Ursula Stephens (NSW, Australian Labor Party, Shadow Parliamentary Secretary for Science and Water) Share this | Hansard source

I hardly think so. While Senator Murray commented about the extent of our current tax legislation, the fact that we are here debating the repeal of inoperative provisions is testament to the fact that we have one of the most complex taxation systems in the world, and something desperately needs to be done about it. In fact, what we believe is that in reality the Tax Laws Amendment (Repeal of Inoperative Provisions) Bill 2006 is an admission of enormous failure by the government when it comes to taxation legislation. Since the Howard government came to office the tax act has actually expanded by some 10,000 pages, and this has made the system much more complex and more confusing for taxpayers and has increased business costs.

In desperation the government asked the Board of Taxation in 2003 to identify inoperative provisions of the tax act. The board reported to the Treasurer in October 2005, identifying some 1,900 redundant pages of legislation. We need to be very clear about this legislation that is before us today: this is just taking away provisions that do not apply. It does not consider provisions that do not work well or are not used but provisions that have no legal effect. The Board of Taxation found 1,900 of these pages—an enormous number. It was a massive admission that 20 per cent of the tax act in Australia was of no legal effect, which is quite a scandalous record in tax legislation.

But then Treasury added a number of redundant sales tax acts to the list, leading to a reduction of some 4,100. That is not 4,100 pages reduced in the income tax acts at all, so the kinds of claims that are being made about the legislation and what it is going to achieve for us are quite complicated and a bit disingenuous. Major commercial publishers have agreed to print an archived volume of repealed provisions, so even these repealed provisions will not actually disappear from the shelves of tax practitioners. In addition, savings provisions come into operation by virtue of the Acts Interpretation Act. A repeal does not affect the operation of the act while it was in force. So the claim that 4,100 pages have been cut from the tax act is in fact quite an exaggeration.

However, the major problem is that repealing redundant provisions does not actually reduce the complexity of the act. The complexity in the operation of the tax system is naturally driven by the provisions that are operative. So in repealing the inoperative provisions the Treasurer, Mr Costello, is simply sanding back some of the rough edges of the structure. He is not reforming its fundamental shape.

The economic benefits from this measure are not significant, whereas real reductions in the compliance costs of tax for small business would enhance returns, economic growth, employment and tax revenue and would also lead to lower prices in a more competitive market. So in fact this bill is a missed opportunity for the Howard government. Although Labor welcomes the bill, we are calling on the government to actually do something that makes the operative provisions of the act work better. This, we believe, is just a half-baked effort. It does not go far enough.

Importantly, though, it should be noted that in some cases in this bill the government is not purely repealing provisions but also changing the law in only small ways. In the previous debate, we heard what the effect of a small change to an act can be and how it can have quite significant impacts on small sectors of the community. The best example is the change to section 26(e), assessable income of goods in kind. This has been rewritten and the operation of the act changed in a minor way. The point is that this bill is really mistitled. When savings provisions and rewrites are considered, the bill involves much more than the repeal of inoperative provisions.

As I say, the best example in this legislation is section 26(e). This makes goods received in kind assessable income, but it is never used due to the operation of the fringe benefits tax regime. What should really happen is that the 26(e) regime should be repealed and consequential amendments made to the fringe benefits tax laws. But the government has not done this; it has just rewritten 26(e). It is not much of a rewrite at all, actually. In fact, it certainly does not reduce the act at all. Again, it is an example of another wasted opportunity.

I would like to make some comments now about the Taxation Institute of Australia’s report, provocatively entitled Beyond 4100. The contents certainly justified the title, as the report indicates a range of areas in which real reform of income tax law can proceed. The Beyond 4100 proposals are about substantive tax reform, in contrast to which the current bill appears rather cosmetic. Some of the recommendations of the Beyond 4100 report are more easily accepted than others. Still, the most conservative and uncontroversial recommendations request that provisions that are either almost never used and cannot be enforced should be repealed or redrafted. Labor thinks the report is an excellent contribution to the debate and now formally indicates its support for some of the less controversial and more easily implemented elements of the report.

I move the second reading amendment standing in my name:

At the end of the motion, add:

        “but the Senate:

        (1)    Notes that while technically operative, the following provisions of the Income Tax Assessment Act 1936 (ITAA) are unnecessary and should be repealed;

             (a)    in the ITAA, 26(b), 26(e), 38 to 42; 94, 102, 108, 109, Part III Div 3 Subdivision D, Part III Div 6A, Part II Div 9C, and Part III Div Subdivision 11B; and

             (b)    in the Income Tax Assessment Act 1997, 15-10, 15-15, 15-20, 15-30, 25-10, 25-35, 25-40, 25-45, 26-30, 26-35, 26-40, Part 2-5 Division 32, Part 3-1 Subdivision 110-B, Part 3-3 Division 149, and Part 2-42.

        (2)    Notes that the following provisions of the Income Tax Act 1936 (ITAA) are rarely used or enforced;

             (a)    ITAA, 95A (2), with consequential repeal of 98(2) and amendment to 99 and, Division 6D of Part II (ultimate beneficiary non-disclosure statement); and

        (3)    Calls on the Government to present to the Joint Committee on Public Accounts and Audit, within 6 months, proposals for the redrafting or repeal of these provisions to further simplify the operation of income tax law”.