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Tuesday, 2 October 1984
Page: 1397


Mr ROCHER(10.26) —Even omitting the Income Tax (International Agreements) Amendment Bill the other two Bills being debated cognately will add nearly 230 pages to the tax legislation via the provisions of the Income Tax Assessment Amendment Bill (No. 4) and the voluminous Taxation Laws Amendment Bill 1984. Throw in the further tax Bills to be debated separately and, during this week, around 250 or 260 pages of law and amendments will be added to one of the largest tomes imaginable; that is, the Income Tax Assessment Act, as amended , has already reached War and Peace proportions and is fast approaching the dimensions of Churchill's memoirs. Accepting, if any reasonable person could, that ignorance of the law is no excuse, every taxpayer in Australia is now expected to memorise and abide by income tax law to be further expanded to an extent which no normal person could absorb. Whatever the merits of individual amendments, they are further straws-indeed another bale of straw-on the camel's back.

The complexity of the principal Act will be expanded and the ability of individuals to understand and abide by the law, as it will be, will be further reduced. Although ignorance of the law is no excuse at law, any other possibility is just incomprehensible. Only a minute proportion of the millions of Australians who are expected to know their obligations under income tax law can ever possess the necessary knowledge. There is something deeply disturbing about law which affects our everyday lives being so complex as to be incomprehensible to the great majority.

These Bills simply add to that circumstance and even savagely increase the penalties for offending against many of the principal Act's requirements, albeit it is not possible for the majority to know and understand those requirements. It seems that no government is really willing to tackle the job of simplifying the Act. The best we can get from the Hawke Government is a promise to do something at some time hence which has all the hallmarks of an intention to squeeze even more tax out of an already seriously overtaxed population.


Mr Cadman —Capital gains tax.


Mr ROCHER —A capital gains tax is on the books. So must be gift and death duties in one form or another. We might see a capital transfer tax of the dimensions of that which applies in the United Kingdom. I thank the honourable member for Mitchell for reminding me of that. In addition to the enormous complexities and size of income tax legislation and the resultant obligations on all and sundry, which cannot be known to them, another inequity continues and is indeed enhanced by these Bills. It is in evidence in one of the provisions of the Taxation Laws Amendment Bill 1984. In clause 297, it is proposed to reverse the onus of proof principle. The Deputy Leader of the Opposition (Mr Howard) and the honourable member for Higgins (Mr Shipton) have both referred to our objections to that matter. I suppose it need not be further canvassed, except to endorse the remarks made by my colleagues. That requirement is consistent with and akin to the many and seemingly endless expansions of the Commissioner of Taxation's discretionary power. Discretionary power in itself is not necessarily objectionable. There may well be occasions when it might be desired that the Commissioner, or his delegates, have a free hand to deal with a particular problem or a particular set of circumstances that cannot be catered for in legislation. However, what should not be countenanced is that discretionary power is exercised post facto and not on application and before the event.

For a few short years prior to July 1966 the Commissioner of Taxation took great pains to inform his clients-that is, taxpayers-in advance how he intended exercising his discretion. Certainly the Commissioner had fewer opportunities to exercise his discretion in those days. He also had fewer personnel then. So it is no excuse to quote an increased work load nowadays. It should be possible today, as it was in the 1960s, to tell interested taxpayers in advance how a particular discretionary power is to be applied. As with much tax legislation, the effect of these Bills will exacerbate the serious uncertainty confronting those businesses and businessmen who are unable to know their tax obligations in advance. Where discretion is given to the Commissioner there is no opportunity to plan for an after tax return on an investment, a risk venture or a project.

This uncertainty is also true with the decision evidenced in the Income Tax Assessment Amendment Bill (No. 4) 1984, where it stipulates extension by only one year of the date by which eligible plant must be first used or installed to qualify for the investment allowance. That uncertainty is all the more critical in the light of the forecast degeneration in private sector investment reflected in the Australian Bureau of Statistics surveys. Private investment remains low in terms of historical levels and on present indications seems likely to be lower in 1985-86 than at any time since the notorious Whitlam years.

There remain several verities if we are to maintain the employment levels, reduce unemployment and improve the prospects for that particularly disadvantaged group-our unemployed youth. Among those truths, excepting industrial relations considerations, is the fact that investment decisions are significantly dependent upon the rate of after tax returns on prospective projects. If the thinking of the former Commissioner of Taxation is typical, as expressed by him at a recent hearing before a Senate committee, the problems facing small and large businesses alike are indeed greater than we might imagine . It seems that the Australian Taxation Office bureaucracy may still labour under the misapprehension that income tax is something to be taken into account when planning a business venture as some sort of insignificant or unimportant cost. Nothing could be further from the truth. That type of old fashioned approach has no relevance in today's commercial thinking. Tax is just another cost to be fully taken into consideration when deciding the efficacy of a project and the adequacy of the after tax return to investors or shareholders.

The second matter of fact is that we need more private investment to sustain our recovery to economic health enabling a return to satisfactorily high standards of living for our populace. Let us not forget the third factor, the third truth; that is, that after-tax returns and profits in Australia are far too low relative to the rate of return on Government bonds, as well as being well down on the levels prevailing during that unprecedented period of sound economic growth and progress during the 1960s.

What do we see in this legislation to remove the sort of uncertainty that is stultifying economic growth in Australia today? We see the extension of the investment allowance by one miserable year to 30 June 1986. What sort of encouragement is that? Apart from those investors whose short term advantage may be catered for, there is nothing in this measure which gives heart, which generates confidence, to those contemplating a medium to long term investment. Everything is short term with this socialist Government. Every economic or taxing measure seems destined to be determined by the date of the next election; that is, the next premature election. In the meantime, with commendable flexibility and dexterity, private investors sit on their hands until their future is clear. It is not difficult to imagine that the private sector will be accused sooner or later, sometime in the future, of perpetrating a strike of capital. That will be the excuse offered by this Government. That sort of diversionary accusation is quite on the cards unless there are reintroduced into business planning matters which encourage and induce medium to long term planning and commitment of capital over the medium to long term. To the extent that these Bills do little or nothing towards durable economic goals, goals without controls, they are to be condemned. To the extent that they do not address real needs, these Bills are to be decried.

While there is almost universal agreement among the economically informed, the Budget and these associated tax measures fly in the face of the demands which should be made by anyone having an iota of common sense. There is almost certainly general agreement in the private sector on the need for increased investment. Increased private investment is probably the most important ingredient of the mix that is necessary to improve our productive capacity and in turn to meet the demands for growth of living standards. But that sort of investment will be forthcoming only if the profitability of private Australian enterprises improves. Economic growth will occur only-in fact, it will occur irrespective of world economic trends and improvement-if after-tax profitability is enhanced. To achieve that, or to achieve what should be common objectives, there has to be a re-ordering of Commonwealth Government priorities, which is not evident in these Bills or in the recently announced Budget.

The extension of the investment allowance by a year will not go any way towards what are inescapably desirable economic objectives; nor will the record levels of deficit spending, taxation or government expenditure. These Bills are part of the Budget plot to increase expenditure on interest-that is not repayment of principal borrowings but interest on a deficit-by 29 per cent to an unprecedented $5.6 billion this financial year. The Bills are part of the scheme to increase expenditure on health by 40 per cent, or $1.772 billion. They are part of the plot to increase total spending by 13 per cent to nearly $64 billion , which is another record. They are part of the scheme to increase pay as you earn taxation by 14 per cent, or $2.755 billion. They are part of the plot to increase other personal taxes by an horrendous 45 per cent or nearly $2 billion. They are part of the scheme of things which will see an increase in total taxation of 18 per cent or nearly $8.6 billion.

These Bills fail, as does the entire Budget strategy, to come to grips with even the basic medium term needs of Australian industry and commerce. The end result of this Government's lack of foresight, which is tantamount in my opinion to negligence, will be more of the unimaginative same for the foreseeable future . There will be more unpredictability, more inflexibility, and more, in fact massive doses of, crippling uncertainty. That is to be regretted. But more than that, it is to be deplored. Particularly will it be deplored by our unemployed youth as the realisation sets in that short term election-oriented measures will rob them of the opportunity of gainful work.

The uncertainty of these voluminous additions and amendments to an already voluminous principal Act is almost beyond description and is yet to be largely understood. The fact remains that massive uncertainty arises out of them. Uncertainty is rife not only because of these measures but also because of other Budget and industrial relations policies adopted by this Government. There is massive uncertainty among the investing public and it will remain to be seen what judgment the Australian people put on that. But I am very confident that in the coming election they will make the right judgment. I hope to see the day when we return to responsible government led by a Liberal Party Prime Minister in Andrew Peacock in coalition with our colleagues in the National Party.