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Tuesday, 8 November 1983
Page: 2427

Mr HURFORD (Minister for Housing and Construction and Minister Assisting the Treasurer)(10.00) —I want to thank those members who have taken part in the second reading debate. I probably will not speak for as long in closing the debate as I would otherwise because we will have a Committee debate. It will be interesting to listen to the Opposition representatives again at the Committee stage trying to defend the indefensible if they have the gall to move the particular amendments which the shadow Treasurer, the honourable member for Bennelong (Mr Howard), and the honourable member for North Sydney (Mr Spender) suggested that they would move.

If ever I heard some hollow arguments it was in the speeches from the Deputy Leader of the Opposition and from the honourable member for North Sydney. I suggest that they were flailing around like a couple of threshing machines, looking for justification of the position they have taken on this bottom of the harbour legislation. Certainly, as the honourable member for Hunter (Mr Robert Brown) has reminded us, the Deputy Leader of the Opposition suggested that it was a Blue Hills debate. It is only a Blue Hills debate because the Opposition has had the gall to knock back perfectly good tax legislation which would have got from people who should be paying taxation the just deserts that they should be paying into revenue. It is because the Government does not have the numbers in the Senate that we have been obliged to be reasonable and to bring back something less than we should on each occasion. Certainly, this mild legislation being presented to the House now should be supported by everyone.

The truth is that the Opposition's attitude to this legislation results from the fact that it has so few friends left that it needs to get even closer to the tax evaders of this nation than it has in the past. It has so few friends that it is trying to defend the indefensible and, my goodness, it will pay for it. I suggest that the empty rhetoric of members of the Opposition gives them away. If ever there was an illustration of what they are about it comes from one of the amendments that they are threatening to move. I refer to the amendment to remove a provision authorising the Commissioner of Taxation to report to the Parliament the names of those who fail to meet their taxation liability under our legislation. Opposition members have given no excuse for this. The Commissioner is already required, as the Treasurer (Mr Keating) said in his second reading speech, to provide in his annual report to Parliament details of breaches or evasions of taxation law. It is consistent with our duty that he be authorised, and he would be so authorised under this legislation if it is not altered by the Opposition, where he considers it appropriate to report failure to pay recoupment tax. I refer to people who have failed to pay the tax that they owe to the community. In such cases what could be the excuse for their being exempt from being named when in every other case such people are named? There is no excuse.

I will say a little more now about the amendments generally. I may even return to that one. But the first amendment mentioned by the Deputy Leader of the Opposition was the repeal of sub-section 3 (12) of the principal Act. He asserted that the removal of that sub-section would mean that the former Government's recoupment tax legislation would apply where companies were not sent to the bottom of the harbour. These companies were sent to the bottom of the harbour, just as many hundreds of companies were sent to the bottom of the harbour. The only difference relates to where the tax avoidance promoter to whom the companies were sold went through the pretence of putting the companies through a post-sale tax avoidance scheme. There is no justification for removing that sub-section. It would be merely luck of the draw. Some promoters used the technique of post-sale avoidance schemes while others did not. Why should we discriminate? There is no justification for discriminating. I have to make the charge that friends of those opposite whom they are trying to save from paying tax must be involved.

I repeat that some people used that technique and some did not. Why do Opposition members want to discriminate between one and the other? The vendors of such companies benefited just as much as the vendors of the companies that were not put through those post-sale tax avoidance schemes. Neither the Deputy Leader of the Opposition nor the honourable member for North Sydney tried during his speech to justify this discrimination. It has consistently been the policy of the Party to which I belong, both in opposition and in government, to get rid of that sub-section 3 (12), which is what this Bill does. It gets rid of sub- section 3 (12). it was part of our election commitment on tax avoidance that we should do so. We have been unsuccessful now in two attempts to do so and we are trying on a third occasion. Yet again those people in Opposition are seeking to frustrate us. They must have some friends whom they are seeking to defend.

Sub-section 3 (12) is said by some people to be an innocence clause. It was clearly stated last year by the former Treasurer that liability under the former Government's legislation did not turn on guilt or innocence but on the fact that benefits were derived from the evasion of company tax. I repeat that the cases presently let out by sub-section 3 (12) involve conferring a benefit on vendor- shareholders. I repeat that there should be no discrimination. I repeat that cases presently let out by that sub-section 3 (12) involve conferring a benefit on the vendor-shareholders. That is why the provision is in this Bill and that is why it defies logic for the Opposition to want to remove it. The honourable member for Bennelong-in fact, the Opposition, but he is leading this debate and he deserves most of the opprobrium in this case-selects a particular small group of bottom of the harbour schemes and exempts them from the legislation, discriminating in their favour with no justification for it. We can only think that he has friends he wants to protect.

I will come back to the naming of the persons. I mentioned it earlier but I have a few more comments to make. This particular provision was contained in the original legislation produced by the Fraser Government. It was omitted from the revised Bill which finally became the Taxation (Unpaid Company Tax) Assessment Act. The rationale for that provision was that it followed upon the existing reporting provisions contained in the income tax law which requires the Commissioner of Taxation to report to the Parliament breaches and evasions of the income tax law. A person who fails to pay a recoupment tax liability is simply compounding that particular evasion of company tax and that is all the more reason why he should be subjected to this provision of being named. He should be subjected to a report by the Commissioner of Taxation to the Parliament. Once again, no justification was given by the Deputy Leader of the Opposition for his opposition to this. It is only when a person fails to pay that he is named. What is the Deputy Leader of the Opposition talking about? It is only when a person fails to pay that this provision applies. I will not say that in this case there is some miserable motive for what the Deputy Leader of the Opposition has done. It is probably merely ignorance that has motivated him on this occasion.

A failure to pay recoupment tax is not merely a failure to pay by the due date but requires a total failure to pay the assessed recoupment tax liability. A person who has a genuine dispute about his or her liability for recoupment tax will not, as is presumably the case, be liable to be reported to Parliament until that dispute has been finalised. So I repeat that only ignorance of what is involved in this measure could possibly motivate the Deputy Leader of the Opposition to want to move that amendment. I hope the fact that I have now cleared up this point will mean that he will not waste the time of the Committee by seeking to amend that clause.

Let me go on to talk about the decision of the High Court of Australia. The Bill proposes to amend the evidentiary provisions of the recoupment tax law to remove possible doubts expressed in a recent case heard in the High Court that the existing provisions render the recoupment tax an uncontestable tax and, therefore, outside the power of this Parliament to enact. There is ample precedent for legislation of this kind. I made it my business to get some evidence of previous cases where this had happened. The most recent was an amendment made by the former Liberal-National Party coalition Government in 1978 . In that year the former Government of which the Deputy Leader of the Opposition, who is leading for the Opposition in this debate, was a senior member, amended section 51 of the Income Tax Assessment Act to overcome a decision of the Supreme Court of Victoria, notwithstanding that a Federal Court challenge to that decision was pending. In the event, the Federal Court reversed the decision of the Supreme Court. But the legislation was brought in.

It is no good the Deputy Leader of the Opposition looking over his shoulder or anywhere else. I knew that there were previous cases. My memory was not good enough to be able to quote them to the honourable member but I was glad to be able to get the advice about them. I understand that similar remedial legislation was put forward while the boilermakers' case was pending before the High Court in the mid-1950s. The Deputy Leader of the Opposition and the honourable member for North Sydney may be receding on top a little but I do not necessarily say that they are old enough to be responsible for what happened in 1950. But, indeed, both being lawyers they ought to remember that example. Whilst it is unusual for a government to seek legislation to overcome possible legislature defects while a case is pending before the courts, it is not unknown where the revenue or other implications of an adverse decision are substantial. In this case a substantial amount of revenue is at stake. I suggest to the Opposition that it should not waste the time of the Committee in moving that amendment.

The Deputy Leader of the Opposition also asked me for an assurance that persons who had paid amounts of recoupment tax in advance but are relieved of liability from recoupment tax under sub-section 6 (18) will receive refunds of the amounts . I am advised by the Commissioner of Taxation that he has received a number of applications from persons who expect to be liable for recoupment tax as a result of their holding shares in public companies. In addition, the Commissioner has recently issued, under the Freedom of Information Act, a taxation ruling dealing with this matter. He expects to be in a position to start processing these applications for relief from recoupment tax liability next week and refunds will be made to those persons relieved of liability who have paid that tax. So there is that assurance.

I move on to talk about stripping arrangements because there were some claims from the Opposition in relation to the proposal to remove the test which requires that the arrangement which rendered a company liable to pay its tax must be identified before a recoupment tax liability can be established. Those making these claims said that the removal of the test would mean that people who made no attempt to escape tax may be caught by the legislation. I say in response that those claims are false. They are totally wrong. The stripping arrangements test is entirely unnecessary because the other tests in the legislation ensure that only bottom of the harbour schemes are within the scope of the legislation.

Mr Spender —I will demonstrate in the Committee that you do not understand what you say.

Mr HURFORD —In this regard the three tests are particularly important. It is the honourable member who does not understand and it would become him well to listen to those who understand these matters rather than to go in for his empty rhetoric. I will now refer to the three tests. Firstly, there must be an amount of unpaid company tax. This test would not be satisfied in cases where tax has been legally avoided or the company has retained assets with which to pay any tax due. Have honourable members opposite got that point? Secondly, the excess consideration test means that the vendor-shareholders must have received a price for their shares which made no allowance for the company tax payable on pre-sale profits. In other words, it was always intended that the company tax should not be paid. The present Treasurer in his second reading speech said that there must have been an expectation that tax would not be paid.

Let me now come to the third test. Finally, the 'same business' test means that the legislation does not apply where a company carries on the same business after the sale as it did before the sale. That test by itself is enough to ensure that the legislation could not possibly apply to any normal commercial takeover of a company which is subsequently unable to pay its tax debts because of commercial misadventure. I will repeat something I have said already-those remarks were made in response to the speeches of the Deputy Leader of the Opposition and the honourable member for North Sydney in the second reading debate when they indicated that the Opposition will move an amendment at the Committee stage. I hope that now they have received those facts they will think again about moving the amendment and that they will not waste the time of the Committee. I have pleasure in supporting the motion for the second reading of this Bill.

Question resolved in the affirmative.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.