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Wednesday, 10 October 1984
Page: 2056

Mr ALLAN MORRIS(6.05) —I thought that a moment ago we were about to see a demonstration of the honourable member for Bennelong (Mr Howard) talking under water. He raised a glass to his head and I thought that we would see another display of his prowess because the rest of his speech was basically about talking under water. Talking under water means that one makes sounds and the person on the receiving end hears something other than what came forward. Let us take the first aspect of his remarks. I refer to the letter in February 1980 which stated in effect: 'Mr Treasurer, you have much bigger problems than cherry-pickers right now; billion dollar problems of people not paying taxes under your government for a number of years'. That is what the Commissioner of Taxation was saying to the then Treasurer. If we are looking at priorities, the first priority is one of a very large volume. We discovered subsequent to February 1980 that in the vicinity of half a billion dollars to a billion dollars a year was being ripped out of revenue by an increasing escalation in paper schemes. Later we saw the report of the present Commissioner, which will have more relevance in a moment.

The honourable member for Bennelong told us that in the late 1970s the previous Government was aware of these schemes, that the report of the Costigan Royal Commission into the Activities of the Federated Ship Painters and Dockers Union and the McCabe-Lafranchi report said nothing new, that these things were already known; and, furthermore, that they had been dealt with in 1980. In fact, so they had-the schemes had been made illegal. But the funds that had been accrued in that way had not been recovered. It is pretty fair to suggest or to postulate that the only reason for the recoupment legislation in late 1982 was the release of the McCabe-Lafranchi and Costigan reports. If those reports had not come forward, the recoupment legislation would not have been brought down by the previous Treasurer. He had been aware of the schemes for four years before he outlawed them. They had been going on for many years.

In 1980 we had what we have here today. In an attempt to pretend that they are not friends of tax avoiders, the Australian Democrats in the other place and the Opposition in this place have proposed an amendment to the Income Tax Assessment Amendment Bill 1984 [No. 2] to make something illegal. But something is made illegal only after it has been successful, after it is all over. The cherry- pickers scheme took place mainly between 1977 and 1981-82. The funds that were accrued were mainly accrued then. By outlawing them now, from the Government's point of view it is certainly a technical point and we accept it purely on that basis. But the fact is that the funds that were received are no different from the money that was collected by the recoupment legislation in 1982, of which the former Treasurer is so proud; legislation he was forced to bring in because of those two reports that said nothing new, except that the public at large did not know how much money had been lost. The former Treasurer may have known how much his friends had ripped out, but we did not know and the people in the community did not know about the volume of money-the hundreds of millions of dollars that was involved in the schemes, ranging back over five or six years. The former Treasurer says that the reports said nothing that was new. Therefore, he knew before those reports were handed down about the money that had been taken out of the system. He knew of the need for recoupment before the McCabe-Lafranchi and Costigan reports had been handed down. He expressed an intention or even a desire to bring in recoupment legislation only after those reports had been handed down. Then, of course, that legislation was disembowelled because the provision for taxation on undistributed profits was cut out of it.

Let me make it clear that no one in Australia believes that the former Treasurer drafted that recoupment legislation. Quite clearly, the model for that legislation and the drafting of it came from the Australian Taxation Office and the Commissioner. But some surgery was applied to it. One piece was taken out- the piece that referred to the retrospective collection of tax on undistributed profits from those companies. On four occasions this Government has tried to recover that money. That was first posited in legislation in 1982, but the money still has not been recovered.

When we talk about tax avoidance, we are talking about two things: The act in itself and the funds that are achieved. It is a mockery and a farce to talk about changing the law to prevent tax avoidance if one makes no attempt to recover the money that has been obtained by that avoidance. As the Minister for Finance (Mr Dawkins) says, when tax avoidance is a dead industry, it will remain dead only if the tax avoiders perceive that the Government and the Parliament are committed to recoupment. This House clearly is committed. But there is a different attitude in the other place, which has had before it two pieces of recoupment legislation designed to recover funds obtained by tax avoiders through the manipulation of their affairs. Those funds have not been recovered to this day.

Almost two years ago the Government was elected with a clear and quite specific mandate to recover funds that were in fact lost to revenue, but the Government has been denied by the other place the opportunity to carry out that mandate. Instead, we have a private member's Bill from the Australian Democrats which says, in effect, to the people of Australia: 'Even though you elected a government to recoup money gained by way of tax avoidance and we will not let it get it back, we will let it change the law so that the scheme that has been used can be made illegal'. It has been pretty clear for the last two years to potential cherry-pickers that that scheme would be put out of action. It is not that scheme that is important in the future; it is the next scheme that comes along. The Australian Democrats have made a mockery and a farce of tax avoidance legislation by approving legislation which dates from December last year-not from the time of the previous Treasurer's announcement of some years ago that tax avoidance is now dead, that blatant avoidance schemes would be a thing of the past and he would legislate against them and that he would date the legislation from the day of that announcement. The Australian Democrats did not date it from the time the 1983 Australian Labor Party policy statement was made. They did not date it from the time the Government was given a mandate following the election in 1983. They did not date it from the Budget Speech of the Treasurer (Mr Keating) in 1983. They dated it from the date the legislation was introduced into the House. In other words, the maximum get-out time has been allowed. Anyone who had a scheme operating at the time of the election last year would have closed that scheme down by the time the legislation was introduced. In effect, they have had nine months warning to close their scheme down. I just wonder how many of those schemes were closed down between March and December of last year.

The fact is that we as a Government have been trying for almost two years to recoup money gained from the bottom of the harbour schemes and the cherry-picker scheme. We sat here today and were lectured by a thoroughly discredited ex- Treasurer who said that we are going to need more money in the next Budget. In fact, what he is suggesting is that the ordinary taxpayers will either pay more taxes or get fewer benefits because we will not be able to collect revenue from the dishonest taxpayers who have not paid their fair share. He is saying to all honest taxpayers in Australia who have paid their taxes legitimately: 'We will not help the Government recover this money because we think that either it should get it from you or else you should get fewer benefits for the money that you provide'.

In the legislation before the House the Government is talking about $15m. That would probably be chicken feed to the ex-Treasurer. To many of his colleagues and friends that could be chicken feed. However, I can assure him that that is an awful lot of money to the taxpayers of Newcastle.

Mr Robert Brown —And the Hunter generally.

Mr ALLAN MORRIS —And certainly in the Hunter area as well. We are talking about half a billion dollars in respect of bottom of the harbour schemes. I think it is pretty obvious that the Opposition and the Australian Democrats are going to persist with their view that they will stop a scheme only after it has been running for a certain time. We have had from the ex-Treasurer examples of schemes which ran for five, six or seven years. They are saying: 'Let them run for five years and then we will stop them. At the end of that time we will not seek to recover the money because that would not be nice and, after all, they are friends of ours'. We are saying that, no matter where a scheme starts and no matter how long it runs, if it is blatant, if it is clearly not for the purposes intended, if there is fiscal nullity and the various other things that mark tax avoidance schemes, we will legislate to recoup the funds from the time the schemes commenced and not from the time the avoidance was detected. Tax avoidance will be dead only if we adopt that principle and take that position. Tax avoidance has always functioned in this way over the last 20 years.

It has been suggested that there has been great success in dealing with tax avoidance in the last decade. The former Treasurer blew his trumpet about how he generated tax avoidance, let it run for five years and then introduced legislation initially to stop it and then, most belatedly, to recoup tax that had been avoided. It is an absolute travesty to say that that is a success and that he should be congratulated for what he did. The previous Government created a system under which the people of Australia were ripped off for years and years . It finally stopped that system after all its friends had benefited. Now it is saying that that is a proud record. If that is a proud record, I can assure the Opposition that the people of Australia understand that record. They understand that the former Treasurer knew before Costigan and before McCabe-Lafranchi. None of this was new, including the amounts of money involved. On that basis the whole of the honourable member's speech was a fraud.