31st Parliament · 1st Session
Mr SPEAKER (Rt Hon. Sir Billy Snedden) took the chair at 2. 1 5 p.m., and read prayers.
– Petitions have been lodged for presentation as follows and copies will be referred to the appropriate Ministers:
To the Honourable the Speaker and Members of the House of Representatives in Parliament assembled. The petition of the undersigned citizens of Australia respectfully showeth:
That it is necessary for the Commonwealth Government to renew for a further term of at least 3 years the States Grants (Dwellings for Pensioners) Act 1974-77, renewed for one year expiring on 30June 1978.
The demand for dwellings has not slackened as the waiting list (all States) of 12,060 single and 4,120 couples as at 30 June 1 977, showeth.
Your petitioners respectfully draw the attention of the Commonwealth Government to the report of the Committee of Inquiry into Aged Persons’ Housing 1975 under the Chairmanship of the Rev. K. Seaman (now Governor of South Australia) which recommended additional funds to State housing authorities to meet the demand for low-rental accommodation in the proportion of $4 for $ 1 with the proviso that the States do not reduce their existing expenditure and
That the Act include married pensioners eligible for supplementary assistance and migrants as specified by the Seaman Report and that particular consideration be paid to the special needs and requirements of the prospective tenants in the location and design of such dwellings.
Furthermore, your petitioners desire to draw the Government’s attention to the hardship of many pensioner home owners caused by the high cost of maintenance.
The Social Security Annual Report 1976-77 shows that 24.6 per cent, or 283,000 home owning pensioners, have a weekly income in excess of the pension of less than $6 per week.
Your petitioners strongly urge the Commonwealth Government to establish a fund whereby loans can be made to means tested pensioners for the purpose of effecting necessary maintenance to their homes. Such a loan to be at minimal interest rates sufficient to cover administrative costs and to be repaid by the estate upon the death of a single pensioner before probate or upon the death of the surviving spouse in the case of married pensioners or where two pensioners jointly own the dwelling. Administration to be carried out by local government bodies.
And your petitioners as in duty bound will ever pray. by Mr Aldred, Mr Carlton, Dr Edwards, Mr Groom, Mr Keith Johnson and Mr O’Keefe.
To the Honourable the Speaker of the House or Representatives in Parliament assembled. The humble petition of the citizens of the Commonwealth respectfully showeth:
That we, citizens of the Commonwealth, earnestly request our Government to protect the interests of Australian grape growers by:
And your petitioners as in duty bound will ever pray, by Mr Giles. Petition received.
Rainforests: Declaration as National Parks
To the Honourable the Speaker and Members of the House of Representatives in Parliament assembled. The humble petition of undersigned citizens of Australia respectfully showeth:
That Australia’s remaining rainforest should not be logged but be made part of National Parks.
Your petitioners therefore humbly pray that Australia’s rainforests be made National Parks.
And your petitioners as in duty bound will ever pray, by Mr Groom. Petition received.
To the Right Honourable the Speaker and Members of the House of Representatives in Parliament assembled. The humble petition of the undersigned citizens of the township of Warburton in the electorate of McMillan respectfully showeth:
Your petitioners therefore humbly pray that the Government of the Commonwealth of Australia per medium of the Minister for Post and Telecommunications give all directions to ensure the installation of all equipment necessary to instal CTAS or such other means to produce television viewing for the citizens of Warburton
And your petitioners as in duty bound will ever pray, by Mr Simon. Petition received.
To the Honourable the Speaker and Members of the House of Representatives in Parliament assembled. The humble petition of undersigned citizens of Australia respectfully showeth:
That ‘The family is the natural and fundamental group unit of society and is entitled to protection by society and the state ‘.
Your petitioners therefore humbly pray that the government initiate a national family policy and use the concept of family impact statements as a means highlighting family needs.
And your petitioners as in duty bound will ever pray,
Petition received. by Mr Wilson. Petition received.
– Is the Deputy Prime Minister aware of the following statement reported to have been made on 1 8 February by Keicchi Ito Director of the Japanese Defence Bureau: ‘If in the future we should hypothetically, cease to be a signatory to the Non-Proliferation Treaty, then we can own nuclear weapons within the constitutional limits. “? Is it a fact, as reported, that high Japanese officials openly discuss the hypothetical possibilities should Japan discard the nuclear proliferation restraint? Is it also a fact that the signatories to the Non-Proliferation Treaty can withdraw from it, and from their safeguards obligations, upon three months’ notice? If so, can the Minister inform the House how the Australian Government’s back-up safeguards obligations would override the perceived national interest of a nation which had decided to withdraw from the Nuclear Non-Proliferation Treaty in order to develop its own nuclear weapons?
– I am not aware of the statement to which the honourable member has alluded and which, in his own words, is a hypothetical proposition, that Japan withdraw from the Nuclear Non-Proliferation Treaty. Japan, having suffered the effects of a nuclear device, is probably more concerned than is any other country in the world to see established a world regime which will prevent the proliferation of nuclear material. Therefore I would not like to canvass any hypothetical question about Japan’s withdrawing from such an agreement; I do not believe it would want to do so.
-Is the Minister for Trade and Resources aware of the crisis in the southern and western coalfields of New South Wales? Does he realise that exports of coal, especially to Japan, are jeopardised and that unemployment will be increased by the refusal of the Premier of New South Wales to make decisions? Can the Minister tell the House what the Government can do to help overcome Premier Wran’s refusal to look after the interests of the men down the mines and the interests of New South Wales and Australia?
– The question is out of order.
– I am aware -
-Order! Before the Deputy Prime Minister answers the question I should indicate in relation to the interjection that the question was very close to being out of order. But I will permit the question. I call the Deputy Prime Minister.
– I can understand the sensitivity of honourable members opposite because there is a great deal of embarrassment among Labor members, particularly those coming from the south coast of New South Wales, over the performance of the New South Wales Government which is throwing into jeopardy the future expansion opportunities of the coal mining industry. At a time when there is some difficulty in selling products around the world there are in fact growing opportunities for the export of coal, particularly steaming coal. But the chance of the southern fields availing themselves of these opportunities is limited very much by port facilities. There was a proposal under the previous Government to develop Botany Bay as a major coal loading port which would have enabled expansion to take place in southern fields and the Lithgow area for a good many years ahead. But as that proposal has now been suspended or abandoned there seems to be absolute conflict. Port Kembla, which is the present loading facility, is quite inadequate. Ships are lined up outside of that harbour and loading is being delayed. Indeed, this is causing a great deal of irritation to the Japanese who are looking for regular shipments from that area.
I am not too sure how the problem can be overcome if we do not have a co-operative State government. There has been some talk of having coal redirected from that area to Newcastle. Of course, this would put a considerable additional cost onto the export of coal from the South Coast. But I can assure the honourable member that the Commonwealth would like to see these coalfields developed because not only would this mean more job opportunities and security for the people in the coal industry but it would also mean more export revenue for the Government.
AUSTRALIAN COMMONWEALTH GAMES TEAM Mr STEWART- I direct my question to the Minister for Invironment, Housing and Community Development. I refer to the announcement by him on 28 February that the Australian
Government would grant $225,000 towards the expenses of the Australian team for the Commonwealth Games in Edmonton, Canada, in August this year. I ask whether this amount towards the total cost of the team of $600,000-plus is about the same percentage of cost granted by the Labor Government to the team for the 1974 Commonwealth Games in New Zealand. Can the Minister say what progress the Commonwealth Games Association has made in raising from State governments, business and commerce and sporting organisations the balance of approximately $400,000? Is it correct that he has expressed both privately and publicly his disappointment that our amateur sporting organisations and business generally are not doing sufficient towards raising funds to assist our athletes to compete in the 1978 Games?
-I thank the honourable member for his question. It is true that the Commonwealth has announced the grant he mentioned. We believe it was a substantial grant, very much greater than the previous grants that have been made by any Commonwealth government to any Commonwealth Games team.
– The same percentage.
– The honourable member mentions the word ‘percentage’. However, if the honourable member looks at the amount paid per team member he will see that the grant of $225,000 that we announced is equivalent to $1,120 per team member. The per capita grant for the 1974 Games in Christchurch was $173. So, we are looking at $1,120 compared with $173. From that comparison honourable members can see the significant increase in the amount of support that we are providing to our Commonwealth Games team. I know that the honourable member is upset about this matter but the fact is that the grant was very well received by the Games Association and by individual sporting bodies throughout Australia, and they said so publicly. They were very pleased about the pre-Games training fund of $75,000 which we provided and this again was an initiative by the present Government. We certainly hope that companies and individuals around Australia will provide further support to the team to back up the amount that the Federal Government has provided. We want to see the Games team get to Edmonton well prepared and well-equipped. We trust that it will be successful. I am sure it will be.
-I ask the Minister for Health whether he can advise the House when the Government will be able to introduce legislation giving effect to our election commitment to broaden the terms of the domiciliary nursing care benefit to include all eligible people over 1 6 years of age.
– Australia has one of the highest nursing home bed to population ratios in the world and the domiciliary nursing care program is probably one of the best social welfare initiatives that the Government is pursuing to try to deinstitutionalise the care of aged people. In fact, it is an aim of the Government to try to deinstitu.tionalise the care of the sick, the care of those who require rehabilitation and certainly the care of the aged. The domiciliary nursing care program is intended to provide an incentive to pursue this objective. The benefit currently applies only to those patients 65 years and over but, as the honourable member for Mallee indicated, the Prime Minister announced during the election campaign last year that the Government would move to reduce the age limit from 65 years to 16 years so that the program would provide cover for paraplegics and other people who receive intensive care in either a nursing home or an institution but who also receive care with assistance from their parents or relatives in their own homes. I expect the Government to take a decision on this matter in the context of the Budget and to give consideration to increasing the present level of benefit which has not been increased since the program was commenced. The rules of eligibility have been relaxed very substantially since I became the Minister so that more people are being covered under this program. Honourable members may recall that the rule was that only those people who received two visits a week from a nurse would be eligible. I think the former Labor Government made some innovations in respect of people living in isolated areas. We have extended that provision now so that, where a doctor and a trained nurse believe that the people who are caring for the patient are capable of providing adequate care, the frequency of visits by the trained nurse is to be reduced. We are very conscious of the program -
-Order! The Minister will draw his answer to a conclusion.
– I expect that in the Budget context the changes will be made.
– The Minister for Defence will be aware of the great concern in the community about the Prime Minister’s decision to spend $26m on the purchase of two aircraft for his own purposes to travel internationally. As the Government’s case seems to be based on the fact that, for security purposes, the Prime Minister needs his own aircraft to travel overseas I ask the Minister: What was the purpose of the decision of the Prime Minister to buy two of the aircraft?
– I reject some of the unpleasant features of the honourable gentleman’s question, notably, that the aircraft are being bought for the Prime Minister’s own use. I invite my honourable friend to reflect upon the fact that circumstances have now been reached, regrettably, where it will be impossible for an Australian Prime Minister, irrespective of his political allegiance, to leave this country with propriety and with appropriate dignity. If the honourable gentleman wants to argue that -
– Why did he argue that?
– If the honourable gentleman is reluctant -
– Why does the Prime Minister want two of them?
– The honourable gentleman is resting my voice and not exercising his brain.
– We do not have to when you are speaking- Mr KILLEN- Well you asked the question and you do not have the courtesy to let me answer it.
– Order! The Minister will continue with his answer.
– I repeat with respect to the purchase of the aircraft on security grounds that a very cogent case is made out for that not merely by me or the Government but also by very experienced members of the Press Gallery who have seen the very intense security arrangements. Having said that, I say to the honourable gentleman that the purchase of two aircraft was necessitated primarily by maintenance reasons and the fact that it is far more economical to operate two aircraft of that character than it is to operate one.
-I ask the Treasurer Has the Government’s 40 per cent investment allowance been successful in allowing primary, secondary and tertiary industries to improve their efficiency and to control costs as well as giving employment opportunities to many Australians? Will the Treasurer consider extending for a further period the investment allowance, which is due to be phased out on 30 June of this year, and also restoring the appreciated allowances for secondhand plant purchased as applied prior to their removal by the administration of the Hon. E. G. Whitlam and the Hon. W. Hayden, in view of the Government’s statesman-like stand to close loopholes in the taxation laws and thus obtain more government revenue?
-Order! The honourable gentleman will not suggest the answer to his own question.
-I think it is fair to say that the investment allowance that was introduced by the present Government shortly after its election to office in 1975 has very much achieved its objective which was to give a boost in the area of investment. If one looks at the progress of capital investment figures since the investment allowance was introduced I think one can make a very powerful case for it. Certainly the cost to revenue, if I may put it like that, of the investment allowance is a very powerful case to the extent to which it has been used. I think it has allowed a large number of Australian business enterprises, both large and small, to improve their cost efficiency.
There are some in the community who would argue that in some areas the investment allowance has aided rather than retarded the process of labour-shedding. I do not accept that overall the investment allowance has been an adverse factor so far as unemployment is concerned, but I think one must bear in mind that there are some in the community who would argue that the investment allowance has not been as effective in the job creation area as some may have thought. Overall, the investment allowance has made a major contribution to cost control for business, both large and small. It has achieved its objective of providing a boost.
The Government does have under consideration at the present time the possibility of some re-examination of the phasing arrangements which are to commence on 30 June of this year, that is, the phasing down from 40 per cent to 20 per cent. I point out to the honourable gentleman in the context of any request for an extension of the investment allowance as such, it has already been extended in terms of a two-year extension of the 20 per cent period from 1983 to 1985. The Government has before it a consideration of the impact of possible industrial disputes on large projects that may not be fully in place by 30
June. A decision will be made on that in due course.
I note the honourable gentleman’s reference to the removal of the statutory accelerated depreciation allowance that was formerly available to primary producers. It is true that this allowance was terminated in 1973, 1 think, although I may be incorrect, as a result of the Coombs task force recommendations which were very punitive in regard to primary industry throughout Australia. Of course, expenditure of that order under normal depreciation provisos is still eligible for deductions. I shall give consideration as I am sure will some of my colleagues in the context of the Budget to the request which is contained in the honourable gentleman’s question. Any decision on it will have to be taken in the context of overall decisions on expenditure by the Government.
-I direct a question to the Prime Minister. I refer to the security report used by the Government to justify its purchase of two Boeing 727 aircraft for the Prime Minister’s personal use on overseas travel. Is it true that the report does not make a clear cut recommendation in support of the purchase of any aircraft, let alone two aircraft? Does the report clearly state that the security risks are minimal when using aircraft chartered either from Qantas Airways Ltd or by Qantas Airways Ltd? In the light of this report, how does the Government justify the extravagant purchase at taxpayers’ expense, of two aircraft at a cost of somewhere between $20m and $40m? Does the Prime Minister still believe that life was not meant to be easy?
-As one would expect, a number of the suggestions contained in the question are completely false. The honourable gentleman should well understand that the security report that was tabled draws together the basis of security information which is available to the Government. The document was compiled on the basis of confidential reports on the nature and subject of threats that are around and which cannot be detailed. To enable a document to be prepared that could be tabled, that report was made and that report itself was tabled. I think that the honourable gentleman is somewhat astray in suggesting that aircraft are for my personal use. That sounds as though the aircraft will be for my personal use, unassociated with the office of Prime Minister. If the honourable gentleman is seeking to convey that kind of imputation quite plainly he is wrong. One editorial I saw suggested that the choice of the aircraft might well have been deficient because true intercontinental aircraft should have been chosen in their stead. Boeing 727- 100s with long range tanks are obviously not intercontinental aircraft such as the 707s or 747s which, I suppose, the present globe-trotting former Leader of the Opposition would have wanted to use. It is well known that the 727 aircraft available to Trans-Australia Airlines and Ansett Airlines of Australia do not have long range tanks and would not be able to cover the distances necessary on international flights. In addition -
– What about Bert Hinkler?
-The honourable gentleman, by that interjection, has truly dated his party’s political philosophy and its attitude to government in Australia. Even if the honourable gentleman wishes to stay rooted in those days, Australians and other people must move on. It is also well known that Qantas shortly will be getting rid of its last 707 aircraft. Three of these aircraft will be delivered in June of this year, leaving two in service. It is thought likely that those last two will be going out of service over the next year or two, and once that happens there will be then no 707s available to Qantas to charter to the Government. Under those circumstances I can only assume that the honourable member is suggesting that a 747 aircraft be chartered.
– That is not true.
– If that is not so then the honourable member is suggesting that no aircraft be chartered. Therefore, the only alternative is to purchase 727s for these particular matters. The honourable member also sought to indicate that the cost would be between $20m and $40m. The cost of the two aircraft of course is about $ 16m, not $20m to $40m as the honourable member sought to indicate. The Minister for Defence also has made it perfectly plain that, as 727s come into service, the rest of the fleet and its use set against modern requirements and present Australian security requirements will be assessed with a view to future rationalisation. So it is not good enough, therefore, merely to look upon the purchase of two 727s as additions to the VIP Fleet on top of present aircraft. Indeed, the choice of the 727 aircraft was determined very significantly on the advice available to us that it is virtually the only aircraft available that will service a domestic requirement and at the same time an international requirement. If 707s are available they will not service the domestic requirements because there are too few airports that they can use and I do not really think it would make much sense travelling around Australia in a 707 aircraft. The 727 aircraft being a 3-engined aircraft is the one best capable of meeting both the domestic requirement and the international requirement.
– What is wrong with the BAC-111?
-The honourable member again interjects and asks: ‘What is wrong with the BAC-111?’ The BAC-111 is a twin-engined aircraft. The Royal Australian Air Force is loath to use that aircraft for any distance overseas because the single engine performance of the aircraft is markedly inferior. Indeed there was an occasion when a previous Prime Minister was somewhat concerned when an engine went out on the way to New Zealand. The range of this aircraft is utterly deficient and its single engine performance deficient in relation to flights over water. There is no way in which the BAC- 1 1 1 could meet the requirements against the security background of 1978 and beyond.
– I direct my question to the Minister for Aboriginal Affairs. Why has he deserted the Aboriginal people of Aurukun and Mornington Island? Is it because he is afraid of the political power of the Premier of Queensland, as indicated in the Press statement issued on behalf of the Aurukun people? Is there any evidence that the Premier of Queensland will in future change the habits of a lifetime and place the welfare of the Aboriginal people before other considerations?
– I thank the honourable member for his question because it enables me to repeat again, as I have repeated before, that the Commonwealth has consistently from the time when this issue arose stood by the people of Aurukun and Mornington Island. We have consistently sought to gain substantial benefits for them against the position that they were faced with when the Queensland Government announced that it was going to take over the management of those two communities from the Uniting Church in Australia. What we have sought is to achieve self-management for those communities and also, when the reserve lands which had been set aside for those communities were abolished, security of that land for their traditional rights and their rights of use and occupation which they had enjoyed for so long. They have been the twin objectives.
In the negotiations that I and my colleague, the Minister for Transport, had with Queensland Ministers- particularly on Thursday of last week- I think it will be seen when this matter has concluded that substantial gains will have been made for those communities. Last Thursday night the Prime Minister and I met with councillors from the Aurukun community for some two hours in the Cabinet room. The range of issues which were discussed included: The complexity of the legislation; the terms of the lease in contrast with a freehold title; the control of the land which would be in the hands of the communities themselves; the role of the advisory committees to support the shire councils and the membership of those committees; the relationship between the Queensland Government and the councils under local government legislation; and the power of the councils, particularly with regard to the by-laws. The Prime Minister had two hours ‘ valuable discussion with these people.
I also take the opportunity to inform the House of the contents of a telegram received by the Prime Minister from the Reverend Roly Busch, the Moderator of the Uniting Church in Queensland. The telegram, which is not very long, stated:
Queensland Synod is most appreciative or time you gave Aurukun and Church representatives in Canberra last Thursday evening. We recognise present negotiations with Queensland Government at a delicate stage but respect your assurances that your Government will act to ensure that Aurukun and Mornington Island people gain the selfmanagement and security of land that they so earnest seek.
Discussions are going on between my officers and Queensland officers, consequent upon the discussions which Mr Nixon and I had in Brisbane last week. I hope that by the end of the week these matters will have been concluded after, if necessary, further discussions between myself and Queensland Ministers.
– My question is directed to the Minister for Productivity. Does the Minister consider the electronics industry vital to the development and security of Australia as a high technology nation? What are the implications of a successful
InterScan development program for this ailing industry? What are the implications of such a program for environmental problems at Australian airports?
-The implication of the development of InterScan for all airports is very great throughout the world, not only for Australia. Its acceptance is a tribute to Dr Wild and his Commonwealth Scientific and Industrial
Research Organisation colleagues who developed this very dramatic and marvellous invention. With regard to Australian airports, one of the benefits can be illustrated by reference to Sydney airport where both today and last Friday fogs greatly disrupted air services. Were Interscan installed there, services would be greatly improved as would the situation in Canberra.
InterScan in fact provides a multiplicity of variable flight paths under the most extreme weather conditions. Environmental factors are again largely the responsibility of the Minister for Transport. In Sydney the Major Airport Needs of Sydney Committee is studying that element. I think that the honourable member should pursue that question with the Minister for Transport.
With respect to the electronics industry, a great deal of progress has been made in the last few weeks towards establishing a commercial base for the manufacture and marketing of InterScan. I believe that this will provide a very great boost to the electronics industry in Australia for decades to come because it will be installed in every aircraft in every airport in the world. It will provide the Australian industry with a great deal of the market. Certainly this Government is determined to do all that it can to help Australian industry get the biggest possible slice of what will be a continuing world market.
-I ask the Minister for Environment, Housing and Community Development: Has his attention been drawn to statements in the Press that there is likely to be a go ahead on oil drilling on the Great Barrier Reef? Has his Department made a submission? What is its view regarding oil drilling on the Great Barrier Reef?
-The honourable member should be concerned not so much about the Department ‘s views but about the Government’s views. That is a point worth noting. I am aware of reports on this subject. As the honourable member would know, the royal commission into drilling for petroleum in the area of the Great Barrier Reef did not actually reach a unanimous view on this important issue in its 1974 report. This is a subject on which the Government will probably at some stage have to determine a policy although, frankly, I am not aware at this stage of any oil company or other commercial body seeking approval to proceed with drilling in the region of the Great Barrier Reef.
I am not willing at this stage to indicate just what the approach of the Government might be if a decision has to be made in due course. However, I stress that the Government certainly would not allow to take place in the area of the Great Barrier Reef any commercial activity which might in any sense cause harm to this unique asset. Of course, in any decision that might be made there would have to be consultation with the Queensland Government. Another point which might be worth noting is that, quite apart from the fact that no policy stance has been taken on this matter at this stage, there is the added protection of the Environment Protection (Impact of Proposals) Act, which is very relevant to this subject.
– My question is directed to the Prime Minister. It refers to a newspaper report this morning about refugees. Can the Prime Minister advise the House whether any request has been made to the Government to allow more refugees from South East Asia to be accepted here?
-The Minister for Immigration and Ethnic Affairs will answer that question.
– I noticed certain newspaper reports over the weekend and this morning concerning Australia’s intake of refugees. It should be stated that Australia’s record in relation to the acceptance of refugees and displaced people over the years has been an enormously good one. It is not often understood that, for instance, last year alone we took displaced people and refugees from over 40 different countries throughout the world. We should not look at the Indo-Chinese refugee problem in isolation. Australia has at the moment and has had over the years a continuing response to these tragic situations. I was very depressed to read a newspaper report which suggested that VicePresident Mondale would somehow place some pressure on Australia in relation to its attitude towards the acceptance of Indo-Chinese refugees. I shall quote a question posed to Mr Mondale. He was asked:
Do you feel Australia due to its past involvement in IndoChina and its geographic position within Asia has some kind of moral duty to take more refugees?
Mr Mondale replied:
We think that the Australian Government has been quite responsive to this problem.
Honourable members should note his next comment. He said:
If all governments had been as responsive, I think we would not have nearly the problem we have now. And we have been in close consultation with the Australian Government for some time on this- no question that the issue will come up- we will be discussing the issue.
We have been discussing the issue. I am pleased to say that I believe that the approach of the United States and our approach are in broad general agreement.
-I ask the Prime Minister: Is it a fact that Vice-President Mondale of the United States favoured the holding of a parliamentary reception in his honour? Is it also a fact that the Prime Minister opposed and quashed the suggestion, seeking to limit the exposure of the VicePresident to no more than a handful of Cabinet Ministers? Does the United States Government share the view of the Fraser Government that the Fraser Government owns the relationship with the United States?
Mr MALCOLM FRASER The honourable gentleman does himself credit every day because he exposes himself politically to the Australian public. They will judge him accordingly. At this moment the Leader of the Opposition and, for all I know, the Deputy Leader of the Opposition are having discussions with the Vice-President.
– Which you opposed.
– Order! The honourable member for Blaxland has asked his question. He will now remain silent while the answer is given.
-The holding of such discussions is something that I applaud. I believe that when a President or a Vice-President comes to this country–
– You oppose it.
-The honourable gentleman is indulging in plain humbug. He knows that perfectly well. I think there is some additional evidence that he is indulging in plain humbug. This Government more than any other is pursuing the view that, in security matters, briefings from the very security agencies of this country, should be available to the Leader of the Opposition and Deputy Leader of the Opposition. That facility was extended to the Deputy Leader of the Opposition at the request of the Leader of the Opposition. If I had wished to maintain these matters in the ambit of the Government alone, as I have authority to do and as other governments in the past have done, that could have been done. But the proper course has been taken. Certainly it has been taken so far as the security for the Vice-President’s visit and other aspects of the matter are concerned. He is here for not much more than 24 hours. It is a working visit and discussions this morning and through lunch were on working matters alone. I believe that with a very brief visit to Australia it is better to be made a working visit which can also embrace the Leader of the Opposition if he so wishes it and does not become a visit that merely indulges itself in ceremonial.
-Is the Minister for Trade and Resources aware of reports indicating that the Premier of New South Wales has announced that the State Government would sponsor a meat trade delegation to Saudi Arabia later this month? In view of the efforts by the Commonwealth Government to expand meat exports, is the Minister taking steps to ensure that a coordinated program is being implemented and that State governments do not pursue independent programs which could prove counterproductive to the overall trade promotion effort?
– It is important that State governments consult with the Commonwealth if they are going to send missions overseas, so that there is complete co-operation in any ideas that they might have of developing overseas markets. Of course our exporters have been involved in the Middle East for a good many years. Recently a delegation from the Australian Meat and Livestock Corporation travelled through that area. At the moment it is planned that another delegation will go there. This has arisen out of the live sheep export dispute. This delegation will include members of the unions involved, producers and exporters. So within a short period of time two delegations will have been in the area. However, I am pleased to say that during the course of the past week there have been discussions between New South Wales and the Commonwealth regarding the Premier’s proposed delegation to the Middle East. I emphasise that if the States go off on their own, their efforts often can be redundant and counter-productive. When States send missions overseas without consultation they generally finish up having to get in touch with our trade commissioners and foreign affairs posts to help them to facilitate arrangements.
– Did Queensland consult before its delegation went to Japan?
– Generally when Queensland sends delegations anywhere- not always- it finds that it needs the facilities of the Commonwealth.
– Did it consult before the last visit?
-No, it did not. That was in the case of the Premier’s -
– Did it ask you -
– Order! If the right honourable gentleman does not respond to the interjections they will cease, because I shall make them.
– It is important, whether it is Queensland or any other State, if we are to get the national benefit out of the efforts, that the State people have a close working relationship with the Commonwealth, and we invite them to talk with us.
-Did the Minister for Health see the Four Corners program on possible long term adverse health effects of pesticides shown last Saturday evening and Sunday? Was he satisfied with the views expressed by the spokesman for the Commonwealth Government, Dr E. J. Fitzsimons of the National Health and Medical Research Council? Would he not agree that even the least alarmist of us have good reason for alarm when we become aware of the apparent lack of concern and knowledge shown by this spokesman for the Commonwealth Government?
– No, I did not see the program, but I have had some complaints about the way in which the program was presented. I have asked my Department to furnish me with a report on the program. I have sought a transcript of the program. The preliminary advice that I have received is that the spokesman from the National Health and Medical Research Council who appeared on the program did not get prior advice of the type of questions to be asked. Some of the questions were outside his professional province.
– All of them?
– Some of the questions I said, and I suppose that should be sufficient. In any event, I think the honourable member should understand that the Council only makes recommendations relating to poisonous substances or substances that could have a harmful effect on the community and it is then up to the States and the Territories to pass legislation, if they think fit, to accommodate the recommendations of the Council. Why the Four Corners program did not have some State spokesmen there to answer for their inactivity in some of these matters I do not have a clue.
– Is the Minister for National Development aware of a Green Paper prepared by the United Kingdom Department of Energy earlier this year which reached certain conclusions with respect to the long-term future of fossil fuels? Does the Minister agree with the conclusions contained in the Green Paper? If so, what are the implications for Australia?
– I thank the honourable member for Denison for that question. The Green Paper produced by the Department of Energy of the United Kingdom is a very important discussion paper and one that is worthwhile reading. I commend it to all honourable members. Basically, the conclusions it drew were that, for the world, the Organisation of Petroleum Exporting Countries will continue to be able to maintain and increase the price of crude oil, and, secondly, that there will be a shortage of fossil fuels by the end of the century. For the United Kingdom, the Department draws one important conclusion: It will be inevitable that the United Kingdom will have to resort to nuclear generation by the end of the century.
For Australia, the implications are also clear. It means that we shall have to progress with our energy policy as we have done to date with energy pricing. We should also move to increase research and development for alternative energy sources. We need a conservation policy for energy. On those latter two points I hope I will be able to make announcements soon. But the important thing is uranium. Often the Opposition would have us believe, as it asserts in this place, that there is no demand for uranium; that the world does not need it. This Green Paper makes utter nonsense of that claim. I recommend to the Opposition that it read that report very carefully. It is inevitable that we have to provide uranium to our trading partners. We will have to do it to meet the demands not only of our trading partners but of the world. The Opposition could well look to its own policy on uranium.
-Mr Speaker, I wish to make a personal explanation.
-Does the honourable member claim to have been misreprestented?
– Yes. It was drawn to my attention over the weekend that an article appeared in the Daily Telegraph last Friday, which I did not see on Friday, written by Mr Leigh Bottrell and headed ‘Blow to Prestige’. Because it is very brief I will quote it:
An exchange of rude notes between the National Country Party’s Mr Steve Lusher and Labor’s Mr Ted Innes in Federal Parliament does little to enhance the standing of our national legislative body.
The pair are among the more fiery of the people ‘s representatives and are not known to sec eye40-eye on anything.
But note-passing which ends in one inquiring of the other if he’d like a punch in the face surely takes this animosity too far.
The report is totally incorrect. I have never corresponded with the honourable member for Melbourne, either formally or informally. I object strongly to this non-factual style of reporting and suggest that more harm is done to the prestige of the Parliament by reports of this nature, particularly when they are untrue.
-Mr Speaker, I wish to make a personal explanation.
– Does the right honourable member claim to have been misrepresented?
– Yes, on two counts.
– The right honourable member may proceed.
– First, in the Hansard of Friday’s proceedings, at page 1937 it is reported that the Treasurer asked for, and received, leave to incorporate that page of the Liberal Party’s policy relating to taxation. Neither the public nor the Parliament were informed of the details. But the Treasurer, referring to what I had said, read part of the preamble which says:
The system must be easy to understand . . . simple and inexpensive to administer . . . fair in appearance and practice.
But, sir, either carelessly or by intent, he left out these critically important words in the platform:
The achievement of these objectives requires a tax system in which the rights of the taxpayer are safeguarded by:
Minimising discretionary powers; and
Ensuring that taxation adjustments do not have retrospective elect
These are the words that I used. The failure to mention them, together with the other words mentioned in my speech, puts a totally false interpretation on what the Liberal Party platform and policy says. Then again, on page 1939 of Hansard, in relation to tax losses of between $500m and $2,000m mentioned by me, the Treasurer is reported to have said:
I think the right honourable member for Lowe suggested that it means that one would need SI ,000m of income in order to support a figure of $S00m.
To be correct, I said that if there is to be a loss of revenue of $2,000m, that is, to the Treasury, there must be taxable income of $4,000m. That statement is correct. The Treasurer, replying, said:
It is $ 1 ,000m of capital reserves, not $ 1 ,000m of profit that is involved.
I did not mention the word profit. With regard to the Treasurer’s statement I point out that it is necessary in a Curran scheme that a company shall have a capital profit. If the example of companies with $ 1,000m of capital profit reserves had been utilised, the tax deduction available would be $ 1,000m, and the tax saving $500m with, therefore, a loss to revenue of the order of $500m too.
As well, the Treasurer’s statement is incorrect unless he is saying that the companies did not pay tax on the created capital reserves. This is confusing income and capital gains tax. No Australian company or individual is required to pay tax on capital profits. There is no capital gains tax. If the company goes into liquidation under section 47 there will be no tax on the distribution of capital profits to the shareholders. At long last we get an estimate from the Commissioner of Taxation: The figure of $500m is not out of the question. That is a far cry from the $500m to $2,000m -
-Order! The honourable gentleman is now debating the issue.
– I finish on that note, but have not gone outside what was actually said by the Treasurer and by myself in the contributions that we made on Friday.
– I have received a letter from the honourable member for Adelaide (Mr Hurford) proposing that a definite matter of public importance be submitted to the House for discussion, namely:
The Fraser Government’s failure to respond to the crisis in the Australian motor vehicle manufacturing industry, with appropriate policies to improve consumer demand and provide a viable future with resulting employment security.
I call upon those members who approve of the proposed discussion to rise in their places.
More than the number of members required by the Standing Orders having risen in their places-
-Mr Speaker, the time for ending the treatment of Australian workers as chattels rather than as people, with hundreds being thrown on the unemployment heap overnight, is long overdue. After their false promises to the nation in national elections in 1975 and 1977, the Liberal and National Country Parties are guilty of negligence. Over the past two years of the Fraser Government the situation has gone from bad to worse, with thousands more unemployed now than there were two years ago. Adding in the hidden unemployment figure, as we have calculated it on a number of occasions in this House, it needs to be said again that the unemployment figure at the moment is somewhere near half a million Australians out of work.
The Chrysler announcement last week, of 300 employees losing their jobs this coming Friday, and there being 1 100 fewer jobs in that one company by the end of next year, is but the latest result of the Government’s benign neglect, not only of the motor manufacturing industry, but also of industry generally.
Let me state some basic truths as perceived by the Australian Labor Party. We believe that a manufacturing industry is essential for our country. There is no other way to provide sufficient rewarding jobs for our people. We believe that a motor vehicle manufacturing industry is a vital base for that manufacturing industry. It is the engine of a manufacturing industry. It not only provides jobs for those making vehicles but also creates work in the steel and chemical industries to mention just two- for the panellings and paint which are basic ingredients of vehicles. It gives life to thousands of small firms. Six thousand small businesses are suppliers to the motor vehicle manufacturing industry.
We of the Australian Labor Party believe also that people deserve security. We know and workers know that in a changing world no one can expect to stay in the same job necessarily forever. Politicians, of course, know this only too well. But people have a right to a job- a right to expect that their government is actively planning for the creation of a job for them; a right to demand that their government has manpower programs and job training, retraining, relocation and income maintenance schemes to allow them and their families to cast aside the fear of being thrown on the dole overnight. People are not getting this security and freedom from this fear under this present Liberal-National Country Party Government. Members of the Opposition want to force a change of heart. We want to see that policies are arrived at to overcome this shame.
The Whitlam Labor Government commenced the long and difficult task of providing Australians with manpower programs, with job training, retraining, relocation and income maintenance schemes. For all intents and purposes these progressive measures have been dismantled by a Fraser Government worshipping at the shrine of smaller government, at the shrine of ‘let the strong get stronger and the weak get weaker’, at the shrine of cutting government spending and the deficit at any price even though that price is bringing about unemployment and lesser employment security generally.
The Chrysler episode is just the latest result of this human tragedy caused by this callous conservative attitude of smaller government, of cutting the schemes and the programs to which I have already drawn attention. In 1 975 the motor manufacturing industry was on the first rung of the ladder of planned stability. Industry generally, thanks to the Labor Government, was on the way to offering satisfactory income security schemes where restructuring and rationalisation was necessary. The first rung of the planned stability ladder was the four-cylinder engine plan for the Lonsdale plant of Chrysler Australia Ltd. What happened to that employment producing plan? It was scrapped by the Liberals. Instead, we are to have more fragmentation. Instead of the economies of scale of one four-cylinder plant we are to have three and possibly four or more four-cylinder engine plants. This is the Liberal ‘s idea of planned stability. It is no wonder that the motor manufacturing industry today is in chaos. There are also other illustrations of the chaos I have described. Because of the evasive answer which the Prime Minister (Mr Malcolm Fraser) gave last week to a question I asked about changes to the local content plan there is complete confusion as well as chaos. Is Chrysler to be allowed to join Nissan and Toyota on a 60 per cent plan reverting from the present 85 per cent to 60 per cent and then working back up to 85 per cent over the next five years? Is Nissan seeking a deferment of its local content deadline plus a further quota allocation for built up cars to facilitate, as Nissan has apparently said, ‘the survival of this company’? We note in Nissan’s submission to the latest Industries Assistance Commission inquiry on commercial motor vehicles, that that company said if it cannot bring in fully built up vehicles or CBUs it cannot go ahead with the local content plan. Is it not true that 1 8 attempts to manufacture or assemble vehicles in Australia have failed? Is it not true that the combined losses suffered by such firms as Chrysler, Hartnett, Leyland, Lightburn and Volkswagen exceeds 100m?
Let us look at some more basic facts which signify the chaos and turmoil that I have alluded to. Let us look directly at the employment situation in the industry. In December 1976 there were 87,800 people employed in the industry and in December 1977 there were 80,300 people employed in it- a reduction of 7,500 people in just one calendar year. The number of dealers and petrol and tyre retailers fell from 172,000 at the end of 1976 to 167,500 at the end of 1977-a reduction of 4,500 in that period. Those figures do not tell the whole story. There have been ups as well as downs in the employment situation. But these figures add up to social irresponsibility. No one should be allowed to take on labour in this way only to discard it shortly afterwards. This is not the planned stability that we in the Labor Party seek. There has been no income security for those people who have been discarded.
Let us look at the registration figures. The number of passenger motor vehicles registrations fell from 58,000 in December 1976 to 46,710 in December 1977- a reduction of 11,290 registrations. There was a reduction of almost 1,000 registrations in January 1977 compared with January 1976. Registrations were down by almost 45,000 in the 1977 calendar year. We are hoping this year for 570,000 to 580,000 registrations, but on present indications there will be 100,000 fewer registrations than that. There is chaos in the industry and even chaos in the allocation of quotas for the industry because no one has any idea what will be the total registration figure for 1978. Above all else in this chaos and turmoil we have to give attention to the very difficult task we as a nation are trying to undertake in regard to this vital industry. We are trying to sustain in a healthy and viable form a vital motor manufacturing industry comprising five manufacturers for half a million new registrations and 14 million people, whereas, for instance, in the United States- I could have used Japan as an illustration- there are only three thriving manufacturers for 200 million people. It just cannot be done; we just cannot achieve the necessary economies of scale and productivity that are necessary in these circumstances.
The sooner we grasp the nettle and plan for something which can be done the better it will be for everybody, particularly those working in the motor manufacturing industry. It will require enormous co-operation between the public and private sectors and between the workers and management, but until it is done we shall continue to suffer turmoil such as that created by Chrysler’s announcement last week. We shall continue to suffer from the lack of economies of scale, the ever increasing cost of cars, a consequent declining market and the scourge of quotas.
– Which companies do you want to shut down?
– In other words, the consumer will continue to be taken for a ride and standards of living will continue to fall. Let me illustrate the chaotic fragmentation a little more vividly. By 1968 we had 190 different passenger models and 734 different light commercial vehicles and truck models in this country. Believe it or not, 800 of them were locally manufactured or assembled. Just contemplate the breathtaking and wasteful scale on which the industry is obliged to keep its spare parts inventories alone. The proliferation of makes is bad enough, but what makes the situation worse is the manner in which the market is fragmented by the availability of countless models. By 1970, 56 different local and overseas car makers were fighting for a share of the market in this country and there were even more models than there were two years earlier. That was a far cry from the Chifley plan, which visualised specific makes and models for the three major price categories, with Holdens catering for the low income bracket. That is a far cry from the ideal which should apply to all mass produced goods, namely, that as far as possible they should be made with identical specifications in as few manufacturing plants as possible and with a minimum number of options. With our proliferation of makes and models and with our 6,000 major suppliers to the industry it is little wonder that our unit production costs are higher than those almost anywhere in the world and that our productivity record is abysmal.
There is only one way of approaching this turmoil. We cannot leave the situation to the sort of plans we have had for the last 25 years and allow to continue the present Government’s attitude of ‘let the market take care of the rest’. In other words we cannot stand back and watch the blood flow, which is what we are doing now. We need a greater leadership role from governments. Local producers must be forced into greater standardisation. If possible local manufacturers must be persuaded to merge, ideally arriving as soon as possible at fewer, perhaps even two manufacturers and far fewer models. We should remember all the time that there is no reason why all the existing facilities wherever they are- in Victoria, South Australia or New South Wales- should not be used to the full, and they can be, by either purchasing them or by using them under contract. We must be wary of allowing new facilities to be created before the existing facilities are being used to the full, with consequent security of employment for those who already have devoted their lives to the great motor manufacturing industry.
Surely it is not too late to start this process by reviving the Labor Party’s four-cylinder engine rationalisation plan. For the sake of people’s employment, let the Liberals admit that they have made a mistake. Let us not in any way water down the 85 per cent content plan as it is. It is an essential feature of the industry. We need a motor vehicle manufacturing industry in Australia. It is essential that we assert that again and again. What we need with it are the economies of scale which would result from there being fewer makes and fewer models. Surely it is not beyond the wit of Government leadership to achieve a marrying of one of the American sixcylinder makers or both the major American sixcylinder car makers with one or even two of the Japanese four-cylinder car makers so that we can have more rationalisation and economies of scale. Until we do this Australian consumers will be hit to leg, as they have been for too long, paying so much for their motor cars.
Government leadership must not confine itself only to achieving these economies of scale under the local content plan, as I have outlined. There are many other things it has to do. For all intents and purposes we do not have Australian cars and have not had them since 1949. We should have them. We have not had proper participation of the dealers, workers and consumers in the decision-making of manufacturers. Manufacturers have made their decisions quite independently. We should recognise that we need this participation. We also need rationalisation of motor marketing and the dealership situation in this country. We can look to California, the home of free enterprise, for the sort of thing that is required.
All this has to be done in the context of two factors. Firstly, we must have a growing consumer demand for these cars. The only way of getting that growing demand is by the national government improving consumer demand immediately by reducing sales tax. A reduction to 15 per cent would mean about $600 less being spent on the purchase of a family car. It is urgent that this be done. The sale of motor cars is very much influenced by the rate of sales tax. When the Menzies Government raised the sales tax on motor cars to 40 per cent in November 1 960 new vehicle sales dropped by 43 per cent. Secondly, we must have more dialogue and communication with the work force. The work force will respond if workers are given the dignity and security about which I have spoken. At present they are involuntary members of the mushroom club- they are kept in the dark and fed on bulldust. This has been the story of the Chrysler dispute and it has been the history of the motor manufacturing industry for too long.
Mr DEPUTY SPEAKER (Mr Millar)Order! The honourable member’s time has expired.
– A number of the things that the honourable member for Adelaide (Mr Hurford) said simply do not rest well together. The most important point made in the fifteen minutes of his speech was that made by way of interjection by the honourable member for Higgins (Mr Shipton), who asked the honourable member for Adelaide which companies he would close down. Let us look at what the honourable member for Adelaide spoke about. He said that we, as a Government, were neglecting people, neglecting the employment situation. At the same time he said that we had to have a rationalisation of product lines. He identified engines with a certain number of cylinders as being open to rationalisation. He spoke about the rationalisation of marketing procedures and the rationalisation of company structures. He talked about reducing the number of companies in the industry. Looking at each of those factors, we can conclude only that the Opposition intends, with regard to the motor vehicle industry, to implement the kinds of things which the Leader of the Opposition (Mr Hayden) and other shadow Ministers have been putting forward for some time.
Each of those plans makes great sense economically and great sense in terms of market decisions, but each of them carries with it serious consequences as regards unemployment. It is all very well to talk about all those conceptsimproving productivity, improving economies of scale, the rationalisation of product lines and company structures and marketing procedures and so forth- but one cannot, in the same breath, condemn the Government for having a high protectionist policy, which is designed to enable a climate to be established in which companies will make decisions of that nature and which, as a consequence, will lead to some unemployment.
It is humbug and hypocrisy to say, as has been said by the honourable member for Adelaide today, that we have been showing a benign neglect for manufacturing industry generally. In fact we have been criticised for various measures of high protection which we have adopted deliberately in order that industry will make decisions of the kind to which the honourable member was referring, in order that they will restructure themselves and will redevelop and make themselves more internationally competitive in order both to resist imports and to find export markets. We have been adopting those proposalsand we have been roundly criticised for it- in order to protect as much as possible employment in our manufacturing sector. At the same time- and this has been illustrated by the InterScan venture, the Nomad venture and other activities with which we have been identified most actively- we have been seeking to create new industries, with new job opportunities, to harness our high education and our technology and to create satisfying jobs, not to treat workers as chattels as the honourable member said.
We cannot however, guarantee everyone a job; certainly not the same job he has always had. The Chifley White Paper on employment did not guarantee everyone the job of his choice but it did seek to guarantee a job within the market structure. We are seeking to do that; we are seeking to create the climate in which the transition can be made, with minimal dislocation to employment and to other economic and social aspects. So we are seeking to create a climate for investment of both capital and labour. In this regard there have been many debates in this Parliament about the training and retraining programs which have been adopted. One can only conclude that in respect of the motor vehicle industry, as in respect of manufacturing generally, the Opposition continues to talk the industry down, to talk the economy down. What that does to the morale of people, I really do not know. We talk about consumer demand and the stimulation of consumer demand. This Government set out to create tax cuts aimed at achieving consumer spending, a demand by consumers and the spending by consumers. As long as the Opposition talks the industry down and talks the economy down and convinces people that they should not spend, that they should put their further tax savings in the bank, of course there will not be a demand for motor vehicles or any other form of manufactured goods.
The Government rejects out of hand the terms of this motion. Consistent with the Opposition’s practice over the last two years, this motion is just part of its process of trying to create a lack of confidence when the Government is working very hard at creating confidence in the economy on the part of all concerned. The Opposition has not put forward one realistic or constructive proposal in this general debate. There have been allusions to the effect that surely it is not beyond the wit of government to do this or to do that. In fact it is not the role of government to decide exactly how the market will be rationalised, what will be produced or how it will be marketed, or which company will merge with what. It is the task of government to create the climate in which good management can prevail and in which the right decisions can be made. None of those decisions, in the difficult climate in which our manufacturing industry now finds itself, will be easy. None of them will be made without some ramifications, both social and economic.
The Leader of the Opposition, on occasions, has claimed that a total cost of $250m would be required to halve sales tax. He says that this cost could be easily managed. Another example of the Opposition’s failure to learn from its experience in government can be seen from this remark. Is this $250m to be an additional cost to the inflationary Budget deficit? If not, where would the Opposition raise this $250m? To mislead consumers into believing that sales tax is going to be cut is to damage consumers themselves. It will damage the health of the industry and the health of all those about whom the Opposition purports to be concerned. It will damage the morale and the security of employment of the people in the work force because the more the Opposition talks about the prospect of a sales tax cut, the more people will refrain from buying a car in case the price is going to be reduced. All that will be achieved is the creation of a bottleneck somewhere along the line if we do as Dr Jim Cairns did and introduce a cut in sales tax. This puts off the difficult question which the industry must face in due course.
– That is not so.
-The honourable member will have his chance to say so later.
– You know that it is not so.
– I do not know that. I know that in fact it created problems. This Government recognises the fact that the industry has experienced certain difficulties over the past 12 months and that registrations in the first quarter of the current year have been subdued. I want to stress that, nevertheless, the outlook for the motor vehicle market in 1978 is generally better than the result achieved in 1977.
– That is in spite of Labor.
– Yes, that is in spite of the Opposition and in spite of its persistent efforts to score short term political points at the long term expense of people employed in the industry. In particular there is the prospect for expansion and demand in the latter half of the year. The personal income tax reductions that have been introduced by the Government should underpin consumption spending and thereby contribute to an expansion of motor vehicle sales, if the Opposition helps the Government to create a climate in which people can have confidence in the future. Chrysler Australia Ltd has constantly expressed its confidence in its future as a result of the rationalisation measures it is adopting and which were recommended by the Opposition. But in fact it is the Opposition which is saying that the Chrysler company is in financial trouble. Improving market conditions, combined with continuing moderation in production costs should lead to better profit performance than in the past 12 months.
Before describing in greater detail some of the Government’s policies- these will be described by the honourable member for Kingston (Mr Chapman) as well- in the light of the comments made by the honourable member for Adelaide I have to say that these problems which we are now facing in the motor vehicle industry have not just begun and, more particularly, did not begin with the coming to power of the Fraser Government.
I do not want to bore the House by reciting some of the difficulties which were inflicted by the previous Labor Government, but I am bound to ask the House to recall that the inflationary spiral created by the Labor Government’s policies, combined with the credit squeeze of 1974, led to massive retrenchments and a virtual collapse of industry confidence. The House will also recall that the wage explosion generated by our predecessors destroyed, to all intents and purposes, the international competitiveness of the industry. We had great exports in this industry all around the world, now we have practically none at all. To illustrate my point, award wages for assemblers in the Australian motor vehicle industry rose by 35 per cent in the 12 months to June 1975, compared with increases in earnings for similar work in the United States of about 5 per cent for the same period. The dramatic increase in costs, aggravated by withdrawal of export incentives, led to a virtual cessation of exports of motor vehicles from Australia which by 1972 had risen to a level of 19,543 units. In addition, the rapid escalation in the level of interest rates added substantially to the purchasing costs of motor vehicles and compounded the effects of recession on vehicle sales.
As well as the serious impact of economic mismanagement on the viability of the motor vehicle manufacturing sector, particular policies were adopted that caused disruption on an almost unprecedented scale. The honourable member for Higgins asked by way of interjection: ‘What about the 25 per cent across the board tariff cut?’ That certainly had a direct consequence in the retrenchment of thousands of employees in the industry. Most members of the Opposition wince at the mention of that, but in fact it is very important to remind the House of that today when we talk of relatively fewer retrenchments than were experienced in those days.
The Labor Government showed itself incapable of coming to grips with the fundamental economic problems that were at the heart of the depression in the motor vehicle industry. It chose instead to adopt short-sighted and ineffectual measures such as temporary reductions in the rates of sales tax. These reductions did nothing more than artificially bring forward sales of motor vehicles which resulted in a consequential sales downturn later in the same year. In addition, they led directly to a fall-off in demand for other consumer goods, such as white goods.
The present Government has moved effectively to try to strengthen the motor vehicle industry and to strengthen manufacturing generally. In the first place, the economic strategy that has been held in place over the past two years has led to a fundamental improvement in business conditions generally. Those conditions would be better still if the Opposition decided at last to try to encourage a better spirit and a better approach to the difficult problems facing investors and the industry’s work force rather than to adopt its present policy. In fact, economic prospects are better now than they have been for at least five years. The fundamental distortions affecting the economy when the present Government came to office in late 1975 are gradually being worked out of the system. Some of those problems were easy to create; some were gradual. We can solve them only gradually.
The rate of inflation, as measured by changes in the consumer price index, was 8.2 per cent over the 12 months to the end of the March quarter of this year. For the first time since 1972 Australia has an annual rate of inflation below 10 per cent and one which is now broadly in line with the average of our major trading partners. Production, consumption and investment spending strengthened during the second half of last year. With inflation coming under control, it has been possible to make a start on bringing interest rates down. The outlook is for further reductions in the course of 1978. Business cost pressures overall, including the cost of finance, should continue to ease. The personal income tax reductions which have come into force, combined with a lowering of interests rates, should give stimulus to steady expansion in consumer demand.
In short, there is now every reason to expect that non-farm product will improve in calendar year 1978. In the second place, and apart from general economic measures, the Government has implemented a well understood and workable motor vehicle policy following the detailed review that was initiated late in 1 975. Even if the Opposition does not understand that policy, it is clearly understood by all manufacturers. Manufacturers are making decisions in accordance with the Government’s policy. The policy is being achieved through the 85 per cent company average local content plan. In the case of the established manufacturers the Government’s policy allows for a reduced local content requirement which provides vehicle manufacturers with flexibility to rearrange product mixes and enables them to source a higher proportion of componentry from lower cost sources overseas. Manufacturers are in fact doing what the Opposition advocates they do, and they are doing it in accordance with Government policy.
If a high level of imports or import orders occurs and this level is not achieved, significant disruption to employment and the viability of companies is likely to occur. At present quantitative restrictions operate to support this policy. By all accounts the policy was in breach in June 1977. As a result, the Government introduced import quotas for six months and, following the report of the Industries Assistance Commission in October 1977, these quotas are to continue until the end of 1979. It cannot be said that the Government has not taken measures designed to protect the Australian motor vehicle industry. It must be said that ad hoc decisions made every few months will not improve the stability of the framework within which decisions are made.
I stress that the Government’s policies for the motor vehicle industry are designed to provide a framework in which normal commercial forces can operate. It is not for the Government to guarantee every company in every industry the right to exist nor to guarantee every worker at every plant in every industry a right to exist. It is our task to adopt overall policies which enable decisions to be made so that maximum manufacturing activity may occur in Australia with maximum productivity improvement and maximum possible employment levels. This we have done in respect of the motor vehicle industry. We monitor it constantly. It will always be our desire to make sure that we maintain the highest possible level of consumer demand and employment in that sector.
– I rise to support the matter of public importance raised by the honourable member for Adelaide (Mr Hurford). I want to deal exclusively with Chrysler Australia Ltd. The decision that the company took last week to retrench some 1,100 employees under the guise of a rationalisation program is too serious, I suggest, for this House to resort to political point scoring. We have a responsibility to analyse what has happened and to look to the wide implications of this shock decision. I assure the honourable member for Kingston (Mr Chapman) who apparently has the ear of the bosses, that if he had any credibility with the workers he destroyed it last week. At the same time, we cannot ignore the way in which this company has consistently treated its work force. In 1 974, Chrysler launched a job recruitment campaign. It spent hundreds of thousands of dollars in getting people to take employment. The basis was that Chrysler’s market research team had calculated the boom was on in the big car range. Will the people engaged at that time be kept in employment? Will they be among the 300 to be retrenched this Friday?
Let us look at some Press headlines which point up the company’s track record. The Advertiser of 3 1 October 1975 carried an article headed ‘Minister reprimands Chrysler over 230 dismissals’; the News of 13 July last year had a headline ‘Top talks at Chrysler to save jobs’; the News of 6 October 1977 had a headline ‘2,300 stood down at Chrysler’. In the Advertiser of 15 October 1977 an article was headed ‘Chrysler puts off 130 staff’. The Advertiser of 19 January 1978 carried a headline ‘315 car workers dismissed: More Chrysler lay-offs tipped ‘. In the News of 15 March 1978 a headline read ‘Chrysler new plant will give job boost’; and a fortnight later in the News of 3 1 March a headline was ‘Chrysler sacks 86 more’. Last week it was reported that some 300 more were to be put off this Friday. Brett Bayly, in the Advertiser last Saturday under the headline ‘Charade on Cars’ wrote:
If any of the 1 100 Chrysler workers who will lose their jobs by the end of next year looked to Canberra for any encouragement they must have been greatly disappointed.
How true that is. The decline in employment in the industry is an inevitable consequence of this Government’s antipathy towards the industry. The facts are that the Australian car industry has got itself into such a mess over the past decade and a half that drastic surgery is now the only way to restore a healthy car industry. Only this
Government is in the position to lead the industry out of the wilderness. That is beyond question.
It is unfortunate that the malaise of the car industry is understood by too few people inside or outside the Parliament. A disturbing element in public debate over the industry is the tendency of some to blame workers for problems in the industry. To do so is to be ignorant of the history and nature of the economic problems in the industry. Many people fail to realise that the high price of Australian cars is entirely due to the large number of producers fishing for a share of a very small market. Australian car workers are actually paid less than their Japanese counterparts. Working conditions in Australian vehicle factories are worse than those of overseas car workers.
The economy of scale factor is the basic problem of the Australian industry. It can most clearly be seen in the design and production side of new motor vehicle components. A large number of engineers, draughtsmen, maintenance workers and production personnel are involved in this work. The testing of new design concepts also involves a large cost. These costs must, of course, be recovered from the sale of vehicles. Some five manufacturers in Australia produce a total of 400,000 cars a year. The costs of each company are spread over an average of only 80,000 cars. In Japan, where there are two main manufacturers producing five million cars, the costs are spread over two and a half million cars. However, the costs of designing a new car and fabricating the tools which produce body panels and components are essentially the same for any manufacturer. The large number of car builders in Australia for such a small market is the basic reason for expensive Australian cars. This factor is completely beyond the control of car workers.
Another major factor in the high cost of Australian cars is the age of Australian car plants and the fact that many of them use outdated machinery. Japanese car manufacturers, on the other hand, are far more efficient. Australian producers are hardly likely to invest in new and expensive equipment in the present economic downturn. In any case, the economy of scale factor creates a vicious circle. The huge capital cost of new equipment must be recovered from a very small number of cars sold. Also the equipment is likely to become obsolete before it is worn out which is, of course, why outmoded equipment is still in use. It can be seen that the main problems of the car industry are beyond the control of workers or unions within the industry and even the companies are restricted in what action they can take.
Only the Federal Government can provide the leadership that is necessary to solve the problems. Basically, the Government should be moving to reduce the multiplicity of production within the industry. This does not mean that the Government should wait for economic conditions to deteriorate to the extent that one or two car makers will be driven to the wall. Rather, the Government should be encouraging existing producers to rationalise their industry and to increase co-operation so that all Australian made vehicles would use common parts such as engines, transmission differentials, axles, et cetera. In this way an economy of scale situation could be approached, the cost of Australian vehicles would be reduced and jobs in the industry to some extent would be guaranteed. In addition, the consumer would benefit by having available cheaper cars, and the use of common parts- and I believe this is factual- would reduce the exorbitant cost of spare parts because motor repairers would be able to afford to carry a smaller range of spare pans in turn reducing the overhead costs which are at present passed on to consumers.
The Government’s present policy is to allow market forces to dictate the fortunes of the motor vehicle industry. What a disaster that has been in the fields of banking, insurance, and brokerage! It is an attitude which shows callous disregard, if honourable members like, to the thousands of Australian families which depend on the motor vehicle industry for their livelihood. The previous Labor Government had laid a foundation on which industry reorganisation could have taken place. The Leyland Motor Corporation of Australia Ltd was given assistance. To facilitate the growing demand for Japanese cars the two main manufacturers- Nissan and Toyota- were to be allowed to import body panels into Australia but they were required to use the fourcylinder engines produced by Chrysler at Lonsdale. In this way a reasonable economy of scale in engine production was to be achieved as only one plant would be allowed. Similarly, it was intended that other common components would be manufactured at one plant in Australia thus reducing the cost of vehicles and guaranteeing employment. The Liberal Government’s approach on taking office in 1975 regrettably has been to shy away from that concept.
The Government is not prepared to do anything about this whole situation. The result now is that we have a situation in which instead of rational production we have the fragmented production spoken of by the Government. The
Government has endorsed fragmented production. The sheer irresponsibility of uneconomic and irrational development has been institutionalised by the Government. There is of course too much fragmentation. The 1978 April issue of Rydge’s analyses the industry, The Australian Stock Exchange Journal of April 1978 analyses the industry. The Australian Financial Review of 5 May analyses Chrysler’s survival strategy. The Industries Assistance Commission has analysed the situation. They all concluded that there are ‘too many manufacturers and assemblers of cars for this country’. The Government cannot blithely go on ignoring the situation. It cannot put off the day of reckoning.
The Government ought to take action now. It has the machinery available to it through the Automotive Industry Advisory Council of which, I understand, the Minister for Industry and Commerce (Mr Lynch) is the chairman. On that Council there are representatives of the Government, the manufacturers, the components industry and the unions. It should be charged with the responsibility of determining the guidelines for the proper restructuring of the automobile industry in the interest of the Australian people. For too long, I regret to say, the automobile workers in this country have been sacrificed at the altar of corporate profitability. It is time that the Government insisted that community responsibility must take precedence over the financial aspirations of the large multinational corporations which dominate the automobile industry in this country. One aspect that will be highlighted in the next two or three years is that no longer will company directors be responsible simply to shareholders. They have a responsibility to the community as a whole. In this respect, I believe that Chrysler has a disastrous record over the last three to four years. It is up to the Government to set guidelines now to pull the vehicle industry out of the depths it is in at the moment.
-This discussion of a matter of public importance proposed by the honourable member for Adelaide (Mr Hurford) today follows on from the events of last week in this Parliament and announcements by Chrysler Australia Ltd. In his remarks the honourable member for Hawker (Mr Jacobi) suggested that my credibility with the workers at the Chrysler plant was nonexistent following my successful moving of a censure motion against the Leader of the Opposition (Mr Hayden) last Tuesday. Of course, what needs to be recognised is that that censure motion was directed against the misleading statements made by the Leader of the Opposition that Chrysler was likely to go to the wall shortly. In fact, in moving that censure motion I referred specifically to the employment situation at the Chrysler plant- the retrenchments that had occurred- and I referred to those retrenchments as an essential part of Chrysler’s rationalisation and modernisation plan. The fact is that Chrysler is engaged in the son of rationalisation that the honourable member for Hawker proposed a few moments ago in his remarks. The retrenchments which have occurred are a part of that rationalisation. They are a part of the action which Chrysler has taken to ensure its longer term viability. What the Leader of the Opposition was saying was that Chrysler is not going to be viable, and that is why a motion of censure was moved last week by me. The retrenchments announced by Chrysler the day after that censure motion was agreed to are of course a consequence of the actions which Chrysler is taking to ensure its long term viability. In a sense the retrenchments themselves negated that earlier statement of the Leader of the Opposition and therefore warranted censure of him in this Parliament.
We have heard the remarks of the honourable member for Adelaide and the honourable member for Hawker in support of this discussion on a matter of public importance. It is worth pointing out that there is some conflict in what they have said. As I have already mentioned, the honourable member for Hawker very commendably said that there needs to be rationalisation and greater efficiency within the industry. That is exactly what Chrysler is doing at the moment. Yet the honourable member for Adelaide in proposing this matter for discussion suggested that what is occurring at Chrysler is the result of the callous attitude of this Government. That is not so. It is the result of Chyrsler responding to the long term needs of this industry- a need for greater competitiveness and a need for greater productivity, as the honourable member for Hawker has suggested is necessary. Clearly there is conflict between what the two members of the Opposition have said to us this afternoon.
The honourable member for Adelaide talked about four-cylinder engine plants. He neglected to tell the House that the four-cylinder engine plant at Lonsdale is still going ahead and that Chrysler is investing significant funds.
– But not on the same scale as before.
– Despite what the honourable member interjects, the four-cylinder engine plant is going ahead irrespective of the scale. In addition, other engine plants are going ahead. So far as engine plants are concerned, employment in the production of engines will be as great if not greater than it would have been if there were only one engine plant. There may well be certain advantages in having one engine plant rather than several but the point is that the companies on their own initiative have made a decision- a commercial decision- based on market prospects to establish engine plants. What the honourable member for Adelaide wants is to have government intervention- heavy handed government intervention- with bureaucrats controlling the industry by going out to tell the manufacturers what to do, telling them they can have only one plant and denying them the right to make a commercial decision. This is the sort of heavy handed socialism that we have heard from the honourable member for Adelaide. That sort of policy is obnoxious to anyone on this side of the House because we recognise the importance of free access to markets, the importance of the market and commercial decisions being made according to market forces. It is on that basis that the fourcylinder engine plants are being established in this country.
The honourable member for Adelaide really suggested in speaking in this discussion that we should induce some sort of stability in output. That is, government policy should continually change at every change of direction in the market and at every change in direction by consumer demand. Under this proposal, whenever the market forces change, the policy would change. Output would remain the same and the situation of the industry would remain the same. The result of such a policy would be a stagnating economy without any encouragement to develop productivity. It is the same sort of thing which the Labor Party’s socialist policy endeavours to do with the society at large, that is, produce an equality of output instead of an equality of input. It is just not possible. It is not possible to do that with society at large and it is not possible to do it with the manufacturing industry. What we need and what the industry needs is stability of inputs. To achieve that objective the industry needs stable government policies- the sort of situation that has transpired since the Fraser Government has been in office. I mentioned those last week.
At three levels, the Government has provided stable policies for industry. In the sense of overall economic management, it has provided stable policies. In the sense of specific policies that are directed at manufacturing industry, such as the investment allowance, once again it has provided suitable long term policies. At the third level, with particular reference to the motor vehicle industry, it also has provided a stable policy with an 85 per cent content plan and quotas on imported vehicles to give a guaranteed 80 per cent market share to local manufacturers. The honourable member for Adelaide wants the Government to run after every hare that emerges in the market situation and to try to forestall changes in our economic structure and changes in industry. Those changes are necessary if industry is to remain competitive. Of course, if that were to happen we would then see the sort of instability that was clearly evident during the regime of the last Whitlam Labor Government with policies changing continuously and overnight. Industry did not know where it was. It did not have a clue what sort of policy was to be announced next by the Whitlam Labor Government. What are needed and what have been provided by the Fraser Government are stable long term policies upon which industry and the people involved in business can make long term decisions. Knowledge that the Government’s policies will be long term policies is essential. It means that industry does not have to take account of overnight changes in government policies. What it has to take account of is the market situation and the labour cost situation. All those commercial inputs are the factors which industry has to take account of in making its decisions.
That is the very situation which Chrysler Australia Limited faced in making its announcement last week. It was faced with the situation that, very largely as a result of the wage explosion which occurred and, indeed, which was encouraged by the Whitlam Labor Government, manufacturing industry has to become less labor intensive if it is to have a viable future in Australia. If Australian manufacturers are to be able to compete against imported products, it is essential that they become more efficient and more productive. Of course, the way to do that is to overcome the tremendous cost increases which have occurred as a result of the wage increases granted during the term of office of the Whitlam Labor Government. The Fraser Government’s wages policy has stabilised those costs in recent times by stabilising wage increases. But the industry still has to take account of past history, including the fact that in the three years of Labor Government rule the relationship between wages and productivity got well out of kilter.
The decision by Chrysler reflects that fact. It reflects that, as a result of that period, for its future viability the company has to become less labour intensive and has to become more efficient and more productive. That it is doing so is reflected in the point that during this financial year its productivity has increased from 1 60 units a day to 166 units a day. There has not been a downturn in production at Chrysler, as the Opposition and the Press would have us believe. The Press beat up this story last week and tried to confuse the two issues, namely, Chrysler’s efforts to become more efficient and the employment situation at Chrysler. Production has not taken a downturn at Chrysler Australia Limited; it has increased, notwithstanding the fact that retrenchments have occurred. As I have said, the retrenchments are part of Chrysler’s rationalisation program- a program which is directed towards its long-term viability.
The other thing that reflects Chrysler’s long term viability is its recent sales performance, particularly with the Sigma car which it has introduced into the market. On the basis of the increased sales of that vehicle in recent monthsparticularly, the one-third increase in April compared with March- Chrysler is extremely confident about its future viability. More recently it has released to the market the Scorpion and the Sigma station wagon, which will have a further impact and will further improve its market position and therefore the viability of the company. Certainly Chrysler has no doubts about its future viability. In fact, the Deputy Premier of South Australia, Mr Des Corcoran, also has no doubts about its future viability. It is only the attempt of the Opposition to talk down that company, to talk down the motor industry in general and in fact to talk down the economy which has led to the suggestion that there is a long term problem with that company. The actions taken by the company are directed towards its long term viability and it will confirm that. The company has every confidence in its future.
-Order! The honourable member’s time has expired. The time allowed for this discussion has now concluded.
-I wish to make a personal explanation.
-Does the honourable member claim to have been misrepresented?
– I do. The honourable member for Kingston (Mr Chapman) claimed that there was conflict between the honourable member for Hawker (Mr Jacobi) and me because he believed that rationalisation of the industry is necessary and apparently I do not. That is ridiculous. As the Minister for Productivity (Mr MacPhee) knows, the main message of my speech and the honourable member for Hawker’s speech was that we believe that government leadership is vital to bring about the necessary changes to achieve a viable motor manufacturing industry and security in employment. There is no conflict between us. We do not want a government standing back and watching the blood flow, which is what the Fraser Government is doing.
– I move:
The proposal is for the construction of facilities to house the testing, research, administration and support activities of the National Acoustics Laboratory and the Ultrasonics Institute of the Department of Health. It is proposed that the laboratory complex be built on vacant Commonwealth land in Chatswood, New South Wales, and that it replace facilities at present located in unsatisfactory warehouse accommodation at Circular Quay West, Sydney, New South Wales. The acoustic performance of the buildings will influence the scope and quality of testing and research activities performed. The site is well suited for these purposes and the design will take advantage of the local topography to shield and isolate the laboratories from noise and vibration. The building will be designed to harmonise with the natural bushland surroundings and an appropriately landscaped car park will be provided. The estimated cost of the proposal at April 1978 prices is $12m. I table plans of the proposed work.
-The Opposition supports this reference to the Parliamentary Standing Committee on Public Works. I think it needs to be said time and time again that the Committee works in a splendid bipartisan way and goes in great detail into the propositions put before it. We are, of course, very pleased that such a project is now in the offing because such public works are essential at the present time in order to maintain employment. In fact, we would like to see more of these projects undertaken. We look forward to the Public Works Committee playing its usual role in regard to detail. At the same time we look forward to this piece of public enterprise being effected in the long run.
Question resolved in the affirmative.
Consideration resumed from 5 May.
Clauses 1 and 2- by leave- taken together, and agreed to.
-I shall divide my comments into three parts. Insofar as each of the schemes that are to be affected by this legislation- the pre-payment of rent out of interest rates and the taking over of loss profit companies by other companies- and the announcement today with regard to dividend stripping are concerned, I agree wholeheartedly with each and every principle involved and the action that is to be taken in regard to them. My argument centres upon restrospectivity. I will divide on that issue. I have two objections that I regard as important. Both come within the platform and policy of my Party- the Liberal Party of Australia. I take it that they would apply with equal force to the National Country Party which usually takes these matters very seriously. Clause 3, which proposes a new section 6BA, relates to what we commonly call the Curran case. I say of this scheme as I said of the others that I do not like it. I would never have been able to participate in it, nor would I have permitted my family to do so. I have also mentioned in the House that to my knowledge I have no connection with any person who is involved with this scheme.
The real problem in this clause is the incredible power given to the Commissioner of Taxation. We believe that it is for the Parliament of this country to govern. If that can be done using guidelines, the Parliament itself should determine them. It should not be left to the widest discretion of the Commissioner of Taxation. I have tremendous respect for the Taxation Office, garnered over the years. Therefore I must necessarily speak with great restraint. Most of us by now know that unless there are extraordinary circumstances a company can be the subject of a Curran case only if there is an increase in the capitalisation of the value of assets or there arc exempt incomes. When bonus shares are given to the equivalent of the capitalisation or the exempt income, the bonus shares can be sold leaving the other shares with no value and, therefore, capable of attracting a tax deduction. I have also made it clear that in this case there are very special circumstances. I referred to a case earlier in a personal explanation. Such cases must be treated on the basis that the rate of income or the grouping in the income structure payable by the beneficiaries also applies. Therefore only half the amount is allowable and the other half is a benefit to the Commissioner of Taxation or to Australian revenue.
The part I do not like in this clause relates to bonus shares and those shares I choose to call the mother shares, that is, shares that were originally in the company before the bonus was issued. The clause states in part:
Very wide powers are given to the Commissioner of Taxation. In respect of the mother shares and the bonus shares he can allot the amounts paid or to be payable in such proportions as he considers appropriate in the circumstances. It is my suggestion now that far from he alone being given the power the words should be ‘in such proportions as are appropriate in the circumstances’. I have been advised that if that is done there will be an ability to carry out a reconciliation but, more importantly there can be an appeal to a court as to whether the circumstances are appropriate. That is the conclusion to which I have come. I am supported by many of the great accounting authorities in Sydney and other parts of New South Wales.
Some other very damaging effects could also occur in the normal course of a business which is not associated with this type of scheme. To show how hurriedly this legislation was prepared I have given a hypothetical case to the Treasurer (Mr Howard) relating to the purchase in the marketplace of 1000 shares at $3.50, with the knowledge that there would be a bonus issue of 1000 new shares at a nominal value of 50c. In this case the gentleman would have paid $3,500 for the shares. The notional value of the new shares would be $500. The value of the shares when sold would also have to be taken into consideration in the sale. That happened to be $1.75. Therefore the value of the bonus shares would be $1,750. A most complex formula has been arrived at to decide the amount of taxable income payable which I do not believe relates to the circumstances. The formula is a over b plus c multiplied by b. The symbol a is the value of the original shares, that is $3,500, and b is the value of the thousand shares with a nominal value of 50c, which is $500. That amount is multiplied by 1,000 times the amount of $1.75 at which the shares were sold. The only profit made on selling all the shares was $200. Under this system, the taxable income would be $944. If he paid tax at a rate of 50 per cent, the gentleman’s taxable income would have been higher than the actual profit he made.
I mention these facts because I do not believe that this is the proper place for us to handle such matters. We have not had enough time to consider the legislation properly. The Senate must take this clause into consideration. After listening to the outline of the case in this House it must be prepared to obtain even stronger advice and to act in the way in which we believe the Senate is capable of acting. I would not under any circumstances call for a division on a measure such as this but I believe that it requires much careful attention. It should be left to the Senate to pass the kind of amendments which would be acceptable to the Government. I have adumbrated my amendment. Therefore, I move:
-The Opposition does not support this amendment. I do not profess to have understood the mathematics of the right honourable member for Lowe (Sir William McMahon) but it seems to me that the simple amendment he has moved to omit the words ‘the Commissioner considers appropriate’ and to substitute the words ‘are appropriate’ is not an appropriate amendment for this House to adopt. In this area the Commissioner has need of some flexibility. To try to put into a tremendously complex piece of legislation something which would spell out every conceivable situation would seem to us to be a legislative absurdity. Some flexibility must remain with the Commissioner of Taxation in this sort of legislation. One trusts the Commissioner enought to think that he will not be unfair.
In this particular area where we are dealing with the Curran case, an area where there has been massive rip-off of the public revenue in the past, we think that if anything the Commissioner should bear down fairly hard rather than to be too lenient. We support the general concept in the Bill which contains the words ‘if the Commissioner considers appropriate ‘; that is, to give the Commissioner the right to decide as he thinks appropriate on the basis of equity and not to try to spell out every possible situation as would in fact be necessary if we were to put just ‘are appropriate’ instead. How would we decide what is appropriate unless we had some sort of legislative guideline to follow? It seems that some other amendment would have to follow from what the right honourable member for Lowe is proposing if it were to make any sense. We oppose the amendment.
– The honourable member for Gellibrand (Mr Willis) has put up an argument which is the basis of everything that I want to do. He now says that he hopes that the Taxation Commissioner will act rather hard and press down very hard. This is what we want to eliminate as far as we can- that it should depend on the opinion of any one person whether legislation is to be applied hard, soft or straight down the middle or whether a decision is to be objective and real. The whole of my argument centres around so many of these things that are happening today. We are getting away from the profound concepts of the law as we have known them in the past and as they have been taught to us because they have turned out to be right. Again, as happened on Friday, we get the Opposition expressing views that would enable people to violate the law, that would put people in a position where they could never be confident of what would happen and would be terrified if a Labor Government came to office again. I think it is a pity because the young fellow is trying his best to be good. I did not mean to laugh at him but I can understand his situation. I confirm my convictions that the Liberal Party and the National Country Party from time immemorial have been against too great a power being held by anyone. We believe that power can always be misused and mistakes can be made. This is the place to act. I recommend therefore that the proposed amendment be accepted.
– I want to make only one or two remarks on this matter. If tax evasion is to be contained in any way it is necessary that the Commissioner of” Taxation have some discretionary powers. The problems that have arisen and have brought about the difficulties of the Government and the former Government with regard to Curran schemes have been because the Commissioner’s discretions were removed almost totally by court decisions. The right honourable member for Lowe (Sir William McMahon) would be as aware as anyone else of the almost total impossibility of drafting legislation in such a form that interpretation of that legislation or changes in the usage of that legislation will not render inoperative the intent of the Parliament in establishing that legislation. I am also concerned with the manner in which attempts are being made to ensure the profitable continuation of the tax evasion industry. It is to me a serious question at which this Parliament has to look. I think the Parliament ought to take such steps as are necessary to make it the taking of a serious risk to enter into tax evasion schemes whether they be within the letter of the law or not. The Government ought to be seen to be consistent. At a time when it has rejected a proposition on the motion for the second reading of the Bill relating to the dates from which these schemes would apply, the Minister for Social Security (Senator Guilfoyle) in another place is announcing that she will be studying the incomes of pensioners for the last 12 months to see what impositions can be made on their incomes of $49 a week in order, I presume, to recoup to the Government some of the $500m-odd that it could have lost and some of the money that it will have lost from tax evasion schemes which will date only from the time that the Government finds them so big that they become embarrassing, not from the start of the financial year.
– I believe that the proposed amendment arises from a sincere concern by the right honourable member for Lowe (Sir William McMahon) which I think is shared by a large number of people on this side of the chamber regarding the very difficult issue of the wide discretionary powers of the Commissioner of Taxation. At the outset I say that I do not regard a concern that the discretionary powers of the Commissioner should not be too wide as evincing in any sense some kind of maudlin sympathy for tax evasion. I think that the cause of putting as many limits as are practicable on the discretionary powers contained in tax legislation and the concern to keep those discretionary powers at a minimum are legitimate and natural for people who espouse a Liberal Party philosophy. I can understand why the matter has been raised.
I inform the Committee that this is a matter that has been the subject of a number of discussions between members of the taxation subcommittee of the Government parties Treasury Committee and me. I am concerned to try to find an appropriate balance between the need- when people are resorting to complicated devices and schemes- to give the Commissioner of Taxation sufficient power to exercise in order to provide for all the combinations and permutations that can arise in legislation of this character and at the same time to provide some kind of restraint on the exercise of those discretionary powers. I think the Committee will be aware that the exercise of those discretionary powers is always subject to an appeal to the independent board of review constituted under the Income Tax Assessment Act and ultimately to the courts.
I am afraid that on this occasion, for a number of reasons the Government, however much it shares the concern of the right honourable member for Lowe, cannot accept the amendment which he moved. The first and most important of course is that we do not believe that if that amendment were adopted the resulting provision would work. It would substitute a subjective test leaving unanswered the question of who is to make the judgment as to what is the appropriate way of spreading the actual costs of the original shares. As a formal matter it is necessary to say that in the first place it is the Commissioner who is to make the necessary judgment. Should the Commissioner spread the actual cost of the original shares in a way that the taxpayer does not accept to be appropriate, the taxpayer has the right to have the matter reviewed by an independent taxation board of review. I illustrate that in a straightforward case. Where a one for one bonus issue is made in respect of shares that cost $5, each of the original and bonus shares will be treated as having cost $2.50 but there cannot be hard and fast rules for other more complicated cases. It must be remembered that private company bonus issues are principally a feature of the Curran or other tax avoidance schemes.
Whilst I did not share some of the other remarks of the honourable member for Gellibrand (Mr Willis) I thought he made a legitimate point when he said that here we are dealing with a method of operation and a vehicle which is fairly commonly employed for tax evasion. There is the danger that any attempt to lay down fixed rules for all cases not only fall to the objection that we cannot think of all cases when legislation is being prepared; but also it is no admission for me to say- or anybody with my responsibilities from time to time- that it is never possible for the legislature to determine in advance what will be all the loopholes in taxation legislation. For those reasons the Government is unable to accept the comments that have been made by the right honourable member for Lowe.
Perhaps, I could take the opportunity when dealing with this clause to say something about a matter which, very understandably, has been the subject of representations to me since the legislation was introduced. It concerns the suggestion that, in some of the assessments that have been made by the Commissioner for Taxation in respect of what might be Curran scheme arrangements in the 1976-77 tax year, there is some question of double taxation or liability for a double amount of tax having arisen. This has been, very understandably, the subject of representations to me by a number of honourable members, including the right honourable member for Lowe and the honourable member for North Sydney (Mr Graham). These representations have concerned, firstly, the method of assessment used by the Commissioner with respect to taxpayers who have utilised Curran schemes in the 1976-77 financial year and, secondly, the combined so-called doubling up effect on Curran type transactions entered into in the 1977-78 year and to which amendments in this
Bill apply. Having conferred with the Commissioner for Taxation on the subject, I inform the Committee that taxpayers who, on the established facts of their particular cases, are able to bring themselves clearly within the ambit of the Curran decision- that is, establish themselves as share traders- will be given the benefit of the decision in their assessments based on the 1 976-77 income year. However, the Commissioner has pointed out that in many of the 1976-77 returns lodged in which a Curran loss was claimed the supporting evidence was not conclusive that the taxpayer concerned was entitled to that loss as a genuine share trader. In some of these cases where the relevant facts had not been uncovered in full a basis of assessment was adopted by the Commissioner which ascribed part of the cost of the original shares to the deriving of the exempt dividends satisfied by the issue of the bonus shares. The Commissioner informs me that this was on his part essentially a holding basis of assessment and that he would not be seeking to maintain it once the material facts relating to the particular transactions had been established.
The Commissioner of Taxation has further informed me that in any defence of particular assessments he will not seek to reduce the allowable costs below their commercial level. In the implementation of this holding basis of assessment some unintended and inappropriate results have appeared. The Commissioner has told me that in these cases he has directed his officers to commence inquiries at once and not to wait for the taxpayer concerned to object to the assessment. As soon as the inquiries are completed the assessment will be amended and reconstituted to reflect information revealed by the inquiry or supplied by the taxpayer. In other cases the normal assessment objection review process will be adhered to. The Commissioner has assured mc that he will not be seeking to collect tax that might, as it turns out, have been based on an inappropriate assessment. Recovery action will be deferred until an amended assessment has issued and the taxpayer has been informed of the tax correctly payable.
With respect to the so-called double penalty effect on Curran transactions to which the amending legislation applies in the 1977-78 year, I have been informed by the Commissioner that there is no possibility of this occurring. I can assure the Committee that it is not the intention of the Government that this should occur or its belief in the circumstances that I have now explained to the Committee after discussion with the Commissioner for Taxation that this will in fact occur. The Commissioner will have no need of recourse, nor will he apply the holding basis of assessment. He will simply apply the provisions embodied in this Bill. I might say to the Committee that this is a matter that quite properly has been brought to the attention of the Government and of the Commissioner. Those honourable members who have raised this matter with me have done so understandably and I can only assure the Committee that there is no intention on the part of the Government or the Commissioner that there be an exposure to double liability for tax in circumstances where that is manifestly not appropriate. There is no covert intention on the part of the Government that that should be the case. I believe that the explanation of the matter which has now been supplied to me by the Commissioner and which I have conveyed to the Committee should put that matter at rest.
-(4.30)-It is rather distressing, I am sure, for the Committee to learn of the number of people who will be reducing their tax over the last couple of financial years through the use of the Curran scheme as a result of the Government’s failure over the last two years- and, indeed, we may even say of the Whitlam Government in 1975- to close that loophole. I make no bones about it: I hoped for a long time that we might back date the provisions embodied in this clause, but that issue may be a better subject for debate when we come to clause 2 of the Bill. I had hoped that we might be able to back date the provisions to 1 December 1 974. However, that is not to be. I have risen to my feet on this occasion to talk to the first amendment moved by the right honourable member for Lowe (Sir William McMahon) and to make it clear that concern about the discretionary powers of the Commissioner for Taxation is not the sole prerogative of members on the government side. I have spent a number of years as a tax practitioner and I can assure the Committee and the nation that we on this side of the chamber will use the Commissioner’s discretion as little as possible because people are entitled to know what is the law.
As has already been said by the honourable member for Gellibrand (Mr Willis) who led for the Opposition, there is need for flexibility in this more complicated world. There is no doubt that these days the schemes are ever more ingenious. Therefore, they are requiring some discretion. However, I would like to draw to the attention of the Committee some debate that is going on outside this Parliament relating to the subject of who should be given the discretion. The claim is made- I must say that I have not seen a lot of evidence of the claim- that perhaps the discretion is being applied in a different manner from State to State where the Commissioner for Taxation has delegated his discretion to deputy Commissioners. I raise this question in the hope that anybody who is following this debate outside the Parliament may get in touch with me or with other members of this Parliament and provide more specific examples of where discretions are being applied in a different way from State to State. This raises the whole subject to which I have alluded already, namely, should we think again as to who should be given the discretion? Is it correct that the Commissioner alone eventually should have that responsibility? Or would we not achieve more uniformity perhaps if the discretion were put in the hands of a committee of three or four, or perhaps a committee of deputy commissioners along with the Commissioner? Maybe we will learn from the Treasurer (Mr Howard) on this occasion or on another occasion of the sort of methods the Commissioner uses in order to seek to achieve greater uniformity.
In summary, this discretion is necessary in the more complicated world. However, we should put it into the law as seldom as possible because people have a right to certainty. But then we raise the other question: Is it correct that the Commissioner alone should have the discretion, because I believe that, in the way it is being applied now, he has of necessity in so many cases to delegate that discretion. It goes to deputy commissioners and it is being applied in a different way.
But this brings me to the right honourable member’s amendment. I believe that if it were successful there would be even less certainty than would result from the way in which the Government has worded the provision. A discretion would then lie with every assessor who applied himself to the particular problem and, because of the subjective nature of deciding what is appropriate, there would then be no certainty present at all. I believe that perhaps the Treasurer himself made that point during his remarks. So I trust that the amendment will not be successful, rather that, as a Committee, we will on all occasions seek to minimise the use of discretion and, where it is used, to ensure that there is uniformity of application and also that we will consider in more detail to whom the discretion should be given.
Sir WILLIAM McMAHON (Lowe)-I ask the indulgence of the Committee to get clarity on one point that I believe is supremely important.
– Order! The right honourable gentleman has already spoken on two occasions.
– Yes, I know. I was asking for the indulgence of the Committee.
– Is it the wish of the Committee that the right honourable member be heard? There being no objection, the right honourable gentleman may proceed.
– I have been thinking very carefully about what the Treasurer (Mr Howard) has stated and must concede that, to the three very important matters I have raised, there has been an answer of a kind that appears to me to be satisfactory although, when a document which is so complicated is read by the Treasurer it is difficult immediately to understand all of its implications- no matter how often one might have considered the three matters involved. Does the Taxation Board of Review, in cases such as the present one, have the right of review; and has the court then the right, if it finds that the Board of Review has acted on wrong grounds, itself to take action? What grounds, under the various parts of sub-clause (3), can one possibly employ to ensure that the matter is taken before a court? In other words, is the authority of the Commissioner absolute, or can an appeal be made successively from one. body to another until both finality and greater justice are achieved?
– I appreciate the comment of the right honourable member for Lowe (Sir William McMahon). The explanation which I gave on the so-called double taxation issue was complicated. I can only plead that the issue itself is complicated and seek forgiveness if my explanation was difficult to follow. If I understand correctly the right honourable gentleman’s question, he is inquiring as to the capacity of boards of review and courts to oversee the exercise of discretion by the Commissioner of Taxation in these matters.
My understanding is that the board, or the courts, will review exercises of discretion by the Commissioner and, in fact, where there is evidence that he has acted on wrong grounds, or capriciously, will substitute other judgments therefor. I cannot, in the short notice given me, be more explicit, but I do not believe that the discretion vested in the Commissioner, untrammelled though it may appear to be on the surface, in fact remains so for all time, objections raised with boards of review or the courts notwithstanding. I can only repeat that it is an extraordinarily difficult area, in which a balance must be struck between the need to provide the Commissioner, because of the type of situation with which he is dealing, with a certain level of discretion and also to provide procedures which involve sufficient checks and balances.
Perhaps I could make one other comment. On the question of the exercise of discretion, a number of people, including honourable members, have over the last two or three weeks raised with me the possibility that a number of public information bulletins could be issued by the Commissioner of Taxation as to the basis upon which the discretions authorised in the Bill might be exercised. Those who urge that course of action have in mind, I believe, the experience with the 1964 amendments. After a period had elapsed subsequent to the amendments coming into force, a large number of such bulletins were issued. I must say that that request raises the dilemma to which I referred earlier- the need to strike a balance between what is required to ensure that all possible cases are covered and, equally, the necessity that the Commissioner’s discretion not be too untrammelled. I assure the Committee that the question of finding an appropriate balance, and additional methods by which it may be struck, will be in investigated further. For instance, I have discussed with the Commissioner of Taxation the possibility of representative groups such as professional accounting bodies being asked to delineate, in a reasonably detailed way, common situations that would be likely to cause concern as a result of uncertainty. The Commissioner would in those circumstances be happy to offer all possible clarification on the way in which, in the course of administration, the relative discretionary powers might be expected to be exercised. If that were done, a fairly wide dissemination of such clarification in the professional journals and so on could be expected.
I do not regard that as being in any sense an exhaustive or conclusive answer to those who have raised this matter. It is an important problem. I do not have a ready-made solution which achieves a desirable balance between the two competing propositions, but one of the matters that will engage my attention closely in coming weeks and months, so far as the operation of the taxation legislation is concerned, is that of exploring further with the Commissioner of Taxation ways in which, in appropriate casesespecially those concerning normal commercial transactions- information as to the basis on which discretion might be exercised can be provided. This would have to be consistent at all times with the need for the Commissioner, for the Committee and indeed for practitioners, to recognise that we are still dealing with an area of the law wherein it is the difficult job of the Commissioner to anticipate every conceivable loophole that might be created, and to recognise that in many cases clarification is sought not in respect of normal commercial transactions but rather those whose only motive is the avoidance of the incidence of tax.
– I move:
My objection now is fundamental, and on this amendment I can assure the House that I will seek a division, if that is practicable.
Sub-clause (2) states:
Section 6BA of the Income Tax Assessment Act 1936 applies in every case where the bonus shares referred to in that section were or are allotted after 1 6 August 1 977.
In my amendment I have recommended that that date be changed to 7 April 1978, that is, the date on which the announcement was in fact made in this chamber. I have moved my amendment on very profound grounds. The first is the rule of law as I have understood it ever since I have been in the Liberal Party of Australia. That rule has never been violated previously. The rule of which I am speaking is that a man cannot be punished or penalised in any way for an act which at the time it was done was in fact lawful. I think that is a very good rule. I have not found anyone who has been able to argue in a substantial way against it. I know that the meaning of the rule has been challenged by a member who has applied an interpretation that he felt would be given to it by Quintin Hogg, that is, Viscount Hailsham himself. One of my colleagues will deal with this matter later. I think he will show how the performance by the individual concerned was a poor performance and how biased we can become when we set out minds in a particular way.
We have been talking about the presumption of retrospectivity. I know that one can quote cases on this subject from all over the world. I believe that one can quote some very very good ones as well as some that I regard as unfortunate. I will not quote again what was said by Lord Ashbourne or anyone else like that. However, I will quote what was said by one of the greatest judicial minds we have ever had in Australia. His thinking as regards to both the rule of common law and presumptions can be stated in these words:
The general rule of the common law is that a statute changing the law ought not, unless the intention appears with reasonable certainty, to be understood as applying to facts or events that have already occurred . . .
In other words, the basic principle expressed there is not only that laws should not be made retrospective but also that there should be a presumption that unless one has absolutely overriding evidence and implications that retrospectivity was obviously intended the benefit of the doubt and the advantage should be given to the individual himself.
I remind members of my own party- I do so with all the strength at my disposal- of something that Sir Robert Menzies, our founder, said when I first became a member of the party. He said, in effect, that it was the responsibility of a member to protect the rights of the individual, no matter how many influences there might be in the opposite direction and regardless of whether they came from the government or from a powerful clique or group, and that if the member thought that it was right that he should support the individual in his fight against might he had every obligation to act as a liberal. I will follow that practice as long as I live.
I would now like to deal with the rules of my party. In this regard I am speaking with some distress. I think that there has been too much misrepresentation of them. When speaking earlier I referred to the platform and policy of my party. I said that the platform and policy were morally binding on every Liberal if he wanted to remain a Liberal and that if he did not want to abide by the platform and policy he ought to ask himself the moral question of whether it is right for him to stay. I then read out the part of the platform and policy which states that the achievement of certain objectives requires a tax system in which the rights of the taxpayer are safeguarded by minimising discretionary powers and ensuring that taxation adjustment does not have retrospective effect.
The Treasurer (Mr Howard) said in reply that he believed that the words in the preamble that the system must be easy to understand, simple and inexpensive to administer and fair in appearance and practice were dominant. What he did do, which I regard as absolutely wrong, was leave out, either carelessly or by intent, the critically important words in the platform and policy which state that the achievement of those objectivesthis is set out in the preamble- requires a tax system in which the rights of the taxpayer are safeguarded in the way that I have mentioned. I believe that the failure to mention those words, together with the others I have mentioned, puts a totally false interpretation on the platform and policy of my party. The Treasurer incorporated the document but he did not mention what was in it. He went on then glibly to quote only the preamble but he did not mention the relationship between the preamble and the part I have quoted from the platform and policy. But that is not all. Some of the great democracies of the world prohibit retroactivity or retrospectivity. In particular, Article 9 of the Constitution of the United States of America forbids it.
– That is right.
-Thank you. I am glad to hear that I am right for once, at least in the minds of some honourable members. I cannot believe that anyone with any reasonable degree of honesty can say there were grounds on which it could be thought that there was a necessary and conclusive implication in what had been said before, that is, that the operation of the Bill would be retroactive to a particular debate. Above everything else, I think I can stress now that many of the things that have occurred have created an entirely different impression. I set them out in my contribution to the second reading debate and I do not want to repeat what I said.
I also want to refer to some other glib things that have been said. The Treasurer challenged me on the use of the words ‘the public interest’. If he had listened to what I had said he would have known that after the most mature thought I stated that if one introduces a glib phrase like ‘the public interest’ and one does not give a definition for it any individual can come along and put a totally different interpretation on it. Unless we know in specific terms what public interest is involved and how we are to protect it there is no way of knowing what that phrase means. If ever I have seen an example of an opening up of Pandora’s box and the creating of difficulties of a kind that I am sure were never envisaged when the Bill was prepared I have seen it in the statements made by the honourable member for Gellibrand (Mr Willis) and the honourable member for Chifley (Mr Armitage). They have clearly indicated that as far as they were concerned the legislation could be backdated as far as was wanted. Once a precedent is created there can be no reservations about how far back the legislation is to be backdated. As the honourable member for Chifley very clearly implied one can go back a very long time.
The honourable member for Chifley introduced other elements which I believe were frightening. For example, he advocated the averaging of farm incomes. He said that it was Labor Party policy that this matter should come up for review. I wonder whether members of the Labor Party know how difficult it is for farmers to make ends meet today. I am in a very strong position to speak about the difficulties of primary producers. I have tremendous sympathy for the National Country Party and the way in which its supporters are being treated. Because of that the Labor Party will lose every seat it contests at the next election. I indicated that I will cross the floor on this issue. I have never gone through such anguished moments as I went through when I not only heard that this would be retrospective but also realised that it is against all the principles of my party and of common law.
– Order! The right honourable member’s time has expired
-The Opposition opposes the amendment moved by the right honourable member for Lowe (Sir William McMahon). The effect of the amendment would be that the closure of the Curran scheme as a tax avoidance measure would not be backdated to 16 or 17 August but would operate as from 8 April. We strongly oppose any amendment which has that effect. As those who listened to the second reading debate would know, every speaker on this side of the House supported the concept of retrospectivity in taxation matters and we did so for very sound reasons. We did it because we believe strongly that unless some retrospectivity or backdating applies to the closure of tax avoidance schemes the advantage will always be with the tax avoiders, the people who are generally reasonably wealthy and certainly at the upper end of the wealth scale in the community and who are avoiding tax at an enormous rate at present. We think that these people should not be given an advantage because it destroys the equity of the taxation system.
The tax avoidance industry devises tax avoidance schemes every year and if we do not have retrospectivity it means that we are giving them a substantial break and are quite possibly letting that scheme operate for two income years. As I said in the second reading debate, in the normal course of events the Taxation Office does not receive the taxation returns for an income year until January or February the following calendar year and this means that about three-quarters of the next income year has passed before the Taxation Office knows what tax avoidance schemes are being used that year by the tax avoiders. If we do not backdate -
– Would you put it back three or four years?
-Obviously if the honourable member had listened to the second reading debate he would have known that that was a stupid statement. If we do not backdate we are giving the tax avoiders the chance to use that scheme not only in the first year but also in the second year. The Opposition believes strongly that the Taxation Office ought to use its best endeavours to find out by less formal means- I am sure it already does that but perhaps it should step up its activities in that regard- what taxation avoidance schemes are being used within an income year so that it can knock them off in the first year and not have to wait until the second year before it learns that they are being used in the taxation returns being placed before it by taxpayers.
The Opposition strongly supports the concept of backdating. If we do not have it we do not have equity in the taxation system and that surely is a tremendously important principle but one which the right honourable member for Lowe entirely neglected in his comments. He had no regard for that principle. Does he think that it is right and proper that the ordinary man and woman, who just cannot afford to utilise tax avoidance schemes because they cannot afford to pay the legal and accounting fees involved and because it would not be worth their while anyway in view of the lower levels of taxation that they pay, should have to pay a higher amount of tax because people on much higher levels of income and wealth are avoiding their tax? That is what it amounts to. If the higher income earners avoid their tax payments it means that someone else has to pick up their tax burden. If the right honourable member for Lowe thinks that it is fine that the ordinary wage and salary earner should pay more tax because the higher income earners can avoid paying their appropriate share of tax, that is something with which he has to live.
– That is a totally untrue statement and you have no right to make it.
– And that is a totally objectionable attitude which the right honourable member has and we do not support him one iota. The fact is that we not only support the concept of retrospectivity but we also indicated during the second reading debate a principle that ought to be applied. I was intending to move amendments during the Committee stage to give force to that principle but I am unable to do so because the effect of moving those amendments would be to increase the incidence of taxation and it is against Standing Order 253 for an honourable member other than the Minister to do that. We therefore moved an amendment during the second reading debate but it was rubbished by the Treasurer (Mr Howard) in his reply to that debate. I think that he did himself less than justice in doing so because every speaker on this side of the House gave support in this matter which is more than he can say for all the members on his own side. Before he scorns the Opposition’s efforts in debate he should bear in mind what has happened in the debate and the support that he has received from us as against the support he has received from some of his own colleagues. He should bear in mind that if he wants to be so unfair he might find in future that we are less principled than we are being in this case.
During the second reading debate we proposed the principle that in every case where the Taxation Office found a tax avoidance measure being utilised by the wealthy people in the community an announcement should be made forthwith that legislation against that scheme would be introduced and backdated to the beginning of the financial year. Everyone then would know where he stood. Every time a scheme was discovered it would be backdated to the beginning of that financial year. If we do not do that we are letting the tax avoiders get away with it for that income year. Let us consider the cases we have in front of us now.
Apart from the Curran scheme, in respect of all the schemes that are being utilised- the charity scheme and the pre-paid rent and interest schemes which we have not got before us but which have been very heavily utilised this financial year- the people who are using them are going to get away with it this financial year. Surely that is an absurdity. If we really want to pursue the principle of equity in the taxation system legislation against all these schemes should be taken back to 30 June. That is what the Government itself thought last year. It is exactly the principle which it then tried to introduce in respect of the amendments to section 36a of the Act and we applaud it for that action. The Opposition thinks that the Government then did the right thing. What we are angry about now is that the Government is not doing it in this case. In a sense the Treasurer and the Government have caved in to the objections of people such as the right honourable member for Lowe by not pursuing the principle which it sought to adopt last year.
– It was a different principle.
– It was not a different principle; it was exactly the same. It involved a backdating to 30 June or 1 July, the beginning of the financial year. What happened was that after objections had been raised within the Government parties the Government decided to capitulate and instead of the legislation operating from the date of the announcement, about 26 April- I forget the date exactly- a substantial time was allowed to elapse before it came into operation. It has been found in other countries that retrospectivity is important. On the very day that the Treasurer announced tax avoidance measures in this country the Chancellor of the Exchequer in Britain, Mr Healey, made an announcement about the need to introduce measures to legislate against tax avoidance schemes operating in the United Kingdom and he backdated that legislation two years. He said that this was absolutely necessary if his Government was to beat the tax avoiders and have equity in its taxation system. We are saying to the Government that we think it is tremendously important that it pursues retrospectivity, providing it is retrospectivity within the one financial year. As I mentioned in the second reading debate, one could put up a respectable argument that it is not really retrospective if it is within that financial year anyway because the tax liability does not occur until the end of that financial year. The Government should have the power to change the tax laws in that financial year so long as it does not invalidate ordinary commercial transactions which may have been made partly because of a taxation benefit. But with the straight out artificial tax avoidance schemes, surely it is not unfair to say: ‘Well, we are going to make this particular legislation closing this scheme operative from the beginning of this financial year and not let it operate on the income which you will earn up to 30 June this financial year’.
We strongly oppose the amendments put forward by the right honourable member for Lowe. We think he is thoroughly wrong in his attitude. We think he is concerned for the wealthly and privileged as against the ordinary people of this country. The theory that we have to pay the tax bills which are avoided by the tax dodgers is one which we cannot possibly share. We support the original clause with the objection that we would prefer to have the scheme operating from 30 June or 1 July rather than from 16 August or 17 August.
– I support the amendment moved by the right honourable member for Lowe (Sir William McMahon). I will vote for it even if it involves crossing the floor. But before dealing with the fundamental principle which I believe is involved in a proper consideration of the amendment, I refer to three preliminary matters, simply to clear the air. The first is to point out that one month ago I did not know of the existence of Curran schemes. I had never had any personal contact with anybody involved with Curran schemes. Since finding out what a Curran scheme is, I want to point out from the outset that in my remarks today I will not attempt to defend the indefensible because I believe the Curran schemes are in fact indefensible.
The second thing I point out is that I do not support people who engage in what has been described in debates in this chamber as ‘tax rip-offs’. Without going into the legal details of the distinction between avoidance and evasion, I want to be heard to say that people who engage in tax rip-offs do not have my support, nor do people who deplete the Commonwealth revenues. I am on public record as having campaigned for lower taxation. 1 merely remind honourable members that as recently as the last Budget, I headed a small but significant backbench group which pressed for lower taxation. I congratulated the Government for the introduction of standard rate taxation and the reduction of the marginal tax rate at that time.
The third thing I want to say is that I have already, on one occasion, publicly voted on the question of retrospectivity. With the Treasurer (Mr Howard) and one or two other members of this chamber, I was a delegate to the 1974 Federal Council of the Liberal Party of Australia, at which the Party platform which had been worked on for several months was presented to that Council and was adopted by that Council. In the months preceding the Federal Council Meeting, there was input from every State and, I believe, from practically every branch in Australia and every section of the platform was gone through in considerable detail. On the question of taxation, as I recall it, it was passed unanimously without a single dissentient vote. Included in the taxation section of the Liberal Party’s platform was the passage referred to by the right honourable member for Lowe:
The rights of the taxpayer are safeguarded by:
ensuring that taxation adjustments do not have retrospective effect.
My problem is simply this: Having voted for and strongly supported that proposition in 1974, I, bearing in mind the respect in which I hold my colleagues who take a contrary view, find it possible to vote publicly now for legislation which creates, as I will demonstrate, a precedent in Australia, because this is the first time in this country that legislation of this nature and the known implications of it passing are to be dealt with by the Parliament.
-The honourable member for Macarthur assists me by saying ‘Nonsense! ‘ With respect, I want to say to him that I do not see his remarks as nonsense and I trust that he will not see mine as nonsense when I say that we are within four years of passing unanimously a party platform on this question repudiating a fundamental principle in it. With the consent of the Opposition I seek leave to have incorporated -
– It has already been incorporated.
-I know that it has already been incorporated. I thank the Treasurer for telling me that but I have asked the honourable member for Gellibrand (Mr Willis) if it could be incorporated in my speech and he has been kind enough to permit that to be done.
The document read as follows-
While recognising the key function of the tax system in providing revenue to finance government expenditure, the Liberal Party also recognises its significant roles in relation to economic management, minimising social hardship, and encouraging or discouraging specific areas of activity. The system must be easy to understand, simple and inexpensive to administer, fair in appearance and in practice, and subject to continuing review.
The achievement of these objectives requires a tax system in which-
. Taxation is equitable as between taxpayers in a similar position.
The tax burden upon individuals has regard for their ability to pay.
Individual incentive is encouraged particularly by ensuring that
the burden of personal income tax is not excessive;
adjustment is made from time to time for inflationary effects.
Direct and indirect taxation is based on principles which will ensure maximum benefits to taxpayers with family responsibilities and those in low-income groups.
The rights of the taxpayer are safeguarded by
minimising discretionary powers and by asserting the fundamental right to be heard;
assuring taxpayers a fair hearing before judicial and administrative bodies;
maintaining confidentiality of information;
ensuring that taxation adjustments do not have retrospective effect.
Taxation adjustments, undertaken for general economic purposes, take full account of the effects on resource allocation and income distribution.
There is continuity in application as it affects industry and commerce to maintain stability and permit effective forward planning.
Commonwealth taxation policies are developed in harmony with State and local government tax systems.
Taxation avoidance schemes will be eliminated.
Tax evasion is a crime and will not be tolerated.
– Having already expressed my public view on the matter in 1 974, 1 repeat that I am not going to turn my back on that decision in 1978. I believe that the amendment ought to be agreed to and even though the numbers which support it in this Committee might be small, I believe the principle it represents is fundamental. I believe that the legislation, in its present form, is wrong for three reasons. I evidence them as follows: Firstly, it breaches a fundamental principle of law; secondly, it breaches a fundamental principle of our Party platform and thirdly- and I do not need to develop this argument- in my view it sets the most frightening and horrific precedent to be used and abused by any future Socialist government in this country. If honourable members do not believe me, I ask them to recall what they heard a few moments ago from the honourable member for Gellibrand and what they heard on Friday in this chamber from a former taxation officer, the honourable member for Chifley (Mr Armitage). Then let them tell me that it is not a fact that the Labor Party welcomes this action by the Government today. We are handing to the Labor Party on a silver platter a precedent which I believe has the most horrific implications.
The question of taxation has bedevilled humanity since time immemorial. One finds in Luke, Chapter 2, verse 1, that:
One day there went out a decree from Caesar Augustus, that all the world should be taxed.
Nothing seems to have changed very much since those days. In the 17th century, Monsieur Colbert, who was the Comptroller-General of France under Louis XIV, said this:
The art of taxation consists in so plucking the goose as to obtain the largest amount of feathers with the least possible amount of hissing.
I suggest that that situation has continued through to today. In 1789, Benjamin Franklin said:
But in this world nothing can be said to be certain, except death and taxes.
Significantly I believe, Chief Justice John Marshall, in the famous McCulloch v. Maryland case back in 1 8 19 said:
The power to tax involves the power to destroy.
– Order! I say to the honourable member for Denison that I have not been able to be persuaded to the point of recognising that clause 3 has anything to do with geese.
- Mr Chairman, I shall not pursue that point. But I can assure you that it does involve a matter of considerable importance and principle. As evidence of the view that I take about this clause if it goes through unamended, cite to you the proposition expounded to me in the Rubaiyat of Omar Khayyam. I believe we should take note of what we are doing in this Parliament this day. We should recall that:
The Moving Finger writes: and, having writ, Moves on: nor all thy Piety nor Wit shall lure it back to cancel half a line, Nor all thy Tears wash out a Word of it.
We are putting on to the statutes of this nation today, a provision which I contend offends a fundamental principle of law and offends the philosophical and fundamental principles of the Liberal Party. I simply deal with the question of the law. I do not suppose that anybody in this chamber would argue with the principles of law as set out in Halsbury, 36th volume, third edition, where it simply says:
The presumption against retrospection applies in general to legislation of a penal character . . .
It goes on to set out a number of precedents and says:
Fixed legislation similarly is subject in general to the presumption against retrospection.
If we were in the United States of America, this situation would not be happening because section 9 of the United States Constitution states bluntly:
No Bill of Attainder or ex post facto Law shall be passed.
If we want to look at common law, we find at page 387 of Craies on Statute Law, these wordsand they are significant:
Every law that takes away or impairs rights vested agreeably to existing laws is retrospective, and is generally unjust and may be oppressive . . .
If we are not happy with that, we can refer to Maxwell on Statute. Again the proposition is clear, without any equivocation that:
Upon the presumption that the legislature does not intend what is unjust rests the leaning against giving certain statutes retrospective operation.
I need only quote on that matter from the decision of His Honour Mr Justice Dixon in the
Maxwell v. Murphy case. But I know that the right honourable member for Lowe has already quoted from that case, so I shall not delay the Committee any longer in that regard. What I am saying is that whilst the Parliament has a right to do this, I suggest that it demeans itself when it passes legislation which, in essence, makes unlawful and subject to financial penalty something which was done, not only in accordance with the law but with the blessing of a High Court of Australia decision as long as four years ago. Are we not getting to the situation posed by Lord Hailsham, in his book, The Dilemma of Democracy? In that book he says:
Since the sixteenth century and except in time of war, never has a Government possessed more power than it has today:
The moment democracy ceases to pay attention to the limitations and restraints which all governments must observe, it ceases to be a form of free government and becomes an organ of tyranny . . .
This Liberal Government will never become an organ of tyranny but the precedent we are setting provides the machinery for a future socialist government to act in a manner, according to the honourable member for Gellibrand, of passing legislation retrospectively, if necessary it says, up to several years retrospectivity. There is no limitation and once this principle is broken, it is broken. Once the door is opened and once a person gets his foot in the door, who is to say that a Socialist government in future times would act with any responsibility at all?
– Look what they did in the Khemlani case.
– Exactly. The right honourable member for Lowe makes the precise point: The standards of socialist governments are clear. We are not only breaching two fundamental principles, one of law which will therefore weaken the rule of law in parliamentary democracy, and one of our party platform, but also giving on a silver platter to a socialist government a precedent upon which it can wreck this country.
– Order! The honourable member’s time has expired.
– I think that the biblical quotation used by the honourable member for Denison (Mr Hodgman) would have been better couched in these terms: Consider the lilies of the field, how they grow; they toil not, neither do they spin; And yet I say unto you, That even Solomon in all his glory was not arrayed like one of these. It seems to me that the honourable member for Denison and the right honourable member for Lowe (Sir William
McMahon) are saying that those who do the least should have the most. That is what this argument is about. I respect the argument that the two honourable gentlemen have placed before the House. Do not let it be thought for a moment that members of the Labor Party have not worried about this general question of retrospectivity as such. Generally speaking, the people whom we represent will be the first victims of the kinds of retrospective laws about which honourable gentlemen opposite talk. To hear the honourable member for Denison say that the legislation will be more dangerous in the hands of a socialist government than his sort of government is, of course, nonsense. We probably all act in much the same way about some sorts of matters under the pressure of critical moments. Is what we are talking about retrospectivity as such? The honourable member for Denison quoted from formidable opinions from the past. He used terms which almost intimidate me, accustomed as I am to be so suffering. He referred to ex post facto law and so on. Is this what we are talking about? I do not think it is. I think that we are talking about taxation adjustments, about the right for people to pay their proper share of the cost of running a nation.
I think the honourable member for Denison, in his opening remarks, said that the Curran scheme was indefensible. So, what was the Curran scheme? It was a piece of jiggery pokery or financial rigging to escape dudes which were due on 1 July of the current financial year. We say that the fundamental principle is not the question of retrospective law in that sense. It is a matter of what the law said on 1 July 1977. The law said at that time that if a person received so much money in that year he would pay so much taxation. We can call the scheme what we likeevasion, dodging, avoidance or tax bludging, to use a favourite term of those opposite. People should be forced to pay that which was due to be paid when they started out on this racket. I have no sympathy for these people whatsoever.
When the Treasurer (Mr Howard) first introduced this legislation I thought of it in much the same way as the honourable member for Denison and the right honourable member for Lowe have now spoken about it. I have since listened to the debate and have examined the situation. I do not claim to have any qualifications in accountancy. I have never had the kind of income whereby I was able to avoid being caught out if I tried to do any taxation rigging and so on. I represent the kinds of people who in the past perhaps were able to get away with some minor piccadillo, such as claiming an extra bottle of ointment from the chemist when they had not actually bought it. We are dealing with a special group of people. I do not think from all I have heard from either side of the Committee or read in letters that have been written to me that this matter has anything to do with retrospectivity in the sense in which we would speak of it. We could talk about a law, say, to outlaw a certain form of union activity as from 14 August last year or what could now be called a certain form of criminal activity. I guess that members on both sides of the Committee on most of these issues would stand as one and not tolerate them.
What are we about? We are about artificial tax avoidance schemes. I was interested to hear the eloquence of the right honourable member for Lowe. I think he was in the most eloquent form I have heard since I came here. He had five or six years practice before I was elected. He was a bit hurt I think that some people may have appeared to have considered him irrelevant because there was some laughter while he was speaking. I do not think any of us thought him irrelevant. He said something about being glad to know that somebody thought he was right.
– No, I was congratulating the National Country Party members.
– The honourable member is nearly always right but never correct. The facts are that he is running a phoney war. What he is on about will not damage anybody as far as I can see. What have people lost? I have seen no evidence from anywhere of a concrete instance of a person suffering any financial hardship in this matter other than that their expectation of an undue gain will be diminished or removed altogether if the Treasurer has his way. We are all on his side about that.
My view, the Party’s view and, I think, the general community’s view, is that people should pay according to their income. I think it is quite false to talk about the division of income and capital and try to divide matters up that way during the year. I have said to this chamber in the past and I repeat: If a person won three-quarters of a million dollars in Tattslotto or some other aberration to which this society is addicted, that money is considered to be a gain. It is just as valuable to him as if he had worked on the wharves and earned three-quarters of a million dollars in some mysterious manner. It could be earned by a person who was a member of Parliament or a tram driver. Of course, if a person drove a tram and received three-quarters of a million dollars, the Treasurer would be after him and would tell him that he has to pay $350,000 in income tax. If the salary of the honourable member for Wills were raised to that sum because of his overwhelming worth as a representative, the Commissioner of Taxation would be after him too. But, of course, that action is not taken when large sums are involved. If a person can make the same amount by way of shares, even if they are not part of his general trading activity, he gets away without paying the same amount of income tax. If a person sells a 1,000 acre property which he has bought on the edge of Melbourne or Sydney some years back or has inherited from his grandparents and makes $Sm, he will keep all that. I do not support that concept at all. If this is the beginning of a thorough re-examination of taxation and of what people should pay, I will support the proposal all the way. If I can be given facts concerning individual cases where people by a means which I would consider legal, decent and honourable back in August are now being inflicted in such a way that they will lose heavily and prejudice their financial future I would say that we should bring in a private members’ Bill to ameliorate their lot. I have not heard yet of one single case.
The right honourable member for Lowe has waxed eloquent on this subject. He talked about democracy. The honourable gentleman has not all that good a record. He came into this Parliament in 1 949. He supported one of the most malevolent pieces of legislation that ever went through this place. I refer to the proposal seeking to achieve the dissolution of the Communist Party. This attempt at the suppression of all the civil liberties was an issue which the people of Australia including, if I remember correctly, the people in his own electorate rejected. It is a pity that people did not carry that rejection further to the ballot box. In these matters it is no good talking about democracy, justice and law if in the past a person’s own record is suspect. I think the time is ripe for the Parliament and the whole body of politics to start to look at what we are about in respect of taxation.
I do not think taxation ought to be used for any purpose other than to raise revenue to run a country. I do not know the budgetary figures for this year; they seem to have slipped out of the Treasurer’s grasp. From memory, the 1975 Budget details were something like this: expenditure was $22,000m and $ 19,000m was income. Some $ 17,000m was for actual running expenses. The difference between the $ 17,000m and the $22,000m was for capital works. The actual running expenses of the country were $17,000m and the revenue $19,000m. As an ordinary citizen, when the taxation authorities say to me ‘well, Bryant’- I hope referring to myself by name is not a breach of the Standing Orders; a lot of people in Australia want to hear it- ‘you this year gained, got or even earned $24,000 and your share of the expenses of running this country is $9,432 ‘ I will pay willingly if we bring some rationale into this system. We hear the nonsense of taxes on cheques and receipts and all the other rubbish for which Charles I had his head chopped off.
If this is a step to stop the people who have the run of money and all the rest of it from making a racket of the laws, we are for this legislation. If it will inflict a serious hardship upon people we should ameliorate it in some way subsequently. In regard to the question of retrospectivity, I think that honourable members opposite and those people outside this place who are using the word ‘retrospective’ are not using it in the sense in which it is applicable in ordinary parlance. The fact of life is that people ought to front up and pay the tax that is due according to the law at the beginning of the financial year. They should have realised that at the commencement of the financial year and they should not have used any kind of trickery to try to avoid paying tax.
– I also am having some difficulty regarding the question of retrospectivity as involved in clause 3. Basically I wholeheartedly support the Government’s decision to crack down on tax bludgers. People such as myself who have been wage and salary earners all their lives have been subsidising these people. Until now my salary always has been rather modest and I have never been in the fortunate position of having a tax problem. Generally I have found that those who have grizzled most about their tax burden were people on very high incomes who generally ended up paying very little tax. I have no sympathy for those people whose devious avoidance schemes will be axed by this legislation. They have not been paying their way and by not paying their way they have helped to destroy the equity of the whole of the taxation system. The equity of the tax system is the basis of my overall support for this legislation. There are other related issues. Proper economic and fiscal management are jeopardised by this kind of avoidance and many demands on the expenditure side of the Budget from people in real need of assistance cannot be met because some people who are in rather more fortunate circumstances are not paying their way. The supreme irony of the situation is that these people who seek to avoid tax and who complain of the high level of taxation interfere, by their own efforts, with the capacity of the Government to reduce taxes for everyone.
This Government has a responsibility to create and maintain a fair taxation system. Certainly the Liberal Party’s platform on taxation states that the rights of the taxpayers should be safeguarded by ensuring that taxation adjustments do not have a retrospective effect. I support that policy. I also agree that this part of our platform can be accommodated only if all the other aspects of the Liberal Party’s taxation principles are being adhered to. It is pan of a total taxation platform which also includes a number of other clauses which are jeopardised by massive and unreasonably contrived and artificial tax avoidance schemes. The other parts of the platform state that the objectives of the Liberal Party in relation to taxation require a system in which taxation is equitable as between taxpayers in a similar position, a system in which the tax burden upon individuals has regard for their ability to pay and a system in which the burden of personal income tax is not excessive. Quite obviously these tax objectives cannot be achieved if there is massive tax avoidance. For that reason I support the platform of our party, which also states:
Taxation avoidance schemes will be eliminated.
I support that statement; we all support it. But I see all of this as requiring prompt and decisive action by government as soon as avoidance schemes are discovered. If that is done there will be no competing claims in future between the principles of retrospectivity and overall tax equity, which is how some spokesmen have defended the application of retrospectivity. Immediate action will obviate the need for retrospectivity. I gather that the justification for the application of retrospectivity in this legislation is related to the amount of revenue lost because of a particular scheme due to the lack of official action since 1974, but it has not been justified as a matter of principle and this is why I have reservations. If the question of retrospectivity involves a principle it is difficult to know where this legislature stands. The Opposition, by its amendment to the motion that the Bill be read a second time, has decided that the question of tax retrospectivity is a question of principle, but its supporters say that it is a good principle and they will apply it universally and consistently in avoidance cases. I do not accept that; but at least one knows where they stand on this question.
The Government, by virtue of the Liberal Party’s platform and in view of recent statements by its spokesmen, also has decided that the question of tax retrospectivity is a question of principle. However, we say that it is a bad principle, although it can be used occasionally. Therefore, it is not an absolute principle. I have trouble in accepting that. If we do not accept retrospectivity as an absolute principle, should we not at least regard it as a legislative convention, that is, where there are at least accepted instances in which it should apply on the basis of some kind of consistent historic precedent, such as an increase in company tax in the Budget which is automatically retrospective to the beginning of the financial year. The present situation is really one of an ad hoc nature that is being argued not on principle or convention but on the grounds of loss of revenue, blatancy or the fact that there would be only a minimal loss to those who have subscribed to the Curran scheme since last August. Frankly, I do not care how much they have lost. I am concerned with basic legislative principles, the rule of law and the importance of the legislature having the confidence of the people by acting according to principles and conventions, not according to shifting or ad hoc criteria. Do not get me wrong. I would like to see every tax avoider jumped on and made to pay his way, but it has to be done by sound legislative principles. This can be achieved if governments act decisively and promptly.
That brings me to my other reservation, which is related to the question of good government in matters of this sort. It has been said that those who have take out Curran scheme measures since August of last year should not have done so because they were on notice that official action would be taken against these sorts of schemes. The fact that they have been on notice since 1 974 and that no legislative action has been taken until April 1978 is, in my opinion, a reflection on government more than on Curran scheme participants. This is simply not good government. I exclude the present Treasurer (Mr Howard) from this criticism because I believe he has acted promptly and decisively, and I congratulate him for so doing. But for four years the problem of the Curran scheme has been recognised and action against it has been promised but none has been taken. That is bad government. I have heard no reasons for the delays. In my opinion it is poor policy to create a dangerous taxation precedent to help to overcome this kind of inexcusable delay.
Let me make my position in this matter quite clear. I have reservations about the implementation of this legislation, but I applaud the Treasurer and the Government for closing these loopholes which, in my opinion, are devious, conniving and immoral even though they have been legal. By this step the Government is moving in the direction of maximising the equity of the entire taxation system. In particular, I welcome the statement by the Treasurer on 1 8 April of this year when he said:
The general approach of the Government will be that as sufficient evidence emerges of a particular scheme of avoidance the Government will make an announcement detailing the scheme and foreshadowing its intention to legislate against it. Such legislation when introduced will operate from the date of the announcement to introduce the legislation.
That is how it should be done. I applaud the Treasurer for his commitment to move in this manner to close further loopholes as they are discovered. It will save us from the difficulties which have surrounded this legislation. If we are to restore fairness and equity to our taxation system so that everybody in like circumstances has the same obligations, with those obligations being related to their ability to pay, these and other avoidance schemes must be stamped out. I support the broad thrust of this legislation, subject to the reservations that I have expressed relating to retrospectivity.
– It is just as we suspected. Behind the solid front of supposed firmness to deal with these tax avoiders we see the ranks of the Government beginning to crack. I might say that I am quite surprised to see the honourable member for Denison (Mr Hodgman) and the honourable member for Perth (Mr McLean) join the right honourable member for Lowe (Sir William McMahon) in expressing their so-called worries about the introduction of retrospective legislation to outlaw the Curran scheme. The right honourable member for Lowe used the argument that no one should be penalised for taking action which was legal at the time he took it. He said that this was a fundamental rule of law. I remind him that there are two principles at stake in regard to this matter, not one. I think the article I am about to refer to sums up the fundamental contradiction between the two basic sets of principles involved. Let me draw the attention of the House to what it says. The first argument is along the lines of that put by the right honourable member for Lowe. The article reads:
But when Governments start to make laws retrospective, people cease to know exactly where they stand. Might not a precedent set in the area of tax law be used in future to justify a retrospective change that affected not just pocket-books, but basic civil rights?
Of course, this article goes on to put the argument against that equally as succinctly. It states:
The best reply is that the question is not one of principle versus expediency, but of two principles in conflict. The first principle is the rule of law, the second is that the tax burden should be shared equitably.
The fundamental issue at stake is whether everyone in the country from shareholders to wage earners and small businessmen should take an equal share of tax responsibility according to their incomes. Of course, these people have not been taking their equal share of responsibility. If we want to do anything about it and if we want to be effective in this matter the way to defeat the tax avoiders is to implement full retrospectivity, not only in the case of the Curran scheme back to 16 August but full retrospectivity for all schemes back to 1 July, the beginning of the financial year. That is the way in which we can defeat these tax cheats. That is the way that we can defeat the schemes as they appear in future. We should implement the principles involved in the amendment moved by the honourable member for Bonython, Dr Blewett; that is, that the measures to outlaw future operations should be backdated to the beginning of the financial year in which the intention to legislate is announced.
We in the Opposition are fed up with this whingeing sort of humbug to which we have been subjected in this spate of sanctimonious correspondence we have received urging us all to oppose retrospectivity in the case of the Curran scheme. They talk about the rule of law and they talk about legality. But in the final analysis, it is not a question of legality, is it? It is a question of politics; it is a question of social acceptance; and it is a question of power. That is what it is all about. That is what the Treasurer (Mr Howard) is exercising; he is exercising power. At least he is showing that he is capable, if he is pushed far enough, to turn on the silvertail supporters of his own Government. That is exactly what he is doing. So long as he is doing it we will give our qualified support.
– You will never be a silvertail.
– No. There is no question about that. I do not aspire to be a silvertail
– A silvertail is a person who does not pay tax.
– It has just been pointed out to me that a silvertail is a person who has been exploiting those schemes and earning perhaps $ 1 00,000 or more a year. I agree with the honourable member for Wakefield (Mr Giles) that I will never be in that category. It has been said- I referred to this during the debate on the second reading- that amount of money involved is probably about $1 billion a year. I am not going to go over what was said the other day. I ask honourable members to think of the possibilities inherent in an income redistribution from these fat cats who have been robbing the Exchequer. We could redistribute that income. If we collected this income we could give every age pensioner in the country another $15 a week or a 30 per cent increase. What a tremendous boost that would be to the economy because they would be able to go out and spend it. They could buy consumer goods, manufactured goods. I also point out that at the last Federal election -
– Order! The honourable member for Cunningham is straying a little too far from the amendment under discussion at the moment.
– I wish to point out, as has been said in this House and as we said in that campaign, that one of our fundamental policies was selected increases in government expenditure in the right areas. We are talking about $800m, honourable members opposite may remember, and of course the cry we heard was: ‘Where will you find the money?’ Now we know where we will find the money. We will make these laws retrospective to last year, pick up a cool billion dollars then the Treasurer will be able to stimulate the economy. I challenge honourable members opposite to refute the logic of that argument. I conclude on this note: It does the honourable member for Lowe (Sir William McMahon), the honourable member for Denison (Mr Hodgman) and the other honourable member who spoke absolutely no credit to come in here today and give comfort in this place to those tax avoiders, those high income spivs, who cheat not only the workers of Australia but also the national Exchequer.
-I support the amendment moved by the right honourable member for Lowe (Sir William McMahon). I add at the outset that I and, I am sure, all other honourable members in this House, have been inundated by letters and correspondence from solicitors, accountants and various other people who have had an opinion to put forward on the principles of retrospectivity and the measures that are now being brought before the House by the Government. I make the point that I have not read one of those letters. I have not taken account of any of the points that have been put to me by those people, many of whom, in my opinion, have an axe to grind. I made my decision on retrospectivity and on the amendment moved by the right honourable member for Lowe as a conscience decision on my own account. It has not been influenced by any other person or by any persons who have had an axe to grind. I hold the view, as I am quite sure do all honourable members in this House, that people who avoid their obligations to the tax system should be cracked down on hard. I see no reason why the Government has not done that in the past.
It has been pointed out by the honourable member for Perth (Mr McLean) that in fact these measures- that are commonly known as the Curran schemes- were first brought to the light of day through the High Court in 1974. I think it is justifiable to ask the question: Why have successive governments not done something about them since 1974? The only conclusion I can draw from that is that action has not been taken by successive governments, both Labor and Liberal, or by the Taxation Office for one of two reasons- either inefficiency within the administration of government or the Taxation Office, or the fact that the amount of money involved was not great enough to invoke the principle of plugging that particular loophole. If either of those is the case, I find it inexcusable. I find it equally inexcusable that we are now being asked to backdate a taxation measure and, in so doing, scrap a fundamental principle of law and a fundamental principle of government in order to cover up the inefficiencies that have been obvious within the system. I find that inexcusable.
As my colleagues the right honourable member for Lowe and the honourable member for Denison (Mr Hodgman) have pointed out, it is quite clear and unequivocal in the Liberal Party platform that taxation measures will not be made retrospective. I think all those who have a Liberal streak in their veins should uphold that principle. Certainly the State Executive of the Liberal Party in Tasmania was unanimous in supporting the principle embodied in that particular platform- that this measure should not be made retrospective. At my electorate conference, which was held two weeks ago, it was passed unanimously that the Government should in fact not make this or any other taxation measure retrospective. As was pointed out by the right honourable member for Lowe, this measure embodies a fundamental principle of law. That principle of law is that people should have confidence under the law and actions that are legal at the time they are made should not subsequently be made illegal by retrospective legislation passed by this or any other government. If the principle is to be embodied in Federal legislation, that an action so taken at the time of being legal subsequently is made illegal, I believe Australia is headed for the state of a banana republic.
All honourable members on this side of the House should think about the precedent that is being set and what could flow in future years from that precedent. We have heard from the honourable member for Gellibrand (Mr Willis), the honourable member for Chifley (Mr Armitage) and other honourable members opposite about what they will do with this precedent once it becomes established. They have given forewarning that they intend to make future taxation legislation retrospective. They have said that they will plug loopholes.
– They will go back for years.
– As the honourable member for Denison said, they will go back for years. Once the principle of backdating taxation legislation is established, what is to stop any future government using that precedent and backdating personal income tax legislation, sales tax legislation or any other taxation measure? There is no saying that that will not happen. It could happen if we establish the precedent. We are being asked now to set that precedent for future governments for years to come.
I appeal to all my colleagues on this side of the Committee to think about that precedent and not vote now for the amount of money that is involved in this measure. In private discussions with my colleague the honourable member for Macarthur (Mr Baume) he pointed out that two conflicting principles are involved. One is the principle of equity in the taxation system. The other is the principle of backdating taxation measures and equity under the law. I acknowledge the conflicting principles outlined by the honourable member for Macarthur. My conclusion is that it should be equitable that those people who have an obligation to pay tax should be made to do so. But that principle is being clouded in this instance by the amount of money involved. As I said earlier, the principle was exactly the same last year, the year before and the year before that. But action was not taken to plug this loophole. What the Government is asking us to do now is to sacrifice the other principle of equity under the law because of the amount of money involved.
I can conclude only that the Government is asking me and other honourable members to put a value in money terms on principles. I cannot do that. If a principle is a principle it remains a principle regardless of the amount of money involved. As I said, the principle of equity under the taxation law is the same this year as it was last year and the year before. The avoidance measures under the Curran scheme were known in 1974. Why then have successive governments not taken action to plug that loophole if the principle of equity was affected in those years? The principle of backdating a taxation measure and the principle of equity under the law were the same in those years as they are now. I cannot put a value in money terms on those principles and I fail to understand how any other person who supports a Liberal philosophy can do so.
-I wish to speak briefly to two of the major issues brought up in respect of the amendment moved by the right honourable member for Lowe (Sir William McMahon), that is the principle of retrospectivity and the point made by the honourable member for Perth (Mr McLean) about acting with expediency in this case. I take the principle of retrospectivity first. It has often been said that one man’s principle is another man’s prejudice. We have here a conflict between principles, the principle of retrospectivity and the principle of equity in the distribution of the taxation burden. As always in English law there are also pragmatic considerations applying to any legal principle. In all the obiter dicta referred to by the honourable member for Denison (Mr Hodgman) the word ‘general’ was used. In English law there is a certain expectation that the law will not be retrospective but there is no clear prohibition against it. There are numerous examples of that in the past. I referred to some of these in my speech on the second reading last week. In particular, the quotation which the Treasurer (Mr Howard) also used relates to this point. He quoted Lord Greene in an important English tax case in 1942. I shall quote Lord Greene again. This is the third time in this debate that he has been quoted. He said:
The fact that the section has to some extent-
That is the law which had just been passed in Great Britain- has to some extent a retrospective effect appears to us of no importance when it is realised that the legislation is a move in a long and fiercely contested battle with individuals who well understand the rigour of the contest.
Thus in a highly relevant case a very respected judge was prepared to accept a pragmatic degree of inhibition on the basic rule of retrospectivity. That also brings us to the point raised by the honourable member for Penh; that is acting with expediency. In a sense we are involved in a vigorous battle with those who design tax avoidance schemes. We are concerned in this debate only with those schemes deliberately designed for no other purpose than tax avoidance. We need to watch very carefully that we are not legislating against other schemes. We are acting against schemes which have one single purpose; that is to avoid taxation. This is a battle conducted vigorously by taxation departments all around the world. As Lord Greene said, the people we are opposing in this legislation are well aware of the vigorous battle going on.
Unless we have some degree of retrospectivity it is very difficult to stop what is being done in the first or second year of the activity because it is difficult to discover it.
As Mr Healey pointed out in a speech I quoted last week, provided the designers of these schemes are conspiratorial and secretive enough they can get away with them for at least one or possibly two years until they are picked up by the taxation authorities. It is interesting to note that not only Australia but also Britain and most countries belonging to the Organisation for Economic Co-operation and Development have begun to rethink the principle of retrospectivity in order to deal with this major problem. It is a problem in Australia. The honourable member for Macarthur (Mr Baume) is often rude about me. But I think he made a good point the other day when he said:
There is no doubt that never before in the history of Australia have we seen such concerted attacks on the revenue as have taken place in recent times.
That is true of most Western advanced societies. It is compelling them all to reconsider what has been a fairly basic principle in most of their legal systems; that is the principle of retrospectivity. For all these reasons we on this side of the House oppose the amendment brought forward by the right honourable member for Lowe.
-The debate on this amendment has been concerned with two principles. I do not believe that it was necessary, as the honourable member for Cunningham (Mr West) did, to impugn my colleague’s motives in reaching the position he finally reached. One can make a very respectable case, as has been made by the honourable member for Bonython (Dr Blewett), without impugning anyone’s motives. I wish he had not done so. The two principles concern equity and the limiting of retrospectivity. The principle of limiting retrospectivity is not allembracing. I shall come back to it.
Principles are not immutable. If we consider that they often come into conflict we will realise that they cannot be immutable. If two principles come into conflict, needless to say one of them must give way. It is quite common to apply pragmatic considerations to principles. Numerous learned statements have been quoted in this debate to demonstrate that that is the practice in
British parliamentary and legal precedent. The principle of equity is widely understood but too little has been said about it in relation to this amendment. The principle proclaims that taxpayers shall, as nearly as possible, share the tax burden. That, of course, is not possible if some people do not pay their taxes. The principle of limiting retrospectivity is more complex. I see the principle in a slightly different way from the honourable member for Bonython. I believe that the principle is limited within itself. It does not merely have the limitation imposed by pragmatic but external considerations. I believe that governments should not take retrospective actions, whether legislative or otherwise, which impose a penalty upon a citizen who has acted in the reasonable belief that his actions were lawful and would remain so. I believe that that is the principle limiting retrospectivity. For two reasons, I contend that the Government has not offended that principle: First, save for any fees that the taxpayer may have paid his lawyer, there is no penalty. He has not other costs. He has no legal position that he has tied himself to from which he cannot escape, such as a trust. He cannot have spent the money he has saved because it relates to future savings. He suffers no penalty because of the application of retrospective legislation to the Curran provisions. We do not offend that principle which limits retrospectivity for another reason, that is, that the taxpayer was clearly on notice. The fact that he was on notice is surely relevant because of precedent, if for no other reason. Honourable members might bear in mind that practically all our major Budget proposals are enacted by legislation with retrospective effect referring to the date of the Budget. Many a policy speech promise is enacted with retrospective effect. Retrospective legislation is common. What we must not do is impose a penalty on the taxpayer.
– You are doing it here.
– We are not doing it in this case with respect. We must not impose a penalty on the taxpayer or on any other citizen in any other area of law who has acted in the belief that he was acting in accord with the law as the law would remain. A taxpayer under this scheme had no reasonable grounds for considering that the law would remain that way. In fact he was on notice that it would not. There is no penalty imposed.
– I congratulate the honourable member for Bonython (Dr Blewett) on making a sound point indeed relating to the question raised by the honourable member for Denison (Mr Hodgman) who quoted at great length various legal principles. The point made in each one of those quotations was that generally, but not universally, retrospectivity is unacceptable. The word ‘universally’ is recognisably different. All of us who are supporting retrospectivity of this piece of legislation maintain that proposition. We support the view expressed in those quotations by the honourable member for Denison because we support the view that generally one should not act retrospectively. But it seems to me that there are specific reasons why the people who wrote those words did not use the word ‘universally’ and they are reasons that are prompting me and the bulk of us on this side of the chamber to support the Treasurer (Mr Howard) in applying specifically to this case a proposition which would not be generally supported by this side of the chamber.
This leads us to deal seriously with the question: How fundamental is this principle being put to us, that one can in no circumstance retrospectively do something. We have heard from the right honourable member for Lowe (Sir William McMahon) who brings an immense amount of experience in this area. He said that a man cannot be penalised for an act he has done which was lawful at the time. I find no objection to that and I would be astounded if any honourable member on this side of the chamber would find objection to it. But I am yet to discover to what extent this legislation makes unlawful what was lawful previously. One can still proceed with one’s schemes. They are not made illegal. I am suggesting that the whole principle that has been quoted, the principle that is being maintained in all the quotations from my colleagues on this side, is related specifically to one element.
Sitting suspended from 6 to 8 p.m.
– Before the suspension of the sitting I was making the point that the principles being established very forcefully here by some members of the Liberal Party were principles that all of us are prepared to accept willingly. However, what we are claiming is that many of the allegations of breaches of these principles simply do not involve breaches. In particular I was referring to a proposition put by the right honourable member for Lowe who said that a man cannot be punished or penalised for an act he has done which was lawful at the time he acted. The point I was simply making was that this legislation makes no actions illegal; it does not affect in any way the lawful standing of those acts. It simply prevents a benefit flowing from those actions.
I would submit to the Committee that it is neither logical nor sensible to claim that the rule of law that is established for the purpose of justice and for maintaining the law extends into this area, particularly when the matters quoted by the honourable member for Denison quite clearly demonstrate that this is a general principle, not a universal principle. The point is that this Bill is a specific example of where the general principle should not apply. I underline again that nothing in this legislation has been made unlawful, and therefore the principle does not extend to this area in this case. It has been alleged that this suggests that we have a price on principle. The honourable member for Wilmot (Mr Bun ) made a point that I find difficult to follow. He said that the only reason we were pursuing this matter was that our principles had a price. The self-evident proposition, if the honourable member for Wilmot and the honourable member for Denison are prepared to listen to it, is that the laws must be equitably applied, that tax must be seen in an equitable situation.
It is only when avoidance schemes like this bring about a situation where there are inequitiesin other words when the tax avoidance schemes are so large that they make the system inequitable- that the principle of equity is breached. So it is absolute nonsense to protest that we have a price on principle. The reality is that it is only when the size of the avoidance comes so large that there is no longer equity in the tax system that the principle of equity must take precedence. It is not a question of ‘may’; it is a question of ‘must’. It is by far the major principle. It must take precedence over any suggestion that retrospectivity may well not be the best general- not universal- thing. So it is clear that, in the conflict of principle that exists here, the major principle is one of equity, and it has been breached.
The next point which I think should be dealt with is the comment by some of my colleagues, with whom I disagree, about the action of the Treasurer in making retrospective this specific section relating to Curran schemes. The allegation has been made that this creates a precedent, that the Opposition would otherwise have been sufficiently dull witted or incompetent to be able to grasp on its own accord. That is arrant nonsense. There have been many instances -I will cite one- in which the Labor Party has enacted retrospective tax legislation. I draw to the attention of the Committee the disgraceful piece of legislation that wiped out the accumulated tax free reserves of mining companies. This was done in 1974 when the tax situation was changed in relation to the tax free nature of earnings from gold mining companies and certain copper mining companies. PekoWallsend Ltd had for many years reinvested its profits in Tennant Creek in the expectation that those tax free reserves would then be available to shareholders whenever the company felt it was in the interests of the company and the nation to distribute them in profits rather than to re-invest them in what is clearly a magnificent operation for the benefit of all Australians. But the fact that the company did not distribute that money meant that when the Labor Party came to power it retrospectively destroyed the tax free nature of those reserves amounting to something like $25m.
I find it extraordinary that some of my colleagues would have a sufficiently convenient memory to forget that. It may well have been that when they were in the House at the time- I was not- they did not sufficiently strenuously object to that retrospective action. I certainly do now. I suggest to the Committee that the principle of retrospectivity has been breached in the past in instances where there was no consideration of equity. It was breached by the Labor Party in those situations. The only reason that principle is being breached at the moment is because of the much greater principle of equity.
-The question of the retrospective application to 16 August 1977 of the bonus shares amendment to the Income Tax Assessment Act has attracted more publicity in the media, amongst lawyers, accountants and in this chamber than any other aspect of the Bill before the Committee. I believe that is unfortunate because the Bill as a whole is of considerable importance as an exercise in blocking tax avoidance loopholes, and no one on either side of the House or in this Committee has disputed the actual measures that have been taken. It is understandable that the retrospectivity aspect has attracted much attention because a very important principle is involved. Let me say that I have a great deal of sympathy with the views expressed this afternoon by the right honourable member for Lowe (Sir William McMahon), the honourable member for Denison (Mr Hodgman) and the honourable member for Wilmot (Mr Burr). The views on this subject closest to mine were those expressed by the honourable member for Perth (Mr McLean).
It is quite clear that the right honourable member for Lowe, the honourable member for
Denison and the honourable member for Wilmot approached this matter as one of high principle. So do I. In fact, this is the most difficult matter on which I have had to search my conscience in determining my attitude since becoming a member of this Parliament Vh years ago. I have agonised over it for three weeks now. I know that many honourable members on both sides of the chamber- certainly on this sidehave, not because I have any truck with those who have entered into Curran schemes since 16 August 1977, or before then for that matter, but because we have here a dilemma placed upon us in choosing between breaching one of two fundamental principles.
The first is the basic principle or presumption of non-retrospectivity in legislation. The second is that our tax system must be fair and equitable. There can surely be no question that blocking the Curran loophole is fair and equitable. It should have been done as soon as the High Court delivered its judgment in the Curran case in late 1 974. That is no less than 3!£ years ago. That this was not done is quite inconceivable to me and in my view it is quite unconscionable. I do not know where the fault lies. I find it difficult to absolve the Taxation Office from a large part of the blame. I find it difficult also to accept that either the Whitlam Government or this Government is blameless. Because of what can be described as none other than bad administration on the part of both governments and their advisers, we are now put in the position of having to decide which of two basically sound principles we have to breach. The Government, for reasons that I fully understand, has opted to stick with the tax equity principle and breach the non-retrospectivity principle.
Like the honourable member for Perth, who spoke before the sitting of the Committee was suspended, I have very serious reservations about this matter. I regard the Curran case schemes as morally repugnant and I applaud all those taxpayers, lawyers, accountants and others who have refused to have a bar of them. I appreciate their strong support for the application of retrospectivity on this occasion. I must say that the views of those persons, who have acted in my opinion with more moral rectitude than those who have been a party to Curran schemes, have influenced my views on this matter considerably. Nevertheless, I believe that the principle or presumption of non-retrospectivity is of such importance that it cannot be breached simply on the ground that what is being retrospectively legislated against is morally repugnant. Morality is a subjective concept. It is difficult to gauge the morality of a nation, even though nations and their citizens must have a moral conscience if they are to survive; but no democratic nation can be run merely on the basis of the moral judgment of the government or the parliament of the day. It can be run only on the basis of those moral or other judgments being translated into decisions in the form of legislation. In other words, democratic nations can operate only on the principle of the rule of law.
By retrospective- there are several definitions of the term- I mean the definition laid down by Buckley L.J. in 1911, namely, that legislation is retrospective if it provides that at a past date the law is to be taken to have been what it was not at that date. Legal support- that is what we are really talking about now- can be found for the Government’s decision to make this part of the Bill retrospective. The Treasurer (Mr Howard) in his speech, which I thought was excellent, concluding the second reading debate last week quoted Lord Greene in a 1942 case involving the United Kingdom Inland Revenue Commissioners. The honourable member for Bonython (Dr Blewett) quoted the same case in his well-chosen remarks earlier this evening. On the basis of this case, Halsbury’s Laws of England, third edition, volume 36 has this to say at page 425:
Fiscal legislation is subject in general to the presumption against retrospection.
The honourable member for Denison quoted that sentence but omitted unfortunately to quote the next sentence, which says:
It has however been suggested that retrospection is unobjectionable in the case or provisions directed against tax evasion and the significance of the presumption in that field may therefore have diminished.
That sentence is in relation to and is based on the case quoted by Lord Greene. The legal case which has done most to persuade me, after very long and agonising deliberation, not to vote against the application of retrospectivity on this occasion is the reasoning of Adam J. in the case of Doro v. Victorian Railways Commissioners in 1960. That is quoted in B. C. Pearce’s Statutory Interpretation in Australia, published by Butterworths of Melbourne in 1 974. It is a very important passage. His Honour said:
The strength of the presumption against retrospectivity in any particular case, and accordingly the ease or difficulty with which it may be overcome, must, I would think, depend on the nature and degree of the injustice which would result from giving a statute a retrospective operation. Where a palpable injustice would result, the presumption should be given its fullest weight. In such a case it is but common sense to require the clearest indication of legislative intention that such an unjust result was intended. On the other hand, where to give retrospective operation to a statute might be considered to work some injustice to one party but is clearly required to rectify a manifest injustice to others, there would, on principle, seem little reason for giving much weight to the presumption.
I believe that His Honour’s reasoning on that occasion has much relevance to the present situation, but I must make it clear that I can avoid specifically opposing clause 3 (2), as drafted, only for extremely special reasons, and then only with the very greatest difficulty. Retrospective legislation is bad legislation. It undermines the rule of law and the confidence that individual citizens, in going about their normal daily affairs, can have in the law. I therefore place great stress on the Treasurer’s pledge in this chamber last week that the decision to breach the basic principle of non-retrospectivity in this case in no way can be taken to imply any rejection of the Government’s commitment to the principle of non-retrospectivity. Retrospectivity on this occasion must in no way be taken as a precedent. Again, I welcome what the Treasurer had to say on this point last week.
The final point that I must make takes me back to what I said before about the delay in presenting this legislation subsequent to the finding in the Curran case. The Government should never have been placed in the situation in which it now finds itself, and we should never have been placed in the situation in which we find ourselves, of being obliged to take a decision of this nature. If one thing is clear it is that the Government must take every step available to it to ensure that such a sorry situation does not arise again.
– I rise to remind the Committee of the Opposition’s arguments in supporting the Government on this occasion and opposing the amendment moved by the right honourable member for Lowe (Sir William McMahon). After a spirited, informed and quite long debate on the subject, we have come to a party view on it. We believe that the time is long overdue for a stand to be taken against the tax bludgers in this community. We believe that our amendment should create in people’s minds a precedent and a knowledge of where we stand when it comes to tax bludgingtax schemes which are clearly immoral and against the nation’s interests.
The decision we took was that as soon as those schemes come to the knowledge of the Labor Party in government the appropriate Minister will stand up in this Parliament if it is then meeting- if not, by other means such as a Press release- and make it quite clear that that particular scheme is against the nation’s interest and that at the first possible opportunity we will legislate against it, with application from the beginning of the financial year in which the statement is made. That ought to be a lesson to all who spend so much time in the tax avoidance industry developing immoral schemes and persuade them that they might as well turn their activities to positive measures which would improve the production of the country, rather than be parasites, which indeed most of them are.
We are talking here about an immoral scheme, the Curran scheme. Anybody who entered that scheme from 1 December 1974 should have known that his actions were at risk. The statement of the then Labor Treasurer, Mr Crean, the day after the High Court decision was issued made clear what was his attitude and what he expected to happen as a result of that decision. To see so many honourable members get up here and weep crocodile tears and pretend there is some measure of support for the immoral things that are done leaves me cold. I do not mind admitting that my attitude in the party Caucus was that the legislation should be backdated to 1 December 1974, that we should say so, and that we should have, in fact, done so. I also do not mind admitting that I believe in Caucus decisions and that I stick to them. I know there were difficulties in dating it back in spite of the fact that most of the immoral schemes that have been entered into by the people of this country have not yet been sanctioned in every possible way. I believe that many of them are still open and have gone against the taxpayer because they are not genuine schemes. But I believe it would have been far better for this House and for the vast majority of the people of this country if we had been able to strike a blow against the immoral entering into these schemes altogether rather than dating this legislation back to what were fairly wishy washy words in the last Budget Speech.
The Opposition is creating this precedent. It is saying that as soon as the schemes are declared wrong we can date back to 1 July of that particular financial year. We are being consistent with the Curran scheme and what we want to move and what was indicated in our amendment at the second reading stage of the Bill is that we would like 1 July 1977- the beginning of this financial year- to be the date from which all of the outlawed tax avoidance schemes should date. The right honourable member for Lowe (Sir
William McMahon) suggested in his earlier remarks that there was some open ended commitment or lack of commitment on the part of the Opposition in what it was putting forward. I want to point out to him and to the House that that is not so. I want to repeat that we agree that the outlawing legislation should be back dated from the beginning of the financial year in question. There is no question of going back to the earlier financial year. Indeed, people who have thought that what they were doing was legal and have acted accordingly should have time before the end of the financial year to correct their thinking and put their affairs in order so that they know before the end of the financial year where they stand.
I want to repeat to the Committee and to the people generally that from 1 December 1974 there should have been no one in this community who entered into this scheme who did not know he was taking a risk in doing so. I want to point out to all those people who entered into those schemes that if they were not told by their advisers, legal or accounting, that they were at risk it is high time they changed their advisers very quickly because they have immoral advisers. It is very sad for this Parliament that there are a few Government supporters- a very few- who are standing up in this place and taking the path of those few immoral advisers by supporting tax bludgers at the expense of the rest of the community.
-The House is unanimous in its condemnation of the Curran schemes. The question is whether or not the legislation should be retrospective. The Government concedes it is retrospective and despite certain arguments that have been put it is clearly so the position because a person who entered into the scheme in November last year would, if it were not for this legislation, enjoy certain financial benefits following the assessment of his returns this year. However, he will not now enjoy those benefits. But when a government brings in legislation of this type we have to be quite clear to ensure that we understand that it is a matter for political judgment. It is a matter for this Parliament to make its decision. The Parliament has the power. The question is whether or not it should use the power. Judicial precedents as such do not bear upon that point. The courts, with the assistance of learned judges, have to decide whether or not in any interpretation of a particular law, of a particular statute, a certain attitude of leaning towards retrospectivity should be taken or a rigid attitude in favour of the citizen should be adopted. That is the whole purpose of these judicial decisions. They in no way bear upon the political decision.
I remind those honourable members who have referred to the decisions of Halsbury and others that Dicey laid it down many years ago that it was fundamental that a government that had power- and he was talking about the British Government- could, if it wished, make laws which might sound quite wrong or ludicrous. It could say that all Frenchmen in London were to be arrested or that all people with blue eyes were to be arrested. He said that Parliament had the power. This Parliament has the power to make retrospective legislation. The question is whether it should do so. Judicial decisions, many of which are in conflict with each other, do not bear on that particular point.
What the Government has to determine is whether this deals with a general rule or a regrettable exception, whether or not this will create precedent for future action one way or the other, the degree of notice that the persons affected might have had, the effect on the revenue, the degree of abuse of the scheme, the effect on the community at large and the effect on public confidence, the balance between the effect on one side of some people saying the rule of law may be brought into disrepute and on the other side people saying ‘We can have no confidence in a government that will not take appropriate actions and will encourage people to welch on the revenue’. All these matters have to be considered by the Government. In this case, regrettable though it might be, the Government has come to the conclusion that it is necessary, that it is proper and that it is in the overwhelming public interest. When we go through these matters that I have just outlined- public interest, the effect on public confidence, the degree of notice that the other person has had and the degree of abuse- it is clear that these are the major elements which have moved the Government to bring in the legislation.
I believe it must be conceded that although morality is important in our community, other factors have to be considered. The public interest generally has to be considered because there will be confiding attitudes of morality on this issue. One must seek to resolve the conflicts of attitudes on immorality. I would like briefly to defend two institutions. I think it is important to refer to the High Court judgment itself because implicit in many of the remarks that honourable members have made is the suggestion that the immorality, as it is alleged, of the Curran scheme has sprung from the High Court or that the strange result that the High Court brought about implies some degree of criticism of that Court. I want to make it quite plain that when one reads the judgment it is quite clear that the High Court was faced with a legal question and on the law as it stood in the interpretation of difficult and complex legislation it produced what it considered to be the logical result even though it is a result that as a matter of policy one could disagree with.
What happened in Curran ‘s case was that the bonus shares were paid for by the company allotting the so-called dividend that was due to the person concerned as purchase price for the bonus shares. Therefore it was said that there had in fact been almost twice the purchase price so that there could be deductions that would produce the loss. Mr Justice Gibbs pointed out:
In fact no dividend, as that word is ordinarily understood, was declared by Stewart Bacon. The appellant was never entitled to receive in cash his proportion of the capitalised profits. Nevertheless, the effect of the special resolution was that capitalised profits to the extent of $191,000 were credited to the appellant and applied on his behalf in paying up the shares:
Again it was stated:
In short, it was, in my opinion, right to bring the bonus shares into trading account at par value and the reason why this leads to the result, at first surprising, that the transactions show a loss of$ 188,2 17.36, is that -
The report goes on that a certain section of the Act had the effect that the value of the bonus shares never became part of the appellant’s assessable income. So it is clear that the High Court derived logically its conclusion and Mr Justice Gibbs in the politest judicial words said that the result was surprising. The court was in fact urging in one way the government of the day to bring in appropriate amendments. Regrettably the idle and incompetent former Labor Government failed to do so. I do not excuse the present Government from some criticism but I certainly excuse the present Treasurer (Mr Howard) who has acted strongly and swiftly since he took on his portfolio.
I also want to defend the Government against the despicable suggestion that I have heard- and I refute it entirely- that the delay had anything to do with the possibility of an early election last year. This matter is primarily something that comes through the processes of the Taxation Office and I am absolutely certain that the bona fides of officers of the Taxation Office, even if they were late and there has been a delay, could not be brought into question. 1 want to refer the House to 1 December 1974 on the question of degree of notice because I think all honourable members would agree that the amount of prejudice to the community and to the revenue and the degree of loss of public confidence if these schemes are not dealt with give the Government a very strong argument on public interest.
The degree of notice is a factor that has to be considered very carefully and in my view the Government in the second reading speech ought to have been stronger in standing on the statement of Mr Crean because that was a very clear statement. I remind honourable members that it was followed up with a warning in the CCH, which is the bible for accountants and lawyers in this field. That warning has been printed there for years so the people now affected by this legislation ought not to be coming along whingeing and crying about what the Government has done. They ought to have written to the Treasurer before entering into a scheme and asked: ‘Is this scheme going to be proscribed as said by Mr Crean or will it be allowed to continue?
Some people took the view that because there had been a change of government we would forget all about it; that the practice would continue. They said: ‘The Libs are in; there is no problem. They are a cynical lot and they will not change the law to cut out all this’. That was the view which some people took and they took it at their peril. They failed to put themselves in the position of a prudent buyer of a scheme and we know from the money back guarantees that many of these persons have produced that the schemes were not entered into in good faith. I do not say necessarily that in this legislation the Government should have gone back to December 1974. There are strong reasons for avoiding dislocation of the economy and for not infringing the rights of people who have settled their property rights over the past few years. However, it would have been open for the Government to do so. I believe that there is something in the Opposition’s view that we could have gone back to 1 July last year.
I do not believe that this legislation sets a precedent. We know what the Labor Party in office would do regardless of precedent if ever it got the chance. We saw what it tried to do before. Consequently, I do not think that this legislation sets any precedent. However, even if it did, it pales to insignificance against the things the Labor Party tried to do before and would try to do again. I refer, for example, to its horrific original version of its Race Relations Act under which a person could have ended up in gaol for saying boo to a goose and also to its Inter-State Commission which contained shocking penal powers. We are well aware of what the Labor Party would do. This legislation could not possibly be seen to be setting a precedent.
There is one other aspect to which I should refer. The Government and the Taxation Commissioner should take strong steps in regard to the period before the Budget was announced last year because in the last financial year there may have been some Curran schemes and I do not believe that a person who entered into those schemes could genuinely call himself a share trader. Curran was a trader and the High Court decision was based on that, but what happened after that? Accountants sitting in their offices would have had people coming in and would have said to, say, Bill Bourke from Cronulla: ‘ We will put you in a partnership with John Jones from Wahroonga and John Smith from Wagga and we will make you a partnership for share trading’. These people had never met each other and had no idea who the others were. They would not have met each other after that. Constituted as a so-called share trading partnership they would buy and sell a few shares. It was a farce. They even made their operations retrospective. What a hide! I believe that the Government and the Taxation Commissioner ought to make sure that objection is taken to these practices. I do not believe that they are genuine share traders and there is no scope for doing other than taking a strong view of these practices in the courts. I remind the Parliament that there are other examples of the Labor Party bringing in retrospective taxation legislation for no good reason. Its abolition of the age allowance was one such measure in view of how it worked. In general, the Bill is well warranted. The Treasurer (Mr Howard) has done a good job in bringing it in quickly, as he did also with his amendments, and I support the legislation.
-One of the things that the Committee ought to take into consideration is that the amendment which the Opposition would have moved is not before the Committee because it would have advantaged the Treasury by increasing the amount of taxation levied, even if only marginally. The amendment which is before the Committee seeks to take away retrospectivity in respect of Curran schemes. The difference between the approach of the Opposition and the Government to this matter is that the Government has clearly indicated that in legislation designed to overcome tax avoidance it is prepared to prevent a continuation of a tax avoidance process only if that tax avoidance process becomes significant enough in terms of revenue lost to be of concern to the Commissioner of Taxation. Therefore, if a tax avoidance scheme is not expanded by the tax avoidance experts to the extent where it becomes noticeable, no announcement will be made by the Treasurer because action on it would not be recommended to him and the tax avoidance will be allowed to continue.
The proposition which the Opposition put in the second reading debate and which it would have moved by way of amendment to this clause in Committee if it had been able was that warning should be given to those people in the tax avoidance industry that tax avoidance schemes entered into in the judgment of the Taxation Commissioner for the purpose of not paying tax which properly should have been paid would be subject to legislation, if legislation were enacted in respect of those schemes, for the whole of the financial year in which the legislation was passed. That would not constitute retrospective legislation. It would constitute a warning to those people who are employing their talents in tax avoidance, and most likely diverting some of the best brains in Australia from productive to negative activities, that there is no safe haven. At the moment there is a guaranteed safe haven written into the legislation and it will be continued under this legislation because the legislation provides that until such time as an announcement is made people can proceed with any tax avoidance scheme they may be able to devise.
Honourable members on the Government side have made a number of remarks about what an Australian Labor Party Government would or would not do but they are quite prepared to sit by silent whilst the aged people in the community are being pursued upon the direction of a Minister last Friday, in respect of income which may be 12 months old but in respect of which inquiries have not been undertaken because the Department was short of staff.
– Who said that?
-Senator Guilfoyle, the Minister for Social Security, on Friday. It is a parallel case. The Government is pursuing pensioners for a few dollars and will send them retrospective taxation bills because these people may not have understood what was required of them or may have made mistakes in their taxation returns.
– I rise to order. Is it in order for the honourable member for Corio not only to carry on with tedious repetition from another occasion but also to produce a political argument on a matter of some substance that this side of the chamber wishes to debate objectively?
– The honourable member for Corio has strayed slightly from the clause but not sufficiently to warrant my intervention.
-I thank you for your ruling, Mr Chairman. If the honourable member had been able to understand he would have seen that I was making a parallel of that case to demonstrate the different standards which honourable members who have spoken in this debate have adopted. For a few dollars of pensioners’ money the Government is pursuing and is seriously jeopardising the standards of living of those people whereas millions of dollars lost to revenue through tax avoidance is a matter of principle. It is a matter of principle that people should be able to withhold ‘ that money. They entered into schemes knowing full well that the schemes were for tax avoidance purposes and that if taxation were levied on that money for the full financial year they would suffer no real loss. Perhaps the Committee will take that into consideration. They would be entitled to claim the legitimate costs of their transactions as a business deduction. They would be denied only the fictitious costs, that is, those which never existed, which they disclose as a loss for taxation purposes. They therefore profit from a law which is obviously improper and from a scheme into which they entered in order to defraud the Commonwealth legally or otherwise of revenues to which it was entitled under the law. They will not be denied taxation concessions in respect of any operation in which expenses were incurred. It is the fictitious expenses, those which do not exist, which are in question and it is schemes which were entered into as a taxation dodge which are to be outlawed, not schemes in respect of which expenses were actually incurred. Many of the people concerned will have entered into those schemes in the full expectation that the Government would take action. They would not be involved in any loss. The loss, said to be between $500m and $ 1,000m- not an insignificant amount- would be to Commonwealth revenues.
– That may or may not be nonsense, but certainly the privileged people in our community are not entitled to that benefit, while this Government pursues people on a maximum income of $49 a week for one or two dollars that it wants to collect because these people may have put in incorrect income returns or, in ignorance, may not have assessed or set out their incomes correctly. There will be more government employees chasing those one or two dollars than there are tax dodgers- let us make no mistake about that. Those are the standards that exist.
The Opposition regrets that it cannot move an amendment which would place at total risk tax avoidance schemes for all time and thereby discourage those who would devise them. It would save the Treasury millions of dollars; it would return equity to taxation and it would have the effect of diverting skilled persons into the productive areas within our community. It might even help our economy.
-Mr Chairman -
– What clause are you going to speak to? Touch on the Bill occasionally.
– I am indebted to the honourable member for Grayndler for drawing my attention to the fact that the previous speaker, his colleague the honourable member for Corio (Mr Scholes), was not speaking to the clause in question.
- Mr Chairman, I take a point of order. During my remarks, a point of order on exactly that matter was taken. You ruled that my remarks were relevant to the clause. The statement by the honourable member for Mackellar is a direct challenge to your ruling.
– The Chair did not construe the remarks as a challenge. However, the point of order is still pertinent.
-Thank you, Mr Chairman. In my view, it has been correct for honourable members on our side of the chamber to agonise over the principle of retrospectivity. The contributions to the debate by the right honourable member for Lowe (Sir William McMahon), the honourable members for Denison (Mr Hodgman), Wilmot (Mr Burr), Perth (Mr McLean) and Ballarat (Mr Short) and others have testified to the very grave concern on our side on this principle. Therefore the principle should be examined very carefully. But matters of principle, whilst in history having brought about the most honourable and uplifting acts of mankind, have also been responsible for people being burned at the stake. Matters of principle have to be examined very carefully. I think that matters of definition of principle are quite critical on occasions such as this.
Matters of precedent have been brought to our attention by the legal members on both sides of the chamber. As somebody who is not skilled in the law or in matters of accountancy, I can approach this question only as a member of this parliament.
– It is no wonder that they sacked you as secretary of the New South Wales Branch of the Liberal Party.
– If the honourable member for Grayndler were to listen for a moment he would find that I have a great deal of sympathy for the views which I am sure he espouses on this clause. There is a very great distinction between the role of the law and the role of the Parliament. Precedent may, as the honourable member for St George (Mr Neil) pointed out, have a certain meaning in the law. Precedent has a different meaning in politics. Politics is the area where all those matters which cannot be resolved by strict logic, or by the application of professional skill, or by business or by other fields of endeavour must be resolved. It is the area where the unresolvable must be resolved.
Over the last month we have been subjected to a very strong campaign of persuasion on this question of retrospectivity. I must confess that when I first heard of the proposals put forward by the Treasurer (Mr Howard) I had grave concern about this matter of retrospectivity as regards the Curran schemes. The sum total of my feeling as a parliamentarian, not as a lawyer, on this question over that month is that the unprincipled have been trading on the principles of the honourable. I believe that the balance of parliamentary justice is in favour of what the Government is doing. Our behaviour as citizens is not governed solely by the law: It is governed by principles of self-applied decency; it is governed by principles of restraint. These principles are the ones that hold our community together. The principles of this community will be upheld by those citizens who decide for themselves what is right and who do not examine legislation in a way which seeks to find the loopholes, who do not examine legislation which has a clear intent to us, the citizens of this country, to give their fair share of the costs of this country or who examine it in a way which will enable them to get away from paying that share. That, to me, is not elementary justice; it is behaviour which is not governed by the law as one sees the law as applying to oneself.
What penalties will flow from the Government’s action in this case? If the people who have taken advantage of these schemes from the date that has been specified by the Treasurer were to suffer criminal penalties, I would be gravely concerned. But they do not. All that happens to them is that they will suffer a disallowance of schemes which they entered into, knowing them to be against the absolute spirit of all the Acts we have ever passed in the Parliament on the subject of taxation. They knew it at the time and the only penalty they will suffer now is that their schemes will be disallowed. They hardly suffer any financial penalty. But what penalty will the citizens of Australia suffer? The citizens of Australia will suffer only from this problem of precedent.
I think the right honourable member for Lowe has argued his case extremely well. On our side of the chamber there is a grave worry about precedent. I believe that the contribution to the debate of the right honourable member for Lowe and of his colleagues will have dulled the political precedent which is the only one we have to worry about. As for legal precedents, they are the ones which judges look up on the basis of case history or in respect of statutes which we have placed on the statute books. We are making a political decision and the sum total of my feeling over a month of argument and a month of pressures is that the elementary justice lies in favour of the Government. Tonight I will be voting on this particular clause on the side of the Treasurer.
– My approach to this matter is a very simplistic one. It is a simple analysis of the case that exists before us at the moment where a certain section of the community has seen fit to absolve itself from contributing to the national purse. A small percentage of people has seen fit not to pay their tax. We are not talking about tax minimisation: We are talking about tax avoidancepeople earning very high incomes who were not happy to minimise their tax; they wanted to avoid it completely. That is the morality of the subject about which we are talking.
I was rather appalled to see honourable gentlemen on the other side of the chamber whom I respect, searching through legal books and legal histories to find all sorts of quasi legal jargon and quasi legal arguments in respect of the precedent of retrospectivity. The main argument they seemed to advance was that they were terrified that this power might fall into the hands of a Labor Government. I refer those honourable members to the many occasions in this nation ‘s history where the Labor Party had control of both Houses of this Parliament. In those circumstances that power was treated with great respect. I defy those honourable members to find one example where the power wielded by any former Labor Government with the numbers in both Houses has been misused in any flagrant fashion.
We are talking now of a group of men elected to this Parliament by 14 million Australians. I do not think that we were elected here to investigate the niceties of the law. What we are here for is to see that all Australians are protected and that they all have an equal right or an equal responsibility under the law. I applaud the stand that the Treasurer (Mr Howard) has taken. I agree with my friend the honourable member for Adelaide (Mr Hurford) in that I too would like to have seen the Labor Government introduce this legislation when Treasurer Crean first spoke about it back in 1974.
– Why did you not?
– We did not; that is the end of that. The point is that the Treasurer has made the matter retrospective to last August. The amendment we have proposed is designed to make the matter retrospective to 1 July. Honourable members opposite are not happy to accept that amendment. At least we are happy that the Treasurer has seen fit to continue with the legislation that he introduced. He has great support from us on that point. It worries me that a certain amount of moral rectitude is being shown by those honourable members opposite who are terrified about the use of this power. The same honourable members when previously in government saw fit to introduce conscription. If that were not a reprehensible act, I do not know what is. It was a reprehensible act to send young kids to Vietnam to fight and die in an unjustified war. The people who did that are now expressing some moral fear -
– Order! I request the honourable member for Parramatta to confine his remarks to the clause.
-I am using the argument to show that the same people are now terrified about the use of some other power to make sure that a privileged section of the community pays its share of the tax bill. We want to ensure that all Australians pay their fair share of the tax bill. We applaud the Treasurer for the stand that he has taken. I am rather worried about the attitude taken by the honourable members opposite who are producing all sorts of strange moral arguments against this legislation. We cannot support their view. Our view is that the great majority of Australians want to see this injustice removed from the statute book and this legislation will go a long way towards doing so. I support the amendment proposed by the Opposition. I also support, in essence, the legislation introduced by the Treasurer.
– I do not want to canvass the arguments I advanced last Friday. Since then quite a few comments have been made for and against the application of retrospectivity. In most cases honourable members have based their arguments on a knowledge of the law with which I am unfamiliar. Strange as it may seem, the same argument has been used to support the application of retrospectivity as has been used against it. I have had discussions about this matter with the Treasurer (Mr Howard) and he knows exactly how I feel. I believe that retrospectivity is a matter of conscience. It is a matter of how each individual views it. I held the view last Septemberthe honourable member for Parramatta (Mr John Brown), who spoke previously, did not express a view on this matter at the time- that anything which was not clearly spelt out in legislation must surely be open to a retrospective application. That is a view I still hold.
The matter of the setting of precedent is one that I cannot understand. The Australian Labor Party has indicated that it will have no regard for precedent in this matter. It will introduce retrospective legislation regardless of whether we like it. So no precedent is being set in that regard. I also feel, from what the Treasurer has indicated quite firmly, that this matter is not to be regarded as a precedent. It is an unfortunate circumstance. He has already advised the Parliament and the people that changes will occur when the need for them occurs. I do not want to say any more on this matter other than that the views I held last September are the views I will be expressing in the vote tonight.
– It is interesting that this matter has brought on probably one of the best debates in the chamber since I have had the privilege of being a member of parliament. Therefore, I do not want to lower the tone of the debate by reiterating the arguments that have been advanced by honourable members on both sides of the chamber. The question of the principles involved was very finely stated by the honourable member for Bonython (Dr Blewett) when he said: ‘Let us note that while opposition to retrospectivity is a general legal principle in Britain and Australia it is not an inviolable principle’. I think that that needs to go further. We are talking about a conflict of principles. That was indentified by the Treasurer (Mr Howard) in his second reading speech when he said that on this occasion the Government was making no apology for acting retrospectively to protect the public revenue. We are looking at the Currantype schemes as being schemes of avoidance and we ought not to forget that they are such and that the public revenue is being lessened as a result of the use of those schemes.
I do not wish to dwell on that aspect. I wish to make one further point about retrospectivity. The honourable member for St George (Mr Neil) touched on this matter. I would like to have recorded in Hansard some the relevant practical aspects. We are not talking about a group of children under five years of age asking their kindergarten director where is the play dough. We are talking about legal people and accountantsprofessional people who have probably the highest training and experience and who are certainly highly sophisticated in the whole area of tax planning. I have no illusions whatsoever about those people not being well aware of the dangers involved in advising their clients to enter into tax avoidance schemes like the Curran schemes. But if they were not in any way alerted to that sort of situation by their practical experience they would be able to go to some of the textbooks. Any student would say that the Australian income tax guide which was published by CCH Australia Limited, is a textbook which in many respects is the bible for this area. A footnote in that volume, after a summary of the facts of the Curran case and a brief statement on the High Court finding, clearly states:
On 1 December 1974 the Treasurer announced that the Government was considering amendments to the law to overcome the decision in Curran ‘s case
If a professional person was not alerted after reading that footnote perhaps he might have been alerted if he had gone to the actual statement which was made by the then Treasurer. A Press statement about it that was released by him on 1 December 1974 was in quite unequivocal terms.
He expected, therefore, that the foreshadowed amendments would have general application in assessments made after today.
I emphasise the word ‘assessments’. There is no reference to schemes. It was stated that every assessment after that date in fact would be affected by that foreshadowed legislation. The retrospective provisions do not go that far. I think that there is some merit in the suggestion that the retrospective provisions ought to have gone back to 1 December 1974.
It has been suggested that retrospective law is bad legislation. I think the honourable member for Ballarat (Mr Short) made that comment. In the not too distant future we will be looking at some amendments to the estate duty law. The amendments will apply retrospectively to 2 1 November 1 977, which is when the Prime Minister (Mr Malcolm Fraser) announced that legislation would be effected during the forthcoming session. We therefore come back not to the question of whether retrospectivity is good or bad but to the question of whether warning or clear notice was given. I refer again to the factors I have mentioned, namely, the Treasurer’s remarks of 1 December 1974 when he said that assessments made after that date would be struck down by legislation, the statement which was published in the Australian income tax guide of the CCH, which was available to all professional advisers and, finally, the general comments that were made on 17 August of last year by the then Treasurer with regard to tax avoidance schemes.
I conclude by saying that we are talking about practical matters as well as morals and principles. One cannot divorce them. If the practical people involved in this matter did not advise their clients that there was some danger of retrospectivity, having regard to the facts to which I have alluded, I suggest that they would be very likely to be the subject of negligence claims if they have not entered into some of those agreements we have heard about whereby the clients will be refunded the costs which have been incurred in getting this advice from their advisers.
-The Opposition supports the proposition that this legislation should be retrospective. In this case the legislation is to be retrospective only to the last Budget. We believe that it should have been retrospective to 1 July of last year, which was the date set out in the amendment moved by the Opposition at the second reading stage. In fact, we believe that all the measures involved in this legislation concerning tax avoidance should have been retrospective to 1 July, that is, the beginning of the financial year. There is a reason for that. When loopholes were closed up in the last financial year many people immediately hopped into the Curran scheme and other schemes.
– Order! The level of conversation on my right is too high. The honourable member for Chifley has the right to be heard in silence. I ask honourable members to remain silent.
– They are really helping me. They do not realise what is to come. The fact is that those people who oppose this legislation being retrospective, whether they oppose it because of some high-flown principle or not, are supporting the tax avoidance industry. Like it or not, there is no doubt that basically they are supporting those wealthy groups in the community who believe that as they are born to rule they have a special right to be able to avoid tax. It does not matter whether one says it is tax avoidance or, to use the latest phrase, tax evasion, it is still the same thing. Some people are evading or avoiding or evading and avoiding tax and for this reason we believe that tax loopholes, as soon as they are discovered, should be closed. We believe many loopholes should be closed such as family trusts, the averaging system and so on.
– I remind the honourable member for Chifley that clause 3 is before the Committee.
- Mr Chairman, I thought you were going to do that.
-I would appreciate it if the honourable member would direct his remarks to clause 3.
– In fact, I anticipated it, Mr Chairman. I appreciate your advice. I was not going to mention the Prime Minister (Mr Malcolm Fraser) or anybody this time. Nevertheless I was just making the point that all methods of evasion or avoidance should be closed. I am rather surprised that some people for whom I have considerable respect, such as the right honourable member for Lowe (Sir William McMahon), should come down on the side of the tax evader, the tax avoider, whatever one may call him, on the basis of some high flown principle. I come back to the point. There have been a number of speakers on the Government side -
– Too many.
– I quite agree with the honourable member for Prospect- too many. It is very obvious that as the Opposition is supporting the measure the Government now has the numbers to pass this legislation through this chamber. Government supporters need not talk it out any longer, so might I suggest that the clause be put to a vote so that we can get it over with.
– I have listened very attentively this evening to what has been a very reasoned and reasonable debate. I suspect it is coming to a close and I do not want to prolong the discussion any further. However, I do feel a responsibility to declare where I stand on the clause under consideration, the amendment and the wider issue which is involved, that is, retrospectivity. In doing so I would like to set the context of what I am about to say by agreeing with what was said by the honourable member for Moore (Mr Hyde) when he spoke on the nature of principles. Principles are general statements of belief to which behaviour should accord. They are not universal, as is obvious when principles come into conflict and a choice has to be made between them. In that case I think the merits of each case should be applied. On this issue I start from the point of strongly believing in the principle of law that legislation should not be retrospective in its effect although I also agree that the tax burden should be equitably shared by all. However long one can agonise one has to arrive at a decision. In doing so I would like to speak in the same vein as did the honourable member for Perth (Mr McLean).
Whilst I heartily welcome the majority of the provisions in this Bill as part of the Government’s overall tax reform program I regret to say that I find it extremely difficult to support that clause which singularly and selectively strikes down so-called Curran type schemes retrospectively to last August. The clause in question is retrospective and I can find no comfort in the argument that it is not retrospective. Clearly people have ordered their affairs in accordance with and as allowed for by the law and this legislation will alter that situation. Not only is it retrospective but I believe it to be adversely retrospective. Certainly there is no legal penalty to be applied but people will lose their joining fee and if we find little sympathy with that position, what about those who have made irreversible commitments on the basis of their affairs being so ordered? Further, I find great difficulty in accepting that there was adequate forewarning of this retrospective clause. With the passing of time and the change of political parties in government, especially in view of the clear differences which distinguish our Government from our socialist predecessors, I find it reasonable for taxpayers to assume that we were not going to act in accordance with the December 1 974 announcement by the then Treasurer Crean. Equally, I do not believe that the statement made in the last Budget was adequate clear notice particularly of a matter which concerns something so vitally important as a principle of law.
In this respect I would reiterate the comments made earlier by some speakers that the real issue is that successive governments have been tardy in their moves to block outrageous, blatant tax avoidance schemes to the point where a considerable amount of revenue has been lost to the public purse. Let us be quite clear as to those who have been taking advantage of this scheme. Much deserved comment and condemnation has been heaped and poured upon those unscrupulous people in the legal and accounting professions who have discovered such loopholes and have outrageously made use of them, but the practice had got to the point where it was not the wealthy few who were using such schemes but also the small fry who were being taken by such operators- good honest genuine citizens who simply fell for the line that it was a legitimate tax avoidance scheme. If they did not fall for that line they were told that they were fools for not getting involved when everybody else was getting involved. Clearly in the face of this situation there is a demand for firm resolution on the part of the present Government and future governments that this will not happen again. I am delighted that the Treasurer (Mr Howard) has made on behalf of this Government such a commitment that other immoral tax avoidance schemes once they are recognised will immediately be stopped and blocked from the date of the announcement of such schemes.
That statement makes clear the Government’s position for the future. The Treasurer is to be applauded for this action because it is the lack of government action which has allowed the other principle and practice of tax equity to be overturned. However, I do not believe that a past wrong on the part of governments should be rectified by imposing a greater wrong on those individuals who, after all, were doing nothing illegal and acting on a principle of law thereby effecting a wrong on all the people. I do not believe that there is sufficient justification in this situation for the overturning of such a fundamental general principle that laws should not be made selectively retrospective in the absence of any clear and definite statements that they will be so made.
-Mr Chairman, I have a feeling that the Committee is beginning to take the view that this clause is being done to death. However, if the Treasurer (Mr Howard) will extend his courtesy for one or two moments more I should like to make a few verybrief comments. This debate has been characterised by the contributions of lawyers and accountants, and in respect of the Opposition, by one or two graduates of the London School of Economics. However, I will speak for a moment or two about some rather basic elements in this discussion. There has been a continual haranguing from both sides of the chamber as to whether this legislation is retrospective. On that question I think the greatest possible confusion has come into the debate. I would not for a moment support legislation that I thought was retrospective and worked against the people’s interests. I do not believe that there is a supporter of the Government who would support such legislation. I do not believe for one minute that the Prime Minister (Mr Malcolm Fraser) would have anything to do with such legislation or, indeed, that the Treasurer would have anything to do with such legislation. The Opposition can speak for itself on that particular point. I think honourable members opposite have made it fairly clear that they would prefer to see this legislation start from 1974 which, of course, would be thoroughly retrospective.
To decide in one’s mind whether this is retrospective, one needs only to think of a very simple proposition- that is, to consider the perspective that faced an individual who sought, on or after 16 August 1977, to enter into a Curran-type scheme. I suggest that the perspective was thoroughly plain and evident for any person to see. It may have been referred to in 1974 in a statement of then Treasurer Crean. However I refer the Committee to a statement made by Treasurer Lynch in the 1977 Budget. He said:
The Government is well aware of the activities in recent years of tax planners who, increasingly, are promoting tax avoidance schemes and arrangements throughout the business and professional community.
He stated further:
We propose to crack down hard on such practices. Many of the arrangements that taxpayers are being introduced to enter into are highly artificial and contrived, but they are causing substantial amounts of revenue to be either lost altogether or deferred for considerable periods of time.
The Government takes a serious view of these developments and proposes, in these Budget sittings, to bring forward amendments to combat these abuses of the provisions of the taxation laws.
That was the perspective facing any individual, any taxpayer, in this country who sought on or after 16 August 1977 to enter into a tax avoidance scheme, the subject with which this clause deals. For that reason, I support the Government.
– When I was speaking previously I received such applause from members National Country Party that, for a moment, I lost track of what I wanted to say. I was mentioning some of the statements made by the Australian Labor Party in an effort to show the degree to which it would go if it had the opportunity to exploit a lapse of judgment of the Government or, if it happened to be on the other side of the chamber, the Opposition. Those of us who have had any experience at all can go back to 1973 when Whitlam took office and to the justifications he made for the first two actions he took when only two Ministers of the Crown were in the Executive for a period of some weeks. After saying that the Liberal Party permitted the money supply to run riot, he immediately turned around and in a matter of months there was a revaluation upwards of 25 per cent, after taking the 10 per cent devaluation of the United States dollar into consideration. At the same time an enormous tariff reduction was made without any consultation at all with his party or with the Parliament itself. He finished up on another note: He entered into the Khemlani agreements knowing that it was in the -
– I rise to a point of order.
– Order! The right honourable member for Lowe is entitled to offer a precedent or two but I think he is extending that entitlement.
-There is so much noise, I cannot hear what you are saying, Mr Chairman. The honourable member for Robertson is now interrupting.
– I have not said a word yet, but I will in a minute if the right honourable member for Lowe goes on like this.
– Order! The honourable member for Robertson will resume his seat. I require the right honourable member for Lowe to confine his remarks to this clause. I am prepared to let him refer to a precedent or two but I think he is going beyond his entitlement.
– I accept your ruling, Mr Chairman. I turn now to the question that has been raised by the honourable member for St George (Mr Neil) who bewildered me no end, and I have listened to him for a long time. He raised the argument of the political versus the legal. I believe that so far as the rule of law is concerned, it is based upon common law and, therefore, is based upon common practices and common ideals. That has been acceptable to and has been accepted by the greatest justices we have known in history. Now, of course, there comes a political time when the Government has to make up its mind whether it wants to change the common law; whether it wants to take some other action which is totally different. Then we are faced with an amendment to the law that can be debated here on a rational and sensible basis. There is no conflict. One follows the other, as day follows the night. Therefore, I feel that that argument of the member for St George is totally unwarranted. But what can be said, with actual realism, is that in 1974 and 1975, when the Labor Party could have taken action, it did not do so. Then, in 1977, there was a second judgment of the High Court upholding the Curran case. If we had wanted to take action then, that was the time for the Liberal Party to take action. But it failed to do so. Are people to be prejudiced now because two opportunities to participate in Curran schemes were handed over to them by the High Court of Australia? If the honourable member for St George wants to run down the High Court of Australia, he should say so without going about it in a roundabout way.
The next point I want to make because this was stressed by some honourable members is this: Was there any justification for thinking that retrospectivity would be practiced in this case or that notice had been given and that, therefore, the schemes were at risk? The words used by the Treasurer in this context were, ‘ no risk ‘. But let us look at the facts to see whether or not there was good reason to think that the Government was adhering to its own rules as set out in the Party platform; that is, that there should be no retrospectivity in taxation law. First, let me refer to the fact that no action was taken in 1974 or 1977 after the High Court decisions. We had the famous Viner letter written on behalf of the Treasurer of the day saying that there would be no retrospectivity so far as section 36 was concerned. So if people had been given notice of retrospectivity after that date they would have acted entirely differently.
At an open forum in Sydney on 30 March this year two of the senior taxation officers who were present were asked the simple question whether there would be any retrospectivity. They said they did not think there would be retrospectivity. On 5 April, my colleague the Treasurer was asked a plain question by the Australian about whether there would or would not be retrospectivity. He had the opportunity to give the answer to that question but he did not give it. It should have been yes or no at that time because there was no reason for secrecy. The Treasurer did not answer that question. This must have led to people being persuaded to think that this was the Government’s policy. This was adhering to the policy in the platform of the Liberal Party and this was stated in the Viner letter. What else should the public take into consideration?
I revert again to what retrospectivity means. If we look at retrospectivity in this case, we find that it represents a failure by the Government to exercise powers within its control. It failed to do that. So now the Government has to make any excuse and find some reason to make legislation retrospective. Why was the Government selective. Why did the Government not propose retrospectivity in all the other cases? If we analyse some of the other cases we find, without any reservation, that they cost the community just as much as, if not more than, the Curran scheme.
I come back to the remarks of the honourable member for Macarthur (Mr Baume) and the honourable member for Barker (Mr Porter). I should like to refer to another definition given by Quinton Hogg, Lord Hailsham. When referring to the two fundamental principles of law, he said:
The first is that a man cannot be punished or penalised for doing something which is lawful at the rime it is done; applied by the judgment of an impartial court; after a public hearing, and executed by public officers. This includes a tax law.
Their interpretations have been horribly wrong. The honourable member for Macarthur quoted me. This is exactly what I said:
They amount to serious qualifications to the ideal that predictability and certainty in the law are essential in the interests of good government, and that retrospectivity should only be tolerated when it is clear beyond doubt that serious damage would otherwise permanently be done.
Keep in mind that retrospectivity could also be applied to all aspects of our lives- for example, our private lives, our privacy, the criminal law, marriage and divorce, and the conduct of business.
Against that basis and the knowledge of the way in which the Labor Party acts it is irresponsibility in the highest degree. And it can be arbitrary. Pandora’s box has been opened. The risk taken is immense. Those who are favouring retrospectivity now will one day pay the penalty.
I think it is a pity this matter was opened up in the way it was. I believe that it was pejorative in nature and was intended to be so. Honest and sensible discussion was prevented. I point out one matter that excited anguish and created too much confusion for the question to be objectively looked at. At the beginning the cost of this practice was $50m hard. The figure then went to $500m to $2,000m. As I said earlier- I have just checked with the authorities- this means a person would have to have a taxable income of $ 1,000m or $4,000m, which is out of the question. Then the figure increased. The Treasurer (Mr Howard) told us that he has now received a report from the Commissioner which states that ‘the figure of $500m is not out of the question’. I am not interested in whether it is out of the question. I am concerned whether it is in the question and within acceptable limits. I do not think it is. After getting advice from counsel who consulted the various individuals concerned, I submit that the figure could not be as high as $ 120m. I added $ 10m just for luck and to be conservative.
I am glad that this Bill will go to the Senate. The Senate will have an opportunity to look at all that has been said before the Bill is introduced and to examine the case for and against it. Senators will not be compelled to say something today which they would not have said yesterday. They will not always be looking around to see that they do not offend a superior authority. As Sir Robert Menzies said -
-Order ! The right honourable member’s time has expired.
-I will not take up the time of the Committee for long. This is an interesting night in Parliament for me. No one has seen the right honourable member for Lowe (Sir William McMahon) so energetic for years. It is exhilarating to see this man who has spent 20 or 30 years in the Parliament suddenly brought to life when a small group of people- I believe that 1,100 people are involved in tax schemes such as the Curran scheme- are suddenly threatened. What a pity it is that he does not show the same concern and interest for pensioners, repatriation pensioners, the sick and the maimed as he does for the people who are -
– The honourable member for Robertson must confine his remarks to the clause.
– Other speakers have been covering a whole range of issues tonight. How interesting it is to see the chamber suddenly full for a debate. There must be 30 or 40 members of the Liberal Party in the chamber tonight. When important Bills are being discussed one after the other they do not come into the chamber. When tax avoidance schemes are being debated they are here in their numbers making their speeches. This is a fascinating exercise.
What are we really talking about tonight? We are talking about the fact that a handful of tax bludgers in Australia have been ripping off $500m. Four hundred thousand people in this country are out of work. They have been subjected to the venom and the spleen of honourable members opposite for the last three years. Yet suddenly the concern of honourable members opposite is aroused by a handful of people who have stolen enough money to keep everyone of the unemployed people in a job. The amount, $500m, which it is claimed is being ripped off- some people have said that it is up to $ 1,000m- is more than money paid for unemployment schemes and unemployment benefit for the 400,000 Australians out of work.
It is interesting to note that for the first time the Liberal Party in Australia has strong support from the Communist Party of Australia. I understand that the Tribune this week is supporting the legislation. I never thought that I would live to see the day when the Tribune of the Communist Party would be on the same side as the Liberal Party.
– I rise to take a point of order. The honourable member is well off the subject matter of clause 3. We have had a sensible debate on matters of principle all night. I think it is a pity that it is being spoilt at this stage.
– There is no substance in the point of order. Before the honourable member for Robertson resumes, I must ask honourable members to remain silent. The debate has been reasonably well disciplined. I endorse the remarks of the honourable member for Moore that it would be a pity to spoil the mood at this late stage.
– I shall conclude on this point. The statements about retrospectivity are absolute nonsense. The legislation is not being made retrospective. It dates back to 16 August. Unless this happens, in future, each financial year the experts, the accountants, the friends of the right honourable member for Lowe will think up their schemes -
– I take exception to that remark. I have never spoken to any accountant about these schemes in my life. I ask the honourable member to withdraw. It is a lie.
-I call upon the honourable member for Robertson to withdraw the allegation.
– Since when has the word ‘accountant’ been defamatory?
– It is not the word ‘accountant’, it is the implication behind your tongue that you have lost control of.
– I ask the honourable member for Robertson to indicate that there was no inference if not an outright assertion in the statement.
-If it offends the right honourable member for Lowe and if he is sensitive, I shall withdraw.
– Oh, aren’t you smart!
-The honourable member for Denison is making his usual sanctimonious contribution to the debate. As I was saying, it is nonsense to refer to this legislation as retrospective. If this sort of legislation cannot be brought in in future quite clearly the accountants, the tax avoiders and the tax bludgers of this world will simply think up another scheme which will save them $500m. They will be able to claim the same sort of let-out that the right honourable member for Lowe is claiming on their behalf.
– I thank everybody who has participated in the debate on this clause. I do not think that I am overstating the situation to say that this has been one of the best Committee debates which has taken place in this chamber over the past year or 18 months. I find absolutely nothing offensive but only something which is only to the good to our side of politics and to the system about the fact that there should be genuine agonising debate in open forum between members of Liberal and National Country Parties on matters of principle. That is how the parliamentary system works. However much I may disagree with some of the things that have been said during this debate by honourable members on my side, particularly the right honourable member for Lowe (Sir William McMahon) I share completely the rejection of the innuendos that have been levelled against the motives of those people on my side who have questioned the Government’s actions.
As I said during the conclusion of the second reading debate on Friday, I can well understand people haying no financial interest whatever in these schemes having very genuine doubts. I also assure those people on my side who have said that they found it very difficult to reach a conclusion that likewise I did not find it easy to recommend to the Government early last month that it should apply legislation which I acknowledged from the beginning was retrospective. Whilst I believe that arguments can be advanced about the degrees of retrospection and the fact that we have on earlier occasions passed laws after the commencement of a financial year which date back to the beginning of the financial year, whatever measure we use it is retrospective legislation although it is retrospective within one financial year. I have made no apology for that. I have already explained, in concluding the second reading debate, that the Government on a balance of the two principles took the view that its duty lay in giving greater weight to the principle of the equity of the tax system. I found very little to disagree with in the speech of the honourable member for Mackellar (Mr Carlton), who put the matter very much on the question of what was the justice of the situation. Governments being charged above all else with the responsibility of making an assessment of the public interest, I believe that it was our job with these two principles in conflict to make a decision which in the view of the Government was based upon the public interest.
I make three other points. The first concerns the question of precedent. That has entered the debate and it is important that it be considered in the debate. I remind the Committee of what I said on this subject on Friday, that is, that ultimately when any government, be it a Liberal government or a Labor government, seeks to justify an action it is about to undertake by resort to precedent it is not sufficient to invoke the precedent in order to satisfy the community that it is justified in taking that action. It must also first persuade the community that the merits of the action which it seeks to undertake are on the side of what it proposes to do. I put it to those on my side of the chamber who are concerned about the precedent that it will not be sufficient for a future Labor government in seeking to apply a piece of retrospective legislation simply to say that it has a precedent in what the present Government is doing in respect of the Curran case. It must go the very vital step further of satisfying the community that the merits of the proposal it intends to put onto the statute book can be justified on the grounds of public interest.
I make a second point about the question of the amount concerned. I have said from the outset, and I say it again, that it is impossible precisely to quantify the amount involved. Anybody who has the barest semblance of understanding of the taxation system will know that we are dealing with the current income tax year which is not yet concluded, and the great majority of the tax returns that would have shown up the incidence of Curran scheme usage if this legislation were not being passed will not be lodged with the Commissioner of Taxation until the early part of next year. Therefore it is impossible for anybody to quantify the amount. It is all very well for the right honourable member for Lowe to say that he wants hard, definitive evidence. It is impossible to give it at this time. I have never made any secret of that. What I have said is that on the basis of the information that is available and on the basis of an examination of returns that were lodged in respect of the 1976-77 tax year the official advice of the Commissioner of Taxation to the Government is that the amount involved is hundreds of millions of dollars and the figure of $500m is not out of the question. The other thing that I should like to say about the amount involved- I say this in defence of the criticism which has been made of the Taxation Office during this debate, and I say it in all sincerity- is that the real evidence of the abuse by these schemes in the tail end of the 1976-77 tax year did not come to the attention of the Commissioner of Taxation until the early part of this year. I say that sincerely because I think it is proper that that be said in defence of the action of the Commissioner of Taxation.
I make one final comment. This debate has rightly raised on this side of the chamber and in some quarters on the other side of the chamber a concern with the question of principle. I say again that, generally speaking, the Government parties are opposed to retrospectivity in taxation legislation. Two or three weeks ago we outlined procedures whereby immediately a taxation abuse emerges in sufficient detail for it to be publicly prescribed it will be followed as soon as possible by remedial legislation. I believe that that will give to the Government a far more speedy and effective weapon for fighting tax avoidance practices in the future. It is unusual for anybody who holds Liberal principles dear to his heart to advocate the application of retrospective legislation but on this occasion I believe that the merits of the situation and our duty to the overwhelming majority of the Australian community require that the principle of the equity of the tax system take precedence over the question of nonretrospectivity.
– The question is that the figures and word proposed to be omitted stand part of the clause. Those of that opinion say aye, to the contrary no. I think the ayes have it. Is a division required?
– Yes, please.
– Yes, Mr Chairman.
– Yes, a division is required.
The Committee divided. (The Chairman-Mr P. C. Millar)
Question so resolved in the affirmative. Amendment negatived. Clause agreed to.
Clauses 4 to 8- by leave- taken together, and agreed to.
Clause 9 (Certain expenditure disregarded in ascertaining taxable income).
– If we turn to page 7 of the Bill we see that clause 9 provides that after section 52 of the Principal Act new section 52a is to be inserted. It then, after examining certain cases where expenditure is to be disregarded in ascertaining taxable income, gives vast powers to the Commissioner of Taxation. Under this clause as a whole the Commissioner is given power to decide what is reasonable and what is unreasonable. That means that he would have to exercise a subjective judgment. 1 have long believed- and have heard honourable members opposite argue just as strenuously- that the Commissioner of Taxation should not be given excessive powers. So for the reasons I have just given and also for those that I gave with regard to clause 3, and because of the application that it would have under sub-clause (3) of that clause, I ask that clause 9 be omitted.
I have stated my views before. But I do not regard this as a matter of fundamental principle. I distinguish principle from what I regard as excessive use of power by an official, rather than the Parliament itself being in a position where it establishes the guidelines and the law. Over and over again when that question has been raised we have come down on the side of denying further power to anyone. No matter how good the Taxation Office is- and nobody knows that much better than I do; I still believe it is one of the great departments, and has very good officials- I would not give it very much power. I believe not so much that power corrupts but that power is sometimes used in excess, and the ability to use excess power is something to which we should all object. Therefore, I move:
-The Opposition does not support this amendment. What the right honourable member for Lowe (Sir William McMahon) proposes, in effect, is to wipe out one form of the legislation prohibiting artificial share trading losses, and we do not support him in that regard. His argument about the discretionary powers of the Commissioner have been well and truly canvassed, and I do not intend to go back over them. I direct the attention of the House to what is involved in clause 9. It comprises three pages of legislation designed to prohibit one form of tax avoidance scheme, that relating to share trading losses. This gives some indication of the enormous complexity of the legislation that this method of attempting to stop tax avoidance brings about. I therefore renew to the Treasurer and to the Government the plea that I and other honourable members on this side made during the second reading debatethat if the Government is really serious about preventing tax avoidance, section 260 of the Act be amended. Section 260, on the face of it, seems to say that all forms of tax avoidance, such as that dealt with in clause 9 and the other clauses of the Bill, are void as against the Commissioner, but in effect the High Court has rendered section 260 virtually useless in prohibiting tax avoidance. Tax avoidance schemes can be dreamed up by the wealthy and efficient tax avoidance industry. It is not just a matter of legislating against the half dozen schemes that we have before us, and particularly that dealt with in clause 9. This sort of thing will happen again and again. Year after year we will be back here with this sort of legislation. The Act, as though it is not already complex enough, will become increasingly complex.
Section 260 gives the Government an alternative. If it were re-written so that the Commissioner of Taxation would have the power to declare void any tax avoidance scheme we would not be faced with the continual need to legislate, or these continual worries on the part of some Government supporters about having to deal with retrospectivity when a particular scheme gets away and the Government becomes worried about loss of revenue. All of this would be avoided if we had an effective section 260. Achieving that result would be by far the most sensible thing to do. Whether the Government does or not will be the real test of whether it is really serious about stopping tax avoidance. If it so amends section 260 as to make tax avoidance schemes illegal, or void as before the Commissioner, it will really have done something effective to prevent tax avoidance in this country.
– I am afraid that the Government cannot accept the amendment moved by the right honourable member for Lowe (Sir William McMahon). I understand the concern he has expressed about discretionary powers being vested in the Commissioner. That was the subject of debate earlier, during the consideration of his three proposed amendments. I think it can be said in respect of the present proposed amendment that whatever may be the arguments on both sides about the appropriateness of vesting discretion in the Commissioner of Taxation, his proposed amendment would be destructive in so far as the purpose of clause 9 is concerned. It proposes the withdrawal of new section 52a, but offers nothing in its place. The Government cannot accept the amendment because it would withdraw a key provision against tax avoidance. Nothing that the right honourable gentleman said had reference to a possible alternative method of achieving that objective. If in fact such a method had been outlined- one that contained the same weaponry against avoidance, while curtailing in some way the discretions extended- the Government would have been prepared to look at it seriously.
This is an example of how extremely difficult it is, if we, are to have serious tax avoidance legislation in areas such as this, to do so without vesting discretion in the Commissioner. The section that the right honourable gentleman seeks to delete is directed at schemes to create artificial loss from share trading. The Government believes that it is a necessary provision. Although I understand the concern of the right honourable gentleman about the giving of discretion, I point out that there are guidelines in the section in respect to the exercise of that discretion. Again, whilst I understand his concern, I am afraid that for the reasons outlined the Government cannot accede to his proposed amendment.
By way of a footnote I might say in response to a comment that was made by the honourable member for Gellibrand (Mr Willis) that the Government will take on board the remarks he has made about section 260 of the Act. There are a lot of arguments- this is not the context in which to raise them- that can be put concerning particular areas of uncertainty, in so far as what are proper commercial transactions is concerned. There are strong arguments both for and against what the honourable gentleman proposes and, as with all other comments that have been made during the debate, his suggestion will be taken on board for the purpose of the Government’s general review of tax legislation.
-I would like the Treasurer (Mr Howard) to explain why this clause is to be made retrospective to 7 April whereas the provision dealing with the Curran scheme is to be made retrospective to 16 August. I understand from what the Treasurer said in reply to the right honourable member for Lowe (Sir William McMahon) earlier in the debate that the overriding principle is a quantitative one. In other words, if a large amount of money is involved one goes back a bit further to try to plug the hole. I have no objection to that.
The Treasurer stated that he does not know the amount of money involved. He said he is not sure about the amount involved in the Curran scheme although he feels it is a large sum. He certainly does not appear to be sure about the scheme we are now talking about or others with which we will deal later. For all we know they may also involve huge amounts of money. I do not know and obviously the Treasurer does not know. If the principle involved is only one of quantity, why go back to 7 April in one case and to 16 August in the other? Can the Treasurer give me some sort of explanation?
– I think the honourable member for Prospect (Dr Klugman) is again raising the substance of the argument on the earlier clause. What I said in concluding the debate on that clause was that it is not possible, certainly not at this stage for reasons I outlined in my reply, to quantify precisely the amounts involved. All the Commissioner of Taxation can do is make assessments on the basis of his own knowledge as a person perhaps more than anyone else who has an understanding of the likely volumes. He has contact with people who might assist him in assessment of the likely volumes. Given the fairly hard evidence of the extent to which the schemes were used in the 1976-77 tax year it is possible to make some quantification in respect of the last six or eight weeks of that tax year. On the basis of that, an assessment of several hundred million dollars has been provided to the Government.
I cannot guarantee to the honourable member, if he is asking me to do so, that ultimately it may be established that a particular scheme, not being the Curran scheme, has also been responsible for the loss of a very large amount of revenue. I do not know that. All I can say to him is that the evidence available to the Commissioner leads him to advise the Government that the dimension of the loss to revenue involved in the Curran scheme is of the magnitude in his view of what I have described during this debate. He does not give me, and has not given me, that advice in respect of the other schemes that are covered by this legislation. For that reason the view of the Government regarding the Curran scheme is- and we have been debating this subject for several hours now and I am sure that the honourable member does not want me to redebate it -
– What about this one?
– It is not possible for me to give the honourable member a quantification regarding the matter he raised. I doubt whether it will be possible to give him an exact or precise quantification. If the honourable gentleman is saying to the Committee it may ultimately be the case that scheme A might have been proved to have been more costly to the revenue but for action taken by the Government I would say to the honourable gentleman that the evidence such as it is available to the Government at the present time indicates that of all the schemes covered by this Bill the Curran scheme represents by far the largest threat to the revenue. There will be people in the community who may disagree with that. There will be others in the community and in the professions who will very strongly agree with that. Inevitably in the debate that has gone on over the past few weeks some people have put it to me that the Government has not been misled in a deliberate sense but that the Government is under a misapprehension regarding the volume. Equally there have been others who have put it to me and to some of my colleagues that the Government has not in any sense been misled or misinformed about the volume. All I can say to the honourable gentleman is that quite honestly on the advice available to the Government the dimension of the threat to revenue by the particular scheme we were talking about earlier is far greater than any of the other schemes which are the subject of this Bill. I cannot in a quantitative sense go further than what I have done during the debate.
Clause agreed to.
Clauses 10 to 19- by leave- taken together.
– I make a very brief comment about clause 17. 1 am certain the Committee will welcome my remarks, particularly in respect of that part of the clause which indicates that people who take advantage of primary producer trusts will not in fact receive that benefit if the share of the trust income in the income year is below $1,040. 1 am interested in that part of the clause which refers to the Commissioner of Taxation being satisfied that the interest was not acquired primarily to gain the benefit of averaging. I note, of course, that the onus is on the taxpayer to establish that he was not in such a situation. I am simply hoping that the Commissioner will be adopting a fairly liberal view because I would imagine there will be many primary producers genuinely concerned with trusts who will in fact be in an income situation well below $ 1 ,040.
Clauses agreed to.
After section 160 ac of the Principal Act the following sections are inserted:
160ACA(1) . . .
‘(25) Where a person has ..een allowed, or is entitled to, a rebate under this section in an assessment in respect of income of that person, the amount of moneys paid on shares to which that rebate relates shall not be allowable as a deduction from the assessable income of that person and shall not be taken into account for the purposes of this Act in ascertaining the amount of any profit or loss arising from sale of the shares in respect of which the moneys were paid.
Omit proposed sub-section (23), substitute the following sub-section : ‘ “(25) Where a person has paid moneys on shares and-
the proceeds of the sale of the shares have been included, or are to be included, in the assessable income of the person of any year of income;
8 profit arising from the sale of the shares has been included, or is to be included, in the assessable income of the person of any year of income; or
a loss arising from the sale of the shares has been allowed, or is allowable, as a deduction in an assessment of the person in respect of income of any year of income, then a rebate in respect of the moneys paid on the shares is not allowable, and shall be deemed not to have been allowable, under sub-section (5) or ( 15) in any assessment in respect of income of that person.”.
This is what I might call a benefit amendment. It deals with clause 20 which gives effect to a commitment made regarding the introduction of a rebate scheme for off-shore petroleum shares. This commitment was made last year shortly after the Budget Speech of my predecessor. The provision proposed to be amended is a safeguarding measure designed to prevent a taxpayer from gaining a double benefit in respect of moneys paid on shares but qualifying for a rebate under the new shareholder rebate scheme. The principle contained in this provision accords with the general prohibition of double deductions already contained in income tax law. The double benefit could arise in the case of a taxpayer being a share trader who, having qualified for a rebate under the new provisions, also qualifies for a deduction under the general provisions of the income tax law for the cost of his shares. It could also arise where shares on which moneys had been subscribed in circumstances that fit within the new rebate scheme are sold within 12 months of acquisition.
Although the Government remains firmly committed to the policy of not allowing double benefits under the income tax law it accepts that the provision in the Bill restricting the tax allowance to a rebate of 30c for each $ 1 subscribed may operate inappropriately for a taxpayer who will be taxable on the sale of shares that have qualified for the rebate, particularly where the rate of tax levied on any profit is significantly greater than 30c and a tax saving from a deduction for the amount subscribed would give a much greater tax saving. Accordingly the Government has decided that in order to remove any disadvantage that may arise in these circumstances the Bill should now be amended to provide for the allowance of a deduction in respect of moneys paid on shares that qualified for the rebate and for the consequent withdrawal of the rebate when the shares are sold in taxable circumstances.
The Government believes that this amendment should generally overcome the difficulty entailed by the provision in its present form. But I should emphasise to the Committee and to those interested in this measure that the Government will be prepared to monitor closely the operation of the amendment which is now proposed to be inserted to ensure that the objective sought by the amendment is in fact achieved. I would like to thank a number of members on this side of the chamber who have drawn attention to the possible detriment or disability to a certain class of potential investors as contained in the existing Bill. In particular I thank the honourable member for Macarthur (Mr Baume) who at an early stage pointed out this possible disability. I am grateful to him and to other members of the Government’s taxation sub-committee for their assistance in this regard. The amendment removes a potential disadvantage to a person in a share trading situation who might wish, for wholly proper and desirable reasons, to invest in these companies and in the purchase of shares that will attract the benefit of the rebate. I think it is desirable and proper that the amendment be made.
-The Opposition supports the amendment to this clause. In so doing I point out that the clause as amended bears some similarity to a provision in old section 77d of the Income Tax Assessment Act which was taken out by the previous Labor Government. In supporting the reintroduction of a concession to those who subscribe paid up capital to mining companies, there are a number of differences which are relevant. Firstly, the form of the concession is now to be a rebate of 30c in the dollar subscribed rather that a straight reduction which before meant that what one gained from the tax concession depended on the marginal rate of tax. It could have been as high as 65 per cent. Secondly, it applies only to offshore exploration companies. The old section 77d applied to all mining companies but this clause has a much more restricted operation and deals with the very delicate area of off-shore petroleum exploration. It is highly desirable that we expand exploration and hopefully come up with greater petroleum reserves. Thirdly, the companies cannot claim the expenditure as a deduction, and the fact that the deduction is claimed by the person who subscribes the funds rather than the company means that there is virtually a transfer of the tax concession, although if the company does not find anything it will not have any profits against which to put its exploration costs. Finally, the legislation contains a number of sub-clauses which are intended to ensure that the loopholes which may have been in the old section 77d, which enabled funds supposedly subscribed for exploration to be used for other purposes, will not exist under this legislation. That is as we understand it. We therefore support the clause as amended.
However, in expressing our support for the clause, I point out that it is the strong view of the members on this side of the House that, if the Government is subsidising the search for offshore petroleum in this way, it makes an even bigger case for the introduction of a resource rent tax if petroleum is found by such a company. A resource rent tax is something to which the Government has paid lip service in the past. The Government does not seem to have got any further with its introduction. However, we on this side of the House are strongly committed to the introduction of a resource rent tax and the case for such a tax is all the greater if the Government is providing a subsidy for funds subscribed to the paid up capital of petroleum exploration companies.
-As a member of the Government members’ tax subcommittee I express my and my fellow members ‘ appreciation of the kind way in which the Treasurer (Mr Howard) listened to our points, took note of them and consequently moved this amendment. The co-operation that the Treasurer has given the Committee is certainly appreciated. I also mention in respect of this clause that some members on this side of the House regret that this opportunity was not taken to extend this kind of incentive on a wider scale to mining companies. There have been some improvements in the legislation, but perhaps not enough yet to enable this incentive to be extended without fear of the revenue being assaulted the way it was during the mining boom. This will be so particularly if the legislation succeeds in limiting the deduction to eligible outgoings, which it seeks to do. In response to the honourable member for Gellibrand (Mr Willis) I make the point that, as I understood it, under the old section 77D the transfer of the tax benefit invariably was to the subscriber so in effect all this clause is doing is solidifying what was the situation when this provision previously existed.
Amendment agreed to.
Clause, as amended, agreed to.
Remainder of Bill- by leave- taken as a whole, and agreed to.
Bill reported with an amendment; report- by leave- adopted.
Bill (on motion by Mr Howard)- by leaveread a third time.
Debate resumed from 13 April, on motion by Mr Eric Robinson:
That the Bill be now read a second time.
Mr HOWARD (BennelongTreasurer)May I have the indulgence of the House to raise a point of procedure on this legislation. Before the debate is resumed on this Bill, I suggest that it may suit the convenience of the House to have a general debate covering this Bill and Appropriation Bill (No. 4) 1977-78 as they are related measures. Separate questions will, of course, be put on each of the Bills at the conclusion of the debate. I therefore suggest, Mr Deputy Speaker, that you permit the subject matter of both Bills to be discussed in this debate.
-Is it the wish of the House to have a general debate covering both measures? There being no objection, I will allow that course to be followed.
-These are Appropriation Bills and it is normal for such Bills at this stage of the year to be introduced to appropriate additional funds for various purposes. The Bills continue the Government’s policy of restraint on expenditure and that so-called policy of expenditure restraint was reaffirmed in the second reading speech of the Minister for Finance (Mr Eric Robinson). In fact, the socalled expenditure restraint policy in our view has not served this country well. It has been a substantial contributing factor to the recessionary nature of the Australian economy over the last two years, particularly in 1 977.
The cutbacks in Government expenditure, especially in the area of public investment, have been substantial. I ask the House to take note of the fact that in the first half of 1 976 public investment declined by 14.8 per cent, a very substantial cutback. In the second half of 1976 it increased by only 0.2 per cent. For the whole of 1976 public investment fell by 6.8 per cent. In 1977 it increased by 3.6 per cent and in 1978, according to the Organisation for Economic Cooperation and Development, it is estimated to increase by only 0.5 per cent. The increase of 3.6 per cent in 1977 was not greatly attributable to the activities of this Government because the figures I have been given relate to public investment by all governments, State and Federal. In 1977 the States raided their own reserves, so to speak, to invest in order to create jobs. That is not something which, as the OECD points out in its recent report on Australia, can continue to occur. Therefore, given the continued very severe restraint which this Government is pursuing in relation to government expenditure, particularly investment, the rate of increase in public investment in 1978 will be substantially reduced. As I have said, it will be reduced from 3.6 per cent in 1977 to 0.5 per cent in 1978.
The effect of these dramatic cuts in public investment and in government expenditure generally has been to bring about a substantially reduced rate of growth in this country. In the calendar year 1976, the gross domestic product increased by 3. 1 per cent. But in calendar year 1977, once the public investment and other government expenditure cuts were really under way, the rate of growth of the real gross domestic product dropped back to 0.6 per cent. If one looks at the figures concerning the gross nonfarm product, which is often taken as the better indicator of how a government is performing, one will see that in 1976 it increased by 4.8 per cent, but in 1977 it increased by only 1.5 per cent. As I say, a number of factors were involved in that, but a very important factor was the substantial slashing of the rate of growth of government expenditure, particularly in the public investment area. A lot of that expenditure normally goes into the private area because it relates to heavy capital works involving private contractors, building materials and so on- the sort of work which stimulates a lot of the private sector in the economy. Severe cutbacks in that area lead to a very substantially reduced level of demand overall in the economy.
Our criticisms of the Government’s expenditure policies are addressed not only to the overall level but also to the kinds of priorities of this Government. In the Budget of August last year various regressive priorities were demonstrated by the Government’s expenditure program. For instance, the outlays on urban and regional development were reduced from $408m in 1975-76 to $168m in 1977-78. This is an area which the Labor Party regards as being particularly important. This enormous cutback, in our view, represents perverted priorities on the part of the Fraser Government. The unemployment benefits area is another area where the Government has acted not to reduce the actual rates but to reduce the rate of entitlement by making payments in arrears rather than in advance. The Government has substantially brought about a delay in the payment of unemployment benefits to people and, as a result, brought about substantial misery. We also had the situation where an additional $2. 2m in last year’s Budget was paid to the well-off private schools at a time when the overall level of expenditure on education was being kept constant. We have also had at that time a reduction in the Aboriginal advancement program- from $194m in 1975-76 to $176m in 1977-78.
I mention those only as examples of the kinds of Budget priorities which the Government had in its last Budget. The Appropriation Bills which are now before us continue those sorts of cutbacks in areas which we regard as important. For instance, in the area of Aboriginal affairs one finds that the Government has made savings on the expenditure on assistance to missions of 8 per cent. Honourable members will note that a document has been distributed setting out the savings that the Government has made this financial year. We are supposed to believe that the savings are something which we should regard as being extra good. There are over $200m worth of these so-called savings, but in fact a lot of these savings are in areas such as Aboriginal affairs, which I have already mentioned. For instance, there was a reduction of 73 per cent in the operating expenses of the secretariat for the National Aboriginal Conference. In the field of education there has been a reduction of $ 1 7.7m in tertiary scholarships- in other words, a cut of over 10 per cent.
In the area of employment and industrial relations one finds, incredibly, a cutback in the amount of money for apprenticeship training of over $4m. Is this something that the Parliament should regard as good? At a time when we have massive unemployment- in fact, the teenage unemployment rate is over 20 per cent- and at a time when we have a generally acknowledged shortage of skilled tradesmen, a shortage which will become horrific should this economy ever get back to something like normal rates of activity, we have the Government boasting about savings of $4m-plus on expenditure concerning apprentices. We regard that as an absolutely perverted priority. I draw the attention of the House to the statements made in the OECD’s report regarding manpower policies in this country. The OECD said that we do a lot less than just about any other member of the OECD. That is something we all knew anyway, but it is good to see that the OECD’s report, which is so heavily edited by the Treasury, at least kept in that part. Also one notes that the relocation assistance provided by the Department of Employment and Industrial Relations has been cut by $470,000 or 37 per cent. The relocation assistance scheme is something which was boasted about by the Government as something which would do great things for structural adjustment. In fact, it is a program which clearly is not working.
Under the heading of social security, one sees that a grant to organisations under the Homeless Persons Assistance Act has been cut almost by half- from $5.6m to $2.9m. Is this something about which we should be pleased? On the other hand, the act of grace payments to the Fraser Island mining companies- not the workers but the companies working on Fraser Island before sand mining was stopped- have been increased by $2m to $4.8m. So on the one hand we have cutbacks of over $2m in the social security area under the Homeless Persons Assistance Act and on the other there is an increase of $2m in the payments to the Fraser Island companies. In our view, those are totally perverted priorities. In the area of construction, expenditure on buildings and works has been cut by a net $5.1m. One other area which is worth mentioning is the area of health. Grants to the States for the expansion and development of community health centres have been cut by $9.7m or 12 per cent. All these represent, to us, very poor savings indeed. They may be something which the Government thinks is good as regards keeping the Budget deficit down, but they are savings in area which are very important to people on this side of the House and savings which we feel are not in the best interests of the economy, either in terms of the priorities used or the overall level of expenditure.
So much for the general level of government expenditure. This brings us from the aspect of the effect of government expenditure cuts to the failure of the Budget strategy. There is absolutely no doubt that this Government’s Budget strategy has failed. There is no way in which any person can stand up and say with integrity that the Government’s Budget strategy is working, because quite clearly it is not. The Government, in its Budget, sought in respect of output to have a rate of growth of 4.1 per cent in gross non-farm product over the course of this financial year. In Statement No. 2 of the Budget Papers it is stated: . . . from June quarter 1977 to June quarter 1978 nonfarm product is expected to grow by over 4 per cent, compared with one per cent from June quarter 1976 to June quarter 1977. It is of course the rate of growth over the course of the year which influences the prospective trend from now on in such other elements in the outlook as employment and unemployment.
It is, of course, quite true that the rate of growth does have a very important bearing on what happens to employment and unemployment. The fact is that the rate of growth has been nothing like 4.1 per cent. In fact, the rate of growth in non-farm product in the first half of the financial year- from the June quarter of 1977 to the December quarter of that year- was minus 0.6 per cent. This financial year we are supposed to have a 4 per cent growth; in fact, we have had a minus 0.6 per cent growth so far, with half the year gone. How can we possibly get the Budget strategy to work in respect of output from now on? Quite clearly, we will be struggling even to make the one per cent increase attained last year. Of course, honourable members will be aware that in the December quarter there was in fact a decline of 1.3 per cent. If anything like that sort of trend continues the Budget strategy will be very substantially off the mark.
Mr DEPUTY SPEAKER (Dr Jenkins)Order! It being 10.30 p.m. I propose the question:
That the House do now adjourn.
Question resolved in the negative.
APPROPRIATION BILL (No. 3) 1977-78 Second Reading
– I am happy to continue but I was not aware that the motion for the adjournment was to be negatived. The Budget strategy certainly will not be borne out in employment policy. This follows substantially from the fact that the output figure will be so hopelessly below target. The employment strategy in the Budget called for an increase of 2 per cent in the level of employment through the year from June 1977 to June 1978. A 2 per cent increase would equal something like 120,000 extra jobs. It is absolutely without doubt that there will be no such increase. The employment figures in respect of the employed labour force from May 1977 to February 1978, which are the latest figures one can get for this financial year, have declined by 100,000 or 1.7 per cent. The number of employed wage and salary earners declined by 22,000 from June 1977 to February 1978. Quite clearly in that area there is no possible hope of the Budget strategy of a 2 per cent increase in employment being borne out. It looks quite likely that in fact not only will there be no increase but in the course of the year there will be a substantial decrease. That part of the Budget strategy is hopelessly misplaced.
In this respect I draw the attention of the House to a table contained in the Economist of 29 April which compares the rates of increase or decrease in unemployment for various countries in the Western world. The table includes
Australia. I regret to say that Australia is the second worst of all the countries listed in our employment performance in the last year. The figures show that in the United States the percentage of population unemployed in the course of the last year fell by 1 .3 per cent; in Holland the unemployment rate remained stable; in West Germany it increased by 0. 1 per cent; in Japan it increased by 0.2 per cent; in France it increased by 0.3 per cent; in Britain it increased by 0.3 per cent; in Canada it increased by 0.4 per cent; in Sweden it increased by 0.4 per cent; in Belgium it increased by 0.9 percent; in Spain it increased by one per cent; in Australia it increased by 1.2 per cent; and in Italy it increased by 1.4 per cent. Only strife-torn Italy in the table of developed western countries had a worse performance than we did in employment in the course of the last year. That is something that really bears thinking about.
Our unemployment is not something that is being shared by most other countries. Most countries are finding it difficult to retain their levels of employment. That is for certain. The table shows that only one country had a worse performance than we did in the last year. The United States had an increase of three and a half million jobs in the last 12 months. I ask honourable members to compare that figure with what has happened in this country. Also in relation to the deficit it is clear that the Government will not achieve its objective, despite the fact that it is continuing to cut back and to make savings which we think are ill-advised. The Budget deficit of $2.2 billion is already considered by the Government as being unlikely to be attained. In fact that Budget deficit will blow out several hundred million of dollars from the $2.2 billion. The Treasurer said that this is because of various factors. He mentions customs duty revenue being less because of a lower volume of imports than was expected and also the level of inflation being less than expected. Therefore incomes are lower and less money is being received from income tax payments. What the Treasurer does not mention- this is an important factor in the blowing out of the deficit- is the fact that the recession being so much more severe than was estimated by the Government, means that the revenue attained by the Government and the expenses which it has in respect of unemployment are much higher than the amount budgeted.
It is quite clear that the total amount of unemployment benefits will be far and above what was estimated. It will be something like $160m more than the estimate. Also, less income tax will be paid simply because fewer people were employed than was expected. Also company tax payments will be lower because of the recession. With two quarterly payments made, only 42 per cent of the estimated $2.9 billion company tax has so far been collected. It appears that the total amount of company tax will be less than was budgeted for. This is what one would expect, given the much poorer performance of the economy than was anticipated in the Budget. Of course, having the Budget deficit blow out in this way because of a recession is the worst possible way in which to have an increased Budget deficit. If a Budget deficit is increased by taking measures to offset unemployment, hopefully the greater level of activity will stimulate the economy. There will be more revenue and the short term increase in the level of the deficit will be wiped out by a higher level of activity later on.
What is happening here is quite the reverse. The Government is cutting government expenditure and thereby creating a further recession which in turn has the effect of increasing the deficit. So we are in a bind which this Government will find it difficult to break out of. Overall, in respect of these major aspects, the Budget strategy can be said to have clearly failed. Only one area can be pointed to as being a real success and that is in reducing inflation. Even there one must have some savers. The Budget estimate for inflation was that by the June quarter of 1978 the rate would be down to two per cent or two and a half per cent. Clearly, already on the figure for the March quarter, the rate has been much below that at 1.3 per cent. This has been achieved partly by some special factors in food prices but also importantly through the squeezing of profit margins. The squeezing of profit margins has not come through increased wage payments- real wages are being cut back- but rather by recession. Recession reduces the level of economic activity, increases fixed costs as a proportion of units of output and therefore reduces profit margins.
If we look at the gross operating surplus of companies as a proportion of gross non-farm product over the last year and a half we can see that the level of 12.9 per cent for profit shares over the September and December quarters of 1976 and the March quarter of 1977 has dropped back to 12.2 per cent in the June 1977 quarter, to 12.7 per cent in the September quarter and to 12.4 per cent in the December quarter. Clearly in 1977 a squeezing of profit margins has been brought about by a recession as employers have been forced to absorb cost increases because of the poor level of demand. This has had its pay-off in a sense in the inflation rate, but the pay-off has been bought at enormous cost. The success the Government has had with inflation has been bought at the cost of total failure of output strategy and employment policy. Substantial costs have been incurred to pay for any gains which have been achieved in inflation.
In respect of the absorption of costs, I draw the attention of the House to a table which appears on page 22 of the survey of the Organisation for Economic Co-operation and Development which shows that in the first half of 1977 the price of imported materials used in the manufacturing industry in this country rose by 32 per cent. That increase, of course, was directly attributable to the devaluation of November 1976. Quite clearly a devaluation of that order has substantial price and inflationary effects. These have not shown up to the extent that most observers thought they would because, as I have already mentioned, of their absorption by employers in their profit margin and the inability of employers to pass on devaluation effects in a state of recession. In a sense they are still in the system. As soon as the level of activity picks up companies will be seeking to pass on those increases to restore their profit margins. So there is in the system this sort of latent inflationary impetus which will keep inflation from reducing, in our view, much below the present levels.
Apart from cuts in the level of government expenditure another factor which has been assisting the recession has been the Government ‘s monetary policy which also has been very restrictive. The Budget estimate was for an increase of 8 per cent to 10 per cent in the money supply but in fact the increase over the last 12 months has been only 6 per cent. It was deliberately kept restrictive, in our view, to contain the inflationary effect of devaluation and it was successful in doing that, but as I have already mentioned we paid the price in the areas of employment and output. Apart from inflation the only other aspect of the economy that offers any joy at present is the area of private investment, and that certainly has increased rapidly since mid- 1977, but there again one must bear in mind that this was to be expected because with the 40 per cent rate of the investment allowance being chopped back to 20 per cent in the middle of this year there is every incentive now for employers to utilise the investment allowance. So one would expect private investment to be going ahead at a decent rate at this time even though the level of economic activity is so low. But of course what is happening, as I have mentioned many times previously, is that the investment is going mainly into labour saving devices and industry is becoming much more capital intensive at a time when there is a massive unemployment problem. This in turn is accentuating the unemployment problem.
As I have mentioned previously- I will not go into details again- the Secretary of the OECD has warned that a country should be very careful about tax systems which have a bias against the use of labour. Our tax system certainly has a very strong bias against the use of labour both through the investment allowance which encourages companies to become more capital intensive and through the high payroll tax which discourages them from employing workers. The rest of the indicators show no joy whatever. The Australian and New Zealand Banking Group Ltd index shows that industrial production is at the same level in January 1978, seasonally adjusted, as it was in November 1975 and that it just got back to that level with a slight increase in the last couple of months before January 1978. So there is absolutely no increase in the level of activity from the time this Government seized office in November 1975.
Since January 1978 we have had further figures on production from the Australian Bureau of Statistics. These show that for the March quarter there was a decline in production in 1 8 of the 34 items which the Bureau monitors month by month. This indicates that production is anything but booming at the present time. Retail sales have done no more than keep up with the rate of inflation plus the rate of the increase in population, so there is no growth in retail sales. The building industry in respect of housing has been in particular trouble for a long time. The total number of approvals for new dwellings fell by 8.8 per cent seasonally adjusted for the March quarter of this year and compared with the March quarter for the previous year approvals were down by 13.3 per cent. Not only has the Budget strategy for 1977-78 clearly failed but also there are few signs of any substantial pick up in activity in 1978-79.
I would like quickly to mention something in regard to the international economy because something which has not been talked about very much in this House which is tremendously important to this country is what is happening to the international economy. The Australian Government’s attitude towards what is happening does it anything but credit, in our view. The nature of the world economy debate is on these lines: The growing world unemployment has caused alarm in many areas. More than 16 million people are unemployed in OECD member countries at the present time and the number is increasing. This has been brought about by countries deflating their currencies to reduce inflation and to overcome their balance of payments deficit. Practically all Western countries, with a few notable exceptions, are running substantial balance of payments deficits to offset the fact that the Arab countries, and in particular the member countries of the Organisation of Petroleum Exporting Countries, are running substantial balance of payment surpluses.
The OECD and the International Monetary Fund, which are responsible international economic bodies, are trying to devise a world strategy for recovery, and they have come up with two forms of strategy. Firstly there was the locomotive strategy, which envisaged the three major economies in the Western world- the United States of America, West Germany and Japanregenerating their economies and bringing the rest of the world along after them because they could more easily regenerate their economies than the rest of the world, which had greater problems in respect of their balance of payments and so on. Secondly, it was thought that perhaps to rely on the activities of the major economies would not be sufficient, and the convoy theory was developed- the theory that not only should we have those major economies being reflated and getting world activity going, but that all countries to the best of their ability should reflate so that we would all move forward together. I must say, this makes a lot of sense to me. I heartily endorse that theory.
That is not something which the Australian Government has done. West Germany and, to a lesser extent, Japan, have been the problem. They have refused to go along with this theory. They have refused to reflate their economies sufficiently and so reduce their balance of payments surpluses. During the course of this year a lot of international pressure has been brought to bear on West Germany and, to a lesser extent, on Japan to regenerate their economies and to go along with the rest of the world in providing some semblance of united economic strategy, so that we could all reflate back towards something like normal levels of activity and reduce unemployment levels.
The United States has played a good role in this respect. At the expense of a falling dollar, it has stimulated its economy quite enormously. Although that has had a bad effect on the balance of payments, the United States has let the dollar devalue, forcing further revaluations of the German mark and the Japanese yen, reducing the export capacity of those countries and therefore reducing their surpluses and allowing the rest of the world a better chance to export. This policy on the part of the United States, which is self-sacrificing in some respects- in respect of the value of the dollar- is a goodneighbour policy in respect of the rest of the world. All this seems to be quite a sound strategy.
Australia would benefit if the rest of the world could have a higher level of economic activity, which is what the United States, the Organisation for Economic Co-operation and Development and the International Monetary Fund have been trying to achieve. If Japan were operating at a much higher level of activity, it clearly would buy more of our goods. We have already seen the enormous problem we face in respect of our exports of coal and iron ore, where not only the volumes but also the prices of our exports of those commodities are being reduced. So Australia ‘s economic interests are very much tied to a reflation- a regeneration- of economic activity in the rest of the world.
What has been Australia’s response? It has been pathetic. Australia has attacked the United States policy. The Prime Minister (Mr Malcolm Fraser) did that at the Commonwealth Heads of Government Regional Meeting earlier this year and criticised it for being inflationary. We are in no position to criticise the United States. It has created nine million jobs in the past three years. In Australia no more jobs at all have been created in the past Vh years of this Government. This Government, the Fraser Government, supported West Germany in its refusal to reflate. Is that something of which we should be proud? West Germany is being the bad neighbour of the Western world at the present time, and Australia is the only country which is strongly supporting it. At the Mexico City meeting of the International Monetary Fund the Minister for Primary Industry (Mr Sinclair) was the strongest supporter of West Germany. That is totally against Australia’s interests and is totally against our export interest. He is selling the farmers down the drain with that sort of policy. The European Economic Community is not going to buy more goods from us if the level of activity does not pick up. It is madness to expect otherwise.
Mr DEPUTY SPEAKER (Mr MillarOrder! The honourable member’s time has expired.
Debate (on motion by Mr McLean) adjourned.
Trade Unions- Coal Industry Motion (by Mr Macphee) proposed: That the House do now adjourn.
Mr FitzPATRICK (Riverina) (10.49)-Last Thursday night the honourable member for Phillip (Mr Birney) spoke about Anzac Day and about the Latham case at Broken Hill. I wish to speak about these matters in the same order. Anzac Day has always been conscientiously observed in Broken Hill. I am proud to say that many of the people who take part in the observance of Anzac Day are tradesmen and members of the Barrier Industrial Council. It would take too long for me to mention all their names. Three names come readily to my mind. They are Lew Johnston the State member for Broken Hill and past President of the Broken Hill branch of the Returned Services League, Bill Moroney and the late Jack Hoare. They have been prominent members of the RSL and tireless workers for war widows and legacy children. These three gentlemen also have been outstanding and prominent unionists and members of the Barrier Industrial Council. I believe that it was very insulting for the honourable member for Phillip to say that such men as these have jackbooted the sacred principles of Anzacs into the dirt.
It would be foolish for this House to set itself up as an industrial court because it must be admitted that we cannot even decide what time we should sit in the morning or what time we should take our tea break. But because the honourable member for Phillip claims that Mr Latham was victorious in every legal forum open to him, I ask the unbiased members of this House to consider what Justice Cahill had to say on this very point. I should like to refer to Mr Justice Cahill ‘s decision of Friday, 17 June 1977. I might say that this judgment is available for anyone who wishes to inspect it. Page 9 of the judgment states:
It also seems to me, with the benefit of hindsight, that Mr Latham’s insistence that his labourer perform the work was unwise. It was he, Mr Latham, who had been spoken to by the foreman about ensuring that the cleaning work was performed each shift. He knew that the practice, both on his shift and on the alternate shift, was for the tradesman, not the labourer to do the work, and he surely must have expected trouble when he gave his instruction to Mr Wall.
It states further:
In the present case, Mr Latham claims that his membership of the ASE, a union which is not now, and, to my knowledge, has never been, an affiliate of the B1C, should be regarded as sufficient union qualification to enable him to continue working at the City Council. Mr Latham is not, of course, a conscientious objector to union membership- on the contrary, he is a strong and active unionist. He claims the right, however not to belong to the union appropriate to his calling operative in Broken Hill, but to belong to an outside union, and that membership of that union should be sufficient to satisfy all requirements for employment in the town.
I cannot agree with that viewpoint. Having regard to the long and strong tradition of unionism in Broken Hill; the accepted tradition whereby unions, in order to be effective in the town, are to be affiliated with the BIC and, in this particular case, the Preference to Unionists Clause of the City Council agreement, which gives preference of employment to members of affiliated unions, I think that it is quite impracticable to regard ASE membership as sufficient for employment under that agreement. To do so would be to fly in the face of Broken Hill industrial tradition and practice and, in addition, would be quite contrary to the spirit, if not the letter, of the agreement concerned, an agreement freely negotiated with the employer by the BIC and the affiliated unions concerned.
There are many people in Broken Hill who say that the Latham case would have been settled long ago except for outside connivance. I wish to inform the House that that is my view. I believe that this House should concern itself with the affairs of the nation instead of trying to deal with industrial matters which are better suited for determination by people who are trained in that field.
– I bring to the attention of the House the difficulties the coal industry is experiencing and about to experience in New South Wales. I will show how the Labor Government there does not appreciate the situation, is not prepared to make a decision and is acting in a manner contrary to the good of New South Wales and Australia. Let me start with mining under the reservoirs in the southern and western coalfields. An expert study costing $3m has been completed by Mr Justice Reynolds. It listened to experts, from all over the world, who have mined under water. Mr Justice Reynolds concluded that there was no reason mining should not take place and he laid down very strict guidelines on the methods to be used. This report is now being used around the world as the complete reference for mining underwater.
It seems, however, that the Metropolitan Water, Sewerage and Draining Board and the New South Wales Minister for Public Works, although jointly commissioning this judicial inquiry, are not prepared to accept its findings. They say that there is a miniscule chance of a collapse causing leakage. The findings stated was that there was little chance of this happening, that if the laid down procedures were used they would effectively negate what little chance there was of this happening. In fact, it would take an atomic explosion or a major earthquake to cause leakage and both of these would break the dam wall itself thus releasing all the water anyway. Taking the worst possible case- a catastrophic situation- if there was a collapse or a crack, water flow would soon stop as rubble and silt washed into the opening. It takes large concretelined passageways to maintain fast flows through rock. It should be borne in mind that the impounded waters have been partly undermined already with pillar sizes less than those proposed and without any problem.
What is the situation if these areas cannot be mined? The first result will be that some mines will run out of coal and have to lay off men. I cite as an example the Wongawilli mine at which 350 men may have to be laid off next month. The next result- this affects the mines, New South Wales and Australia- is that one-quarter of the coal reserves of the southern and western coal fields will be lost, essentially for all time. The South Coast coal resources are the State’s only source of hard coking coal which is essential to the furnace designs at Port Kembla and to the export market of quality coking coal. Now I come to deal with the loading of coal. There is a constant waiting line of ships waiting to load at Port Kembla. This is causing major problems with our overseas customers. The situation has been known for some years and it awaits a definite decision from the New South Wales Government. It is tied in with the location of a new loader at White Bay, Botany Bay or Port Kembla and with a mode of transport- rail or road. It is also tied in with who will pay for what. Until the New South Wales Government makes a decision, contracts will be in jeopardy, sales cannot increase and unemployment will increase.
Let me make it clear that the matter is not a case of New South Wales versus Queensland. It is a political decision which Premier Wran finds hard to make because he made deals with the left wing and in case the decision he makes upsets his chances even more. It is a straight out matter for the New South Wales Government to make a decision for the good of New South Wales and Australia.
Question resolved in the affirmative.
House adjourned at 10.59 p.m.
Cite as: Australia, House of Representatives, Debates, 8 May 1978, viewed 22 October 2017, <http://historichansard.net/hofreps/1978/19780508_reps_31_hor109/>.