The Opposition makes a very solid point morally and a good one legally about the Government’s Budget trick.
The Government has hinted that it might put its Budget goodies and baddies in the one Bill so that the Senate has to knock back the goodies if it is to knock back the baddies. The Opposition would then be accused of preventing people’s tax cuts.
Let’s leave aside the political brawl for a moment and turn to the dry old Constitution. The Founding Fathers in Australia wanted to avoid a trap found in the United States Constitution. In the US as in Australia, revenue Bills had to originate in the House of Representatives. But in the US, the Constitution allowed the Senate to amend them. Often amendments took the form of trivial pet projects and laws, such as desexing cats or gum-tree preservation. When the amended Bill was sent back to the House, the House had to either to accept the pet project (which could be quite unpalatable) or reject the whole Bill, including the tax.
The cunning Australian Founding Fathers fixed this by taking away the Senate’s right to amend tax bills. No cat-desexing provisions or gum-tree-preservation laws were to be attached by the Australian Senate to the nation’s major tax efforts.
However, in return for cutting the Senate’s power this way, they provided Section 55. This requires that tax Bills only impose tax and nothing else. This, of course, was to stop the House of Representatives from tacking on its cat-desexing laws to major money Bills.
The Founding Fathers went further. Not only were tax Bills to contain tax and nothing but tax, the streams of tax were separated: excise bills could only deal with excise; customs could only deal with customs and other tax Bills could only deal with one subject of taxation only.
This was to allow the Senate to deal with each tax on its merits. This is precisely what the Opposition was talking about at the weekend. It was recognised in the early years of the century in Harding’s case when Sir Isaac Isaacs said the purpose of Section 55 was in “”guarding the Senate from the compulsive acquiescence in one tax by the moral necessity of passing another distinct tax”.
In other words the Senate should not be blackmailed into passing the wine tax by the threat of having to knock back the income tax cuts.
Justice Menzies (a cousin to Sir Robert) said in the üDennis Hotels case@ in 1955 that Section 55 was not a question of economics, rather “”it is concerned with political relations”.
It seems therefore that legally and morally, the Opposition is quite within its rights in kicking up a fuss over a Government trick in mixing its taxes in one Bill. The trick was understood by the Founding Fathers who put in Section 55 and Section 53 to guard against it, and it was recognised by the High Court very early on for its political significance.
The litigation on Section 55, however, has generally not been based around Senate rights. Rather it has been based on taxpayers trying to wriggle out of taxes; states trying to wriggle out of Commonwealth imposts and entrepreneurs trying to strike down marketing and other economic-regulatory schemes.
Despite the legal and moral force of what the Opposition says, it is still has a political difficulty. The Government could still present a mixed-tax Bill to the Senate and the Senate would still have to vote on it. Senators would still be faced with knocking back the tax cuts. The reason is that Section 55 does not say: “”The House shall not present to the Senate a Bill with mixed taxes . . .”. Rather it says “”üLaw@ imposing taxation shall deal . . . ”. It means you can only challenge the measure after it has been made law.
It should not come to that. The Government should look at Section 55 and realise that any Bill providing changes to wine and wholesale taxes and at the same time changing income-tax would have a severe risk of offending Section 55 and that there would be plenty of taxpayers out there ready, willing and able to make the challenge.
In this instance it has separated tobacco and petrol, putting them in a different excise and customs Bill. Once again, it is putting a goodie (tobacco) with a baddie (petrol), but the Constitution permits it.
We would then go through the farce of trying to fix the mess or pay back the tax. (Though remember the invalid departure tax; virtually no-one got their tax back who paid it in the interim before it was fixed.)
The Government argues that decreases in income tax and increases in existing rates of excise tax are not “”laws imposing taxation”; they are just rate adjustments. That is sophistry. In the past 90 years the High Court seems to have done its damnedest to uphold Commonwealth tax laws, but it should surely draw the line at that if Section 55 is to meaan anything at all.
Morality and common sense suggest the Government should not try it on. But since when has politics got anything to do with morality or common sense?