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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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