Identity Cards: The Major Issues
John Angley
Education and Welfare Group
July 1985
Introduction
Background
The Australia Card Proposal
The Type of Identity Card
Uses and Advantages of Identity Cards
Comments Supporting the Introduction of Identity Cards
Arguments Against Identity Cards: Philosophical
Case Study – possible
wider uses of specific purpose cards
The Dehumanising
Effect
Arguments Against Identity Cards: Practical
Costs
Forgeries
Specific Purpose Identity
Cards
Social Security Fraud
Conclusion
Appendix 1: Methods of Identifying Social Welfare Recipients
in Selected Countries
Appendix 2: Arguments Related to Tax Evasion (Michael
Peacock)
One of the hardy perennials of Australian politics and public debate
is the issue of whether or not Australian citizens should be issued with
identity cards. Every so often someone in the community calls for identity
or ID cards to be issued, describing them as the answer to a particular
problem.
This paper seeks to contribute to the current debate by presenting some
of the major issues. The first part identifies the factors which have
generated the present public debate. Then follows an outline of the Commonwealth’s
proposals for a national identification scheme, called the Australia Card.
The discussion then turns from the specific proposal to the issues which
relate to any plan for ID cards, national identification systems, Australia
Cards or whatever they may be called, First, there is discussion of the
uses and advantages of such a system and a review of the opinions of those
who support or do not oppose the idea of all Australians being issued
with identity cards. Secondly, the paper considers the arguments and opinions
of opponents of any such national system of identification. Finally, there
are two appendices: one discussing methods of identifying social welfare
recipients in selected overseas countries; and the other, the use of ID
cards to reduce tax avoidance.
Background
There have been three factors which have prompted the current debate
on ID cards.
First, David Simmons, M.P., moved the following resolution at the meeting
of the Federal ALP Caucus on 7 May 1985:
That the Government examine the feasibility of issuing photographic
identity cards to all Australian citizens and permanent residents as a
positive means of combatting fraudulent practices in Commonwealth Government
administration.[1]
In supporting the resolution Mr Simmons made the following points, inter
alia:
- the use of identity cards of one sort or another is now required
by many governments throughout the world including Canada, Denmark,
West Germany, Sweden and the United States;
- the issue and use of identity cards will create problems of achieving
a balance between efficiency and individual privacy;
- it should not be compulsory to carry the card;
- Australians are now used to carrying various cards and forms of identification;
and
- the card could be used in the following situations – using
Government services such as legal aid, obtaining pensions and benefits,
beginning employment, opening and changing bank accounts.
Secondly, Mr Eric Risstrom, Secretary of the Taxpayers Association, has
in recent times been campaigning for the introduction of an identity card
as a means of reducing tax avoidance. Mr Risstrom’s arguments are
discussed in the body of the paper.
Thirdly, the recently published White Paper Reform of the Australian
Tax System raised the subject of ID cards. In its discussion on tax avoidance,
the White Paper suggests that, in the search for ways to reduce avoidance,
‘ … consideration might also be given to ... the introduction
of a national identification system, involving the issue of a unique identity
card to individuals’.[2]
The Australia Card Proposal
On Monday, 24 June 1985, the Federal Cabinet considered a report from
an Interdepartmental Committee (IDC) formed to consider the introduction
of a national identity card system. The IDC comprised representatives
from the Tax Office and the Departments of Prime Minister and Cabinet,
Treasury, Social Security, Health, Attorney-General and Immigration and
Ethnic Affairs. According to newspaper reports during the week before
the Cabinet meeting the IDC report covered, inter alia: tax benefits
which might be gained from the introduction of an ID card; the ‘cost’
of the loss of civil liberties; what supporting legislation would be required;
and possible uses for the ID card, such as when opening new bank accounts.
On 21 June 1985, the Sydney Morning Herald reported that Minister
for Health, Hon. Neal Blewett, M.P., had been given charge of the identity
card project. This move was apparently the result of Dr Blewett’s
role in the successful introduction of the Medicare Card in 1984 by the
Health Insurance Commission. During the period September 1983 to February
1984, 95 per cent of Australians had enrolled with Medicare and had received
a Medicare Card.
At the afternoon session of the Tax Summit on Tuesday, 2 July 1985, Dr
Blewett presented the Commonwealth’s proposal for a national identity
card. In an explanatory booklet, the Commonwealth outlined its proposals:
The concept is simple. A system which is a national register of all
Australians, designed to assist with identification. It would provide
every adult with a personal card, similar to a Medicare card or credit
card, containing only basic information: name, identification number
and colour photograph.
Whilst assisting the government to establish records and verify information,
the card would not reveal any more than that. In this way the privacy
of every individual would be maintained.
The principal objectives of the system and the card would be to:
- Generally assist government agencies to carry out their functions
more effectively. In particular, prevent or reduce the incidence of:
tax avoidance and evasion – incorrect payment of benefits and other
government monies – other abuses of other government programs.
- Aid the fight against organised crime and drug trafficking.
- In the longer term, rationalise the many government identification
systems currently in operation and simplify dealings with government
for all Australians.
The system could be operated by the Health Insurance Commission, which
currently administers the Medicare programs.[3]
The Benefits
The system could aid identification for tax, social security, employment
and other purposes.
This would make it easier to track tax evaders and also reduce health
and welfare fraud.
And with a fully operational system, the reduction in tax evasion alone
could be up to $800 million per year.
It could also help detect illegal immigrants and open up employment
opportunities for legal residents.
This would lead to substantial reductions in the payment of unemployment
and other benefits.
And because the data on all Australians would be complete, totally
up to date and available from a single source, the community as a whole
would benefit from the elimination of much duplication of effort by
government agencies.
The system could also provide improved demographic data to allow for
much better planning of community services.
This register could take on even more significance in emergencies.
Through the system, arrangements might be made to provide hospital and
other emergency services with life-saving information at a moment's
notice: blood groups, organ donors, next of kin and name of family doctor.
Information that is vital. Diabetics could be quickly identified, as
could people with rare diseases or those requiring special medication.
But the option to include this type of information on the register
would be at the sole discretion of the cardholder.[4]
The proposal for the Australia Card also estimated the financial costs
and savings associated with the introduction of an identity card. Tax
savings were estimated as $150m in the first year, $450m in the second
year, $750m in the third year and $800m in each subsequent year. Other
savings in government expenditure, the proposal continues, would accrue
from the reduction in unemployment ‘and other welfare benefit costs’.[5]
As well, government identification systems could be rationalised, thereby
reducing administrative costs.
The establishment and operating costs of the Australia Card, as estimated
by the Health Insurance Commission are, in 1985 terms, $38m for establishment
and annual operating costs of $49m. The estimate of costs is accompanied
by the rider that they may vary from the estimates because they ‘will
be dependent upon the implementation strategy decided by the Parliament.’[6]
The proposal document then describes how the Australia Card system will
operate:
In most cases, cards would be issued to the individuals concerned from
Medicare offices. This would protect privacy, ensure correct delivery
and allow recipients to check and amend details on the spot. Special
arrangements could be made for those who do not have ready access to
a Medicare office.
Having identified individuals, the Commission would write and invite
them to call at a convenient location to collect their card. At this
time a photograph would be taken and affixed to the card. The details
on the card and in the register would be checked and amended if necessary.
Children would be recorded in the register but cards generally not issued
for them.
The register could be updated with information from other government
sources and cards would be reissued periodically.[7]
According to the Commonwealth’s proposal ‘the privacy and
security of an individual’s information will be paramount’.[8]
This discussion on privacy and security said that the national identification
system’s register will contain basic identifying information such
as name, sex, date of birth and address. The register would not include
information from other government sources such as medical and taxation
data.[9] It is proposed that the legislation needed to
establish the Australia Card would ‘tightly define the uses of the
card’.[10] One particular claim made in this section
of the proposal is ‘the Health Insurance Commission already has
a proven record of security and is totally familiar with the need to protect
sensitive data’.[11] During the recent New South
Wales doctor's dispute the Sydney Morning Herald published information
concerning the claims for Medicare benefits made by prominent doctors.
Those doctors and their organisations accused the Health Insurance Commission
of being the source of the journalists information but this matter was
never resolved.
Finally, it is worth noting that nowhere in the glossy booklet which
outlines the Government's proposal for the Australia Card, is the term
identification card or ID card used. This perhaps reflects the Government'
s appreciation that the term ID card implies to some Australians a de
facto internal passport which must be carried at all times and produced
on demand.
The Type of Identity Card
The use of identity cards of one sort or another is required by many
governments throughout the world. Generally, these fall into three categories:
- a multi-purpose identity card containing such personal information
as name, birth-date, sex, marital status and sometimes a photo; similar
to that advocated by Eric Risstrom;
- a system of numbers usually linked to a central computer where the
number on the card serves as a key to more detailed information and
to certain identification, as exists in USA; and
- specific purpose cards, like the Australian Medicare card.
Uses and Advantages of Identity Cards
Some countries enforce the universal use of identity cards for internal
security purposes and to monitor the movement of individuals within the
country. They serve as internal passports and as an easy means of identification
of individuals in their dealings with the State. In these circumstances
identity cards may be a useful aid in maintaining law and order.
In some countries identity cards are used to obviate abuses at the ballot
box by requiring citizens to produce them before they vote. They are also
widely used for purposes of identification in the course of private commercial
transactions – in much the same way as a driver’s licence is often
demanded in Australia as evidence of identity when writing cheques.
A system of numbers as a form of identification is used in some countries
for recipients of social security benefits. The number serves as identification
and authentication of the recipient of the pension or benefit and is aimed
at preventing multiple registration either by using false names or by
registering at various offices. This system is also intended to help in
speedier and more accurate delivery of State services to eligible citizens,
and is particularly useful where many citizens have the same name, e.g.
Smith or Jones.
The advantages of identity cards arise from the purposes to which they
are put in any particular country:
- in countries such as the Federal Republic of Germany they provide
a means of checking on the movements of individuals for internal security
purposes;
- in South Africa they identify different racial groupings and control
the movements of non-whites;
- in the United States they are used to register social security accreditations;
and
- in Israel they are used for internal security and to obtain social
security benefits.
It can therefore be seen that the advantages would be perceived differently
according to the extent to which the State’s right to control and
have knowledge of its citizens is accepted.
Comments Supporting the Introduction of Identity
Cards
Among those who do not strongly oppose the introduction into Australia
of ID cards, there are two groups of opinion: those who advocate the introduction
of the ID cards; and those who, while not directly advocating such an
action, are not completely opposed to the idea. Both of these groups appear
to build their opinions from the same premise: that Australians already
carry many forms of identification which they may be required to produce.
Mr Eric Risstrom of the Taxpayers Association is quoted as saying, ‘Everybody
already has credit cards or Medicare cards and the like, so what have
they got to fear?’[12] This argument was also
promoted in an Australian editorial.[13]
The average Australian today has a Medicare card, a Bankcard and probably
one or more other credit cards issued by department stores, credit unions
or organisations such as American Express or Diners Club. The Australian
Taxation Office has a record of his income and tax-deductible expenditure,
and the Immigration Department knows if he has a passport and has travelled
overseas. The Electoral Office has a record of his address and occupation,
and his State Government knows if he has a driver’s licence and
owns a car.
It is hard to see how a single card bearing a photograph and encoded
with information such as address, tax file number and perhaps blood
type could infringe the liberties of someone about whom so much is already
known.
No proposal along these lines could be totally immune to the devices
of determined cheats. But it would benefit the majority of honest Australians
at no cost to their civil liberties.
The Canberra Times editorial of 7 June 1985 followed a similar
line to that taken by Mr Risstrom and the Australian, when it
advocated the use of ID cards for Australian citizens. It concluded:
Citizens in a democracy have obligations as well as rights, and it
should be an obligation to carry an identity card, not only to prevent
the unprincipled from cheating the system but to ensure that people
unconscious or dead after an accident can quickly be identified. Honest
people would have nothing to fear, but would benefit from an assurance
that others are not misusing taxpayers’ funds or avoiding paying
their share of the tax bill.
In its issue of 28 May 1985, the Age quoted the views of various
people for and against identity cards. Among them was Professor Colin
Howard who, while not advocating identity cards, did not see them as significantly
contributing to the invasion of the privacy of individuals. While supporters
of the ID cards quoted above took the line that Australians were used
to being asked to identify themselves, Professor Howard’s argument
was that government at all levels, and in all guises, already knows a
great deal about all of us. Therefore any new identity card would not
really add a further threat to our freedom. According to the Age,
… the whole debate is too late for Melbourne University’s
Professor Colin Howard. He points to the innumerable ways we are already
on official social security and tax files, electoral rolls, employment
records – everything from birth to death certificates.
‘It is easy to get out of touch with the times’, he says.
‘The idea that in some sense we can preserve some sort of privacy
by not having ID cards seems to be somewhat of an illusion.
‘We have all been brought up to believe that we live in the best
possible system, and nobody should tamper with it, Just the very expression
“ID card” puts people off. If they were called something
else, it might not produce the same reaction.’
Professor Howard says an ID card would not make it any easier than
now for a government to abuse citizens’ rights. ‘It is only
the force of public opinion that keeps them in check.’[14]
Arguments Against Identity Cards: Philosophical
The so-called philosophical arguments against the introduction of identity
cards for all Australians have two themes. The first concerns the idea
of Government assuming the role of ‘Big Brother’ and the consequential
invasion of the civil rights of citizens as Australia moves towards becoming
a police state. As will be obvious from the reactions below, the advocacy
of ID cards attracts strong and emotional responses. In a letter to the
editor of the Australian, Ron Castan Q.C., President of the Victorian
Council for Civil Liberties, highlighted the major philosophical worries:
SIR – Your editorial (8/5) supporting the introduction of identification
cards reflects an appallingly naive view of the way in which bureaucracies
function.
In totalitarian countries one of the most effective means of control
of the population is the monitoring of every citizen’s activities,
by a process of registration. In order to undertake such a monitoring
exercise it is necessary that each person be issued with a ‘pass
card’ (as in South Africa), or an ‘internal passport’
(as in the Soviet Union).
This must be produced on every occasion on which the citizen changes
residence, travels across State or municipal boundaries, has any dealings
with any governmental agency or joins any organisation.
Controls on freedom of movement, thought and action of citizens cannot
be effectively implemented unless each citizen carries a ‘pass’.
The first stage in the destruction of the liberty of the individual
is the requirement that every person carry the ‘pass’, which
can be required to be produced on all occasions desired by the State.
Once such a system is introduced, the occasions for its use will proliferate.
Every governmental organisation will find it necessary to require production
of the ‘pass’. And every time the pass is produced, the
computer records will be updated.
Your editorial suggests that the introduction of such cards will only
affect the dishonest and only harm those who have something to hide.
The same argument is put in relation to every proposed intrusion into
our civil liberties. The argument is spurious.
Unless we are vigilant to prevent the establishment of a system which
facilitates the control of our lives by the State, that system, once
introduced, will inevitably lead to that very control. The introduction
of the ‘pass’ will itself become the reason for the use
of it in an oppressive manner.
In considering such a proposal, the fundamental starting point must
be that the bureaucracy is not to be trusted. An additional
instrument for the control of people’s lives should not be placed
in the hands of government upon the assumption of a misplaced faith
in the ability of governmental bureaucracies to administer such powers
fairly and well.
Experience demonstrates that massive governmental bureaucracies do
not administer such powers fairly or well. They are not geared to the
protection of the rights of the individual. They are geared to the promotion
of their own systems.
The proposal for the introduction of a ‘pass’ is outrageous
and should be resisted at all costs.[15]
Opponents of ID cards fear that if the cards are introduced for one or
two specific purposes, such as to reduce social security fraud or tax
evasion, the number of purposes for which the cards are used will increase
rapidly as other government agencies, and perhaps non government organisations,
realise the value of such a system of centralised information and data.
The existence and rapid improvement in computer technology adds to their
fears:
The President of the New South Wales Court of Appeal, Mr Justice Kirby,
warns: ‘What is at stake is nothing less than the nature of our
society, and the power and authority of the state in relation to the
individual’.
Mr Justice Kirby says technology has starkly thrown up key issues for
our society. ‘Will we retain our British traditions and keep great
power under control?’ he asks. ‘Or will we succumb to the
destruction of personal autonomy and privacy as a result of a frightening
combination of amazing new technology and enthusiastic efficiency experts
who would throw away our freedoms?’[16]
In past years as attention has focussed on organised crime in Australia,
the suggestion has been made that any attempt to combat such crime would
be made easier if all Australians carried identification cards. This,
for example, would make it more difficult to obtain a false passport.
In his 1983 Royal Commission Report on Drug Trafficking, Mr Justice Stewart
said that Australia had not reached the stage where the community would
find a compulsory system of identification acceptable. According to the
Age, Mr Justice Stewart’s views ‘still stand’:
At the moment a system of compulsory identification cards, or a statutory
requirement that any citizen must be able to produce satisfactory identification,
‘would be repugnant to many Australians as resembling too much
the apparatus of dictatorship’.[17]
Of course, the idea that identity cards constitute a threat to personal
liberties by offering opportunities for Government to centralise all personal
data and use it as it wishes, is not a recent one. In a report in June
1976 the Federal Advisory Committee on False Identification in the United
States rejected proposals for a national identity card. One of the grounds
for rejection was that it represented an invasion of personal privacy,
and data required for citizenship identification could be abused by government
or private interests.
In Australia in the 1970s, during the debate preceding the introduction
of Medibank, the Committee of Enquiry into Protection of Privacy in its
Second Interim Report to the then Attorney-General, Senator Murphy, looked
at various aspects of proposed health insurance cards and considered that
such details as date of birth, sex, address and signature should not appear
because they constituted an undesirable invasion of privacy.
It is the existence of computerised data banks to which identity cards
may be linked which constitutes the major threat to privacy. A card may
have only a simple identification or even a number but by means of a computer
link much more detailed information can be readily obtained whether it
is relevant to the purpose for which the card was presented or not. For
instance, in Australia Taxation Department files are said to be confidential
but the exemptions under the secrecy provisions of the Taxation Act include
Boards of Review, the Repatriation Commission, the Director-General of
Social Security, the Director-General of Health and others. This means
that information from a variety of government departments could be pooled
in a way not originally intended.
Case Study – possible wider uses of specific
purpose cards
In the USA, 98 per cent of households hold social security cards.[18]
Social security legislation was first passed in 1935 and by the end of
the first year of operation 45 million social security accounts were opened
and numbers issued to account holders. Because of the advantages associated
with participation in Social Security, the number of accounts rose quickly
to approximate the number of employed persons. By mid-1983 there were
205 million active accounts, each with a Social Security number and card
corresponding to it. Some 5.5 million new accounts are being added each
year. Because nearly every economically active adult in the United States
has a Social Security number, the number is ideal for other surveillance
and management purposes. Since 1961, the Internal Revenue Service (IRS)
has adopted the use of Social Security numbers for ordering income tax
records and for identifying taxpayers.[19]
The use of a person’s social security number as both a means of
identification and as a method of collecting data is now much greater
than must ever have been envisaged in 1935. Some examples:
- To open a bank account, one has to quote one’s social security
number. The new account is then reported to and recorded by the IRS.
- The same occurs when a person buys shares.
- Some US States now use a person’s social security number as
the number for their drivers licence.
The Dehumanising Effect
The second philosophical objection to the use of identity cards or any
form of compulsory identification system is the de-personalising effect
of such systems. The number or card replaces the person:
The danger is that the personality becomes not the living flesh and
blood but the face on the card. Just as the person needing medical care
is not the body but the Medibank number. Or the person wanting credit
is the Bankcard or Diners Card.[20]
To be a number for official purposes has a dehumanising effect. This
has been found in prisons and the Nagle Royal Commission into Prisons
in NSW in 1978, recommended that the use of numbers be abolished. Prison
activist Brett Collins recently wrote, ‘Because its members have
worn numbers and names on their chests for decades in prison, the Prisoners
Action Group finds the proposition for a universal ID system shocking’.[21]
Commenting on this aspect of the ID card system as mentioned in the Tax
White Paper, Peter Cole-Adams wrote,
If Bob Hawke and Paul Keating have their way, Australians in the closing
years of the 20th century will be confident of their existence only
if they have a little plastic-coated card to prove it.[22]
Arguments Against Identity Cards: Practical
Costs
The actual costs involved in establishing and maintaining a national
scheme of identification will obviously vary according to the type of
system adopted and the purposes for which it is used. However there are
some costs which will be common to any type of system using an ID card
or number:
- establishment costs – e.g. publicity, mailing, computers, recruiting,
materials; and
- costs of maintaining and policing the system – e.g. size of
bureaucracy needed to maintain system and to check applications for
new cards or renewals; pursuing forgeries; handling information about
card-holders.
At the time of the establishment of Medicare, estimates of the cost of
issuing Medicare cards were:
- Set up costs – machinery, postage etc.:
- if sent to all households – $11.2m
- if sent to all individuals – $14.5m
- Cost of replacement every two years:
- to households – $2.5m
- to individuals – $4.6m
In its 1976 Report the (US) Federal Advisory Committee on False Identification
also listed as a major objection to a national ID scheme, the expense
involved in verifying and storing information supplied by cardholders.
As discussed earlier, the Government’s proposal for the Australia
Card includes estimates of the costs of its establishment and operation.
They are, in 1985 terms, $38m for establishment of the system and annual
operating costs of $49m.
Forgeries
A further objection is the fact that such a system would be subject to
defeat by imposters and counterfeiters taking advantage of careless inspection
of documents or through the corruption of officials. The forging of identity
cards would not be difficult and attempts to make this more difficult
by the use of photographs or fingerprints would complicate the system
and arouse strong opposition.
In an attempt to reduce forgery attempts, the proposed Australia Card
includes a holographic diagram of the map of Australia and the Australian
flag.
Specific Purpose Identity Cards
Since its introduction the Australian Medicare card has maintained a
low profile. It has attracted little attention because the only time it
is really needed is when a doctor bulk bills a patient, or when being
treated in some public hospitals. Furthermore, it is not compulsory to
carry the card. There has been little or no publicity about the card being
demanded for other purposes.
However, as already discussed, the US social security number is an example
of how easily an identification system and its centralised data and information
facilities can be used for purposes other than the original one. The growing
use of social security numbers for a wide variety of purposes caused concern
in the United States, and in 1974 became the subject of a federal investigation.
Although a 1939 law guaranteed that information in social security files
would be used only for that program, so many exceptions had been granted
by Congress that it was stated in 1975,
… the Social Security Administration is a fount of information
for Federal, State and municipal-government agencies. In at least 30
situations, personal data from Social Security records may be released
to other agencies without the consent of the individual involved.[23]
In addition to the official agencies which had access to the files, the
federal inquiry was investigating why social security numbers were often
included on mailing lists sold commercially.
Social Security Fraud
According to reports in the Age and the Australian Financial Review[24]
the submission on identity cards from the Department of Social Security
was less than enthusiastic. As well as commenting on the costs of such
a scheme and its possible effect on the privacy of its clients, the Department,
according to press reports, offered the following opinions:
- ID cards would assist in correcting overpayment problems.
- Unless the security of the cards was virtually absolute, the existence
of the ID cards might exacerbate the degree of fraud. While the cards
might deter the amateur, it might have no effect on the professional
defrauder. ‘They argue that once a card is forged the whole system
is unlocked.’[25]
- The existence of ID cards will not assist the Department of Social
Security in its major problem of people supplying false information
about their income levels and domestic circumstances.
Conclusion
It is up to each individual to decide whether he or she agrees or disagrees
or even cares whether Australians should be issued with identity cards.
This paper has sought to raise the issues on which this decision might
be based. Probably the practical objections are not as important as the
philosophical arguments. The decisions made on certain issues and the
assurances offered by a Government responsible for the proposal to introduce
an ID cards scheme will probably sway public opinion for or against the
idea. Those issues include:
- whether or not it will be compulsory to carry the card at all times;
- what information the card will contain, e.g. will it carry only a
number or many personal details, with or without a photograph;
- whether the card will be for a specific purpose or whether its use
may be changed by the Government of the day;
- whether Australian citizens can be assured that the information that
they are compelled to supply will remain confidential and will not be
passed between government agencies and even commercial organisations;
- what rights Australians will have to see their files to ensure that
all information is accurate, and whether there will be avenues of appeal
against incorrect, unfair or inaccurate entries;
- finally (and impossible to answer), how will Australian citizens know
whether or not they can trust the Government of the day and the bureaucracy
not to abuse the power which is presented to them by centralised, computerised
information on every citizen in Australia.
Identity cards or numbers as such are neither good nor bad. It is in
their potential for abuse that the danger lies. If they are adopted in
any form it would seem to be necessary for the controlling authority to
ensure that their use is not extended to unrelated purposes, that access
to the collected data is not exploited and that the privacy of individual
Australians is completely safeguarded.
So the question of accepting or rejecting ID cards is a question of balance.
There are those people who completely reject the idea because they see
them as a threat to the rights and liberties of individual Australians.
To such people assurances from governments that there will be no abuses
of power, intentional or unintentional, are not good enough: identity
cards are merely Big Brother’s foot in the door.
On the other side of the debate are those people who feel so strongly
about a particular issue, such as social security fraud or tax evasion,
that they advocate identity cards as a method of overcoming these problems.
They do not see the dangers to be as great as feared by opponents of the
idea. As has been asked, which is a greater abuse, an identity card or
having to pay more than your fair share of tax? David Simmons M.P. commented
on this situation,
You have to balance out with considerations of civil liberties. There
have obviously got to be questions of cost-benefit, balancing the efficiency
of the bureaucracy with the privacy of the individual.[26]
Perhaps the answer is somewhere in between these two positions. A final
word of warning is contained in a 1927 comment from Mr Justice Brandeis
of the US Supreme Court,
Experience should teach us to be most on our guard when the Government’s
purposes are beneficent. Men born to freedom are naturally alert to repel
invasion of their liberty by evil-minded rulers, The greatest dangers
to liberty lurk in insidious encroachment by men of zeal, well-meaning,
but without understanding.[27]
Appendix 1: Methods of Identifying Social Welfare
Recipients in Selected Countries
Canada. The SINCARD system, introduced more than ten
years ago, was originally intended for social security purposes but has
expanded in use, despite widespread protests. By computerisation it links
into income tax as well as social security. The individual has a SINCARD
giving name and number but there is no provision for signature, photo
or finger print. The number is essential for employment. However, its
main advantage is convenience; as a means of identification it has little
advantage over a driving licence, for example.
Denmark. Each individual has a postal registration card,
with a number based on birth date and year: this is used for social security
registration and identification. Social Security is administered by a
single centralised, computerised system which is the main control mechanism.
Federal Republic of Germany. Each individual has an
ID card with photo and other details as in a passport (address, date of
birth, signature, height, eye colour) and a number based on name and birth
date, Control of illegal payments is effected by the requirement for individuals
to register annually and to update family circumstances. Payments are
made through a bank account or personally on production of identification.
Netherlands. There is no national ID system. Abuse of
the social security system is made difficult by the fact that each adult
is subject to registration of address with the local authority. The social
security system is computerised and centralised, and all benefits are
paid by the GIRO system (the postal banking system) for which there is
no charge and which all beneficiaries are required to use.
New Zealand. The situation in New Zealand is similar
to Australia. There is no national ID system, nor is there a specific
social security card. The main means of control are through the efficiency
of the preliminary registration system and the requirement to re-register
or report periodically. There is also a benefits control division, as
in other countries, which investigates suspicious cases or allegations
made by members of the public.
Sweden. Each individual has an identity card and. the
number is used by banks and for taxation and social security purposes.
There is an elaborate Data Act to limit and prevent abuse of the ID card
and related information systems.
United Kingdom. The social security system in Britain
is funded through individuals (as well as employers’ and government)
contributions. An essential document for employment is the social security
card which keeps account of contributions and is used for social security
benefits as well. The only identification is the name, number and signature.
United States. All employees in formal employment (other
than federal and some other government employment.) have a social security
card which carries the name and number but no signature or other identification.
It is used for income tax as well as social security.
Appendix 2: Arguments Related To Tax Evasion
by Michael Peacock, Economics and Commerce Group
Arguments for identity cards
If identity cards were introduced and laws enacted to require people
to produce the cards for taxation purposes, tax evasion in two areas in
particular would be curtailed if not eliminated. These areas are discussed
below.
(a) Curtailment of evasion of tax deductions at PAYE stage
By way of background, the general PAYE tax instalment scale takes into
account the zero rate of tax that applies on the first $4595 of a person’s
income (titled the ‘General Exemption’ for PAYE purposes).
The tax instalments deductible in accordance with the general scale apply
to the great majority of employees who do not claim concessional rebates
(e.g. the dependent spouse rebate) and the instalments in that scale are
reduced for people claiming concessional rebates for PAYE purposes by
the weekly value of the rebate(s) claimed.
Another scale, which sets out the PAYE instalments to be deducted where
an employee has a second job, makes no allowance for the zero rate step
nor is the scale reduced by the value of any concessional rebate. Furthermore,
the scale (described as the ‘no declaration scale’ in these
notes) assumes the employee earns a certain amount of income in his or
her main job. It is necessary to make this assumption in order that the
higher marginal rates of tax that apply at the higher levels of income
are reflected in the PAYE deductions made from earnings in second jobs.
To have the general scale applied in determining the PAYE deduction from
his/her pay an employee has to lodge with his/her employer a completed
Income Tax Instalment Declaration form claiming the general exemption.
Any concessional rebates to which the employee is entitled may also be
claimed in that declaration. Legally employees may have only one declaration
in force at any time. Accordingly, an employee with two jobs who complies
with the law and furnishes a declaration to only one of his/her employers
would have the general scale (or that scale less the value of any concessional
rebates claimed) applied by the employer to whom the declaration was furnished,
and the no declaration scale applied by the other employer.
A large number of employees are overcoming the rule that an employee
may have only the one Income Tax Instalment Declaration in force at any
time – perhaps in some cases with the collusion of their employers
– by working under a false name in one or more of their jobs. Some
of these employees also insert false dependants in their false declarations
to ensure that no PAYE deductions, or only negligible amounts of deductions,
are made from their earnings. Of course, the second job earnings of these
people are not shown in taxation returns.
Other categories of employees who use false names and who claim false
dependants for PAYE purposes are seasonal workers and employees in other
casual employment, Some of these employees lodge false declarations with
all of their employers.
If people who are evading tax in the way described above have to identify
themselves correctly and have the appropriate amount of tax deducted each
week this avenue of tax evasion would be closed off.
(b) Curtailment of evasion of tax on dividend and interest income
There is evidence that a very substantial amount of the interest that
is paid to people, and to a lesser extent dividends, is not being included
as income in taxation returns. Some of the income distributed by unit
trusts would also, no doubt, not be declared for taxation purposes.
The Taxation Office has a program for checking that interest paid to
people is shown by the recipients as income in taxation returns, For the
purpose of these checks certain of the financial institutions report to
the Taxation Office the interest (or interest over a certain moderate
amount) that they have paid to each account holder, Also, dividend payments
are checked by the Taxation Office from company records.
Reports indicate that the program is having only a limited effect, mainly
because it is difficult for the Taxation Office to match information supplied
by the institutions with information extracted from taxation returns.
This is because there are often several people with the same name (father/son
for example) and a large number of people change their address each year.
Apart from the difficulty of checking that amounts paid to people who
have accounts in their correct names are declared as income, there is
also the problem that some people may be evading tax by opening accounts
in false names early in a financial year and closing the accounts in the
next financial year before the Taxation Office can make its checks. The
process can then be repeated with another financial institution. It was
recently reported in the press that an elderly person had been advised
by a financial adviser to open an account with the adviser’s company
in a false name to avoid the assets test affecting the person’s
pension. Is it possible then that suggestions to this effect are being
made to people concerning evading tax on such payments as interest?
Identity cards would overcome the problem of people avoiding tax on interest
and dividends and unit trust declarations by opening accounts in false
names. Furthermore, the cards would change the Taxation Office’s
task of checking that the payments in question have been declared as income,
from a time-consuming and not greatly effective task to a relatively simple
and very effective one. With identity cards in operation the banks, building
societies, credit unions, trusts and businesses paying interest to other
than banks, building societies and credit unions (these groups are referred
to as financial institutions in this paper) could report interest, dividends
and interest payments by identity. Details of these payments could then
be inserted into a computer and compared with amounts extracted from taxation
returns which could have the same identity number.
It may be thought that the evasion of tax by way of interest and dividend
payments not being shown in taxation returns could be simply overcome
by withholding tax from such payments at source. Under such a system the
financial institutions would withhold tax from interest, dividends and
unit trust payments at the time of payment, or crediting of payments in
question in the same way as employers withhold tax from the pay of employees
under the PAYE system.
The problem with such a system would be that the financial institution
would have no means of knowing at what rate tax would be payable by a
person on his/her payments. That rate would depend on not only the payment
concerned but on the person’s net income from other sources, and
in some cases the person’s entitlement to tax rebates. Accordingly,
unless avenues are to be left open for those on the higher incomes to
evade tax by not including their dividends and interest payments in taxation
returns, tax would have to be withheld from the payments in question at
the maximum rate of tax.
It may be said that the overwithholding of tax from interest, dividends
and unit trust payments would not be a serious problem, as the amount
withheld would be allowed as a credit against the person’s total
tax liability at the assessment stage following lodgment of income tax
returns. Any excess over that necessary to pay the assessed tax would
then be refunded to the taxpayer, or deducted from the tax payable on
income from other sources. Despite this, a large number of people would,
no doubt, think that because tax was being withheld at the maximum rate
of tax the Government was taking half or more of their interest receipts
in tax.
A withholding system would be particularly inconvenient (or disadvantageous)
for those pensioners who supplement their pension with income from interest,
dividends or unit trusts, and who, because their total income is less
than the tax threshold, are not required to pay tax. With a withholding
system operating these pensioners would either have to lodge taxation
returns (in the meantime going without the income that was withheld for
tax) or apply to have their interest exempt from withholding. In the latter
case they would, in effect, be revealing to the financial institutions
that their total income each year was below the tax threshold.
The pensioners and beneficiaries whose income is of a level that requires
them to pay only small amounts of tax would also be disadvantaged by having
to wait, for up to a year, for that part of the withholding deduction
that was in excess of the tax actually payable on their interest payments.
A further point against a withholding system for interest and dividend
payments is that unless some method could be found to enable the Taxation
Office to readily identify people who had been paid interest and who were
entitled to credit for tax withheld, the financial institutions would
have to issue certificates to all their account holders showing the interest
earned and tax withheld. There would be an enormous number of certificates
required and the exercise would be costly for the financial institutions.
(c) Curtailment cf some other avenues of tax evasion
There are, no doubt, a number of other areas where the correct identification of people would result in the closing off of tax evasion avenues. For example, correct identification for foreign exchange transaction purposes may be helpful in overcoming tax evasion on off-shore transactions.
(d) Gain to taxation revenue
According to the White Paper on the reform of the taxation system the gain to taxation revenue that would follow from the introduction of identity cards is put at $800m annually within three years of implementation.
Arguments Against Identity Cards
Leaving aside the civil liberties argument, the cost of issuing the cards
and the fact that the great majority of taxpayers already correctly identify
themselves for both PAYE and other taxation purposes, there would be few
points against the issue of cards from a taxation point of view.
A number of taxpayers, especially those whose avenues for evading tax
were closed off, would criticise the cards as a further discriminatory
move against PAYE taxpayers or the ‘little people’. They would
point out that these people are already disadvantaged, as compared with
taxpayers with a business or a profession, in that they are not able to
split their incomes with family members for taxation purposes. However,
the great majority of employees should welcome the introduction of the
cards if they can be convinced that the revenue that will be gained, as
a result of people being required to correctly identify themselves, will
permit a reduction in the tax payable by them
Endnotes
- David Simmons, M.P., Letter to Members of ALP Caucus,
26 April 1985.
- Reform of the Australian Taxation System, White Paper,
AGPS, Canberra, 1985, p. 38.
- Australia Card, explanatory booklet, p. 3.
- Ibid., p. 4.
- Ibid., p. 5.
- Ibid., p. 5.
- Ibid., p. 6.
- Ibid., p. 7.
- Ibid., p. 7.
- Ibid., p. 7.
- Ibid., p. 7.
- Sydney Morning Herald, 5 June 1985, p. 35.
- Australian, 8 May 1985.
- Age, 28 May 1985.
- Australian, 20 May 1985.
- Age, 28 May 1985.
- Ibid.
- Rule, J.B. et al., ‘Documentary Identification
and Mass Surveillance in the US’, Social Problems, Dec.
1983.
- Ibid.
- Canberra Times, 27 November 1977.
- Sydney Morning Herald, 9 May 1985.
- Age, 8 June 1985, p. 11.
- US News and World Report, 17 November 1975,
p. 50.
- Age, 22 June 1985 and Australian Financial
Review, 27 and 28 June 1985.
- Australian Financial Review, 27 June 1985.
- Sydney Morning Herald, 6 June 1985.
- Quoted in Age, 28 May 1985.
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