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TAX OR PENALTY? - THE LATEST SEQUEL
By Vince Morabito
The judgment of the Victorian Court of Appeal in Woodhams v DFC of T 97 ATC 5119 constitutes the latest judicial pronouncement on the distinction between a tax and a penalty for the purpose of determining the validity of Commonwealth fiscal legislation. This article provides an extensive review of the concept of a penalty through an analysis of Woodhams as well as other relevant cases.
The process of ascertaining the constitutional validity of Commonwealth legislation in the tax arena frequently necessitates a determination as to whether the levy imposed by the Commonwealth Act in question is a penalty rather than a tax. Whilst the concept of a tax has been extensively canvassed by both judges[1] and legal commentators,[2] the significant concept of a penalty has generally been the subject of very limited scrutiny. The recent discussion by the Victorian Court of Appeal in Woodhams v DFC of T[3] as to what constitutes a penalty provides an ideal opportunity to examine in depth this concept. In Part 2 of this article, the relevance of penalties in ascertaining the constitutional validity of Commonwealth taxation legislation is explained. The pronouncements of the High Court and the Federal Court on this concept are canvassed in Part 3 of this article. The judgments in Woodhams are reviewed in Part 4.
Section 51(ii) of the Commonwealth Constitution, the so-called "taxation power", confers upon the Commonwealth Parliament the power to enact laws with respect to taxation "but so as not to discriminate between States or parts of States". This taxation power enables the Commonwealth to pass laws which impose taxes as well as laws which make provision for its collection and recovery.[4] Consequently, the most important issue in determining whether a given Commonwealth Act was enacted pursuant to the taxation power is, generally, whether it imposes, or otherwise deals with, an exaction which can be characterised as a tax.[5]
The courts and commentators have regarded the classic definition of a tax as being that enunciated by Latham CJ in Matthews v Chicory Marketing Board where the Chief Justice said:
... a tax ... is a compulsory exaction of money by a public authority for public purposes, enforceable by law, and is not a payment for services rendered.[6]
Even though a levy satisfies the positive attributes of the Latham definition (as subsequently modified),[7] it will clearly not be a tax within that formulation if it is a fee for services rendered. Subsequent cases have indicated that other exactions, not just fees for services rendered, may also not be characterised as taxes, notwithstanding that these exactions meet the positive attributes of the Chief Justice's formulation. So much is evident from the following comments in Air Caledonie International v Cth:
... the negative attribute [of the Latham formula] - "not a payment for services rendered" - should be seen as intended to be but an example of various special types of exactions which may not be taxes even though the positive attributes mentioned by Latham CJ are all present. Thus, a charge for the acquisition or use of property, a fee for a privilege and a fine or penalty imposed for criminal conduct or breach of statutory obligation are other examples of special types of exactions of money which are unlikely to be properly characterized as a tax notwithstanding that they exhibit those positive attributes.[8] (emphasis added)
The passage above clearly indicates that the concepts of taxes and penalties are mutually exclusive. A given exaction may be either a tax or a penalty, but it cannot be both.[9] Consequently, if the Commonwealth Act under challenge deals with only one exaction which is characterised by the court as a penalty, rather than a tax, then the law is not authorised by the taxation power and will be declared invalid by the court, unless the Commonwealth can place reliance on other heads of legislative power.
But the role of this concept of penalties, in the process of determining the validity of Commonwealth legislation in the tax arena, goes beyond the confines of the taxation power. A Commonwealth law may be held to be unconstitutional despite the fact that it was enacted pursuant to one or more heads of Commonwealth legislative power. This scenario results from the existence of a number of both express and implied constitutional restrictions/prohibitions on the ability of the Commonwealth to make laws. Consequently, the second step in the process of determining the validity of a given Commonwealth law is to ascertain whether it violates any of these restrictions. The most relevant constitutional prohibition, for present purposes, is found in s 55 of the Constitution. The first paragraph of s 55 reads as follows:
Laws imposing taxation shall deal only with imposition of taxation, and any provision therein dealing with any other matter shall be of no effect.[10]
As Mason CJ, Wilson, Dawson, Toohey and Gaudron JJ explained in State Chamber of Commerce and Industry v Cth,[11] this part of s 55:
... is related to sec 53 of the Constitution which provides that a proposed law imposing taxation shall not originate in the Senate or be amended by the Senate. Without some such provision as contained in that paragraph the practice of tacking would have led to further inroads on the Senate's power of amendment of bills.[12]
The dividing line between provisions dealing with the imposition of taxation and provisions which cannot be so described was explained as follows by Fullagar J in Re Dymond:
[T]he specification of the persons who are to be liable to taxation and the definition of their liability is part of the denotation of the term "imposition of taxation". But provisions for administration and machinery, the appointment and powers and duties of a Commissioner of Taxation, the making of returns and assessments, the determination of questions of law and fact relating to liability, the collection and recovery of tax, the punishment of offences, stand on a different footing. They "deal with" matters which must be dealt with if the imposition of tax is to be effective. But they cannot be said to deal with the imposition of taxation, because their subject matter is not comprehended within the meaning of the term "imposition of taxation". The creation of a liability and (for example) the enforcement of the liability by civil or criminal proceedings are different subject matters. "Dealing with the imposition of taxation" is a different thing from "dealing with taxation", and the former expression does not mean or include "dealing with matters incidental to the imposition of taxation".[13]
Consequently, a provision which imposes a penalty is, for the purposes of s 55, a provision which deals with matters other than the imposition of taxation. As a result of the first paragraph of s 55, the parliamentary practice of enacting two sets of Acts - Assessment Acts and Tax Acts - has developed:
Assessment Acts] provide means for assessing and collecting tax - they give authority to officers to assess and collect the tax, and they impose duties upon persons to make returns in order to make such assessment and collection possible. The Tax Acts contain the grant of money - they impose the burden upon the people. It is the latter Acts and not the former which have been regarded as imposing taxation ...
This practice has been recognised by [the High Court] as carrying out the constitutional provisions upon a correct basis. It has been held on several occasions that various Assessment Acts do not impose taxation ...[14]
The consequence of breaching the first paragraph of s 55 is that the provisions dealing with matters other than the imposition of taxation are invalid.[15] However, as a result of the decision of the High Court in Air Caledonie,[16] where an amendment inserts a provision dealing with the imposition of taxation into an Act which contains only provisions dealing with matters other than the imposition of taxation, the amending Act, rather than the existing non-taxation provisions, are invalidated by s 55.[17] This is because the amending Act has purported to bring about a state of affairs which contravenes s 55 and is therefore without constitutional validity.[18] As we will see in Part 4 below, it was the insertion of a provision into an Assessment Act, through an amending Act, which provoked the litigation in Woodhams as the taxpayer contended that the amending Act contravened s 55 by attempting to include a provision imposing taxation in an Act which did not deal with the imposition of taxation.
In light of the principles formulated above, it is clear that, for the purposes of s 55, the concept of penalties becomes crucial in a number of scenarios including the following:
• The taxpayer argues that the exaction imposed on him/her/it by a Tax Act is a penalty. If the taxpayer's argument succeeds, then the provision imposing the penalty is unconstitutional as it is a provision not dealing with the imposition of taxation which, contrary to s 55, is found in an Act which imposes taxation.
• The taxpayer successfully submits that the exaction imposed on him/her/it by a provision inserted into an Assessment Act, or other Acts not dealing with the imposition of taxation, through an amending Act, is a tax. As indicated above, as a result of Air Caledonie, s 55 invalidates the amending Act and, consequently, the new tax.
• The taxpayer persuades the relevant court that the exaction imposed by a provision inserted into a Tax Act, by an amending Act, is a penalty. Again, since the amending Act purports to do something which contravenes s 55 - by inserting a non-taxation provision into an Act which deals with the imposition of taxation - it is ineffective to make the amendment for which it was designed.
The distinction between a penalty, on the one hand, and a tax, on the other, was drawn as early as 1908 by Isaacs J in R v Barger.[19] He distinguished "a penalty for an unlawful act or omission" from "a contribution to revenue irrespective of any legality or illegality in the circumstances upon which the liability depends".[20]
A well known instance of a penalty was provided by the statutory provision which was challenged in Re Dymond.[21] Section 46 of the Sales Tax Assessment Act (No. 1) 1930 (Cth) imposed a liability to pay "additional tax" on those who were in default for (a) failing to make a return or (b) failing to make full return. In relation to scenario (a), the amount payable was 10% of the amount assessable to the taxpayer in question or one pound, whichever was greater. In relation to scenario (b), the liability amounted to one pound or double the amount of tax otherwise avoided (whichever was the greater). The High Court held that s 46 imposed a penalty, and not a tax, as:
... [t]he liability was imposed by the Act not as a consequence of a sale of goods but as a consequence of an attempt to evade payment of a tax on a sale of goods. The exaction is directly punitive, and only indirectly fiscal. It is imposed for the protection of the revenue, but as a sanction and not for the sake of revenue as such. It is not a tax on the sale of goods, and it is not a tax on anything else.[22]
The taxpayer's reliance on the fact that the impost imposed by s 46 was expressed to be payable "by way of additional tax" was rejected on the following basis:
The words "by way of additional tax" mean, I think, no more than the amount of the penalty (to the extent to which it is not remitted) is to be notified, like the tax itself, by a notice of assessment, so that the quantified penalty and the quantified tax are, subject to the right of objection and appeal, made actually payable by the same machinery.[23]
A similar ruling was made by Nicholson J of the Federal Court in DFC of T v Fontana[24] in relation to the exaction levied by s 207 of the Income Tax Assessment Act 1936 (Cth) ("ITAA36"). Section 207(1) provides that:
If any tax remains unpaid after the time when it became due and payable or would, but for section 206, have become due and payable, additional tax is due and payable by way of penalty by the person liable to pay the tax at the rate of 20% per annum on the amount unpaid, computed from that time ...
The issue before the Court was whether s 207 was a provision dealing with the imposition of taxation for the purposes of the first paragraph of s 55.[25] Nicholson J was of the view that a plain reading of s 207 showed that it imposed a penalty:
A penalty is a punishment imposed for breach of law, rule or contract (see The Shorter Oxford English Dictionary 1973 p.1543). Additional tax by way of penalty applies when there is a breach of the law or rule that tax due shall be payable by a certain date.[26]
Reliance was also placed, by his Honour, on the fact that the liability to pay the additional tax under s 207 arose "from a failure to discharge antecedent obligations on the part of the persons upon whom the exaction falls, namely the taxpayer who fails to pay income tax on the due date."[27]
The distinction between a tax and a penalty was last considered by the High Court in Northern Suburbs General Cemetery Reserve Trust v Cth.[28] The High Court was asked to determine, inter alia, whether a levy (the "training guarantee charge") payable by employers, under the Training Guarantee (Administration) Act 1990 (Cth) ("TGAA90"), was a tax or a penalty. The liability to pay this levy arose whenever employers incurred a "training guarantee shortfall". In simple terms, this occurred where an employer spent less than the minimum amount required under the Act on "eligible training activities". The moneys received by the Commonwealth were to be paid to the States and Territories who were required to expend these moneys in relation to "eligible training programs".[29] In doing so, they were to act on the advice of a body which included representatives of employers and trade unions.[30] The Court held that the training guarantee charge did not constitute a penalty. Mason CJ, Deane, Toohey and Gaudron JJ explained that:
... the considerations pointing to a tax rather than a penalty are decisive. Neither the Act nor the Administration Act mandates or proscribes conduct of any kind. The legislative provisions do not make it an offence to fail to spend the minimum training requirement; nor do they provide for the recovery of civil penalties for such a failure. Consequently, the charge is not a penalty because the liability to pay does not arise from any failure to discharge antecedent obligations on the part of the person on whom the exaction falls ... The fact that the legislature has singled out those who do not spend the minimum training requirement as the class to bear the burden of the charge and to quantify the amount of the liability by reference to the shortfall does not deprive the charge of the character of a tax.[31]
Constitutional challenges against Commonwealth tax legislation that are heavily, if not exclusively, based on the tax/penalty dichotomy are most likely to be encountered where the exaction in question is in the nature of compensation for lost revenue. The judicial pronouncements in Collector of Customs (NSW) v Southern Shipping Co Ltd,[32] MacCormick v FC of T[33] and Woodhams tend to indicate that such "recoupment" measures are not inherently of a fiscal nature. Whether or not they are penalties or taxes, needs to be determined on the basis of a review of the legislative regime in question.
In Southern Shipping, the High Court was asked to determine whether, inter alia, the levy exacted by s 60 of the Excise Act 1901-1952 (Cth) was a tax. Section 60 provided that:
Where a person who has, or has been entrusted with, the possession, custody or control of excisable goods which are subject to the control of the Customs - (a) fails to keep those goods safely; or (b) when so requested by a Collector, does not account for those goods to the satisfaction of the Collector, that person shall, on demand in writing made by the Collector, pay to the Commonwealth an amount equal to the amount of the Excise duty which, in the opinion of the Collector, would have been payable on those goods if they had been entered for home consumption on the day on which the Collector made the demand.
Dixon CJ, with whom Windeyer J agreed, felt that the impost was not a tax as s 60 was "not based on primary notions of liability to tax. It is a secondary liability and is based on the hypothesis that the tax is escaped. It is indeed an ancillary measure and not itself a tax".[34] Similar views were expressed by McTiernan[35] and Taylor JJ.[36] The following comments of Kitto and Owen JJ, respectively, indicate that they regarded the s 60 impost as a penalty rather than a tax:
It imposes upon a person a liability to make to the Commonwealth a payment in the nature of compensation for a loss of excise duty, the person being made liable because he has committed one or the other of two defaults which the Parliament has considered sufficient to affect him with responsibility for the loss.[37]
[T]he obligation imposed by the section is to be regarded ... as an obligation to make good to the Commonwealth the loss of revenue which would have been received by it had the custodian of the goods kept them safely or accounted for them to the satisfaction of the Collector.[38]
In MacCormick, the legislation[39] under challenge sought the recoupment of company tax which became irrecoverable as a result of the companies, which would have been liable to pay the tax, being stripped of their assets. The liability was imposed upon the vendors of shares where the sale of the shares was followed by a stripping operation and upon those who promoted the scheme of which the sale formed part.
The High Court rejected the taxpayer's main submission that the laws in question were not laws with respect to taxation as it held that the recoupment measures did not impose a penalty for failure to pay company tax but, instead, imposed a new tax which was distinct and separate from the unpaid company tax. This judicial finding was arrived at despite the fact that the liability to pay this recoupment tax was only activated by the failure to pay company tax and that the recoupment tax was equal to the unpaid company tax:
The exactions in question answer the usual description of a tax. They are compulsory. They are to raise money for governmental purposes. They do not constitute payment for services rendered ... They are not penalties since the liability to pay the exactions does not arise from any failure to discharge antecedent obligations on the part of the persons upon whom the exactions fall ... They are not arbitrary. Liability is imposed by reference to criteria which are sufficiently general in their application and which mark out the objects and subject matter of the tax.[40] (emphasis added)
The appellant, who was a director of a company which failed to remit group tax deducted from the salaries and wages of its employees, was the unsuccessful defendant in an action instituted in the County Court by the Deputy Commissioner of Taxation ("the Commissioner") to recover from the appellant and a second defendant penalties imposed by ss 222AOC and 222APC of the ITAA36. The appeal, to the Victorian Court of Appeal, was launched on the ground that these two provisions - which were added to the ITAA36 by s 16 of the Insolvency (Tax Priorities) Legislation Amendment Act 1993 (Cth) ("ITPA93") - imposed a tax and were therefore unconstitutional as the ITPA93 contravened the first paragraph of s 55 of the Constitution by inserting provisions dealing with the imposition of taxation into an Act, the ITAA36, which did not, otherwise, contain provisions dealing with the imposition of taxation.
In light of the similarities between ss 222AOC and 222APC, the appellant proceeded on the basis that the judicial finding on one provision would dictate the result on the other. Consequently, both the litigants and the Court focussed solely on s 222AOC. Section 222AOC works in conjunction with s 222AOB. This latter provision places upon the directors of a company, which has failed to remit group tax deducted from the salaries and wages of its employees, an obligation to "cause the company to do at least one of the following on or before the due date":
• to remit to the Commissioner the tax deductions;
• to make an agreement with the Commissioner, under s 222ALA of the ITAA36, for the purpose of discharging the company's liability in respect of the tax deductions;
• to appoint an administrator of the company under s 436A of the Corporations Law, with a view to voluntary administration under Pt 5.3A; or
• to commence winding up the company.
Section 222AOB(2) provides that s 222AOB is complied with when one of the four events mentioned above "happens, even if the directors did not cause the event to happen". The relevant parts of s 222AOC read as follows:
If section 222AOB is not complied with on or before the due date, each person who was a director of the company at any time during the period beginning on the first deduction day and ending on the due date is liable to pay to the Commissioner, by way of penalty, an amount equal to the unpaid amount of the company's liability under a remittance provision in respect of deductions:
(a) that the company has made for the purposes of Division ... 2 ...; and
(b) whose due date is the same as the due date.
The appellant's contention that s 222AOC imposed a tax, rather than a penalty, was based on two major propositions. The first proposition was that the amount of the "penalty" was equal to the unpaid amount of the company's own liability under the ITAA36. This indicated, according to the appellant, that the purpose of s 222AOC was not to enforce compliance with pre-existing obligations imposed upon the company, but instead to secure the payment of compensation for revenue otherwise lost.
Reliance was also placed on the fact that the liability imposed by s 222AOC was parallel to the liability imposed on other directors as well as that imposed on the company itself. Section 222AOH(2) provided that if an amount is paid in discharging one of these parallel liabilities, each of the other liabilities is pro tanto discharged. On the basis of this legislative scenario, the appellant argued that the exaction imposed by s 222AOC was not a penalty because:
... a penalty, by its very nature, is a liability which can only be discharged by the person upon whom it is exacted.
Thus, even when a defendant refuses to pay a fine imposed by him, and a benefactor "pays the fine" in his place, the benefactor in reality makes a gift to the defendant of an amount equal to the amount of the fine, with the gift being effected by the payment to the relevant authority ...
Accordingly, because the liability imposed upon a particular director by sec 222AOC can be discharged subsequently by the discharge of a parallel liability by either the company, or by another director, then, by definition, the director's liability is not a penalty. In the absence of any other relevant alternative it must therefore be a tax.[41]
Support for the argument above of "parallel liabilities" was placed on the ruling of the High Court in MacCormick that the impost imposed on vendor shareholders by s 5(1) of the Taxation (Unpaid Company Tax) Assessment Act 1982 (Cth) was a tax. The relevant aspect of s 5(1) is that, as a result of s 9(1) of the same Act, the liability imposed upon a particular vendor shareholder by s 5(1) was reduced by any amounts paid to the Commissioner, in relation to the unpaid company tax, by another vendor shareholder or by the company itself.
The judgment of the Victorian Court of Appeal was delivered by Phillips JA. He held that s 222AOC imposed a penalty rather than a tax. His Honour acknowledged that the purpose of s 222AOC was to secure payment of the tax deductions which had not been remitted by corporate employers. But this finding did not alter the fact that the impost levied by s 222AOC was for breach by the directors of the obligations imposed upon them by s 222AOB, thereby constituting a penalty for constitutional purposes. In making this finding, reliance was placed on the fact that the obligations imposed directly on the directors by s 222AOB involved, not simply causing the company to remit the unmerited tax deductions, but also causing the company to, either, enter into an agreement with the Commissioner for payment, move into voluntary administration or liquidation. These last three options "did not reflect things which the company was already bound to do".[42]
Reliance was also placed by the Court on the fact that the default of the company was only in respect of the collection of another taxpayer's tax (its employees) and not in respect of tax liability imposed on the company itself:
[Section 222AOC] is part of an elaborate process of collection involving more than one stage ... there is but the one primary obligation to pay tax, and that is imposed upon the company's employees. In aid of that there are two auxiliary obligations imposed, one upon the company (to make deductions and to remit what is deducted) and the other, at a further remove, upon the directors of the company (to cause the company to honour its obligations under Division 2 to make an agreement for payment to the respondent or to proceed promptly into voluntary administration or liquidation). Penalties are imposed in respect of both of these auxiliary obligations which are themselves directed to collecting the tax payable by the employees - and the provision made by sec 222AOC is but a part of that process. Accordingly, s 222AOC does not impose a tax.[43]
MacCormick was distinguished on a number of grounds including the fact that in that case there was no pre-existing obligation which it was sought to enforce. Finally, the Court placed reliance on Southern Shipping to demonstrate that exactions that are in the nature of compensation for lost revenue are not necessarily taxes.
One may be forgiven for concluding that whether or not a given exaction is judicially characterised as a penalty rather than a tax is dependent on which characterisation is essential to the validity of the Commonwealth law which imposed the exaction in question. In fact, in Re Dymond, Fontana, Woodhams and Southern Shipping, the validity of the Commonwealth laws under challenge could only be upheld if the Court characterised the imposts in question as penalties and this is precisely what the Court did. Similarly, in MacCormick and Northern Suburbs the judicial ruling that the Commonwealth legislation under attack exacted taxes, rather than penalties, ensured that no judicial pronouncement of invalidity would follow.
But adopting the analytical stance articulated above would not provide a complete picture of this area of law as it would shift the focus away from an essential consideration, namely, the ease with which legislative provisions imposing levies may be drafted to ensure that the levies in question are judicially classified in the manner desired by the Commonwealth. The discussion of the relevant case law, set out in Parts 3 and 4 above, has shown that:
1. the essential inquiry in determining the existence of a penalty is whether the liability to pay the exactions in question arises from the failure to discharge antecedent obligations on the part of the persons upon whom the exactions fall; and
2. in applying the test articulated above, emphasis is placed by the courts upon the terms of the legislation in question rather than on its practical operation or legislative motives.
In light of this scenario, if the Commonwealth wishes to encourage or discourage particular conduct, "instead of creating an offence or imposing a sanction, the Commonwealth could achieve the same result by imposing a tax on certain classes of conduct or imposing a tax with an exemption for those who act or refrain from acting in a manner desired by the Commonwealth."[44] This device is generally sufficient to avoid a judicial finding that the impost is a penalty.
This state of affairs was vividly highlighted by the legislative scheme challenged in Northern Suburbs which relied on the taxation power to ensure that all employers expended an amount specified by the Commonwealth on certain training programs for employees. This was achieved by ensuring that the legislation did not impose an obligation upon employers to spend a minimum amount on training activities. The legislation, instead, simply provided that those who failed to spend the specified amount would be liable to pay a levy equal to the difference between this specified amount and what was actually spent by the employer in question.
Conversely, if the Commonwealth wishes a judicial ruling to the effect that the impost is a penalty - as would be the case where the provision in question is found in an Assessment Act - it would simply need to impose an obligation to engage or cease to engage in particular conduct, as the case may be, and provide that those who fail to discharge this obligation are liable to pay to the Commonwealth a specified amount. An illustration of this scenario is provided by Woodhams where the Court held that the impost in question was a penalty - because it was imposed as a financial sanction for the failure of the directors to discharge certain obligations imposed on them by the ITAA36[45] - despite acknowledging that the purpose of the legislative provision in question, s 222AOC, was to secure payment of the tax deductions which had not been remitted by corporate employers.
The Victorian Court of Appeal's judgment in Woodhams does not appear to alter the constitutional scenario depicted above, with perhaps one exception. The exception relates to the Court's apparent acceptance of the appellant's proposition that "while the breach of an antecedent obligation might be a necessary element before a compulsory exaction could constitute a penalty ... it was not alone sufficient".[46] It is submitted that, whilst this proposition appears to be inconsistent with the High Court's pronouncements in MacCormick and Northern Suburbs, it constitutes a positive development - if applied in subsequent cases - for it may remove some of the artificiality described above that currently exists in the application of the penalty/tax dichotomy. If the concept of penalties is, indeed, viewed by future courts as extending beyond the narrow notion of financial sanctions for breaches of antecedent obligations, then the "parallel liabilities" argument that was rejected in Woodhams may well prevail in the future. This argument, based on the proposition that a penalty can only be discharged by the person upon whom it is exacted, is not without conceptual appeal and deserves to be considered by the courts together with other relevant factors such as, of course, the breach of antecedent obligations.
Vince Morabito is a Senior Lecturer in Law at Monash University's Department of Business Law and Taxation and a member of the Journal of Australian Taxation's Advisory Board. He holds BEc, LLB (Hons) and LLM degrees. Vince has written several articles in the areas of taxation law, tax administration, constitutional law, civil procedure and judicial administration. He is also the co-author of several books including the 2000 Core Tax Legislation and Study Guide, published by CCH Australia Ltd.
[1] See, for instance, Matthews v Chicory Marketing Board [1938] HCA 38; (1938) 60 CLR 263; Air Caledonie International v Cth [1988] HCA 61; (1988) 165 CLR 462; and Australian Tape Manufacturers Association Ltd v Cth (1993) 176 CLR 480 ("Australian Tape Manufacturers").
[2] See, for instance, P Johnston, "A Taxing Time: The High Court and the Tax Provisions of the Constitution" (1993) 23 University of Western Australia Law Review 362; D Challis, "Ejecting the Blank Tape Levy: Australian Tape Manufacturers Association Ltd v Cth of Australia" [1994] SydLawRw 38; (1994) 16 Sydney Law Review 537; V Morabito and S Barkoczy, "What is a Tax? - The Erosion of the 'Latham Definition'" (1996) 6 Revenue Law Journal 43; and FJ Alpins, "Why the Superannuation Guarantee Scheme is Unconstitutional" (1999) 28 Australian Tax Review 13.
[3] 97 ATC 5119 ("Woodhams").
[4] "The power to make laws providing for the collection and recovery of taxation is necessarily contained in the power to make laws with respect to taxation granted by s 51(ii) of the Constitution to the Parliament": Moore v Cth [1951] HCA 10; (1951) 82 CLR 547, 573 Moore") (per McTiernan J).
[5] "[T]he conventional view now is that s 51(ii) can be used to support legislation which will have the effect of regulating behaviour across a wide spectrum of social and economic situations, over which the Commonwealth has no direct constitutional power. This result can be achieved as long as the Commonwealth legislation imposes a legal obligation to pay taxation, and does not attempt to create any wider legal obligation": P Hanks, Constitutional Law in Australia (2nd ed, 1996) 291-292.
[6] [1938] HCA 38; (1938) 60 CLR 263, 276.
[7] The High Court has recently indicated that it is possible for an impost to be regarded as a tax despite its failure to exhibit all the attributes of the Latham definition: see Australian Tape Manufacturers (1993) 176 CLR 480, 500-508 (per Mason CJ, Brennan, Deane and Gaudron JJ).
[8] [1988] HCA 61; (1988) 165 CLR 462, 467 ("Air Caledonie") (per Mason CJ, Wilson, Brennan, Deane, Dawson, Toohey and Gaudron JJ). See also Australian Tape Manufacturers (1993) 176 CLR 480, 507 (per Mason CJ, Brennan, Deane and Gaudron JJ); and Northern Suburbs General Cemetery Reserve Trust v Cth [1993] HCA 12; (1993) 176 CLR 555, 566-567 (per Mason CJ, Deane, Toohey and Gaudron JJ).
[9] Woodhams 97 ATC 5119, 5126 (per Phillips JA).
[10] Section 55 also provides, among other things, that "any provision therein dealing with any other matter shall be of no effect" and that "laws imposing taxation, except laws imposing duties of customs or of excise, shall deal with one subject of taxation only".
[11] [1987] HCA 38; (1987) 163 CLR 329.
[12] Ibid 353-354. Section 53 expressly recognises penalties by providing that "a proposed law shall not be taken to appropriate revenue or moneys, or to impose taxation, by reason only of its containing provisions for the imposition or appropriation of fines or other pecuniary penalties".
[13] [1959] HCA 22; (1959) 101 CLR 11, 21 ("Re Dymond").
[14] Cadbury-Fry-Pascall Pty Ltd v FC of T [1944] HCA 31; (1944) 70 CLR 362, 372-373 (per Latham CJ).
[15] This result is expressly specified in s 55 itself as it provides that "any provision therein dealing with any other matter shall be of no effect".
[16] [1988] HCA 61; (1988) 165 CLR 462.
[17] In Air Caledonie, the Migration Amendment Act 1987 (Cth) added s 34A to the Migration Act 1958 (Cth) which imposed a fee payable by passengers travelling to Australia on an overseas flight as part of their immigration clearance. Since the Migration Act 1958 (Cth) was clearly an Act dealing with matters other than the imposition of taxation, the Court had to determine whether the fee in question was a tax. If so, a violation of s 55 had occurred.
[18] "If an amending Act purports to insert a provision imposing taxation in an existing valid Act which contains provisions dealing only with other matters, it seeks to bring about something which the Constitution directly and in terms forbids and which is not within the competence of the Parliament to achieve ... The injunction of the first limb constitutes a restriction on legislative power. Its effect in the present case is to invalidate the relevant provisions of the amending Act and one never reaches the situation where the second limb operates to strike down all of the provisions of the principal Act dealing with matters other than the imposition of taxation": Air Caledonie [1988] HCA 61; (1988) 165 CLR 462, 472 (per Mason CJ, Wilson, Brennan, Deane, Dawson, Toohey and Gaudron JJ).
[19] [1908] HCA 43; (1908) 6 CLR 41.
[20] Ibid 99. In this case, the High Court held by a majority (Griffith CJ, Barton and O'Connor JJ; Isaacs and Higgins JJ dissenting) that the Excise Tariff Act 1906 (Cth) was not a law with respect to taxation despite the fact that it imposed a tax, an excise duty, on a number of agricultural machines and provided an exemption from this tax in relation to, among others, "goods manufactured by any person in any part of the Commonwealth under conditions as to the remuneration of labour which ... are declared by resolution of both Houses of the Parliament to be fair and reasonable": s 2. Griffith CJ, Barton and O'Connor JJ were of the view that this law was "an Act to regulate the conditions of manufacture of agricultural implements, and not an exercise of the power of taxation conferred by the Commonwealth": Ibid 76. This judicial finding was based on a doctrine, the "reserved powers" doctrine, and a method of characterisation pursuant to which a law may not be with respect to more than one subject matter, that have since been rejected by the High Court.
[21] [1959] HCA 22; (1959) 101 CLR 11.
[22] Ibid 22 (per Fullagar J). See also Moore v Cth [1951] HCA 10; (1951) 82 CLR 547; and Collector of Customs (NSW) v Southern Shipping Co Ltd [1962] HCA 20; (1962) 107 CLR 279.
[23] Re Dymond [1959] HCA 22; (1959) 101 CLR 11, 22 (per Fullagar J).
[24] 88 ATC 4751 ("Fontana").
[25] Since the ITAA36 is not an Act dealing with the imposition of taxation, the imposition of a tax, through s 207, would have violated s 55.
[26] Fontana 88 ATC 4751, 4753.
[27] Ibid 4754.
[28] [1993] HCA 12; (1993) 176 CLR 555 ("Northern Suburbs").
[29] TGAA90, s 35(2)(b)(ii).
[30] TGAA90, s 35(2)(b)(i).
[31] Northern Suburbs [1993] HCA 12; (1993) 176 CLR 555, 571.
[32] [1962] HCA 20; (1962) 107 CLR 279, 288 ("Southern Shipping").
[33] [1984] HCA 20; (1984) 158 CLR 622 ("MacCormick").
[34] Southern Shipping [1962] HCA 20; (1962) 107 CLR 279, 288.
[35] Ibid 291.
[36] Ibid 297.
[37] Ibid 292.
[38] Ibid 306.
[39] The Taxation (Unpaid Company Tax) Assessment Act 1982 (Cth) and the Taxation (Unpaid Company Tax - Vendors) Act 1982 (Cth).
[40] MacCormick [1984] HCA 20; (1984) 158 CLR 622, 639.
[41] F Farrow and E Power, "Possible Constitutional Defence to Directors' Liability" [1997] 54 CCH Tax Week 793, 794. Farrow appeared for the appellant in Woodhams.
[42] Woodhams 97 ATC 5119, 5127.
[43] Ibid 5131.
[44] L Zines, The High Court and the Constitution (4th ed, 1997) 34.
[45] Another reason for the Court's conclusion was, of course, the fact that the Scheme related to the collection of a tax which was paid by another group of taxpayers, the employees.
[46] Woodhams 97 ATC 5119, 5129.
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