Arthur Sinodinos (NSW, Liberal Party) Share this | Hansard source

Thank you for that powerful speech, Senator Edwards. You stole all my best lines! That having been said, there is so much in this government's approach to taxation policy that even I can make a contribution to this debate. The first point I would like to make is that I am surprised that the Tax Laws Amendment (2012 Measures No. 2) Bill 2012 contains a number of measures which, I suppose, taken together almost exemplify this government's approach to taxation policy generally. We are looking at a series of measures which impose retrospective elements and a series of measures which impose onerous new obligations. Thankfully, we have been saved one measure which was withdrawn in the House of Representatives regarding withholding tax on managed investment trusts. This goes to the heart of the way that this government does taxation policy and people in the community and people who are out there listening to this debate should be very concerned about the approach that the government takes to these matters.

I turn to the Pay As You Go Withholding Non-compliance Tax Bill 2012 and schedule 1 of the Tax Laws Amendment (2012 Measures No. 2) Bill 2012, which makes directors personally liable for unpaid superannuation, stops director penalties being discharged by placing a company into administration and makes directors and associates liable for PAYG withholding non-compliance tax where a company has failed to pay. Ostensibly, these measures are directed at phoenix like activities. Those of us on this side of the house fully support efforts to stop companies being put into administration in such a way so as to remove them from their lawful obligations. We do not like phoenix activity. People such as Senator Fierravanti-Wells, in a previous profession as a solicitor, including during the time she spent with the tax office, was very much involved in trying to unearth examples of that sort of activity and combating it. No-one has an argument with that, but here we have a bill which is a sledgehammer to crack a nut. The reason I say that is that we are putting further onerous obligations on directors and I think this is where there is an element of unrealism in the approach of the government.

The reason I say that is that, as part of my role as Chairman of the Coalition Deregulation Taskforce, I have been talking to companies across the country, to top company directors and also to people who might be said to be a bit more objective about the role and responsibilities of company directors. They are saying that company directors today face so many obligations that there is a concern about attempts to keep increasing those obligations, particularly in circumstances where a director may have no direct control over the matter that is of concern.

The Australian Institute of Company Directors have identified 700 separate pieces of legislation or regulation that they believe imposes obligations on company directors. So things are getting to a stage where many people are hesitating to become directors because of the obligations they are being asked to take on. That is not necessarily a reaction to the specific points being made here but it is like all these things: if you add further regulation or layers of regulation on top of what is, if you like, an iceberg of regulation, they can be the straw that breaks the camel's back. Many directors give us that feedback. So often with this government, with all respect to my colleagues on the other side, there seems to be this lack of understanding of how the corporate sector works.

We saw an important example of that when this government rushed through measures to do with employee share ownership, which were the subject of considerable brouhaha after they were introduced as part of one of the budgets a few years ago, were considerably unrealistic and did not seem to understand the underpinnings of these schemes. I think they had to be substantially redrawn and modified. That was a concern, because that betrayed a mindset of not understanding the way some of these schemes work in the private sector. We as a parliament and as, if you like, stewards of the public interest have an obligation to ensure that private operators, private interests do not in some way subvert the public interest or get an undue tax advantage. But the way that those bills were structured and the way those schemes were attacked showed a lack of understanding of how the corporate sector works. Again, I think there has been a lack of understanding here about the obligations already being put on directors. As I said, we on this side of the house support targeting phoenix type activities.

One issue with the bill, as I see it, is that we keep having ad hoc piecemeal measures introduced to deal with phoenix activity, but we have yet to see a comprehensive definition of 'phoenix activity'. The government stands accused of having continually failed to target measures applying to directors of phoenix companies, without imposing onerous and new obligations on directors of the vast majority of companies that continue to comply with their legal obligations. This is all a matter of perspective and proportionality. This idea that the business sector out there is spending its whole time trying to find ways to get around the laws of the land is not right. In every section of society there are bad apples and we should go after them. But in business you have to build trust with your customers, suppliers, employees and others. In building trust you have to show that you will meet your obligations.

Every parliament and every government have an obligation to understand the broader role that trust plays, particularly in a market type society. That is why, as I say, there is a lack of proportion, a lack of perspective in some of these measures. The coalition will continue to strongly oppose fraudulent phoenix activity and we will support all appropriate measures to stamp out this practice. However, this bill imposes too many obligations on too many good people who are trying to do the right thing.

In relation to a second set of measures, the changes to the taxation of financial arrangements provisions, let me first make the point that TOFA, as it is known in the vernacular, was a long time coming and very complex in the way it was put together. That is not a reflection on the people who put it together. We are talking here about an inherently very complex set of arrangements. No-one on this side of the chamber underestimates the difficulty of framing measures dealing with aspects of the taxation of financial arrangements. But that said, what we are dealing with here is a very clear, if you like, abrogation of the government's duty in that they are introducing changes which are retrospective to the existing tax law. These are being done both as a revenue protection measure and as a revenue gain over the forward estimates. They relate to a consolidation regime which treats a group of wholly owned or majority owned companies and other associated entities such as trusts and partnerships as a single entity for tax purposes so that the head of the entity group is responsible for all or most of the group's tax obligations, including the lodgement of tax returns and the payment of tax obligations.

This bill operates to retrospectively reverse the changes made to the consolidation regime in 2010:

For corporate acquisitions that … took place before 12 May 2010—

which, I think, was budget day—

the changes prevent the retrospective operation of unintended effects of, and perceived weaknesses in, amendments to the law that were made in 2010. These changes are necessary to protect a significant amount of revenue that would otherwise be at risk.

In other words, this is a retrospective tax increase to correct legislative errors the government now accepts that it made when changing the consolidation tax cost-setting arrangements in 2010—clearly a mistake of the government's own making. The government had been warned before the 2010 changes were introduced that it had got this wrong, but it refused to listen. This is of a pattern where consultations occur with the private sector but where, essentially, you sometimes wonder whether it is for form's sake or for going through the motions or for ticking the box, as opposed to having a genuine dialogue and listening to each other. There is nothing worse than having some sort of dialogue of the deaf when it comes to consultation between government and stakeholders.

Sometimes, unfortunately, I find that governments can bring the attitude to the table that the people on the other side, because they are in the private sector, are potentially tax evaders, tax dodgers and the rest and therefore they should be treated as being guilty and have to prove their innocence.