Mrs ELIZABETH GRACE —My question is addressed to the Prime Minister. Has the Prime Minister's attention been drawn to recent studies of changes to Australia's indirect tax system? What are the implications for the current debate about tax reform?

Mr HOWARD (Prime Minister) —In reply to the honourable member for Lilley, yesterday the Leader of the Opposition, in asking me a question about tax reform, relied upon a statement made by Dr Neil Warren, a noted academic who does have quite a reputation in this field. As a result of the Leader of the Opposition's reference to Dr Warren, I had occasion to look back over some of the recent academic work of Dr Warren. I came across an extremely interesting paper which he presented to a conference on tax reform and a GST on 15 April 1998.

What Dr Warren did in that paper was to lend support to the assertion that has frequently been made by the coalition: that before the 1993 election the Labor Party promised tax cuts without a GST but after the election the Labor Party in government gave us the exact opposite. They not only failed to deliver through their notorious repudiation of the l-a-w law commitment and failed to deliver the income tax cuts but also in fact delivered their own goods and services tax. To add insult to injury and further pain to the working men and women of Australia, they delivered it without any compensation. When you go through Dr Warren's paper, it contains one of the most damning indictments of the two-faced politics of saying one thing in a campaign and doing another once you get into office.

Opposition members interjecting—

Mr SPEAKER —I remind members of the opposition of my remarks.

Mr HOWARD —It is a warning to the entire Australian community. They did it in 1993. If you let them do so, they will do it again in 1998. At the beginning of his paper—it is a document that would repay study by all those who are interested in a proper discussion of the Australian taxation system—this is what Dr Warren had to say:

To demonstrate this point most clearly, we shall focus on the equity and efficiency implications of the electorate's failure to support the Fightback indirect tax reform package in 1993 and contrast this with the indirect tax reforms introduced by the newly elected Labor government between 1993 and 1996.

This paper will argue that there are a number of important lessons to be learnt, and these include:

(1) Labor introduced in 1993 its own form of a goods and services tax but in this case without any compensation to those adversely affected;

(2) That, even if Labor had compensated groups for the adverse equity impact of the indirect tax changes introduced, what their tax reform did was

(a) make Australia less internationally competitive by increasing input taxation; and

(b) make the tax system less economically efficient by increasing the tax rates on a range of selected goods but not on services.

This is what Dr Warren goes on to say:

Even though in practice no-one advocates the introduction of a GST without compensation, an important finding of this paper is that this was effectively what Labor did in the period 1993 to 1996.

What you have from one of the most respected taxation academics in Australia is a clear indictment that, in government, what the Labor Party, having gone to the people and said, `We will cut your tax without fixing the indirect taxation system,' and having sneaked back into office on that deceptive commitment, then did in government was to repudiate the personal tax commitment, effectively embrace a goods and services tax and, to rub the electorate's nose in the dirt, they did it without any compensation to the working men and women of Australia. It represented one of the most cynical and one of the most calculated betrayals of the Australian electorate.

Mr O'Connor —But you said you would never ever introduce it.

Mr SPEAKER —The member for Corio.

Mr HOWARD —I would commend to all members of the House a very careful study. What Dr Warren reveals is that the cumulative effect of the changes introduced by the Labor government between 1993 and 1996 was to erode household real disposable income by an average of 2.1 per cent. In other words, you promise the electorate income tax cuts without changing indirect taxation. You scramble back into office and you do the reverse. You snaffle the tax cuts and, to add insult to injury, you introduce a goods and services tax, you do it without compensation and you rob the poor and the battlers of disposable income to the tune of 2.1 per cent. It represents a total demolition of the credibility of the Australian Labor Party on the subject of taxation.

Mr O'Connor —Tell us about never ever.

Mr SPEAKER —The member for Corio.

Mr HOWARD —It is not surprising that there is gathering support within the Australian community for fundamental reform of the Australian taxation system. I want to put on record my appreciation of the willingness of sections of the Australian business community to get behind the cause of fundamental reform.

We have needed a better taxation system for a long time in this country. As far back as 1975, the Asprey report to the Whitlam government recommended the need for fundamental reform of the Australian taxation system. We have got the courage and we have the openness to put the proposals to the Australian people. By contrast, the Australian Labor Party deceived the public in 1993. They promised tax cuts; they did not deliver them. They promised no GST; they delivered one of their own and, for good measure, they kicked in with no compensation. That was a total and cynical betrayal of what they told the Australian people. They ultimately deserved the fate they enjoyed in 1996.