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Thursday, 26 May 1983
Page: 1078


Mr SPENDER(9.27) —We have not heard from the Minister for Finance (Mr Dawkins) and I doubt that we shall hear from him until the end of the debate , when he will read us a few notes and retire, sitting, as he has, like a stone dwarf at the bottom of the garden and unable to comprehend what it is that has been said to him. Let me concentrate attention on two matters. The first is section 5 (1) (h) of the Act. Perhaps the Minister might scuttle back to his advisers to see whether they can tell him what section 5 (1) (h) means. Section 5 (1) (h) was the very thing on which the 1982 Act was originally predicated- that is, the need for there to be an arrangement whereunder the company was rendered unable to pay its company tax. That is to go, and now the legislation will apply to any circumstances in which a company, after shares have been sold, has not paid its tax. Section 5 (1) (h) is perfectly explicit on this. It refers to an arrangement or transaction which secured or achieved the result that the company was unable, having regard to other debts of the company, to pay to the Commissioner of Taxation all the company tax due and payable by the company at the relevant time. That is to go, so that no considerations of equity are to remain in the Act.

Next, let me return to what has already been referred to by the Deputy Leader of the Opposition (Mr Howard) and by me in relation to the question of the tax and how it is to be calculated. So that the Minister will understand what he is putting to this House-I put this to him last night-let me go over it again. Where there is a distributable amount of undistributed profits, a primary dividend amount shall be taken to exist. Those two components are technical, I grant, but this is within the Minister's portfolio and I trust he understands the words. That primary dividend amount is to be ascertained in a certain manner . We then come to the formula, which is to be found in proposed section 5A (3). It is a perfectly simple formula. It has four components which even the Minister should be able to understand. It is ascertained by taking the total value of the assets of a company and from that total value subtracting three components: First, the total amount of paid up capital; secondly, the total amount of liabilities of the company immediately before the last sale time; and, thirdly, the amount of the company tax liability.

I explained this last night and I will put it again by way of a simple illustration. Let us take a company with two shareholders, which may have been trading for many years. Let us assume that it has made $200,000 in profits, half of which are capital profits and half of which are revenue profits. Let us also assume that it has $20,000 of paid up capital and an unpaid tax liability of $1, 000. The answer is that it is caught, the vendor shareholders are caught. What are they caught for? They are not caught for the $1,000 but for an amount of $ 179,000, on which they are to be assessed at rates, which the Minister will well understand since he introduced the legislation into this House, which can go up to 69 per cent. That can apply no matter how large the capital part of the sum on which the tax is to be levied, and that is by any meaning of any language a capital tax. It is a capital tax which is applied retrospectively. It is a capital tax which overturns Slutzkin's case. As I said before, it is a dishonest piece of legislation dishonestly put before this House because at no time has there been a willingness on the part of the Minister and his Government to say to this country: 'Yes, it is a capital gains tax. Yes, we are taxing you in a way which has never before taken place. Yes, we are taxing you in a way which would never happen had you wound up the company and distributed the profits under section 47'. He nods his head, which means that he understands about one- tenth of what he has put to this House, because that happens in relation to profits-it does not happen in relation to capital. The Minister today made that crystal clear in reading his prepared notes. I would hate to see him come into this House without a brief to read when he has to explain taxation legislation, or indeed anything which engages his mind, because this is what he said:

I take this opportunity to refer again to one matter that has been the subject of much debate, and that is that personal tax liability under the Bill attaches to profits of stripped companies that have been effectively distributed to former owners, regardless of whether those profits were, in the hands of the company, of a revenue or a capital kind.

With a little bit of prodding from his departmental officers we have finally got the Minister to admit that he is imposing a capital gains tax, because that is what it is. Yet before the prodding which has taken place from the Deputy Leader of the Opposition and others not one word of this was put out to the Australian public. What do we face? We face a piece of legislation which has been put through in the space of a week, in respect of which none of the professional organisations that have an understanding of this highly technical kind of legislation have had an opportunity to put views; in respect of which people who would be affected by it have not had an opportunity to put views; and in respect of which the media have not had an opportunity to become informed and to put views. The Government has sometimes been described as a government of taxation by stealth. This is an exercise in taxation by dishonesty, and by dishonesty that can only be described as, not dishonesty from imcompetence but dishonesty by design.