Chapter 13 - Financial legislation

(ii) taxation bills

A foundation of the 1903 debate in the Senate and the outcome of that debate was, as has been noted, the observation that the third paragraph of section 53 must apply to appropriation bills because it cannot apply to bills imposing taxation, which cannot be amended in any way. Therefore, notwithstanding that the expression “charge or burden” is suggestive of taxation, most senators on both sides of the debate rejected any notion of any such application. Much of the speech of Senator Symon, who supported the contention that the expression referred to appropriations, was taken up by citations of persuasive authorities that the expression in fact historically referred to appropriations (pp 2391-8).

There is obviously a profound logical difficulty in any attempted application of the paragraph to taxation legislation. In order to fall within the prescription of the paragraph, an amendment must increase a proposed charge or burden contained in a bill. If a bill contains a proposed charge or burden, it must, on any reasonable construction of that expression if it is to have any application to taxation legislation, be a bill imposing taxation, which therefore cannot be amended at all. If an amendment is to increase a proposed charge or burden, there must be a proposed charge or burden to increase, that is, there must be an imposition of taxation.

This logical analysis provided an equally profound difficulty for those who wished to argue that the third paragraph has no application to appropriations. They were compelled to look for something else which may be referred to by the expression “charge or burden”, and which is not an imposition of taxation or an appropriation. Perhaps, it was said, it refers to fines or fees, which are excluded from the definition of appropriations by the first paragraph of section 53. This argument has subsequently had appeal to some (opinion of Bailey, 21 April 1950, presented to the Senate on 23 March 1994 with that of Garran). Senator Baker came to the conclusion that the paragraph must refer to loan bills (SD, 1903, p. 1843). Both of these arguments involve the difficulty that the kinds of bills contemplated can be introduced in the Senate, a difficulty which Garran swept aside by declaring that the paragraph refers only to bills first introduced into the House, without considering the further difficulty arising from such a view. These arguments were not convincing at the time, and have become less convincing with the passage of time.

One senator in 1903 suggested that the paragraph could apply to bills which do not impose taxation but which provide for “machinery”, an amendment to which might widen the scope of the taxation. This suggestion, however, was made in the context of a somewhat strange argument that the paragraph operated to prevent both amendments and requests, and was immediately dismissed and not taken up by any other speaker. It was thought, quite reasonably, and consistently with the arguments advanced in the debate, that an amendment which would have the effect of increasing tax would have to affect the imposition of the tax and not merely the “machinery” provisions, and in any other case such an amendment would be in effect a proposed law imposing taxation under the first paragraph of section 53 (Senators Millen and Dobson, pp 2403-8; Senator McGregor, p. 1845).

Thus the conclusion drawn in the 1903 debate is that the paragraph applies to appropriation bills otherwise amendable by the Senate and could have no application to taxation bills.

At first sight it may be thought that there is one obvious exception to this rule. A bill which reduces or abolishes a tax may be regarded as a bill which does not impose taxation. It may appear to be contrary to the third paragraph for the Senate to amend such a bill to substitute a higher rate of tax than that proposed. This apparent exception, however, conforms with the interpretation of the third paragraph here expounded. While the Senate could introduce its own bill to abolish a tax, when the question is posed: could the Senate introduce its own bill to raise the level of a tax?, the answer is clear: it could not, because such a bill would in that context clearly be a bill imposing taxation. The Senate may not do by way of amendment that which it may not do by initiating its own bill. Therefore an amendment may not be moved in the Senate to raise the level of a tax. This is not an application of the third paragraph of section 53 but an application of the first paragraph: such an amendment to such a bill would indeed be a proposed law for imposing taxation.

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).

An argument has been mounted from time to time that in the third paragraph the word “charge” refers to taxation while the word “burden” refers to appropriations, an argument which may appeal on linguistic ground alone, but there is no historical basis for such a contention. It was well said in the 1903 debate that “charge or burden” is a “drag-net” phrase (Senator Higgs, p. 1829), and the historical analysis and argument then presented sufficiently establish that “charge” historically referred to appropriations and that both words refer to appropriations.

Prior to the Taxation Laws Amendment Bill (No. 4) 1993, there were no precedents of the Senate making requests for amendments to bills which did not impose taxation for the reason only that the amendments would increase liability to pay a tax imposed under another bill or act. The Senate declared in relation to that bill that its action in making requests did not commit it to a view as to the application of the third paragraph of section 53 to that bill or in similar cases.

In debate on the Taxation Laws Amendment Bill (No. 4) 1993 on 22, 23 and 24 March 1994, it was pointed out that the bill was classified as a bill not imposing taxation, but government amendments which were moved to the bill were framed in the form of requests apparently because it was thought that the amendments would increase the taxation liability of taxpayers. It was suggested that this highlighted again the difficulties arising from the government’s classification of taxation legislation, and the claim that a bill can increase taxation without being a bill imposing taxation within the meaning of section 53 of the Constitution, and that Senate amendments can increase taxation without imposing taxation and should then take the form of requests. This view was the basis of the dispute concerning the taxation legislation arising from the 1993 budget, which resulted in the government withdrawing and reframing its taxation bills (see above).

In this case the Senate agreed to the requests for amendments but passed a declaratory resolution, similar to resolutions used for the 1993 taxation legislation (see above), declaring that in agreeing to the requests the Senate did not necessarily accept that requests were appropriate and had not arrived at any concluded view as to the application of sections 53 and 55 of the Constitution to the bill. See also the statements by the Chair of Committees in relation to the Taxation Laws Amendment Bill (No. 4) 1994, SD, 8/12/1994, pp 4267-8; and the Tax Law Improvement Bill 1997, SD, 26/6/1997, p. 5317.

The problems with the interpretation advanced by the government’s advisers were also well illustrated by a bill introduced by the government in the Senate and passed on 4 May 1994. The Customs Tariff Amendment Bill 1994 increased rates of customs duties, but was classified as a bill which did not impose taxation and was introduced in the Senate. According to the view of the government’s advisers, the Senate could have amended the bill to increase further the rates of duty. Thus the House of Representatives would not only receive from the Senate a bill which increased taxation but which had been amended by the Senate to increase the taxation beyond the level proposed by the government. This would completely undermine the main purpose of section 53, which is to give the House of Representatives the exclusive right to introduce taxation imposition and appropriation measures.

The Chair of Committees has directed that government requests to bills dealing with taxation be moved in the form of amendments where the amendments have been proposed as requests apparently because of a view on the part of government advisers that they might result in higher taxation by comparison with the bill, as distinct from the status quo in the absence of the bill. The chair has pointed out that the Senate has not accepted such a strained interpretation of the charge or burden provision (SD, 22/11/1995, p. 3722; 1/12/1995, pp 4570-1; 20/11/1996, p. 5711; 10/2/1997, p. 277; SD, 25/5/1998, p. 3022; SD, 10/5/2000, p. 14265; SD, 7/12/2000, p. 21146).

In relation to amendments which might increase tax payable, the constitutional provision refers to an amendment which would increase any proposed charge or burden, and the view taken in the Senate since 1903 is that a bill dealing with taxation does not contain a proposed charge or burden unless it is a bill imposing taxation. Amendments of this kind are therefore directed by the chair to be moved as amendments (New Business Tax System (Thin Capitalisation) Bill 2001, SD, 27/9/2001, p. 28123). The claim that any amendment which might be regarded as in any way disadvantageous to taxpayers should be a request was also not accepted (statement by Chair of Committees, SD, 27/6/1996, pp 2367-8).

On the other hand, the government drafters have taken the view that amendments which reduce the taxation payable should be requests on the basis that appropriations may increase to compensate for the lost revenue! In one case a Governor-General’s message was prepared (but not used) to recommend the appropriation supposedly arising from the amendments (A New Tax System (Indirect Tax and Consequential Amendments) Bill (No. 2) 1999: statements by Chair of Committees, SD, 9/12/1999, pp 11654, 11691). Where it has been indicated that an amendment will give rise to tax refunds payable out of a standing appropriation, the Senate has accepted that the amendments should be requests (statement by Chair of Committees, New Business Tax System (Miscellaneous) Bill 1999, SD, 8/6/2000, p. 14923, 26/6/2000, p. 15633; this case gave rise to a resolution of the Senate requiring explanations of government amendments framed as requests: 26/6/2000, J.2899; Indirect Tax Legislation Amendment Bill 2000, SD, 26/6/2000, p. 15556).

On occasions government amendments have been initially presented as requests despite the explanatory memoranda indicating that they would have no financial impact (Taxation Laws Amendment Bill (No. 1) 1997, SD, 27/6/1997, p. 5456; Superannuation Contributions Tax Bills, SD, 24/11/1997, p. 9289; Ballast Water Research and Development Funding Levy Collection Bill, SD, 26/3/1998, p. 1392; Taxation Laws Amendment (Trust Loss and Other Deductions) Bill 1997, SD, 23/3/1998, p. 1087. For other cases involving tax bills see New Tax System Bills, SD, 30/4/1999, p. 4657; 24/6/1999, p. 6252; 25/6/1999, p. 6465; Telecommunications Bills, SD, 27/5/1999, p. 5549).

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