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P R B M E  MINISTER

FOR MEDIA ÃÂ  SUNDAY. SEPTEMBER 26 19 82---------------------------  <2D j  -------------- : ---------------------------------------------------—

ELECTORATE t a l k  .

The Government is determined to get rid of the cancer of  tax evasion, and blatant artificial and contrived tax . avoidance schemes. .

Already.' the Treasurer, John Howard, has done more to .   eliminate tax avoidance and evasion schemes than any  Treasurer in the history of the Commonwealth. Some of.  the rewards that honest tax payers are reaping from the

Government's unremitting campaign against tax evasion .   are particularly evident,:ih. this year's budget. For the  first time in many years,  the Commissioner of Taxation . has said that it will not be-necessary to make allowance

in income tax revenue, estimates in the budget for revenue  lost through tax evasion. Indeed, hundreds .of millions of  dollars of extra revenue will be collected this year from  measures taken against avoidance and evasion. .

Taking out that extra revenue to be collected from tax  dodgers there is actually a fall in real terms in tax .   collection. Clearly, the measures we have introduced . are having an impact on tax levels faced by honest tax

payers, and there can be no doubt that the measures have .   contributed significantly to the Government's ability to  give the tax cuts which will start from November 1. .

One of the measures that we are introducing is designed  to allow the Government to recoup tax lost as a result of .   the so-called bottom-of-the-harbour schemes. These schemes  were particularly unpleasant, and particularly fraudulent.

They always involved some people in some parts of the  transactions acting illegally.  Let me give an example of  how a bottom-of-the-harbour operation worked, an example  drawn in its broad outline from the McCabe Lafranchi Report: A company has made a current year trading profit of about

$750,000 on which company income tax should eventually  be paid.  Including that current year profit, it,has a total  "cashed-up" value of about $1.1 million. That is, when all  its assets are sold, and the proceeds put into the company's  bank account, there is the amount of about $1.1 million in

that account. . .  .

The company is then sold for about $1 million.and that  $1 million is then divided between the company's original  shareholders. The other $100,000 then goes to the promoter  or to the person who did the deal Ã¢ÂÂ  The $1 million represented  capital to the original shareholders.

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We need to remember that in. the particular example there  was about $750,000 which was current year profit on which  taxes should have been paid but on which no taxes had been  paid. No allowance was made for meeting the tax either by

the original shareholders or by the purchasers.and that is  where the fraud came into the scheme. .

You can see that there was a lot of money involved.,It was a  fraudulent way of avoiding paying company, tax. At some point the  scheme had to involve fraud.  At some point the scheme had . to be illegal. These became known as bottom-of-the-harbour -schemes because in some cases the documents were literally  dumped into the harbour.

I think you can see how unfair all.that is, how unreasonable  that is. Why should people be able to profit by that kind  of device? Why should the Government and honest tax payers  put up with losing the' tax that ought to have been paid -  which in the example that I have given could have been

over: $340,000? '

The practice was stopped by a special Act of Parliament  in 1980 and that legislation provides for very severe "  . criminal penalties of up to five years in gaol. Schemes  of this kind corrode the whole basis of Australian society. There are some who say that they went into such schemes Â·  .  .

innocently , not knowing that-something-.was wrong.  But the . essence of these schemes is that the price paid to the  shareholders was too high because no allowance was made  for paying tax. Some people involved in this practice went  back to the trough time and time again. The Government made

up. its mind that it was going to collect the ..tax that should  have been paid, and we are going to collect that tax from  the people who profited from the device. That.is, from the  shareholders who sold the company and from others who

benefited from the deal. I would think that most Australians . would agree that that was fair enough.

There is an element of retrospectivity in the legislation,  that John Howard introduced last Thursday and I know there  are many people who intensely dislike any idea of retrospectivity  A s .a broad principle, I. :and all members of the Government would

support that view. It is an important principle. But it is  not the only principle by which we must govern. There is, above  all, the principle of fairness. The Government represents  all Australians.Its duty is to govern fairly for all  Australians. At elections,  people divide up their vote

between political parties. But it is the duty of governments  and of members of Parliament to represent all Australians. . That deeply held conviction is the very foundation of the  Liberal Party. It is clear that the Government had to make

a difficult choice between supporting absolutely the principle  of no restrospective legislation or maintaining its support  for the principle of governing fairly for all. Australians.

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In this instance, in relation to the bottom-ofr-the-harbour  schemes,  we made the decision that we must place the principle  of fairness above the principle of retrospectivety.  I hope .   that the legislation will be given a thoughtful but  nevertheless speedy passage through Parliament so we"

can get on with the business of collecting taxes that  should have been paid. -....

There is no doubt that the legislation will be passed. My Government will not. stand by and see average Australians  ripped off by a very few mean and greedy individuals who  have been very unAustralian in their attitudes and practices.

There is one final point I.want to make, and that concerns  Mr Hayden's'cowardly and vicious attack on Mr John Reid,  .  . following his appointment as Chairman of the Review of . Commonwealth Administration. The Commissioner of Taxation

has given Mr Reid a clean bill of health, jand that fact has  now .been widely publicised. Mr Hayden began a smear campaign  against Mr Reid without any attempt to have his implied  allegations checked. The.record has been set straight,  but Mr Hayden seems>, J determined not to accept the facts.

He seems determined to continue the smear.  He can gain. , no credit from that.

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