, but I think it is a very important matter and, therefore, deserves to be raised.

  In a very useful research report, research report No. 8 1993 from Western Australia, Ms Meredith Wilkie talks about women social security offenders and experiences of the criminal justice system in Western Australia. I would like to quote from a section of its introduction. Professor Richard Harding states:

Ms Wilkie's findings are powerful indeed. It emerges graphically that Magistrates Courts are overwhelming more likely to imprison women offenders for this category of offence than for any other category coming before themand that, moreover, women are more likely to be imprisoned for such offences than men are.

It is clearly a provision within the Social Security Act which is not intended to be discriminatory but has a discriminatory function because of the way it allows magistrates courts right throughout the country to have a very different approach to it.

  Ms Jill McClements, who is a Perth financial counsellor, wrote an excellent article that drew this issue to the attention of people in Western Australia. It appeared in the Legal Service Bulletin of February 1990. It had come to people's attention that an unprecedented number of women were imprisoned for social security fraud in Western Australia in the years 1987 to 1988. The article accounted for the dramatic rise within the 1980s of women's imprisonment as a whole. Fortunately, after considerable lobbying, that rise in women's imprisonment is tailing off. The issues that underlie it are referred to in this article. Some of the issues are being addressed at a local level.

  The question being asked frequently is: what is the difference between fraud and a survival strategy for the poor, who are increasingly being locked out of the affluent society? While no-one would argue that organised rackets which siphon off social security funds to criminals should be curtailed, along with corporate tax evasion and white collar crime, the imprisonment of extremely disadvantaged people for first offences is another matter. In the article that I have referred to, the spectacle of dozens of very disadvantaged citizens being sent to prison for such fraud is examined with particular reference to the imprisonment of an unprecedented number of women for such offences in Western Australia in 1987 and 1988.

  I have some examples of the most appalling way in which people are penalised by having these provisions within the act; but I know we are short of time, so I will move on. However, it is an Australia-wide problem, not simply a problem in Western Australia. Michelle Robertson, in the August 1989 issue of Inside Out, referring to women and social security fraud in Queensland, states:

For women charged with social security fraud, the outlook is grim. Magistrates and judges are prone to judge women not only as offenders but by their status as women and mothers. We have seen that women in Queensland are more likely to receive a sentence than women in other states. This must raise concerns about the attitudes of officers of social security, police prosecutors, magistrates and judges.

She also raises a very important point. The impact of imprisonment penalties falls not simply on the person who has committed the offence, no matter how trivial its nature or how serious. Women's imprisonment also affects children within their care. Usually women have the primary responsibility for the support of their children, and a woman's imprisonment will often mean relocation of the child or children to other family members or friends. If other family members or friends are not on hand, the children will be placed in the care of the state. The effects on children are not taken into account by sentences. The economic and social costs of the disruption and the loss to children should be recognised by those who determine the punishment of the offender.

  Upon their release, women also pay restitution to the Department of Social Security. This amounts to double jeopardy or a double penalty. In Queensland, the restitution is deducted at the rate of 14 per cent of whatever benefit the woman receives. If financial difficulties motivated the original offence, what is the point of further impoverishing the benefit recipient? It is time the community reassessed its attitude to social security fraud and looked behind the offence to address its causes. Clearly the threat of imprisonment is not a deterrent and actual imprisonment is not a solution. It is clearly time that this chamber looked at that too when we, on a routine basis, simply let offences and penalties that involve imprisonment slip through without checking what we are actually doing.

  Ms Wilkie notes that in many ways social security offences are similar to tax evasion. Yet, the former is viewed by the public and authorities as much more serious because the public perceives the tax office as taking from us, so any claw-backs we can achieve are to our credit. Welfare recipients are also seen as taking from us and many people feel offended about the abuse of a system which is generously provided for the support of the needy. Even though tax prosecutions have risen dramatically, only 0.2 per cent of tax offenders were gaoled in 1992 compared with 24 per cent of social security offenders in 1991.

  One judge, Her Honour Judge Kennedy, has noted that the DPP usually requests imprisonment for social security offenders but not for tax offenders. I think we have to look seriously at how the penalty of imprisonment is being used in a very inequitable way within our community. People have expressed concern that if we slow down the use of imprisonment as a penalty, this will encourage more serious crimes.

  I want to draw to senators' attention the differential between taxation and social security fraud. I have a graphic example of that differential. There was a case regarding two estate agents who sold real estate in false names, who defrauded the Commonwealth of approximately $200,000 each, and who did not receive imprisonment; while in a case of social security fraud amounting to $80,000, the person got a minimum term of two and a half years imprisonment. I seek leave to incorporate that article from the Legal Service Bulletin.

  Leave granted.

  The article read as follows

Taxation v social security fraud

MERRIN MASON comments on the sympathetic reporting of taxation fraud cases in the 1990-91 Annual Report of the Commonwealth Director of Public Prosecutions.

  It is not a new observation that ripping off the Taxation Office is considered by many to be a socially acceptable activity, while any attempt to obtain benefits from the Department of Social Security (DSS) to which one is not entitled is roundly condemned. Why should this be so when the two offences involve mostly similar elements and produce the same outcome?

  Two of the cases reported in the l990-9l Annual Report of the Director of Public Prosecutions involved barristers who pleaded guilty to one count each of imposing on the Commonwealth contrary to s.29B of the Crimes Act. Both had understated their incomes by approximately $100 000 over three-year periods, evading the payment of about $50 000 each. Neither had any previous convictions. The first was sentenced to six months' imprisonment suspended upon entering a good behaviour bond for 12 months. He was barred from practice for six months by the Victorian Bar Association. The second was sentenced to three months' imprisonment also suspended upon entering a good behaviour bond. He was barred from practice for three months.

  Another case involved two estate agents who sold real estate in false names and operated bank accounts in false names to conceal their property dealings. The total amount of tax evaded was $404 000. No prior convictions were mentioned for either of them. Both were sentenced to 18 months' imprisonment suspended upon entering into good behaviour bonds. They were both subsequently disqualified from acting as estate agents.

  Only one case study of social security fraud was reported and this involved a defendant with many previous convictions. It is therefore not a useful comparison. In the 1989-90 Report, however, there was a case worth comparison. This involved two people who were apparently not social security recipients. One worked for DSS and set up bogus claims. The other (not an employee of DSS) set up bank accounts into which the benefits were paid. Over a three and a half year period they received about $160 000 ($80,000 each). Both pleaded guilty to 20 and 22 counts respectively of defrauding the Commonwealth. Both were sentenced to four years' imprisonment with a minimum term of two and a half years. Neither is reported as having any previous convictions and there is no mention of what mitigating factors were raised.

  While this case does not fall into the category of struggling welfare recipient trying to make ends meet, it does indicate the different approach taken to social security fraud. The person who was not employed by DSS (and hence not also guilty of defrauding his employer) should be compared with the estate agents who also set up false bank accounts to receive their illgotten gains. The estate agents defrauded the Commonwealth of approximately $200 000 each while the social security fraud was $80,000 each. One got a suspended sentence und the other a minimum term of two and a half years. While such comparisons are based on sketchy details of the cases involved, it is the way that such cases are reported in the annual reports, as much as the actual outcomes that is indicative of the different attitudes to the two types of fraud.

  The Report notes that each magistrate in sentencing the taxation fraud defendants referred to the likely consequences on their professional and community standing. For the estate agents the Report notes that sentencing was affected by the defendants' backgrounds and the fact that they had lost community respect and professional standing. There was no reference in the Report to the outrageous greed that appears to motivate these crimes. It is obvious that the barristers must have had high incomes to be able to understate their incomes by these amounts, and it is of course well known that barristers are well paid. One of the defendants was a Queen's Counsel. Real estate agents also are usually reasonably well off.

  In the case of both types of fraud, matters considered to be serious fraud are charged under the Crimes Act. The elements of the offences are the same. So is the outcome, namely that the Commonwealth is denied funds to which it is entitled. Each person who evades tax thereby increases the tax burden on those who pay tax, in the same way that social security fraud does. One suspects too that the amount of money lost through taxation fraud far exceeds that lost through social security fraud. Yet the outrage from taxpayers is usually reserved for cases of social security fraud.

  Cases of social security recipients imprisoned for fraud where need is a relevant factor were not reported in the annual reports, but do exist. The particular issue of women in Western Australia being imprisoned for social security fraud received much media attention in 1988. The DPP decided to defend their actions in their 1988-89 Annual Report. Since then it appears that decisions to prosecute are considered more carefully by the DSS, but some individuals prosecuted still appear to receive unduly harsh sentences.

  In determining sentence the magistrate or judge will take into account among other factors character evidence. This usually includes evidence of community standing and testimony from respected people who know the defendant. A high community profile and public respect are often seen as mitigating factors, and the effect on these of the conviction is seen as a type of punishment and in this way also mitigates sentencing. It could be argued that high community status carries with it a certain responsibility that has been breached, making the offences more rather than less serious. By contrast, a social security beneficiary is unlikely to be able to call character witnesses well known and respected in legal or business circles. Should a person be penalised because poverty and other social disadvantage make them less likely to be involved in an recognised for community activities? Should a person be able to gain advantage from a so-called `social standing' which is often based mainly on wealth or at least made possible by it, particularly when the conviction is for accumulating some of that wealth in a criminal, fraudulent manner?

  The effect on the defendant's employment is also mentioned as a mitigating factor in the tax fraud cases. Certainly the estate agents suffered, as they were disqualified from acting as estate agents. Both barristers, however, were barred from practising for only a few months and then they presumably returned to their practices. Their employment is unlikely to be significantly affected, precisely because tax fraud is seen by many as a legitimate practice and the defendants as unlucky to be caught. The effect on the employment prospects of an unemployed recipient of social security benefits is likely to be significant. A criminal record will hinder them in obtaining employment, and would probably have a much greater impact on their future careers than a criminal record would for someone who is employed and established in their field.

  Social security fraud needs to be treated more rationally and fairly, and a comparison with taxation fraud points out a reasonable perspective on the crime. Unfortunately the issue is predominantly one of attitude, and attitudes are often slow to change.

  Merrin Mason works for the Law and Government Group in the Parliamentary Research Service, Canberra.


Senator CHAMARETTE —I thank the Senate. I am trying to get us to vote against imprisonment being put in as a penalty at this point and having it replaced by a pecuniary penalty. I have some questions to ask the minister. She may want to seek the advice of the department. I would like to know whether the penalties that are actually there for offences under the Crimes Act are different from the ones under the Social Security Act, what benefit there is in having these provisions in separate acts and whether there is any duplication between the offences punishable under the different acts.

  Perhaps I could also talk about something else at this time. I am trying to prove a point that imprisonment should not be routinely used as a penalty within the Social Security Act and that we should be looking for creative alternatives that actually provide appropriate penalties. I do not think a conversion to pecuniary penalties is necessarily the best option. In fact, it is probably quite ridiculous to fine people who may be already in a disadvantaged situation and may have been drawn into an offence against the Social Security Act because of their difficulties. So I clearly do not see these amendments as providing an ideal solution. I just see them as pointing up the ridiculousness of the penalties of imprisonment in the act.