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Thursday, 28 February 1985
Page: 347


Mr ALLAN MORRIS(10.13) —As interesting and as divergent as the views previously expressed by the honourable member for Mitchell (Mr Cadman) might be, they have nothing to do with the matter before the House. I am becoming increasingly offended at the intrusion into parliamentary business of matters which are totally irrelevant and which do not in any way conform or relate to the business with which we are trying to deal. The legislation before the House, the three trust recoupment tax Bills, are a repeat of Bills that were brought in last year. They have a long history and I think that history is worth recounting. If we go back to November 1979 we see that the then Treasurer, the honourable member for Bennelong (Mr Howard), brought in some amendments to the taxation Act to deal with trust accounts. The debates of that day are worth reading. On 14 November 1979 the honourable member for Gellibrand (Mr Willis) had some comments to make regarding this matter and he pointed out that the then Treasurer had opened up a wide area of tax avoidance by the removal of gift tax. He quoted from the then Treasurer's answer to a question on notice as follows:

Abolition of gift duty is not seen as relevant to tax evasion practices which are, of course, illegal. To the extent that abolition resulted in the lifting of a constraint on the transfer of capital assets, it has, to a degree, made tax avoidance that much less complicated and costly.

In other words, the then Treasurer, by his own actions, had made tax avoidance easier, less expensive and open to more people. That really is the crux of the whole question. In 1979 the honourable member for Gellibrand said to the then Government: 'What you have done is opened up a Pandora's box'. The then Treasurer said: 'Yes, we have. It had made tax avoidance easier, less complicated and, therefore, more likely to happen'. In the same speech, the honourable member for Gellibrand said that the government of the day had brought in a train of anomalies which left open wide scope for tax avoidance. At that point the then Treasurer nodded his head, which was noted. In 1979 the Treasurer of the day said: 'Yes, I agree, we have brought in a lot of problems and of course we are addressing them'. So he addressed the problems in 1979 and he addressed them again in 1981, which followed a statement he had made in 1980. The amendments in 1981 related quite specifically to trust stripping schemes. Legislation had initially been enacted in 1979 and further legislation was enacted in 1981 to try to address the problem. In May 1981 the then Treasurer brought in legislation retrospective to 24 June 1980. He stated:

In a statement on 24 June 1980, I foreshadowed legislation on tax avoidance through attempts to exploit the tax-exempt status of various entities. As I said at the time, two earlier warnings about the abuse of the privileged status of tax-exempt bodies had gone unheeded . . .

What are we doing today? We are dealing with transfers of assets to tax exempt bodies. So, four years later, almost to the day, we are still dealing with the same call, its having gone unheeded. In fact, on the point of the retrospective nature of this legislation, it should date back to 1979, because the then Treasurer indicated then that there were anomalies and tax avoidance would in fact increase in that particular area.

The honourable member for Gellibrand and then shadow Treasurer said that if the Treasurer was serious he should, in fact, date his retrospectivity from the time the practices were started. The point of this whole debate in the last two years has been at which point the legislation should apply. The Government is making the point, as it has made for six years, that the only way to really destroy the tax avoidance industry is to make legislation corrective and applicable from the time when the fraudulent schemes were started. That is the only way we can address the problem. Members of the Opposition are saying now 'When we find a scheme, some years after it has started, we will serve notice'. They would do that after the scheme had been operating, and that would protect and encourage people to introduce those kinds of schemes. In 1979, in 1981, right through to now, loophole schemes, paper schemes, schemes which are blatantly fraudulent have been developed.

The parallel drawn in recent weeks between morality and law is a very good one. We are talking about morality; the Opposition is talking about legalism. What we are trying to address is the incompetence in the previous Government's legislation that left these kinds of openings. The legislation before us really is an attempt to address the flaws brought in by legislation introduced by the previous Government over a number of years, flaws that were able to be exploited by people engaging in these kinds of schemes, be it the cherry-pickers scheme, trust stripping or a range of other schemes. The fact is, we are trying to remedy the errors brought into the system. I think it is worth heeding the warnings of the honourable member for Gellibrand in May 1981, when he stated that the tax Act already extended to 1,010 pages; three years previously it had been 695 pages. The tax Act increased in size by 100 pages per year under the previous Government. It has been greatly increased in size and incomprehensibility by the vast amount of tax avoidance legislation that has been passed in recent years also. The increased complexity not only makes it more difficult to understand, but also increases the scope for tax avoidance. In effect, the previous Treasurer, who trumpets in this House and around the countryside how much he has done about tax avoidance, has, quite clearly, greatly increased the capacity for people to avoid paying tax by introducing massive amounts of legislation which was incomprehensible, which was full of loopholes and which has been exploited. After he did that he said to us: 'But that was the law. I made those laws and I made mistakes but you can't punish somebody else. You can't go back and correct that'.

For six years the Australian Labor Party has been saying that it would take the legislation back to when this scheme was started to serve warning on those people. People who engage in fraudulent schemes, in paper schemes and in schemes aimed clearly at tax avoidance by artificial means are acting immorally. Morality is not dated in time and it is not dated by a parliament; it is dated by a person's actions.

Who in the Opposition will start defending the recent Irish court case which clearly flies in the face of morality on a legalistic principle? Which honourable members opposite will tell the Australian people that this Government should not try to bring back to Australia a man who has charges to face? Technically and legalistically that man does not have to come back to Australia as there is no requirement by law for him to do so because of the actions that were taken at the time of his arrest. Are members of the Opposition going to argue the legalism of that and say that this Government should not persist with a moral case and return that man to Australia? The parallel is very close. The Government is saying that there is a moral charge to answer and a moral role to play. If we are to equate morality with the Opposition's incompetent drafting of legislation, God help Australia! We would be in awful trouble in the years ahead, particularly if the Opposition were returned to government. The Australian people want governments to act in a way that is moral. The Opposition wants governments to act in a way that is tied to its own incompetent legislative drafting programs. I do not think the Australian people will wear that and I do not think they should.

Over the last two years the Government has been saying consistently that it does not matter whether $10m or $500m is involved as the principle of taxation equity, the principle of taxation equity, the principle of morality of the taxation system, has to be upheld. The way to do that is to issue the warning to tax avoiders that the Government issued when in opposition six years ago. Our spokesman of the day on taxation said that, no matter what the law says at the time, if a person engages in fraudulent schemes which are blatantly aimed at tax avoidance-schemes of fiscal nullity and the like-a Labor government would make the legislation retrospective to the time the scheme was started. The tax avoiders were told that they should not look for loopholes because if they find them a Labor Government would close them from the time they were found. How can the Government be expected to answer to the Australian people for loopholes in legislation which was passed by previous governments? The Opposition is asking the Government to wear the Opposition's incompetence and it is asking the Australian people to accept the Government's wearing of it. The Government cannot and will not wear it and neither should the Opposition. I assure honourable members that the Australian people will not wear it.

Most Australian people are locked into the pay as you earn tax system. Most of what we are talking about today is outside their realm of knowledge or capacity. The Opposition is suggesting that the Government apply morality to PAYE taxpayers but that it does not apply it to those who are not in the PAYE system. The speech by the honourable member for Mitchell was a superb example of distortion, confusion and virtual deceit in regard to the way the tax Act is applied. If one were to apply the honourable member's parameters there would not be any PAYE taxpayers in Australian at all and every taxpayer would be paying a lot less tax. One would then, of course, have to change completely the taxation levels. The increasing burden on PAYE taxpayers is largely a result of the kind of thinking and argument presented in the honourable member for Mitchell's speech.

Not only is the Opposition inconsistent but also its tax policy is contradictory. The previous Treasurer indicated in 1979, 1980 and 1981 that tax avoidance was increasing because of the changes to gift tax in particular. He had opened up areas of avoidance that were not there previously and he said that he would address them. In 1980 he made two calls for that to be done, both of which went unheeded. Finally, he brought in legislation that was retrospective by almost 12 months. It is sheer hypocrisy for him to criticise us when the effective date of his legislation was 24 June 1980 and ours will be 1 July 1980. We are addressing the same issues.

Of course, the greatest irony is that back in 1981 the honourable member for Gellibrand read to the House details of a tax avoidance scheme operating under the trust fund system which was very similar to the schemes being addressed in this legislation. He outlined it to the House then and said: 'Here is an example that has been circulated, showing how it works. What is being done about this one?' In effect, he gave notice then that we would take action on those kinds of schemes.

The Australian Labor Party has acted absolutely morally for the last six years. It has warned the people of Australia, and more importantly the tax avoiders, that we would make our legislation retrospective. We twice sought a mandate for that principle and twice the people granted us a mandate that it was fair to treat fraud from when it was occurring. If the law does not cope with it, one has to make the laws retrospective to when the offences were committed.

I suggest that the Opposition should think very carefully about the Irish case because the principles applying there now are exactly the same. On the Opposition's argument this Government would not persist with that extradition process because legally it has now been settled. If the Opposition wants to take that issue to the people, I think the people's judgments made in the last two years will be endorsed for many years to come.

The fact is that one cannot separate morality from the law. The law must be based on morality. If one takes away the morality and applies only the legalism, there is no longer a legitimate law making body. The tendency of the other side of the House is to escape the issue through legalism and symbolic posing about what the law stands for. To the people of Australia law is about morality. How can immorality be legalised? That is what the Opposition would do. It would legalise immorality by its own incompetence in framing legislation. We all know, and the Opposition admits, that these schemes are fraudulent, blatant and aimed solely at tax avoidance. Having admitted all that, the Opposition says that they are still legal and therefore moral. The fact is that those two issues cannot be separated. The longer the Liberal Party of Australia and the National Party of Australia maintain the separation between law and morality, the longer they will stay on that side of the House. These Bills are important Bills. They are setting a pattern, a precedent and a standard for Australia which Australian people expect. I trust that this time both of the Houses of Parliament will accept that principle.

Question resolved in the affirmative.

Bill read a second time.