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Legislative Council - Fifty-First Parliament, Third Session (51-3)
2008-10-14 Daily Xml
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STATUTES AMENDMENT AND REPEAL (TAXATION ADMINISTRATION) BILL

Second Reading

Adjourned debate on second reading.

(Continued from 23 September 2008. Page 134.)

The Hon. P. HOLLOWAY (Minister for Mineral Resources Development, Minister for Urban Development and Planning, Minister for Small Business) (15:38): I do not believe that any other members wish to speak on this bill, so I thank the Hon. Mr Lucas for his contribution to the debate and will use this opportunity to provide answers to a number of questions asked in relation to the proposed amendments. The Hon. Mr Lucas asked how the 25 per cent red tape reduction target will be measured by the government and how we as a parliament will be able to monitor the success or not in terms of meeting the target of 25 per cent.

In 2006 the government endorsed a savings target of $150 million per annum to be achieved by July 2008 to reflect a 25 per cent reduction. Independent consultancy firm Deloitte was engaged to verify the scope of the project and achievement of the outcomes. Deloitte confirmed the achievement of net savings of over $170 million from nearly 200 red tape reduction initiatives across government agencies. The government's target was therefore exceeded within the two-year time frame. These achievements are documented in the report Reducing Red Tape for Business in South Australia 2006 to 2008, which is available in hard copy from the Department of Trade and Economic Development or from the Competitiveness Council's website.

The honourable member also asked whether by consolidating and updating reciprocal powers provisions there has been any increase in any way in the powers of investigation and, if so, in what areas. I am advised that the provisions have been rewritten for ease of understanding and operation. However, there has been no increase in the powers of taxation officers under the new provisions.

The honourable member asked: will the changes to the market rate of interest, which are set out in the Taxation Administration Act, in any way see an increase in revenue to the government and, also, as the market rate of interest outlined in the TAA (Taxation Administration Act) refers to a rate that has not been published since 1999, what has the government been doing in relation to the market rate of interest for the past nine years?

I am advised that these changes will have no revenue effect. The rate of interest over the last nine years has been set by the Treasurer by way of notice in the Gazette, and this rate has reflected the average rate at the 90-day bank accepted bill rate prescribed by the Reserve Bank of Australia for the month of May preceding each financial year.

The honourable member also asked: what has been the level of unpaid emergency services levies for each of the past three financial years, and how has the Commissioner approached that issue if there was no specific power within the current legislation to pursue those issues? I am advised that the emergency services levy outstanding for the last three financial years as at 3 October 2008 is as follows: for 2005-06, $200,409.63; for 2006-07, $429,745.56; and for 2007-08, $1,425,787.71.

The emergency services levy is a first charge on property and, as such, any outstanding liabilities currently can be protected by caveats or court proceedings, which have been utilised with good effect. Whilst the current provisions do not allow penalties to be charged, the act does allow for interest to be charged on unpaid levies. The ability to charge penalty is proposed to provide consistency with other revenue lines and provide further incentive for levy payers to meet their obligations in a timely fashion.

The honourable member further asked about what advice has been received, given that there will be the capacity to charge penalties on unpaid emergency services levies, and how much additional revenue from penalties the government will now collect from this new imposition of penalty on emergency service levies that have been unpaid, based on the level of unpaid levies in the past three years. I am advised that the revenue impact will be minimal. The Commissioner has advised he proposes to impose an initial level of penalty of 5 per cent on outstanding ESL amounts. However, the penalty could be increased to 25 per cent if there is a further default.

Based on the amount currently outstanding for the 2007-08 financial year, penalty would be 5 per cent of $1,425,787.71, which is approximately $71,300. However, if the amount of a penalty levy is less than $20, no penalty levy will be payable and, therefore, if a 5 per cent penalty rate is imposed no penalty would be payable on any account less than $400, which would reduce the potential amount of penalty levy collectable even further, as less than 5 per cent of emergency services levy accounts are more than $400.

As stated earlier, the imposition of penalty provides for consistency of administration with other revenue lines, and a further incentive for levy payers to meet their obligations in a timely fashion. I again thank the chamber for its contribution to the second reading debate.

Bill read a second time.

In committee.

Clause 1.

The Hon. R.I. LUCAS: I thank the minister for the replies to the questions asked in the last week of sitting. I think this particular aspect, whilst it was raised in the second reading (and I have now had an answer provided to my second reading speech), may well be not within the purview of the minister's adviser at the moment.

I am assuming (from what the minister has said in relation to the government's goal—of which this is a part, in terms of a 25 per cent red tape reduction) that the government in some way calculated that the total cost of red tape to businesses in South Australia was $600 million; that it has interpreted its 25 per cent reduction in red tape as being the equivalent of $150 million; and that the government now has this independent report which says it has already achieved that.

My question is: who calculated this magical sum of $600 million as being the total cost of red tape to business in South Australia? As I briefly discussed in the second reading, the whole notion of the cost of red tape to business in South Australia is complex and almost impossible to summarise simply, I would have thought. It has been suggested to me that all the government has done is take the number that Victoria used and applied a pro-rata formula, which begs the question as to where Victoria got its number from in terms of the total cost of red tape.

I am not sure whether the minister will be able to usefully add to the debate today but, if he can, I will be delighted. However, if he is prepared to take it on notice then I am happy to receive a considered response from, I presume, the boffins in the Competitiveness Council or the Department of Trade and Economic Development who may be able to answer the question. Can they can confirm the information that was provided to me or, if not, clarify how the government calculated the total cost of red tape to business in South Australia is $600 million a year?

The Hon. P. HOLLOWAY: As I indicated in my answer, Deloittes (an independent consultancy firm) did verify the scope of the project, and the achievement and the outcome. It confirmed the achievement of net savings of over $170 million so, presumably, it would have verified the methodology that was used. One can only assume that it was the Department of Trade and Economic Development and, in particular, the Competitiveness Council that were responsible for these calculations. However, we may need to seek further information on that.

The Hon. R.I. LUCAS: I am happy with that. I do not intend to delay the committee stage of the bill any further and I accept that assurance. The other issue I wanted to canvass was a part of the minister's response which referred to unpaid bills under the ESL Act. I was very surprised to hear that the unpaid bills over the past three years have exploded in terms of their size—that is, the unpaid bills in 2005-06 were about $200,000; in 2006-07, $400,000; and I think in 2007-08, $1.4 million.

Did the level of unpaid bills for 2005-06 (which was $200,000 but is, as of October 2008, still unpaid for that year) start off at something like $1 million or $1.4 million soon after the end of that financial year but was then whittled down to $200,000? Similarly, with the $400,000 of unpaid bills in 2006-07, is that the case as well?

The Hon. P. HOLLOWAY: My advice is that, yes, these are the figures as at 3 October. Obviously, the further one is away from the event the longer one has had to collect that money, and that is why it appears to decline so sharply. The $1.4 million figure for 2007-08 was probably due in December last year so, clearly, some of that money will come in. Obviously, the further back you go and the more effort you put in, you would expect the outstanding balance to be less significant.

The Hon. R.I. LUCAS: I think in his response the minister said that the government did not believe that there would be any additional revenue from the extra penalties which will now be imposed. We are now in the 2008-09 financial year, almost three financial years after the 2005-06 financial year and people still have not paid $200,000 plus for the 2005-06 emergency services levy. One would assume that the Commissioner for Taxation has been doing a range of things over the past two or three years trying to get these people to pay their unpaid levies and they are refusing. I assume that he will impose these not insignificant penalties on the outstanding balances. One would assume, therefore, that there would be an additional revenue inflow for the government and the Commissioner as a result of these penalties, particularly on the oldest outstanding balances.

I have not asked about previous years—perhaps I should have—but I assume that there may well even be outstanding debts from 2004-05 and 2003-04 where people have refused to pay. I just did not ask the question in relation to those years. I assume that there are outstanding debts from previous financial years as well which the Commissioner has not been able to collect and will now impose the penalties. Surely, as a result of that, it would mean some modest additional revenue for the government.

The Hon. P. HOLLOWAY: The point I made earlier was that, if the amount of a penalty levy is less than $20, no penalty levy would be payable. Therefore, if a 5 per cent penalty rate is imposed, that means no penalty would be payable on any account less than $400. Given the value of most emergency services levy accounts, as I indicated earlier the potential amount of penalty levy collected as less than 5 per cent of emergency services levy accounts of more than $500 would be relatively small. As I said, if only 5 per cent of the accounts are more than $400, so you will only apply those to 5 per cent of those amounts, it is probably counter-productive to pursue them below that amount.

That is why the government says that the penalty would be very low. Even if the entire $1.4 million outstanding for 2007-08 had a 5 per cent levy, that would be approximately $71,300 but, given that only 5 per cent of those accounts that make up that sum of $1.4 million are above $400, obviously it would be a much lower figure than that. Given what there might be in earlier years, there could be a whole lot of reasons why the ESL might be outstanding. It could be that deceased estates have not been finalised, and all sorts of reasons might come into it.

The Hon. R.I. LUCAS: I assume that at some stage the Commissioner writes off as uncollectible certain ESL debts. Can the minister take on notice and report back, going back six or seven years—not just three years, because I guess there is some sort of limit as to when the Commissioner decides to write off as uncollectible the ESL—the level of ESL write-offs as uncollectible? Also, what was the level of still uncollected ESL levies—if they have not been written off—going back to 2001-02 for each of the financial years? Obviously, I am happy for the minister to take that on notice, and I indicate that I have no further questions.

The Hon. P. HOLLOWAY: I will obviously have to take that question on notice.

Clause passed.

Remaining clauses (2 to 54) passed.

Bill reported without amendment.

Bill read a third time and passed.

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