Pape v Commissioner of Taxation [2009] HCA 23 - HCA 2009 case summary — Zoe

[475]

However, the other submissions of the plaintiff broadly to the following effect are correct. The right to recover the payments did not affect the legal rights and liabilities of recipients with respect to their taxation affairs. The tax liability of recipients as assessed under the Income Tax Assessment Act 1997 (Cth) remains unchanged: they are obliged to pay a sum corresponding to the tax assessed as payable in their notices of assessment, not that sum less the tax bonus. The Tax Bonus Act does not provide for the amendment of any assessment. It does not provide for a refund or repayment or rebate. The entitlement to a tax bonus cannot be set off by the Commissioner or the recipient against the recipient's existing tax liability**[492]. The lack of correlation of the tax bonuses with tax liability is revealed by the fact that even if the recipient's "adjusted tax liability" is less than the bonus - even if it is as little as $1 - it may still trigger a bonus of $900. The Tax Bonus Act has nothing to do with arriving at a figure which the recipient must pay by way of tax, or which the Commonwealth must pay in order to ensure that no more than the legally correct amount of tax was exacted. The tax bonuses were to come to recipients, in the ordinary course, by payment to the credit of a nominated financial institution account pursuant to s 7(2) of the Tax Bonus Act. The Tax Bonus Act injects $7 billion into the bank accounts of persons thought likely to spend what they receive. The Tax Bonus Act is thus a method of achieving fiscal goals. It is not a law about tax liabilities. It does not change, regulate or abolish any right, duty, power or privilege with respect to taxation. The Tax Bonus Act may produce for recipients an effect equivalent in money terms to an Act retrospectively reducing their tax liability and reimbursing any overpayment[493]**, but, even in substance, it is not equivalent in law. An Act of the latter kind would alter taxation liabilities; the Tax Bonus Act does not. The references to "adjusted tax liability" and "taxable income" serve as methods for identifying the class of recipients and the quantum of what they are to receive. These references to their tax position have nothing to do with the correctness of their tax liability. Their tax position is significant because of its utility as a guide to whether recipients are likely to spend rather than save the bonuses paid, and because of the Commissioner's possession of readily available records enabling expeditious assessment of whether recipients meet the criteria for entitlement to the bonuses. It was not the bonus which adjusted any tax liability; rather, it was the "adjusted tax liability" which was a criterion for identifying which persons were eligible for the bonus.

[509]

The G-20 Declaration - the central passage. The high point of the defendants' argument, and the only matter to which South Australia referred, was the passage quoted above from the G-20 Declaration**[511]. That language is no more than aspirational. It does not say which fiscal measures are to be used. What is stated leaves it very much open to individual governments to decide whether to use fiscal measures, and, if so, which ones. That is because of the words "as appropriate". It is also because of the reference to "maintaining a policy framework conducive to fiscal sustainability", which points against deficit spending. As New South Wales submitted, it is a qualified proposition on which governments can agree, but it "commits to nothing, because different views quite reasonably can be taken of what is sufficient to stimulate domestic demand to rapid effect as appropriate, and what is necessary to maintain fiscal sustainability." It is what might be expected of an organisation like the G-20, which concentrates on discussion, dialogue and influence, and which has a diverse membership[512]. It is highly improbable that in the ordinary course the deliberations of such a body would generate obligations in international law. In Victoria v The Commonwealth it was said that an "external affair" did not exist where all that was stated was a "broad objective with little precise content and permitting widely divergent policies by parties"[513]. Yet that is all the G-20 Declaration does. The defendants submitted that it went further, because the "words of commitment" given by the G-20 nations had triggered "an overall sameness about the nature of the responses." That was not demonstrated by the material the defendants referred to[514]. In any event, the existence of parallel conduct does not necessarily demonstrate a commitment to pursue it. The defendants submitted that the relevant passage was "expressed in terms as specific as one gets in international agreements." With respect, that submission is entirely incorrect. The G-20 Declaration lacks "sufficient specificity to direct the general course to be taken"[515]**.

[547]

"I do not think that the full power of the Commonwealth Parliament to legislate against subversive or seditious courses of conduct and utterances should be placed upon s 51(xxxix) in its application to the executive power dealt with by s 61 of the Constitution or in its application to other powers. I do not doubt that particular laws suppressing sedition and subversive endeavours or preparations might be supported under powers obtained by combining the appropriate part of the text of s 51(xxxix) with the text of some other power. But textual combinations of this kind appear to me to have an artificial aspect in producing a power to legislate with respect to designs to obstruct the course of government or to subvert the Constitution. History and not only ancient history, shows that in countries where democratic institutions have been unconstitutionally superseded, it has been done not seldom by those holding the executive power. Forms of government may need protection from dangers likely to arise from within the institutions to be protected. In point of constitutional theory the power to legislate for the protection of an existing form of government ought not to be based on a conception, if otherwise adequate, adequate only to assist those holding power to resist or suppress obstruction or opposition or attempts to displace them or the form of government they defend. As appears from Burns v Ransley[536] and R v Sharkey[537], I take the view that the power to legislate against subversive conduct has a source in principle that is deeper or wider than a series of combinations of the words of s 51(xxxix) with those of other constitutional powers. I prefer the view adopted in the United States ... '... it is within the necessary power of the federal government to protect its own existence and the unhindered play of its legitimate activities. And to this end, it may provide for the punishment of treason the suppression of insurrection or rebellion and for the putting down of all individual or concerted attempts to obstruct or interfere with the discharge of the proper business of government ...'

[T]he considerations giving rise to the implied power exist in the Commonwealth Constitution."

[580]

Stimulating the economy by means other than the tax bonuses. That is because a speedy stimulus equal in size to the tax bonuses could have been effectuated for the benefit of the nation in some other way. The Commonwealth acting alone could have given an equivalent stimulus in a different form under s 51(ii) (by granting tax rebates a little higher than the bonuses and paying them out in exactly the way the tax bonuses were paid out)[577]. The Commonwealth acting in cooperation with the States could have done it under s 96, by granting the money to the States on condition that the bonuses be paid pursuant to the formula which is set out in the Tax Bonus Act. The modification which the defendants wish to make to Mason J's test rests on a perception which contradicts, and indicates the incorrectness of, the defendants' submission that the Commonwealth Government "is the only Government with the resources, both financial and administrative, to provide it." This in turn undermines the defendants' contention that the Tax Bonus Act is supported by the need for national action in consequence of the insufficiency of the powers of the States to engage in the relevant enterprise. So framed, the question is one of insufficiency of powers. Legally, there is no bar to the States injecting monies equivalent to the total of the tax bonuses into the economy: their powers are "sufficient" to do this; they are not in the very constrained position that they are in, compared to the Commonwealth, in international affairs**[578]**. Practically, it may be true that the States in the year 2009 would have difficulty in raising sufficient monies for the purposes of a large fiscal injection, at least without considerable disruption to the rest of their activities: but the Special Case did not aver or deny this. It was for the defendants to demonstrate, if it were integral to their argument, that the States lack practical power to raise the monies by persuading the Commonwealth to engage in an act of cooperative federalism and supply them through s 96, or that they would have refused to cooperate with a Commonwealth plan to employ s 96. This the defendants did not do.

[622]

Organic changes contrasted with revolutions. Secondly, it may be accepted that some find merit in "organic" or "living tree"[600] or "living force"[601] approaches to the Constitution, free from the "dead hands" of the framers**[602], insulated from the cryogenic effects of their language[603], and emancipated from enslavement to their mental world[604]. It may be assumed but not conceded that in particular instances those approaches, depending on what is meant by them, can have value. However, they do not work validly when applied to developments in governmental practices, whether "organic" or not, which led to legislation that was not within legislative power as originally understood. So to apply them would be to espouse a theory of continuous constitutional revolution, in which successive usurpations would be constantly seeking to legitimise themselves by claiming de jure status from their de facto position. Some of the defendants' submissions suggested that it is appropriate to take into account the individual mental attitudes of the framers. That is not correct. But even if it were, there is little doubt that it would have come as a grave shock to O'Connor J, who thought that the meaning of the Constitution in 1900 would remain its meaning thereafter[605]**, to be told, if the Reserve Bank Act and the Charter of Budget Honesty Act had been enacted in 1903, that these statutes demonstrated the existence of a power in the Commonwealth Executive and the Commonwealth legislature to manage the economy fiscally, even though three years earlier no express language to that effect had been inserted in s 51 or in any other part of the Constitution. If, as the defendants suggested, O'Connor J's principles could be used to that end, they would be profoundly damaging to the position of the States. For the wider the Commonwealth's power to manage the economy by legislative means the less is the power of the States to enact valid legislation to control economic problems as they perceive them. That is inverting O'Connor J's principles, not applying them.

Parties

Applicant/Plaintiff:

# Pape

Respondent/Defendant:

Commissioner of Taxation \[2009\] HCA 23

Legislation Cited (4)

Court Rules 2004

Administration Act 1953

Court Rules 2004

Administration Act 1953

Cases Cited (135)

Pape v Commissioner of Taxation [2009] HCA 23 (7 July 2009)

(1951) 83 CLR 1

(1998) 192 CLR 285

(1920) 28 CLR 66

(1932) 47 CLR 50

(1960) 106 CLR 186

(1965) 112 CLR 177

(1975) 134 CLR 338

(1981) 146 CLR 559

(1997) 191 CLR 119

(1998) 194 CLR 247

(1931) 46 CLR 73

(1997) 189 CLR 520

(1993) 176 CLR 555

(1924) 34 CLR 198

(1934) 52 CLR 455

(1932) 46 CLR 155

(1954) 92 CLR 424

(2000) 96 FCR 272

(1945) 71 CLR 237

(1908) 7 CLR 179

(1922) 31 CLR 421

(1974) 131 CLR 477

(1975) 135 CLR 337

(1975) 132 CLR 164

(1988) 166 CLR 79

(1935) 52 CLR 533

(1940) 63 CLR 278

(1949) 79 CLR 101

(1949) 79 CLR 121

(2005) 224 CLR 494

(1916) 21 CLR 433

(1904) 2 CLR 139

(2000) 202 CLR 535

(1983) 158 CLR 535

(1994) 179 CLR 226

(1980) 146 CLR 493

(2000) 200 CLR 591

(1946) 73 CLR 213

(1996) 187 CLR 416

(2003) 211 CLR 476

(2004) 220 CLR 388

(2004) 222 CLR 322

(1988) 165 CLR 360

(1990) 169 CLR 482

(1999) 199 CLR 462

(1995) 184 CLR 453

(1975) 132 CLR 270

(2001) 207 CLR 344

(1997) 190 CLR 410

(2001) 110 FCR 491

(1907) 4 CLR 1087

(1962) 108 CLR 372

(1999) 196 CLR 392

(1970) 123 CLR 89

(2006) 227 CLR 614

(1984) 156 CLR 532

(2007) 231 CLR 570

(2007) 233 CLR 307

(1947) 74 CLR 492

(1982) 151 CLR 342

(1947) 74 CLR 31

(1948) 76 CLR 1

(1995) 183 CLR 323

(2003) 217 CLR 30

(1939) 61 CLR 634

(1995) 183 CLR 373

(1994) 179 CLR 155

(1951) 82 CLR 547

(1964) 113 CLR 207

(2000) 202 CLR 479

(1926) 38 CLR 399

(1956) 94 CLR 254

(1908) 6 CLR 41

(1920) 28 CLR 129

(2006) 229 CLR 1

(2003) 215 CLR 185

(1999) 198 CLR 511

(1955) 93 CLR 55

(2008) 234 CLR 418

(2006) 227 CLR 532

(1965) 114 CLR 1

(1993) 176 CLR 480

(1999) 202 CLR 133

(2002) 210 CLR 333

(1989) 166 CLR 518

(1943) 68 CLR 87

(1971) 124 CLR 468

(1986) 161 CLR 376

(1910) 11 CLR 1

(1935) 51 CLR 677

(1951) 84 CLR 442

(2002) 213 CLR 401

(1951) 84 CLR 58

(1981) 149 CLR 27

(1995) 183 CLR 552

(1908) 6 CLR 309

(1975) 134 CLR 201

(1975) 135 CLR 1

(1982) 150 CLR 169

(1982) 153 CLR 168

(1983) 153 CLR 297

(1983) 158 CLR 1

(1989) 168 CLR 340

(1989) 168 CLR 461

(1996) 186 CLR 140

(1904) 1 CLR 329

(1904) 1 CLR 208

(1904) 1 CLR 497

(1904) 1 CLR 585

(1906) 4 CLR 488

(1907) 4 CLR 1304

(1908) 6 CLR 469

(1910) 10 CLR 266

(1909) 8 CLR 330

(1945) 71 CLR 29

(2002) 208 CLR 460

(1965) 113 CLR 54

(1976) 138 CLR 492

(1991) 172 CLR 501

(1996) 187 CLR 579

(1996) 187 CLR 640

(1994) 181 CLR 183

(2007) 230 CLR 89

(1936) 55 CLR 608

(1925) 37 CLR 36

(1959) 107 CLR 208

(1994) 182 CLR 104

(2000) 203 CLR 1

(2000) 204 CLR 82

(1990) 169 CLR 195

(1926) 39 CLR 1

(1942) 65 CLR 373

(1977) 139 CLR 585

(1929) 42 CLR 481

Pape v Commissioner of Taxation [2009] HCA 23

At a glance

Court

Decision date

Before

Source

Judgment (1447 paragraphs)

Parties

Legislation Cited (4)

Cases Cited (135)

Pape v Commissioner of Taxation [2009] HCA 23 (7 July 2009)