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Tuesday, 15 November 1983
Page: 2743

Question No. 307

Mr Jacobi asked the Treasurer, upon notice, on 23 August 1983:

(1) Does the Taxation Commissioner's report for 1981 reveal that (a) at the end of June 1981, $973m of tax assessed in tax avoidance schemes remained uncollected, because of administrative challenge, (b) there was a shortfall in revenue due to tax avoidance schemes in 1980-81, which alone reached $310m, (c) the number of experienced staff required to be allocated to the additional work of detecting, monitoring, investigating and contesting tax avoidance schemes continues to make serious inroads into resources available for other administrative functions, (d) investigations, field audits and internal check processes raised an additional $167.7m in 1980-81 from tax evasion and fraud, (e ) the total staff in the Taxation Office at 30 June 1981 was 12,311, of which 983 were investigating officers, (f) income tax revenue collected in 1980-81 was $22,398,907,062 and net cost of collection of income tax as a percentage of income tax revenue collected was 0.87 per cent, a decrease on previous years and (g) in 1980-81, income, wage and salary earners paid 82 per cent of all the individual income tax burden.

(2) Did the former Treasurer (a) increase taxation staff by 400 in an effort to minimise tax losses, as indicated in response to my question in May 1979 and (b) maintain or increase staff throughout the subsequent years; if so, by how many.

(3) If staff levels were reduced, by what number were they reduced, and what was the resultant loss to revenue.

(4) Is it a fact that for each reduction in staff by one there is a saving of $ 20,000, but the loss to revenue from such a cut is estimated to be $200,000.

(5) In order to give the Commissioner sufficient investigating, recovery and support staff and to enable his Department to minimise this escalation of revenue loss, will he issue immediate instructions that there will be no staff ceiling imposed in his Department as one effective weapon to minimise tax avoidance.

(6) Given the Commonwealth powers under sections 177, 207, 209 and 218 of the Income Tax Assessment Act to collect taxes after one month has elapsed from the date of assessment, even though appeals may be pending, why is the uncollected tax figure so large.

(7) Is the Commissioner using the full range of powers available to him.

(8) Has the Commissioner commenced legal proceedings against any suspected tax- avoiders under part IV (A) of the Act; if so, when and will he name the people; if not, why not.

(9) Do these offenders fall within sub-section 14 (2) of the Act which obliges disclosure.

(10) In the case of proceedings which have commenced, when are they expected to conclude.

Mr Keating —The answer to the honourable member's question is as follows:

(1) (a) The amount of $973m represents the cumulative amount of tax assessed and additional tax which was unpaid at 30 June 1981 by taxpayers who participated in schemes which had been identified and were under administrative challenge.

(b) Taxpayer participation in identified artificial tax avoidance schemes in respect of which the revenue involved was able to be quantified resulted in an estimated revenue shortfall of $310m, during 1980-81.

(c) to (e) Yes.

(f) The net cost of collecting income tax in the year ended 30 June 1981 was . 879 per cent of total income collected. While this figure is lower than the corresponding figure for the previous year, the net cost of collection increased in absolute terms from $175m to $201m.

(g) Collections of tax instalments from wages, salaries, pensions etc. of individuals in 1980-81 net of pay as you earn refunds-mainly in respect of PAYE collected in 1979-80-represented 80.5 per cent of total income tax collections from individuals.

(2) (a) On the basis of submissions made by the Commissioner of Taxation to the Public Service Board in January 1979 the staff ceiling of the Taxation Office was increased by 400 for the year ended 30 June 1980.

(2) (b) and (3) The allocation of staff ceilings to the Taxation Office for the year ended 30 June 1981 was maintained at the level of operative for the previous financial year. Allocated staff ceilings at 30 June 1982 and 1983 were 12,757 and 14,245, that is increases of 432 and 1488 respectively.

(4) The effect of revenue of a reduction in staff depends upon which particular functional area within the Taxation Office ultimately absorbs the reduction. Any variation to staff numbers in the Taxation Office can be expected to have some effect on the amount of taxation revenue that will be collected but it is impossible to quantify the net effect.

(5) Practical constraints preclude any Government from adopting a policy of expanding the number of staff in the Taxation Office-or any other revenue collecting agency-to the point where every dollar of revenue capable of being collected each year is collected, no matter at what cost.

Staff ceilings are initially determined by means of the forward staffing estimates process, the procedures of which enable the staffing needs of the Taxation Office to be considered in relation to those of the whole Public Service and to the Government's budgetary objectives.

(6) The collection and recovery policy applied in respect of a taxpayer who disputes an income tax assessment will depend on whether the dispute concerns a so-called artificial or paper scheme of tax avoidance, or is a genuine dispute. The differing treatment follows from a ruling of the courts.

Where, in respect of an artificial scheme case, an objection is determined against a taxpayer, the taxpayer is immediately notified of the amount outstanding. If payment of the amount is not made within 30 days of notification , and the taxpayer does not qualify for extended time for payment, legal action for recovery will commence unless there is a court decision on a substantive issue against the Commissioner of Taxation.

With regard to genuine dispute cases, decisions of the courts make it quite clear that, despite the existence of the tax provisions mentioned, in proceedings to collect or recover tax owing the courts have a discretion, and will use that discretion to stay the execution of a judgment or the presentation of a winding up or sequestration order where the relevant assessment is in dispute and the taxpayer has a substantial argument that the assessment might be set aside.

In practice, an offer by a taxpayer with a genuine dispute to pay 50 per cent of the tax attributable to the matters at issue-plus the full amount of tax that would remain payable irrespective of the result of the dispute-subject to the balance attracting additional tax for late payment from the original due date is generally sufficient for the Commissioner to defer legal action until resolution of the issues.

(7) The Commissioner has assured me that, subject to the exercise of a court's discretion mentioned in the preceding answer, his officers use all appropriate means available to recover outstanding tax, depending on the circumstances of each particular case. In doing so reliance is placed not only on the provisions of the taxation laws but also on any other laws which are appropriate in the circumstances of the relevant case.

(8) The Commissioner of Taxation has informed me that the application of part IVA has not yet been the subject of legal proceedings. He confirmed, however, that the provisions have been applied to a number of taxpayers to deny claims made in connection with their participation in a particular tax avoidance scheme . It is expected that the dispute will proceed to litigation in the ordinary way .

(9) The Commissioner has advised me that, in deciding whether to report a breach or evasion of the Income Tax Assessment Act pursuant to sub-section 14 (2 ), the same considerations will apply to a taxpayer in relation to whom a determination has been made under part IVA as apply to taxpayers who are charged additional tax under sub-section 226 (2) of the Act.

(10) See answer to question (8).