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Wednesday, 21 June 2000
Page: 17814


Mr KELVIN THOMSON (10:28 AM) —The Labor Party will be providing in-principle support to this A New Tax System (Tax Administration) Bill (No. 2) 2000 but will be seeking quite detailed scrutiny of this legislation. This bill has 195 amendments, and these are on top of the more than 1,000 amendments that were moved to the new tax system in 1999. The new tax system is a piece of legislation which is measured not so much in pages but in kilograms, particularly by my colleague the member for Rankin. This was supposed to be a simplification of the tax system, but once again we have seen legislation entering the House on 11 May this year. It is now 21 June—just 10 days to go before the GST comes in. Those people who practise accountancy, and other people who will be impacted upon by this legislation in business, have had just over a month to digest the changes proposed in this legislation.

What is the justification for dropping 195 amendments on us and expecting stakeholders to understand and provide feedback in such a short period? We need decent exposure to legislation like this to check whether it will work and how it will work. We need to give it time in the public sphere so that people have a chance to look at it before it is made law. Otherwise, the government will find itself coming back time after time amending its own amendments, as indeed this government so often does. Last night I dealt with a piece of legislation and when it came time to discuss this legislation, which was hundreds of pages in its own right, the government walked in and dropped 77 amendments on top of us. It is a very poor piece of legislative process from a government which has not got on top of the new tax system—a tax system which is making taxation in this country not simpler but more complex.

This legislation has three key purposes. It seeks to rationalise the administrative penalties across a range of taxes. That standardisation should make the system of penalties easier for people to understand. A common penalty will apply where the taxpayer fails to satisfy the same type of obligation under different tax laws. This seems to us to be sensible. This is the second of three pieces of legislation that are aimed at simplifying and unifying the penalty regime. Last year we saw the general interest charge being introduced to apply a uniform interest rate to all late payments. I look forward to the third in this series, which deals with penalties in the new tax system. Whether the actual fines themselves are right or not, we will have to wait and see. That is a difficult thing to determine in advance from opposition.

The second part of this bill deals with the provision of business activity statement services by people other than registered tax agents. That is an issue which I became aware of in March this year when I came into possession of a proposal from the Australian Taxation Office—I come into possession of quite a few proposals that circulate around the tax office—to widen the range of people who can lodge tax returns on behalf of others. In this was a very clear admission from the government that the implementation of the GST is proving to be a much more difficult and complex task than it originally envisaged, understood or imagined. The document that was leaked to me back in March contained the following statement: `If tax agents cannot service all business, this will create an administrative risk for the new tax system.' What they were proposing to do in this leaked document was to drop the restriction so that anybody could lodge a tax return—a business activity statement, in this case—for reward for others. I referred to this as the Fred Nerk amendment because the existing legislation requires somebody to be a tax agent or a qualified lawyer in order to lodge these tax returns for reward. The government's concerns on this front are virtually repeated on page 48 of the explanatory memorandum accompanying this legislation which states:

The Commissioner is concerned about the ability of tax agents to meet the demand for this work and the consequences for small businesses of not having an agent to assist in meeting their obligations.

That is about as clear as it gets: it is telling Australia that what we are getting is not a simpler tax system but a more complex system and that it is, in fact, so complex that there are not enough tax agents presently in Australia to provide the business activity statements that the new tax system requires; so we have to broaden the scope of people who can prepare these returns for reward.

The government has backed off the Fred Nerk idea that anybody can prepare such a statement. No doubt, it received a pretty negative response from business following my blowing the whistle on this idea. This provision expands the list of people who can lodge returns on behalf of others to include members of accounting bodies and tax practitioners, bookkeepers who are working for accounting bodies or tax practitioners and persons who provide payroll services. There are a number of concerns about this issue and a number of issues that could arise, particularly concerning the quality of advice that may be given to taxpayers. If you look at section 251L, paragraph (6), this issue of bookkeepers working under direction is a pretty easy arrangement to contrive and pretend and we could see smaller agents effectively subcontracting out their tax agent's number. It does appear to me that the enforcement provisions are weak and that the legislation is lacking in teeth concerning the issue of penalties. There is no suggestion that defendants have to bear any evidential burdens. I think that there are issues of proof in relation to how the government is proposing to deal with this issue and that there is a need for a close eye to be kept on this practice to ensure that it does not lead to a deterioration in the quality of taxation advice. Of course, these are the sorts of problems you run into when you create another 1.6 million entities to collect tax—giving us something approaching world's worst GST practice, with the effect of the GST increasingly making the Y2K issue look like a picnic in the park.

As my colleague the member for Hotham's amendment indicates, this panic is now affecting all areas of the Australian Taxation Office. We have seen it with the tax office dropping the ball in relation to fuel substitution testing. We have seen it with inadequate follow-up on superannuation guarantee complaints. We have seen the removal of staff from the individual, small business, large business and debt collection areas of the tax office to fill GST positions, and we have seen a lot of money being wasted on finding applicants for the 4,700 GST jobs.

I will turn to the issue of tax office staffing. It is an issue of ongoing concern within the tax office and there are some industrial issues arising there. We have a situation where the tax office is required to fill 4,700 GST positions but, of course, it is also being required to keep its normal functions running against a background where every major and minor accountancy and consultancy firm out there is also trying to hire people for GST work. The tax office has been consistently behind its own targets in hiring staff for this purpose, and it has used many of its own staff for the purpose of doing GST work. According to the latest Senate estimates, the tax office hired 3½ thousand staff towards its target of 4,700, but some 40 per cent of those staff had been hired from internal positions which, in turn, had not been backfilled. That is simply robbing Peter to pay Paul. The large business line, the small business line and the individuals non-business line have all suffered as a result of losing staff for GST work.

You have to contrast that with the protestations of the Treasurer back in June 1989 when he said:

The notion that efficiencies to be achieved elsewhere in the ATO are to fund the GST is also completely wrong.

It is the Treasurer who is wrong. What is in fact going on in the tax office is that staff are being moved to GST work and, as a result, other functions of the tax office are suffering. For example, Senator Conroy asked in the Senate estimates committee process:

Has that movement of staff internally resulted in the ATO being behind in any of its normal tasks of processing tax returns?

Mr D'Ascenzo, on behalf of the Taxation Office, said:

The reality of any dislocation of those numbers necessarily puts a strain on the management of any organisation. I can not state here that without that dislocation we could have done better, but we have managed as well as we can and met targets in an open and transparent way.

We have to hope that `as well as we can' will be good enough. I also note that the process of getting these staff was pretty unsatisfactory as well. The whole thing has been outsourced to Morgan and Banks, who have been paid $9.875 million to recruit those staff. As I mentioned before, some 40 per cent of those staff were internal tax office positions, so Morgan and Banks have been paid $4 million to miraculously find these tax office staff who were already there—$4 million to move them one desk to the left. Clearly, the tax office should have been involved in recruiting its own staff internally, those who were suitable and wanted to move to GST, and then Morgan and Banks should have done the remainder, the external recruiting work, and the taxpayers could have been saved that $4 million Morgan and Banks success fee.

The other area that I want to comment on, where the strain on the tax office has been showing in recent times, is the issue of the privacy of Australian business record information—and we had a backflip from the government just yesterday in relation to this.


Mr Martin —Not another one.


Mr KELVIN THOMSON —We get many backflips in tax and in other areas of government policy, but they are still working it out on GST. When the opposition raised privacy concerns about the Australian business register and the selling of the information for $20 a pop, the government and the tax office were pretty defensive about this. The Commissioner of Taxation, Michael Carmody, said:

Reports suggesting privacy laws had been breached by the tax office are completely false. Protected taxpayer information will never be sold by the tax office. We strive vigilantly to protect the privacy of taxpayer information and, contrary to media reports today, the Office of the Privacy Commissioner has today confirmed that no investigation has been commenced.

That was back at the start of June. Yesterday we saw an announcement from Senator Kemp that `publicly available information from the business register will be restricted in response to concerns raised over public access to the register'. Senator Kemp was not generous enough to say that those public concerns had been very much the work of the opposition and in particular our work in the Senate estimates committee. But the point is that he has now indicated that postal address details and email addresses, while part of the register, will now not be made available to the public and that there will be an option for people in exceptional circumstances to request that their information be suppressed from the register.

So we welcome this backflip from the government. It indicates that the opposition was quite right to raise privacy concerns regarding the selling of Australian business register information and it reflects again a government which is struggling to cope with the size of the task, that has botched the implementation of the GST and that is giving us in fact world's worst practice concerning a GST. Regrettably, rather than trying to properly come to terms with that, it has decided that what we all need is a $400 million-plus promotion campaign to tell us just what a great new tax system it is giving us. To make the obvious point, if it were such a good tax system, why is it that $400 million of taxpayers' money is needed in order to promote it and to convince us that this is the case?

I support the amendment moved by my colleague the member for Hotham and I urge all members of the House to support that amendment. I indicate that the opposition wants to give this legislation further scrutiny in the Senate. With its 195 amendments, it is clearly more detailed legislation and it deserves more detailed scrutiny than it has received so far.