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Monday, 23 June 1997
Page: 5983


Mr GARETH EVANS —My question is addressed to the Treasurer. Does he accept Professor John Freebairn's estimate that a GST excluding food would need to be set at over 11 per cent, to replace existing sales and payroll taxes; at nearly 15 per cent, to replace as well existing state stamp and financial institutions duties; and at over 20 per cent, to replace as well the existing fuel excise on petrol and diesel? I ask the Treasurer: is a GST of over 20 per cent, before you even get to paying for an income tax reduction, one of those options still on the table for this government?


Mr COSTELLO —No, I do not agree with the observations that were made by the Deputy Leader of the Opposition. I made it clear in the parliament last week and I make it clear again that the government is interested in broad based tax reform. What a broad based tax reform would obviously look at would be the indirect tax base and the income tax base. I made the point that a narrow indirect tax base means that, on those classes of goods within the net, the comparative taxation burden falls heavily and it is a declining base. I do not think there is any doubt about that.

I also made the point that one of the corollaries of that is that, in relation to income tax, people in Australia are kicked into high marginal tax rates at low multiples of average weekly earnings. If you were going to design a better tax system, you would want a broader base in relation to indirect taxes and a broader base in relation to income taxes. The important point about that second observation I make is to ensure that everybody pays their fair share of income taxes. It is one of the reasons why our government ended R&D syndication. The Labor Party knew very well what R&D syndication was. It was available to rich people to minimise or walk away from their tax liabilities. Who stood with them? The Labor Party.


Mr Gareth Evans —Mr Speaker, I raise a point of order on the subject of relevance. The question was whether or not the Treasurer agreed specifically with the calculations of Professor John Freebairn. That has nothing to do with the exercise on which he has now embarked. I ask you to bring him back to the question.


Mr SPEAKER —I thank the Deputy Leader of the Opposition. There is no point of order.


Mr COSTELLO —It is very relevant to talk about widening the income tax base, because the people of Australia ought to know who it was that presided over the narrowing of the income tax base and, when this government decided to address it, who it was that stood with the tax avoiders—the Labor Party. We had Cheap Jack over there running around saying, `If you want to stay in an R&D syndicate, we'll vote for you.' `Paying tax is optional,' he said. `If you want to be in infrastructure bonds, the Labor Party will be there with you, too,' he said. And he is nodding. They were there. Of course they were.


Mr Beazley —Mr Speaker, I raise a point of order and it goes to relevance. An effort has been made on this side of the House to close our questions up tightly in accordance with your directives. Also in accordance with your directives is an undertaking to ensure that the government remains within the context of the questions asked. We have eliminated all preambles of an argumentative nature from our questions, as they were eliminated from these previous two, which have traditionally given licence for people to go on as the Treasurer has. The Treasurer ought to be brought back to order.


Mr SPEAKER —I thank the Leader of the Opposition. It is within the general focus of tax reform which has been addressed.


Mr COSTELLO —I was asked about tax reform and I am talking about the government's policy: a widening of the income tax base. Mr Speaker, what really gets me is that they always stand up and interject whenever they are reminded about their own policy.


Mr Beazley —Mr Speaker, I raise a point of order. We have no problems about the reminders on this. The Treasurer is clearly under a misapprehension. He was not asked in generality about tax reform, which is what he said. He was asked about a specific set of levels of a GST to replace certain taxes. That was all. That was it.


Mr SPEAKER —I am listening very carefully. I can recall the question. It defined broad based taxation—a GST of in excess of 20 per cent. The Treasurer's response, thus far, is within the context and thrust of the question.


Mr COSTELLO —If the question is asked about tax reform, the question is going to be answered, and it is going to be answered in a fulsome way. You would think that this sort of modern Labor Party were a group of orphans who did not stand for anything. But we know what you stood for. You stood for optional taxes for high income earners—on R&D syndicates, on infrastructure borrowings and on superannuation surcharges. This is the government that had the guts to address it, and you are the people that would like to walk away from it.


Mr Beazley —Mr Speaker, I raise a point of order. The question that was asked was quite specific: do you accept these estimates of Freebairn's—one, two, three? Then: is a GST of over 20 per cent, before you even get to paying for an income tax reduction, an option still on the table of the government? A one-word answer would suffice, Mr Speaker.


Mr SPEAKER —I thank the Leader of the Opposition. There is no point of order.


Mr Tuckey —On a point of order: can I just draw your attention to the relevant standing order. Standing order 145 states:

An answer shall be relevant—

not explicit—

to the question.

It is relevance. And nobody knows it better than them when they were in government.


Mr SPEAKER —I thank the member for O'Connor. Resume your seat.


Mr COSTELLO —Of course, one of the ways you reduce marginal income tax rates is by broadening the base. Let us just think about this. The Labor Party should just think about this for a moment: one of the reasons why ordinary PAYE taxpayers have high marginal income tax rates is that you wanted to make it optional for high income earners to pay income tax. It was optional under R&D syndicates and it was optional under infrastructure borrowings. You had to be on $135,000 to get into infrastructure borrowings. If you were above $185,000 on superannuation, you reduced your marginal tax rate from 47 to 15. From 47, you could bring it down to 15—a 32 per cent tax reduction. What you do when you broaden the income tax base is you have the capacity to lower marginal tax rates. That is why we did it. That is why Cheap Jack opportunism of the Labor Party kind is anti-PAYE taxpayers and that is why we stood against it.


Mr GARETH EVANS —I have a supplementary question, Mr Speaker, before you call anyone else. My supplementary question—


Mr SPEAKER —Whether it is approved is another thing.


Mr GARETH EVANS —I understand that, Mr Speaker. Is the Treasurer saying that he disagrees with the specific rate calculations of Professor John Freebairn, one of the country's leading tax analysts and someone whose advice the coalition drew on for Fightback?


Mr SPEAKER —The question is out of order.