Craig Emerson (Rankin, Australian Labor Party) Share this | Hansard source

The Bankruptcy Legislation Amendment (Anti-avoidance) Bill 2005 is welcomed by Labor but it has been a long and sorry period of time coming forward. Thank goodness it finally has. As the member for Gellibrand has pointed out, Labor continued throughout a period of five years to provide concrete and very constructive suggestions of how the government might deal with this problem of high-flying bankrupts—very often barristers—who had been able to avoid tax and other liabilities while maintaining lavish lifestyles by continuing to enjoy property that they had put in the name of a third party, whether it be a family member or a related company. For a very considerable time the government rejected Labor’s suggestions but, in this piece of legislation, belatedly the government has picked up a large number of our suggestions. Of course we welcome that.

The legislation is indeed an attempt to cut off the use of bankruptcy by high-flyers to avoid their fair share of tax and to avoid other debts that they may have accumulated with creditors. The problem was identified back in 2001; here we are, in 2006, five long years later. Indeed, five years after a task force report, the government still had not come up with workable legislation until the introduction of this bill.

I will not go through all of the provisions of the legislation in detail, but certainly Labor welcomes the increase in the period from two to four years of clawback from related entities. By that, I mean that at present the transfer of property to an entity cannot be voided if it occurred more than two years before the bankruptcy, and the transferee can prove that the transferrer was solvent at the time. The bill before us proposes to amend this to provide for a four-year period. That means that it is more likely that the authorities can prove that these were sham arrangements with the purpose of avoiding tax and other obligations. Of course we welcome that. There is also a provision to allow clawback of property hidden in the name of a natural person. Labor certainly welcomes that along with the other provisions.

As I said a moment ago, the scandal underlying this legislation was identified as early as 2001 when barristers in particular were shifting assets into the names of their spouses or related corporate entities in order to avoid paying tax, or certainly avoid their fair share of tax, while continuing to enjoy lavish lifestyles. I have no problem if people want to enjoy a lavish lifestyle, but they should not enjoy it at taxpayers’ expense. They should pay their fair share of tax. I remember the Sydney Morning Herald, amongst other media outlets, did a very good job in exposing this rort.

I fear, though, that this is but the tip of the iceberg. I am not asserting that these very same barristers are involved in a range of other activities—I am not sure. But we do know from the most recent annual report of the Australian tax office that it has been compelled to establish what it calls a ‘serious non-compliance unit’. It says in that annual report that unfortunately there has been no shortage of work for this newly established unit. The purpose of the serious non-compliance unit is to target in particular high-wealth individuals. I have a great sense of foreboding that the tax avoidance and tax evasion that is going on here in Australia in 2006 is no less rampant than it was during the notorious bottom-of-the-harbour schemes of the late 1970s and early 1980s.

I have been on a number of parliamentary committees where you get a window into the sorts of unscrupulous, unethical and immoral activities that many high-wealth individuals have been engaging in. For example, we conducted a parliamentary inquiry into employee share ownership plans. A report was commissioned at the invitation of the minister of the day. The idea was to examine whether the interests of employees might be aligned more closely with the interests of their employers through enhanced share ownership arrangements. But a little bit like the painters and dockers royal commission back in the early 1980s, while we were looking at what seemed to be one issue we discovered another. The issue back in the 1980s with the painters and dockers union was in fact rampant tax avoidance in the form of the bottom-of-the-harbour schemes. When we were innocently looking at employee share ownership plans, we discovered that what was rampant was the use of executive share plans—that is, company executives being able to take a very substantial, even an overwhelming, part of their remuneration in the form of share options and then being able to minimise their tax through that device.

Sadly but not surprisingly, the government members of that particular committee saw this as fairly legitimate activity and in fact proposed ways of making that activity even more attractive. But the Australian people can always be assured that the Australian Labor Party will not join the coalition in condoning and providing greater rewards for tax avoidance activity. On that occasion we produced a dissenting report, and to the credit of the Treasury officials of this country they obviously advised the Treasurer not to go down that path, not to open up new loopholes through which company executives could dive, avoiding their fair share of tax. As a result, the recommendations of the government members of that particular committee have not been picked up by this government. I said a moment ago that I am deeply concerned that we are seeing the same tax morality in 2006 as was prevalent during the notorious bottom-of-the-harbour schemes back in the early 1980s. The reason I say that is that everywhere we look we see evidence of large-scale avoidance and evasion by high-wealth individuals.

I think, as the Australian newspaper points out, that it is probably not the high-wealth individuals who are on the top marginal rate of income tax. In fact, some work that has been done by the Australian newspaper, using the HILDA survey analysis, suggests that high-wealth individuals are probably paying an average income tax of around $28,000 a year. There is no doubt that John Garnaut of the Sydney Morning Herald has unearthed, through good investigative reporting, cases of not only rampant tax avoidance but downright evasion. The government has been dragged kicking and screaming to the mark, as it was during the notorious bottom-of-the-harbour schemes, in order to do something about that.

A welcome development was reported in the Australian Financial Review today. It seems that the government might be finally getting around to closing off some of the arrangements with Bermuda—that great Bermuda Triangle into which the dollars of lots and lots of Australian taxpayers are disappearing every year. The tax havens around the world are being used by high-wealth individuals in this country. They are being used ruthlessly and relentlessly by high-wealth individuals.

The member for Hunter exposed just in the last couple of weeks, in relation to the Australian Wheat Board, the most extraordinary development—that Australian taxpayers have unwittingly subsidised $90 million of kickbacks to Saddam Hussein. The Howard government is the best friend that Saddam Hussein has ever had—certainly to the tune of $300 million. But $90 million of that came out of the pockets of Australian taxpayers because the AWB successfully claimed those kickbacks as a tax deduction. The government seems blissfully unconcerned about that. It sees it as a legitimate sort of activity. The member for Hunter has said time and again that these sorts of facilitation payments should not be tax deductible. Every decent, fair-minded Australian would be outraged at the suggestion that they had unwittingly contributed $90 million of the $300 million that went into Saddam Hussein’s pocket from the Australian Wheat Board.

It is everywhere you look, whether it is the Bermuda Triangle or the other tax havens around the world that are being accessed by high-wealth individuals, or whether it is the barristers who live high on the hog and then, when the tax bill comes in, declare themselves bankrupt, put their assets in the names of their spouses or some other entity and get away with it. At last, shamed by the Labor Party, after six years the government has finally gotten around to doing something about barristers evading and avoiding their fair share of tax.

No wonder Australians pay so much income tax—because high-wealth individuals do not pay their fair share of tax. A key reason for that is that this government has made the income tax system so complex. It has created in just 10 years 100 more tax concessions. In the first 60-year history of the Income Tax Act, 170 special tax concessions were created. But in just 10 years of the Howard government another 100 were created. Why? Very often it was to support tax minimisation and tax avoidance by favoured constituencies so that their accountants could dive them through the loopholes deliberately created in the income tax system by this government.

That is why we have high income tax rates in this country: honest taxpayers are paying the burden that has been shifted onto their shoulders by wealthy, dishonest Australians, most often with the full concurrence and support of this government in creating so many tax loopholes and such complexity in the Income Tax Act. The Treasurer has announced a special inquiry so that he can work out what is going on with the Australian tax system. He has had 10 long years to work out what is going on with the Australian tax system. I can tell him that this is the highest taxing government in Australia’s history. In the year 2000 it brought in a special new monster tax—the orphan tax—which is collecting more than $36 billion a year. The day it was born in this parliament, the government said, ‘It’s not ours; it’s someone else’s. It’s a state tax.’

The Commonwealth Statistician says that the GST is a Commonwealth tax. The Auditor-General says that it is a Commonwealth tax. According to the Treasurer, the whole purpose of the GST in this great tax adventure, this streamlined A New Tax System for a new century, was to fund reductions in income tax rates, yet it has done nothing of the sort. Every year this government is whacking ordinary Australians with bracket creep and using the proceeds to become the highest taxing government in Australia’s history, to provide welfare for the wealthiest people in this country. Last night, a Channel 7 story showed that millionaire couples in Vaucluse, Double Bay, Edgecliff, Rose Bay and Kirribilli are receiving family tax benefits. That is why ordinary people are paying so much tax.

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