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Wednesday, 14 December 1983
Page: 3741

Senator JACK EVANS(12.31) —Having heard the speakers on this subject now for the third time-it is pretty much the same topic being regurgitated for the third time-a few points need to be put into perspective. The first is that the Government of Australia stands indicted. It has been found guilty of inaction and gross dereliction of duty from 1972 to 1980 when tax avoiders and tax evaders, call them what one will, ran riot around this country, not just quietly underground but blatantly and openly ripping off the Australian taxpayers as a result of their activities. They did it with the help, the blessing and-one suspects the motives-the implicit support of a number of key people around Australia, people in government and people in places such as the High Court of Australia, which had ruled, for instance, that section 260 of the Income Tax Assessment Act was ineffective to bring tax avoiders under some sort of control so that they did not move into that darker, grey area of tax evasion. Once that ruling that the government and the Commissioner of Taxation had no powers under section 260 to collect taxes was given, it was open slather. The sad thing is that the innocent victims of that ruling and the government's subsequent inaction are the darn near 15 million Australians who over that period had to pay additional tax as a result of government negligence.

I am probably one of the few people in this Senate in a position to claim innocence, because I was elected to the Senate in March this year when this damage had been done and when one could look back at government inaction as an observer of that previous inaction, as one of main people in the community who had become aware of the inaction and of the sort of activity taking place- blatant advertising of tax avoidance and evasion schemes which were rife around the community and which were being used by people to avoid their obligations, whether legal or moral, to pay their way for living in this country. The sad thing is that when ultimately a government decided to take action it had to start looking for scapegoats to ensure that not all the odium compounded upon it . The scapegoats it picked out, of course, were the Opposition parties. Ultimately the Australian Democrats and Senator Harradine became scapegoats. In some cases innocent shareholders as well as the guilty shareholders became scapegoats. On top of that a search for culprits commenced. Some of the guilty parties, some of the people who should have been picked up in this net, have undoubtedly been embraced in the provisions and are now being pursued by the Commissioner of Taxation.

In some cases the search for culprits developed into a vendetta against some people. That was rather sad to see because, whether justified or not, I do not believe that the powers of that guilty government should have been used against people who, whether morally right or wrong, were legally acting within their rights. The interesting thing to have witnessed over that period was that it was not the lawyers or accountants, the people arranging these deals, nor even public servants or the legislators, who were highlighted as the culprits over this decade of inaction; it was the shareholders who copped all the blame for the negligence over this period.

One would have thought that with the passage of the 1982 legislation by the Fraser Government the tax avoidance industry would have been killed but, regrettably, it is still alive and well. That is one of the reasons why this measure is being debated today. It is to tidy up a little more of the legislation. Tax avoidance is alive and well because our tax Acts still provide opportunities for people legally and legitimately to avoid what others would regard as their moral obligation to pay their way in this community. In all probability, tax evasion has gone either underground or off-shore. Certainly, as was indicated earlier by Senator Macklin, the big tax evasion area, the cash economy, has made its move underground, quite effectively I am told, and is still evading or avoiding-probably evading now that it has gone underground-its tax obligations. I am not suggesting for one moment that that is a result of bad or inappropriate legislation. I think that the legislation can go only so far at this early stage in picking up the withholding tax evaders.

The arrival in 1982 of the Fraser bottom of the harbour legislation came complete with loopholes for friends. That was discussed around Australia. It was discussed within the Liberal Party and it was revealed in the media around Australia that there were problems with the legislation, that some people who would be picked up were influential within the Liberal Party and needed to be accommodated. So section 3 (12) was inserted into the legislation to provide that accommodation. The sad thing to me is that while the Fraser Government in 1982 was busy looking after friends, it provided inadequate safeguards for the genuinely innocent people who could prove that they had not benefited.

It was for that reason that in 1983 the first Labor Government attempt was made to remedy the position and to increase the size of the tax evader or avoider share of the community to be netted in the bottom of the harbour legislation. It introduced its first Bill. Senator Mason and I, while we felt it was justified under the mandate that had been given to the Labor Party to clear up once and for all the tax avoidance and evasion industry, persuaded the Government that some modifications were needed not just for those caught up in the 1983 legislation but also for those who in 1982 had been denied natural justice. We persuaded the Government to go down that path with us; but, in the event, that Bill was lost at the second reading stage, so no firm arrangement was made to help the people who had been unjustly caught up in the 1982 legislation.

However, the Government tried again to bring in a supplementary bottom of the harbour Bill-its second attempt. Senator Mason and I went once more to the Government and again achieved a further leap forward in the agreement for the creation of an anomalies tribunal, completely independent from the Taxation Commissioner, which would hear the appeals of individuals who had been caught up in the 1982 or the 1983 legislation and who did not deserve to be hit with additional tax either because they had not benefited from the bottom of the harbour activity or because they were completely innocent of any involvement as shareholders remote from the directors making those decisions and were totally unaware, and could prove that they were totally unaware, of the moves to put the company to the bottom of the harbour.

Once again, the Government's legislation failed. It did not achieve a majority in the Senate and, therefore, once more the opportunity to provide justice for the people unjustly caught up in the 1982 legislation was denied. So, on behalf of the Australian Democrats, I introduced a private member's Bill which would create that anomalies tribunal-that tribunal of appeal-completely independent of the Taxation Commissioner, which would allow people the right to set out before the tribunal reasons why they should not be assessed-that is, reasons based on the fact either that they had not benefited in any way from the sinking of the company to the bottom of the harbour or that they were completely innocent and could prove their innocence in regard to the actions taken by others.

That Bill is still before us; but, of course, it will be superseded by this third attempt by the Government-the Labor Government-to expand the effects of the bottom of the harbour legislation of 1982. This third attempt adopts the proposal that we put for the creation of the anomalies tribunal and at the same time removes the innocence clause-the loophole clause-inserted into the 1982 legislation by the Fraser Government. I believe that it will be necessary for the anomalies tribunal to hear not only from shareholders of public companies who have been unjustly dealt with in the 1982 legislation or this legislation but also from private companies. It is my understanding that there are shareholders of private companies-maybe comparatively few; there might be only several hundred; perhaps as many as several thousand, but in the overall context not a great proportion-who were caught up as a result of being remote, innocent and completely unaware shareholders whose companies were sent to the bottom of the harbour by their directors without their support for, knowledge of or agreement in any way to that action being taken. Those shareholders may have received absolutely no benefit from the action of their directors but still may be caught up in this net and, as a result, be quite unjustly dealt with. There needs to be that additional provision for those private company shareholders to be embraced in that anomalies tribunal provision.

I should like briefly to go over the difficulties that we in the Australian Democrats and a lot of people around Australia are experiencing with this legislation as they did with previous legislation introduced on this matter. I have already indicated that I believe that most Australians feel that the Bill covers up government mismanagement and that, that mismanagement having been discovered, the problem is now being remedied retrospectively.

Debate interrupted.

Sitting suspended from 12.45 to 2 p.m.