Western Australia Taxation Administration Bill 2001 sections 67 and 100

The Australian Institute of Company Directors ("AICD") is the peak organisation representing the interests of company directors in Australia. Current membership is over 16,000, drawn from large and small organisations, across all industries, and from private, public and the not-for-profit sectors.

We write to confirm our strong opposition to the proposed Sections 67 (Recovery from Directors of Body Corporate) and 100 (Offence by Body Corporate) of the Western Australia Taxation Administration Bill 2001 ("Bill"). The AICD has grave concerns about the wide reaching implications of these sections and urges that they be removed from the Bill.

We are not in a position to prepare a full submission to the Committee, given the very short timeframe within which we have been given to respond. We are disappointed that this is the case. Our grave concerns about the Bill led us to write to the Deputy Premier Hon Eric Ripper and Mr Lee Rossetto of the Leader of the Opposition Hon Colin Barnett's office on 19 February 2002. We attach copies of these submissions for your information. We have also taken the issue up with the Premier personally.

We have had the opportunity to read the submission that the Taxation Institute of Australia has prepared and submitted to the Committee. We strongly support that submission.

A fundamental tenet of the corporate entity is limited liability. This tenet has been demonstrated to promote an effective and efficient market where innovation, wealth and job creation are maximised. Personal liability for directors in the absence of their personal culpability should not be mandated unless there are compelling policy reasons to do so. No such reasons have been advanced. In any event, the Corporations Act provides a comprehensive regime of duties and liabilities for directors. To impose criminal liability on directors by shifting the onus in criminal proceedings is another radical departure from the tried and tested principles of criminal law. Again, no reason has been given for the departure from these principles.

If the intention of the sections is to punish rogue directors, each and every diligent and complying director will be at risk. On that basis, it is indeed a legislative reform that is vastly disproportionate to the errant behaviour sought to be addressed.

The relevant sections fail to recognise the nature of the role of the board of directors which is one of oversight, not operational management. Directors should not be required to personally check that each and every operational liability such as State tax liabilities have been satisfied, in order to protect themselves from personal liability. To do so would distract directors from their key role of policy and strategic development.

We urge the Committee to consider the practical implications of Sections 67 & 100 on directors in Western Australia and the business environment in the State. We consider that such implementation will ultimately be to the economic detriment of Western Australia and its reputation as a State that is conducive to business. They will serve as a disincentive for investment into Australia and Western Australia and, in particular, will cause high calibre directors to think twice about accepting board positions.

We confirm the telephone conversation between our Western Australian Division President, Peter Mansell, and David Driscoll on 9 May 2002 in which Mr Driscoll assured us that AICD would be afforded the opportunity to make oral representation to the Committee this week. Would you please confirm the date, time and location for the hearing.

Yours sincerely,

John Hall
Chief Executive Officer