Chapter 13 - Financial legislation

When requests are required: (a) bills imposing taxation

A bill for imposing taxation may not be amended by the Senate, and any amendments to such a bill moved in the Senate must take the form of requests to the House of Representatives to amend the bill.

In order to meet the requirements of section 55 of the Constitution, bills establishing schemes of taxation have been divided into bills imposing taxation and dealing only with the imposition of taxation and bills dealing with other matters associated with the taxation scheme such as provisions for the collection of the taxation and the enforcement of payment.

Until 1993, the principle was generally followed in the presentation of legislation, and accepted by both Houses, that only the bill which contained the expression “tax is imposed” was a bill imposing taxation within the meaning of sections 53 and 55, and any other bills dealing with other aspects of taxation were not bills imposing taxation within the meaning of those sections.

The form of the government’s major taxation legislation arising from the 1993 budget, however, led to claims that it breached section 55 of the Constitution, and to a reconsideration of the application of section 55, and consequently of section 53.

Section 55 requires that laws imposing taxation deal only with the imposition of taxation and only with one subject of taxation. Over many years government drafters, who classify government bills (see below, Decision as to amendments or requests), taking clues from expressions used in judgments of the High Court under section 55, had drawn a distinction between bills imposing taxation, bills dealing with the imposition of taxation (for example, setting taxation rates) and bills dealing with taxation generally (for example, providing for assessment and collection machinery). Only the bills actually imposing taxation had been regarded as subject to the restrictions of section 55. This meant that there were some bills which, by affecting assessment and rates of taxation, had the effect of increasing the incidence of taxation, but which were regarded as technically not imposing taxation, although the government drafters had not been consistent in their classification of such bills. This had also meant that bills technically not imposing taxation could be amended in the Senate by way of direct amendment, rather than requests to the House of Representatives for amendment, under section 53 of the Constitution. The sales tax legislation, for example, had always consisted of acts which imposed the sales tax and acts which, in effect, set the rates of tax for various categories of goods, and bills amending the latter had been treated as amendable in the Senate.

The separation of bills imposing taxation and bills setting rates of taxation had been accepted in the past, and had been supported, in effect, in the Senate, because it allowed the Senate to make amendments instead of requests for amendments. This past acceptance, indeed support, by the Senate of the practice of separating the bill imposing the tax and the bill, in effect, setting the rates of tax, when the practice reinforced the ability of the Senate to make amendments to taxation proposals, is best illustrated by the case of the Sales Tax Bills 1981 (8/9/1981, J.474, 16/9/1981, J.503, 23/9/1981, J.521). Senators disputed the inclusion in those bills of provisions traditionally included in the amendable bills. The Senate, before dealing with the bills in committee of the whole, passed a resolution declaring that its decision to make requests for amendments to the bills did not indicate an acceptance that matter included in the bills was properly included in bills imposing taxation. (See also rulings of President Givens, SD, 10/12/1921, p. 14274, 19/7/1923, p. 1302; the Income Tax Bill 1943, recounted in ASP 6th ed., 1991, pp 592-3; ruling of Acting Deputy President Sibraa, 4/5/1984, J.822-3; and the amendment made by the Senate to the Taxation Laws Amendment (Rates and Provisional Tax) Bill 1990, 17/10/1990, J.346.)

The Taxation (Deficit Reduction) Bill 1993, however, drew attention to a significant consequence of this technical classification of bills: provisions which affected the levels of various taxes could be combined into one bill without breaching section 55, if the views of the government drafters were correct. The bill increased the rates of several taxes by this means, but it was classified by the government drafters as a bill which technically did not impose taxation.

The bill had the virtue of providing a reductio ad absurdum of the established classification of taxation bills, and an opportunity of considering that classification properly. As exemplified by the bill it could be seen to be based on an artificial distinction which, if carried to its logical conclusions, undermines a rational interpretation of the constitutional provisions. If accepted as it was manifested in this bill, it meant that bills which propose to increase significantly the levels of taxes may technically not be bills imposing taxation, may be introduced in the Senate, may be amended by the Senate (but presumably not to increase rates of taxation: a subsidiary absurdity, see below), and, most significantly, may be combined into one bill.

It was clear that if a bill such as this were to be enacted and were challenged in the High Court, it is possible that the Court would reject the technical and seemingly paradoxical classification of bills relied upon by the government drafters, and find that bills of this sort are bills imposing taxation and therefore subject to the limits of section 55. This the Court could do without setting aside, but by developing, its previous relevant judgments, and by having regard to the plain words and stated purposes of sections 53 and 55.

Because of the political significance of the changes contained in this bill, it was immediately questioned. The Leader of the Opposition in the Senate, Senator Hill, tabled two legal opinions to the effect that the bill would impose taxation and would violate section 55 if enacted (30/8/1993, J.396). The Leader of the Government in the Senate, Senator Evans, then tabled an Attorney-General’s Department opinion, in anticipation of an order for the production of documents of which Senator Hill had given notice, which expounded the government’s advisers’ views on the classification of taxation measures (31/8/1993, J.412). Senator Hill later tabled a supplementary opinion criticising the government opinion (2/9/1993, J.440). Questions relating to sections 53 and 55 of the Constitution and the bill were referred to the Legal and Constitutional Affairs Committee on the motion of Senator Hill (31/8/1993, J.420). The committee found that there was a substantial risk that the bill would be held to be invalid under section 55. To the motion to take note of the report an amendment was passed, calling upon the government to heed the conclusions of the report (27/9/1993, J.498). The government had already announced that it would divide the bill into a number of separate bills to avoid the possibility of the legislation being held to be invalid.

The new bills were rushed through the House of Representatives and received by the Senate. They consisted of a bill making the assessment-type changes to taxation, a “test bill” designed to provoke a legal challenge to determine the question of whether an alteration in rates of taxation is an imposition of taxation (this bill dealt with increases in the rates of fringe benefits tax and tax on friendly societies), a bill making the changes to income tax rates, and five separate bills making the changes to sales tax. The first two bills were referred to the Legal and Constitutional Affairs Committee (30/9/1993, J.548). The majority of the committee subsequently reported that the first bill would be valid and both bills should be passed, but the non-government senators doubted the validity of the first bill as well as the “test bill”.

When the Senate dealt with the bills, declaratory resolutions were passed (5/10/1993, J.570; 6/10/1993, J.587), similar to a resolution passed in 1981 when the Senate dealt with the 1981 sales tax legislation (see above). The resolutions in substance declared that the Senate, by proceeding with the bills as either amendable or non-amendable, was not committed to any view of whether they would be held to be bills imposing taxation. Requests for amendments were then made to some of the bills which the government claimed did not impose taxation (20/10/1993, J.660).

Similarly, requests were made to the sales tax bills arising from the 1995 budget to remove certain sales tax increases, and the requests were agreed to by the government in the House of Representatives, although the government claimed (in the explanatory memorandum accompanying the bills) that they were not bills imposing taxation (28/6/1995, J.3560-3). To avoid a repetition of the 1993 dispute, the government divided the tax increases between three separate bills. Government amendments moved to certain bills which increased taxation were the subject of a statement by the Chair of Committees (SD, 31/8/1995, pp 761-2).

The issues arising from these events were not resolved; in particular, the “test bill” was not challenged and the High Court was therefore not given the opportunity of resolving the disputed questions of interpretation.

The Senate, in its subsequent decisions about whether to proceed by way of amendments or requests for amendments in relation to bills dealing with taxation, has not accepted the interpretation of the government’s advisers. Bills stated by the government not to be bills imposing taxation have been treated by the Senate as bills imposing taxation and Senate amendments put in the form of requests accordingly. (Statements by Chair of Committees, A New Tax System (Fringe Benefits) Bill 2000, SD, 10/5/2000, p. 14265; New Business Tax System (Alienation of Personal Services Income) Bill 2000, SD, 29/6/2000, p. 16068.) The Governor-General Legislation Amendment Bill 2001 contained provisions regarded by the Senate as imposing taxation (subjecting the salaries of governors-general to income tax for the first time) but also other provisions not dealing with the imposition of taxation (statement by Chair of Committees, 21/6/2001, J.4376). (See Supplement)

If a bill does not impose taxation, the Senate may amend it, and if a bill does impose taxation the Senate may seek amendments to it by way of requests. The difference between amendments and requests is a difference of procedure only, and does not in practical terms inhibit the Senate, as the Leader of the Government in the Senate, Senator Gareth Evans, pointed out in debate in the Senate (SD, 1/9/1993, p. 740). As was also pointed out in discussion in the Senate, however, the combination of various measures in one bill, regardless of whether any of those measures impose taxation, restricts the options of the Senate in dealing with the various measures. If the measures were contained in separate bills, the Senate could reject some measures, amend some measures and agree to some measures without amendment. Those to which the Senate agreed without amendment would proceed at once to assent, and only those which the Senate rejected or amended could be the subject of further dealings between the two Houses. With the combination of the measures in one bill, the Senate can seek changes to the various measures only by way of amending the bill, including by leaving out provisions of the bill, or by dividing the bill. The procedure of dividing the bill has no practical advantage over amendment, because the concurrence of the House of Representatives to the division of the bill is required before any of the measures can proceed to assent. By declining to agree to the division of the bill, the government in the House of Representatives can insist on the various measures being dealt with as a whole, and none of them can pass until agreement is reached between the two Houses on all of them.

The combination of various taxation measures in one bill therefore limits the Senate’s scope for consideration of those measures, and section 55 is designed to avoid so limiting the Senate.

Under the second paragraph of section 55 of the Constitution, bills imposing customs or excise tariffs, unlike other bills imposing taxation, may cover more than one subject of taxation. A bill which increases any tariffs is regarded as a bill imposing taxation, even though it reduces or removes other tariffs (statements by the Chair of Committees, SD, 26/11/1997, p. 9461; 4/4/2001, p. 23731).

For an analysis of the suggested application of the third paragraph of section 53 to taxation bills, see below under When requests are required: (c) proposed charge or burden.

A bill which validates tax unlawfully imposed by regulations is regarded as an amendable bill (Wheat Tax Regulations (Validation) Bill 1987, 17/12/1987, J.458).

On the contrary, bills which are stated to “close a loophole” or “correct an anomaly”, but which in fact impose tax where none was imposed before, even if the tax has been collected, are bills imposing taxation (Radiocommunications (Transmitter Licence Tax) Amendment Bill 2002; Bankruptcy (Estate Charges) Amendment Bill 2002).

Measures which provide for the indexation of taxation are not bills imposing taxation (Road Transport Charges (Australian Capital Territory) Amendment Bill 2002).

The imposition of charges on Commonwealth entities only is not an imposition of taxation (Australian Radiation Protection and Nuclear Safety (Licence Charges) Bill 1998 and its amendment bill 2002).

A bill which empowers the making of regulations to impose a tax is regarded as amendable (Life Insurance Policy Holders’ Protection Levies Bill 1991, 19/12/1991, J.1987-8; Overseas Students Tuition Assurance Levy Bill 1993, 17/12/1993, J.1080). A bill which imposes a tax but allows the regulations to set or vary the rate of the tax is treated as non-amendable (Forest Industries Research Levy Bill 1993, 23/11/1993, J.862-3).

A bill which amends regulations so as to impose taxation where none was imposed before would seem to be a bill imposing taxation, but, by including other matters in such a bill, the government drafters seem to have taken the view that it is not (Migration Legislation Amendment (Contributory Parents Migration Scheme) Bill 2002, 5/3/2003, J.1527-9).

On occasions the Senate has made requests for the insertion of appropriation provisions in bills originating in the House (4/10/1984, J.1153; 18/10/1995, J.3958-9). On these precedents, it could be argued that it would be open to the Senate to request the insertion in a bill originating in the House of a provision having the effect of imposing taxation. The better view, however, is that such amendments may not be moved in the Senate at all, in that, by turning a bill into a bill imposing taxation, they are contrary to the initiation provision of the first paragraph of section 53 of the Constitution (statement by President Calvert, SD, 16/9/2003, p. 15275).

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