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Thursday, 7 October 1971
Page: 2039

Mr HUGHES (Berowra) - I listened with interest to the contribution made to this debate by the honourable member for Adelaide (Mr Hurford). I am in general agreement with him on one point, but on another point I think he may have fallen into an error of fact. The honourable member suggested to the Committee that not enough was being done inside the Commonwealth Taxation Office to rearrange its activities with a view to being able more efficiently to cope with the increased demands made upon that Office by reason of the greatly increased burden placed upon it resulting from a number of activities on the part of taxpayers including activities designed to avoid the payment of tax. All I want to say about that matter is that I think the honourable member did fall into an error of fact.

If the honourable member had consulted the forty-ninth report of the Commissioner of Taxation for the year 1969-70 he would have found that during that year a major review was undertaken of the upper executive structure in the Commonwealth Taxation Office. The structure of the Office was reorganised. Additional senior officers were appointed. Part of the purpose of this general reorganisation was to establish a Policy and Legislation Division. On page 8 of that report a chart is embodied. According to the chart, the Policy and Legislation Division is charged with the responsibility of controlling policy considerations in the Taxation Office associated with proposals for a new or amended legislation other than matters relating to classification and exemption in the area of sales tax.

The honourable member for Adelaide went on to suggest - here I do agree with him - that in this country .now we should be considering the appointment of a committee to inquire into the whole taxation system. I agree with that suggestion. The relevant facts, it seems to me, are these: In December 1959 the Government appointed the Ligertwood Committee. . Within 18 months that Committee produced a most valuable report on a number of aspects of the Commonwealth taxation system. I need not bother the Committee with the terms of reference of the Ligertwood Committee. They were wide, but in one respect they were restricted. From my reading of the terms of reference, there was not committed to the consideration of the Ligertwood Committee the question of the wisdom or otherwise of altering the taxation laws of the Commonwealth so as to impose some form of capital gains tax. I am not advocating in this Committee at this stage the imposition of a capital gains tax. I am saying, however, that in my judgment this is a question that is well worth looking into.

The position appears to me to be this: It is now 10 yeaTs since the Ligertwood Committee presented its report. In that time, the ingenuity of those professional people who advise taxpayers how best to avoid the incidence of taxation in its various forms, but particularly income tax, has not lain fallow. Those people have been busy in the intervening 10 years and many taxpayers have avoided the payment of a great deal of tax. The law reports are an eloquent page of history in this respect. Great problems have arisen because of judicial interpretation of section 260 of the

Income Tax Act. This is the section wirier strikes down arrangements or agreements made with intent to avoid the payment of tax. Without going into the fine detail of judicial decisions - one just cannot do that in a 10 minute speech - I think it is fair to put the position, in a summarised form, in this way: Section 260 is perhaps a less useful weapon as a result of judicial interpretation - I make no criticism of the bench in this respect - than the people who framed section 260 intended it to be.

In Canada in 1966 a Royal Commission - the Carter Commission - wa appointed to investigate the taxation system generally. In the result, that Commission came forward with a suggestion that is being substantially implemented for the introduction in Canada of a moderate capital gains tax. It is said by opponents of capital gains tax that such a tax is essentially unjust because it taxes productive resources. That argument has no great appeal to me because it seems to me out income tax laws are so framed as to tax, and to tax very substantially, productive resources. People who, by themselves or through their parents, have paid money for a good education so as to acquire an ability to earn a high rate of income have, in a very real sense, their productive resources taxed. I have never heard it argued against a high rate of income tax that this is unfair because productive resources are being taxed. That is, after all, what is being done.

While there are arguments for. and against a capital gains tax - and I would not wish to express myself firmly in favour of its imposition at this stage - I do believe that the arguments should be investigated. It seems to me that as it is a long time since an independent committee of inquiry investigated our taxing structure and its operation the time has come to appoint another committee of the same kind as the Ligertwood Committee. In making that suggestion, I am not seeking in any way to denigrate the good work that, I understand, is being done and has been done over the last year inside the Commonwealth Taxation Office in the way of investigating anomalies with respect to tax avoidance. The published cases of tax avoidance, the ones which get into the law reports, are probably, I think, only the tip of the iceberg.

Tax avoidance, although it is perfectly legal, is essentially inequitable. I doubt whether, with the best will in the world and the great dedication that we know there is among officers of the Commonwealth Taxation Office, the resources of that Office are sufficient in themselves to do ali the work that ought to be done in the way of investigating tax avoidance and suggesting remedies designed to stop it as far as possible. Tax avoidance in one form or another is an inseparable concomitant of any system of taxation. No government and no system of taxation can abolish it entirely. Human ingenuity, will always reach out to create new loopholes where old ones are blocked up. But I question whether the process of blocking up loopholes is proceeding fast enough. The report of the Commissioner of Taxation for the year ended 30th June 1970 indicates very plainly if one reads it that despite the structural reorganisation within the Commonwealth Taxation office the resources are still pretty thinly spread. Therefore I suggest that the Government give urgent consideration to the question of appointing a committee. I do not think it is sufficient to commit this large and very technical problem to a committee of the House although I do not wish for one moment to deprecate the very valuable and constructive suggestion made by the honourable member for Isaacs (Mr Hamer) in his speech last night on the estimates of the Parliament. I think there is room for such a committee to work alongside an expert committee of the type that I have suggested.

The DEPUTY CHAIRMAN (Mr Hallett) - Order! The honourable member's time has expired.

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