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Wednesday, 24 May 1972
Page: 3034


Dr SOLOMON (Denison) - It is not my habit to talk on taxation matters but I want to say just a few words about the one of these 3 cognate measures which has been most talked about tonight, in particular by the honourable member for Melbourne Ports (Mr Crean) and also by my colleague, the honourable member for Angas (Mr Giles). I do not want to talk at any length, but I think that one should say at least this much: This is a commendable move in Income Tax Assessment Bill (No. 2) 1972, relating to section 26 (a) of the Income Tax and Social Services Contribution Assessment Act, in so far as it seeks to define - and I hope successfully - with somewhat greater precision an area that has been so much left to the Commissioner of Taxation to make judgments about.

One of the problems in this country about taxation decision-making, I think, is that there are in fact many areas of discretion available which could, on the whole, be somewhat more closely curtailed in order to reduce the discretion and to make it a little more straightforward in the minds of the people who are being taxed. By the same token, I think it might well be something for the Taxation Office to bear in mind as time goes on that some of these things might be, as it were, advertised in advance in the form of published guidelines, which are none too readily available, except on application by particularly interested groups or people.

I must not stray too far from the matter in hand. What I want to say is that I think there is often a considerable underestimate - and I doubt that anybody really knows the true figures - probably by the public at large, and certainly by honourable members opposite, of the extent to which small trading in shares is a function of the general populace. I think it can readily be said that the average working man does not have much truck with share dealings, although there would be exceptions to that. However, certainly in the vast area of the middle class, there is a great deal more smalltime investing in shares than is generally believed. One has to look only at the structure of certain companies, which need not be named at this stage - although there are many examples - to see that quite substantial proportions of their total capital are found to be in the hands of relatively large numbers of small shareholders as compared with the small number of large shareholders. It is the fact in numerous instances and, therefore, we are not talking here necessarily about the privileged or the affluent.

In that sense, it seems to me very wise to define the situation, in terms of this Bill, in respect of 18 months of share ownership. Under that period of ownership the shareholding may be suspect, as it were, in terms of its being sold for possible profit. If the shares have been owned for longer than 18 months, then in the terms of this Bill it is concluded that unless they are an adjunct to business, incidental to the carrying on of business, or unless they are declared to be held for the purpose of profit-making by sale, then the ownership makes the shares not normally subject to taxation if any profit is made, nor to the reverse if a loss is incurred. That seems to me to be a good thing and. something that should, and I hope will, encourage the small shareholder to take up small parcels of good, bad, blue chip, or whatever sorts of shares are on offer on the stock exchanges of this country.

Considerable mention has been made in the course of the last few speeches of matters such as tax avoidance, tax evasion and the differences between the two. That does not deserve further airing at this stage, except that as we are touching on the area of capital gains as distinct from shares held for dividend earning, in the same way as one might hope to get a continuing return or a recurring return from any other sort of investment, and seeing that we are talking about something which is in the field of capital gains, I think it might well be the place to register my current doubts about other areas of taxation relief which I believe have a certain anachronistic flavour about them these days. It is nothing new to say it, I know, but it worries me somewhat that at the present time at least some people who are investing in rural development probably have the sole purpose of tax avoidance in the legal sense, and are in fact carrying on an operation which is no longer of the same benefit, if indeed it is of any benefit, to the country as it was at the time that the provision was made. I do not intend to dilate upon that further. However, I think it is worth making the point in relation to this discussion about capital gains or not, according to the provisions of the Bill.

I The honourable member for Angas talked about section 26(a) as having been a vexed question in South Australia. I cannot admit to the same degree of problem having arisen, at least to my notice, in my own State of Tasmania. It may well be that certain individuals find vexation of the same kind as expressed by the honourable member for Angas. However, I think that, whatever the case there, in the logic of the matter if not in practice, he is right in saying that the previous provisions, until the introduction of this Bill, have in fact provided doubts for the man who is a small and certainly unpractised, unprofessional investor, and in that sense also have constituted something of a physical barrier to investment.

As this is, to my mind, a good thing - that is to say, that the small investor, as distinct from the highly affluent or professional investor, should be encouraged to take a stake in the community where he might find it not only for his good but also for the good of the community - I believe that the eradication of that assumed barrier and the removal of those apparent doubts is in the best interests of the country.

The only other point I make - it may be a somewhat amateurish observation - is that it seems to me that the very considerable focus of my friends on the other side of the chamber on profits, whether large or small, but particularly large, and on high incomes in particular, whether they be of conciliation commissioners or anybody else and however deserved or undeserved they might be - I think they are often undeserved - is sometimes ill placed. If I were somewhat to the left of this side of the chamber - certainly, if I were on the other side of the chamber - I would take a much greater interest in the means by which taxation can be a great leveller. The honourable member tor Melbourne Ports (Mr Crean) and other honourable members well know this. It seems to me that that could be a function of taxation, in the proper sense, which would still allow people who believe that they are doing a highly valuable job in the community to take the level of income they receive and to derive whatever benefit they do from the status accruing from that job, and yet to be kept within reasonable bounds in relation to the general level of the population m their net incomes. That, to me, seems to be an area deserving of considerable focus.

I know that people are not unaware of this point, but I think it is deserving of more focus in relation to the other side of the question than in fact it receives. I do not know whether honourable members opposite will choose to take my advice on that matter. I presume that almost certainly they will not. However, that strikes me as being the area in which, if we wanted to do it this way, people could be brought down to something nearer a common level and yet be allowed to exercise their particular attributes and, might I say, energies, because the question of hours worked and energy input is something which is hardly irrelevant to this aspect. It is not just a question of the level of job that is being operated. I believe that that is not entirely irrelevant to this whole question of taxation. I will not take up the time of the House further by digressing at any greater length from the immediate provisions of this Bill in relation to section 26 (a) of the Act.







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