Page 178 - Week 01 - Wednesday, 17 February 1993
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business, the abolition of the payroll tax can mean the end of the slide towards massive unemployment and a reduction in the Consumer Price Index of up to 2 per cent a year. At one blow, we can cut the upwards prices spiral and the downwards jobless spiral.
Mr Kaine: They were enlightened people in the Labor Party in those days.
Mr Humphries: Where did they all go?
MR DE DOMENICO: Exactly, Mr Humphries. Ironically, in 1977 they were concerned - and they should have been concerned, too - about the horrendous unemployment rate. Let me remind people sitting here and people outside who might be listening in the phone boxes that currently the unemployment level in Australia is over one million people. So we have all these eminent Labor politicians saying, "Payroll tax is the scourge of the private sector". But what do we do? We sit here and we debate a payroll tax Act. Let me say that I am delighted to be standing here debating payroll tax because I know with every bone within me that it will not be long before all this complicated legislation will be wiped away in one fell stroke of the pen when Dr Hewson wins the election on 13 March.
But I will go back to this particular Bill, Mr Deputy Speaker. It is interesting to note that the ACT Revenue Office conducts payroll tax audits of Canberra and the region to examine service contracts to ensure that they comply with payroll tax provisions. The Commissioner for ACT Revenue, Mr Gordon Faichney, has said from time to time that, as provisions requiring payment of payroll tax on service contracts have been in place for over two years now, taxpayers who failed to comply would be considered tax evaders. Mr Faichney is on record as saying that seven penalties, which would be calculated as a percentage of tax avoided, would apply. The commissioner, as we know, in the ACT has the power to impose a penalty tax of up to 200 per cent of the tax avoided. Under changes to the payroll tax legislation which date back to 1 November 1989, certain payments made to contractors or subcontractors and agents may be deemed to be wages and must be taken into account in determining the employer's payroll tax liability.
It is interesting, because, if anybody can stand up and tell me in, say, one or two words or one or two sentences what exactly is a service contract, they are better people than I thought they would be. It has been the scourge of all lawyers and drafters and everybody else for a very long time, and still is. The definition is wide, obviously; it is complex and confusing. It is also subject to certain exemptions, and this is what is interesting about this legislation. Traditionally, payroll tax is levied where an employer-employee relationship exists; however, the service contract provisions extend to payments to various subcontractor arrangements or agency arrangements. While the person performing the work may be regarded at law as a contractor, payments to such a person may be subject to payroll tax if the contract is primarily for the supply of labour.
A typical situation arises where, for example, two parties are in business - one is supplying a service, let us say a carpenter, and another party is receiving a service, a builder, let us say in this instance. In this situation the service is principally for the provision of labour. Obviously, one of the main industries affected by the service contract provisions is indeed the building industry, and we hear from time to time how important that industry is to the overall well-being of the ACT economy.
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