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Wednesday, 7 September 1983
Page: 466

1982 1983

$ $

1. COMPUTATION OF TAX ON COMPANY

Taxable Income of Company 100.0 100.0 Less: Company Tax (applied to 1981 year of income @ 46%) 46.0 46.0

Distributable Amount 54.0 54.0

Less: Retention Allowance, say 70% 37.8

16.2 Less: Undistributed Profits Tax @ 50% 8.1

Balance of Retained Earnings 8.1

2. SUMMARY OF TAXES PAYABLE

Vendor Recoupment Tax

Company Tax (as above) 46.0 46.0 Undistributed Profits Tax (as above) 8.1 Section 226 (1) Additional Tax

(Note: Commissioner has discretion to apply maximum of 100% penalty for failure to furnish information) . . 46.0

(max.) Personal or Dividend Recoupment

Tax (assumed rate of 60% on $54) . 32.40

54.1 124.40


Mr HOWARD —Thank you, Mr Deputy Speaker. I thought leave would be granted because the Minister is a courteous Minister. As I mentioned earlier, this legislation goes against the pre-election undertakings which were given by Senator Gareth Evans about the nature of retrospective legislation that would be introduced by a Labor Government. Not only is the legislation penal in character , but it does not merely seek to recover tax which has been avoided or evaded; rather it goes much further and retrospectively imposes, for the first time, a totally new taxation liability. It has not been enough for the Government, under this legislation, to go beyond the principles of the former Government's legislation and impose retrospectively a totally new taxation liability which is a massive extension of what the former Government did, but it has seen fit to tinker with the provisions of the former Government's legislation dealing, as it did genuinely, with the issue of recouping illegally evaded company tax. The Government has removed from the former Government's legislation the so-called innocence clauses dealing with vendor- shareholders.

Let me go through some of the consequences of that particular decision. The honourable member for Hunter nods his head as if indicating that he thinks the Government is on the right track in having that particular provision removed. Let us go through some of the consequences and then the House can make a judgment as to whether the Government is, in reality, on the right track. Firstly, this will have the effect that at all times some vendor-shareholders will be affected, notwithstanding the fact that at all times the target companies were correctly maintained in relation to the taxation, companies and all other Acts. Secondly, at all times the target companies have had, and still have, real live directors and officers with a professional registered office and have maintained records in a professional manner. Thirdly, no criminal, fraudulent or unlawful act has been committed by any party including the innocent vendor and the purchaser. Fourthly, there has been no dumping of the records. In other words, in the parlance of the trade, nothing has been sent to the bottom of the harbour. Fifthly, there have been no men of straw involved at any stage in the transactions. Finally, no offence has been committed by any party against the Crimes (Taxation Offences) Act 1980 even if that Act had been in force at the relevant time.

Maybe now I might ask again whether the honourable member for Hunter thinks the Government is on the right track in taking provisions out of legislation that will have the effect of inculpating vendor-shareholders, notwithstanding the fact that all the conditions and criteria that I have just read out have been met. In other words, this legislation will get people who could not, by the criteria understood at the time of last years debate, be regarded as having been involved in bottom of the harbour schemes. Even that must make the honourable member for Hunter, with his willingness to support instinctively Government legislation in this chamber, think again.

It is not surprising that, over the course of the last few months, more than a few articles have appeared suggesting that a number of members of the Government , including perhaps the Prime Minister (Mr Hawke) and the Treasurer were not all that keen about this legislation. A couple of months ago the story seemed to be getting around that this legislation had really been master-minded by the Minister for Finance (Mr Dawkins) who was previously responsible for taxation. One of the reasons why the Australian Taxation Office was taken away from the Minister for Finance and given back to the Treasurer was that the Treasurer and the Prime Minister were not all that happy with the way in which the Minister for Finance had handled this legislation. Maybe this legislation had put a few noses out of joint that should not have been put out of joint as far as the Government was concerned. Maybe it was getting a bit close to the bone as far as some of the Government's own friends were concerned. So the Government had to take control of the legislation away from the Minister for Finance and give it back to the Treasurer. One of the things that the Minister for Housing and Construction, who is seated at the table, can explain when he is replying to this debate is whether there is any substance in those allegations.

Mr Hurford-It has nothing to do with the Bill.


Mr HOWARD —I have been told that there is absolutely no substance in the allegations. Mr Deputy Speaker, through you, I can only say to my friend who is seated at the table representing the Government that there was quite a lot of talk around this place that a lot of people in the Government were secretly relieved that the Senate had knocked this legislation off a few months ago because it realised that it had gone much too far. The Government ran the risk of blurring the impression that it was trying to create in its desire to be all things to all men-that, when it came to dealing with the business community of Australia, the Government was not going to take any 'ad hoc', disruptive decision and it was not going to do anything that would be very disturbing or disruptive. Perhaps my friend and colleague who is seated at the table can say a few things on that subject when he is replying to this debate.

Not only does this legislation retrospectively, wrongly and in a totally discriminatory fashion, impose a new taxation liability, a penal taxation liability, a taxation liability based on only one concept-that is, the concept of finding a scapegoat to try to get some phoney runs on the board in the tax avoidance debate-but also it interferes with in a quite unjustified way, and brings within the ambit of the former Government's recoupment legislation, vendor-shareholders who could not properly, according to the definitions of the debate on the bottom of the harbour legislation of last year, be regarded as having been involved in bottom of the harbour arrangements. It also quite absurdly and unrealistically abolishes the 12-month provision that was inserted in the legislation by the former Government. What possible common sense can lie behind the decision by the Government to abolish that provision? Surely it is realistic and common sense that, if companies are obliged under the terms of the recoupment legislation to meet a taxation liability that has been outstanding for a number of years, for which no provision has been made, which was not expected and the meaning of which could involve severe dislocation for a business and some employment consequences, to say to those vendor- shareholders- this is happening in many cases under the existing legislation-'Okay, let us make an arrangement for the payment of the taxation outstanding over a period of 12 months'. Surely that is the common sense of the situation. Surely that would commend itself to a government that wants to take a common sense and not a punitive approach in this area. But even that is not good enough for those on the Government side who want a bit of blood in this area, who want to get some phoney runs on the board. They have to take out that 12 month provision because they are so desperate to be able to go back to some of their ideologues in their branches and say: 'We have really been tough on this tax avoidance issue. We told you that we would discover a whole lot of schemes that the former Government had not covered up. We have not been able to find any new schemes but we can totally bury those who were involved in the schemes that the former Government unearthed, notwithstanding the fact that they have already met their taxation liabilities'.

This is not genuine anti-tax avoidance legislation. It is a discriminatory, punitive measure which is not based upon the desire of the Government to eliminate genuine, sophisticated, anti-tax avoidance schemes. It is based upon a desire of the Government to find scapegoats. It retrospectively imposes a punitive taxation liability. It singles out a small number of private companies. It will cause justifiable concern within the business community. It will be seen by many fair-minded people around Australia who supported the principle of the former Government's legislation as a gross extension of what was involved in that legislation and being in no way comparable with that legislation.

The Opposition, therefore, will vote against this legislation. We will reject the McCarthyist smear that, in so doing, we are the friends of tax avoiders in this community. The fact of the matter is that our credentials in wiping out tax avoidance are well and truly known throughout this community. The fact that the Government has not been able to produce any genuine, anti-tax avoidance legislation during its first six months is a demonstration of that. The Treasurer, who has now come into the chamber, has had two opportunities to do this. He had his mini-Budget in May and he had his Budget in August of this year to identify all those tax avoidance arrangements that we left untouched. What has he done? Nothing! He has not produced any enormous tax rip-offs that the former Government left untouched. In fact, he has demonstrated by his inaction on both those occasions that the former Government had well and truly covered the field as far as effective, anti-tax avoidance legislation is concerned. He has demonstrated the emptiness of the rhetoric he and his colleagues used in opposition. The final demonstration of the bankruptcy of their position on tax avoidance, both in opposition and in government, is this miserable piece of legislation-not genuine tax avoidance legislation, but legislation shamefully based upon the principle of finding a scapegoat and adopting the McCarthyist technique of a smear.